-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QOnVarr0eRv6juNhq1+9aprwNpdi0sTwgvQvlQfh4Goa/D8PwCNGtEJRe3T1Tjzs wFu/tOxwrGS4ut1AQA9olg== /in/edgar/work/0000950124-00-006067/0000950124-00-006067.txt : 20001017 0000950124-00-006067.hdr.sgml : 20001017 ACCESSION NUMBER: 0000950124-00-006067 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20001002 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001016 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMMIS COMMUNICATIONS CORP CENTRAL INDEX KEY: 0000783005 STANDARD INDUSTRIAL CLASSIFICATION: [4832 ] IRS NUMBER: 351542018 STATE OF INCORPORATION: IN FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-23264 FILM NUMBER: 740363 BUSINESS ADDRESS: STREET 1: ONE EMMIS PLAZA STREET 2: 40 MONUMENT CIRCLE SUITE 700 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3172660100 MAIL ADDRESS: STREET 1: ONE EMMIS PLZ STREET 2: 40 MONUMENT CIRCLE #700 CITY: INDIAPOLIS STATE: IN ZIP: 46204 FORMER COMPANY: FORMER CONFORMED NAME: EMMIS BROADCASTING CORPORATION DATE OF NAME CHANGE: 19920703 8-K 1 c57890e8-k.txt FORM 8-K 1 As filed with the Securities and Exchange Commission on October 16, 2000 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): October 2, 2000 EMMIS COMMUNICATIONS CORPORATION (Exact name of registrant as specified in its charter) INDIANA 0-23264 35-1542018 (State or other jurisdiction of (Commission File (IRS Employer incorporation) Number) Identification No.) ONE EMMIS PLAZA, 40 MONUMENT CIRCLE, SUITE 700, INDIANAPOLIS, IN 46204 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (317) 266-0100 NOT APPLICABLE (Former name or former address, if changed since last report) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On October 2, 2000, Emmis Communications Corporation (the "Company") announced that it had acquired eight network-affiliated and seven satellite television stations from Lee Enterprises, Incorporated ("Lee") effective on October 1, 2000, pursuant to a Purchase and Sale Agreement, dated as of May 7, 2000, by and among Lee, New Mexico Broadcasting Co. and the Company (the "Lee Purchase Agreement"). The purchase price was $559.5 million in cash plus working capital. In addition, on October 6, 2000, the Company announced that it had completed the acquisition of six radio stations in St. Louis, Missouri from Sinclair Broadcast Group Inc. ("Sinclair"), pursuant to an Asset Purchase Agreement, dated as of June 21, 2000, by and among Sinclair Radio of St. Louis, Inc., Sinclair Radio of St. Louis Licensee, LLC and the Company (the "Sinclair Purchase Agreement"), for approximately $220.0 million in cash. At the same time, the Company announced that it had exchanged four radio stations in St. Louis, including three of the six stations acquired from Sinclair, for a radio station in Los Angeles, California owned by Bonneville International Corporation ("Bonneville"), pursuant to an Asset Exchange Agreement, dated as of October 6, 2000, between the Company, Emmis 106.5 FM Broadcasting Corporation of St. Louis and Emmis 106.5 FM License Corporation of St. Louis, and Bonneville and Bonneville Holding Company (the "Bonneville Exchange Agreement"). Copies of the Lee Purchase Agreement, the Sinclair Purchase Agreement and the Bonneville Exchange Agreement are attached hereto as Exhibits 2.1, 2.2 and 2.3, respectively, and copies of the press releases announcing the acquisition of the television stations from Lee and the radio stations from Sinclair and Bonneville are attached hereto as Exhibits 99.1 and 99.2, respectively. ITEM 5. OTHER EVENTS On October 2, 2000, the Company entered into a Third Amended and Restated Revolving Credit and Term Loan Agreement (the "Amended and Restated Credit Agreement") with Toronto Dominion (Texas), Inc., as Lead Arranger and Administrative Agent, Fleet National Bank, as Documentation Agent, First Union National Bank, as Syndication Agent and each of the financial institutions from time to time party thereto. The Amended and Restated Credit Agreement increased the commitments thereunder to $1,000,000,000 by adding a $600,000,000 term loan facility to the existing $400,000,000 revolving credit loan for the purpose of enabling the Company to make further acquisitions. A copy of the Amended and Restated Credit Agreement is attached hereto as Exhibit 10.1. On August 24, 2000, the Company announced that it had completed the acquisition of a radio station in Phoenix, Arizona and a radio station in Denver, Colorado from AMFM, Inc. for approximately $108.0 million pursuant to an Asset Purchase Agreement, dated as of June 19, 2000, by and among the Company, AMFM Houston, Inc., AMFM Ohio, Inc. and AMFM Radio Licenses, LLC (the "AMFM 2 3 Purchase Agreement"). A copy of the AMFM Purchase Agreement is attached hereto as Exhibit 10.2. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements of businesses acquired SINCLAIR BROADCAST GROUP FINANCIAL INFORMATION Report of Independent Public Accountants.................... 4 Combined Balance Sheet As of December 31, 1999............ 5 Combined Statement of Operations For the Year Ended December 31, 1999...................................... 6 Combined Statement of Stockholders' Equity For the Year Ended December 31, 1999................................ 7 Combined Statement of Cash Flows For the Year Ended December 31, 1999...................................... 8 Notes to Combined Financial Statements As of December 31, 1999................................................... 9 Report of Independent Public Accountants.................... 15 Combined Balance Sheets As of December 31, 1999 and June 30, 2000............................................... 16 Combined Statements of Operations For the Six Months Ended June 30, 1999 and 2000................................. 17 Combined Statements of Cash Flows For the Six Months Ended June 30, 1999 and 2000................................. 18 Notes to Combined Financial Statements As of June 30, 2000................................................... 19 KZLA-FM FINANCIAL INFORMATION Independent Auditor's Report................................ 21 Combined Balance Sheets As of December 31, 1999 and June 30, 2000............................................... 22 Combined Statements of Operations For the Year Ended December 31, 1999 and For the Six Months Ended June 30, 1999 and 2000.......................................... 23 Combined Statements of Cash Flows For the Year Ended December 31, 1999 and For the Six Months Ended June 30, 1999 and 2000.......................................... 24 Notes to Combined Financial Statements For the Year Ended December 31, 1999 and For the Six Months Ended June 30, 1999 and 2000.......................................... 24 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS FINANCIAL INFORMATION Independent Auditor's Report................................ 31 Combined Statements of Net Assets......................... 32 Combined Statements of Income............................. 33 Combined Statements of Changes in Net Assets.............. 34 Combined Statements of Cash Flows......................... 35 Notes to Combined Financial Statements.................... 36 Condensed Combined Statements of Net Assets............... 37 Condensed Combined Statements of Income................... 40 Condensed Combined Statements of Cash Flows............... 41 Notes to Unaudited Condensed Combined Financial Statements............................................. 42 3 4 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Emmis Communications Corp.: We have audited the accompanying balance sheet of Sinclair Broadcast Group, Inc. -- St. Louis Radio Group (the Group) as of December 31, 1999, and the related statements of operations, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sinclair Broadcast Group, Inc. -- St. Louis Radio Group as of December 31, 1999, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP Baltimore, Maryland August 23, 2000 4 5 COMBINED BALANCE SHEET AS OF DECEMBER 31, 1999 (IN THOUSANDS) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS COMBINED BALANCE SHEET. ASSETS CURRENT ASSETS: Cash...................................................... $ 230 Accounts receivable, net of allowance for doubtful accounts of $245....................................... 4,890 Deferred barter costs..................................... 225 -------- Total current assets........................................ 5,345 FIXED ASSETS, net........................................... 5,228 INTANGIBLES ASSETS, net..................................... 102,498 -------- Total assets................................................ $113,071 ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable.......................................... $ 91 Accrued liabilities....................................... 1,243 Deferred barter revenue................................... 390 -------- Total current liabilities................................... 1,724 LONG-TERM LIABILITIES: Due to parent............................................. 100,759 Deferred tax liabilities.................................. 2,070 Other long-term liabilities............................... 1,025 -------- Total liabilities........................................... 105,578 -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Contributed capital....................................... 7,000 Retained earnings......................................... 493 -------- Total stockholders' equity.................................. 7,493 -------- Total liabilities and stockholders' equity.................. $113,071 ========
The accompanying notes are an integral part of this combined balance sheet. 5 6 COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS) REVENUES: Station broadcast revenues, net of agency commissions of $3,258................................................. $25,193 Revenues realized from station barter arrangements........ 847 ------- Total revenues.............................................. 26,040 ------- OPERATING EXPENSES: Program and production.................................... 6,832 Selling, general and administrative....................... 7,719 Corporate expenses........................................ 755 Depreciation and amortization............................. 4,226 ------- Total operating expenses.................................... 19,532 ------- Broadcast operating income.................................. 6,508 ------- OTHER INCOME (EXPENSE): Interest expense.......................................... (6,173) Other income.............................................. 1 ------- (6,172) ------- INCOME BEFORE PROVISION FOR INCOME TAXES.................... 336 INCOME TAX PROVISION........................................ 186 ------- Net income.................................................. $ 150 =======
The accompanying notes are an integral part of this combined statement. 6 7 COMBINED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS)
TOTAL CONTRIBUTED RETAINED STOCKHOLDERS' CAPITAL EARNINGS EQUITY ----------- -------- ------------- BALANCE, December 31, 1998................................ $7,000 $343 $7,343 Net income.............................................. -- 150 150 ------ ---- ------ BALANCE, December 31, 1999................................ $7,000 $493 $7,493 ====== ==== ======
The accompanying notes are an integral part of this combined statement. 7 8 COMBINED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................ $ 150 Adjustments to reconcile net income to net cash flows from operating activities-- Depreciation and amortization............................. 4,226 Changes in assets and liabilities, net of effects of acquisitions and dispositions- Increase in accounts receivable, net................... (639) Decrease in prepaid expenses........................... 49 Increase in accounts payable and accrued liabilities... 60 Deferred tax provision................................. 959 Net effect of changes in deferred barter revenues and deferred barter costs................................. 137 Decrease in other long-term liabilities................ (319) ------- Net cash flows from operating activities.................... 4,623 ------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment..................... (341) ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in due to parent............................... (4,241) ------- NET INCREASE IN CASH........................................ 41 CASH, beginning of period................................... 189 ------- CASH, end of period......................................... $ 230 ======= SUPPLEMENTAL INFORMATION: Increase in parent company indebtedness related to acquisitions........................................... $14,602 =======
The accompanying notes are an integral part of this combined statement. 8 9 NOTES TO COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 1. BASIS OF PRESENTATION: The St. Louis Radio Group of Sinclair Broadcast Group, Inc. (the "Company") was formed through acquisition. Sinclair Broadcast Group, Inc. ("SBG") entered into the radio business in May 1996 when it acquired radio stations from River City Broadcasting LLP ("River City"). As a result of the subsequent Heritage Media Services, Inc. (Heritage) acquisition and the acquisition of KXOK from WPNT, Inc., the Company now is comprised of radio stations KPNT, KXOK, KIHT, WVRV, WIL, and WRTH, serving the St. Louis market. These acquisitions have been recorded under the purchase method of accounting. These combined financial statements have been prepared from SBG's historical accounting records and present the operations of the St. Louis Radio Group as if the Company had been a separate entity for all periods presented. During these periods, SBG provided various services to the Company (see Note 6). Furthermore, acquisitions consummated by SBG have been presented as if they were made by the Company and the consideration to effect these acquisitions was both loaned and contributed by SBG. All significant intercompany transactions and account balances between the six St. Louis stations have been eliminated in consolidation. The financial information included herein may not necessarily reflect the consolidated results of operations, financial position, changes in stockholder's equity and cash flows of the Company in the future or what they would have been had it been a separate, stand-alone entity during the periods presented. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to intangible assets, allowances for doubtful accounts, income taxes and litigation based on currently available information. Changes in facts and circumstances may result in revised estimates. CONCENTRATION OF CREDIT RISK The Company's revenues and accounts receivable relate primarily to the sale of advertising within the radio stations' broadcast areas. Credit is extended based on an evaluation of the customers' financial condition; and generally, collateral is not required, credit losses are provided for in the financial statements and consistently have been within management's expectations. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments is determined by the Company using the best available market information and appropriate valuation methodologies. However, considerable judgment is necessary in interpreting market data to develop the estimates of fair value. Accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange or the value that ultimately will be realized by the Company upon maturity or disposition. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts. Most of the Company's financial instruments, including cash, accounts receivable and payable and accruals are short-term in nature. Accordingly, the carrying amount of the Company's financial instruments approximates fair value. The carrying amount of long-term debt approximates fair value. 9 10 LONG-LIVED ASSETS In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," the Company evaluates the recoverability of its long-lived assets which include broadcasting licenses, other intangibles and other assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If indications are that the carrying amount of the asset may not be recoverable, the Company will estimate the future cash flows expected to result from use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, the Company recognizes an impairment loss. The impairment loss recognized is measured as the amount of which the carrying amount of the asset exceeds its fair value. BARTER ARRANGEMENTS The Company broadcasts certain customers' advertising in exchange for equipment, merchandise and services. The estimated fair value of the equipment, merchandise or services received is recorded as deferred barter costs and the corresponding obligation to broadcast advertising is recorded as deferred barter revenue. The deferred barter costs are expensed or capitalized as they are used, consumed or received. Deferred barter revenue is recognized as the related advertising is aired. ACQUIRED INTANGIBLE BROADCASTING ASSETS Acquired intangible broadcasting assets are being amortized on a straight-line basis over periods of 15 to 40 years. These amounts result from the acquisition of radio station broadcasting assets. If indications are that the carrying amount of one of these assets may not be recoverable, the Company will estimate the future cash flows expected to result from use of the asset. Management believes that the carrying amounts of the Company's tangible and intangible assets have not been impaired. Intangible broadcasting assets, at cost, as of December 31, 1999 consist of the following (in thousands):
AMORTIZATION PERIOD ------------ Goodwill............................... 40 years $ 43,721 Decaying advertiser base............... 15 years 4,124 FCC licenses........................... 25 years 61,819 Network affiliations................... 25 years 122 Other.................................. 15 years 196 -------- 109,982 Less: Accumulated amortization......... (7,484) -------- $102,498 ========
ACCRUED LIABILITIES As of December 31, 1999, accrued liabilities are $1.2 million. This balance contains $0.6 million of compensation -- related liabilities, $0.5 million of additional liabilities assumed in acquisitions and $0.1 million of other accrued liabilities. REVENUE RECOGNITION Broadcasting revenues are derived principally from the sale of radio advertising spots to local, regional and national advertisers. Advertising revenue is recognized in the period during which the program time and spot announcements are broadcast. 10 11 3. ACQUISITIONS KXOK-FM ACQUISITION In August, 1999, SBG completed the purchase of KXOK-FM in St. Louis, Missouri from WPNT, Inc. Sinclair's total consideration for KXOK was $15.8 million, including assumed liabilities. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and acquired intangible broadcast assets for $0.6 million and $15.2 million, respectively, based on an appraisal. 4. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed under the straight-line method over the following estimated useful lives. Buildings and improvements......................... 10-35 years Station equipment.................................. 5-10 years Office furniture and equipment..................... 5-10 years Leasehold improvements............................. 10-31 years Automotive equipment............................... 3-5 years
Property and equipment consists of the following as of December 31, 1999 (in thousands): Land and improvements................................. $ 258 Buildings and improvements............................ 574 Station equipment..................................... 5,217 Office furniture and equipment........................ 387 Leasehold improvements................................ 131 Automotive equipment.................................. 186 ------- 6,753 Less: Accumulated depreciation and amortization....... (1,525) ------- $ 5,228 =======
5. PARENT COMPANY INDEBTEDNESS: In connection with the acquisition discussed in Note 3 and the Heritage acquisition, SBG made loans to the Company. The Company has been charged interest on these loans at a rate of interest equal to SBG's annual weighted average borrowing rate on its outstanding indebtedness. The weighted average interest rates on parent company indebtedness for the year ended December 31, 1999 was 6.7%. Substantially all of the Company's assets have been pledged as security for SBG's notes payable and commercial bank financing. Additionally, the operations of the Company have been utilized to service the debt principal and interest payments of SBG. 6. RELATED PARTY TRANSACTIONS: The Company has utilized various services provided by SBG or its subsidiaries. These services included, among others, certain investor relations, executive, human resources, legal, investment, finance, real estate, information management, internal audit, tax preparation and treasury. The costs of such services have been allocated according to established methodologies and are determined on an annual basis by SBG. Such methodologies depend on the specific service provided and include allocating costs that directly relate to the Company or allocating costs that represent a pro rata portion of the total costs for the services provided. Management of the Company believes these allocations to be a fair and reasonable share of such costs. For the year ended December 31, 1999, allocated expenses of approximately $755,000 were included in the consolidated statements of operations of the Company. Substantially all costs relating to direct intercompany services have been reflected in the accompanying combined financial statements. 11 12 The Company's radio stations and SBG's television stations have historically provided broadcast time to each other. The revenues or costs associated with these intercompany transactions were not significant in the periods presented. The Company and SBG have entered into joint advertising arrangements. Revenues are distributed to the parties providing the services based upon the contract terms. The revenues associated with such sales were not significant in the periods presented. 7. INCOME TAXES: Income taxes are provided by using the asset and liability method in accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred tax assets and liabilities are recognized based on differences between book and tax basis of assets and liabilities using presently enacted tax rates. The provision for income taxes is the sum of the amount of income tax paid or payable for the year as determined by applying the provisions of enacted tax laws to taxable income for that year and the net changes during the year in the Company's deferred tax assets and liabilities other than changes arising from acquisitions and dispositions. SBG files a consolidated federal tax return and separate state tax returns for each of its subsidiaries. It is SBG's policy to reimburse the Company for its federal net operating losses when generated through intercompany charges. The Company is responsible for its current state tax liabilities. The accompanying financial statements have been prepared in accordance with the separate return method of SFAS 109, whereby the allocation of federal tax provision due to the parent is based on what the subsidiary's current and deferred federal tax provision would have been had the subsidiary filed a federal income tax return outside its consolidated group. Given that SBG is required to reimburse the Company for its federal net operating losses when generated, the value of the tax effected federal net operating losses is recorded as an intercompany charge and included as a reduction of the due to parent amount in the accompanying balance sheets. The provision for income taxes consists of the following: Provision for income taxes.............................. $186 Current: Federal............................................... -- State................................................. -- ---- -- ---- Deferred: Federal............................................... 166 State................................................. 20 ---- 186 ---- $186 ====
The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision (in thousands): Statutory federal income taxes.......................... $118 Adjustments-- State income and franchise taxes, net of federal effect............................................. 14 Nondeductible expense items........................... 54 ---- Provision for income taxes.............................. $186 ====
Temporary differences between the financial reporting carrying amounts and the tax basis of assets and liabilities give rise to deferred taxes. The Company has a net deferred tax liability of $2.1 million as of December 31, 1999. The realization of deferred tax assets is contingent upon the Company's ability to generate sufficient future taxable income. Management believes that deferred assets will be realized through future operating results. 12 13 Total deferred tax assets and deferred tax liabilities as of December 31, 1999 including the effects of the source of differences between financial accounting and tax bases of the Company's assets and liabilities which give rise to the deferred tax assets and deferred tax liabilities and the tax effect of each are as follows (in thousands): Deferred tax assets: Accruals and reserves................................ $ 153 State net operating losses........................... 269 Other................................................ 42 ------ $ 464 ====== Deferred tax liabilities: FCC license.......................................... $1,354 Fixed assets and intangibles......................... 1,180 ------ $2,534 ======
8. EMPLOYEE BENEFITS: Employees of the Company participate in the Sinclair Broadcast Group, Inc. 401(k) Profit Sharing Plan and Trust (the "SBG Plan") which covers eligible employees of the Company. Contributions made to the SBG Plan include an employee elected salary reduction amount, company matching contributions and a discretionary amount determined each year by SBG's Board of Directors. During December 1997, SBG registered 800,000 shares of its Class "A" Common Stock with the Securities and Exchange Commission (the "Commission") to be issued as a matching contribution for the 1997 plan year and subsequent plan years. The Company's 401(k) expense for the year ended December 31, 1999 was $68,000. 9. COMMITMENTS AND CONTINGENCIES: LITIGATION The Company is involved in certain litigation matters arising in the normal course of business. In the opinion of management, these matters are not significant and will not have a material adverse effect on the Company's financial position. OPERATING LEASES The Company leases certain property and equipment under noncancellable operating lease agreements. Future minimum lease payments under noncancellable operating leases beginning January 1, 2000, are as follows (in thousands): 2000................................................... $ 853 2001................................................... 782 2002................................................... 782 2003................................................... 774 2004................................................... 367 2005 and thereafter.................................... 274 ------ $3,832 ======
10. SUBSEQUENT EVENT: SALE OF THE ST. LOUIS RADIO GROUP In connection with the acquisition of River City, SBG entered into a five year agreement (the "Baker Agreement") with Barry Baker (the Chief Executive Officer of River City) pursuant to which Mr. Baker served as a consultant to SBG until terminating such services effective March 8, 1999 (the "Termination 13 14 Date"). As of February 8, 1999, the conditions to Mr. Baker becoming an officer of SBG had not been satisfied, and on that date Mr. Baker and SBG entered into a termination agreement, effective on March 8, 1999. Mr. Baker had certain rights as a consequence of the termination of the Baker Agreement. These rights included Mr. Baker's rights to purchase, at fair market value, the radio stations owned by SBG serving the St. Louis, Missouri market. In June, 1999, SBG received a letter from Mr. Baker in which Mr. Baker elected to exercise his option to purchase SBG's radio properties in the St. Louis market for their fair market value. In his letter, Mr. Baker named Emmis Communications Corp. ("Emmis") as his designee to exercise the St. Louis purchase option. Notwithstanding their belief that Emmis was not an appropriate designee of Mr. Baker, SBG negotiated with Emmis regarding the potential sale of the St. Louis properties. Following unsuccessful negotiations, however, on January 18, 2000, SBG filed suit in the Circuit Court of Baltimore County, Maryland against Mr. Baker and Emmis claiming, alternatively, that Mr. Baker's designation of Emmis was invalid, that the St. Louis purchase option was void for vagueness and/or that Emmis breached a duty that it owed to SBG by refusing to negotiate the acquisition agreement in good faith. In the lawsuit, SBG requested that the court grant declaratory relief and/or monetary damages. On March 17, 2000, Emmis and Mr. Baker filed a joint answer and counterclaim generally denying the allegations made by SBG in its lawsuit and claiming that SBG had acted in bad faith in failing to fulfill its contractual obligations, had mismanaged the St. Louis properties and had interfered with the contract between Mr. Baker and Emmis in which Mr. Baker agreed to designate Emmis to buy the properties. The counterclaim sought compensatory and punitive damages, the appointment of a special receiver to manage the St. Louis properties and a declaratory judgment requiring Sinclair to complete the sale of those properties to Emmis. On June 21, 2000, SBG entered into an agreement to sell the assets of the six stations comprising the St. Louis Radio Group to Emmis for $220.0 million in cash (the "St. Louis Sale"). The agreement also included the settlement of the outstanding lawsuit between SBG and Emmis. This acquisition is awaiting approval by the Federal Communications Commission and Department of Justice. In connection with the signing of the purchase agreement, Emmis made an escrow payment of $22.0 million. 14 15 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Emmis Communications Corp.: We have reviewed the accompanying condensed combined balance sheet of Sinclair Broadcast Group, Inc. -- St. Louis Radio Group (the Group) as of June 30, 2000, and the related condensed combined statements of operations and cash flows for the six-month periods ending June 30, 2000 and 1999. These financial statements are the responsibility of the Group'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 auditing standards generally accepted in the United States, 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 accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the combined balance sheet of Sinclair Broadcast Group, Inc. -- St. Louis Radio Group as of December 31, 1999, and in our report dated August 23, 2000, we expressed our unqualified opinion on that statement. In our opinion, the information set forth in the accompanying condensed combined balance sheet as of December 31, 1999 is fairly stated, in all material respects, in relation to the combined balance sheet from which it has been derived. /s/ ARTHUR ANDERSEN LLP Baltimore, Maryland August 23, 2000 15 16 SINCLAIR BROADCAST GROUP, INC. -- ST. LOUIS RADIO GROUP COMBINED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND JUNE 30, 2000 (IN THOUSANDS)
DECEMBER 31, 1999 JUNE 30, 2000 ------------ ------------- (NOTE 1) (UNAUDITED) ASSETS CURRENT ASSETS: Cash...................................................... $ 230 $ 287 Accounts receivable, net of allowance for doubtful accounts of $245 and $239, respectively................ 4,890 6,068 Prepaid expenses and other current assets................. -- 47 Deferred barter costs..................................... 225 303 -------- -------- Total current assets........................................ 5,345 6,705 FIXED ASSETS, net........................................... 5,228 4,892 INTANGIBLE ASSETS, net...................................... 102,498 100,649 -------- -------- Total assets................................................ $113,071 $112,246 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable.......................................... $ 91 $ 197 Accrued liabilities....................................... 1,243 1,258 Deferred barter revenue................................... 390 558 -------- -------- Total current liabilities................................... 1,724 2,013 LONG-TERM LIABILITIES: Due to parent............................................. 100,759 98,708 Deferred tax liabilities.................................. 2,070 2,614 Other long-term liabilities............................... 1,025 876 -------- -------- Total liabilities........................................... 105,578 104,211 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Contributed capital....................................... 7,000 7,000 Retained earnings......................................... 493 1,035 -------- -------- Total stockholders' equity.................................. 7,493 8,035 -------- -------- Total liabilities and stockholders' equity.................. $113,071 $112,246 ======== ========
The accompanying notes are an integral part of these combined balance sheets. 16 17 SINCLAIR BROADCAST GROUP, INC. -- ST. LOUIS RADIO GROUP COMBINED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000 (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, -------------------------- 1999 2000 ------------- --------- (UNAUDITED) REVENUES: Station broadcast revenues, net of agency commissions of $1,414 and $1,528, respectively................................... $11,899 $13,398 Revenues realized from station barter arrangements........ 273 622 ------- ------- Total revenues.............................................. 12,172 14,020 ------- ------- OPERATING EXPENSES: Program and production.................................... 3,517 3,735 Selling, general and administrative....................... 3,689 3,895 Corporate expenses........................................ 365 321 Depreciation and amortization............................. 2,016 2,210 ------- ------- Total operating expenses.................................... 9,587 10,161 ------- ------- Broadcast operating income.................................. 2,585 3,859 ------- ------- OTHER (EXPENSE) INCOME: Interest expense.......................................... (2,653) (3,154) Other (expense) income.................................... (61) 218 ------- ------- (2,714) (2,936) ------- ------- (LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES... (129) 923 INCOME TAX (BENEFIT) PROVISION.............................. (71) 381 ------- ------- Net (loss) income........................................... $ (58) $ 542 ======= =======
The accompanying notes are an integral part of these combined statements. 17 18 SINCLAIR BROADCAST GROUP, INC. -- ST. LOUIS RADIO GROUP COMBINED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000 (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, --------------------------- 1999 2000 ------------ ----------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income......................................... $ (58) $ 542 Adjustments to reconcile net (loss) income to net cash flows from operating activities -- Depreciation and amortization of property and equipment... 2,016 2,210 Changes in assets and liabilities, net of effects of acquisitions and dispositions- Increase in accounts receivables, net.................. (1,549) (1,178) Increase in prepaid expenses and other current assets................................................ (57) (47) Decrease in other long-term assets..................... 1,199 -- Increase in accounts payable and accrued liabilities... 463 122 Deferred tax provision................................. 400 543 Net effect of changes in deferred barter revenues and deferred barter costs......................................... 77 90 Decrease in other long-term liabilities................ (108) (148) ------- ------- Net cash flows from operating activities.................... 2,383 2,134 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment..................... (279) (26) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in due to parent............................... (2,139) (2,051) ------- ------- NET (DECREASE) INCREASE IN CASH............................. (35) 57 CASH, beginning of period................................... 189 230 ------- ------- CASH, end of period......................................... $ 154 $ 287 ======= =======
The accompanying notes are an integral part of these combined statements. 18 19 SINCLAIR BROADCAST GROUP, INC. -- ST. LOUIS RADIO GROUP NOTES TO COMBINED FINANCIAL STATEMENTS AS OF JUNE 30, 2000 1. BASIS OF PRESENTATION: The St. Louis Radio Group of Sinclair Broadcast Group, Inc. (the "Company") was formed through acquisition. Sinclair Broadcast Group, Inc. ("SBG") entered into the radio business in May 1996 when it acquired radio stations from River City Broadcasting LLP ("River City"). As a result of the subsequent Heritage Media Services, Inc. (Heritage) acquisition and the acquisition of KXOK from WPNT, Inc., the Company now is comprised of radio stations KPNT, KXOK, KIHT, WVRV, WIL, and WRTH, serving the St. Louis market. These acquisitions have been recorded under the purchase method of accounting. These condensed combined financial statements have been prepared from SBG's historical accounting records and present the operations of the St. Louis Radio Group as if the Company had been a separate entity for all periods presented. During these periods, SBG provided various services to the Company (see Note 2). Furthermore, acquisitions consummated by SBG have been presented as if they were made by the Company and the consideration to effect these acquisitions was both loaned and contributed by SBG. All significant intercompany transactions and account balances between the six St. Louis stations have been eliminated in consolidation. The financial information included herein may not necessarily reflect the consolidated results of operations, financial position and cash flows of the Company in the future or what they would have been had it been a separate, stand-alone entity during the periods presented. INTERIM FINANCIAL STATEMENTS The condensed combined financial statements for the six months ended June 30, 1999 and 2000, are unaudited, but in the opinion of management, such financial statements have been presented on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial position and results of operations and cash flows for these periods. 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 accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading. The condensed combined financial statements included herein should be read in conjunction with the combined financial statements and the notes thereto included in the Company's annual financial statements for the year ended December 31, 1999. 2. RELATED PARTY TRANSACTIONS The Company has utilized various services provided by SBG or its subsidiaries. These services included, among others, certain investor relations, executive, human resources, legal, investment, finance, real estate, information management, internal audit, tax preparation and treasury. The costs of such services have been allocated according to established methodologies and are determined on an annual basis by SBG. Such methodologies depend on the specific service provided and include allocating costs that directly relate to the Company or allocating costs that represent a pro rata portion of the total costs for the services provided. Management of the Company believes these allocations to be a fair and reasonable share of such costs. For the six months ended June 30, 1999 and 2000, allocated expenses of approximately $365,000 (unaudited) and $321,000 (unaudited), respectively, were included in the combined statements of operations of the Company. Substantially all costs relating to direct intercompany services have been reflected in the accompanying combined financial statements. 19 20 The Company's radio stations and SBG's television stations have historically provided broadcast time to each other. The revenues or costs associated with these intercompany transactions were not significant in the periods presented. The Company and SBG have entered into joint advertising arrangements. Revenues are distributed to the parties providing the services based upon the contract terms. The revenues associated with such sales were not significant in the periods presented. 3. SIGNIFICANT EVENTS SALE OF THE ST. LOUIS RADIO GROUP On June 21, 2000, SBG entered into an agreement with Emmis Communications Corp. ("Emmis") to sell the assets of the radio stations WIL-FM, WRTH-AM, WVRV-FM, KPNT-FM, KXOK-FM and KIHT-FM in St. Louis, Missouri for a cash purchase price of $220.0 million. The agreement also included the settlement of outstanding lawsuits by and between SBG and Emmis. This acquisition is awaiting approval by the Federal Communications Commission and Department of Justice. In connection with the signing of the purchase agreement, Emmis made an escrow payment of $22.0 million which will be held in trust as a deposit until the deal is closed. 20 21 INDEPENDENT AUDITORS' REPORT Emmis Communications Corporation: We have audited the accompanying combined balance sheet of KZLA-FM (the Station) and the related FCC broadcasting license owned by Bonneville Holding Company (collectively, the Company) as of December 31, 1999, and the related combined statements of operations and of cash flows for the year then ended. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such combined financial statements present fairly, in all material respects, the combined financial position of the Company as of December 31, 1999, and the combined results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying combined financial statements have been prepared from the separate records maintained by the Company and may not be indicative of the conditions that would have existed or the results of operations had the Company been operated as an unaffiliated company. As discussed in Notes 1 and 6, certain expenses represent allocations made by the Company's parent. /s/ DELOITTE & TOUCHE LLP Salt Lake City, Utah September 5, 2000 21 22 KZLA-FM COMBINED BALANCE SHEETS DECEMBER 31, 1999 AND JUNE 30, 2000 (UNAUDITED)
DECEMBER 31, JUNE 30, 1999 2000 ------------ ------------ (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $144,860 $120,067 Accounts receivable -- net of allowance for doubtful accounts of $93,000 at December 31, 1999 and $38,000 at June 30, 2000.......................................... 3,839,637 3,531,190 Prepaid expenses and other current assets................. 214,480 117,614 Current deferred tax assets............................... 129,731 110,436 ------------ ------------ Total current assets................................. 4,328,708 3,879,307 ------------ ------------ Property, plant, and equipment: Land...................................................... 181,692 181,692 Buildings and leasehold improvements...................... 2,048,374 2,048,709 Furniture, fixtures, and equipment........................ 2,809,543 2,784,876 Construction in progress.................................. 424,136 483,263 ------------ ------------ Total................................................ 5,463,745 5,498,540 Accumulated depreciation and amortization................. (3,543,454) (3,701,906) ------------ ------------ Total property, plant, and equipment -- net.......... 1,920,291 1,796,634 ------------ ------------ Due from affiliates......................................... 2,324,554 3,733,873 Radio broadcast license -- net of accumulated amortization of $6,630,000 at December 31, 1999 and $8,524,000 at June 30, 2000.................................................. 144,917,025 143,022,685 Other intangible assets -- net of accumulated amortization of $248,000 at December 31, 1999 and $319,000 at June 30, 2000...................................................... 402,236 331,357 Deferred tax assets......................................... 231,692 256,739 Other assets................................................ 36,896 34,081 ------------ ------------ Total....................................................... $154,161,402 $153,054,676 ============ ============ LIABILITIES AND NET INVESTMENT CURRENT LIABILITIES: Accounts payable.......................................... $174,774 $87,979 Accrued payroll and benefits.............................. 443,754 294,742 Accrued expenses.......................................... 63,450 110,646 ------------ ------------ Total current liabilities............................ 681,978 493,367 Commitments and contingencies (Notes 4 and 5) Net investment.............................................. 153,479,424 152,561,309 ------------ ------------ Total....................................................... $154,161,402 $153,054,676 ============ ============
See notes to combined financial statements 22 23 KZLA-FM COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000 (UNAUDITED)
SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, ------------------------ 1999 1999 2000 ------------ ---- ---- (UNAUDITED) Net revenues, net of agency and representative commissions and revenue sharing fees of $2,446,000, $1,062,000, and $1,267,000 at December 31, 1999, June 30, 1999, and June 30, 2000, respectively............. $14,779,604 $6,468,160 $7,481,533 ----------- ---------- ---------- Expenses: Operating............................................. 2,774,094 1,375,116 1,731,601 Selling and promotional............................... 4,148,952 2,423,101 3,046,511 General and administrative............................ 1,418,152 745,381 675,504 Allocated corporate expenses.......................... 188,860 97,562 94,688 Depreciation and amortization......................... 4,354,414 2,178,233 2,164,288 ----------- ---------- ---------- Total expenses................................... 12,884,472 6,819,393 7,712,592 ----------- ---------- ---------- Net operating income (loss) before income tax expense... 1,895,132 (351,233) (231,059) Income tax expense...................................... 2,302,575 631,719 687,056 ----------- ---------- ---------- Net loss................................................ $ (407,443) $ (982,952) $ (918,115) =========== ========== ==========
See notes to combined financial statements 23 24 ' KZLA-FM COMBINED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000 (UNAUDITED)
SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, -------------------------- 1999 1999 2000 ------------ ---- ---- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss............................................ $ (407,443) $ (982,952) $ (918,115) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization.................... 4,354,414 2,178,233 2,164,288 Provision for losses on accounts receivable...... 69,000 21,000 30,000 Loss on disposal of property and equipment....... 425 Deferred income taxes............................ (54,196) (61,558) (5,752) Changes in operating assets and liabilities: Accounts receivable............................ (993,425) (140,858) 278,447 Prepaid expenses and other current assets...... 81,494 355,631 96,866 Other assets................................... (23,222) (2,729) 2,815 Accounts payable............................... 137,033 43,432 (86,795) Accrued payroll and benefits................... (2,196) (157,962) (149,012) Accrued expenses............................... 59,903 18,104 47,196 ----------- ----------- ----------- Net cash provided by operating activities... 3,221,787 1,270,341 1,459,938 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant, and equipment.......... (210,526) (61,418) (75,412) Proceeds from sale of property, plant, and equipment........................................ 445 ----------- ----------- ----------- Net cash used in investing activities....... (210,081) (61,418) (75,412) ----------- ----------- ----------- Cash flows from financing activities -- Increase in due from affiliates..................... (3,172,436) (1,204,115) (1,409,319) ----------- ----------- ----------- Increase (decrease) in cash and cash equivalents...... (160,730) 4,808 (24,793) Cash and cash equivalents, beginning of period........ 305,590 305,590 144,860 ----------- ----------- ----------- Cash and cash equivalents, end of period.............. $ 144,860 $ 310,398 $ 120,067 =========== =========== ===========
See notes to combined financial statements 24 25 KZLA-FM NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000 (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS -- The radio station, KZLA-FM, is broadcast in the Los Angeles, California area. Through July 31, 2000, KZLA-FM (the Station) was operated by Bonneville International Corporation (BIC) with the related FCC broadcasting license being owned by Bonneville Holding Company (BHC), a not-for-profit tax exempt affiliate of BIC, and the operating assets for the Station being owned by BIC (collectively, the Company). On June 21, 2000, BIC and BHC executed a letter of intent to enter into an asset exchange agreement (the Exchange Agreement) with Emmis Communications Corporation (Emmis) whereby BIC has agreed to transfer title to substantially all of the assets of the Station and BHC has agreed to transfer title to the related Station's FCC license to Emmis in exchange for Emmis transferring title to substantially all of the assets and related FCC licenses of four radio stations located in the St. Louis, Missouri Market to BIC and BHC, respectively. For income tax purposes, the exchange is structured as a "like-kind exchange" under the provisions of Section 1031 of the Internal Revenue Code. Emmis is operating the Station under a time brokerage agreement for the period August 1, 2000 through the closing of the Exchange Agreement, which is expected to be on or about September 30, 2000. BASIS OF ACCOUNTING -- The combined balance sheets and statements of operations and cash flows include the historical accounts and transactions of the Station, as operated by BIC, and the Station's FCC license owned by BHC. In this context, no direct ownership relationship exists and, accordingly, a net investment is shown in lieu of stockholders' equity in the accompanying combined financial statements. Historically, BIC did not charge the Company for certain corporate overhead expenses and income taxes; however, for purposes of the accompanying statements of income, such expenses have been charged as described below and in Note 6. Intercompany transactions have been eliminated in the combination. INTERIM RESULTS (UNAUDITED) -- In the opinion of management, the accompanying unaudited interim combined financial statements as of June 30, 2000 and for the six months ended June 30, 1999 and 2000 have been prepared on the same basis as the audited combined financial statements as of and for the year ended December 31, 1999 and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the combined balance sheets, operating results, and cash flows for such periods. Operating results for the six months ended June 30, 2000 are not necessarily indicative of the results that may be reported for any future periods. USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS -- All highly liquid, short-term investments with original maturities of three months or less are considered to be cash equivalents. ALLOWANCE FOR DOUBTFUL ACCOUNTS -- The allowance for doubtful accounts is based on historical bad debt experience and periodic evaluation of the collectibility of individual accounts receivable. The provision for doubtful accounts charged to operations is made in amounts required to maintain an adequate allowance to cover anticipated losses. 25 26 PROPERTY, PLANT, AND EQUIPMENT -- Property, plant, and equipment is stated at cost. Depreciation and amortization are computed using the straight-line method, based on historical costs, over estimated useful lives, as follows:
ESTIMATED LIVES (YEARS) ------------- Buildings............................. 8-40 Furniture and fixtures................ 5-8 Equipment............................. 3-15 Leasehold improvements................ Shorter of life of lease or useful life of asset
DUE FROM AFFILIATES -- The due from affiliates account represents amounts due primarily from BIC and is noninterest bearing and has no specified repayment date. The Company's cash and certain operating activities are largely managed on a centralized basis by BIC. Accordingly, the Company's available cash is deposited in, and cash requirements are transferred from, BIC corporate accounts on a regular basis. Such transactions are recorded through the due from affiliates account. RADIO BROADCAST LICENSE AND OTHER INTANGIBLE ASSETS -- The radio broadcast license is being amortized on a straight-line basis over 40 years. Other intangible assets are being amortized over various periods on a straight-line basis not exceeding 15 years. REVENUE RECOGNITION -- Revenues are recognized when advertisements are broadcast. Advertising costs are recognized as services are rendered. Included in revenues are nonmonetary transactions arising from the trading of advertising time for merchandise and services. These transactions are recorded as the advertising is broadcast at the fair market value of the merchandise and services received. Advertising time exchanged for merchandise and services amounted to approximately $223,000 for the year ended December 31, 1999 and $116,000 and $27,000 for the six months ended June 30, 1999 and 2000, respectively. INCOME TAXES -- The results of the Station's operations are included in consolidated federal and state returns filed by the parent corporation of BIC, Deseret Management Corporation (DMC). Income taxes are calculated for the Station in a manner that approximates a separate return basis. Included in due from affiliates at December 31, 1999 and June 30, 2000 is a current income tax liability payable to BIC of approximately $2,400,000 and $693,000, respectively. The Station utilizes the liability method of accounting for income taxes. Under the liability method, deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Recognition of deferred tax assets is limited to amounts considered by management to be more likely than not of realization in future periods. BHC is a not-for-profit entity and is not subject to federal and state income taxes; accordingly, the amortization relating to the broadcast license owned by BHC does not have any benefit for income tax purposes in the accompanying combined financial statements. CONCENTRATION OF CREDIT RISK -- The Company extends credit to customers on an unsecured basis in the normal course of business. The customers are generally located in the greater Los Angeles, California area, and no individual industry or industry segment is significant to the Company's customer base. The Company has policies governing the extension of credit and collection of amounts due from customers. IMPAIRMENT OF LONG-LIVED ASSETS -- The Company evaluates the carrying value of long-term assets based upon current and anticipated undiscounted cash flows, and recognizes an impairment when such estimated cash flows will be less than the carrying value of the asset. Measurement of the amount of impairment, if any, is based upon the difference between carrying value and fair value. FAIR VALUE OF FINANCIAL INSTRUMENTS -- The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the short maturity of these financial instruments. 26 27 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In June 1999, Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued, which establishes accounting and reporting standards for derivative financial instruments and hedging activities. Management believes adoption of this statement will not impact the Company's financial position or results of operations. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements" (SAB 101). SAB 101 establishes accounting and reporting standards for the recognition of revenue. It states that revenue generally is realized or realizable and earned when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller's price to the buyer is fixed or determinable; (4) collectibility is reasonably assured. SAB 101 is effective no later than the fourth quarter of fiscal years beginning after December 15, 1999. The Company has determined that the impact of SAB 101 will not have a material impact to the Company's combined financial statements. 2. INCOME TAXES Income tax expense (benefit) for the year ended December 31, 1999 and the six months ended June 30, 1999 and 2000 consisted of the following:
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, -------------------- 1999 1999 2000 ------------ ---- ---- (UNAUDITED) Current: Federal..................................... $2,003,255 $589,285 $588,887 State....................................... 353,516 103,992 103,921 ---------- -------- -------- 2,356,771 693,277 692,808 ---------- -------- -------- Deferred: Federal..................................... (46,067) (52,324) (4,889) State....................................... (8,129) (9,234) (863) ---------- -------- -------- (54,196) (61,558) (5,752) ---------- -------- -------- Income tax expense............................ $2,302,575 $631,719 $687,056 ========== ======== ========
Income tax expense for the year ended December 31, 1999 and for the six months ended June 30, 1999 and 2000 differs from that computed at the federal statutory corporate tax rate as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, --------------------- 1999 1999 2000 ------------ ---- ---- (UNAUDITED) Computed income taxes at 34%................. $ 644,345 $(119,419) $(78,560) State income tax, net of federal benefit..... 345,387 94,758 103,058 Broadcast license amortization............... 1,288,150 644,075 644,075 Nondeductible expenses....................... 24,693 12,305 18,483 ---------- --------- -------- Provision for income taxes................... $2,302,575 $ 631,719 $687,056 ========== ========= ========
27 28 The components of deferred tax assets at December 31, 1999 and June 30, 2000 are as follows:
DECEMBER 31, 1999 JUNE 30, 2000 --------------------- --------------------- CURRENT LONG-TERM CURRENT LONG-TERM ------- --------- ------- --------- Deferred tax assets: Accrued vacation and bonuses....... $ 83,730 $ 86,450 Tax and book basis difference in property, plant, and equipment....................... $ 90,620 $111,747 Allowance for doubtful accounts.... 37,201 15,186 Pension accruals................... 77,797 80,840 Other.............................. 8,800 63,275 8,800 64,152 -------- -------- -------- -------- Deferred tax assets.................. $129,731 $231,692 $110,436 $256,739 ======== ======== ======== ========
3. NET INVESTMENT The net investment includes accumulated equity as well as any working capital funding requirement to/from BIC. The net investment is comprised of the following for the year ended December 31, 1999 and the six months ended June 30, 2000: Balance at January 1, 1999.................................. $153,886,867 Net loss.................................................... (407,443) ------------ Balance at December 31, 1999................................ 153,479,424 Net loss (unaudited)........................................ (918,115) ------------ Balance at June 30, 2000 (unaudited)........................ $152,561,309 ============
4. COMMITMENTS AND CONTINGENCIES LEASES -- Rental expense pursuant to the terms of the Company's operating leases was approximately $242,000 for the year ended December 31, 1999 and $122,000 and $128,000 for the six months ended June 30, 1999 and 2000, respectively. At December 31, 1999, future minimum rental payments required under these leases are as follows: Year ending December 31: 2000...................................................... $161,265 2001...................................................... 104,783 2002...................................................... 42,488 2003...................................................... 41,325 2004...................................................... 24,000 Thereafter................................................ 198,000 -------- Total................................................ $571,861 ========
CONTINGENCIES -- The Company is involved in various claims and litigation regarding transactions occurring in the ordinary course of business. In the opinion of management, the effects of these potential liabilities arising from the other claims, if any, will not be material to the combined financial position or the results of operations and cash flows of the Company. EMPLOYMENT AGREEMENTS -- The Company enters into employment agreements with certain key employees of the Company. These agreements specify base salary, along with bonuses. 28 29 Future minimum payments under these employment agreements are as follows at December 31, 1999: Year ending December 31: 2000...................................................... $ 336,923 2001...................................................... 454,569 2002...................................................... 480,998 2003...................................................... 111,358 ---------- Total................................................ $1,383,848 ==========
5. EMPLOYEE BENEFIT PLANS DEFINED BENEFIT PLAN -- The Station participates in a defined benefit plan of BIC which covers all employees who work at least 1,000 hours in a year, have one year or more of service, and are at least 21 years of age. The plan is sponsored by BIC. Retirement benefits are based on years of service and an average of the employee's highest five years of compensation during the last ten years of employment. BIC's policy is to fund the maximum amounts allowed by the Employee Retirement Income Security Act of 1974. Contributions were intended to provide not only for benefits attributed for service to date but also for those expected to be earned in the future. Pension expense under this plan allocated to the Station by BIC was not material for the year ended December 31, 1999 and for the six months ended June 30, 1999 and 2000. THRIFT PLAN -- The Station participates in a Section 401(k) defined contribution plan (the Thrift Plan) of BIC in which employees age 21 or older could participate. Under provisions of the Thrift Plan, participants could contribute up to 17% of their pre-tax compensation to either a savings option (based on after tax earnings) or a deferred option (based on pre-tax earnings), subject to the "excess contribution" limitations defined in the Internal Revenue Code. For each participating employee, the Station provides a matching contribution of up to 3% of a participant's annual salary. The Station's contributions to the Thrift Plan were approximately $75,000 for the year ended December 31, 1999 and $38,000 and $43,000 for the six months ended June 30, 1999 and 2000, respectively. The plan is sponsored by BIC. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- BIC provides a postretirement monetary benefit other than pensions. It consists of a fixed monthly dollar contribution toward the purchase of medical, dental, and life insurance for substantially all of its retired employees. In 1993, BIC began advance funding for postretirement life benefits for employees retiring on or after January 1, 1994. Advance funding for medical benefits commenced in 1994. Medical benefits for employees who retired before January 1, 1994 continue to be funded on a pay-as-you-go basis. The Station has included in the accompanying combined statements of operations, expense under this plan of approximately $17,000 for the year ended December 31, 1999 and $7,000 and $8,000 for the six months ended June 30, 1999 and 2000, respectively. 6. RELATED PARTY TRANSACTIONS The Station is charged for certain corporate services received from BIC based upon the full-time equivalent employees of the Station to total full-time equivalent employees of all stations operated by BIC. Although BIC management is of the opinion that the allocations used are reasonable and appropriate, other allocations might be used that could produce results substantially different from those reflected herein and these cost allocations might not be indicative of amounts which might be paid to unrelated parties for similar 29 30 services. For purposes of these combined financial statements, the following BIC corporate departmental expenses have been charged to the Station's combined statements of income:
SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, ------------------ 1999 1999 2000 ------------ ---- ---- (UNAUDITED) Management...................................... $ 63,007 $33,347 $34,950 Finance......................................... 43,116 23,154 22,379 Information systems............................. 17,077 8,923 9,503 Human resources................................. 32,044 15,083 13,477 Engineering..................................... 7,605 4,044 3,316 Legal........................................... 10,742 5,110 5,259 Public relations................................ 3,648 2,022 Building and maintenance........................ 3,434 1,758 2,358 Depreciation.................................... 8,187 4,121 3,446 -------- ------- ------- Total...................................... $188,860 $97,562 $94,688 ======== ======= =======
****** 30 31 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Lee Enterprises, Incorporated Davenport, Iowa We have audited the accompanying combined statements of net assets of Lee Enterprises Certain Broadcasting Operations (Albuquerque, NM; Charleston-Huntington, WV; Honolulu, HI; Omaha, NE; Portland, OR; Topeka, KS; Tucson, AZ; Wichita, KS) (not a legal entity, see Note 1) as of September 30, 1998, and 1999, and the related statements of income, changes in net assets, and cash flows for the years ended September 30, 1997, 1998, and 1999. These financial statements are the responsibility of Lee Enterprises Certain Broadcasting Operations' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the net assets of Lee Enterprises Certain Broadcasting Operations as of September 30, 1998 and 1999, and the results of their operations and their cash flows for the years ended September 30, 1997, 1998, and 1999 in conformity with generally accepted accounting principles. /s/ McGLADREY & PULLEN, LLP Davenport, Iowa August 14, 2000 31 32 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND, OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) COMBINED STATEMENTS OF NET ASSETS SEPTEMBER 30, 1998 AND 1999 (DOLLARS IN THOUSANDS)
1998 1999 ---- ---- ASSETS Current Assets: Cash...................................................... $ -- $ 694 Receivables: Trade, less allowance for doubtful accounts 1998 $925; 1999 $1,099............................................... 20,516 22,770 Other.................................................. 1,074 1,504 Program rights............................................ 7,477 8,382 Prepaid expenses.......................................... 910 839 -------- -------- TOTAL CURRENT ASSETS................................. 29,977 34,189 -------- -------- Property and Equipment, net................................. 30,904 30,434 -------- -------- Intangible Assets, net...................................... 127,494 123,476 -------- -------- Other Assets: Program rights, net of current portion.................... 372 678 Investments............................................... 2,555 2,551 -------- -------- 2,927 3,229 -------- -------- $191,302 $191,328 ======== ======== LIABILITIES AND NET ASSETS Current Liabilities: Current maturities of program rights...................... $ 7,684 $ 8,962 Accounts payable.......................................... 2,646 1,578 Accrued compensation...................................... 3,025 2,874 Other accrued expenses.................................... 1,169 1,343 -------- -------- 14,524 14,757 -------- -------- Long-Term Program Rights, net of current maturities......... 539 982 -------- -------- Deferred Revenue and Other.................................. 2,267 2,267 -------- -------- Net Assets.................................................. 173,972 173,322 -------- -------- $191,302 $191,328 ======== ========
See Notes to Combined Financial Statements. 32 33 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND, OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) COMBINED STATEMENTS OF INCOME YEARS ENDED SEPTEMBER 30, 1997, 1998, AND 1999 (DOLLARS IN THOUSANDS)
1997 1998 1999 ---- ---- ---- Gross revenue: Local and regional........................................ $ 66,894 $ 72,585 $ 68,087 National.................................................. 45,696 47,487 49,405 Network................................................... 7,455 7,150 6,152 Political................................................. 6,839 5,589 6,723 Other..................................................... 7,924 8,744 8,249 -------- -------- -------- TOTAL GROSS REVENUE.................................. 134,808 141,555 138,616 Less agency commissions................................... 18,719 19,842 19,585 -------- -------- -------- NET REVENUE.......................................... 116,089 121,713 119,031 -------- -------- -------- Operating expenses: Compensation costs, including expenses from parent 1997 $108; 1998 $199; 1999 $981............................. 48,069 49,591 50,667 Depreciation.............................................. 6,986 6,889 7,814 Amortization of intangibles............................... 4,226 4,225 4,018 Program amortization...................................... 7,004 7,896 9,561 Other, including allocations from parent 1997 $440; 1998 $631; 1999 $670........................................ 25,717 27,414 26,979 -------- -------- -------- 92,002 96,015 99,039 -------- -------- -------- INCOME BEFORE INCOME TAXES........................... 24,087 25,698 19,992 Income tax expense.......................................... 10,053 10,682 8,456 -------- -------- -------- NET INCOME........................................... $ 14,034 $ 15,016 $ 11,536 ======== ======== ========
See Notes to Combined Financial Statements. 33 34 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND, OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) COMBINED STATEMENTS OF CHANGES IN NET ASSETS YEARS ENDED SEPTEMBER 30, 1997, 1998, AND 1999 (DOLLARS IN THOUSANDS)
1997 1998 1999 ---- ---- ---- Balance, beginning.......................................... $182,033 $179,943 $173,972 Net income................................................ 14,034 15,016 11,536 Transfers to parent, net.................................. (26,177) (31,669) (20,642) Income tax expense transferred to parent.................. 10,053 10,682 8,456 -------- -------- -------- Balance, ending............................................. $179,943 $173,972 $173,322 ======== ======== ========
See Notes to Combined Financial Statements. 34 35 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND, OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 1997, 1998, AND 1999 (DOLLARS IN THOUSANDS)
1997 1998 1999 ---- ---- ---- Cash Flows from Operating Activities: Net income................................................ $ 14,034 $ 15,016 $ 11,536 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 11,212 11,114 11,832 Program amortization................................... 7,004 7,896 9,561 Program contract rights payments....................... (7,404) (8,413) (9,051) Other, primarily (gain) on sale of property and equipment............................................ (2) (43) (55) Income tax expense transferred to parent............... 10,053 10,682 8,456 Changes in assets and liabilities: (Increase) decrease in receivables................... (2,062) 218 (2,684) (Increase) decrease in prepaid expenses.............. (50) 404 71 Increase (decrease) in accounts payable and accrued expenses and deferred revenue..................... (312) 802 (1,045) -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES......... 32,473 37,676 28,621 -------- -------- -------- Cash Flows from Investing Activities: Proceeds from sale of property and equipment.............. 155 477 334 Purchase of property and equipment........................ (6,334) (6,705) (7,619) -------- -------- -------- NET CASH (USED IN) INVESTING ACTIVITIES........... (6,179) (6,228) (7,285) -------- -------- -------- Cash Flows (Used In) Financing Activities, transfers to parent, net............................................... (26,177) (31,669) (20,642) -------- -------- -------- NET INCREASE (DECREASE) IN CASH................... 117 (221) 694 Cash: Beginning................................................. 104 221 -- -------- -------- -------- Ending.................................................... $ 221 $ -- $ 694 ======== ======== ======== Supplemental Disclosure of Noncash Operating Activities, program rights acquired................................... $ 7,023 $ 8,486 $ 10,772
See Notes to Combined Financial Statements. 35 36 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND,OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) NOTES TO COMBINED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS: Lee Enterprises Certain Broadcasting Operations (Business) consists of eight network-affiliated and seven satellite television stations and a mobile television production business owned by Lee Enterprises, Incorporated (Parent). SIGNIFICANT ACCOUNTING POLICIES: Basis of presentation: The accompanying combined financial statements represent the net assets and associated revenues, expenses, and cash flows of the Business, assuming that the Business was organized as a separate legal entity. The Parent provides certain administrative services to the Business including general management, engineering services, insurance, accounting, and payroll. Included within compensation costs are $108, $199, and $981 of costs allocated from the Parent for the years ended September 30, 1997, 1998, and 1999, respectively. Other operating expenses include $440, $631, and $670 of additional costs allocated from the parent for various items including training costs, consulting services, relocation costs, and travel and entertainment for the years ended 1997, 1998, and 1999, respectively. Accounting estimates: The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Property and equipment: Property and equipment is recorded at cost. Depreciation is calculated under the straight-line method over the estimated useful lives, 5-to-25 years for buildings and improvements, and 15-20 years for towers. Other major equipment is calculated under accelerated methods over 3-to-10 years. Program rights: Cost of program rights is stated at the lower of cost or estimated net realizable value. Estimated net realizable values are based upon management's expectations of future advertising revenue, net of sales commissions, to be generated by the program material. The total cost of the rights is recorded as an asset and a liability when the program becomes available for broadcast. Cost of program rights is charged to operations primarily on accelerated bases related to the usage of the program. The current portion of program rights represents those rights that will be amortized in the succeeding year. Intangible assets: Intangible assets are carried at cost and consist primarily of customer lists, broadcast licenses and agreements, and the excess of acquisition costs over estimated fair value of net assets acquired (goodwill). The excess costs over fair value of net tangible assets acquired include $15,017 incurred prior to October 31, 1970, which is not being amortized. The remaining cost are being amortized using the straight-line method primarily over 40 years. The Business reviews its intangibles and other long-lived assets annually to determine potential impairment. In performing the review, the Business estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment is recognized. The 36 37 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND,OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) NOTES TO COMBINED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) amount of impairment is measured based upon projected discounted future cash flows using a discount rate reflecting the Business' average cost of funds. Net assets: The Business participates in the Parent's cash management system. Under the system, all cash generated by the Business is transferred to the Parent and all cash requirements of the Business are funded by the Parent. These transfers of funds are reflected in the net asset balance. Broadcast revenue: Revenue is recognized when advertisements or network programming are broadcast. Income taxes: The Business represents a business unit of Lee Enterprises, Incorporated and as such does not file separate income tax returns. The provision for income taxes of the Business has been calculated as if the Business was a stand-alone corporation filing separate tax returns. The Business accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Cumulative deferred taxes have been settled through net assets. Financial instruments: The Business has reviewed the following financial instruments and has determined that their fair values approximated their carrying values as of September 30, 1997, 1998, and 1999: cash, receivables, accounts payable, accrued expenses, and program rights. NOTE 2. PROPERTY AND EQUIPMENT A summary of property and equipment is as follows:
SEPTEMBER 30, ------------------- 1998 1999 ---- ---- Land and improvements....................................... $ 3,610 $ 3,655 Buildings and improvements.................................. 16,960 17,814 Equipment................................................... 76,805 82,760 Other, primarily deposits................................... 2,041 1,667 ------- -------- 99,416 105,896 Less accumulated depreciation............................... 68,512 75,462 ------- -------- $30,904 $ 30,434 ======= ========
37 38 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND,OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) NOTES TO COMBINED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 3. INTANGIBLE ASSETS A summary of intangible assets is as follows:
SEPTEMBER 30, -------------------- 1998 1999 ---- ---- Customer lists, broadcasting licenses, and agreements....... $ 91,020 $ 91,020 Goodwill.................................................... 79,333 79,333 Other....................................................... 4,200 4,200 -------- -------- 174,553 174,553 Less accumulated amortization............................... 47,059 51,077 -------- -------- $127,494 $123,476 ======== ========
NOTE 4. RETIREMENT PLAN The Parent maintains a qualified defined contribution retirement plan (Plan) that covers all full-time employees of the Business who have satisfied minimum age and service requirements. Total contributions to the plan for the years ended September 30, 1997, 1998, and 1999 were approximately $1,996, $2,181, and $2,191, respectively. NOTE 5. COMMITMENTS AND CONTINGENCIES The Business has entered into agreements to acquire broadcast rights for certain syndicated programs of approximately $19,776 as of September 30, 1999. NOTE 6. SUBSEQUENT EVENT On May 7, 2000, Lee Enterprises, Incorporated entered into an agreement to sell the Business to Emmis Communications Corporation. The purchase price is approximately $562,500. The sale is subject to various conditions, including approval by the Federal Communication Commission, and other customary contingencies for a transaction of this nature. The sale is anticipated to be complete later this year. 38 39 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND, OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) CONDENSED COMBINED STATEMENTS OF NET ASSETS (DOLLARS IN THOUSANDS)
SEPTEMBER 30, JUNE 30, 1999 2000 ------------- -------- (UNAUDITED) ASSETS Current Assets: Cash...................................................... $ 694 $ 511 Receivables: Trade, less allowance for doubtful accounts 1999 $1,099; 2000 $1,003....................................... 22,770 24,581 Other.................................................. 1,504 1,415 Program rights............................................ 8,382 2,105 Prepaid expenses.......................................... 839 974 -------- -------- TOTAL CURRENT ASSETS................................. 34,189 29,586 -------- -------- Property and Equipment, net................................. 30,434 30,017 -------- -------- Intangible Assets, net...................................... 123,476 120,515 -------- -------- Other Assets: Program rights, net of current portion.................... 678 326 Investments............................................... 2,551 3,322 -------- -------- 3,229 3,648 -------- -------- $191,328 $183,766 ======== ======== LIABILITIES AND NET ASSETS Current Liabilities: Current maturities of program rights...................... $ 8,962 $ 2,144 Accounts payable.......................................... 1,578 1,518 Accrued compensation...................................... 2,874 2,295 Other accrued expenses.................................... 1,343 1,363 -------- -------- 14,757 7,320 -------- -------- Long-Term Program Rights, net of current maturities......... 982 766 -------- -------- Deferred Revenue and Other.................................. 2,267 2,128 -------- -------- Net Assets.................................................. 173,322 173,552 -------- -------- $191,328 $183,766 ======== ========
See Notes to Unaudited Condensed Combined Financial Statements. 39 40 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND, OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) CONDENSED COMBINED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED -------------------- JUNE 30, JUNE 30, 1999 2000 -------- -------- (UNAUDITED) Gross revenue: Local and regional........................................ $ 51,539 $ 53,408 National.................................................. 36,830 40,081 Network................................................... 4,752 2,895 Political................................................. 6,588 3,196 Other..................................................... 5,928 6,176 -------- -------- TOTAL GROSS REVENUE.................................. 105,637 105,756 Less agency commissions................................... 15,035 15,298 -------- -------- NET REVENUE.......................................... 90,602 90,458 -------- -------- Operating expenses: Compensation costs, including expenses from parent 1999 $735; 2000 $444........................................ 37,958 38,160 Depreciation.............................................. 5,472 6,093 Amortization of intangibles............................... 3,005 2,961 Program amortization...................................... 6,451 7,759 Other, including allocations from parent 1999 $300; 2000 $292................................................... 20,446 18,669 -------- -------- 73,332 73,642 -------- -------- INCOME BEFORE INCOME TAXES........................... 17,270 16,816 Income tax expense.......................................... 7,230 7,053 -------- -------- NET INCOME........................................... $ 10,040 $ 9,763 ======== ========
See Notes to Unaudited Condensed Combined Financial Statements. 40 41 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND, OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) CONDENSED COMBINED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED -------------------- JUNE 30, JUNE 30, 1999 2000 -------- -------- (UNAUDITED) Cash Flows from Operating Activities: Net income................................................ $ 10,040 $ 9,763 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 8,477 9,054 Program amortization................................... 6,451 7,759 Program contract rights payments....................... (6,953) (8,489) Other.................................................. (12) (168) Income tax expense transferred to parent............... 7,230 7,053 Changes in assets and liabilities: (Increase) in receivables............................ (6,338) (1,722) (Increase) in prepaid expenses....................... (167) (135) Increase (decrease) in accounts payable and accrued expenses............................................ 1,224 (758) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES......... 19,952 22,357 -------- -------- Cash Flows from Investing Activities: Purchase of property and equipment........................ (6,471) (5,843) Proceeds from sale of property and equipment.............. 278 172 Purchase of investment.................................... -- (608) -------- -------- NET CASH (USED IN) INVESTING ACTIVITIES........... (6,193) (6,279) -------- -------- Cash Flows (Used In) Financing Activities, transfers to parent, net............................................... (12,897) (16,261) -------- -------- NET INCREASE (DECREASE) IN CASH................... 862 (183) Cash: Beginning................................................. -- 694 -------- -------- Ending.................................................... $ 862 $ 511 ======== ========
See Notes to Unaudited Condensed Combined Financial Statements. 41 42 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND, OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1. GENERAL, NATURE OF BUSINESS, AND SIGNIFICANT ACCOUNTING POLICIES GENERAL: Pursuant to the rules and regulations of the Securities and Exchange Commission, the consolidated interim financial statements included herein have been prepared, without audit, by Lee Enterprises Certain Broadcasting Operations (Albuquerque, NM; Charleston-Huntington, WV; Honolulu, HI; Omaha, NE; Portland, OR; Topeka, KS; Tucson, AZ; Wichita, KS). As permitted under the applicable rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosure 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, Lee Enterprises Certain Broadcasting Operations believe that the disclosures are adequate to make the information presented not misleading. The condensed combined financial statements included herein should be read in conjunction with the combined financial statements and the notes thereto included elsewhere in this prospectus. The unaudited information furnished reflects all adjustments, consisting of normal recurring accruals, which are, in the opinion of management, necessary to a fair presentation of the financial position as of June 30, 2000 and the results of operations and cash flows for the nine-month periods ended June 30, 2000 and 1999. The results of the nine-month periods are not necessarily indicative of the results of the Lee Enterprises Certain Broadcasting Operations (Business) which may be expected for the entire year. NATURE OF BUSINESS: The Business consists of eight network-affiliated and seven satellite television stations and a mobile television production business owned by Lee Enterprises, Incorporated (Parent). SIGNIFICANT ACCOUNTING POLICIES: Basis of presentation: The accompanying combined financial statements represent the net assets and associated revenues, expenses, and cash flows of the Business, assuming that the Business was organized as a separate legal entity. The Parent provides certain administrative services to the Business including general management, engineering services, insurance, accounting, and payroll. Included within compensation costs are $735 and $444 of costs allocated from the Parent for the nine months ended June 30, 1999 and 2000, respectively. Other operating expenses include $300 and $292 of additional costs allocated from the parent for various items including training costs, consulting services, relocation costs, and travel and entertainment for the nine months ended June 30, 1999 and 2000, respectively. Net assets: The Business participates in the Parent's cash management system. Under the system, all cash generated by the Business is transferred to the Parent and all cash requirements of the Business are funded by the Parent. These transfers of funds are reflected in the net asset balance. 42 43 LEE ENTERPRISES CERTAIN BROADCASTING OPERATIONS (ALBUQUERQUE, NM; CHARLESTON-HUNTINGTON, WV; HONOLULU, HI; OMAHA, NE; PORTLAND, OR; TOPEKA, KS; TUCSON, AZ; WICHITA, KS) NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 2. PROPERTY AND EQUIPMENT A summary of property and equipment as of June 30, 2000 is as follows: Land and improvements....................................... $ 3,573 Buildings and improvements.................................. 17,677 Equipment................................................... 84,536 Other, primarily deposits................................... 5,305 -------- 111,091 Less accumulated depreciation............................... 81,074 -------- $ 30,017 ========
NOTE 3. INTANGIBLE ASSETS A summary of intangible assets as of June 30, 2000 is as follows: Customer lists, broadcasting licenses, and agreements....... $ 91,020 Goodwill.................................................... 79,333 Other....................................................... 4,200 -------- 174,553 Less accumulated amortization............................... 54,038 -------- $120,515 ========
NOTE 4. SUBSEQUENT EVENT On May 7, 2000, Lee Enterprises, Incorporated entered into an agreement to sell the Business to Emmis Communications Corporation. The purchase price is approximately $562,500. The sale is subject to various conditions, including approval by the Federal Communication Commission, and other customary contingencies for a transaction of this nature. The sale is anticipated to be completed later this year. 43 44 (b) Pro forma financial information PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION Introduction.............................................. 45 Pro Forma Combined Condensed Balance Sheet as of May 31, 2000................................................... 46 Pro Forma Combined Condensed Statement of Operations for the three months ended May 31, 2000.................... 47 Pro Forma Combined Condensed Statement of Operations for the Year ended February 29, 2000....................... 48 Notes to Unaudited Pro Forma Condensed Combined Financial Statement.............................................. 49 44 45 EMMIS COMMUNICATIONS CORPORATION PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION The accompanying financial statements present our unaudited pro forma combined condensed balance sheet as of May 31, 2000 and our unaudited pro forma combined condensed statement of operations as of May 31, 2000, and for the year ended February 29, 2000. The unaudited pro forma combined condensed balance sheet as of May 31, 2000 is presented as if (i) the acquisition, which we refer to as the "Sinclair Acquisition," of six radio stations in St. Louis from Sinclair Broadcast Group, Inc. for $220 million in cash, (ii) the acquisition, which we refer to as the "Bonneville Acquisition," of a radio station in Los Angeles from Bonneville International Corporation in exchange for one of our radio stations in St. Louis and three of the radio stations we acquired in the Sinclair Acquisition, (iii) the acquisition, which we refer to as the "Lee Acquisition," of eight network-affiliated television stations from Lee Enterprises, Incorporated for $559.5 million in cash and the payment of $21.5 million in cash for working capital, (iv) the disposition, which we refer to as the "Hawaii Disposition," of one of our television stations in Hawaii that was acquired as part of the Lee Acquisition for cash equal to our management's estimate of the fair value of that station, and (v) the debt financing for these transactions, had each occurred on May 31, 2000. The pro forma combined condensed statement of operations for the three month period ended May 31, 2000 and for the year ended February 29, 2000 are presented as if (i) the acquisition, which we refer to as the "Votionis Acquisition," of a 75% interest in Votionis, S.A. which operates two radio stations in Buenos Aires, Argentina for $13.3 million in cash, (ii) the acquisition, which we refer to as the "WKCF Acquisition," of a television station in Orlando from Press Communications LLC for $197.1 million in cash, (iii) the Sinclair Acquisition, (iv) the Bonneville Acquisition, (v) the Lee Acquisition, (vi) the Hawaii Disposition, (vii) the application of $210.4 million of the net proceeds from our public offerings of common stock and convertible preferred stock and from our private placement of common stock to a subsidiary of Liberty Media Corporation, which public offerings and private placement we refer to as our "1999 Equity Transactions," to the Votionis Acquisition and the WKCF Acquisition, (viii) the application of $311.6 million of the net proceeds from our 1999 Equity Transactions to the repayment of our senior debt, and (ix) the debt financing of the Sinclair Acquisition, the Bonneville Acquisition and the Lee Acquisition had each occurred at March 1, 1999 and carried forward. Preparation of the pro forma financial information was based on assumptions deemed appropriate by our management. The pro forma information is unaudited and is not necessarily indicative of the results which actually would have occurred if the transactions had been consummated at the beginning of the period presented, nor does it purport to represent the future financial position and results of operation for future periods. The pro forma information does not reflect any increased revenues, synergies or cost savings that we expect to realize from our recent acquisitions. The pro forma information should be read in conjunction with our audited historical financial statements filed on Form 10-K/A for our year ended February 29, 2000 and our unaudited financial statements filed on Form 10-Q for our fiscal quarter ended May 31, 2000. 45 46 EMMIS COMMUNICATIONS CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF MAY 31, 2000 (IN THOUSANDS)
PRO FORMA ADJUSTMENTS --------------------- EMMIS SIGNIFICANT EMMIS HISTORICAL ACQUISITIONS (2C) PRO FORMA ---------- ----------------- --------- CURRENT ASSETS: Cash and cash equivalents............ $19,751 $(4,380) $15,371 Accounts receivable, net............. 81,494 21,500 102,994 Prepaid expenses..................... 14,474 -- 14,474 Other................................ 17,160 5,488 22,648 ---------- -------- ---------- Total current assets................. 132,879 22,608 155,487 Property and equipment, net.......... 127,953 71,148 199,101 Intangible assets, net............... 1,058,167 729,550 1,787,717 Other assets, net.................... 51,117 (620) 50,497 ---------- -------- ---------- Total assets....................... $1,370,116 $822,686(2a) $2,192,802 ========== ======== ========== CURRENT LIABILITIES: Accounts payable................... $25,992 $7,245 $33,237 Current portion of allocated other long-term debt..................... 3,475 -- 3,475 Current portion of TV program rights payable............................ 16,712 4,718 21,430 Accrued salaries and commissions..... 8,500 -- 8,500 Accrued interest..................... 4,969 -- 4,969 Deferred revenue..................... 18,704 -- 18,704 Other................................ 4,561 -- 4,561 ---------- -------- ---------- Total current liabilities............ 82,913 11,963(2b) 94,876 Allocated credit facility and senior subordinated notes................. 332,000 801,000 1,133,000 Acquisition payable.................. -- -- -- TV program rights payable, net of current portion.................... 54,257 770 55,027 Other long-term debt, net of current portion............................ 14,551 -- 14,551 Other noncurrent liabilities......... 4,907 -- 4,907 Deferred income taxes................ 90,341 3,402 93,743 Minority interest.................... 557 -- 557 ---------- -------- ---------- Total liabilities.................... 579,526 817,135 1,396,661 SHAREHOLDERS' EQUITY: Class A Common Stock................. 445 -- 445 Class B Common Stock................. 49 -- 49 Additional paid-in capital........... 815,048 -- 815,048 Accumulated deficit.................. (23,817) 5,551 (18,266) Accumulated other comprehensive loss............................... (1,135) -- (1,135) ---------- -------- ---------- Total shareholders' equity (deficit).......................... 790,590 5,551 796,141 ---------- -------- ---------- Total liabilities and shareholders' equity.......................... $1,370,116 $822,686 $2,192,802 ========== ======== ==========
46 47 EMMIS COMMUNICATIONS CORPORATION UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 31, 2000 (IN THOUSANDS)
PRO FORMA ADJUSTMENTS ----------------------------- SIGNIFICANT EMMIS ACQUISITIONS ACQUISITION EMMIS HISTORICAL AND OTHER (3A) ADJUSTMENTS PRO FORMA ---------- -------------- ----------- --------- Net revenues................................. $100,519 $28,898 $-- $129,417 Operating expenses......................... 61,856 21,029 -- 82,885 International business development expenses................................ 404 -- -- 404 Corporate expenses......................... 3,720 227 -- 3,947 Depreciation and amortization.............. 14,272 4,216 2,745(3B) 21,233 Noncash compensation....................... 1,664 -- -- 1,664 Programming Restructuring Cost............. -- -- -- -- Time Brokerage Agreement Fee............... -- -- -- -- -------- ------- -------- -------- Operating Income............................. 18,603 3,426 (2,745) 19,284 Other Income (Expense)....................... -- Interest Expense........................... (8,412) (669) (16,883)(3C) (25,964) Other Income (expense), net................ 310 18 -- 328 -------- ------- -------- -------- Total other income (expense).......... (8,102) (651) (16,883) (25,636) -------- ------- -------- -------- Income before income taxes................... 10,501 2,775 (19,628) (6,352) Tax Provision (Benefit)...................... 4,590 2,162 (8,566)(3D) (1,814) -------- ------- -------- -------- Net Income (loss)............................ 5,911 613 (11,062) (4,538) Less: Preferred Stock Dividends.............. 2,246 -- -- 2,246 -------- ------- -------- -------- Net Income (loss) Available to Common........ $3,665 $613 $(11,062) $ (6,784) ======== ======= ======== ======== EPS (basic).................................. $0.08 $ (0.15) ======== ======== EPS (diluted)................................ $0.08 $ (0.15) ======== ======== Basic (weighted average shares outstanding)............................... 46,269 46,269 ======== ======== Diluted (weighted average shares outstanding)............................... 48,012 46,269 ======== ========
47 48 EMMIS COMMUNICATIONS CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 29, 2000 (IN THOUSANDS)
PRO FORMA ADJUSTMENTS ---------------------------- SIGNIFICANT ACQUISITIONS EMMIS AND OTHER ACQUISITION EMMIS HISTORICAL (3A) ADJUSTMENTS PRO FORMA ---------- ------------ ----------- ------------- Net revenues................................ $325,265 $153,288 $-- $478,553 Operating expenses........................ 199,818 103,896 -- 303,714 International business development expenses............................... 1,558 -- -- 1,558 Corporate expenses........................ 13,872 2,035 -- 15,907 Depreciation and amortization............. 44,161 21,753 11,072(3B) 76,986 Noncash compensation...................... 7,357 -- -- 7,357 Programming restructuring cost............ 896 -- -- 896 Time brokerage agreement fee.............. -- -- -- -- -------- -------- -------- --------- Operating income (loss)..................... 57,603 25,604 (11,072) 72,135 Other income (expense) Interest expense.......................... (51,986) 18,198 (69,328)(3C) (103,116) Other income (expense), net............... 3,247 (2,857) -- 390 -------- -------- -------- --------- Total other income (expense)................ (48,739) 15,341 (69,328) (102,726) -------- -------- -------- --------- Income before income taxes.................. 8,864 40,945 (80,400) (30,591) Tax provision (benefit)..................... 6,875 17,921 (32,914)(3D) (8,118) -------- -------- -------- --------- Income before extraordinary item............ 1,989 23,024 (47,486) (22,473) Less: Preferred stock dividends............. 3,144 -- -- 3,144 -------- -------- -------- --------- Net income to common shareholder before extraordinary item..................... $(1,155) $23,024 $(47,486) $(25,617) ======== ======== ======== ========= EPS before extraordinary item (basic)....... $(0.03) $ (0.57) ======== ========= EPS before extraordinary item (diluted)..... $(0.03) $ (0.57) ======== ========= Basic (weighted average shares outstanding).............................. 36,156 45,337 ======== ========= Diluted (weighted average shares outstanding).............................. 36,156 45,337 ======== =========
48 49 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (IN THOUSANDS) 1. BASIS OF PRESENTATION We are a diversified media company with radio broadcasting, television broadcasting, and magazine publishing operations. The accompanying combined condensed pro forma financial statements give effect to our 1999 Equity Transactions and the transactions described below. The following acquisitions have been completed since March 1, 1999. Each acquisition has been accounted for using the purchase method of accounting. - On October 6, 2000, we acquired from Sinclair Broadcast Group, Inc. ("Sinclair") certain assets of radio stations WIL-FM, WRTH-AM, WVRV-FM, KPNT-FM, KXOK-FM, and KIHT-FM in St. Louis, Missouri for a cash purchase price of $220.0 million. This acquisition was financed with borrowings under our credit facility. - On October 6, 2000, we acquired certain assets of radio station KZLA-FM ("Bonneville") in exchange for three radio stations acquired from Sinclair (WIL-FM, WVRV-FM and WRTH-AM) and our existing radio station WKKX-FM. The acquired assets of Bonneville will be recorded based on the fair value of the Sinclair radio stations ($154.5 million) and our station WKKX-FM ($30.5 million) totaling $185 million, exchanged for KZLA. The net book value of WKKX-FM approximates $21.5 million. - On October 2, 2000, we purchased eight network-affiliated and seven satellite television stations from Lee Enterprises, Incorporation for $559.5 million and the payment of $21.5 million for working capital (the "Lee Acquisition"). This transaction was financed through borrowings under our amended credit facility. As a result of the Lee Acquisition, we will own more television stations in the Hawaiian market than is currently permitted by FCC regulations. We may be required to sell one of our Hawaiian television stations to be in compliance with this regulatory requirement. The operating results of the Lee station serving the Hawaiian market have been excluded from the accompanying pro forma statements of operations. - On November 9, 1999, we completed our acquisition of 75% of the outstanding common stock of Votionis, S.A. ("Votionis") for $13.3 million in cash plus liabilities recorded of $5.6 million. Votionis, which operates two radio stations in Buenos Aires, Argentina, is included in our operating results effective November 9, 1999. A pro forma adjustment is required to reflect its operating results for the period prior to the acquisition. The purchase of Votionis was financed with proceeds from our 1999 Equity Transaction. Therefore, no pro forma adjustment related to debt or interest expense has been recorded for this transaction. - On October 29, 1999, we completed an acquisition of substantially all of the assets of television station WKCF in Orlando, Florida ("WKCF") from Press Communications, L.L.C. for approximately $197.1 million in cash. WKCF is included in our operating results effective October 29, 1999. A pro forma adjustment is required to reflect WKCF's operating results for the period prior to the acquisition. The purchase of WKCF was financed with proceeds from the 1999 Equity Transactions. Therefore, no pro forma adjustment related to debt or interest expense has been recorded for this transaction. 49 50 2. PRO FORMA ADJUSTMENTS TO COMBINED CONDENSED BALANCE SHEET (A) DETERMINATION OF COMBINED PURCHASE PRICE TELEVISION Lee -- cash requirement, including working capital of $21,500................................................... $581,000 Lee -- program rights liability assumed..................... 5,488 Lee -- estimated transaction costs.......................... 560 --------- Total purchase price -- television acquisition.............. 587,048 --------- RADIO Sinclair -- cash requirement................................ 220,000 Sinclair -- assets exchanged................................ (154,527) Bonneville -- assigned value................................ 185,000 Sinclair and Bonneville -- estimated transaction costs...... 11,685 --------- Total purchase price -- significant radio acquisitions...... 262,158 --------- Combined Purchase price -- significant acquisitions......... $849,206 ---------
(B) DETERMINATION OF COMBINED FINANCING REQUIREMENT Combined purchase price -- significant acquisitions......... $849,206 Less: Fair value of assets exchanged (WKKX-FM).............. (30,473) Less: liabilities assumed and transaction costs............. (17,733) --------- Total debt required to finance all acquisitions............. $801,000 =========
- --------------- In order to finance the Lee Acquisition and the Sinclair Acquisition, we amended our existing credit facility to increase our borrowing capability to a total of $1.0 billion. We borrowed $801.0 million under the amended credit facility to finance these acquisitions and $128.0 million to fund other acquisitions. 50 51 (C) ALLOCATION OF PURCHASE PRICE FOR SIGNIFICANT ACQUISITIONS:
SIGNIFICANT ACQUISITIONS ------------------------------------------------ ALLOCATION OF PURCHASE PRICE BOOK VALUE PRO FORMA AND FINANCING OF ASSETS ACQUISITIONS COSTS (CA) EXCHANGED (CB) ADJUSTMENT -------------- -------------- ------------ CURRENT ASSETS: Cash and cash equivalents............................. $(4,380) $-- $(4,380)(Cc) Other................................................. 26,988 -- 26,988 -------- -------- -------- Total current assets.................................. 22,608 -- 22,608 Property and equipment, net........................... 72,736 (1,588) 71,148 Intangible assets, net................................ 749,482 (19,932) 729,550 Other assets, net..................................... 4,380 (5,000) (620)(Cc) -------- -------- -------- Total assets.......................................... $849,206 $(26,520) $822,686 ======== ======== ======== CURRENT LIABILITIES: Current portion of TV program rights payable.......... $4,718 $-- $4,718 Accounts payable and other............................ 12,245 (5,000) 7,245 -------- -------- -------- Total current liabilities............................. 16,963 (5,000) 11,963 TV program rights payable, net of current portion..... 770 -- 770 Deferred taxes........................................ 3,402 -- 3,402 Credit facility, bridge loan and senior subordinated notes............................................... 801,000 -- 801,000(Cd) -------- -------- -------- Total liabilities..................................... 822,135 (5,000) 817,135 NET ASSETS:........................................... 27,071 (21,520) 5,551(Ca) -------- -------- -------- Total Liabilities and Net Assets...................... $849,206 $(26,520) $822,686 ======== ======== ========
- ------------------------- (Ca) Reflects management's preliminary purchase price allocation for the Lee, Sinclair and Bonneville stations to be acquired and retained based on information currently available. Net assets includes the book gain net of taxes resulting from the exchange of our WKKX-FM radio business in connection with the Bonneville Acquisition of $5.551 million net of $3.402 million of deferred income taxes. The gain has been properly excluded from the accompany pro forma statement of operations. (Cb) Pro forma adjustment required to reflect the elimination our radio station WKKX's assets to be exchanged in connection with the Bonneville Acquisition. (Cc) Pro forma adjustment to reflect a reduction in cash related to deferred financing costs incurred in connection with the recent amendment to our credit facility. (Cd) Pro forma adjustment to reflect debt incurred to finance the Lee and Sinclair Acquisitions. 3. PRO FORMA ADJUSTMENTS TO COMBINED STATEMENTS OF OPERATIONS Certain reclassifications have been made to the historical results of the acquired businesses to conform to Emmis' pro forma financial presentation. These reclassifications had no effect on results of operations. (A) Emmis' February 28 fiscal year end differs from the September 30 or December 31 fiscal year ends of Lee, Sinclair and Bonneville. The historical results of the Lee television stations KOIN, KRQE, WSAZ, KSNW, KGMB, KGUN, KMTV and KSNT, the Sinclair radio stations, KPNT, KXOK, KIHT, WIL, WRTH and WVRV, and the Bonneville radio station KZLA for the three months ended March 31, 2000 are included in our pro forma statement of operations for the three months ended May 31, 2000. The historical 51 52 results of the Lee, Sinclair and Bonneville stations for the twelve months ended December 31, 1999, are included in our pro forma statement of operations for the fiscal year ended February 29, 2000.
PRO FORMA ADJUSTMENTS --------------------- ELIMINATE SINCLAIR STATIONS TO BE SIGNIFICANT LEE BONNEVILLE EXCHANGED ACQUISITIONS THREE MONTHS ENDED MAY 31, 2000 (HISTORICAL)(AA) (HISTORICAL) (AB) OTHER (AC) AND OTHER (A) ------------------------------- ---------------- ------------ -------------- ---------- ------------- (IN THOUSANDS) Net revenues....................... $24,891 $9,333 $(5,326) $-- $28,898 Operating expenses................. 18,252 6,183 (3,406) -- 21,029 International business development expenses......................... -- -- -- -- -- Corporate expenses................. 115 194 (82) -- 227 Depreciation and amortization...... 2,843 2,253 (880) -- 4,216 Noncash compensation............... -- -- -- -- -- Programming restructuring cost..... -- -- -- -- -- Time brokerage agreement fee....... -- -- -- -- -- ------- ------- ------- --- ------- Operating income (loss)............ 3,681 703 (958) -- 3,426 Interest expense................... -- (1,603) 934 -- (669) Other income (expense), net...... -- 50 (32) -- 18 ------- ------- ------- -- ------- Total other income (expense)....... -- (1,553) 902 -- (651) Income (loss) before income taxes............................ 3,681 (850) (56) -- 2,775 Tax provision / (benefit).......... 1,590 494 78 -- 2,162 ------- ------- ------- --- ------- Income (loss) before extraordinary item............................. $ 2,091 $(1,344) $(134) -- $613 ======= ======= ======= =======
PRO FORMA ADJUSTMENTS --------------------- SINCLAIR ELIMINATE SIGNIFICANT LEE BONNEVILLE STATIONS TO BE ACQUISITIONS TWELVE MONTHS ENDED FEBRUARY 29, 2000 (HISTORICAL)(AA) (HISTORICAL) EXCHANGED (AB) OTHER (AC) AND OTHER (A) - ------------------------------------- ---------------- ------------ -------------- ---------- ------------- Net revenues....................... $105,848 $40,819 $(22,141) $28,762 $153,288 Operating expenses................. 77,007 22,892 (13,801) 17,798 103,896 International business development expenses......................... -- -- -- -- -- Corporate expenses................. 1,557 944 (466) -- 2,035 Depreciation and amortization...... 11,432 8,580 (3,231) 4,972 21,753 Noncash compensation............... -- -- -- -- -- Programming restructuring cost..... -- -- -- -- -- Time brokerage agreement fee....... -- -- -- -- -- -------- ------- -------- ------- -------- Operating income(loss)............. 15,852 8,403 (4,643) 5,992 25,604 Interest expense................... -- (6,173) 3,586 20,785 18,198 Other income (expense), net........ -- 1 6 (2,864) (2,857) -------- ------- -------- ------- -------- Total other income (expense)....... -- (6,172) 3,592 17,921 15,341 Income before income taxes......... 15,852 2,231 (1,051) 23,913 40,945 Tax provision / (benefit).......... 6,799 2,489 (454) 9,087 17,921 -------- ------- -------- ------- -------- Income before extraordinary item... $ 9,053 $ (258) $ (597) $14,826 $ 23,024 ======== ======= ======== ======= ========
- ------------------------- (Aa) The Lee historical amounts have been adjusted to reflect the elimination of the historical results of Lee television station KGMG in Honolulu, which we may be required to sell to meet FCC ownership limits. 52 53 (Ab) Pro forma adjustment to reflect the elimination of the historical results of the Sinclair radio stations WIL, WRTH, and WVRV and our radio station WKKX, which will be exchanged for Bonneville radio station KZLA. (Ac) Pro forma adjustment to reflect (1) the operating results of Votionis and WKCF for the periods of March 1, 1999 through November 8, 1999 and March 1, 1999 through October 28, 1999, prior to their respective acquisitions by us. Votionis and WKCF were acquired prior to the three months ended May 31, 2000 and are therefore included in our historical operating results for the period. The pro forma adjustment also reflects the reduction in interest expense related to the repayment of $311.6 million of the credit facility with proceeds from the 1999 Equity Transactions and the reduction of investment earnings by us prior to the repayment date. (B) Pro forma adjustment to reflect the increase in depreciation and amortization expense as a result of recording property, plant and equipment and intangible assets at acquisition value.
FOR THE YEAR FOR THE THREE ENDED MONTHS ENDED FEBRUARY 29, MAY 31, 2000 2000 ------------- ------------ Lee.................................................. $2,122 $ 8,428 Bonneville/Sinclair.................................. 623 2,644 ------ ------- $2,745 $11,072 ====== =======
(C) Pro forma adjustment to reflect the following adjustments to interest expense.
FOR THE FOR THE THREE YEAR ENDED MONTHS ENDED FEBRUARY 29, MAY 31, 2000 2000 ------------- ------------ $801,000 borrowed, interest at approximately 8.5% per annum based on the terms of our amended credit facility........................................... $17,027 $68,109 Amortization of deferred financing cost related to our amended credit facility and a permanent financing proposal................................. 525 3,806 ------- ------- Total Additional Pro Forma Interest Expense.......... 17,552 71,915 Historical interest expense.......................... (669) (2,587) ------- ------- Pro Forma Adjustment................................. $16,883 $69,328 ======= =======
If the interest rate on our variable debt were to increase by 0.125%, our pro forma interest expense would have been higher by approximately $1.0 million and $0.3 million for the year ended February 29, 2000 and the three months ended May 31, 2000, respectively. (D) To adjust income taxes based on combined federal and state statutory rate of 38%. 53 54 Exhibit (c) Exhibits Number Description - ------ ----------- 2.1 Purchase and Sale Agreement, dated as of May 7, 2000, by and among Lee, New Mexico Broadcasting Co. and the Company. 2.2 Asset Purchase Agreement, dated as of June 21, 2000, by and among Sinclair Radio of St. Louis, Inc., Sinclair Radio of St. Louis Licensee, LLC and the Company. 2.3 Asset Exchange Agreement, dated as of October 6, 2000, between the Company, Emmis 106.5 FM Broadcasting Corporation of St. Louis and Emmis 106.5 FM License Corporation of St. Louis, and Bonneville and Bonneville Holding Company. 10.1 Third Amended and Restated Revolving Credit and Term Loan Agreement, dated as of October 2, 2000, among the Company, Toronto Dominion (Texas), Inc., as Lead Arranger and Administrative Agent, Fleet National Bank, as Documentation Agent, First Union National Bank, as Syndication Agent, and each of the Financial Institutions Now or Hereafter Parties Hereto. 10.2 Asset Purchase Agreement, dated as of June 19, 2000, by and among the Company, AMFM Houston, Inc., AMFM Ohio, Inc. and AMFM Radio Licenses, LLC. 23.1 Consent of McGladry & Pullen LLP 23.2 Consent of Arthur Andersen LLP 99.1 Press release, dated October 2, 2000, of the Company and Lee. 99.2 Press release, dated October 6, 2000. of the Company. 54 55 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 By: /s/ Walter Z. Berger ----------------------------------------- Name: Walter Z. Berger Title: Executive Vice President, (Authorized Corporate Officer) Chief Financial Officer and Treasurer Dated: October 16, 2000 55 56 EXHIBIT INDEX 2.1 Purchase and Sale Agreement, dated as of May 7, 2000, by and among Lee Enterprises, Incorporated, New Mexico Broadcasting Co. and Emmis Communications Corporation. 2.2 Asset Purchase Agreement, dated as of June 21, 2000, by and among Sinclair Radio of St. Louis, Inc., Sinclair Radio of St. Louis Licensee, LLC and Emmis Communications Corporation. 2.3 Asset Exchange Agreement, dated as of October 6, 2000, between Emmis Communications Corporation, Emmis 106.5 FM Broadcasting Corporation of St. Louis and Emmis 106.5 FM License Corporation of St. Louis, and Bonneville International Corporation and Bonneville Holding Company. 10.1 Third Amended and Restated Revolving Credit and Term Loan Agreement, dated as of October 2, 2000, among Emmis Communications Corporation, Toronto Dominion (Texas), Inc., as Lead Arranger and Administrative Agent, Fleet National Bank, as Documentation Agent, First Union National Bank, as Syndication Agent, and each of the Financial Institutions Now or Hereafter Parties Hereto. 10.2 Asset Purchase Agreement, dated as of June 19, 2000, by and among Emmis Communications Corporation, AMFM Houston, Inc., AMFM Ohio, Inc. and AMFM Radio Licenses, LLC. 23.1 Consent of McGladry & Pullen LLP 23.2 Consent of Arthur Andersen LLP 99.1 Press release, dated October 2, 2000, of Emmis Communications Corporation and Lee Enterprises, Incorporated. 99.2 Press release, dated October 6, 2000, of Emmis Communications Corporation. EX-2.1 2 c57890ex2-1.txt PURCHASE AND SALES AGREEMENT 1 Exhibit 2.1 PURCHASE AND SALE AGREEMENT FOR LEE ENTERPRISES, INCORPORATED, NEW MEXICO BROADCASTING CO., AND EMMIS COMMUNICATIONS CORPORATION May 7, 2000 2 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered into as of May 7, 2000 by and among Lee Enterprises, Incorporated, a Delaware corporation ("Lee"), and New Mexico Broadcasting Co., a New Mexico corporation ("NMBC", and Lee and NMBC sometimes referred to in this Agreement, individually and collectively, as "Lee-NMBC"), and Emmis Communications Corporation, an Indiana corporation (the "Purchaser"). WITNESSETH: WHEREAS, Lee owns and operates television stations WSAZ-TV ("Station WSAZ") in Charleston-Huntington, West Virginia; KGMB-TV ("Station KGMB") in Honolulu, Hawaii, and television station satellites KGMD ("Station KGMD") in Hilo, Hawaii, and KGMV ("Station KGMV") in Wailuku, Hawaii; KGUN-TV ("Station KGUN") in Tucson, Arizona and KMTV-TV ("Station KMTV") in Omaha, Nebraska. WHEREAS, Lee owns all of the outstanding capital stock of KOIN-TV, Inc., a Delaware corporation ("KOIN"), and KOIN owns and operates television station KOIN-TV and an operating division, MIRA MOBILE TELEVISION (KOIN-TV and MIRA MOBILE are collectively, "Station KOIN") in Portland, Oregon. WHEREAS, Lee owns all of the outstanding capital stock of NMBC and NMBC owns and operates television station KRQE-TV ("Station KRQE") in Albuquerque, New Mexico and television station satellites KBIM ("Station KBIM") in Roswell, New Mexico, and KREZ-TV in Durango, Colorado-Farmington, New Mexico ("Station KREZ" and together with Station WSAZ, Station KGMB, Station KGMD, Station KGMV, Station KGUN, Station KMTV, Station KRQE and Station KBIM, the "Lee-NMBC Stations," and individually a "Lee-NMBC Station"). WHEREAS, Lee owns all of the outstanding capital stock of SJL of Kansas Corp., a Kansas corporation ("SJL-Kansas"), and SJL-Kansas owns and operates television station KSNW-TV ("Station KSNW") in Wichita, Kansas, and television station satellites KSNG-TV ("Station KSNG") in Garden City, Kansas, KSNC-TV ("Station KSNC") in Great Bend, Kansas, and KSNK-TV ("Station KSNK") in Oberlin, Kansas-McCook, Nebraska; SJL-Kansas owns all of the outstanding shares of capital stock of Wichita License Subsidiary Corp., a Delaware corporation ("Wichita License Sub"), and all of the outstanding capital stock of Topeka Television Corporation, a Missouri corporation ("Topeka"); Topeka owns all of the outstanding shares of capital stock of Topeka License Subsidiary Corp., a Delaware corporation ("Topeka License Sub" and together with KOIN, SJL-Kansas, Wichita License Sub and Topeka, the "Acquired Companies," and individually an "Acquired Company"), and Topeka owns and operates television station KSNT-TV in Topeka, Kansas ("Station KSNT" and together with 3 Station KOIN, Station KSNW, Station KSNG, Station KSNC, Station KSNK, the "Acquired Companies' Stations," and individually an "Acquired Company Station"). WHEREAS, the Purchaser desires to purchase from Lee-NMBC, and Lee-NMBC desires to sell to the Purchaser, substantially all of the assets of Lee-NMBC owned, used or held for use by Lee-NMBC primarily to conduct the operations of the Lee-NMBC Stations, and in connection therewith, the Purchaser has agreed to assume certain Liabilities of Lee-NMBC relating to the Lee-NMBC Stations, all upon the terms and subject to the conditions set forth herein (the "Asset Purchase"). WHEREAS, the Purchaser desires to purchase from Lee, and Lee desires to sell to the Purchaser, all of the issued and outstanding capital stock of the Acquired Companies, all upon the terms and are subject to the conditions set forth herein (the "Stock Purchase"). WHEREAS, Lee-NMBC and Lee, on behalf of each Acquired Company, and the Purchaser desire to make certain representations, warranties, covenants and agreements in connection with the Asset Purchase and Stock Purchase, all as more fully set forth herein. AGREEMENT NOW THEREFORE, in consideration of the foregoing premises, the mutual covenants, promises and agreements hereinafter set forth, the mutual benefits to be gained by the performance of such covenants, promises and agreements, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the parties hereto hereby agree as follows: ARTICLE 1 DEFINITIONS 1.1 Certain Definitions. For all purposes of and under this Agreement, the following terms shall have the respective meanings set forth below: (a) "Action" means any claim, demand, action, suit or proceeding, arbitral action, governmental inquiry or criminal prosecution. (b) "Affiliate" means any "affiliate" as defined in Rule 144(a)(1) promulgated under the Securities Act. (c) "Business Day" means any weekday (Monday through Friday) on which commercial banks in Chicago, Illinois are open for business. (d) "Code" means the Internal Revenue Code of 1986, as amended, any successor statute thereto, and the rules and regulations promulgated thereunder. -2- 4 (e) "Communications Act" means the Communications Act of 1934, as amended, any successor statute thereto, and the rules, regulations and written policies of the FCC promulgated thereunder. (f) "Confidentiality Agreement" means the letter agreement between Lee and the Purchaser, dated as of March 6, 2000. (g) "Contract" means any contract, agreement, indenture, note, bond, instrument, lease, conditional sales contract, mortgage, license, franchise agreement, concession agreement, insurance policy, security interest, guaranty, binding commitment or other agreement or arrangement, whether written or oral. (h) "Encumbrance" means any security interest, pledge, mortgage, lien, charge, adverse claim of ownership or use, restriction on transfer (such as a right of first refusal or other similar right), defect of title, or other encumbrance of any kind or character. (i) "Environmental Law" means any Law pertaining to land use, air, soil, surface water, groundwater (including the protection, cleanup, removal, remediation or damage thereof), public or employee health or safety or any other environmental matter, including the following laws as in effect on the Closing Date: (i) Clean Air Act (42 U.S.C. Section 7401, et seq.); (ii) Clean Water Act (33 U.S.C. Section 1251, et seq.); (iii) Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.); (iv) Comprehensive Environmental Resource Compensation and Liability Act (42 U.S.C. Section 9601, et seq.); (v) Safe Drinking Water Act (42 U.S.C. Section 300f, et seq.); (vi) Toxic Substances Control Act (15 U.S.C. Section 2601, et seq.); (vii) Rivers and Harbors Act (33 U.S.C. Section 401, et seq.); (viii) Endangered Species Act (16 U.S.C. Section 1531, et seq.); (ix) Occupational Safety and Health Act (29 U.S.C. Section 651, et seq.); and (x) any other Laws relating to Hazardous Materials or Hazardous Materials Activities. (j) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, any successor statute thereto, and the rules and regulations promulgated thereunder. (k) "Exchange Act" means the Securities Exchange Act of 1934, as amended, any successor statute thereto, and the rules and regulations promulgated thereunder. (l) "FCC" means the United States Federal Communications Commission, and any successor agency thereto. (m) "FCC Licenses" means all licenses, authorizations, permits and other authorizations issued by the FCC for the operation of the Lee-NMBC Stations and the Acquired Companies' Stations, as the case may be, all of which are set forth in SCHEDULE 4.8(B) hereto. (n) "FCC Transfer Application" means the written application to be filed with the FCC requiring its written consent to the assignment or the transfer of control of each of the FCC Licenses to Purchaser or any of its Subsidiaries, as the case may be, or each of their permitted assignees or designees. -3- 5 (o) "Final Determination" means the final resolution of liability for any Tax for a Taxable Period, including any related interest or penalties, that is final and nonappealable, including by reason of the expiration of the applicable statute of limitations. (p) "Final Order" means an order or action by the FCC, that by reason of expiration of time or exhaustion of remedies, is no longer subject to administrative or judicial reconsideration, or review or rehearing. (q) "Funded Debt" means all indebtedness for borrowed money, all obligations under leases which in accordance with GAAP constitute capital leases, all notes payable and drafts accepted representing extensions of credit and any guarantee obligation with respect to any of the foregoing, as applied to the Lee-NMBC Stations or any Acquired Company. (r) "GAAP" means generally accepted accounting principles in the United States on the date of this Agreement. (s) "Governmental Authority" means any government, any governmental entity, department, commission, board, agency or instrumentality, and any court, tribunal, or judicial body, in each case whether federal, state, county, provincial, local or foreign. (t) "Governmental Order" means any statute, rule, regulation, order, judgment, injunction, decree, stipulation or determination issued, promulgated or entered by or with any Governmental Authority of competent jurisdiction. (u) "Hazardous Material" means any material or substance that is prohibited or regulated by any Environmental Law or that has been designated by any Governmental Authority to be radioactive, toxic, hazardous or otherwise a danger to health, reproduction or the environment, including asbestos, petroleum, radon gas and radioactive matter. (v) "Hazardous Materials Activity" means the handling, transportation, transfer, recycling, storage, use, treatment, manufacture, investigation, removal, remediation, release, exposure of others to, sale or other distribution of any Hazardous Material or any product containing a Hazardous Material. (w) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, any successor statute thereto, and the rules and regulations promulgated thereunder. (x) "Income Tax" means any federal, state, county, provincial, local or foreign income, franchise, business profits or other similar Tax, any estimated Tax related thereto, any interest and penalties (civil or criminal) thereon or additions thereto. (y) "Intellectual Property" means any (i) United States and foreign patents, patent applications, patent disclosures and improvements thereto, (ii) United States, state or -4- 6 foreign trademarks, service marks, trade dress, logos, trade names and corporate names, the goodwill associated therewith, and the registrations and applications for registration thereof, (iii) United States and foreign copyrights, and the registrations and applications for registration thereof, and (iv) websites and domain names. (z) "IRS" means the United States Internal Revenue Service, and any successor agency thereto. (aa) "Knowledge of" "known to" and phrases of similar import mean the actual knowledge of each executive officer of Lee-NMBC and each Acquired Company or Purchaser, as the case may be, together with each General Manager and Chief Engineer of the Lee-NMBC Stations and Acquired Companies' Stations, without obligation of inquiry. (bb) "Law" means any federal, state, county, provincial, local or foreign statute, law, ordinance, regulation, rule, code or rule of common law. (cc) "Lee Documents" means, collectively, the (i) the Grant Deeds, (ii) the Bill of Sale, (iii) the Assignment and Assumption, (iv) the Assignment of Proprietary Rights, (v) the Stock Certificates, and (vi) any other document executed and delivered at the Closing under or in connection with this Agreement by or on behalf of Lee-NMBC or any of the Acquired Companies. (dd) "Liability" means any direct or indirect debt, obligation or liability of any kind or nature, whether accrued or fixed, absolute or contingent, determined or determinable, matured or unmatured, and whether due or to become due, asserted or unasserted, or known or unknown, and regardless of whether required by GAAP to be reflected in a balance sheet or disclosed in the related notes. (ee) "License" means any franchise, approval, permit, order, authorization, consent, license, registration or filing, certificate, variance and any other similar right obtained from or filed with any Governmental Authority. (ff) "Lien" means any adverse claim, restriction on voting or transfer or pledge, lien, charge, Encumbrance or security interest of any kind. (gg) "Loss or Losses" means any claims, demands, Liabilities, losses, damages, deficiencies, assessments, judgments, remediations and costs or expenses (including reasonable attorneys', consultants' and experts' fees and expenses but excluding punitive damages for breach of this Agreement or any Lee Document). (hh) "Material Adverse Effect" means any change or effect that is materially adverse to the assets, properties, operations, business, financial condition or results of operations of the Lee-NMBC Stations and the Acquired Companies' Stations, taken as a whole, except for any such change or effect resulting directly or indirectly from (i) the transactions contemplated by this Agreement, (ii) the announcement or other disclosure of the transactions contemplated by -5- 7 this Agreement, (iii) regulatory changes, (iv) changes in conditions generally applicable to the television broadcasting industry, or in general economic conditions in the geographic regions in which such stations are operated; or (v) circumstances that are not likely to recur and have been substantially restored or will be substantially restored in the near future. (ii) "Permitted Encumbrances" means (i) Encumbrances for inchoate mechanics' and materialmen's liens for construction in progress and workmen's, repairmen's, warehousemen's and carriers' liens arising in the ordinary course of business securing amounts not in default; (ii) Encumbrances for Taxes and other Liabilities not yet due and payable, and for Taxes and other Liabilities being contested in good faith, (iii) Encumbrances securing liabilities shown on the Financial Statements, (iv) Encumbrances and imperfections of title (including but not limited to those contained in a standard pre-printed ALTA exception) the existence of which do not, and would not reasonably be expected as of the date hereof to, materially detract from the value of, interfere with, or otherwise affect the use and enjoyment of the property subject thereto or affected thereby, consistent with past practice, and (v) solely with respect to Owned Real Property, provided that the following are not violated by existing improvements in any material respect and do not prohibit or materially restrict the continued use and operation of such Owned Real Property for the same uses and operations as currently conducted, or grant any third party any option or right to acquire or lease a material portion thereof, (A) easements, rights of way and other similar restrictions which would be shown by a current title report, (B) conditions that may be shown by a current survey, title report or visual site inspection, and (C) zoning, building and other similar restrictions imposed by applicable Law. (jj) "Person" means any individual, general or limited partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity. (kk) "Proprietary Rights" means (i) Intellectual Property, (ii) trade secrets and confidential business information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), knowhow, research and development information, software, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information), (iii) other proprietary rights, (iv) copies and tangible embodiments thereof (in whatever form or medium), and (v) licenses granting any rights with respect to any of the foregoing. (ll) "Securities Act" means the Securities Act of 1933, as amended, any successor statute thereto, and the rules and regulations promulgated thereunder. (mm) "Subsidiary" means, unless otherwise indicated with respect to a Person, any other Person in which such Person has a direct or indirect equity interest or other ownership interest in excess of fifty percent (50%). (nn) "Tax" means any federal, state, county, provincial, local or foreign income, gross receipts, sales, use, ad valorem, employment, severance, transfer, gains, profits, -6- 8 excise, franchise, property, capital stock, premium, minimum and alternative minimum or other taxes, fees, levies, duties, assessments or charges of any kind or nature whatsoever imposed by any Governmental Authority (whether payable directly or by withholding), together with any interest, penalties (civil or criminal), additions to, or additional amounts imposed by, any Governmental Authority with respect thereto, and any expenses incurred in connection with the determination, settlement or litigation of any Liability therefor. (oo) "Tax Benefit" means, with respect to any Taxable Period, the amount of the actual reduction in an indemnified party's liability for Taxes payable for the Taxable Period as a result of the payment or accrual of any Loss indemnifiable under this Agreement. The amount, if any, of a Tax Benefit with respect to a Taxable Period arising from the payment or accrual of any Loss indemnifiable under this Agreement shall be determined after first reducing Taxes for the Taxable Period by taking into account all other applicable credits and items of loss, deduction and similar items. (pp) "Tax Cost" means, with respect to any Taxable Period, the amount of the actual increase in an indemnified party's liability for Taxes payable for the Taxable Period (including as a result of any decrease in a Tax refund or credit) as a result of the accrual or receipt of payment for any Loss for which the indemnified party is entitled to indemnification under this Agreement. (qq) "Tax Return" means a report, return or other information required to be supplied to a Governmental Authority with respect to any Tax. (rr) "Taxable Period" means any taxable year or any other period that is treated as a taxable year with respect to which any Tax may be imposed under any applicable statute, rule or regulation. 1.2 Certain Additional Definitions. For all purposes of and under this Agreement, the following terms shall have the respective meanings ascribed thereto in the respective sections of this Agreement set forth opposite each such term below:
TERM SECTION Acquired Companies Recitals Acquired Companies' Closing Liabilities 2.7(b)(i) Acquired Companies' Common Stock 2.6 Acquired Companies' Stations Recitals Acquired Company Recitals Acquired Company Station Recitals Agreement Preamble Asset Purchase Recitals Asset Purchase Cash Payment 2.3(a) Asset Purchase Notice of Disagreement 2.3(b)(v) Asset Purchase Price 2.3(a)
-7- 9 Assignment and Assumption 3.2(a)(iii) Assignment of Proprietary Rights 3.2(a)(iv) Assumed Liabilities of the Lee-NMBC Stations 2.2(b) Benefit Plan(s) 4.10(a) Bill of Sale 3.2(a)(ii) Cash Payment 2.9 Claimant 8.3(a) Closing 3.1 Closing Date 3.1 Closing Adjusted Net Worth of the Acquired Companies 2.7(b)(ii) COBRA 4.10(a) Contract of the Lee-NMBC Stations 2.1(b)(ii) Contracts of the Lee-NMBC Stations 2.1(b)(ii) CST 3.1 Employee 4.9 Employees 4.9 Excluded Assets of the Lee-NMBC Stations 2.1(c) Excluded Liabilities of the Lee-NMBC Stations 2.2(c) Financial Statements 4.12 Grant Deeds 3.2(a)(i) Indemnitor 8.3(a) Independent Accountant 2.3(b)(v) Insurance Policies 4.17(a) Interest Rate 2.3(b)(iv) KOIN Recitals KOIN Common Stock 4.3(a) Leased Assets 4.5(a) Leased Real Property 4.5(a) Lee Preamble & 9.1(a) Lee-NMBC Preamble Lee-NMBC Hawaii Stations 6.4(c) Lee-NMBC Station Recitals Lee-NMBC Stations Recitals License of the Lee-NMBC Stations 2.1(b)(iii) Licenses of the Lee-NMBC Stations 2.1(b)(iii) Material Contract 4.7(a) Material Contracts 4.7(a) Material License 4.8(a) Material Licenses 4.8(a) NMBC Preamble Owned Real Property 4.5(a) Preliminary Statement of Closing Adjusted Net Worth of 2.7(c)(i)
-8- 10 the Acquired Companies Preliminary Statement of Working Capital of the Lee-NMBC Stations 2.3(b)(ii) Purchased Assets of the Lee-NMBC Stations 2.1(b) Purchaser Preamble Purchaser's Hawaii Stations 6.4(c) Purchaser's Plans 6.9(a) Schedules 6.11 Short Term Agreement 4.7(a) SJL-Kansas Recitals SJL-Kansas Common Stock 4.3(b) Spin-Off Applications 6.4(c) Statement of Closing Adjusted Net Worth of the Acquired Companies 2.7(c)(ii) Statement of Working Capital of the Lee-NMBC Stations 2.3(b)(iii) Station KBIM 2.3(b) Station KGMB Recitals Station KGUN Recitals Station KMTV Recitals Station KOIN Recitals Station KREZ Recitals Station KRQE Recitals Station KSNC Recitals Station KSNG Recitals Station KSNK Recitals Station KSNT Recitals Station KSNW Recitals Station WSAZ Recitals Stock Certificates 3.2(a)(vii) Stock Purchase Recitals Stock Purchase Cash Payment 2.7(a) Stock Purchase Notice of Disagreement 2.7(c)(iv) Stock Purchase Price 2.7(a) Termination Date 9.1(b) Topeka Recitals Topeka License Sub Recitals Transferred Employees 6.9(a) Transferred Non-Union Employees 6.9(a) Transferred Union Employees 6.9(a) Violation 8.5(e) Wichita License Sub Recitals Working Capital of the Lee-NMBC Stations 2.3(b)(i)
-9- 11 ARTICLE 2 PURCHASE AND SALE 2.1 Purchase and Sale of Purchased Assets of the Lee-NMBC Stations. (a) Purchase and Sale of Purchased Assets of Lee-NMBC Stations. Upon the terms and subject to the conditions set forth herein, at the Closing, the Purchaser shall purchase from Lee-NMBC, and Lee-NMBC shall irrevocably sell, convey, transfer, assign and deliver to the Purchaser, free and clear of all Liens other than Permitted Encumbrances, all right, title and interest in and to the Purchased Assets of the Lee-NMBC Stations (as defined below). (b) Definition of Purchased Assets of the Lee-NMBC Stations. For all purposes of and under this Agreement, the term "Purchased Assets of the Lee-NMBC Stations" shall mean, refer to and include all of Lee's and NMBC's right, title and interest in and to all tangible and intangible assets, properties and rights which are owned, used or held for use by Lee-NMBC primarily to conduct the operations of the Lee-NMBC Stations, including, except for the Excluded Assets of the Lee-NMBC Stations, all right, title and interest of Lee and NMBC in and to all real property (including the Owned Real Property of the Lee-NMBC Stations set forth in SCHEDULE 4.5(a) hereto), and any leaseholds and sub-leaseholds therein (including leases for the Leased Real Property of the Lee-NMBC Stations set forth in SCHEDULE 4.5(a) hereto), buildings, structures, improvements, fixtures, furnishings and other fittings thereon, and easements, rights-of-way, and other appurtenances thereto, all tangible personal property (whether or not located on any of the premises of the Lee-NMBC Stations and including the tangible personal property set forth in SCHEDULE 4.5(a) hereto) including all machinery, equipment and tools, furniture and furnishings, computers and computer supplies, office materials and supplies, automobiles, trucks and other vehicles, inventories of any kind or nature, materials and supplies, purchased goods, all accounts, notes and other receivables, all prepaid assets and expenses, and all books, records (other than records relating to Income Taxes), ledgers, files, documents, correspondence, customer, supplier, advertiser, and other lists, invoices and sales data, creative, advertising and other promotional materials, studies, reports, and other printed or written materials or data, and specifically including the following: (i) Proprietary Rights (including the Intellectual Property of the Lee-NMBC Stations set forth in SCHEDULE 4.6(a) hereto), goodwill associated therewith, licenses and sublicenses granted and obtained with respect thereto, rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the applicable Laws of all jurisdictions; (ii) Contracts to which Lee-NMBC is a party or by which its assets or properties are bound which primarily relate to the operations of the Lee-NMBC Stations (each, a "Contract of the Lee-NMBC Stations" and, collectively, "Contracts of the Lee-NMBC Stations") (including the Material Contracts of the Lee-NMBC Stations set forth in SCHEDULE 4.7(a) hereto), and all rights thereunder; -10- 12 (iii) Licenses owned or possessed by Lee-NMBC (each, a "License of the Lee-NMBC Stations" and, collectively, "Licenses of the Lee-NMBC Stations") (including the FCC Licenses of the Lee-NMBC Stations and the Material Licenses of the Lee-NMBC Stations), and all rights thereunder; (iv) rights in or to all Assumed Plans of the Lee-NMBC Stations, and any and all assets associated with or allocated to the Employees of the Lee-NMBC Stations thereunder; (v) any and all refunds of Taxes relating primarily to the Lee-NMBC Stations other than refunds of Income Taxes; (vi) Actions, deposits, prepayments, refunds, causes of action, chooses in action, rights of recovery, rights of set off, and rights of recoupment of any kind or nature (including any such item relating to Taxes other than Income Taxes) relating to the Purchased Assets of the Lee-NMBC Stations or the Assumed Liabilities; and. (vii) Upon reimbursement at the closing for all amounts paid by or due from iBlast, Inc. to Lee, either as a capital contribution or loan or other form of indebtedness (such reimbursement not to exceed, however, $750,000 in the aggregate), all capital stock of or other equity interests in iBlast, Inc. (c) Definition of Excluded Assets of the Lee-NMBC Stations. Notwithstanding anything to the contrary set forth in this Section 2.1 or elsewhere in this Agreement, the term "Purchased Assets of the Lee-NMBC Stations" shall not mean, refer to or include the following (collectively, the "Excluded Assets of the Lee-NMBC Stations"): (i) the corporate charter and bylaws, qualifications to transact business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance, and existence of Lee and NMBC as a corporation; (ii) all assets, whether real or personal, tangible or intangible, which are owned, used or held for use by Lee-NMBC which do not primarily relate to the Lee-NMBC Stations, including such assets set forth in SCHEDULE 2.1(c) hereto; (iii) Contracts of the Lee-NMBC Stations described in Section 2.5 that, in accordance with Section 2.5, are not assigned to the Purchaser; (iv) Nontransferable Licenses, other than FCC Licenses, of the Lee-NMBC Stations described in Section 2.5 that, in accordance with Section 2.5, are not assigned to the Purchaser; -11- 13 (v) rights in or to all Benefit Plans (other than Assumed Plans of the Lee-NMBC Stations and employment agreements included in the Contracts of the Lee-NMBC Stations), and all assets associated with or allocated to the Employees of the Lee-NMBC Stations thereunder; (vi) cash and cash equivalents; (vii) any and all refunds of Income Taxes; (viii) Actions, deposits, prepayments, refunds, causes of action, chooses in action, rights of recovery, rights of set off, and rights of recoupment of any kind or nature (including any such item relating to Income Taxes) relating to the Excluded Assets of the Lee-NMBC Stations or the Excluded Liabilities of the Lee-NMBC Stations; (ix) refunds paid or payable in connection with the cancellation or discontinuance of any insurance policies applicable to the Lee-NMBC Stations (including the Insurance Policies of the Lee-NMBC Stations set forth in SCHEDULE 4.17 hereto) following the Closing; (x) all rights of Lee-NMBC under this Agreement, any agreement, certificate, instrument or other document executed and delivered by Lee-NMBC in connection with the transactions contemplated hereby, or any side agreement between Lee-NMBC and the Purchaser entered into on or after the date of this Agreement related primarily to the Lee-NMBC Stations; and 2.2 Assumption of Liabilities. (a) Assumption. Upon the terms and subject to the conditions set forth herein, at the Closing the Purchaser shall assume from Lee-NMBC (and therefore pay, perform and discharge), and Lee-NMBC shall irrevocably convey, transfer and assign to the Purchaser, all of the Assumed Liabilities of the Lee-NMBC Stations (as defined below). (b) Definition of Assumed Liabilities of the Lee-NMBC Stations. For all purposes of and under this Agreement, the term "Assumed Liabilities of the Lee-NMBC Stations" shall mean (i) the liabilities of the Lee-NMBC Stations included in the determination of the Working Capital of the Lee-NMBC Stations pursuant to Section 2.3(b), (ii) the obligations of Lee-NMBC arising during and attributable to any period after the Closing under the Contracts, Licenses and Assumed Plans of the Lee-NMBC Stations that are assigned to Purchaser at Closing in accordance with this Agreement (excluding (A) any obligations or liabilities of Lee-NMBC under any such Contract, License or Assumed Plan resulting from the failure to obtain any consent required in connection with the transactions contemplated by this Agreement, (B) any default under any such Contract, License or Assumed Plan prior to or as a result of the Closing, and (C) any bonus or other payment or benefit conditioned upon or payable in connection with or as a result of the Closing under any employment agreement, or calculated -12- 14 with reference to the financial terms, of the transactions contemplated by this Agreement), and (iii) the obligations of Lee-NMBC arising during and attributable to any period after the Closing under any other Contracts of the Lee-NMBC Stations not assigned to Purchaser in accordance with this Agreement but only as and to the extent provided in Section 2.5 hereof. (c) Definition of Excluded Liabilities of the Lee-NMBC Stations. The term "Excluded Liabilities of the Lee-NMBC Stations" shall mean all Liabilities of Lee-NMBC other than the Assumed Liabilities of the Lee-NMBC Stations. Purchaser shall not assume any of the Excluded Liabilities of the Lee-NMBC Stations. 2.3 Consideration for Purchased Assets of the Lee-NMBC Stations. (a) Consideration. Subject to Section 2.3(b) hereof, the purchase price (the "Asset Purchase Price") for the Purchased Assets of the Lee-NMBC Stations shall be (i) the portion of the Cash Payment (as defined in Section 2.9) allocated to the Purchased Assets of the Lee-NMBC Stations pursuant to Section 2.9, which shall be paid in cash at the Closing (the "Asset Purchase Cash Payment"), and (ii) the assumption by the Purchaser of the Assumed Liabilities of the Lee-NMBC Stations pursuant to Section 2.2 hereof. (b) Working Capital Adjustment of the Lee-NMBC Stations. (i) For all purposes of and under this Agreement, the term "Working Capital of the Lee-NMBC Stations" shall mean the current assets of the Lee-NMBC Stations included within the Purchased Assets of the Lee-NMBC Stations, minus the current liabilities of the Lee-NMBC Stations as of the close of business on the date immediately preceding the Closing Date (the "Adjustment Date"), each determined in accordance with GAAP applied in a manner consistent with the preparation of the Financial Statements, and adjusted to exclude (1) from current assets the current portion of program rights and (2) from current liabilities the current portion of program liabilities and any reserve or accrual for loss contingencies required by GAAP related to the matters disclosed in SCHEDULE 4.14 hereto; provided, however, that current liabilities shall include the amount or value of both cash and noncash consideration that has not been paid or provided prior to the Closing Date for programming run by any of the Lee-NMBC Stations prior to the Closing Date. (ii) Three Business Days prior to the Closing Date, Lee shall provide Purchaser with a reasonably detailed statement (the "Preliminary Statement of Working Capital of the Lee-NMBC Stations") setting forth Lee's reasonable and good faith estimate of the Working Capital of the Lee-NMBC Stations. The Asset Purchase Cash Payment payable on the Closing Date shall be decreased by the amount of any negative Working Capital of the Lee-NMBC Stations shown on the Preliminary Statement of Working Capital of the Lee-NMBC Stations or increased by the amount of any positive Working Capital of the Lee-NMBC Stations shown on the Preliminary Statement of Working Capital of the Lee-NMBC Stations. (iii) As promptly as practicable, but in any event within sixty (60) calendar days following the Closing, Lee shall cause to be prepared and delivered to the -13- 15 Purchaser a further determination and statement (the "Statement of Working Capital of the Lee-NMBC Stations") setting forth the Working Capital of the Lee-NMBC Stations. (iv) Within thirty (30) calendar days following delivery of the Statement of Working Capital of the Lee-NMBC Stations pursuant to Section 2.3(b)(iii) hereof or, if applicable, such later date determined in accordance with Section 2.3(b)(v) hereof, Lee shall pay the Purchaser the amount, if any, by which the Working Capital of the Lee-NMBC Stations shown on the Statement of Working Capital of the Lee-NMBC Stations is less than the amount thereof shown on the Preliminary Statement of Working Capital of the Lee-NMBC Stations or (B) the Purchaser shall pay to Lee the amount, if any, by which the Working Capital of the Lee-NMBC Stations shown on the Statement of Working Capital of the Lee-NMBC Stations is more than the amount thereof shown on the Preliminary Statement of Working Capital of the Lee-NMBC Stations. Any and all payments made pursuant to this Section 2.3(b)(iv) shall bear interest at the three (3) month London Inter-Bank Offered Rate published in the Wall Street Journal on the Closing Date (the "Interest Rate") for the period commencing on the Closing Date and to but not including the date of payment, and shall be made by wire transfer of immediately available funds to an account designated in writing by the party to receive such payment. Any payment made pursuant to this Section 2.3(b)(iv) shall be deemed to be an adjustment to the Asset Purchase Price. (v) If the Purchaser disagrees in good faith with the Statement of Working Capital of the Lee-NMBC Stations, then the Purchaser shall notify Lee in writing (the "Asset Purchase Notice of Disagreement") of such disagreement within thirty (30) calendar days following delivery of the Statement of Working Capital of the Lee-NMBC Stations. The Asset Purchase Notice of Disagreement shall set forth in reasonable detail the basis for the disagreement described therein. Thereafter, Lee and the Purchaser shall attempt in good faith to resolve and finally determine the amount of the Closing Working Capital of the Lee-NMBC Stations. If Lee and the Purchaser are unable to resolve the disagreement within thirty (30) calendar days following delivery of the Asset Purchase Notice of Disagreement, then Lee and the Purchaser shall retain the services of KPMG Peat Marwick LLP (the "Independent Accountant"), to resolve the disagreement and make a determination with respect thereto. The determination by the Independent Accountant will be made, and written notice thereof given to Lee and the Purchaser, within thirty (30) calendar days after the Independent Accountant's retention. The determination by the Independent Accountant shall be final, binding and conclusive upon Lee-NMBC and the Purchaser. The scope of the Independent Accountant's engagement (which will not be an audit) shall be limited to the resolution of the disputed items described in the Asset Purchase Notice of Disagreement, and the recalculation, if any, of the Statement of Working Capital of the Lee-NMBC Stations in light of such resolution. If an Independent Accountant is engaged pursuant to this Section 2.3(b)(v), the fees and expenses of the Independent Accountant shall be borne equally by Lee and the Purchaser. Any payment required by Section 2.3(b)(iv) hereof shall bear interest at the Interest Rate for the period commencing on the Closing Date and to but not including the date of payment, and shall be made based on such determination within ten (10) calendar days after delivery of a notice of determination by the Independent Accountant as described above, -14- 16 (c) A11ocation of Asset Purchase Price. The Asset Purchase Price shall be allocated among the Purchased Assets of the Lee-NMBC Stations for all purposes (including Tax and financial accounting purposes) on the basis of a customary appraisal report prepared by an independent appraisal firm which shall be selected and whose report shall be approved by the Purchaser, or as agreed by the parties. The Purchaser shall pay all fees, costs and expenses of the appraisal firm. The appraisal report and allocation will be consistent with Section 1060 of the Internal Revenue Code. The Purchaser and Lee-NMBC shall (i) execute and file all Tax Returns and prepare all financial statements, returns and other instruments in a manner consistent with the allocation determined pursuant to this Section 2.3(c), (ii) not take any position before any Governmental Authority or in any judicial proceeding that is inconsistent with such allocation, and (iii) cooperate with each other in a timely filing, consistent with such allocation, of Form 8594 with the IRS. 2.4 Further Assurances. At and after the Closing, and without further consideration therefor, (i) Lee-NMBC shall execute and deliver to the Purchaser such further instruments and certificates of conveyance and transfer as the Purchaser may reasonably request in order to more effectively convey and transfer the Purchased Assets of the Lee-NMBC Stations to the Purchaser and to put the Purchaser in operational control of the Lee-NMBC Stations, or for aiding, assisting, collecting and reducing to possession any of the Purchased Assets of the Lee-NMBC Stations and exercising rights with respect thereto, and (ii) the Purchaser shall execute and deliver to Lee such further instruments and certificates of assumption, novation and release as Lee may reasonably request in order to effectively make the Purchaser responsible for all Assumed Liabilities of the Lee-NMBC Stations and release Lee-NMBC therefrom to the fullest extent permitted under applicable Law. 2.5 Nontransferable Contracts and Licenses. To the extent that transfer or assignment hereunder by Lee-NMBC to the Purchaser of any Contracts of the Lee-NMBC Stations or Licenses (other than the FCC Licenses) of the Lee-NMBC Stations is not permitted or is not permitted without the consent of another Person, this Agreement shall not be deemed to constitute an undertaking to assign the same if such consent is not given or if such an undertaking otherwise would constitute a breach thereof or cause a loss of benefits thereunder. Lee-NMBC shall use all commercially reasonable efforts to obtain any and all such third party consents under all Material Contracts of the Lee-NMBC Stations and Material Licenses of the Lee-NMBC Stations; provided, however, that Lee-NMBC shall not be required to pay or incur any cost or expense to obtain any third party consent that Lee-NMBC is not otherwise required to pay or incur in accordance with the terms of the applicable Material Contract of the Lee-NMBC Stations or Material License of the Lee-NMBC Stations. Purchaser shall cooperate with Lee-NMBC in obtaining such third party consents, provided, however, that Purchaser shall not be required to agree to any change in the terms of any such Contract or to pay any fee or other consideration to a third party in order to obtain any such third party consent. Purchaser's cooperation shall include, without limitation, signing and delivering consent forms which may be provided by third parties to such Contracts pursuant to which Purchaser shall agree to assume and perform the obligations of Lee-NMBC under such Contracts arising during and relating to the period on and after the Closing Date. If any such third party consent is not obtained before the Closing, Lee-NMBC shall cooperate with the Purchaser in any reasonable arrangement -15- 17 designed to provide to the Purchaser on and after the Closing with the benefits under the applicable Contract of the Lee-NMBC Stations or License of the Lee-NMBC Stations, and Purchaser shall perform on and after the Closing Date the applicable Contract and License and the financial obligations thereunder, as the case may be, to the extent commensurate with the benefits actually received by Purchaser thereunder. After the Closing Date, Lee-NMBC and Purchaser shall continue to cooperate with one another and use commercially reasonable efforts to obtain any such third party consents, and any such Contracts and Licenses shall be deemed transferred or assigned upon Purchaser's receipt of any necessary third party consent thereto. Notwithstanding anything contained above in this Section 2.5 to the contrary, this Section 2.5 shall not apply to any FCC License. 2.6 The Stock Purchase. Upon the terms and subject to the conditions set forth herein, at the Closing Lee shall transfer, assign and deliver to Purchaser, and Purchaser shall purchase from Lee, the KOIN Common Stock and the SJL-Kansas Common Stock (as defined in Section 4.3) (together, the "Acquired Companies' Common Stock"), representing all issued and outstanding shares of the Acquired Companies' Common Stock, solely in exchange for the Stock Purchase Price (as defined below). 2.7 Consideration for Acquired Companies' Stock. (a) Consideration. Subject to Section 2.7(c) hereof, the purchase price (the "Stock Purchase Price") for the Acquired Companies' Common Stock shall be the portion of the Cash Payment allocated to the Acquired Companies' Common Stock pursuant to Section 2.9, which shall be paid in cash at the Closing (the "Stock Purchase Cash Payment"). (b) Additional Definitions. For all purposes of and under this Agreement, the following terms shall have the meanings indicated below: (i) "Acquired Companies Closing Liabilities" means all Liabilities that would be included on a consolidated balance sheet of the Acquired Companies as of the Adjustment Date prepared in accordance with GAAP applied in a manner consistent with the preparation of the Financial Statements, including but not limited to, all indebtedness for borrowed money and all bonuses, severance payments or other benefits for employees of the Acquired Companies conditioned upon or payable in connection with or as a result of the Closing, or calculated with reference to the financial terms, of the transactions contemplated by this Agreement which any of the Acquired Companies is obligated to make or provide as a result of the transactions contemplated by this Agreement. (ii) "Closing Adjusted Net Worth of the Acquired Companies" means the current assets of the Acquired Companies as of the Adjustment Date (excluding any such current assets (or portion thereof) to the extent not relating to and usable in the operation of the Acquired Companies' Stations after the Closing Date), minus the Acquired Companies Closing Liabilities, as determined on a consolidated basis in accordance with GAAP applied in a manner consistent with the preparation of the Financial Statements, adjusted to exclude (A) from current assets the current portion of program rights and (B) from Acquired Companies Closing -16- 18 Liabilities (1) the current and long-term portion of program liabilities, (2) any amount related to unearned income under the Station KOIN Sylvan lease agreement, and (3) any reserve or accrual for loss contingencies required by GAAP related to the matters disclosed in SCHEDULE 4.14 hereto; provided, however, that Acquired Companies Closing Liabilities shall include the amount or value of both cash and noncash consideration that has not been paid or provided prior to the Closing Date for programming run by any of the Acquired Companies' Stations prior to the Closing Date. (iii) "Acquired Companies Assumed Liabilities" means (A) the Acquired Companies Closing Liabilities, and (B) the obligations of the Acquired Companies arising during and attributable to any period after the Closing under the Contracts and Licenses of the Acquired Companies, excluding, however, (1) any obligations or liabilities arising under (aa) any such Contracts or Licenses that do not relate primarily to the operation of the Acquired Companies' Stations, (bb) any Contracts or Licenses required by this Agreement to be terminated at or prior to Closing, (cc) any Benefit Plans of the Acquired Companies other than (I) liabilities thereunder included as Acquired Company Closing Liabilities and (II) employment contracts of the Acquired Companies and (dd) any bonus or other payment or benefit conditioned upon or payable in connection with or as a result of the Closing under any employment agreement, or calculated with reference to the financial terms, of the transactions contemplated by this Agreement, and (2) any obligations or liabilities of the Acquired Companies resulting from the failure to obtain any consent required in connection with the transactions contemplated by this Agreement or resulting from any default under any Contract or License prior to or as a result of the Closing. (iv) "Acquired Companies Excluded Liabilities" means all Liabilities of the Acquired Companies as of the Closing Date, other than the Acquired Companies Assumed Liabilities. (c) Adjusted Net Worth Adjustment of the Acquired Companies. (i) Three (3) Business Days prior to the Closing Date, Lee shall provide Purchaser with a reasonably detailed statement (the "Preliminary Statement of Closing Adjusted Net Worth of the Acquired Companies") setting forth Lee's reasonable and good faith estimate of the Closing Adjusted Net Worth of the Acquired Companies. The Stock Purchase Cash Payment payable on the Closing Date shall be decreased by the amount of any negative Closing Adjusted Net Worth of the Acquired Companies shown on the Preliminary Statement of Closing Adjusted Net Worth of the Acquired Companies or increased by the amount of any positive Closing Adjusted Net Worth of the Acquired Companies shown on the Preliminary Statement of Closing Adjusted Net Worth of the Acquired Companies. (ii) As promptly as practicable, but in any event within sixty (60) calendar days following the Closing, Lee shall cause to be prepared and delivered to the Purchaser a further determination and statement (the "Statement of Closing Adjusted Net Worth -17- 19 of the Acquired Companies") setting forth the Closing Adjusted Net Worth of the Acquired Companies. (iii) Within thirty (30) calendar days following delivery of the Statement of Closing Adjusted Net Worth of the Acquired Companies pursuant to Section 2.7(c)(ii) hereof or, if applicable, such later date determined in accordance with Section 2.7(c)(iv), (1) Lee shall pay to Purchaser the amount, if any, by which the Closing Adjusted Net Worth of the Acquired Companies shown on the Statement of Closing Adjusted Net Worth of the Acquired Companies is less than the amount thereof shown on the Preliminary Statement of Closing Adjusted Net Worth of the Acquired Companies, or (2) the Purchaser shall pay to Lee the amount, if any, by which the Closing Adjusted Net Worth of the Acquired Companies shown on the Statement of Closing Adjusted Net Worth of the Acquired Companies is more than the amount thereof shown on the Preliminary Statement of Closing Adjusted Net Worth of the Acquired Companies. Any and all payments made pursuant to this Section 2.7(c)(iii) shall bear interest at the Interest Rate for the period commencing on the Closing Date and to but not including the date of payment, and shall be made by wire transfer of immediately available funds to an account designated in writing by the party to receive such payment. Any payment made pursuant to this Section 2.7(c)(iii) shall be deemed to be an adjustment to the Stock Purchase Price. (iv) If the Purchaser disagrees in good faith with the Statement of Closing Adjusted Net Worth of the Acquired Companies, then the Purchaser shall notify Lee in writing (the "Stock Purchase Notice of Disagreement") of such disagreement within thirty (30) calendar days following delivery of the Statement of Closing Adjusted Net Worth of the Acquired Companies. The Stock Purchase Notice of Disagreement shall set forth in reasonable detail the basis for the disagreement described therein. Thereafter, Lee and the Purchaser shall attempt in good faith to resolve and finally determine the amount of the Closing Adjusted Net Worth of the Acquired Companies. If Lee and the Purchaser are unable to resolve the disagreement within thirty (30) calendar days following delivery of the Stock Purchase Notice of Disagreement, then the Independent Accountant shall resolve the disagreement and make a determination with respect thereto. Such determination will be made, and written notice thereof given to Lee and the Purchaser, within thirty (30) calendar days after such selection. The determination by the Independent Accountant shall be final, binding and conclusive upon Lee and the Purchaser. The scope of the Independent Accountant's engagement (which will not be an audit) shall be limited to the resolution of the disputed items described in the Stock Purchase Notice of Disagreement, and the recalculation, if any, of the Statement of Closing Adjusted Net Worth of the Acquired Companies in light of such resolution. If an Independent Accountant is engaged pursuant to this Section 2.7(c)(iv), the fees and expenses of the Independent Accountant shall be borne equally by Lee and the Purchaser. Within ten (10) calendar days after delivery of a notice of determination by the Independent Accountant as described above, any payment required by Section 2.7(c)(iii) hereof shall be paid based upon such determination, together with interest at the Interest Rate for the period commencing on the Closing Date and to but not including the date of payment. -18- 20 (d) Allocation of Modified Aggregate Deemed Sales Price ("MADSP") and Adjusted Grossed-Up Basis ("AGUB") to KOIN Assets. If a Section 338(h)(10) election is made with respect to KOIN, the "MADSP" and "AGUB" shall be determined and allocated among the assets of KOIN in accordance with the applicable Treasury Regulations under Section 338 for all purposes. The Stock Purchase Price attributed to KOIN in Section 2.7(a) shall be allocated among the assets of KOIN for all purposes (including Tax and financial accounting purposes) on the basis of a customary appraisal report prepared by an independent appraisal firm which shall be selected and whose report shall be approved by the Purchaser, or as agreed by the parties. The Purchaser shall pay all fees, costs and expenses of the appraisal firm. The appraisal report and allocation will be consistent with Section 338 of the Internal Revenue Code. The Purchaser and Lee shall (i) execute and file all Tax Returns and prepare all financial statements, returns and other instruments in a manner consistent with the allocation determined pursuant to this Section 2.3(d), (ii) not take any position before any Governmental Authority or in any judicial proceeding that is inconsistent with such allocation, and (iii) cooperate with each other in a timely filing, consistent with such allocation, of Form 8023 with the IRS. 2.8 Further Assurances. At and after the Closing, subject to the terms and conditions herein provided, each of the Purchaser and Lee covenants and agrees to use reasonable efforts to take, or cause to be taken, all action, or do, or cause to be done, all things, necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated by the Stock Purchase. 2.9 Allocation of Cash Payment. Subject to Sections 2.3(b) and 2.7(c), the total purchase price payable in cash at the Closing for the Purchased Assets of the Lee-NMBC Stations and the Acquired Companies' Common Stock shall be Five Hundred Sixty-Two Million Five Hundred Thousand Dollars ($562,500,000) (the "Cash Payment"). Purchaser shall be entitled to specify (i) the allocation of the Cash Payment between the Asset Purchase Cash Payment and the Stock Purchase Cash Payment and (ii) the allocation of the Stock Purchase Cash Payment between the KOIN Common Stock and the SJL-Kansas Common Stock, provided that (A) Purchaser delivers such allocations to Lee at least ten (10) days prior to Closing and (B) Lee approves such allocations, which approval shall not be unreasonably withheld or delayed. ARTICLE 3 THE CLOSING 3.1 The Closing. The consummation of the transactions contemplated hereby shall take place at a closing (the "Closing") to be held at 10:00 a.m., Central Standard Time ("CST"), on a date to be designated by Lee and the Purchaser, which date shall be no later than the second (2nd) Business Day after satisfaction and fulfillment of the last to occur of the conditions set forth in Sections 7.1(c) or (d) and Sections 7.2(c) or (d), subject to the conditions set forth in Section 7.1(e) and Section 7.2(e) (the "Closing Date"), at the offices of Lane & Waterman, 220 N. Main Street, Suite 600, Davenport, Iowa, unless another time, date or place is mutually agreed upon in writing by Lee and the Purchaser. -19- 21 3.2 Closing Deliveries of Lee-NMBC and the Acquired Companies. At the Closing, Lee shall deliver, or cause to be delivered, to the Purchaser the following instruments, certificates and other documents, dated as of the Closing Date and executed on behalf of Lee-NMBC or an Acquired Company by a duly authorized officer thereof, in order to effect the transfer of the Purchased Assets of the Lee-NMBC Stations to the Purchaser pursuant to Section 2.1 hereof and effect the transfer of the Acquired Companies' Common Stock to the Purchaser pursuant to Section 2.6 hereof: (a) Instruments of Transfer and Assignment. (i) A grant deed or deeds, as the case may be, in a customary and usual form acceptable to the parties (the "Grant Deeds"), conveying fee simple title to all of the Owned Real Property of the Lee-NMBC Stations; (ii) a Bill of Sale with respect to the Purchased Assets of the Lee-NMBC Stations in a customary and usual form acceptable to the parties (the "Bill of Sale"); (iii) an Instrument of Assignment and Assumption with respect to the Purchased Assets of the Lee-NMBC Stations and Assumed Liabilities of the Lee-NMBC Stations in a customary and usual form acceptable to the parties (the "Assignment and Assumption"); (iv) an Assignment of Proprietary Rights with respect to the Lee-NMBC Stations substantially in a customary and usual form acceptable to the parties (the "Assignment of Proprietary Rights"); (v) copies of all instruments, certificates, documents and other filings (if applicable) necessary to release the Purchased Assets of the Lee-NMBC Stations from all Encumbrances other than Permitted Encumbrances and those Encumbrances set forth in SCHEDULE 4.5(b) hereto, all in a form reasonably satisfactory to counsel for the Purchaser; (vi) copies of all requisite Licenses, waivers, consents, approvals, authorizations, qualifications and other orders of any Governmental Authority with competent jurisdiction over the transactions contemplated hereby, and all requisite consents, approvals or waivers from third parties, which are necessary to effect the valid transfer and assignment of the Purchased Assets of the Lee-NMBC Stations to the Purchaser pursuant to this Agreement and to otherwise consummate the Asset Purchase, Stock Purchase and as otherwise contemplated by this Agreement; (vii) stock certificates representing all of the outstanding shares of KOIN and SJL-Kansas duly endorsed or accompanied by duly executed stock powers in blank (the "Stock Certificates"); (viii) all other documents, instruments and certificates required to be delivered by Lee-NMBC or the Acquired Companies pursuant to this Agreement or otherwise -20- 22 required or reasonably requested by Purchaser, including of conveyance and transfer, as the Purchaser may reasonably request in order to more effectively convey and transfer the Purchased Assets of the Lee-NMBC Stations to the Purchaser and to put the Purchaser in operational control of the Lee-NMBC Stations, or for aiding, assisting, collecting and reducing to possession any of the Purchased Assets of the Lee-NMBC Stations and exercising rights with respect thereto and to otherwise consummate the Asset Purchase, the Stock Purchase and as otherwise contemplated by this Agreement; (ix) resignations of all directors and officers of the Acquired Companies which have been previously requested in writing by Purchaser shall have been delivered to Purchaser, effective upon the Closing; and (x) the stock book, stock ledger, and minute book of each of the Acquired Companies. (b) Closing Certificates. (i) an officer's certificate in a form reasonably acceptable to the parties; (ii) a secretary's certificate substantially in a form reasonably acceptable to the parties; and (iii) a certificate of Lee-NMBC and each Acquired Company certifying as to its non-foreign status which complies with the requirements of Section 1445 of the Internal Revenue Code. (c) Legal Opinions. (i) A legal opinion of Lane & Waterman, outside counsel for Lee-NMBC and the Acquired Companies, substantially in the form attached hereto as EXHIBIT A; and (ii) a legal opinion of Wiley, Rein & Fielding, FCC counsel of Lee-NMBC and the Acquired Companies, substantially in the form attached hereto as EXHIBIT B. 3.3 Closing Deliveries of the Purchaser. At the Closing, the Purchaser shall deliver, or cause to be delivered, to Lee the following instruments, certificates and other documents, dated as of the Closing Date and executed or acknowledged (as applicable) on behalf of the Purchaser by a duly authorized officer thereof, in order to pay for the Acquired Companies' Common Stock and the Purchased Assets of the Lee-NMBC Stations and effect the assumption of all Assumed Liabilities of the Lee-NMBC Stations pursuant to Section 2.2 hereof. (a) Cash Payment. An amount in cash equal to the Cash Payment, payable by wire transfer of immediately available funds to an account designated in writing by Lee at least two (2) Business Days prior to the Closing Date. -21- 23 (b) Instruments of Assumption. (i) the Bill of Sale; (ii) the Assignment and Assumption; (iii) the Assignment of Proprietary Rights; and (iv) all other documents, instruments and certificates required to be delivered by Purchaser pursuant to this Agreement or otherwise secured and reasonably requested by Lee including instruments and certificates of assumption, novation and release as Lee may reasonably request in order to effectively make the Purchaser responsible for all Assumed Liabilities of the Lee-NMBC Stations and release Lee-NMBC therefrom to the fullest extent permitted under applicable Law but without any additional obligation incurred on the part of Purchaser. (c) Closing Certificates. (i) an officer's certificate substantially in a form reasonably acceptable to the parties; and (ii) a secretary's certificate substantially in a form reasonably acceptable to the parties. (d) Legal Opinion. A legal opinion of outside counsel for the Purchaser, substantially in the form attached hereto as EXHIBIT C. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF LEE-NMBC OR EACH ACQUIRED COMPANY Lee and NMBC jointly and severally represent and warrant to the Purchaser as follows: 4.1 Organization. Lee-NMBC and each Acquired Company is a corporation duly organized, validly existing and in good standing under the Laws of the state of such company's incorporation, and have all requisite corporate power and authority to own, operate or lease the assets and properties now owned, operated or leased by it, and to conduct the operation of the Lee-NMBC Stations and each Acquired Company as presently conducted by such company. Lee-NMBC, with respect to the Lee-NMBC Stations, and the Acquired Companies are duly authorized, qualified or licensed to do business as a foreign corporation, and are in good standing, under the Laws of each state or other jurisdiction in which the character of such company's properties owned, operated or leased, or the nature of such company's activities, makes such qualification necessary, except in those states and jurisdictions where the failure to be so qualified or in good standing would not reasonably be expected, as of the date hereof, to have a Material Adverse Effect. Corporate minutes of each Acquired Company for the past five -22- 24 years, and the stock records of each Acquired Company have been made available to Purchaser. For the past five years, all corporate action which has previously been taken by the shareholders of the Acquired Companies, by the board of directors of each Acquired Company, or by any committee of any board of the type customarily recorded in the minutes or proceedings of shareholders, board of directors and committees of the board is properly and accurately recorded in the corporate minutes of each Acquired Company. Complete and accurate records with respect to the issuance, transfer, redemption and cancellation of shares of capital stock of each Acquired Company are contained in each Acquired Company's stock records. 4.2 Authority and No Violation. (a) Lee-NMBC and each Acquired Company have all requisite corporate power and authority to enter into this Agreement and the Lee Documents, to perform such company's obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Lee-NMBC and each Acquired Company of this Agreement and Lee Documents, the performance by Lee-NMBC and each Acquired Company of its obligations hereunder and thereunder, and the consummation by Lee-NMBC and each Acquired Company of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of Lee-NMBC and each Acquired Company. This Agreement has been duly executed and delivered by Lee-NMBC and, assuming the due authorization, execution and delivery of this Agreement by the Purchaser, this Agreement constitutes a legally valid and binding obligation of Lee-NMBC, enforceable against Lee-NMBC in accordance with its terms, except as such enforceability may be limited by principles of public policy, and subject to (i) the effect of any applicable Laws of general application relating to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors' rights and relief of debtors generally, and (ii) the effect of rules of Law and general principles of equity, including rules of Law and general principles of equity governing specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law). Upon the execution and delivery of the Lee Documents by Lee-NMBC and each Acquired Company, at the Closing and, assuming the due authorization, execution and delivery of the Assignment and Assumption by the Purchaser, each of the Lee Documents will constitute a legally valid and binding obligation of Lee-NMBC and each Acquired Company, enforceable against Lee-NMBC and each Acquired Company, in accordance with its respective terms, except as such enforceability may be limited by principles of public policy, and subject to (i) the effect of any applicable Laws of general application relating to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors' rights and relief of debtors generally, and (ii) the effect of rules of Law and general principles of equity, including rules of Law and general principles of equity governing specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law). (b) Assuming that all consents, waivers, approvals, orders and authorizations set forth in SCHEDULE 4.4 hereto have been obtained and all registrations, qualifications, designations, declarations or filings with any Governmental Authorities set forth in SCHEDULE 4.4 hereto have been made, and except as set forth in SCHEDULE 4.2 hereto, the execution and delivery -23- 25 by Lee-NMBC and each Acquired Company of the Lee Documents, the performance by Lee-NMBC and each Acquired Company of its obligations hereunder and thereunder, and the consummation by such company of the transactions contemplated hereby and thereby, will not conflict with or violate in any material respect, constitute a material default (or event which with the giving of notice or lapse of time, or both, would become a material default) under, give rise to any right of termination, amendment, modification, acceleration or cancellation of any material obligation or loss of any material benefit under, result in the creation of any material Encumbrance pursuant to, or require such company to obtain any consent, waiver, approval or Action of, make any filing with, or give any notice to any Person as a result or under, the terms and provisions of (i) the respective charter or the respective bylaws of such company, (ii) any material Contract to which such company is a party or by which any of the Purchased Assets of the Lee-NMBC Stations is bound, or (iii) any material Law applicable to such company, any of the Purchased Assets, assets of the Acquired Companies or the Acquired Companies' Common Stock, or any Governmental Order issued by a Governmental Authority by which Lee-NMBC or any Acquired Company or any of the Purchased Assets of the Lee-NMBC Stations is in any way bound or obligated. 4.3 Capitalization, Subsidiaries and Charter. (a) The authorized capital stock of KOIN consists of thirty thousand (30,000) shares of common stock, par value of $10.00 per share (the "KOIN Common Stock"). There are thirty thousand (30,000) shares of KOIN Common Stock issued and outstanding. No shares of KOIN Common Stock are held by KOIN in its treasury. All of the issued and outstanding shares of KOIN Common Stock are validly issued, fully paid and nonassessable. Lee is the legal and beneficial owner of record of the KOIN Common Stock, and the KOIN Common Stock is free and clear of all liens, pledges and other Encumbrances. There are no securities of KOIN presently outstanding, nor at the Closing will there be, which are convertible into or exchangeable or exercisable for any shares of KOIN Common Stock, and there are no outstanding or authorized subscriptions, options, warrants, calls, rights, commitments or any other agreements of any character obligating KOIN to issue, sell or transfer any additional shares of KOIN Common Stock or any securities convertible into or evidencing the right to subscribe for any shares of KOIN Common Stock. (b) The authorized capital stock of SJL-Kansas consists of one million nine hundred fifty thousand shares (1,950,000) shares of Class A common stock with a par value of .01 per share; nine hundred fifty thousand (950,000) shares of Class B common stock with a par value of .01 per share; one hundred thousand (100,000) shares of Class C common stock with a par value of .01 per share and fifty thousand (50,000) shares of Class D 6% preferred stock (the "SJL-Kansas Common Stock"). There are one thousand (1,000) Class A shares of SJL-Kansas Common Stock issued and outstanding. No shares of SJL-Kansas Common Stock are held by SJL-Kansas in its treasury. All of the issued and outstanding shares of SJL-Kansas Common Stock are validly issued, fully paid and nonassessable. Lee is the legal and beneficial owner of record of the SJL-Kansas Common Stock, free and clear of all Liens. There are no securities of SJL-Kansas outstanding which are convertible into or exchangeable or exercisable for any shares of SJL-Kansas Common Stock, there are not now, nor at the Closing will there be, any -24- 26 outstanding or authorized subscriptions, options, warrants, calls, rights, commitments or any other agreements of any character obligating SJL-Kansas to issue, sell or transfer any additional shares of SJL-Kansas Common Stock or any securities convertible into or evidencing the right to subscribe for any shares of SJL-Kansas Common Stock. (c) SCHEDULE 4.3 hereto sets forth the name, date and jurisdiction of incorporation, and the outstanding shares of capital stock of Topeka, Wichita License Sub, Topeka License Sub and any Subsidiary of an Acquired Company. Each company listed on SCHEDULE 4.3 hereto is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has the corporate power and lawful authority to own, lease and operate its assets, properties and business and to carry on its business as now being and as heretofore conducted. Each company listed on SCHEDULE 4.3 hereto is duly qualified or otherwise authorized as a foreign corporation to transact business and is in good standing in all jurisdictions in which the nature of the activities conducted by it or the character of the assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not, in any individual case, reasonably be expected as of the date hereof to have a Material Adverse Effect. No shares of any company listed on SCHEDULE 4.3 hereto are held by such company in its treasury. All of the issued and outstanding shares of such company are validly issued, fully paid and nonassessable. All shares of Topeka, Topeka License Sub and Wichita License Sub are owned beneficially and of record by the corporation specified as the owner in the Recitals to this Agreement, free and clear of all Liens. There are no securities of any company listed in SCHEDULE 4.3 hereto presently outstanding, nor at the Closing will there be, which are convertible into or exchangeable or exercisable for any shares of such company, and there are no outstanding or authorized subscriptions, options, warrants, calls, rights, commitments or any other agreements of any character obligating such company to issue, sell or transfer any additional shares or any securities convertible into or evidencing the right to subscribe for any shares of such company except as set forth in SCHEDULE 4.3 hereto with respect to IBS-Lee Partners LLC. (d) Except as set forth in SCHEDULE 4.3 hereto, neither Lee-NMBC nor any Acquired Company has any Subsidiaries, and does not own any direct or indirect equity or debt interest in any other Person, including any interest in a corporation, partnership or joint venture, and is not obligated or committed to acquire any such interest, in any case in which the Subsidiary, interest or other Person relates primarily to the Lee-NMBC Stations or the Acquired Companies. (e) Each Acquired Company and each company listed on SCHEDULE 4.3 hereto has heretofore delivered to Purchaser true and complete copies of its respective charter documents and by-laws or comparable instruments of such company as in effect on the date hereof. 4.4 Government Consents. No material consent, waiver, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority is required on the part of Lee-NMBC in connection with the execution and delivery by such company of this Agreement and by Lee-NMBC and each Acquired -25- 27 Company of the Lee Documents, the performance by Lee-NMBC and any Acquired Company of its respective obligations hereunder and thereunder, or the consummation by Lee-NMBC and each Acquired Company of the transactions contemplated hereby and thereby, including the sale and transfer of the Acquired Companies' Common Stock and Purchased Assets of the Lee-NMBC Stations and transfer of the FCC Licenses of the Lee-NMBC Stations to the Purchaser or connection with the Acquired Companies' Common Stock, except as set forth in SCHEDULE 4.4 hereto. 4.5 Tangible Property. (a) Except for the shared property or assets identified in SCHEDULES 2.1(c) and 6.10, SCHEDULE 4.5(a) hereto contains a true, correct and complete list of the following to the extent owned, used or held for use by Lee-NMBC or any Acquired Company in the operation of the Lee-NMBC Stations and the operation of each Acquired Company, as the case may be: (i) each parcel of real property owned, as of the date hereof, by such company ("Owned Real Property"), (ii) each parcel of material real property leased from or to a third party, as of the date hereof, by such company ("Leased Real Property"), the name of the third party lessor(s) or lessee(s) thereof, as the case may be, the date of the lease contract relating thereto and all amendments thereof, and (iii) a list of all material fixed assets owned by such company as set forth in each company's depreciation schedule attached thereto, (excluding therefrom such fixed assets with an original cost of less than $5,000 or which have been fully depreciated) and prepared in the ordinary course of business as of the date set forth therein. Except as set forth in SCHEDULE 4.5(a) hereto, the Lee-NMBC Stations and each Acquired Company does not own, or have a contractual obligation to purchase or otherwise acquire any material interest in, any parcel of real property which would be used or held for use primarily in the operation of the Lee-NMBC Stations or by the Acquired Company. All of the tangible assets and properties used by Lee-NMBC Stations or the Acquired Companies pursuant to a lease or license included among the Purchased Assets of the Lee-NMBC Stations or to which an Acquired Company is a party shall be referred to herein, collectively, as "Leased Assets." (b) Lee-NMBC and each Acquired Company have fee simple title to all of the Owned Real Property of the Lee-NMBC Stations and the Owned Real Property of the Acquired Companies, free and clear of Liens except Permitted Encumbrances. (c) Within twenty-one (21) days after the date of this Agreement, Lee-NMBC and each Acquired Company shall, with respect to each tract of Owned Real Property owned by such company, procure at its expense (except as provided below) and deliver to Purchaser (i) commitments for either (x) endorsements to existing owner's policies of title insurance committing to date the existing policies down to the Closing, subject to all matters listed on said policies and such other matters of record since the date of the policies or (y) ALTA owner's policies of title insurance in the amounts ascribed to the applicable tract of Owned Real Property, issued by Chicago Title Insurance Company or an affiliate or agent thereof, subject to all matters of record as of the date of the commitments, the pre-printed jacket exclusions and the standard pre-printed exceptions, (ii) copies of all matters listed as exceptions on the policies and commitments, as the case may be, and (iii) if requested by Purchaser and at Purchaser's expense, -26- 28 surveys accompanied by certifications by surveyors registered and licensed in the jurisdiction where each tract is located stating that the surveys have been prepared as of a recent date in accordance with the current ALTA minimum standard detail requirements, or accompanied by a recertification updating to a current date a prior certification regarding preparation in accordance with such requirements. 4.6 Intellectual Property and Proprietary Rights. (a) SCHEDULE 4.6(a) hereto contains a true, correct and complete list of all material Intellectual Property owned by Lee-NMBC and each Acquired Company, as the case may be, as of the date hereof, to the extent such Intellectual Property is related primarily to the Lee-NMBC Stations and the operation of each Acquired Company. A true and complete copy of all material documentation relating to each item of Intellectual Property set forth in SCHEDULE 4.6(a) hereto has been made available to the Purchaser and its agents and representatives. (b) Lee-NMBC and each Acquired Company, as the case may be, own or have a valid right to use all Proprietary Rights used by such company to conduct the Lee-NMBC Stations and the Acquired Companies' operations as currently conducted by such company, without, to their Knowledge, materially infringing upon the material rights of any other Person. To the Knowledge of Lee-NMBC and each Acquired Company, as the case may be, no other Person is materially infringing upon the material rights of such company in or to any of the Intellectual Property set forth in SCHEDULE 4.6(a) hereto. 4.7 Lee-NMBC Stations and the Acquired Companies' Contracts. (a) SCHEDULE 4.7(a) hereto contains a list of each of the Lee-NMBC Stations or the Acquired Companies' Contracts (including all amendments thereto) to which Lee-NMBC and each Acquired Company, as the case may be, is a party or by which Lee-NMBC and each Acquired Company, as the case may be, or any of the Purchased Assets of the Lee-NMBC Stations or any of the assets of the Acquired Companies is bound as of the date hereof, which involves an executory obligation of more than $25,000 or is otherwise material to the Lee-NMBC Stations or the Acquired Companies, the Purchased Assets of the Lee-NMBC Stations or the Assumed Liabilities of the Lee-NMBC Stations (each, a "Material Contract" and, collectively, the "Material Contracts"), except (i) contracts for the sale of advertising time entered into in the ordinary course of business; and (ii) contracts which are Short Term Agreements. The Material Contracts include, except as noted above, the following: (i) leases relating to all Leased Real Property of the Lee-NMBC Stations or the Acquired Companies; (ii) capital or operating leases or conditional sales agreements relating to any Purchased Assets of the Lee-NMBC Stations or to which an Acquired Company is a party (other than Short Term Agreements), in each case involving monthly payments in excess of $10,000, (iii) noncompetition or other agreements restricting the ability of Lee-NMBC or any Acquired Company, as the case may be, to engage in the television broadcasting business in any location; (iv) employment, consulting, separation, collective bargaining or other labor agreements; (v) agreements under which Lee-NMBC or any Acquired Company, as the case may be, is obligated to indemnify, or entitled to indemnification from, any other Person primarily related to the Lee- -27- 29 NMBC Stations and the Acquired Companies, other than any agreement that requires indemnification solely in connection with or as a result of a breach of such agreement; and (vi) the network affiliation agreements of Lee-NMBC and each Acquired Company. For all purposes of and under this Agreement, the term "Short Term Agreement" shall mean an agreement entered into in the ordinary course of business that is terminable by Lee-NMBC or any Acquired Company upon ninety (90) days or less notice without penalty or cancellation fee or charge. Accurate and complete copies of all Material Contracts have been made available for inspection by Purchaser. (b) Lee-NMBC and each Acquired Company, as the case may be, has made available to the Purchaser and its agents and representatives a copy or summary of each written Material Contract and a written summary of each oral Material Contract. Except as set forth in SCHEDULE 4.7(b) hereto, (i) each Material Contract is in full force and effect and represents a valid, binding and enforceable obligation of such company in accordance with the respective terms thereof and, to the knowledge of Lee-NMBC and each Acquired Company, as the case may be, represents a valid, binding and enforceable obligation of each of the other parties thereto; and (ii) there exists no material breach or material default (or event that with notice or the lapse of time, or both, would constitute a material breach or material default) on the part of Lee-NMBC or any Acquired Company, as the case may be, or, to the knowledge of Lee-NMBC and each Acquired Company, as the case may be, on the part of any other party under any Material Contract, in any individual case which has had or could reasonably be expected, as of the date hereof, to have a Material Adverse Effect. 4.8 Licenses and FCC Licenses. (a) Lee-NMBC and each Acquired Company, as the case may be, owns or possesses all right, title and interest in and to all the FCC Licenses and all other material Licenses under its respective name which are necessary to conduct the business of the Lee-NMBC Stations and each Acquired Company as conducted by each of Lee-NMBC or any Acquired Company, as the case may be, as of the date hereof (each, a "Material License" and, collectively, the "Material Licenses"). No loss or expiration of any Material License is pending or, to the knowledge of Lee-NMBC and each Acquired Company, as the case may be, threatened, other than the expiration of any Material License in accordance with the terms thereof. Any action of the FCC with respect to each FCC License is a Final Action with the exception of the FCC's grant of its consent to the FCC Transfer Application. Each of the Lee-NMBC Stations and Acquired Companies' Stations is being operated in all material respects in accordance with the Communications Act. (b) Lee-NMBC and each Acquired Company, as the case may be, is the holder of all rights in and to the FCC Licenses listed under its respective name on SCHEDULE 4.8(b) hereto. The FCC Licenses listed in SCHEDULE 4.8(b) hereto constitute all of the FCC Licenses used or necessary to lawfully operate the Lee-NMBC Stations and the Acquired Companies' Stations in the manner now operated. The FCC Licenses, including extensions or renewals thereof, are in full force and effect and are unimpaired by any acts or omissions of Lee-NMBC, any Acquired Company or their respective shareholders, employees or agents. Without limiting -28- 30 the generality of the foregoing, the FCC Licenses are valid for the balance of the current license term applicable to television stations licensed to communities in the states where the Lee-NMBC Stations and the Acquired Companies' Stations are located and are subject to no restrictions or conditions outside of the ordinary course. (c) There is not, to the knowledge of Lee-NMBC and each Acquired Company, any FCC investigation, notice of apparent liability or order of forfeiture pending or outstanding against any of the Lee-NMBC Stations and the Acquired Companies' Stations respecting any violation, or allegation thereof, of any FCC rule, regulation or written policy, or, to the knowledge of Lee-NMBC and each Acquired Company, any complaint before the FCC as a result of which an investigation, notice of apparent liability, or order of forfeiture may issue from the FCC relating to any of the Lee-NMBC Stations and the Acquired Companies' Stations. 4.9 Employees. SCHEDULE 4.9 hereto contains a true, correct and complete list of all employees of Lee-NMBC or any Acquired Company who, as of the date of this Agreement, have duties principally related to the Lee-NMBC Stations and each Acquired Company, as the case may be, including (and designating as such) any such employee who is an inactive employee on paid or unpaid leave of absence, and indicating date of employment, current title, currently accrued and unused vacation (including both the number of days and dollar value), compensation (including bonus arrangements), and arrangements (including amounts) for termination or severance payments or benefits. Each employee set forth in SCHEDULE 4.9 hereto who remains employed by Lee-NMBC and each Acquired Company immediately prior to the Closing (whether actively or inactively), and each additional employee who is hired to work in the Lee-NMBC Stations and by each Acquired Company following the date hereof and prior to the Closing who remains employed by such respective company immediately prior to the Closing (whether actively or inactively), shall be referred to herein individually as an "Employee" and, collectively, as the "Employees". 4.10 Employee Benefit Plans. (a) SCHEDULE 4.10(a) hereto lists all bonus, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock and stock option plans, all employment, completion, change of control or severance contracts, health, medical, vision, and dental insurance plans, life insurance and accident and disability insurance plans, leave of absence, layoff, vacation, day or dependent care, legal services, education assistance, cafeteria (within the meaning of Code Section 125), flexible spending and other employee benefit plans, policy contracts, agreements or arrangements (including any collective bargaining agreement), whether written or if material, oral, which cover Employees or former employees of the Lee-NMBC Stations and each Acquired Company or with respect to which the Lee-NMBC Stations and each Acquired Company has any material actual or potential liability, including "employee benefit plans" within the meaning of Section 3(3) of ERISA (the "Benefit Plans"). Except as set forth in SCHEDULE 4.10(a) hereto, no Benefit Plan is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA), and, except as set forth in SCHEDULE 4.10(A) hereto, no Benefit Plan provides health or other welfare benefits to former employees other than in compliance with Part 6 of Title I of ERISA or Section 4980B of -29- 31 the Code or similar state Law ("COBRA"). True and complete copies of the Benefit Plans have been made available to Purchaser. (b) Each Benefit Plan has been maintained and administered in compliance in all material respects with the applicable provisions of ERISA, the Code and any other Laws (including compliance with all reporting and disclosure obligations). Each Benefit Plan (other than any multiemployer plan) which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter that it is so qualified; to the extent that there have been any amendments to such Benefit Plan after the most recent favorable determination letter, the remedial amendment period under Section 401(b) of the Code has not expired as of the date of this Agreement with respect to such amendments. (c) Lee-NMBC, with respect to the Employees, and each Acquired Company does not have any Liability under Title IV of ERISA (other than for the payment of premiums, none of which are overdue). Lee-NMBC, with respect to the Employees, and each Acquired Company or any ERISA Affiliates thereof, have not incurred or expect to incur Liability in connection with an "accumulated funding deficiency" within the meaning of Section 412 of the Code, whether or not waived. Lee-NMBC, with respect to the Employees, and each Acquired Company, have not incurred, nor expect to incur, any withdrawal liability with respect to a "multiemployer plan" under Title IV of ERISA. Lee-NMBC, with respect to the Employees, and each Acquired Company have not incurred any material Liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA with respect to any Benefit Plan. Each Benefit Plan has been maintained and administered in all material respects in compliance with its terms. There is no pending, nor has Lee-NMBC or any Acquired Company received notice of any threatened, material claims against or otherwise involving any of the Benefit Plans. All material contributions required to be made as of the date of this Agreement to the Benefit Plans have been made or provided for. (d) Lee-NMBC and each Acquired Company has complied with the requirements of COBRA. 4.11 Sufficiency of Assets. (a) The Purchased Assets of the Lee-NMBC Stations and the assets and properties (including tangible, intangible, personal, real or mixed) of the Acquired Companies, including but not limited to the assets listed on SCHEDULE 4.5(A) hereto, together with such fixed assets of the Lee-NMBC Stations and the Acquired Companies with an original cost of less than $5,000 or which have been fully depreciated, as the case may be (including the licenses or leasehold interests in or relating to the Leased Assets), constitute all of the assets, properties and rights necessary for the conduct of the operations of the Lee-NMBC Stations and for the conduct by each Acquired Company of each of its Acquired Companies' Stations, in each case in the manner consistent with past practice. Each of Lee-NMBC or the Acquired Companies which owns the Lee-NMBC Station or Acquired Company Station in which any of such assets, properties or rights are used in the operation of such station owns all of such assets, properties -30- 32 and rights, free and clear of all Liens, except for Permitted Encumbrances, and those Encumbrances set forth in SCHEDULE 4.5(b) hereto. (b) The tangible personal property included in the Purchased Assets of the Lee-NMBC Stations and the assets of the Acquired Companies listed on the depreciation schedules set forth in SCHEDULE 4.5(a) hereto or the Leased Assets are in good condition and repair (ordinary wear and tear excepted) for property of comparable type, age and usage, except for tangible personal property that is obsolete, depleted or worn out and no longer used in the operation of the Lee-NMBC Stations and each Acquired Company. 4.12 Financial Statements. Attached as SCHEDULE 4.12 hereto are true and complete copies of the consolidated unaudited balance sheets of the Lee-NMBC Stations and each Acquired Company, and the unaudited balance sheet of each Lee-NMBC Station and Acquired Company Station individually, as of, and the consolidated unaudited statements of income of the Lee-NMBC Stations and each Acquired Company, and the unaudited statement of income for each Lee-NMBC Station and Acquired Company Station individually, for the fiscal year ended September 30, 1999, (the aforementioned financial statements referred to as the "Financial Statements"). The Financial Statements have been prepared from the books and records of the Lee-NMBC Stations and each Acquired Company in a manner consistent with the audited financial statements of Lee and present fairly the financial position and results of operations of the Lee-NMBC Stations and each Acquired Company as of the date and for the period indicated, in each case in conformity with GAAP, except that the Financial Statements are summary in nature and do not include the statement of stockholders' equity and cash flows or notes and related disclosures required by GAAP. 4.13 No Undisclosed Liabilities. Lee-NMBC, with respect to the Lee-NMBC Stations, and each Acquired Company have no liabilities other than (i) the liabilities reflected on the Financial Statements, (ii) liabilities incurred in the ordinary course of business after the date of the Financial Statements, none of which is material to the assets, properties, business, results of operations or condition (financial or otherwise) of the Lee-NMBC Stations and each Acquired Company, (iii) liabilities set forth in SCHEDULE 4.13 hereto, and (iv) liabilities that individually or in the aggregate are not material to any Lee-NMBC Station or Acquired Company Station. 4.14 Litigation; Governmental Orders. (a) Except as set forth in SCHEDULE 4.14 hereto, as of the date hereof, there are no pending or, to the knowledge of Lee-NMBC and each Acquired Company, as the case may be, threatened material Actions by any Person or Governmental Authority against or relating to such company with respect to the Lee-NMBC Stations or their assets or properties or any Acquired Company or its assets or properties. (b) Lee-NMBC and each Acquired Company are not subject to or bound by any materially adverse Governmental Order affecting any of the Lee-NMBC Stations, any Acquired Company or any Acquired Company Station. -31- 33 4.15 Compliance with Laws. Except as set forth in SCHEDULE 4.15 hereto, to the knowledge of Lee-NMBC and each Acquired Company as the case may be, each is in compliance in all material respects with, and such company has never received any claim or notice that it is in material noncompliance with, any material Law or Governmental Order applicable to the Lee-NMBC Stations and each Acquired Company. 4.16 Environmental Matters. Except as disclosed in the environmental site assessments identified in SCHEDULE 4.16 hereto, all of which have been made available to Purchaser: (a) to the knowledge of Lee-NMBC and each Acquired Company, as the case may be, there has not been any release of any Hazardous Material in violation of Environmental Law into the environment on the Owned Real Property. (b) neither Lee-NMBC, with respect to the Lee-NMBC Stations, nor any Acquired Company have operated in or is in violation of any Environmental Law in any material respect. (c) Lee-NMBC and each Acquired Company have not received any directive, order or notice from any Governmental Authority alleging any violation of or failure to comply with any Environmental Law at the Owned Real Property, nor have any of Lee-NMBC and each Acquired Company received any directive, order or notice from any Government Authority or any other Person alleging that such company is actually or potentially liable under Environmental Laws for the costs of environmental investigation or remediation of the Owned Real Property. (d) With respect to the Owned Real Property, a copy of all environmental inspections, studies, audits, tests, reviews or analysis by Lee-NMBC and each Acquired Company or any consultant engaged by such company within the last five (5) years, has been previously provided to the Purchaser. 4.17 Insurance. (a) Lee-NMBC, with respect to the Lee-NMBC Stations, and each Acquired Company or Affiliates thereof, directly or through Lee, maintain adequate insurance coverage or self-insure with adequate reserves with respect to its assets, properties and operations to insure against commercially reasonable risks of Loss, damage or Liability. (b) All of the insurance policies listed on SCHEDULE 4.17 hereto in the name of Lee-NMBC, with respect to the Lee-NMBC Stations, and each Acquired Company with respect to libel shall be in full force and effect and enforceable by the Purchaser following the consummation of the transactions contemplated by this Agreement in respect of all reported or unreported libel claims arising out of occurrences prior to the consummation of this Agreement. -32- 34 (c) SCHEDULE 4.17 hereto lists and briefly describes each insurance policy maintained by Lee-NMBC with respect to the Lee-NMBC Stations and by or on behalf of the Acquired Companies, and an insurance claims history for each Lee-NMBC Station and Acquired Company Station for the preceding five (5) years. 4.18 Transactions with Affiliates. Except as set forth in SCHEDULE 4.18 hereto, no shareholder, officer, director or employee of Lee-NMBC or any Acquired Company or any of its Affiliates has (a) an outstanding loan from, or an outstanding loan to, the Lee-NMBC Stations and the Acquired Companies which will remain outstanding as of the Closing, (b) except as set forth in SCHEDULE 4.14 hereto, any material contractual or other claim, express or implied, of any kind whatsoever which has been asserted or, to the knowledge of the Lee-NMBC Stations and the Acquired Companies, threatened, (c) any interest in any of the Purchased Assets of the Lee-NMBC Stations or the Acquired Companies' Common Stock, or (d) engaged in any other transaction with the Lee-NMBC Stations and the Acquired Companies other than in such person's capacity as an employee, officer or director of such respective company. 4.19 Taxes. Except as set forth in SCHEDULE 4.19 hereto: (a) Lee-NMBC and each Acquired Company (i) have filed (or caused to be filed) all Tax Returns required to be filed by such company prior to the date of this Agreement, except for those Tax Returns for which requests for extensions have been timely filed, and all such Tax Returns are accurate and complete in all material respects, (ii) have paid all Taxes shown to be due and payable on such Tax Returns and (iii) have accrued on the Financial Statements (or caused to be accrued) all unpaid Taxes for all periods ending on or prior to the date of the Financial Statements of such company. Lee-NMBC and each Acquired Company and its Subsidiaries have not incurred any liability for Taxes subsequent to the date of the Financial Statements of such company other than in the ordinary course of such company's business. (b) There are no Liens for Taxes on the Purchased Assets of the Lee-NMBC Stations or the assets of any Acquired Company except for Permitted Encumbrances, and there is no pending Tax audit, examination, refund, litigation or adjustment in controversy with respect to the Purchased Assets or income of the Lee-NMBC Stations or the assets or income of any Acquired Company. 4.20 Labor Controversies. Except as set forth on SCHEDULE 4.20 hereto, with respect to the Lee-NMBC Stations and the Acquired Companies, as the case may be, no such company is a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor union organization. There is no material unfair labor practice or labor arbitration proceeding pending or, to the knowledge of Lee-NMBC and each Acquired Company, threatened against any such company. 4.21 Cable Television Transmission. SCHEDULE 4.21 lists (i) to the best knowledge of Lee-NMBC each cable television system on which the signal of any Lee-NMBC Station or any Acquired Company Station is currently being carried (each, a "Carrying System"), (ii) the cable -33- 35 channel on which any Lee-NMBC Station or any Acquired Company Station is currently carried on each Carrying System, and (iii) as to each Carrying System, whether carriage of the signal of such station is pursuant to a "must-carry" election, a retransmission consent agreement, or otherwise. Except as set forth in SCHEDULE 4.21, at the date hereof and extending, to the extent applicable, to the Closing, (i) each Lee-NMBC Station or each Acquired Company Station is carried on each applicable 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) none of Lee-NMBC or the Acquired Companies is a party to an agreement to reimburse any cable television system for any copyright royalties in respect of carriage of the signal of any Lee-NMBC Station or any Acquired Company Station, (iii) no cable system has advised any of Lee-NMBC, the Acquired Companies, the Lee-NMBC Stations, or the Acquired Companies' Stations of any signal quality or copyright indemnity or other prerequisite to cable carriage of the applicable 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 any Lee-NMBC Station's or any Acquired Company's Station's market for signal carriage purposes. 4.22 Digital Television Authorizations. Except as set forth in SCHEDULE 4.22 hereto, Lee-NMBC and the Acquired Companies have timely filed, and shall use their commercially reasonable efforts to prosecute, applications for digital television authorizations for the Lee-NMBC Stations and the Acquired Companies' Stations including, without limitation, any applications necessary or appropriate to "maximize" each such station's digital television facilities in order that such facilities shall be protected from interference by Class A Low Power Television stations. 4.23 Brokers. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by Lee directly with the Purchaser without the intervention of any Person on behalf of Lee-NMBC and any Acquired Company, in such manner as to give rise to any valid claim by any Person against the Purchaser for a finder's fee, brokerage commission or similar payment, other than Credit Suisse First Boston Corporation and McFarland Dewey & Co., L.L.C., whose fees and expenses shall be borne by Lee. 4.24 Full Disclosure. None of the representations and warranties made by Lee-NMBC and each Acquired Company in this Agreement, the Schedules or Exhibits hereto or any document, instrument, written statement or other information furnished by or on behalf of such company in connection with the negotiations and transactions set forth herein, contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained therein or herein not misleading. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser hereby represents and warrants to Lee-NMBC as follows: -34- 36 5.1 Organization. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. 5.2 Authority. The Purchaser has all requisite corporate power and authority to enter into this Agreement and the Assignment and Assumption, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Purchaser of this Agreement and the Assignment and Assumption, the performance by the Purchaser of its obligations hereunder and thereunder, and the consummation by the Purchaser of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and, assuming the due authorization, execution and delivery of this Agreement by Lee-NMBC and any Acquired Company, as the case may be, this Agreement constitutes a legally valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by principles of public policy, and subject to (i) the effect of any applicable Laws of general application relating to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors' rights and relief of debtors generally, and (ii) the effect of rules of law and general principles of equity, including rules of law and general principles of equity governing specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law). Upon the execution and delivery of the Assignment and Assumption by the Purchaser at the Closing and, assuming the due authorization, execution and delivery thereof by Lee-NMBC, the Assignment and Assumption will constitute a legally valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by principles of public policy, and subject to (i) the effect of any applicable Laws of general application relating to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors' rights and relief of debtors generally, and (ii) the effect of rules of law and general principles of equity, including rules of law and general principles of equity governing specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.3 No Violation. Assuming that all consents, waivers, approvals, orders and authorizations set forth in SCHEDULE 5.4 hereto have been obtained and all registrations, qualifications, designations, declarations or filings with any Governmental Authorities set forth in SCHEDULE 5.4 hereto have been made, and except as set forth in SCHEDULE 5.3 hereto, the execution and delivery by the Purchaser of this Agreement and the Assignment and Assumption, the performance by the Purchaser of its obligations hereunder and thereunder, and the consummation by the Purchaser of the transactions contemplated hereby and thereby, will not conflict with or violate in any material respect, constitute a material default (or event which with the giving of notice or lapse of time, or both, would become a material default) under, give rise to any right of termination, amendment, modification, acceleration or cancellation of any material obligation or loss of any material benefit under, result in the creation of any Encumbrance other than a Permitted Encumbrance on any of assets or properties of the Purchaser pursuant to, or require the Purchaser to obtain any consent, waiver, approval or Action of, make any filing with, or give any notice to any Person as a result or under, the terms or provisions of -35- 37 (i) the organizational documents of the Purchaser, (ii) any Contract to which the Purchaser is a party or is bound, or (iii) any Law applicable to the Purchaser, or any Governmental Order issued by a Governmental Authority by which the Purchaser is in any way bound or obligated, except, in the case of clauses (ii) and (iii) of this Section 5.3, as would not, in any individual case, have a material adverse effect on the ability of the Purchaser to perform its obligations under this Agreement and the Assignment and Assumption or to consummate the transactions contemplated hereby or thereby. 5.4 Governmental Consents. No consent, waiver, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority is required on the part of the Purchaser in connection with the execution and delivery by the Purchaser of this Agreement and the Assignment and Assumption, the performance by the Purchaser of its obligations hereunder and thereunder, and the consummation by the Purchaser of the transactions contemplated hereby and thereby, including the assumption of the Assumed Liabilities of the Lee-NMBC Stations, except (i) as set forth in SCHEDULE 5.4 hereto, and (ii) where the failure to obtain such consent, waiver, approval, order or authorization, or to make such registration, qualification, designation, declaration or filing, would not have a material adverse effect on the ability of the Purchaser to perform its obligations under this Agreement and the Assignment and Assumption or to consummate the transactions contemplated hereby or thereby. 5.5 Brokers. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by the Purchaser directly with Lee without the intervention of any Person on behalf of the Purchaser in such manner as to give rise to any valid claim by any Person against Lee-NMBC and any Acquired Company for a finder's fee, brokerage commission or similar payment. 5.6 Funding. Purchaser has cash available or has existing borrowing facilities which, together with its available cash, are sufficient to enable it to consummate the transactions contemplated by this Agreement and pay all related fees and expenses for which Purchaser will be responsible and will, from time to time, provide assurances and information to Lee as shall reasonably be requested by Lee that it will have such financial capability at the Closing. 5.7 Investment Representation; Business Investigation. Purchaser is acquiring the Acquired Companies' Common Stock for its own account or investment purposes only and not with a view to the distribution of the shares of such common stock. Purchaser acknowledges that none of the Acquired Companies' Common Stock has been registered under the Securities Act or any state securities Law in reliance upon an exemption therefrom for non-public offerings, that shares of common stock must be held indefinitely unless the sale thereof is registered under the Securities Act or such state securities law, or an exemption therefrom for such registration is available under Rule 144, promulgated under the Securities Act, or otherwise. Purchaser (a) has such knowledge, sophistication and experience in business and financial matters that it is capable of valuing an investment in the shares of the Acquired Companies' Common Stock, (b) has conducted an examination of available reports and other materials relating to each Acquired Company, (c) fully understands the nature, scope and duration of the limitations on transfer -36- 38 applicable to the shares of the Acquired Companies' Common Stock and (d) can bear the economic risk of an investment in the shares of the Acquired Companies' Common Stock and can afford a complete loss of such investment. 5.8 FCC Matters. Except as set forth on SCHEDULE 5.4, Purchaser is legally and financially qualified under the Communications Act to enter into this Agreement and to consummate the transactions contemplated hereby. Except as set forth on SCHEDULE 5.4, it is not necessary for Purchaser or any Affiliate of Purchaser (or any Person in which Purchaser or any Affiliate of Purchaser has an attributable interest under the Communications Act) to seek or obtain any waiver from the FCC, dispose of any interest in any media or communications property or interest (including the Lee-NMBC Stations or the Acquired Companies' Stations), terminate any venture or arrangement, or effectuate any changes or restructuring of their ownership, including the withdrawal or removal of officers or directors or the conversion or repurchase of equity securities of Purchaser or any Affiliate of Purchaser (or any Person in which Purchaser or any Affiliate of Purchaser has any attributable interest under the Communications Act). Purchaser is able to certify on FCC Forms 314 and 315 that it is financially qualified. ARTICLE 6 COVENANTS AND AGREEMENTS 6.1 Conduct of Business. (a) At all times during the period commencing upon the execution and delivery hereof by each of the parties hereto and terminating upon the earlier to occur of the Closing or the termination of this Agreement pursuant to and in accordance with the terms of Section 9.1 hereof, unless the Purchaser shall otherwise consent in writing (which consent shall not be unreasonably withheld or delayed), and except as otherwise set forth in SCHEDULE 6.1 hereto, Lee-NMBC shall, and shall cause each Acquired Company, as the case may be, to (i) conduct the operations of the Lee-NMBC Stations and the Acquired Companies' Stations in the ordinary course of business and consistent with past practices, (ii) use commercially reasonable efforts to preserve intact the goodwill of the Lee-NMBC Stations and the Acquired Companies' Stations and the current relationships of the Lee-NMBC Stations and each Acquired Company with its officers, employees, customers, suppliers and others with significant and recurring business dealings with the Lee-NMBC Stations and each Acquired Company, (iii) use commercially reasonable efforts to maintain all of the Insurance Policies and all of the Licenses and FCC Licenses that are necessary for Lee-NMBC and each Acquired Company to carry on the Lee-NMBC Stations and Acquired Companies' Stations in the manner conducted by such company as of the date hereof, (iv) maintain the books of account and records of the Lee-NMBC Stations and each Acquired Company in the usual, regular and ordinary manner and consistent with past practices, and (v) not take any action that would result in a breach of any of the representations and warranties of Lee-NMBC and each Acquired Company contained in Article 4 hereof. (b) At all times during the period commencing upon the execution and delivery hereof by each of the parties hereto and terminating upon the earlier to occur of the Closing or the termination of this Agreement pursuant to and in accordance with the terms of -37- 39 Section 9.1 hereof, unless the Purchaser shall otherwise consent in writing (which consent shall not be unreasonably withheld or delayed), and except as otherwise set forth in SCHEDULE 6.1 hereto, Lee-NMBC shall not, and shall cause each of the Acquired Companies not to, take, or cause to be taken, any of the following actions to the extent such actions relate to any of the Lee-NMBC Stations, any Acquired Company or any of the Acquired Companies' Stations: (i) merge with or into, or consolidate with, any other Person; provided, however, that nothing in this Section 6.1(b)(i) shall prohibit or otherwise restrain Lee-NMBC from entering into an agreement with another Person which is an Affiliate of Lee to merge with or into, or consolidate with, such Person, provided that, if Lee and NMBC do not survive the consummation of such merger or consolidation, such Affiliate shall assume and agree to perform all of the obligations of Lee-NMBC under this Agreement pursuant to an assumption agreement satisfactory to Purchaser within its reasonable judgment. (ii) change or agree to rearrange in any material respect the character of any Acquired Company; (iii) adopt, enter into or amend any arrangement which is, or would be, an Assumed Plan of the Lee-NMBC Stations or Benefit Plan of any Acquired Company except for any amendment to any Benefit Plan offered to all employees of Lee or unless otherwise required by applicable Law or this Agreement; (iv) knowingly waive any right of material value; (v) make any change in the accounting methods or practices of such company, or make any changes in depreciation or amortization policies or rates adopted by such company; (vi) make any material write-down of inventory or material write off as uncollectible of accounts receivable; (vii) increase any wage, salary, bonus or other direct or indirect compensation payable or to become payable to any of the Employees, or make any accrual for or commitment or agreement to make or pay the same, other than increases in wages, salary, bonuses or other direct or indirect compensation made in the ordinary course of business consistent with past practice, and those required by any existing Contract or Law; (viii) enter into any transactions with any of its shareholders, officers, directors or employees, or any Affiliate of any of the foregoing, other than employment arrangements made in the ordinary course of business consistent with past practice; (ix) except as required by the Additional Compensation Agreements disclosed in SCHEDULE 4.10 hereto, make any payment or commitment to pay any severance or termination pay to any Employee or any independent contractor, consultant, agent or other representative of the Lee-NMBC Stations and each Acquired Company, other than payments or -38- 40 commitments to pay such Employees in the ordinary course of business consistent with past practice; (x) (1) other than office leases entered into in the ordinary course of business, enter into any real property lease (as lessor or lessee); (2) sell, abandon or make any other disposition of any of the assets or properties of such company other than in the ordinary course of business consistent with past practice; or (3) grant or incur any Encumbrance on any of the assets or properties of such company other than Permitted Encumbrances; (xi) except in the ordinary course of business and except for Excluded Liabilities of the Lee-NMBC Stations, incur or assume any debt, obligation or Liability pursuant to a Material Contract; (xii) make any acquisition of all or any part of the capital stock or all or substantially all of the assets, properties or business of any other Person; (xiii) pay, directly or indirectly, any of its Liabilities before the same become due in accordance with its terms or otherwise than in the ordinary course of business; (xiv) enter into any commitments to make capital expenditures in an aggregate amount materially exceeding its approved capital expenditure budget for the current fiscal year or, with respect to any period subsequent to the current fiscal year, the capital expenditure budget approved by Lee-NMBC in good faith and consistent with past practice; (xv) amend in any material respect the charter or the bylaws of any Acquired Company; (xvi) issue, transfer, sell or dispose of, authorize or agree to the issuance, transfer, sale or disposition of (whether through the issuance or granting of options, rights, warrants, or otherwise), any shares of capital stock or any voting securities of any Acquired Company or any options, rights, warrants or other securities convertible into or exchangeable or exercisable for any such shares of capital stock or voting securities of such Acquired Company or amend any of the terms of any securities or agreements relating to such capital stock or voting securities outstanding on the date hereof; (xvii) acquire or agree to acquire, by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, any business or any Person or otherwise acquire or agree to acquire any materials assets, in any such case, except in the ordinary course of business; (xviii) sell, lease, license, encumber or otherwise dispose of or agree to sell, license, encumber or otherwise dispose of, any of such Acquired Company's material assets other than in the ordinary course of business consistent with past practice or pursuant to existing contractual relationships disclosed on SCHEDULE 6.1(B)(xviii) hereto; -39- 41 (xix) enter into or renew any contract or agreement to provide or grant any party with a non-terminable exclusive right to develop, host, service, provide or operate any Lee-NMBC Station's or Acquired Company Station's e-mail or internet site or portion thereof; (xx) terminate without cause any employee of a Lee-NMBC Station or an Acquired Company Station who is a party to an employment contract with Lee as disclosed in SCHEDULE 4.10(A) hereto; or (xxi) voluntarily enter into any collective bargaining agreement applicable to any employees of the Lee-NMBC Stations or of the Acquired Companies or otherwise voluntarily recognize any union as the bargaining representative of any such employees; or (xxii) amend, enter into, renew or extend any network affiliation agreement, Scripps-Howard-HGTV Contract, CNN Contract, AP Contract, programming Contract with a duration exceeding one (1) year, national media advertising representation contract, talent agreement (unless for a term of not more than one (1) year and total compensation of not more than One Hundred Thousand Dollars ($100,000)), employment agreement (other than nonsolicitation, noncompetition or nondisclosure agreement), antenna or transmitter lease, or any agreement involving payments or other consideration having a value of more than Twenty-Five Thousand Dollars ($25,000) that requires any of the Lee-NMBC Stations or the Acquired Companies to acquire goods or services exclusively from a single supplier or provider or prohibiting any of the Lee-NMBC Stations or Acquired Companies from providing certain goods or services to any Person other than a specified Person unless terminable on thirty (30) days notice without further obligation or penalty. (c) Notwithstanding anything to the contrary set forth in this Section 6.1 or elsewhere in this Agreement, (i) Lee-NMBC shall be permitted, without obtaining the consent or other approval of the Purchaser, to enter into, perform its obligations under, and consummate the transactions contemplated by, any existing or new agreements or other arrangements pursuant to which such company shall sell, transfer or otherwise dispose of any of its assets other than the Purchased Assets of the Lee-NMBC Stations or shares of the stock or assets or properties of any Acquired Company, it being expressly acknowledged and agreed by each of the parties hereto that the foregoing shall include the right to distribute the proceeds from any such sale, transfer or other disposition to the shareholders of Lee or NMBC without obtaining the consent or other approval of the Purchaser, (ii) each Acquired Company shall be permitted, without obtaining the consent or other approval of the Purchaser, to declare, issue, make or pay any cash dividend or other cash distribution to its stockholders prior to the Closing or make a dividend or distribution to its stockholders of any intercompany receivables between Lee, on the one hand, and any of the Acquired Companies on the other, prior to the Closing, (iii) Lee-NMBC and each Acquired Company shall be permitted prior to the Closing, without obtaining the consent or other approval of the Purchaser, the right to transfer any of the Purchased Assets of the Lee-NMBC Stations and the Assumed Liabilities of the Lee-NMBC Stations or any of the Acquired Companies' Common Stock, to any Affiliate thereof and substitute such Affiliate as a party to this Agreement, provided -40- 42 that (A) any such Affiliate shall assume and agree to perform all of the obligations of Lee-NMBC under this Agreement pursuant to an assumption agreement satisfactory to Purchaser within its reasonable judgment, and (B) Lee and NMBC shall remain primarily and jointly and severally liable for the performance and observance of all such obligations, and (iv) Lee shall not be otherwise prohibited from taking any action relating to the newspaper or online information business or any activity related thereto. 6.2 Access and Information. (a) Subject to the terms of the Confidentiality Agreement, at all times during the period commencing upon the execution and delivery hereof by each of the parties hereto and terminating upon the earlier to occur of the Closing or the termination of this Agreement pursuant to and in accordance with the terms of Section 9.1 hereof, Lee-NMBC and each Acquired Company shall permit the Purchaser and its authorized agents and representatives to have reasonable access, upon reasonable notice and during normal business hours, to all of the Employees, assets and properties and all relevant books, records and documents of or relating primarily to the Lee-NMBC Stations and each Acquired Company and the Purchased Assets of the Lee-NMBC Stations and the assets of the Acquired Companies, and shall furnish to the Purchaser such information and data, financial records and other documents relating thereto as the Purchaser may reasonably request. Lee-NMBC and each Acquired Company shall permit the Purchaser and its agents and representatives reasonable access to such company's accountants, auditors and suppliers for reasonable consultation or verification of any information obtained by the Purchaser during the course of any investigation conducted pursuant to this Section 6.2 relating primarily to the Lee-NMBC Stations and each Acquired Company, and shall use reasonable efforts to cause such Persons to cooperate with the Purchaser and its agents and representatives in such consultations and in verifying such information. (b) The transactions contemplated hereby are expressly conditioned upon each FCC Transfer Application becoming a Final Order, and nothing contained in this Agreement shall give Purchaser the right to control the programming, equipment, personnel or operations of the Lee-NMBC Stations and the Acquired Companies' Stations prior to the Closing. 6.3 Confidentiality. The terms of the Confidentiality Agreement are hereby incorporated herein by reference and shall continue in full force and effect from and after the Closing in accordance with the terms thereof, such that the information obtained by any party hereto, or its officers, employees, agents or representatives, during any investigation conducted pursuant to Section 6.2 hereof, in connection with the negotiation, execution and performance of this Agreement, the consummation of the transactions contemplated hereby, or otherwise, shall be governed by the terms set forth in the Confidentiality Agreement. 6.4 Further Actions. (a) Upon the terms and subject to the conditions set forth in this Agreement (including the terms of Section 6.4(b) hereof), Lee-NMBC and each Acquired Company and the Purchaser shall each use their respective commercially reasonable best efforts to take, or cause to -41- 43 be taken, all appropriate action, and to do, or cause to be done, and to assist and cooperate with the other party hereto in doing, all things necessary, proper or advisable under applicable Laws to consummate the transactions contemplated hereby, including, without limitation: (i) obtaining all necessary Material Licenses, including the FCC Licenses, actions or nonactions, waivers, consents, approvals, authorizations, qualifications and other orders of any Governmental Authorities with competent jurisdiction over the transactions contemplated hereby; (ii) obtaining all necessary consents, approvals or waivers from third parties; (iii) defending any lawsuits or other Actions, challenging this Agreement or the consummation of the transactions contemplated hereby, including seeking to have vacated or reversed any stay or temporary restraining order entered by any Governmental Authority prohibiting or otherwise restraining the consummation of the transactions contemplated hereby; and (iv) executing and delivering any additional instruments, certificates and other documents necessary or advisable to consummate the transactions contemplated hereby and to fully carry out the purposes of this Agreement. (b) Without limiting the generality of the foregoing, Lee-NMBC and each Acquired Company, and the Purchaser hereby agree to proceed diligently to prepare and file, no later than ten (10) days after the date of this Agreement (or as soon as practicable thereafter if additional time is necessary to negotiate the spin-off described in Section 6.4(c)), as follows: (i) any notification, transfer application and report form and related material required under the HSR Act and to provide promptly to Governmental Authorities with regulatory jurisdiction over enforcement of any applicable antitrust Laws all information and documents requested by any such Governmental Authorities or necessary, proper or advisable to permit consummation of the transactions contemplated hereby; (ii) the FCC Transfer Application, and, thereafter, to cooperate with each other and use reasonable, diligent and good faith efforts to obtain the FCC Final Order and the parties hereto shall make good faith efforts to answer FCC inquiries and third-party objections, if any, with respect to the FCC Transfer Application, and to avoid designation for hearing; and (iii) any notification, transfer application and report form and related material required under applicable Law and to provide promptly to Governmental Authorities with regulatory jurisdiction over enforcement of any applicable Laws all information and documents requested by any such Governmental Authorities or necessary, proper or advisable to permit consummation of the transactions contemplated hereby. -42- 44 (c) Purchaser shall use its commercially reasonable efforts to obtain a temporary waiver of the FCC "Local Television Multiple Ownership" rule to permit, for a period following consummation of the transactions contemplated by this Agreement, common ownership of (i) the television stations in the Honolulu television market currently owned by Purchaser ("Purchaser's Hawaii Stations") and (ii) the television stations in the Honolulu television market that are the subject of this Agreement ("Lee-NMBC's Hawaii Stations") . In the event that, as of the date which is sixty (60) days following the date of filing of the FCC Transfer Application, communications counsel for Lee-NMBC, after due evaluation, determines in such counsel's reasonable and good faith judgment that such waiver is not likely to be granted or that FCC consent to the FCC Transfer Application will be significantly delayed due to the pending waiver request, Purchaser (i) shall, within fifteen (15) days after receipt of a written request by Lee-NMBC, file one or more applications (the "Spin-off Applications") with the FCC to assign the licenses of either Purchaser's Hawaii Stations or Lee-NMBC's Hawaii Stations, at Purchaser's election, to either (A) a qualified trustee under a trust which will permit FCC approval of the FCC Transfer Application or (B) a legally and financially qualified third-party purchaser with which Purchaser shall have entered into a definitive agreement for the purchase and sale of either Purchaser's Hawaii Stations or the Lee-NMBC Hawaii Stations; and (ii) in either case, shall prosecute such application with due diligence. Purchaser shall be solely responsible for all costs and expenses related to the Spin-off Applications. Lee-NMBC shall, when and as reasonably requested by Purchaser, cooperate in the preparation, filing, and prosecution of the Spin-off Applications. No assignment of licenses to a trustee or to any other third party shall reduce or modify Purchaser's obligation to pay the full amount of the Cash Payment pursuant to this Agreement. Purchaser and Lee-NMBC and each Acquired Company, hereby further agree to use their respective commercially reasonable best efforts to (1) respond to any request of any Governmental Authority for information, (2) contest and resist any Action, including any legislative, administrative or judicial Action, and have vacated, lifted, reversed or overturned, any Governmental Order (whether temporary, preliminary or permanent) that restricts, prevents or prohibits the consummation of the transactions contemplated hereby, including by using all legal efforts to vigorously pursue all available avenues of administrative and judicial appeal and all available legislative action, and (3) in the event that any permanent or preliminary injunction or other Governmental Order is entered or becomes reasonably foreseeable to be entered in any proceeding that would make consummation of the transactions contemplated hereby in accordance with the terms of this Agreement unlawful or that would prohibit, prevent, delay or otherwise restrain the consummation of the transactions contemplated hereby, to cause the relevant Governmental Authorities to vacate, modify or suspend such injunction or order so as to permit the consummation of the transactions contemplated hereby prior to the Termination Date. 6.5 Fulfillment of Conditions by Lee-NMBC and the Acquired Companies. Lee-NMBC and each Acquired Company shall not knowingly take or cause to be taken, or fail to take or cause to be taken, any action that would cause the conditions to the obligations of such company or the Purchaser to consummate the transactions contemplated hereby to fail to be satisfied or fulfilled at or prior to the Closing, including by taking or causing to be taken, or failing to take or cause to be taken, any action that would cause the representations and -43- 45 warranties made by each company in Article 4 hereof to fail to be true and correct as of the Closing in all material respects. Lee-NMBC and each Acquired Company shall take, or cause to be taken, all commercially reasonable actions within its power to cause to be satisfied or fulfilled, at or prior to the Closing, the conditions precedent to the Purchaser's obligations to consummate the transactions contemplated hereby as set forth in Section 7.1 hereof. 6.6 Fulfillment of Conditions by the Purchaser. The Purchaser shall not knowingly take or cause to be taken, or fail to take or cause to be taken, any action that would cause the conditions to the obligations of Lee-NMBC and each Acquired Company or the Purchaser to consummate the transactions contemplated hereby to fail to be satisfied or fulfilled, including by taking or causing to be taken, or failing to take or cause to be taken, any action that would cause the representations and warranties made by the Purchaser in Article 5 hereof to fail to be true and correct as of the Closing in all material respects. The Purchaser shall take, or cause to be taken, all commercially reasonable actions within its power to cause to be satisfied or fulfilled, at or prior to the Closing, the conditions precedent to the obligations of such company to consummate the transactions contemplated hereby as set forth in Section 7.2 hereof. Purchaser will not cause any Acquired Company to take any action on the Closing Date that is not in the ordinary course of business of such company. 6.7 Publicity. Lee-NMBC and any Acquired Company and the Purchaser shall cooperate with each other in the development and distribution of all news releases and other public disclosures relating to the transactions contemplated by this Agreement. Neither Lee-NMBC or each Acquired Company nor the Purchaser shall issue or make, or allow to have issued or made, any press release or public announcement concerning the transactions contemplated by this Agreement without the consent of the other party hereto, except as otherwise required by applicable Law or stock exchange rules, but in any event only after giving the other party hereto a reasonable opportunity to comment on such release or announcement in advance, consistent with such applicable legal requirements. 6.8 Transaction Costs. The Purchaser shall pay all transaction costs and expenses (including legal, accounting and other professional fees and expenses and other fees described in Section 5.5 hereof) that it incurs in connection with the negotiation, execution and performance of this Agreement and the consummation of the transactions contemplated hereby, including, without limitation, any and all costs and expenses incurred in connection with the spin-off of one of the Honolulu television stations pursuant to Section 6.4(c). Lee-NMBC and each Acquired Company shall pay all transaction costs and expenses (including legal, accounting and other professional fees and expenses and other fees described in Section 4.21 hereof) that it incurs in connection with the negotiation, execution and performance of this Agreement and the consummation of the transactions contemplated hereby. Notwithstanding the foregoing and anything to the contrary contained in this Agreement, Lee and the Purchaser shall share equally any filing fees in connection with the HSR Act or FCC Transfer Application and any real estate transfer, sales, use and deed Taxes, or refunds thereof, and the fees and costs of recording or filing all applicable conveyancing instruments associated with the transfer of the Purchased Assets of the Lee-NMBC Stations from Lee-NMBC to the Purchaser pursuant to this Agreement or the Acquired Companies' Common Stock from Lee to Purchaser pursuant to this Agreement. -44- 46 Lee-NMBC and the Purchaser shall cooperate in the preparation, execution and filing of all Tax Returns regarding any real estate transfer Taxes, which become payable as a result of the transfer of the Purchased Assets of the Lee-NMBC Stations from such company to the Purchaser pursuant to this Agreement or the Acquired Companies' Common Stock from Lee to Purchaser pursuant to this Agreement. 6.9 Employees and Employee Benefit Matters. (a) The Purchaser shall offer employment as of the Closing Date to all of the Employees. As of the Closing Date, the Purchaser shall employ each of the Employees whose employment is not covered by a collective bargaining agreement and who accepts the Purchaser's offer of employment ("Transferred Non-Union Employees"). Purchaser shall cause all Transferred Non-Union Employees as of the Closing Date to be eligible to participate in its "employee welfare benefit plans" and "employee pension benefit plans" (as defined in Section 3(1) and 3(2) of ERISA (respectively) of Purchaser in which similarly situated employees of Purchaser are generally eligible to participate from time to time ("Purchaser's Plans"), and all Transferred Non-Union Employees shall be eligible for coverage immediately after the Closing Date (and shall not be excluded from coverage on account of any pre-existing condition) under Purchaser's Plans constituting employee welfare benefit plans to the extent permitted under such plans with respect to the Transferred Non-Union Employees. Following the Closing Date, Purchaser shall cause the Purchaser's Plans to recognize any prior accrued service credit, credit towards satisfying deductible expense requirements and out-of-pocket expense limits of Transferred Non-Union Employees for purposes of Purchaser's Plans to the extent such prior service credits and limits are recognized by Purchaser or the Purchaser's Plans for similarly situated employees of Purchaser (including, but not limited to, eligibility to participate and vesting, but excluding benefit accruals). As soon as practicable following the Closing Date, Purchaser shall make available to the Transferred Non-Union Employees Purchaser's 401(k) Plan in accordance with the terms and provisions of such plan. Lee-NMBC shall cause to be transferred to Purchaser's 401(k) Plan, in cash, all of the individual account balances of the Transferred Non-Union Employees under the 401(k) plan in which the Employees now participate. Notwithstanding any other provision of this Agreement, Employees who become employed by the Purchaser as of the Closing who are covered by a collective bargaining agreement on and after the Closing (the "Transferred Union Employees" and, collectively with the Transferred Non-Union Employees, the "Transferred Employees") shall receive benefits in accordance with the terms of such agreement. Except for the employment contracts listed in SCHEDULE 4.10, nothing in this Agreement is intended to nor shall guarantee employment for any Transferred Non-Union Employees or Transferred Union Employees for any length of time after the Closing Date. (b) Immediately prior to the Closing Date, Lee-NMBC shall cause each of the Acquired Companies to cease to be a participating employer under, and terminate its sponsorship of, each Benefit Plan. Except as otherwise provided in Section 6.9(c), Lee-NMBC shall pay, discharge and be solely responsible for all Liabilities which arise or become payable under any Benefit Plan as a result of, or in connection with, the termination of any Employee before, upon or after Closing, including, without limitation, all severance or termination pay and all accrued -45- 47 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 Assumed Liabilities of the Lee-NMBC Stations or Acquired Companies Assumed Liabilities. Purchaser shall pay, discharge and be solely responsible for all Liabilities which arise or become payable as a result of or in connection with Purchaser's employment of any Transferred Employees upon Closing or Purchaser'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 under or pursuant to any employee benefit plan of Purchaser. Purchaser shall not, however, assume or be obligated to pay or perform any Liabilities under any Benefit Plans (including, but not limited to, any stay bonus or severance policy, plan, arrangement or benefit), except that (i) Purchaser shall provide vacations to Transferred Employees to the extent such vacations are accrued and included as either (A) liabilities of the Lee-NMBC Stations in the determination of the Working Capital of the Lee-NMBC Stations or (B) the Acquired Companies Closing Liabilities, and (ii) Purchaser shall assume and agree to perform the employer's obligations under the employment contracts included in the Contracts of the Lee-NMBC Stations or the Acquired Companies and listed in SCHEDULE 4.10(a) hereto to the extent such obligations arise during and are attributable to any period after Closing. (c) Notwithstanding any other provisions of this Section 6.9, upon consummation of the Closing, Purchaser shall (i) recognize the union which is a party to the collective bargaining agreement set forth in SCHEDULE 4.20 hereto, and (ii) assume and be responsible for the obligations of Lee-NMBC under such collective bargaining agreement to the extent such obligations arise during and are attributable to any period after Closing. (d) Purchaser acknowledges and agrees that Purchaser's obligations pursuant to this Section 6.9 are in addition to, and not in limitation of, Purchaser's assumption of the employer's obligations under the employment agreements included in the Contracts of the Lee-NMBC Stations or the Acquired Companies' Stations and listed in SCHEDULE 4.10(a) hereto to the extent such obligations arise during and are attributable to any period after Closing. (e) The covenants and agreements set forth in this Section 6.9 shall be solely for the benefit of, and shall only be enforceable by, the parties to this Agreement and their permitted assigns. Without limiting the generality of the foregoing, nothing in this Agreement shall provide or be construed to provide any Employees with any rights under this Agreement, and no Person, other than the parties to this Agreement, is or shall be entitled to bring any action to enforce any provision of this Agreement. (f) Notwithstanding anything to the contrary contained to this Agreement, in the event that after Closing, (i) Purchaser or an Affiliate of Purchaser terminates any employee specified on SCHEDULE 6.9(f) (or any such employee terminates his or her employment) and Purchaser or its Affiliate pays such terminated employee severance in connection with such termination in accordance with the employee's employment agreement in effect as of the Closing, and (ii) Lee or any Affiliate of Lee hires such terminated employee within two (2) years -46- 48 after such termination, Lee shall promptly reimburse Purchaser or its Affiliate for the amount of such severance paid by Purchaser or its Affiliate. 6.10 Interdivisional Agreements. Unless otherwise requested by the Purchaser in writing, prior to Closing, Lee-NMBC and any Acquired Company shall terminate, without any continuing Liability to the Lee-NMBC Stations and the Acquired Companies resulting therefrom, all agreements between any division, Affiliate or Subsidiary of such company not related to the Lee-NMBC Stations and the Acquired Companies, on the one hand, and the division, Affiliate or Subsidiary of the Lee-NMBC Stations and each Acquired Company, all of which are described in SCHEDULE 6.10 hereto. 6.11 Schedules. Lee-NMBC and each Acquired Company shall have the right from time to time after the date hereof to deliver written updates of the Schedules attached hereto (the "Schedules") to reflect changes in the business condition of the Lee-NMBC Stations and each Acquired Company that occur or arise after the date hereof until the date of the Closing; provided, however, that such updates to the Schedules shall reflect matters consistent with the covenants applicable to Lee-NMBC and each Acquired Company pursuant to the terms hereof. Such updated Schedules shall be promptly furnished to Purchaser. Purchaser shall have ten (10) days after receipt of each updated Schedule within which to accept or object to such updated Schedule. In the event Lee-NMBC or any Acquired Company delivers an updated Schedule to Purchaser prior to the Closing and Purchaser does not object within ten (10) days after receipt of such update, the disclosure in such updated Schedule shall be deemed to amend and supplement the representations and warranties of Lee-NMBC and the Acquired Companies and the applicable Schedule hereto, and in such event Purchaser shall not have the right to be indemnified for any matter contained in such updated Schedule. If Purchaser objects to any updated or revised Schedule, Lee-NMBC or the Acquired Company shall have thirty (30) days in which to satisfy Purchaser's objection. If the objection cannot reasonably be cured within thirty (30) days despite good faith efforts to do so, Lee-NMBC or the Acquired Company shall have a reasonable period of time necessary to cure the objection. If Lee-NMBC or the Acquired Company does not cure an objection of Purchaser to a revised or updated Schedule, and the objection is material to the assets, business, operations, results of operations or financial condition of any Lee-NMBC Station or Acquired Company Station, Purchaser may elect to close and pursue the remedies, if any, under Article 8 of this Agreement or pursue its remedies under Article 9 hereof; provided that if such objection is not material to the assets, business, operations, results of operations or a financial condition of any Lee-NMBC Station or Acquired Company Station, such objection shall not relieve Purchaser of the obligation to close under this Agreement, but Purchaser shall retain its rights under Article 8 with respect to such objection if such objection constitutes a breach of this Agreement by Lee-NMBC. Nothing contained in this Section 6.11 shall be construed as limiting any party's right to terminate this Agreement. 6.12 Retention of and Access to Records. From and after the Closing, the Purchaser shall preserve, in accordance with the normal document retention policy of the Lee-NMBC Stations and each Acquired Company, all books and records transferred by Lee-NMBC and each Acquired Company to the Purchaser pursuant to this Agreement. As soon as practicable following the Closing, the Purchaser shall deliver a copy of all books and records of Lee-NMBC -47- 49 relating to the Lee-NMBC Stations and each Acquired Company in the possession of Purchaser pursuant hereto to Lee in sufficient detail to enable Lee to prepare Lee's financial statements, the Statement of Closing Adjusted Net Worth of the Acquired Companies, the Statement of Working Capital of the Lee-NMBC Stations and all Tax Returns of Lee-NMBC and each Acquired Company relating to periods ending on or prior to the Closing Date. In addition to the foregoing, from and after the Closing, the Purchaser shall afford to Lee, and its counsel, accountants and other authorized agents and representatives, during normal business hours, reasonable access to the employees, books, records and other data relating to the Lee-NMBC Stations and each Acquired Company with respect to periods prior to the Closing, and the right to make copies and extracts therefrom, to the extent that such access may be reasonably required by the requesting party (a) to facilitate the investigation, litigation and final disposition of any claims which may have been or may be made against any such party or Person, or its Affiliates, (b) for the preparation of Tax Returns and audits, and (c) for any other reasonable business purpose. 6.13 Tax Matters. (a) Lee-NMBC will include the income of the Lee-NMBC Stations and each Acquired Company (pursuant to Section 1502 of the Code ) on Lee's consolidated federal income Tax Returns for all periods through the Closing Date and pay any federal income Taxes attributable to such income. The Purchaser shall cause each Acquired Company to furnish Tax information to Lee for inclusion in Lee's federal consolidated income Tax Return for the period which includes the Closing Date in accordance with the Lee-NMBC Stations and each Acquired Company's past custom and practice. Lee will take no position on such returns that relate to the Lee-NMBC Stations and each Acquired Company that would adversely affect the Lee-NMBC Stations, and each Acquired Company after the Closing Date except to the extent allowable by Law and consistent with past custom and practice. The income and any Tax credits of the Lee-NMBC Stations and each Acquired Company will be apportioned to the period up to and including the Closing Date and the period after the Closing Date by closing the books of the Lee-NMBC Stations and each Acquired Company as of the end of the Closing Date. (b) All refunds of Taxes (including interest thereon) with respect to taxable periods of each Acquired Company for which Lee is responsible for the payment of liabilities for Taxes which are received by each Acquired Company or credited against liabilities for Taxes of any such Acquired Company for periods for which Lee is not so responsible (or against any other Liability for which Lee is not responsible) shall be paid in cash by wire transfer of immediately available funds by Purchaser or each Acquired Company (as determined by Purchaser) to Lee promptly after receipt. Amounts paid pursuant to this Section 6.13(b) shall be treated as additional Stock Purchase Price for the shares of the Acquired Companies' Common Stock. (c) The Purchaser agrees that (i) on the Closing Date, all of the shares of the Acquired Companies' Common Stock shall be acquired by a domestic corporation, (ii) such corporation shall not make an election for any Acquired Company pursuant to Section 338(g) of the Code, (iii) Purchaser, not Lee, shall be responsible for all Taxes arising from any sale or disposition of the assets of each Acquired Company in any transaction (other than a deemed sale as a result of the Section 338(h)(10) election referred to in the following clause (iv)) that is -48- 50 consummated after the Closing, and (iv) at the Purchaser's request and within the time required under Section 338(h)(10) of the Code and applicable IRS regulations, Lee shall make a joint election solely as to KOIN on IRS Form 8023 to enable the Purchaser to receive the benefits afforded under said Section 338(h)(10), provided that the contents of such election shall be reasonably satisfactory to Lee and Purchaser. 6.14 Interim Financial Statements. During the period commencing on October 1, 1999 and ending on the Closing Date, Lee shall deliver to the Purchaser, as soon as practicable after the end of each month in such period, an unaudited interim consolidated balance sheet of the Lee-NMBC Stations and each Acquired Company, and an unaudited interim balance sheet of each Lee-NMBC Station and each Acquired Company Station, as of the end of such month, and the related consolidated statement of income for the Lee-NMBC Stations and the Acquired Companies' Stations, and the related statement of income of each Lee-NMBC Station and each Acquired Company Station, in each case for the portion of the fiscal year ended as of the end of such month. All such statements shall be prepared in a manner consistent with the Financial Statements. 6.15 Audited Financial Statements. Lee-NMBC recognizes that Purchaser is a publicly reporting company and agrees that Purchaser shall be entitled at Purchaser's expense to cause audited and unaudited financial statements of the Lee-NMBC Stations and the Acquired Companies to be prepared for such periods and filed with the Securities and Exchange Commission, and included in a prospectus distributed to prospective investors, as required by Law applicable to Purchaser as a publicly reporting company or registrant. Lee-NMBC agrees to cooperate with Purchaser and the auditing accountants as reasonably requested by Purchaser 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 and shall make a reasonable request to obtain the consent of Lee-NMBC's independent accounting firm to permit Purchaser and Purchaser's auditors to have access to such firm's workpapers. 6.16 Assignments of Network Affiliation Agreements. Promptly following the execution of this Agreement, Lee and the Purchaser shall jointly request and use their respective commercially reasonable efforts to obtain the written consent, in form and substance satisfactory to Purchaser within its reasonable judgment, of each broadcast network with which Lee-NMBC or the Acquired Companies has an Affiliation Agreement to the assignment or transfer of control of such Affiliation Agreement to the Purchaser, provided that neither Lee nor Purchaser shall be required to pay or provide material consideration to obtain such consent. If such written consent from each such broadcast network is not obtained within sixty (60) days after application therefor, then Purchaser may, prior to the expiration of such sixty-day period, give notice of election to terminate this Agreement without further obligation by either party to the other. If each such consent is not obtained and this Agreement is not terminated, Purchaser shall be deemed to have waived the requirement to secure any such consent of a broadcast network as a condition precedent to the closing of the transactions contemplated by this Agreement. -49- 51 ARTICLE 7 CLOSING CONDITIONS 7.1 Conditions to Obligations of the Purchaser. The obligations of the Purchaser to consummate the transactions contemplated by this Agreement are subject to the satisfaction or fulfillment at or prior to the Closing of the following conditions, any of which may be waived in whole or in part by the Purchaser in writing: (a) All representations and warranties of Lee-NMBC and any Acquired Company contained in this Agreement shall be true and correct in all material respects at and as of the Closing with the same effect as though such representations and warranties were made at and as of the Closing (except for changes permitted or contemplated by this Agreement and except for any representation or warranty that is expressly made as of a specified date, which shall be true and correct in all material respects as of such specified date only). (b) Lee-NMBC and each Acquired Company shall have performed and complied in all material respects with all the covenants and agreements required by this Agreement to be performed or complied with by it at or prior to the Closing. (c) All applicable waiting periods (and any extensions thereof) under the HSR Act shall have expired or otherwise been terminated. (d) The FCC shall have granted its consent to the FCC Transfer Application, such consent shall have become a Final Order, and any conditions set forth in such consent shall have been satisfied. (e) There shall be in effect no Law or injunction issued by a court of competent jurisdiction making illegal or otherwise prohibiting or restraining the consummation of the transactions contemplated by this Agreement. (f) Lee-NMBC and each Acquired Company shall have delivered to the Purchaser all of the certificates, instruments and other documents required to be delivered by such company at or prior to the Closing pursuant to Section 3.2 hereof. (g) Lee-NMBC shall have obtained prior to Closing the written consents or waivers to the transactions contemplated by this Agreement, in form reasonably satisfactory to Purchaser's counsel and without any modification or condition materially adverse to Purchaser or any of the Lee-NMBC Stations or Acquired Companies' Stations, which are required under (i) each Material Contract for each transmitter, antenna (including each satellite and translator antenna or transmitter), office and studio site, (ii) unless waived under or by reason of the provisions of Section 6.16, the network affiliation agreement for each of the Lee-NMBC Stations and each of the Acquired Companies' Stations, and (iii) the programming agreements identified on SCHEDULE 7.1(g). -50- 52 7.2 Conditions to Obligations of Lee-NMBC and Acquired Companies. The obligations of Lee-NMBC and each Acquired Company to consummate the transactions contemplated by this Agreement are subject to the satisfaction or fulfillment at or prior to the Closing of the following conditions, any of which may be waived in whole or in part by Lee in writing: (a) All representations and warranties of the Purchaser contained in this Agreement shall be true and correct in all material respects at and as of the Closing with the same effect as though such representations and warranties were made at and as of the Closing (except for changes permitted or contemplated by this Agreement and except for any representation or warranty that is expressly made as of a specified date, which shall be true and correct in all material respects as of such specified date only). (b) The Purchaser shall have performed and complied in all material respects with the covenants and agreements required by this Agreement to be performed or complied with by it at or prior to the Closing. (c) All applicable waiting periods (and any extensions thereof) under the HSR Act shall have expired or otherwise been terminated. (d) The FCC shall have granted its consent to the FCC Transfer Application. (e) There shall be in effect no Law or injunction issued by a court of competent jurisdiction making illegal or otherwise prohibiting or restraining the consummation of the transactions contemplated by this Agreement. (f) The Purchaser shall have delivered to Lee the Cash Payment and all of the certificates, instruments and other documents required to be delivered by the Purchaser at or prior to the Closing pursuant to Section 3.3 hereof. ARTICLE 8 INDEMNIFICATION 8.1 Obligations of Lee and NMBC. Subject to the limitations set forth herein, Lee agrees to and shall indemnify and hold Purchaser, and its directors, officers, employees, Affiliates (including the Acquired Companies if Closing occurs), agents and assigns harmless from and against any and all Losses resulting from, based upon or arising out of, directly or indirectly: (a) Any breach of any representation or warranty made by Lee or NMBC in or pursuant to this Agreement or any Lee Document; or (b) Any nonfulfillment or breach of any covenant or agreement of Lee or NMBC under this Agreement or any Lee Document; or -51- 53 (c) All Benefit Plans, including but not limited to (i) any claim arising under any Benefit Plan in connection with termination of any Employee before, upon or after Closing; (ii) termination of any Benefit Plan, (iii) termination of any Employee's participation in any Benefit Plan, (iv) withdrawal of any Acquired Companies from any Benefit Plan, or (v) the obligation under any Benefit Plan to pay or provide any Employee a bonus, severance, or any other benefit as a result of or in connection with the transactions under this Agreement; except in each case to the extent included as Acquired Companies Closing Liabilities, or as liabilities of the Lee-NMBC Stations in the determination of the Working Capital of the Lee-NMBC Stations pursuant to Section 2.3(b); or (d) All other Excluded Liabilities of the Lee-NMBC Stations and all other Acquired Companies Excluded Liabilities. 8.2 Obligations of Purchaser. Subject to the limitations set forth herein, Purchaser agrees to indemnify and hold Lee and NMBC and their respective directors, officers, employees, Affiliates, agents and assigns harmless (after the Closing) from and against any and all Losses of Lee and NMBC, resulting from, based upon or arising out of, directly or indirectly: (a) Any breach of any representation or warranty made by Purchaser in or pursuant to this Agreement; (b) Any non-fulfillment or breach of any covenant or agreement of Purchaser in this Agreement or other document delivered pursuant to this Agreement; (c) Any Assumed Liabilities of the Lee-NMBC Stations and any Acquired Companies Assumed Liabilities; or (d) Any Liability to the extent relating to and arising out of the operation of the Lee-NMBC Stations or any Acquired Company following the Closing, excluding, however, all Excluded Liabilities of the Lee-NMBC Stations and all Acquired Companies Excluded Liabilities. 8.3 Procedure for Indemnification. The procedure for indemnification shall be as follows: (a) The party or parties claiming indemnification (the "Claimant") shall give written notice to the party from which indemnification is sought (the "Indemnitor") reasonably promptly after the Claimant learns of any claim or proceeding covered by the foregoing agreements to indemnify and hold harmless, but failure to provide prompt notice shall not be deemed to jeopardize Claimant's right to demand indemnification if Indemnitor is not materially prejudiced by the delay in receiving notice. If Indemnitor is materially prejudiced, the Claimant's right to indemnification shall be reduced according to the extent of the actual Loss or prejudice which Indemnitor can demonstrate was caused by the delay. Purchaser shall not be deemed to have notice of any claim or proceeding by reason of any knowledge acquired on or -52- 54 before the Closing Date by an Employee, independent contractor or other agent of any Lee-NMBC Station or Acquired Company. (b) With respect to claims between the parties, following receipt of notice from the Claimant of a claim, the Indemnitor shall have 15 days to make any investigation of the claim that the Indemnitor deems necessary or desirable, or such lesser time if a 15 day period would jeopardize any rights of Claimant to oppose or protest the claim. For the purpose of this investigation, the Claimant agrees to make available to the Indemnitor and its authorized representatives the information relied upon by the Claimant to substantiate the claim. If the Claimant and the Indemnitor cannot agree as to the validity and amount of the claim within the 15-day period, or lesser period if required by this Section (or any mutually agreed upon extension hereof) the Claimant may seek appropriate legal remedies. (c) The Indemnitor shall have the right to undertake, by counsel or other representatives of its own choosing, the defense of such claim. In the event that the Indemnitor shall elect not to undertake such defense, or within 15 days after notice of such claim from the Claimant shall fail to defend, the Claimant shall have the right to undertake the defense, compromise or settlement of such claim, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the Indemnitor. Anything in this Section 8.3 to the contrary notwithstanding, (i) if there is a reasonable probability that a claim may materially and adversely affect the Claimant other than as a result of money damages or other money payments, the Claimant shall have the right, at the reasonable cost and expense of the Indemnitor, to participate in the defense, compromise or settlement of the claim, (ii) the Indemnitor shall not, without the Claimant's written consent (such consent not to be unreasonably withheld), settle or compromise any claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the plaintiff to the Claimant of a release from all Liability in respect of such claim, and (iii) in the event that the Indemnitor undertakes defense of any claim consistent with this Section, the Claimant, by counsel or other representative of its own choosing and at the reasonable cost and expense of the Indemnitor, shall have the right to consult with the Indemnitor and its counsel or other representatives concerning such claim and the Indemnitor and the Claimant and their respective counsel or other representatives shall cooperate with respect to such claim. If any disagreement arises in the handling of the claim, the Indemnitor shall have the right to make the final determination consistent with the requirements of this Section. (d) The Indemnitor and its duly appointed representatives shall have the sole right to negotiate, resolve, settle or contest any claim for Tax made by a Tax authority with respect to which the Indemnitor is bound to indemnify Claimant under Section 8.1 or Section 8.2. If the Indemnitor does not assume the defense of a claim for the Tax made by a Tax authority with respect to which the Indemnitor is bound to indemnify a Claimant under Section 8.1 or Section 8.2, the Claimant may defend the same at the reasonable expense of the Indemnitor (in accordance with the provisions of Article 8) in such manner as it may deem appropriate, including, but not limited to, settling such audit or proceeding with the consent of the Indemnitor, which consent shall not be unreasonably withheld -53- 55 (e) Lee and NMBC waive and release, effective as of the Closing Date, all claims against any of the Acquired Companies for any Liabilities as of the Closing not included as Acquired Companies Closing Liabilities, including any right to contribution or indemnification for any indemnity payments made by Lee or NMBC after the Closing Date pursuant to this Agreement. 8.4 Sole Remedy. Each party agrees that the sole Liability and obligations of the other party and the sole right, remedy and entitlement of each party for recovery of any monetary claim with respect to or in connection with this Agreement or any of the transactions contemplated by this Agreement shall be limited to indemnification under this Article 8, and all such parties hereby waive any and all other statutory and common law rights and remedies (including without limitation rights of indemnification and contribution) which it has or may hereafter have, provided such waiver shall in no event be construed to prevent Purchaser from seeking specific performance or other equitable relief or remedies. 8.5 Limitations on Indemnification; Exclusive Remedy. (a) No claim for indemnification under Section 8.1(a) or Section 8.2(a) for breach of any representation or warranty shall be valid unless made within the applicable Survival Period as defined in Section 8.6. (b) No party shall be obligated to indemnify any other party or parties under Section 8.1(a) or Section 8.2(a) unless the Claimant's aggregate amount of Losses as to which a right of indemnification is provided under Section 8.1(a) or Section 8.2(a) shall exceed $2,500,000, in which event $1,250,000 plus all of such Losses above $2,500,000 shall be indemnifiable; provided that Purchaser's right to recover under Section 8.1(a) for breach of any representation or warranty contained in Section 4.1, 4.2 or 4.3 shall not be subject to such limitation. (c) In no event shall the aggregate liability (i) of Lee pursuant to Section 8.1(a), on the one hand, or of the Purchaser pursuant to Section 8.2(a), on the other hand, exceed $75,000,000 (provided that Lee's liability for breach of any representation or warranty contained in Sections 4.1, 4.2 or 4.3 shall not be subject to such limitation); or (ii) of Lee pursuant to Section 8.1(a) for breach of any representation or warranty contained in Section 4.1, 4.2 or 4.3 and pursuant to Section 8.1(b), (c) and (d), on the one hand, or of the Purchaser pursuant to Section 8.2(b), (c) or (d), on the other hand, exceed the sum of the Asset Purchase Price plus the Stock Purchase Price. (d) Any Loss relating to any of the Acquired Companies for which indemnification is provided under this Agreement shall be (i) increased by any Tax Cost and (ii) reduced by any Tax Benefit which the Claimant incurs or receives prior to or during the Taxable Period in which the corresponding indemnification payment is received by the Claimant. In addition, if indemnification under this Agreement results in an increase in the basis of any asset (other than stock) or increase in the amount of any net operating loss of the Claimant, the Claimant shall pay the Indemnitor, within ninety (90) days after the end of each Tax Period, the -54- 56 Tax Benefit, if any, realized for such Tax Period by the Claimant that is attributable to such increase in basis or net operating loss. In the event any indemnification paid by an Indemnitor is reduced by a Tax Benefit, or the Claimant pays the Indemnitor the amount of any Tax Benefit, and there is a subsequent Final Determination denying the Tax Benefit, the Indemnitor shall promptly reimburse the Claimant for the amount of the Tax Benefit that was denied. In the event any indemnification paid by an Indemnitor is increased by a Tax Cost, or the Claimant receives payment for any Tax Cost, and there is a subsequent Final Determination reducing the Tax Cost, the Indemnitor shall promptly be reimbursed by the Claimant for the amount of the Tax Cost that was reduced. To the extent permitted by law, any indemnity payments made under this Agreement relating to any of the Acquired Companies shall be treated as an adjustment to the Stock Purchase Price. (e) If any remediation or other work or action is required in order to correct or cure a violation of any Environmental Law or of any demand (a "Violation"), Purchaser shall promptly notify Lee-NMBC after acquiring knowledge of such requirement and shall present a remediation plan to Lee-NMBC at least twenty (20) days prior to performing such remediation. The remediation plan shall be designed to minimize the remediation cost to the extent feasible while providing for a reasonable and customary level of clean-up in compliance with applicable Law. Lee shall have ten (10) days to review and approve the remediation plan, the approval of which cannot be unreasonably withheld. (f) If Purchaser acquires knowledge prior to Closing that any representation, warranty, covenant or agreement of Lee-NMBC contained in this Agreement or any of the Schedules attached hereto has been materially breached, is materially false or requires material modification or amendment to be correct, Purchaser shall notify Lee-NMBC within ten (10) days after acquiring such knowledge. Lee-NMBC shall have up to thirty (30) days to take corrective action to cure such breach. If Lee-NMBC cannot reasonably cure such breach within thirty (30) days, despite its good faith efforts, Lee-NMBC shall have such additional time as may be reasonably necessary to effectuate a cure if such breach is capable of being cured, but in no event more than an additional sixty (60) days. If Lee-NMBC fails to cure such a breach, and the breach is material to the assets, business, operations, results of operations or financial condition of any Lee-NMBC Station or Acquired Company Station, Purchaser may close the transactions contemplated by this Agreement and pursue its rights to indemnification under Article 8 or terminate this Agreement under Article 9. 8.6 Survival. Subject to the provisions of Section 8.5(f), all representations, warranties, covenants and agreements of the parties made in this Agreement or any of the Lee Documents shall survive the Closing regardless of any investigation or inquiry 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 of the Lee Documents; provided, however, that the period of survival shall (i) with respect to the representations and warranties in Sections 4.1, 4.2, 4.3, 5.1, 5.2 and 5.3, continue indefinitely; and (ii) in the case of any other representation and warranty, end one (1) year 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 of the Lee Documents unless written notice -55- 57 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 such 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. All covenants and agreements under this Agreement or any of the Lee Documents shall survive the Closing for the applicable statutory limitation period. ARTICLE 9 TERMINATION 9.1 Termination. This Agreement may be terminated: (a) By either Lee, acting in its own right or on behalf of NMBC or each Acquired Company (Lee, together with NMBC and each Acquired Company, "Lee" for purposes of this Article 9), or the Purchaser at any time prior to the Closing with the mutual written consent of the other party hereto; (b) Unless the Closing has not occurred as a result of a material breach of this Agreement by the party seeking such termination, by either Lee or the Purchaser if the Closing has not occurred on or prior to 5:00 p.m. CST on the date which is nine (9) months following the date of this Agreement (the "Termination Date"); provided, however, that either Lee or Purchaser in its sole discretion may elect to extend the Termination Date until 5:00 p.m. (CST time) on the date which is one (1) year following the date of this Agreement by written notice to the other at least ten (10) calendar days prior to the initial Termination Date; or (c) By either Lee or the Purchaser if any Governmental Authority with jurisdiction over such matters shall have issued a final and nonappealable Governmental Order permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement; provided, however, that neither Lee nor the Purchaser may terminate this Agreement pursuant to this Section 9.1(c) unless the party seeking to so terminate this Agreement has used all commercially reasonable best efforts to oppose any such Governmental Order or to have such Governmental Order vacated or made inapplicable to the transactions contemplated by this Agreement, but nothing contained in this Section 9.1(c) shall prevent a party that is otherwise entitled to terminate this Agreement pursuant to Section 9.1(b) or 9.1(d) from doing so; (d) If the Closing has not occurred, by either Lee or the Purchaser, if not then in material breach of this Agreement, if the other party has continued in material breach of this Agreement for thirty (30) days after receipt of written notice of such breach from the terminating party, and such breach is not cured within such thirty (30) day period provided, however, that if a party has undertaken but is not able to cure such breach within thirty (30) days, despite its good faith efforts, the party shall have such additional time as may be reasonably necessary to effectuate a cure if such breach is capable of being cured, but in no event more than an additional sixty (60) days; or -56- 58 (e) By Purchaser if entitled to do so under Section 6.11, 6.16 or 8.5(f). 9.2 Effect of Termination. If this Agreement is terminated pursuant to Section 9.1 hereof, neither party hereto shall have any further Liability hereunder except that (i) the provisions of Sections 6.7 and 6.8, and Articles 8 and 9 shall remain in full force and effect, and (ii) each party hereto shall remain liable to each other party hereto for any breach of its obligations under this Agreement prior to such termination. ARTICLE 10 MISCELLANEOUS 10.1 Notices. All notices that are required or may be given pursuant to this Agreement must be in writing and delivered personally, by a recognized courier service, by a recognized overnight delivery service, by telecopy or by registered or certified mail, postage prepaid, to the parties at the following addresses (or to the attention of such other person or such other address as any party may provide to the other parties by notice in accordance with this Section 10.1):
if to the Purchaser, to: with copies to: ----------------------- -------------- Emmis Communications Corporation Emmis Communications Corporation 40 Monument Circle, Suite 700 15821 Ventura Boulevard, Suite 685 Indianapolis, Indiana 46204 Encino, California 91436 Attn: Jeffrey H. Smulyan, Chairman Attn: Gary Kaseff, Esq. Attn: J. Scott Enright, Esq. Bose McKinney & Evans LLP 135 North Pennsylvania, Suite 2700 Indianapolis, Indiana 46204 Attn: David L. Wills if to Lee-NMBC, to: with copies to: ------------------- --------------- Lee Enterprises, Incorporated Lane & Waterman 215 N. Main Street 220 N. Main St., Suite 600 Davenport, IA 52801 Davenport, IA 52801 Attn: Chairman and CEO Attn: C. Dana Waterman III
Any such notice or other communication will be deemed to have been given and received (whether actually received or not) on the day it is personally delivered or delivered by courier or overnight delivery service or sent by telecopy (receipt confirmed) or, if mailed, when actually received. 10.2 Attorneys' Fees and Costs. If any judicial action at law or in equity, including an action for specific enforcement or declaratory relief, is brought to enforce or interpret any provision of this Agreement, the prevailing party shall be entitled to recover reasonable -57- 59 attorneys' fees and expenses from the other party, which shall be in addition to any other relief which may be awarded. For purposes of this section, the prevailing party shall be the claimant if the claimant is successful in obtaining substantially all of the relief sought, and shall be the defendant or respondent if the defendant or respondent is successful in denying substantially all the relief sought by the claimant. 10.3 Amendments and Waiver. This Agreement may not be modified or amended except in writing signed by the party against whom enforcement is sought. The terms of this Agreement may be waived only by a written instrument signed by the party waiving compliance. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise provided. No delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. Unless otherwise provided in this Agreement, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties hereto may otherwise have at law or in equity. Whenever this Agreement requires or permits consent by or on behalf of a party, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 10.3. 10.4 Assignment. Except as provided in Section 6.1(c), neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned or delegated by Lee-NMBC or the Purchaser without the prior written consent of the other party and any purported assignment or delegation in violation hereof shall be null and void. Notwithstanding the foregoing, (a) Lee-NMBC shall be entitled after the Closing Date to assign its obligations under this Agreement to another entity which succeeds to all or substantially all of such company's assets and properties, whether by sale, merger, consolidation, liquidation or otherwise, provided that (i) such successor assumes and agrees to perform all of Lee-NMBC's obligations under this Agreement pursuant to an assumption agreement satisfactory to Purchaser within its reasonable judgment, and (ii) the successor to Lee or NMBC shall remain liable for the performance and observance of all such obligations; (b) Purchaser may assign its rights under this Agreement as collateral security to any lender providing financing to Purchaser or any of its Affiliates; provided that no such assignment shall relieve Purchaser of its obligations hereunder; (c) Purchaser may assign all of its rights under this Agreement to a direct or indirect wholly-owned subsidiary of Purchaser or to an entity in which Purchaser holds at least a twenty-five percent (25%) equity interest, provided that (i) the representations and warranties of Purchaser hereunder shall be true and correct in all respects as applied to the assignee, (ii) both Purchaser and the assignee shall execute and deliver to Lee-NMBC a written instrument in form and substance satisfactory to Lee-NMBC within their reasonable judgment in which both Purchaser and the assignee agree to be jointly and severally liable for performance of all Purchaser's obligations under this Agreement, (iii) such assignment shall not materially delay issuance by the FCC of its consent to the FCC Transfer Application, expiration or termination of the waiting period under the HSR Act, or the Closing, and (iv) Purchaser and the assignee shall deliver such other documents and instruments as reasonably requested by Lee-NMBC, including appropriate certified resolutions of the boards of directors of -58- 60 Purchaser and the assignee, and (d) Purchaser may assign all of its rights, but not its obligations, under this Agreement to a purchaser of Station KGMB in order to accomplish the spin-off of a Honolulu television station as provided in Section 6.4(c). 10.5 Entire Agreement. This Agreement, the Confidentiality Agreement and the related documents contained as Exhibits and Schedules hereto or expressly contemplated hereby (including Lee Documents) contain the entire understanding of the parties relating to the subject matter hereof and supersede all prior written or oral and all contemporaneous oral agreements and understandings relating to the subject matter hereof. The Exhibits and Schedules to this Agreement are hereby incorporated by reference into and made a part of this Agreement for all purposes. 10.6 Representations and Warranties Complete. The representations, warranties, covenants and agreements set forth in this Agreement, the Lee Documents and the Confidentiality Agreement constitute all the representations, warranties, covenants and agreements of the parties hereto and their respective shareholders, directors, officers, employees, Affiliates, advisors (including financial, legal and accounting), agents and representatives and upon which the parties have relied. 10.7 Third Party Beneficiaries. This Agreement is made for the sole benefit of the parties hereto, their respective successors and permitted assigns, and nothing contained herein, express or implied, is intended to or shall confer upon any other Person any third party beneficiary right or any other legal or equitable rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. 10.8 Governing Law. This Agreement will be governed by and construed and interpreted in accordance with the substantive laws of the State of Illinois, without giving effect to any conflicts of law rule or principle that might require the application of the Laws of another jurisdiction. 10.9 Neutral Construction. The parties to this Agreement agree that this Agreement was negotiated fairly between them at arms' length and that the final terms of this Agreement are the product of the parties' negotiations. Each party represents and warrants that it has sought and received legal counsel of its own choosing with regard to the contents of this Agreement and the rights and obligations affected hereby. The parties agree that this Agreement shall be deemed to have been jointly and equally drafted by them, and that the provisions of this Agreement therefore should not be construed against a party or parties on the grounds that the party or parties drafted or was more responsible for drafting the provision(s). 10.10 Severability. In the event that any one or more of the provisions or parts of a provision contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement or any other jurisdiction, but this Agreement shall be reformed and construed in any such jurisdiction as if such invalid or illegal or unenforceable provision or part of a provision had never been contained -59- 61 herein and such provision or part shall be reformed so that it would be valid, legal and enforceable to the maximum extent permitted in such jurisdiction. 10.11 Bulk Sales Laws. The parties hereby waive compliance with the bulk sales or transfer Laws of any state in which the Purchased Assets of the Lee-NMBC Stations are located or in which operations relating to the Lee-NMBC Stations or Acquired Stations are conducted. 10.12 Headings; Interpretation; Schedules and Exhibits. (a) The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. References to Sections or Articles, unless otherwise indicated, are references to Sections and Articles of this Agreement. The word "including" means including without limitation. Words (including defined terms) in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires. The terms " hereof," "herein" and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules and Exhibits hereto) and not to any particular provision of this Agreement unless otherwise specified. It is understood and agreed that neither the specifications of any dollar amount in this Agreement nor the inclusion of any specific item in the Schedules or Exhibits is intended to imply that such amounts or higher or lower amounts, or the items so included or other items, are or are not material, and no party shall use the fact of setting of such amounts or the fact of the inclusion of such item in the Schedules or Exhibits in any dispute or controversy between the parties as to whether any obligation, item or matter is or is not material for purposes hereof. (b) Whenever Lee-NMBC or each Acquired Company is called upon to list any contracts or agreements, there shall be deemed excluded from the applicable representation or warranty any agreement where the primary obligations of all the parties thereto have been performed or will be performed before the Closing Date. (c) Certain matters and items disclosed in any Schedule or Exhibit may not be required to be disclosed therein, but may be disclosed therein for informational purposes only, and no such disclosure shall constitute an indication or admission of the materiality thereof or create a standard of disclosure. (d) If any fact or item is included on a Schedule referenced by a particular section in this Agreement and the existence of the fact or item or its contents is relevant to any other section in this Agreement, the fact or item shall be deemed to be disclosed with respect to such other section whether or not an explicit cross-reference appears in the Schedules if such relevance is readily apparent from examination of the Schedules. 10.13 Counterparts. This Agreement may be executed in one or more counterparts for the convenience of the parties hereto each of which shall be deemed an original and all of which together will constitute one and the same instrument. Signatures to faxed copies of this -60- 62 Agreement shall be binding so long as original counterparts thereof are provided to the other party via overnight delivery service received within three (3) business days thereafter. 10.14 Cooperation. From and after the Closing, Purchaser will cooperate with Lee-NMBC in the investigation defense or prosecution of any Action which is pending or threatened against such company or any of its Affiliates and which relates to the Lee-NMBC Stations and each Acquired Company, whether or not any party has notified the other of a claim for indemnity with respect to such matter. Without limiting the generality of the foregoing, Purchaser will make available its employees employed by the Lee-NMBC Stations and each Acquired Company to give depositions or testimony and will furnish all documentary or other evidence in each case as Lee may reasonably request. Lee-NMBC shall reimburse Purchaser for all reasonable and necessary out-of-pocket expenses incurred in connection with the performance of its obligations under this Section 10.14. 10.15 Insurance. Purchaser acknowledges that all insurance policies maintained by Lee-NMBC and each Acquired Company and its Affiliates with respect to the Lee-NMBC Stations and each Acquired Company and Purchased Assets of Lee-NMBC Stations will be terminated effective on the Closing Date. 10.16 Joint and Several Liability. Lee and NMBC shall be jointly and severally liable for each representation, warranty, covenant, agreement, liability or obligation of both or either of them under this Agreement or any of the Lee Documents whether or not so indicated in any other provision of this Agreement or in any of the Lee Documents. 10.17 Specific Performance. Lee and NMBC acknowledge that each of the Lee-NMBC Stations and the Acquired Companies' Stations is of a special, unique and extraordinary character, and that damages alone are an inadequate remedy for a breach of this Agreement by Lee-NMBC. Accordingly, as an alternative to termination of this Agreement under Section 9.1, if Purchaser is not then in material default hereunder, Purchaser shall be entitled, in the event of Lee-NMBC's breach, to enforcement of this Agreement (subject to obtaining any required approval of the FCC or under the HSR Act) by a decree of specific performance or injunctive relief requiring Lee-NMBC 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, Purchaser's right to recover damages and to pursue any other remedies available to Purchaser for Lee-NMBC's breach. In any action to specifically enforce Lee-NMBC's obligation to close the transactions contemplated by this Agreement, Lee-NMBC shall waive the defense that there is an adequate remedy at law or in equity and agrees that Purchaser shall be entitled to obtain specific performance of Lee-NMBC's obligation to close without being required to prove actual damages. As a condition to seeking specific performance, Purchaser shall not be required to tender the Cash Payment but shall be required to demonstrate that Purchaser is ready, willing and able to tender the Cash Payment as prescribed in this Agreement. [SIGNATURE PAGE FOLLOWS] -61- 63 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by a duly authorized officer as of the date first above written. LEE ENTERPRISES, INCORPORATED NEW MEXICO BROADCASTING CO. By:_____________________________ By:____________________________ Name: Richard D. Gottlieb Name: Colleen B. Brown Title: Chairman and CEO Title: President EMMIS COMMUNICATIONS CORPORATION By:_____________________________ Name: Jeffrey H. Smulyan Title: Chairman
-62- EX-2.2 3 c57890ex2-2.txt ASSET PURCHASE AGREEMENT 1 Exhibit 2.2 Execution Copy ASSET PURCHASE AGREEMENT AMONG SINCLAIR BROADCAST GROUP, INC. AND SINCLAIR RADIO OF ST. LOUIS, INC. SINCLAIR RADIO OF ST LOUIS LICENSEE, LLC AS SELLERS, AND EMMIS COMMUNICATIONS CORPORATION AS BUYER JUNE 21, 2000 2
TABLE OF CONTENTS ----------------- RECITALS 1 ARTICLE I TERMINOLOGY 1 1.1 Defined Terms. 1 1.2 Additional Defined Terms. 5 ARTICLE II PURCHASE AND SALE 6 2.1 Sale Assets. 6 (a) Tangible Personal Property 7 (b) Real Property 7 (c) Permits 7 (d) Stations Agreements 7 (e) Intellectual Property 7 (f) Records 8 (g) Miscellaneous Assets 8 2.2 Excluded Assets. 8 2.3 Assumption of Liabilities. 10 2.4 Earnest Money. 10 2.5 Purchase Price. 10 2.6 Allocation of the Purchase Price. 12 2.7 Adjustment of Purchase Price. 12 2.8 Accounts Receivable. 15 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES 16 3.1 Organization, Good Standing and Requisite Power. 16 3.2 Authorization and Binding Effect of Documents. 17 3.3 Absence of Conflicts. 17 3.4 Consents. 17 3.5 Sale Assets; Title. 18 3.6 FCC Licenses. 18 3.7 Station Agreements. 20 3.8 Tangible Personal Property. 22 3.9 Real Property. 22 3.10 Intellectual Property. 23 3.11 Financial Statements. 24 3.12 Absence of Certain Changes or Events. 25 3.13 Litigation. 26 3.14 Labor Matters 27 3.15 Employee Benefit Plans 28 3.16 Compliance with Law 29 3.17 Tax Returns and Payments 29 3.18 Environmental Matters 30 3.19 Broker's or Finder's Fees 31 3.20 Insurance 31 3.21 Transactions with Affiliates 31 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 32 4.1 Organization and Good Standing 32 4.2 Authorization and Binding Effect of Documents 32 4.3 Absence of Conflicts 32 4.4 Consents 33 4.5 Broker's or Finder's Fees 33 4.6 Litigation 33 4.7 Buyer's Qualification 33 4.8 Availability of Funds 34 4.9 WARN Act 34
3 4.10 Buyer's Defined Contribution Plan 34 ARTICLE V OTHER COVENANTS 34 5.1 Conduct of Each Station's Business Prior to the Closing Date 34 5.2. Notification of Certain Matters 36 5.3 HSR Filings 37 5.4 FCC Filing 37 5.5 Title; Additional Documents 37 5.6 Other Consents 38 5.7 Inspection and Access 38 5.8 Confidentiality 38 5.9 Publicity 39 5.10 Material Adverse Effect 39 5.11 Commercially Reasonable Efforts 39 5.12 FCC Reports and Applications 40 5.13 Tax Returns and Payments 40 5.14 No Solicitation 40 5.15 Audited Financial Statements 40 5.16 Planned Divestiture 41 5.17 Disclosure Schedules 41 5.18 Bulk Sales Law 41 5.19 Cooperation on Tax Matters 42 5.20 Lease of Studio and Office Space. 42 ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE 42 6.1 Accuracy of Representations and Warranties; Closing Certificate 43 6.2 Performance of Agreement 43 6.3 FCC Order 44 6.4 HSR Act 44 6.5 Opinions of Selling Parties' Counsel 44 6.6 Required Consents 45 6.7 Delivery of Closing Documents 45 6.8 No Adverse Proceedings. 45 ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLING PARTIES TO CLOSE 45 7.1 Accuracy of Representations and Warranties 46 7.2 Performance of Agreement 46 7.3 FCC Order 46 7.4 HSR Act 46 7.5 Opinion of Buyer's Counsel 46 7.6 No Adverse Proceedings 47 7.7 Delivery of Closing Documents 47 ARTICLE VIII CLOSING 47 8.1 Time and Place 47 8.2 Documents to be Delivered to Buyer by Selling Parties 47 8.3 Deliveries to Sellers by Buyer 48 ARTICLE IX INDEMNIFICATION 50 9.1 Survival 50 9.2 Indemnification by Selling Parties 50 9.3 Indemnification by Buyer 51 9.4 Administration of Indemnification 51 9.5 Mitigation and Limitation of Damages 52 ARTICLE X TERMINATION 53 10.1 Right of Termination 53 10.2 Obligations Upon Termination 53 10.3 Termination Notice 54
i 4 10.4 Selling Parties as a Single Party 55 ARTICLE XI CONTROL OF STATIONS 55 ARTICLE XII EMPLOYMENT MATTERS 55 12.1 Transfer of Employees 55 12.2 COBRA 56 12.3 Buyer's Employee Benefit Plans. 56 12.4 Union Employees. 58 12.5 Employment Agreements. 58 12.6 No Third Party Beneficiaries. 58 ARTICLE XIII MISCELLANEOUS 59 13.1 Further Actions 59 13.2 Payment of Expenses 59 13.3 Specific Performance 59 13.4 Notices 60 13.5 Entire Agreement 61 13.6 Binding Effect; Benefits 61 13.7 Assignment 61 13.8 Governing Law 62 13.9 Amendments and Waivers 62 13.10 Severability 62 13.11 Headings 62 13.12 Counterparts 63 13.13 References 63 13.14 Schedules and Exhibits 63 13.15 Joint and Several Liability 63
SCHEDULES: - ---------- Schedule 3.1 Qualification to Do Business Schedule 3.3 Absence of Conflicts(Selling Parties) 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 3.16 Compliance with Law Schedule 3.17 Tax Returns and Payments Schedule 3.18 Environmental Matters Schedule 3.19 Broker's or Finder's Fees
ii 5 Schedule 3.20 Insurance Schedule 3.21 Transactions with Affiliates Schedule 4.3 Absence of Conflicts (Buyer) Schedule 4.7 Buyer's Qualification Schedule 4.10 Buyer's 401(k) Plan Schedule 12.1(a) Potentially Excluded Employees Schedule 12.3(b) Prior Service Credit Policy
iii 6 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of June 21, 2000, among SINCLAIR BROADCAST GROUP, INC., a Maryland corporation ("Parent"); SINCLAIR RADIO OF ST. LOUIS, INC., a Maryland corporation ("Sinclair Radio"), SINCLAIR RADIO OF ST. LOUIS LICENSEE, LLC, a Maryland limited liability company ("Radio Licensee"), (Sinclair Radio and Radio Licensee sometimes referred to together as "Sellers"); and EMMIS COMMUNICATIONS CORPORATION, an Indiana corporation ("Buyer"). RECITALS: WHEREAS, (i) Sinclair Radio owns and operates radio station KPNT-FM, 105.7 FM ("KPNT"), St. Genevieve, Missouri, radio station KIHT-FM, 96.3 FM ("KIHT"), St. Louis, Missouri, radio station WVRV-FM, 101.1 FM ("WVRV"), East St. Louis, Illinois, radio station WRTH-AM, 1430 AM ("WRTH"), St. Louis, Missouri, radio station WIL-FM, 92.3 FM ("WIL"), St. Louis, Missouri, and radio station KXOK-FM, 97.1 FM ("KXOK"), Florissant, Missouri; and (ii) Radio Licensee owns the FCC Licenses (as hereinafter defined) used in or relating to KPNT's, KIHT's, WVRV's, WRTH's, WIL's and KXOK's radio broadcasting; WHEREAS, Parent (indirectly) owns all of the outstanding equity interests of the Sellers; and WHEREAS, Buyer desires to acquire substantially all the assets used or useful in the business and operation of such stations (as more fully described below), and Sellers are willing to convey such assets to Buyer. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Parent, Sellers and Buyer agree as follows: ARTICLE I TERMINOLOGY 1.1 DEFINED TERMS. As used herein, the following terms shall have the meanings indicated: 1 7 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. Assumed Plans: The Benefit Plans to which any Selling Party is required to contribute pursuant to the collective bargaining agreements and labor union contracts that are Station Agreements. Code: The Internal Revenue Code of 1986, as amended. 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: Bank One Trust Company, NA. Escrow Agreement: The Escrow Agreement, dated as of the date hereof, by and among Selling Parties, Buyer and the Escrow Agent relating to the deposit, holding, investment and disbursement of the Earnest Money. Excess Stations: Those FM radio stations serving the St. Louis, Missouri metropolitan area now owned by Affiliates of Buyer or to be acquired pursuant to this Agreement that are to be sold or otherwise divested in order for Buyer to avoid noncompliance with radio station ownership restrictions under the Act (as defined below) and the rules, regulations and policies of the Department of Justice and the Federal Trade Commission. FCC: Federal Communications Commission. 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. 2 8 Knowledge (or any derivative thereof): With respect to the Sellers, exclusively, the actual Knowledge of the President and Chief Executive Officer or the Chief Financial Officer of Parent or Sinclair Communications, Inc. ("SCI"), any other employee of Parent or SCI designated as a "vice president," any other officer of any of the Sellers, Parent or SCI, or the General Manager, Sales Manager or Chief Engineer of any of the Stations. 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, 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 adversely affect or impair, in any material respect, the right of Buyer to the ownership, use, control or operation of any Station; provided, however, that any condition which requires (i) that Buyer or any of its subsidiaries file periodic reports with the FCC regarding compliance with rules and policies of the FCC pertaining to affirmative action and equal opportunity employment, or (ii) that a 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 such Station, shall not be a Material Adverse Condition. Material Adverse Effect: A material adverse effect on the assets, business, operations, financial condition or results of operations of the Stations taken as a whole, except for any such effect resulting from (i) general economic conditions applicable to the radio broadcast industry, (ii) general conditions in the markets in which the Stations operate, or (iii) circumstances that are not likely to recur and either have been 3 9 substantially remedied or can be substantially remedied without substantial cost or delay. Permitted Lien: (i) Any statutory Lien (including encumbrances of a landlord) which secures a payment not yet due that arises, and is customarily discharged, in the ordinary course of the applicable Seller's business; (ii) Liens arising in connection with equipment or maintenance financing or leasing under the terms of any Station Agreement; (iii) encumbrances for Taxes not yet delinquent or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on Sellers' books in accordance with generally accepted accounting principles, and (iv) any other Liens or imperfections in a Seller's title to any Sale Assets or properties that, individually and in the aggregate, are not material in character or amount to the Sale Assets of such Seller and are not reasonably expected to materially detract from the value or materially interfere with the existing use of any of such Sale Assets in the operation of the applicable Station. Person: Any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. Planned Divestiture: The sale or other divestiture, prior to or simultaneously with the Closing, by Buyer or one or more of its Affiliates of the FCC licenses and authorizations pertaining to the Excess Stations. Selling Parties: Sellers and Parent. Stations: KIHT, KPNT, KXOK, WIL, WRTH, and WVRV. 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. 4 10 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 Sellers and the purchase by Buyer of the Stations whether now in effect or hereinafter adopted and regardless of which party such Transfer Tax is imposed upon. Transfer Taxes shall in no event include any net or gross income Taxes. 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 Buyer's 401(k) Plan Section 4.10 Buyer's Loss Section 9.2(a) Buyer's Plans Section 12.3(a) Buyer's Trade Credit Section 2.7(b) Cap Section 9.2(b) CERCLA Section 3.18(f) Closing Section 8.1 Closing Date Section 8.1 Collection Period Section 2.8(b) Dispute Notice Section 2.7(d) Employees Section 3.15(a) ERISA Section 3.15(a) Excluded Assets Section 2.2 FCC Licenses Section 3.6(a) Final Proration Notice Section 2.7(d) HSR Act Section 5.3 HSR Filings Section 5.3
5 11 Indemnified Party Section 9.4(a) Indemnifying Party Section 9.4(a) Initial Closing Period Section 2.5(c) Intellectual Property Section 2.1(e) Interim Balance Sheet Section 3.11 KIHT Recitals KPNT Recitals KXOK Recitals Leased Real Property Section 3.9(c) Multiemployer Plan Section 3.15(c) Owned Real Property Section 3.9(b) Parent Introduction Permits Section 2.1(c) Preliminary Adjustment Report Section 2.7(d) Purchase Price Section 2.5(a) Radio Licensee Introduction 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 Sellers Introduction Selling Parties' Enforcement Costs Section 10.2(c) Selling Parties' Payment Amount Section 10.2(c) Sinclair Radio Introduction Stations 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) Transferred Employees Section 12.1(a) WIL Recitals WRTH Recitals WVRV Recitals
ARTICLE II PURCHASE AND SALE 2.1 SALE ASSETS. 6 12 Upon and subject to the terms and conditions provided herein, on the Closing Date, Sellers will sell, transfer, assign and convey to Buyer, and Buyer will purchase from Sellers, all of Sellers' right, title and interest in and to all tangible and intangible assets (except Excluded Assets) used in the operation of the Stations as now or previously operated (the "Sale Assets"), including the following (but excluding any real or tangible personal property located at 1215 Cole Street, St. Louis, Missouri, other than such tangible personal property used in the operation of any of the Stations that is specifically listed in Schedule 3.8 or 3.9): (a) Tangible Personal Property . All transmitter, antenna and other broadcast equipment, studio equipment, furniture, parts, computers and office equipment, supplies, programming library and other tangible personal property owned or leased by Sellers and used in connection with the Stations, including but not limited to the applicable items listed on Schedule 3.8 (but excluding any real or tangible personal property located at 1215 Cole Street, St. Louis, Missouri, other than such tangible personal property used in the operation of any of the Stations that is specifically listed in Schedule 3.8 or 3.9), together with such modifications, replacements, improvements and additional items, and subject to such deletions therefrom, made or acquired collectively between the date hereof and the Closing Date in accordance with the terms and provisions of this Agreement (collectively, the "Tangible Personal Property"). (b) Real Property . All interests of Sellers (including, but not limited to, leaseholds) in the real estate listed on Schedule 3.9 and all fixtures and improvements thereon, together with such additional improvements and interests in real estate made or acquired between the date hereof and the Closing Date (collectively, the "Real Property"). (c) Permits . The FCC Licenses, and all other governmental permits, licenses and authorizations (and any renewals, extensions, amendments or modifications thereof) currently in effect and now held by any Seller or hereafter obtained by any Seller between the date hereof and the Closing Date, that are necessary for or related to the operation of any Station (the "Permits"). (d) Stations Agreements . All rights of Sellers in, to and under all contracts, leases, agreements, commitments and other arrangements, and any amendments or modifications, used in the operation of such any Station as of the date hereof (including, but not limited to, those listed on Schedule 3.7(a), 3.7(b) or 3.9) or made or entered into by Sellers between the date hereof and the Closing Date in compliance with this Agreement (collectively, the "Station Agreements"). (e) Intellectual Property . All trade names, trademarks, service marks, copyrights, patents, jingles, slogans, symbols, logos, the applicable call letters, internet 7 13 websites and domain names, inventions, and any other proprietary material, process, trade secret or trade right used by any Seller in the operation of any Station, and all registrations, applications and licenses for any of the foregoing, including, without limitation, those set forth on Schedule 3.10; any additional such items acquired or used by any Seller in connection with the operation of any 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 Selling Parties shall retain exclusive rights to, all right, title and interest whatsoever in or to the name "Sinclair" or any derivations thereof. (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 any Station, including, but not limited to, computer-readable disk or tape copies of 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 any Seller principally in connection with the operation of any Station, including but not limited to all goodwill of each Station (but excluding any real or tangible personal property located at 1215 Cole Street, St. Louis, Missouri, other than such tangible personal property used in the operation of any of the Stations that is specifically listed in Schedule 3.8 or 3.9). 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, securities, cash deposits made by any Seller to secure contract obligations (except to the extent Sellers receive 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 Sellers prior to the Closing Date; (b) All rights and claims of any Seller whether mature, contingent or otherwise, against third parties with respect to, or which are made under or pursuant to, other Excluded Assets or which relate to the period prior to the Closing; (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; 8 14 (d) All Benefit Plans (other than Assumed Plans); (e) All Tax Returns (and supporting materials) and all claims of any Seller with respect to any Tax refunds; (f) All of any Seller's rights under or pursuant to this Agreement or any other rights in favor of any Seller pursuant to the other Documents; (g) All loan agreements, letters of credit 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) Each 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) All rights to the names "Sinclair Broadcast Group," "Sinclair Communications," Sinclair and any logo or variation thereof and goodwill associated therewith; (l) All assets which are owned by the Sellers and used, or which Sellers have the right to acquire and are to be used, principally in connection with any television station owned and/or programmed by any of the Sellers, including, without limitation, the Real Property and tangible personal property located at 1215 Cole Street, St. Louis, Missouri, other than such tangible personal property used in the operation of any of the Stations that is specifically listed in Schedule 3.8 or 3.9; and (m) All shares of capital stock, partnership interests, interests in limited liability companies or other equity interest, including, but not limited to, any options, warrants or voting trusts relating thereto which are owned by Sellers and not expressly specified in Section 2.1. 9 15 2.3 ASSUMPTION OF LIABILITIES. (a) Buyer shall at Closing assume and agree to pay, discharge and perform the following Liabilities of Sellers (collectively, the "Assumed Obligations"): (i) All Liabilities arising under all Stations Agreements and the Permits 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 any Seller upon or prior to Closing under any Station Agreement). (ii) Provided that Sellers pay Buyer the amount, if any, owed by Sellers after Closing under Section 2.7, the Assumed Obligations shall also include such other Liabilities of Sellers 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 any Selling Party of any kind or nature, all of which such Selling Party shall pay, discharge and perform when due. 2.4 EARNEST MONEY. (a) Concurrently with the execution of this Agreement, Buyer has deposited with the Escrow Agent in immediately available funds the sum of Twenty-Two Million Dollars ($22,000,000). (b) The Escrow Agent shall hold the Earnest Money under the terms of the Escrow Agreement in trust for the benefit of the Selling Parties and Buyer. (c) If Closing does not occur, the Earnest Money shall be delivered to Sellers or returned to Buyer in accordance with Section 10.2, and if Closing does occur, the Earnest Money shall be applied at Closing as provided in Section 2.5. 2.5 PURCHASE PRICE. (a) Subject to increase as provided in Section 2.5(c) and adjustment as provided in Section 2.7, the purchase price for the Sale Assets ("Purchase Price") shall be Two Hundred Twenty Million Dollars ($220,000,000), payable as follows: 10 16 (i) An amount equal to the Earnest Money shall be paid by the Escrow Agent's disbursement of the Earnest Money to Sellers by wire transfer of immediately available funds pursuant to joint written instructions from Sellers and Buyer. (ii) The difference of (A) the Purchase Price minus (B) the Earnest Money shall be paid by Buyer to Sellers on the Closing Date by wire transfer of immediately available funds pursuant to written instructions from Sellers to Buyer. (b) Sellers shall furnish Buyer wire instructions at least two (2) business days prior to the Closing Date. (c) The Purchase Price shall be increased: (i) By One Million Dollars ($1,000,000) upon expiration of the 60-day period following publication of notice by the FCC that applications for the FCC Order have been accepted for filing (the "Initial Closing Period") if, and only if, (A) Closing has not occurred prior to expiration of the Initial Closing Period because the FCC has failed to grant the FCC Order or the waiting period (including any extensions) under the HSR Act applicable to the transactions contemplated by this Agreement has not expired or been terminated, and (B) such failure of the FCC, or such failure of such waiting period (including any extensions) to expire or be terminated, is the result of facts relating to Buyer or its Affiliates, including, but not limited to, the facts disclosed on Schedule 4.7; and (ii) By an additional One Million Dollars ($1,000,000) upon expiration of each consecutive 30-day period following the Initial Closing Period (up to a maximum of four (4) such 30-day periods) if, and only if, (A) Closing has not occurred prior to expiration of such 30-day period because the FCC has failed to grant the FCC Order or the waiting period (including any extensions) under the HSR Act applicable to the transactions contemplated by this Agreement has not expired or terminated, and (B) such failure of the FCC, or such failure of such waiting period (including any extensions) to expire or be terminated, is the result of facts relating to Buyer or its Affiliates, including, but not limited to, the facts disclosed on Schedule 4.7; provided, however, that the aggregate increase in the Purchase Price under this Section 2.5(c) shall in no event exceed Five Million Dollars ($5,000,000). 11 17 2.6 ALLOCATION OF THE PURCHASE PRICE. (a) Promptly after the Closing, Sellers 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 Sellers and Buyer as soon as reasonably practicable (the "Appraisal Report"). Buyer shall pay the fees, costs and expenses of the Appraisal Firm; provided, Seller shall use reasonable efforts to make available to Buyer and the Appraisal Firm copies of any appraisals prepared in connection with Sellers' acquisitions of the Stations. (b) Buyer and Sellers 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 Stations shall be adjusted and allocated between Sellers and Buyer, and an adjustment in the Purchase Price shall be made as provided in this Section, to the extent necessary to reflect the principle that all such income and expenses attributable to the operation of the Stations on or before the date preceding the Closing Date shall be for the account of Sellers, and all such income and expenses attributable to the operation of the Stations on and after the Closing Date shall be for the account of Buyer. The net amount by which the Purchase Price is to be increased or decreased in accordance with this Section is herein referred to as the "Adjustment Amount". (b) Without limiting the generality of the foregoing: (i) Sellers shall receive a credit for the unapplied portion, as of Closing, of the security deposits made by Sellers under those Stations 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, if any, by which the fair market value of all advertising time required to be broadcast on the Stations on or after the Closing Date under the Trade Agreements exceeds by more than $250,000, the fair market value of the goods and services to be received on or after the Closing Date under the Trade Agreements. Sellers shall be given a credit in the amount, if any, by which the fair market value of the goods or services to be received on or after the Closing Date under the Trade Agreements exceeds by more than $250,000 the fair 12 18 market value of any advertising time required to be broadcast on the Stations on or after the Closing Date. (iii) Buyer shall be given a credit equal to the amount of cash consideration that Sellers have not paid prior to the Closing Date for programming run by the Stations prior to the Closing Date. (iv) With respect to each vacation day or portion thereof earned but not taken before the Closing Date by the Stations' employees hired by Buyer, Buyer shall receive a credit equal to the compensation equivalent thereof. (v) An adjustment and proration shall be made in favor of Sellers for the amount, if any, of prepaid expenses, the benefit of which accrues to Buyer hereunder, and other current assets acquired by Buyer hereunder which are paid by Sellers to the extent such prepaid expenses and other current assets relate to the period after the Closing, provided that the credit given Sellers for each prepaid expense shall not exceed an amount commensurate with the benefit therefrom to be received by Buyer after Closing. (vi) There shall be no proration for sick leave. (vii) There shall be no proration for any payments made by Interep to any of the Sellers in connection with obtaining the right to serve as the national sales representative of any of the Stations. (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, Sellers shall provide Buyer with a statement setting forth a detailed computation of Sellers' 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. Within ninety (90) days after the Closing Date, Buyer shall deliver to Sellers in writing and in reasonable detail a good faith final determination of the Adjustment Amount determined as of the Closing Date ("Final Proration Notice"). Sellers shall assist Buyer in making such determination, and Buyer shall provide Sellers with reasonable access to the properties, books and records relating to the Stations for 13 19 the purpose of determining the Adjustment Amount. Sellers shall have the right to review the computations and workpapers used in connection with Buyer's preparation of the Adjustment Amount. If Sellers disagree with the amount of the Adjustment Amount determined by Buyer, Sellers shall so notify Buyer in writing (the "Dispute Notice") within forty-five (45) days after the date of receipt of Buyer's Final Proration Notice, specifying in detail any point of disagreement; provided, however, that if Sellers fail to notify Buyer in writing of Sellers' disagreement within such 45-day period, Buyer's determination of the Adjustment Amount, as indicated in the Final Proration Notice shall be final, conclusive and binding on Sellers and Buyer. After the receipt of any notice of disagreement, Buyer and Sellers shall negotiate in good faith to resolve any disagreements regarding the Adjustment Amount. If agreement is reached within forty-five (45) days after Buyer's receipt of the Dispute Notice, then upon reaching such agreement, Sellers shall pay to Buyer or Buyer shall pay to Sellers, as the case may be, an amount equal to the difference between (i) the agreed Adjustment Amount and (ii) the preliminary Adjustment Amount indicated in the Preliminary Adjustment Report. Any such payment shall be made as provided in Section 2.7(f). If agreement is not reached within such 30-day period, then the dispute resolutions of Section 2.7(e) shall apply. (e) If Sellers and their auditors and Buyer and its auditors do not, within the 30-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") which has not regularly provided services to either the Buyer or Sellers in the last three (3) years, which shall be knowledgeable and experienced in the operation of radio broadcasting stations, shall be selected by Sellers and Buyer to resolve the disputed items. If Sellers 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 Sellers and one firm designated by Buyer). Buyer and Sellers 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 and the basis for its determination. 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, Sellers shall pay to Buyer, or Buyer shall pay to Sellers, 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(f). 14 20 (f) 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, Sellers shall furnish to Buyer a true and complete list of Sellers' accounts receivable (other than non-cash receivables under Trade Agreements) arising from the operation of the Stations prior to the Closing Date (the "Retained Receivables"), which list shall set forth for each Retained Receivable the name of the debtor, the date of the invoice, the amount of any payments previously received on account and the balance due. (b) For a period of one hundred eighty (180) days after the Closing Date (the "Collection Period"), Buyer will, without charge to Sellers, use its usual and customary procedures (which may include referral to a collection agency) to collect the Retained Receivables as Sellers' agent for collection, provided that (i) Buyer shall not be required to commence litigation, employ legal counsel or make any other extraordinary collection efforts, and (ii) Buyer's obligation to act as Sellers' agent in the collection of the Retained Receivables shall terminate upon expiration of the Collection Period. For the purpose of determining amounts collected by Buyer with respect to the Retained Receivables, each payment by an account debtor shall be applied to the older or oldest accounts receivable of such account debtor unless the account debtor in writing (a copy of which Buyer shall provide to Sellers) 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 Sellers a statement showing all collections of Retained Receivables made on behalf of Sellers since the last previous report and shall pay such collections to Sellers by check, or by wire transfer, as specified by Sellers, at the time such statement is delivered. Buyer shall have no right to setoff amounts owed hereunder by Buyer to Seller against any amounts owed hereunder by Sellers to Buyer. (d) Sellers shall not engage in any collection efforts against account debtors under the Retained Receivables during the first ninety (90) days of the Collection Period, other than with respect to accounts receivable identified as in dispute as provided in foregoing Section 2.8(b). After the first ninety (90) days of the Collection Period, Sellers shall have the right, at their expense, to assist and participate with Buyer 15 21 in the collection of unpaid Retained Receivables, provided, however, Sellers' collection efforts shall be commercially reasonable and consistent with its past practices. (e) Buyer shall not, without Sellers' prior written consent, compromise or settle for less than full value any of the Retained Receivables unless Buyer pays Sellers the full amount of any deficiency. Buyer shall be entitled to purchase from Sellers any Retained Receivable for the full amount thereof at any time during or at the expiration of the Collection Period. (f) At the end of the Collection Period, Buyer shall return to Sellers all files concerning the collection or attempts to collect the Retained Receivables and Buyer's responsibility for the collection of the Retained Receivables shall cease; provided, Buyer shall promptly pay over to Sellers any amounts received with respect to the Retained Receivables after the Collection Period, together with a statement setting forth the components of such amounts. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES Selling Parties, jointly and severally, represent and warrant to Buyer as follows; 3.1 ORGANIZATION, GOOD STANDING AND REQUISITE POWER. Each Selling Party, other than Radio Licensee, is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland, and has all requisite power to own, operate and lease those Sale Assets which it owns and carry on its business. Radio Licensee is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Maryland and has all requisite power to own, operate and lease those Sale Assets which it owns and carry on its business. Each Seller is duly licensed, qualified to do business and in good standing as a foreign entity under the laws of the jurisdiction listed beside such Seller's name in Schedule 3.1. 16 22 3.2 AUTHORIZATION AND BINDING EFFECT OF DOCUMENTS. Each Selling Party has all requisite corporate power and authority (or other appropriate power and authority based on the structure of such Selling Party) to enter into this Agreement and the other Documents and to consummate the transactions contemplated by this Agreement and each of the other Documents. The execution and delivery of this Agreement and each of the other Documents by each Selling Party and the consummation by each Selling Party of the transactions contemplated hereby and thereby have been duly authorized by all necessary action (including all necessary shareholder or member approvals, if any) on the part of each Selling Party. This Agreement has been, and each of the other Documents at or prior to Closing will be, duly executed and delivered by each Selling Party. This Agreement constitutes (and each of the other Documents, when executed and delivered, will constitute) the valid and binding obligation of each Selling Party enforceable against each Selling Party in accordance with its terms except as the enforceability of this Agreement or of any of the other Documents may be affected by bankruptcy, insolvency, or similar laws affecting creditors' rights generally and by judicial discretion in the enforcement of equitable remedies. 3.3 ABSENCE OF 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 each Selling Party of this Agreement and the other Documents, and consummation by each Selling Party of the transactions contemplated hereby and thereby, do not and will not (i) conflict with or result in any breach of any of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in a violation of, (iv) give any third party the right to modify, terminate or accelerate any obligation under, or (v) result in the creation of any Lien upon the Sale Assets under, the provisions of the organizational documents of such Selling Party, any material indenture, mortgage, lease, loan agreement or other material agreement or instrument to which such Selling Party is bound or affected, or any law, statute, rule, judgment, order or decree to which such Selling Party is subject. 3.4 CONSENTS. Except as set forth on Schedule 3.3, Schedule 3.7 or Schedule 3.9, and except for any necessary clearances or approvals under the HSR Act or the Act, the execution, delivery and performance by each Selling Party of this Agreement and the other Documents, and consummation by each Selling Party 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. 17 23 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 Stations, with the exception of the Excluded Assets (which Excluded Assets include the traffic system used in the operation of KPNT, WVRV and KXOK at 1215 Cole Street, St. Louis, Missouri, the other assets described as Excluded Assets in Section 2.2(l), and all other assets described as Excluded Assets in Section 2.2). (b) Together, Sellers own and have good title to, or a valid lessee's or licensee's interest (pursuant to one or more Station Agreements) in, all of the Sale Assets free and clear of all Liens except (i) Liens described on Schedule 3.5(b) which Sellers shall cause to be released prior to Closing and (ii) Permitted Liens. 3.6 FCC LICENSES. Except as set forth on Schedule 3.6: (a) Radio Licensee is the valid and legal holder of each of the licenses, permits and authorizations of the FCC listed on Schedule 3.6 (together as to all Stations, 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 main FCC License is shown on Schedule 3.6. (b) The FCC Licenses (i) are valid and in full force and effect, and constitute all of the licenses, permits and authorizations used in or required for the current operation of the Stations under the Communications Act of 1934, as amended, and the rules, regulations and policies of the FCC thereunder (collectively, the "Act"), and (ii) constitute all the currently in effect licenses and authorizations, including amendments and modifications thereto, issued by the FCC for the operation of the Stations. (c) Other than as set forth in the FCC Licenses or restrictions applicable to the radio broadcast industry generally, none of the FCC Licenses is subject to any restriction or condition which limits in any material respect the full operation of the applicable 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 such Station as currently operated. 18 24 (d) Each Station is being operated by the applicable 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 any Selling Party, 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 material fines, forfeitures or other administrative actions by the FCC with respect to any Station or its operation, other than actions or proceedings affecting the radio broadcasting industry in general. (f) Sellers have complied in all material respects with all requirements to file registrations, reports, applications and other documents with the FCC with respect to each 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 radio broadcasting industry in general or facts relating to Buyer, no Seller has 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 material fines or forfeitures by the FCC against any Selling Party, 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 any Station or its operation. (i) True, complete and accurate copies of all FCC Licenses material to the operation of each Station as now conducted have been delivered by Sellers to Buyer. (j) Except for the FCC Licenses, there are no material licenses, permits or authorizations from governmental or regulatory authorities required for the lawful operation and conduct of the Stations as previously and currently operated by Sellers. 19 25 3.7 STATION AGREEMENTS. (a) Schedule 3.7(a) lists all agreements, contracts, understandings and commitments (including, without limitation, programming agreements which may be listed on Schedule 3.7(b)) as of the date indicated thereon for the sale of time on any 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 each Seller from and after the date of such Schedule. True and complete copies of all written Trade Agreements in effect as of such date involving broadcast time of more than $25,000, including all amendments, modifications and supplements thereto, have been delivered to Buyer, and each Trade Agreement involving broadcast time of more than $25,000 entered into by any 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 each Station: (i) Agreements for sale of broadcast time on such Station for monetary consideration that (A) are not terminable by Sellers without charge or penalty upon thirty (30) days or less prior written notice and (B) involve broadcast time of more than Twenty-Five Thousand Dollars ($25,000); (ii) All network affiliation agreements; (iii) All sales agency or advertising representation contracts; (iv) Each lease of any Sale Asset (including a description of the property leased thereunder) other than such agreements not requiring expenditures of more than $25,000 in any calendar year and having a term (after taking into account any cancellation right of Sellers without charge or penalty) of one (1) year or less) except for leases of Real Property listed on Schedule 3.9; (v) All collective bargaining agreements; (vi) All severance agreements, employment agreements, talent agreements and agreements with independent contractors, other than such agreements that (A) do not provide for any severance payments or benefits, (B) do not require expenditures of more than $25,000 in any calendar year and (C) have a term (after taking into account any cancellation right of Sellers without charge or penalty) of one (1) year or less; 20 26 (vii) All agreements requiring such Station to acquire goods or services exclusively from a single supplier or provider, or prohibiting such Station from providing certain goods or services to any Person other than a specified Person; (viii) All agreements that have a remaining term (after taking into account any cancellation rights of Sellers without charge or penalty) of more than one (1) year or involve a commitment of more than $25,000; and (ix) Any other agreement that is material to the business, operations, financial condition or results of operations of any Station. True and complete copies of all the foregoing Station Agreements that are in writing, and true and accurate summaries of all the foregoing Station Agreements that are oral, including all amendments, modifications and supplements, have been delivered to Buyer. The Stations Agreements that are not described in Section 3.7(a) or in the foregoing clauses (i) through (ix) of this Section 3.7(b) (without regard to the monetary thresholds set forth in Section 3.7(a) or in such clauses of Section 3.7(b)) do not involve commitments by parties thereto with an aggregate fair market value of more than One Hundred Fifty Thousand Dollars ($150,000). (c) Schedule 3.7(c) lists all of the contracts and agreements used in or relating to the operation of the Stations to which an Affiliate of any Seller is a party (other than agreements for sale of broadcast time on the Stations and KDNL-TV for monetary consideration entered into in the ordinary course of business that involve broadcast time on the Stations of less than Twenty-Five Thousand Dollars ($25,000)). 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) With respect to the Station Agreements which are, individually or in the aggregate, material to the assets, business, operations, financial condition or results of operations of a 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 their terms except as the enforceability of such Contracts may be affected by bankruptcy, insolvency, or similar laws affecting creditors' rights generally and by judicial discretion in the enforcement of equitable remedies; (ii) neither Sellers nor, to the Knowledge of any Seller, any other party is in material default under, and no event has occurred which (after the giving of notice or the lapse of time or both) would constitute a material default under, any such Station Agreements; (iii) neither Sellers nor any Affiliate of Sellers has granted or been granted any material waiver or forbearance with respect to any such Station Agreements; (iv) the applicable 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 21 27 agreement; (v) none of the rights of any Seller or any Affiliate of any 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) except as set forth on Schedule 3.7(a), 3.7(b) or 3.9, no 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 noted on such Schedule, all Tangible Personal Property (other than Excluded Assets, office supplies and other incidental items) material to the conduct of the business and operations of each 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 each Station as now operated by any Seller has been properly maintained in all material respects in accordance with 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 material 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 any Seller holds or which are used to any material extent in the operation of any Station. (b) Each Seller holds good fee simple title to each parcel of Real Property listed in Schedule 3.9 as owned by the Seller (the "Owned Real Property") free and clear of any Liens except (i) Liens described on Schedule 3.5(b) which Sellers shall cause to be released prior to Closing, and (ii) Permitted Liens. To each Seller's Knowledge, except as set forth on Schedule 3.9, there is no pending, threatened or contemplated action to take by eminent domain or to condemn any of the Real Property. (c) Each lease (including all amendments, modifications and supplements) under which any Seller leases an interest in any of the Real Property (each, a "Real Property Lease") is specified, and each leased Real Property, including but not limited to studio and office space and each transmitter or antenna site (the "Leased Real Property"), and its use by any Seller are identified, on Schedule 3.9. Except as set forth on such Schedule, such Seller holds good title to the lessee's interest under each Real Property Lease free and clear of all Liens except Permitted Liens. True and complete 22 28 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 Sellers nor, to the Knowledge of any Seller, any other party is in material default under any Real Property Lease; (iii) to the Knowledge of each 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 any Selling Party received written notice alleging any such event has occurred; (iv) none of the rights of the applicable 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 contemplated hereby; and (vi) no Seller has granted or been granted any material waiver or forbearance with respect to any Real Property Lease. (e) All improvements on the Real Property owned by any of the Sellers are in compliance in all material respects with applicable federal, state and local laws, building codes, ordinances and regulations, including but not limited to zoning and land use laws, ordinances and regulations, and the use by any Seller of each portion of the Real Property complies in all material respects with applicable zoning and land use laws, ordinances and regulations. Each 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 each Seller, the applicable Seller owns, free and clear of Liens other than Permitted Liens, all right and interest in, and right and authority to use, or has a valid license to use, in connection with the conduct of the business of the applicable 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 any Seller, threatened judicial or adversary proceedings with respect to any of the Intellectual Property. 23 29 (c) No Selling Party has 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) No Seller has Knowledge of any infringement or unlawful use of any of the Intellectual Property. (e) To each Seller's Knowledge, no Seller has violated any provisions of the Copyright Act of 1976, 17 U.S.C.Section101, et seq., in any material respect. (f) Sellers have 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. Attached as Schedule 3.11 are: (a) The unaudited balance sheets of each Seller as of December 31, 1998 and 1999; (b) The unaudited balance sheet of each Seller as of April 30, 2000 (the "Interim Balance Sheet"); (c) The unaudited consolidated income statements of Sinclair Radio for the years ended December 31, 1998 and 19 99, and for the interim period ended April 30, 2000; (d) The unaudited income statements of Radio Licensee for the years ended December 31, 1998 and 1999, and for the interim period ended April 30, 2000; (e) The unaudited broadcast cash flow statements for KIHT for the years ended December 31, 1998 and 1999, and for the interim period ended April 30, 2000; (f) The unaudited combined broadcast cash flow statements for KPNT, WVRV and KXOK for the years ended December 31, 1998 and 1999, and for the interim period ended April 30, 2000; and (g) The unaudited combined broadcast cash flow statements for WIL and WRTH for the years ended December 31, 1998 and 1999, and for the interim period ended April 30, 2000. 24 30 To the extent each financial statement (i.e., balance sheet, income or broadcast cash flow statement) referred to in this Section 3.11 relates to the period of time during which, or a date on which, the Station or Stations covered by such financial statement were owned by Sellers (or any Affiliate thereof), such financial statement (i) has been prepared from and accurately reflects the books and records of Sellers and (ii) and has been prepared, and presents fairly and accurately the financial condition of the Station or Stations covered by such financial statement as at its date or the results of operations of such Station or Stations for the period then ended, in conformity with generally accepted accounting principles applied in a manner consistent with the preparation of the most recent audited financial statements of Parent, except for the absence of footnotes and certain normal and recurring year-end adjustments, none of which will be material to the results of operations or financial condition of any such Station. Except as specifically stated in Section B of Schedule 3.11, none of such financial statements understates in any material respect the normal and customary costs and expenses of conducting the business or operations of any of the Stations as currently conducted, or otherwise materially inaccurately reflects the results of operations of any of the Stations; provided, that the foregoing representations regarding each such financial statement are given only to each Seller's Knowledge with respect to any Station for any period of time or date covered by such financial statement during or on which neither Sellers nor an Affiliate thereof owned the Station. 3.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Interim Balance Sheet and through the date hereof, 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) None of Sellers or the Stations 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) No Seller has: (i) amended or terminated any Station Agreement except in the ordinary course of business consistent with past practices, or any Real Property Lease (other than amendment, noted on Schedule 3.9 hereto); (ii) mortgaged, pledged or subjected to any Lien, any of the Sale Assets, except for Permitted Liens; 25 31 (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 except those that (A) were entered into in the ordinary course of business consistent with past practice or (B) are not material to the assets, business, operations, results of operations or financial condition of any Station; (v) paid any bonus to any officer, director or employee or granted to any officer, director or employee any other increase in compensation in any form, except in the ordinary course of business consistent with past practices; (vi) adopted or amended any collective bargaining, bonus, profit-sharing, compensation, stock option, pension, retirement, deferred compensation, severance or other plan, agreement, trust, fund or arrangement for the benefit of employees (whether or not legally binding) or made any material changes in its policies of employment; (vii) entered into any agreement (other than agreements that will be terminated prior to Closing) with any Affiliate of any Seller; or (viii) operated its business other than in the ordinary course consistent with past practices. 3.13 LITIGATION. Except as described in Schedule 3.13, (i) there are no actions, suits, claims, investigations or administrative or arbitration proceedings pending or, to the Knowledge of any Seller, threatened against any Seller before or by any court, arbitration tribunal or governmental department or agency, domestic or foreign, that relates to any Station or the Sale Assets; (ii) neither any Seller nor, to the Knowledge of any Seller, any of the officers or employees of any Seller, has been charged with, or to the Knowledge of any 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 any Station or with any Seller; and (iii) neither any Seller, any properties or assets of any Seller nor, to the Knowledge of any Seller, any officer or employee of any Seller is a party to or bound by any order, arbitration award, judgment or decree of any court, arbitration tribunal or governmental department or agency, domestic or foreign, in respect of any business practices, the acquisition of any property, or the conduct of any business of any Seller which, individually or in the aggregate, has had or is reasonably likely to have a Material 26 32 Adverse Effect or materially impair the ability of any Seller to perform its obligations hereunder and consummate the transactions contemplated hereby. 3.14 LABOR MATTERS. (a) Except as listed on Schedule 3.14(a): (i) To each Seller's Knowledge, no present or former employee or independent contractor of any Station has a pending claim or charge which has been asserted or threatened against any Seller for (A) overtime pay; (B) wages, salaries or profit sharing; (C) vacations, time off or pay in lieu of vacation or time off; (D) any material 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 material violation of occupational safety or health standards. (ii) There is not pending or, to the Knowledge of any Seller, threatened against any Seller any labor dispute, strike or work stoppage that affects or interferes with the operation of any Station, and no Seller has Knowledge of any organizational effort currently being made or threatened by or on behalf of any labor union with respect to employees of any Station. There are no material unresolved unfair labor charges against any Seller, and no Seller has 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) no Selling Party is a signatory or a party to, or otherwise bound by, a collective bargaining agreement now in effect which covers employees or former employees of any Station, (ii) no Selling Party has agreed to recognize any union or other collective bargaining unit with respect to any employees of any Station, and (iii) no union or other collective bargaining unit has been certified as representing any employees of any Station. (c) Schedule 3.14(c) sets forth a true and complete list, as of the date set forth on such list, of all persons employed by a Seller in connection with the operation of a Station who earn more than $15,000 per year, and states for each such employee the date hired, the current level of compensation (including any projected bonus) payable to such employee (limited in the case of each employee who is compensated on a commission basis to a description of the manner in which such commissions are determined and the specification of compensation earned by such employee in 1999), and whether such employee is employed under a written contract or is covered by a 27 33 written severance agreement. Except pursuant to written employment agreements and written severance agreements listed on Schedule 3.7(b), the only severance obligations of Sellers are set forth on Schedule 3.14(c). A true and complete copy of any handbook, policy manual or similar written guidelines furnished to employees of any 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 any Station or the beneficiaries or dependents of such employee or former employee (such employees, former employees, beneficiaries and dependents herein referred to collectively as the "Employees") which are or have been established or maintained and are currently in effect, or to which contributions are being made by any Selling Party or by any other trade or business, whether or not incorporated, which is or has been treated as a single employer together with any Selling Party under Section 414 of the Code (such other trades and businesses referred to collectively as the "Related Persons") or to which any Selling Party 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, the severance policy described on Schedule 3.14(c) or any agreements disclosed in Schedule 3.7(b), no Selling Party has fixed or contingent liability or obligation to any of the Employees or to any person whose services are or were provided as an independent contractor to any Seller or any Station. (b) All Benefit Plans (other than the Assumed Plans, with respect to which this representation is limited to each Seller's Knowledge) have been administered and are in compliance in all material respects with the terms of the Benefit Plans and applicable provisions, if any, of ERISA and the Code and all other applicable law. No Selling Party or any Related Person has engaged in a transaction with respect to any Benefit Plan that could result in a material Tax, penalty or other liability under the Code or ERISA being imposed against Buyer, a Station or the Sale Assets. (c) Other than the Assumed Plans, no Benefit Plan is a multiemployer plan within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA (a "Multiemployer Plan"). (d) No Selling Party or any Related Person has, to any Seller's Knowledge, incurred or expects to incur any material withdrawal liability with respect to a 28 34 Multiemployer Plan under Subtitle E of Title IV of ERISA regardless of whether based on contributions by any entity which is considered a predecessor of any Selling Party or one employer with any Selling Party under Section 4001 of ERISA. (e) All contributions required to have been made by any Selling Party under the terms of any Benefit Plan or applicable law have been timely made. (f) No Selling Party has any unfunded obligations (including projected obligations) for retiree health and life benefits under any Benefit Plan other than continuation coverage required by law, provided that this representation is limited to the Knowledge of Sellers to the extent it relates to the Assumed Plans. (g) No Selling or any Related Person has incurred any material liability under or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and several liability provisions of the Code relating to employee benefit plans and, to each Seller's Knowledge, no event or condition has occurred or exists which would result in any such material liability to any Selling Party. 3.16 COMPLIANCE WITH LAW. Sellers have operated and are operating each Station in all material respects in compliance with the Act and all other material 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 specified on Schedule 3.16, no Seller has received any written notice of material noncompliance pertaining to any operation of any Station that has not been cured. 3.17 TAX RETURNS AND PAYMENTS. (a) Except as set forth in Schedule 3.17, each Selling Party has filed all Tax Returns required to be filed by a Selling Party, including filings regarding employees, sales, operations or assets. All Taxes due and payable pursuant thereto have been paid, except for any such Taxes that are being contested in good faith for which adequate reserves have been made on a Selling Party'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 any Selling Party, (ii) no Selling Party has received written notice of any such deficiency, delinquency or default, and (iii) to each Seller's Knowledge, no taxing authority is now threatening to assert any such deficiency, delinquency or default and, to each Seller's Knowledge, there is no reasonable basis for any such assertion. 29 35 (c) No Tax is required to be withheld by Buyer pursuant to Section 1445 of the Code as a result of the transactions contemplated by this Agreement. (d) Each Selling Party has withheld any Tax required to be withheld by such Selling Party under applicable law and regulations, and such withholdings have either been paid to the proper governmental agency or set aside in accounts for such purpose, or accrued, reserved against and entered upon the books of such Selling Party. 3.18 ENVIRONMENTAL MATTERS. (a) Except as set forth on Schedule 3.18, Sellers have obtained all material environmental, health and safety permits necessary for the operation of each Station, all such permits are valid and in full force and effect, and Sellers are in compliance in all material respects with all terms and conditions of such permits. (b) Except as set forth on Schedule 3.18, there is no proceeding pending or, to any 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 Stations, and to each Selling Party's Knowledge, there is no basis for any such proceeding. (c) Except as set forth on Schedule 3.18, to each Seller's knowledge, each Seller has operated and is operating in all material respects in compliance with all material 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 such Seller relating to environmental matters. (d) Except as set forth on Schedule 3.18, to each Seller's knowledge, there are no conditions or circumstances associated with the Sale Assets which may give rise to any material liability or material cost under applicable environmental law. Except as listed on Schedule 3.18, no Seller owns or uses 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. 30 36 (f) Except as set forth on Schedule 3.18, with respect to the operation of any Station, no Seller has filed or, to any Seller's knowledge, been required to file any notice under any applicable material 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. Section9601, et seq. ("CERCLA") or any other applicable environmental law or regulation has been or, to any Seller's Knowledge, was required to be filed. (g) Except as set forth on Schedule 3.18, no Selling Party has received any notice letter under CERCLA or any other written notice, and, to each Seller's Knowledge, there is no investigation pending or threatened, to the effect that any 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 any Seller's Knowledge, does there exist any basis for such investigation. 3.19 BROKER'S OR FINDER'S FEES. Except as set forth on Schedule 3.19, no agent, broker, investment banker or other person or firm acting on behalf of or under the authority of any Selling Party or any Affiliate of any Selling Party 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 currently maintained by any Seller with respect to the assets and business of any Station. All of such insurance policies are in full force and effect, and no Seller is in default with respect to its obligations under any such insurance policy and has not been denied insurance coverage thereunder. 3.21 TRANSACTIONS WITH AFFILIATES. Except as described on Schedule 3.21, no Seller has been involved in any business arrangement or relationship relating to any Station with any Affiliate of any Seller, and no Affiliate of any Seller owns any property or right, tangible or intangible, which is used in the operation of any Station or is material to the Sale Assets or the business, operations, financial condition or results of operations of any Station. 31 37 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to Selling Parties 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. Prior to the Closing Date, Buyer will be qualified to do business in each of the States in which any of the Stations are located. 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, to consummate the transactions contemplated by this Agreement and the other Documents and to own the Sale Assets. 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. 32 38 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. 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. Except as disclosed in Schedule 4.7, Buyer is, and at all times between the date hereof and up until and including Closing will be, legally, financially and otherwise qualified under the Act, HSR Act and all rules, regulations and policies of the FCC, the Department of Justice, the Federal Trade Commission (the "FTC") and any other governmental agency, to acquire and operate the Stations. Except as disclosed in Schedule 4.7, there are no facts or proceedings which would reasonably be expected to disqualify Buyer under the Act or HSR Act or otherwise from acquiring or operating the Stations or would cause the FCC not to approve the assignment of the FCC Licenses to Buyer or the Department of Justice and the FTC not to allow the waiting period under the HSR Act to terminate within thirty (30) days of the filing provided for in Section 5.3. Except as disclosed in Schedule 4.7, Buyer has no knowledge of any fact or circumstance relating to Buyer or any of Buyer's Affiliates that would reasonably be expected to (a) cause the filing of any objection to the assignment of the FCC Licenses to Buyer, (b) lead to a material delay in the processing by the FCC of the applications for such assignment or (c) lead to a material delay in the termination of the waiting period required by the HSR Act. Except as disclosed in Schedule 4.7, no waiver of any 33 39 FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses to Buyer, nor will processing pursuant to any exception or rule of general applicability be requested or required in connection with the consummation of the transactions herein. 4.8 AVAILABILITY OF FUNDS. Buyer will have available on the Closing Date sufficient funds to enable it to consummate the transactions contemplated hereby. 4.9 WARN ACT. Buyer is not planning or contemplating and has not made or taken any decisions or actions concerning the employees of the Stations after the Closing Date that would require the service of notice under the Worker Adjustment and Restraining Notification Act of 1988, as amended, or any similar state law. 4.10 BUYER'S DEFINED CONTRIBUTION PLAN. Schedule 4.10 completely and accurately lists all Buyer's defined contribution plan or plans (the "Buyer's 401(k) Plan") intended to be qualified under Section 401(a) and 401(k) of the Code in which the Transferred Employees will be eligible to participate. Buyer has a currently applicable determination letter from the Internal Revenue Service. ARTICLE V OTHER COVENANTS 5.1 CONDUCT OF EACH STATION'S BUSINESS PRIOR TO THE CLOSING DATE. Selling Parties covenant and agree with Buyer that from the date hereof through the Closing Date, or the termination of this Agreement if earlier, unless Buyer otherwise consents in writing (which consent shall not be unreasonably withheld, delayed or conditioned), Sellers shall: (a) Operate each Station in the ordinary course of business consistent with past practices, including (i) incurring promotional expenses substantially 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, 34 40 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 consistent with past practice, 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 each Station and otherwise conduct its business in all material respects in compliance with the terms or conditions of its FCC Licenses, the Act, and all other material rules, regulations, laws and orders of all governmental authorities having jurisdiction over any aspect of the operation of such Station; (c) Maintain each 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 Stations Agreements which are, individually or in the aggregate, material to the Sale Assets or the business, operations, financial condition or results of operations of any Station; (e) Timely comply in all material respects with the Stations Agreements which are individually or in the aggregate, material to the Sale Assets or the business, operations, financial condition or results of operations of any Station; (f) Not sell, lease, grant any rights in or to or otherwise dispose of, or agree to sell, lease or otherwise dispose of, any of the Sale Assets except for dispositions of assets that (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; (g) Not amend, enter into, renew or extend, except in the ordinary course of business consistent with past practice, any Trade Agreement; 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 in the aggregate Twenty-Five Thousand Dollars ($25,000.00); any studio or office lease; antenna or transmitter space lease; network affiliation agreement; programming agreement; or any agreement described in Section 3.7(b)(vii); (h) Not enter into, amend, renew or extend any employment or talent contracts or other Station Agreements except on terms comparable to those of Station 35 41 Agreements now in existence and otherwise in the ordinary course of business consistent with past practices; (i) Maintain 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 any Seller or any Station, except in the ordinary course of business consistent with past practice, as required by an employment or consulting agreement or in connection with and commensurate with a change in responsibility; (k) Not enter into any agreement relating to any Station (other than agreements that will be terminated prior to Closing) with any Affiliate of any Seller; (l) Except as required by law, not voluntarily enter into or amend any collective bargaining agreement applicable to any employees of any Station or otherwise voluntarily recognize any union as the bargaining representative of any such employees; and not enter into or amend any collective bargaining agreement applicable to any employees of any Station to provide that it shall be binding upon any "successor" employer or such employees; and (m) Not take or agree to take any action that would materially delay the consummation of the Closing as contemplated by this Agreement. 5.2. NOTIFICATION OF CERTAIN MATTERS. Selling Parties shall give prompt notice to Buyer, and Buyer shall give prompt notice to the Selling Parties, of (a) the occurrence, or failure to occur, of any event that would be likely to cause any of their respective representations and 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. 36 42 5.3 HSR FILINGS. Within ten (10) days after the execution of this Agreement, Selling Parties 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 Filings"). Sellers and Buyer shall use their commercially reasonable efforts to diligently take, or to fully cooperate in the taking of, all necessary and proper steps, including (in the case of Buyer) consummating the Planned Divestiture, and provide any additional information reasonably requested, in order to comply with the requirements of the HSR Act. 5.4 FCC FILING. (a) Within ten (10) business days after the execution of this Agreement, Selling Parties and Buyer shall file all applications with the FCC necessary to obtain the FCC Order (except for those applications that will be required in connection with the Planned Divestiture), and shall cooperate in taking all commercially reasonable action necessary and proper to promptly obtain the FCC Order without a Material Adverse Condition and 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 (i) commercially reasonable action shall not include payment or providing of material consideration to settle with an objecting party, and (ii) Buyer shall not be obligated to consummate the Planned Divestiture except in accordance with Section 5.16. Buyer and Sellers shall oppose and file such papers and pleadings with the FCC or other appropriate forum opposing and objecting to any petitions to deny or other objections filed with respect to the application for the FCC Consent and any requests for reconsideration or judicial review of the FCC Consent. (b) If the Closing shall not have occurred for any reason within the original effective period of the FCC Consent, and neither party shall have terminated this Agreement under Article X, the parties shall jointly request an extension of the effective period of the FCC Consent. No extension of the effective period of the FCC Consent shall limit the exercise by either party of its right to terminate the Agreement under Article X. 5.5 TITLE; ADDITIONAL DOCUMENTS. At the Closing, Sellers shall transfer and convey to Buyer good title to all of the Sale Assets free and clear of any Liens except Permitted Liens. Sellers shall execute or cause to be executed such documents, in addition to those delivered at the Closing, as may be necessary to confirm in Buyer such title to the Sale Assets and to carry out the purposes and intent of this Agreement, which documents shall be in a form reasonably 37 43 acceptable to Buyer and Sellers. Buyer shall execute or cause to be executed such documents, in addition to those delivered at Closing, as may be necessary to confirm Buyer's assumption of the Assumed Obligations, which documents shall be in a form reasonably acceptable to Buyer and Sellers. 5.6 OTHER CONSENTS. Selling Parties shall use their commercially reasonable efforts to obtain the consents or waivers to the transactions contemplated by this Agreement required under the Station Agreements without any condition or modification adverse to Buyer or any Station, and Buyer shall cooperate as reasonably requested by Selling Parties in assisting Selling Parties to obtain such consents. Neither Selling Parties nor Buyer shall be required to pay or grant any material consideration in order for Selling Parties to obtain any such consent or waiver except that Selling Parties shall be required to obtain releases of Liens (other than Permitted Liens) which encumber any of the Sale Assets with Selling Parties being permitted to use the proceeds delivered by Buyer at Closing in order to obtain such releases. 5.7 INSPECTION AND ACCESS. Sellers will, prior to the Closing Date, make available the assets, books, accounting records, correspondence and files of Sellers (to the extent related to the operation of the Stations) for examination by Buyer, its officers, attorneys, accountants 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 Stations. Sellers will furnish to Buyer monthly unaudited financial statements corresponding to and prepared in a manner consistent with the unaudited statements identified in Section 3.11, and such additional financial, operating and other information regarding Sellers or the Stations 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 Sellers for four (4) 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 four (4) 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 5.15, all information delivered or made available to Buyer or Buyer's representatives or otherwise disclosed in writing by the Selling Parties (or their 38 44 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 (i) such information was otherwise publicly available when received, (ii) is or hereafter becomes lawfully obtainable from third parties not related to Buyer or its Affiliates, (iii) such information is required to be disclosed by law, judicial or other governmental rule or order, or the rules of any stock exchange, (iv) such duty as to confidentiality is waived in writing by Sellers or (v) such information is provided by Buyer to a buyer of one or more of the Stations resold by Buyer as part of the Planned Divestiture, provided that such buyer is bound by a confidentiality agreement (of which buyer affirmatively acknowledges Sellers are third party beneficiaries) as restrictive as the foregoing provisions of this Section 5.8 and the Confidentiality Agreement referred to in the immediately following sentence. Buyer shall continue to be bound by the terms and conditions of the Confidentiality Agreement dated June 25, 1999 between the parties hereto, subject, however, to clause (v) of the foregoing sentence. 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 (which will not be unreasonably withheld), except as required by law or applicable regulations, in which case the party issuing the press release or announcement shall provide the other party with a copy thereof sufficiently in advance of such issuance to permit the other party to comment thereon. The parties further agree that they shall not, and shall direct their employees located in, or having responsibilities with respect to the St. Louis Market not to, publicly discuss the transaction contemplated hereby or the Planned Divestiture with any advertisers on, or vendors to, the Stations. 5.10 MATERIAL ADVERSE EFFECT. Buyer and Selling Parties will promptly notify the other party of any event of which Buyer or Selling Parties, as the case may be, obtains knowledge which has had or could reasonably be expected to have Material Adverse Effect. 5.11 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and conditions of this Agreement, each party will use its commercially reasonable 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. 39 45 5.12 FCC REPORTS AND APPLICATIONS. Sellers shall file, on a current and timely basis and in all material respects in a truthful and complete fashion until the Closing Date, all reports and documents required to be filed with the FCC with respect to the Stations. In addition, Sellers shall timely file all applications necessary for renewal of any of the FCC Licenses, shall prosecute each such application with diligence, shall in each case seek renewal for a full term, and shall diligently oppose any objection to, appeal from or petition to reconsider the grant of any such renewal application. 5.13 TAX RETURNS AND PAYMENTS. Selling Parties will timely file with the appropriate governmental agencies all Tax Returns required to be filed by Selling Parties with respect to the Stations prior to Closing and timely pay all Taxes reflected on such Tax Returns as owing by the Selling Parties. 5.14 NO SOLICITATION. From the date hereof until the earlier of Closing or termination of this Agreement, none of the Selling Parties or any Affiliate of any Selling Party shall directly or indirectly (i) knowingly discuss, solicit or encourage any proposal or offer from any Person relating specifically to the acquisition or purchase of any interest in any Seller or any material assets of any Station or any merger, consolidation or other business combination with any Seller (each an "Acquisition Proposal"), or (ii) otherwise knowingly assist or negotiate with any Person with respect to an Acquisition Proposal; provided, nothing contained herein shall apply to limit discussions, negotiations, etc. relating to a sale of any stock of Parent or of all or substantially all of Parent's broadcast properties (other than the Stations) and/or non-broadcast properties. Selling Parties shall promptly notify Buyer in writing if an Acquisition Proposal is made after the date of this Agreement. 5.15 AUDITED FINANCIAL STATEMENTS. Selling Parties recognize 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 Stations to be prepared for such periods and filed with the Securities and Exchange Commission, and included in a prospectus distributed to prospective investors, as required by laws and regulations applicable to Buyer as a publicly reporting company or registrant. Selling Parties agree to cooperate with Buyer and the auditing accountants as reasonably requested by Buyer in connection with the 40 46 preparation and filing of such financial statements, including providing a customary management representation letter in the form prescribed by generally accepted auditing standards and using their commercially reasonable efforts to obtain the consent of Sellers' independent accounting firm to permit Buyer and Buyer's auditors to have access to such firm's workpapers. Under no circumstance shall the preparation of any financial statements pursuant to such audit: (a) require any Seller to change or modify any accounting policy, (b) cause any unreasonable disruption in the business or operations of any Station, or (c) cause any delay that is more than de minimis in any internal reporting requirements of any Seller. 5.16 PLANNED DIVESTITURE. Buyer shall use its commercially reasonable efforts to consummate the Planned Divestiture as promptly as practicable on terms and conditions acceptable to Buyer within its reasonable judgment and with a third-party buyer that (i) is not an Affiliate of Buyer, (ii) is not a trust in which Buyer has a direct or indirect beneficial interest, and (iii) will not cause Buyer, after consummation of the Planned Divestiture, to have an attributable interest under the Act in any of the Excess Stations. 5.17 DISCLOSURE SCHEDULES. Sellers and Buyer acknowledge and agree that Sellers shall not be liable for the failure of the Schedules to be accurate as a result of the operation of the Stations prior to a Closing in accordance with Section 5.1 of this Agreement. The inclusion of any fact or item on a Schedule referenced by a particular section in this Agreement shall, should the existence of the fact or item or its contents be relevant to any other section, be deemed to be disclosed with respect to such other section whether or not an explicit cross-reference appears in the Schedules if such relevance is readily apparent from examination of such Schedules. 5.18 BULK SALES LAW. Buyer hereby waives compliance by Sellers, in connection with the transactions contemplated hereby, with the provisions of any applicable bulk transfer laws. 41 47 5.19 COOPERATION ON TAX MATTERS. Buyer agrees to cooperate as reasonably requested by Sellers in effecting a tax-deferred like-kind exchange under Section 1031 of the Code in which Buyer will acquire the Sale Assets from Sellers and Sellers will assign all or part of their rights (but not their obligations) under this Agreement to a "qualified intermediary" (as defined in Treas. Reg. 1.1031(k)-(g)(4)); provided that (i) such exchange will not cause the Closing Date to be delayed beyond the first date on which Buyer would otherwise be entitled to close its purchase of the Sale Assets under this Agreement, (ii) Buyer is reimbursed by Sellers for all of its costs and expenses incurred in cooperating with Sellers to effect such exchange, (iii) Buyer is not required to incur or assume any liability or obligation in addition to the liabilities and obligations Buyer is required to incur or assume under the terms of this Agreement determined as if this Section 5.19 were not included in this Agreement (other than costs and expenses reimbursed by Sellers), (iv) Sellers' ability to effect the exchange shall not constitute a condition precedent to the Selling Party's obligation to close the sale of the Sale Assets to Buyer in accordance with the terms and conditions of this Agreement (excluding this Section 5.19), and (v) the Selling Parties shall indemnify Buyer from and against any and all Losses arising from, relating to or in connection with such exchange (other than Losses resulting from (A) Buyer's breach of this Section 5.19 or (B) any liability or obligation Buyer is required to incur or assume under the terms of this Agreement determined as if this Section 5.19 were not included in this Agreement), and indemnification of such Losses shall not be subject to or count against the Threshold or the Cap. 5.20 LEASE OF STUDIO AND OFFICE SPACE. On the Closing Date, Buyer as lessee shall, and the Selling Parties shall cause the owner of the real property located at 1215 Cole Street, St. Louis, Missouri, as lessor to, enter into a lease for use of studio and office space for the operation of KPNT, WVRV and KXOK in the form and substance of Exhibit A, under which Buyer will be entitled to sublet in whole or in part to a subsequent buyer of any of such Stations. 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: 42 48 6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES; CLOSING CERTIFICATE. (a) The representations and warranties of the Selling Parties contained in this Agreement or in any other Document shall be true and correct in all material respects on the date of this Agreement, and on and as of the Closing Date (except for representations and warranties that speak as of a specific date or time which need only be true and complete as of such date or time) with the same effect as though made on and as of the Closing Date except for changes permitted under this Agreement and except where the failure to be true and complete (determined without regard to any materiality or Knowledge qualifications therein) does not have a Material Adverse Effect. (b) Selling Parties shall have delivered to Buyer on the Closing Date an officer's and manager's certificate that the conditions specified in Sections 6.1(a), 6.2, 6.7, and 7.6 are satisfied as of the Closing Date. 6.2 PERFORMANCE OF AGREEMENT. Each Selling Party shall have performed in all material respects all of its material covenants, agreements and obligations required by this Agreement to be performed or complied with by it prior to or at Closing. 43 49 6.3 FCC ORDER. (a) The FCC Order shall have been granted without any Material Adverse Condition notwithstanding that it may not have become a Final Action; provided that if a petition to deny or other third-party objection is filed with the FCC prior to the date on which the FCC Order is issued and becomes effective, and such petition or objection is not withdrawn as of such date and in the reasonable judgment of Buyer's counsel such objection would reasonably be expected to result in a reversal or rescission of the FCC Consent, then Buyer's obligation to effect the Closing shall be subject to the further condition that the FCC Order shall have become a Final Action. (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 material to the operation of each Station as now conducted shall be in full force and effect. 6.4 HSR ACT. The waiting period (including any extensions) under the HSR Act applicable to the transactions contemplated by this Agreement shall have expired or been terminated. 6.5 OPINIONS OF SELLING PARTIES' COUNSEL. Buyer shall have received (a) the written opinion or opinions of Selling Parties' counsel, dated as of the Closing Date, that (i) each Selling Party is a corporation or limited liability company, as applicable, duly formed and in good standing under the laws of the state of its formation and is in good standing and duly qualified to do business under the laws of each applicable jurisdiction, (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 shareholder or member approval) on the part of each Selling Party, and (iii) the Agreement and other Documents have been duly and validly executed and delivered by each Selling Party and constitute valid and legally binding obligations enforceable against each Selling Party in accordance with their terms, subject to bankruptcy, insolvency and other laws affecting the enforcement of creditors' rights generally and general principles of equity; and (b) the written opinion of Sellers' FCC counsel, dated as of the Closing Date, that (i) Radio Licensee holds the FCC Licenses listed in a schedule to such legal opinion, and the FCC Licenses (A) are in full force and effect and constitute all of the licenses, permits and authorizations required by the FCC for the operation of the Stations; and (B) constitute all of the licenses and authorizations issued by the FCC to the Radio 44 50 Licensee for, or in connection with, the operation of the Stations, (ii) all authorizations, approvals and consents of the FCC required under the Act to permit the assignment of the FCC Licenses by the Radio Licensee 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 any 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 or radio industry. Each opinion may be subject to customary qualifications and limitations. 6.6 REQUIRED CONSENTS. Selling Parties 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 adverse modification or condition that is material to Buyer or any of the Stations, which are required under each Station Agreement indicated with an asterisk on Schedule 3.9. 6.7 DELIVERY OF CLOSING DOCUMENTS. Selling Parties 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. 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. ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLING PARTIES TO CLOSE The obligations of Selling Parties 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 Selling Parties in writing: 45 51 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 on and as of the Closing Date with the same effect as though made on and as of the Closing Date except for changes that are not materially adverse to Sellers. (b) Buyer shall have delivered to Sellers on the Closing Date a certificate that the conditions specified in Sections 7.1(a), 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 at Closing. 7.3 FCC ORDER. (a) The FCC Order shall have been granted. (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 extensions) under the HSR Act applicable to the transactions contemplated by this Agreement shall have expired or been terminated. 7.5 OPINION OF BUYER'S COUNSEL. Sellers shall have received the written opinion of Buyer's counsel, dated as of the Closing Date, that (i) Buyer is a corporation duly formed and in good standing under the laws of the state in which Buyer is incorporated, (ii) the execution, delivery and performance of the Agreement and other Documents have been duly authorized by all requisite corporate action (including any necessary shareholder approval) on the part of Buyer 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 46 52 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. 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 any 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 Sellers 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 Thomas & Libowitz, USF&G Tower, Suite 1100, 100 Light Street, Baltimore, Maryland 21202, 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 SELLING PARTIES. At the Closing, Selling Parties shall deliver to, or cause to be delivered to, Buyer the following, in each case in form and substance reasonably satisfactory to Buyer: (a) The opinions of Selling Parties' counsel and FCC counsel, dated the Closing Date, to the effect set forth in Section 6.5; (b) To the extent available from applicable jurisdictions, governmental certificates, dated as of a date as near as reasonably practicable to the Closing Date, showing that each Selling Party is duly organized and in good standing in its state of formation and, as to each Seller, is qualified to do business and in good standing in each jurisdiction listed for such Seller in Schedule 3.1; (c) A certificate of a Secretary, Assistant Secretary, or Member of each Selling Party attesting as to the incumbency of each officer or manager of such Selling 47 53 Party who executes this Agreement and any of the other Documents and to similar customary matters; (d) A bill of sale and other instruments of transfer and conveyance transferring the Sale Assets to Buyer, in form acceptable to Buyer in its reasonable judgment; (e) The certificate described in Section 6.1(b); (f) A written instruction of Selling Parties 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; (h) A certificate for each of the Selling Parties dated as of the Closing Date and executed by the Selling Party's Secretary certifying that the resolutions, as attached to such certificate, were duly adopted by the Selling Party's Board of Directors, members or managers as required to duly authorize and approve the execution of this Agreement and the consummation of the transaction contemplated hereby and that such resolutions remain in full force and effect; (i) Affidavits executed by Sellers regarding mechanic's liens sufficient to allow deletion of such liens as a standard exception in final title insurance policies to be issued pursuant to any title insurance commitments which Buyer shall have obtained to insure fee simple title to any of the Owned Real Property or leasehold title to any of the Leased Real Property; (j) The lease in the form and substance of Exhibit A; and (k) Such additional information and materials as Buyer shall have reasonably requested in writing 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 Selling Parties at Closing. 8.3 DELIVERIES TO SELLERS BY BUYER. At the Closing, Buyer shall deliver or cause to be delivered to Sellers the following, in each case in form and substance reasonably satisfactory to Sellers: (a) The Purchase Price in accordance with Section 2.5, as adjusted under Section 2.7(d); 48 54 (b) The opinion of Buyer's counsel, dated the Closing Date, as prescribed in Section 7.5; (c) The certificate described in Section 7.1(b); (d) A certificate of the Secretary or Assistant 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; (e) A written instruction of Buyer to Escrow Agent instructing the Escrow Agent to distribute the Earnest Money as prescribed in Section 2.4; (f) A certificate, dated as of the Closing Date, executed by Buyer's Secretary certifying that the resolutions, as attached to such certificate, were duly adopted by Buyer's Board of Directors, authorizing and approving the execution of this Agreement and the consummation of the transaction contemplated hereby and that such resolutions remain in full force and effect; (g) An assumption agreement, in form acceptable to the Selling Parties within their reasonable judgment, pursuant to which Buyer shall assume and agree to perform the Assumed Obligations; (h) To the extent available from the applicable jurisdictions, certificates as to the formation and/or good standing of Buyer issued by the appropriate governmental authorities in the state of organization and each jurisdiction in which Buyer is required to be qualified to do business as the owner of the Stations, each such certificate (if available) to be dated a date not more than a reasonable number of days prior to the Closing Date; (i) The lease in the form and substance of Exhibit A; and (j) Such additional information and materials as Sellers shall have reasonably requested to evidence the satisfaction of the conditions to their obligation to close hereunder. 49 55 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 3.18 (Environmental Matters), end eighteen (18) months after the Closing Date, and (ii) in the case of any other representation or warranty, end twelve (12) months after the Closing Date (in each case, the "Survival Period"). No claim for breach of any representation or warranty may be brought under this Agreement or any other Document unless written notice describing in reasonable detail the nature and basis of such claim is given on or prior to the last day of the applicable Survival Period. In the event such notice of a claim is so given, the right to indemnification with respect to such claim shall survive the applicable Survival Period until the claim is finally resolved and any obligations with respect to the claim are fully satisfied. 9.2 INDEMNIFICATION BY SELLING PARTIES. (a) Subject to Section 9.2(b), Selling Parties shall, jointly and severally, indemnify, defend, and hold harmless Buyer and its officers, directors, employees, Affiliates, successors and assigns from and against, and pay or reimburse each of them for and with respect to, any Loss (each, a "Buyer's Loss") relating to, arising out of or resulting from: (i) Any breach by any Selling Party of any of its representations, warranties, covenants or agreements in this Agreement or any other Document; or (ii) Any obligation, indebtedness or Liability of any Selling Party (other than the Assumed Obligations) regardless of whether disclosed to Buyer and regardless of whether constituting a breach by a Selling Party of any representation, warranty, covenant or agreement hereunder or under any other Document; or (iii) Noncompliance by any Seller with the provisions of the Bulk Sales Act, if applicable, in connection with the transactions contemplated by this Agreement. 50 56 (b) If Closing occurs, notwithstanding anything to the contrary contained herein, Selling Parties shall not be obligated to indemnify Buyer except to the extent that (i) the aggregate amount of Buyer's Losses exceeds Five Hundred Thousand Dollars ($500,000) (the "Threshold") (and then only to the extent the aggregate amount of Buyer's Losses exceed Two Hundred Fifty Thousand Dollars ($250,000)) and (ii) the aggregate amount of Buyer's Losses is less than Twenty-Two Million Dollars ($22,000,000) (the "Cap"), provided that any payment owed by Selling Parties to Buyer for any of Buyer's Losses pursuant to or under Section 2.7, Section 5.19 or Section 9.2(a)(ii) or (iii) shall not be counted in determining whether the Threshold limitation is satisfied or the Cap is reached, and Buyer shall have the right to recover any such Buyer's Losses without regard to the Threshold limitation or the Cap. 9.3 INDEMNIFICATION BY BUYER. Subject to Section 10.2, Buyer shall indemnify and hold harmless Selling Parties and their 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 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 Stations on or after the Closing Date (except for any Loss relating to, arising out of or resulting from any Excluded Asset) or Buyer's ownership of the Sale Assets. 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. 51 57 (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 (at each such party's own expense) who shall cooperate with one another in defending against such claim. (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 determines is 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 actual loss or prejudice occurs as a result of such failure or delay. Buyer shall not be deemed to have notice of any claim solely by reason of any knowledge acquired on or prior to the Closing Date by an employee of any Station. 9.5 MITIGATION AND LIMITATION OF DAMAGES . Each party hereto agrees to use reasonable efforts to mitigate any losses which form the basis for any claim for indemnification hereunder. Notwithstanding anything contained in this Agreement to the contrary, no party shall be entitled to punitive damages regardless of the theory of recovery. 52 58 ARTICLE X TERMINATION 10.1 RIGHT OF TERMINATION. This Agreement may be terminated prior to Closing: (a) By written agreement of Selling Parties 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 thirty (30) days after written notice of such breach from the terminating party is received by the other party; or (ii) On the date that would otherwise be the Closing Date if any of the conditions precedent to the obligations of Buyer (in the case of termination by Buyer) set forth in Sections 6.1(a), 6.1(b), 6.2, 6.5, 6.6 and 6.7 of this Agreement, or any of the conditions precedent to the obligations of Sellers (in the case of termination by the Selling Parties) set forth in Sections 7.1(a), 7.1(b), 7.2, 7.5 and 7.7 of this Agreement, have not been satisfied or waived in writing by the party with respect to which satisfaction is a condition precedent to its obligation to close (whether or not occurring as the result of a party's material breach of any provision of this Agreement); or (iii) Closing does not occur within twelve (12) months after the date hereof. 10.2 OBLIGATIONS UPON TERMINATION. (a) Sections 5.8, 5.9, 13.2 and 13.4 through 13.15 and Articles IX and X shall survive the termination of this Agreement and remain in full force and effect. Each party to this Agreement shall remain liable after termination for breach of this Agreement prior to termination; provided that if Closing does not occur, the aggregate liability of Buyer for breach 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 as specified in Section 10.2(c), Buyer shall be entitled to the return of the Earnest Money, in which case Buyer and Selling Parties 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. 53 59 (c) If this Agreement is terminated prior to Closing (i) by the Selling Parties pursuant to Sections 10.1(b)(i) or 10.1(b)(ii) or (ii) by either party hereto pursuant to Section 10.1(b)(iii) if on the date of such termination pursuant to Section 10.1(b)(iii) any of the conditions precedent specified in Sections 6.3, 6.4, 7.3 and/or 7.4 shall not have occurred as a result of facts relating to Buyer or any Affiliate of Buyer (including, without limitation, as a result of the failure by Buyer to consummate the Planned Divestiture regardless of whether Buyer has used its commercially reasonable efforts to do so and has otherwise complied with its obligations hereunder), Selling Parties' sole remedy at law or in equity under this Agreement shall be (i) the termination by Selling Parties of this Agreement, and (ii) the recovery from Buyer of (A) an amount equal to the Earnest Money (the "Selling Parties' Payment Amount") and (B) Selling Parties' reasonable attorneys' fees and other costs of collection incurred by Selling Parties in enforcing their right to recover Selling Parties' Payment Amount (such fees and other costs herein referred to as "Selling Parties' Enforcement Costs"). In the event of such termination, Selling Parties shall be entitled to receive the Earnest Money in payment of Selling Parties' Payment Amount, and Buyer and Selling Parties shall cooperate in taking such action as required under the Escrow Agreement to effect the Escrow Agent's distribution of the Earnest Money to Selling Parties. Selling Parties shall also be entitled to pursue any other remedy available to Selling Parties at law or in equity to recover the entire Selling Parties' Payment Amount and Selling Parties' Enforcement Costs, provided that the total monetary damages (including any amount received from the Escrow Agent under the Escrow Agreement) to which Selling Parties shall be entitled shall not exceed the sum of Selling Parties' Payment Amount plus Selling Parties' Enforcement Costs. BUYER ACKNOWLEDGES AND AGREES THAT SELLING PARTIES' RECEIPT OF SELLING PARTIES' PAYMENT AMOUNT SHALL CONSTITUTE EITHER PAYMENT OF LIQUIDATED DAMAGES HEREUNDER OR CONSIDERATION IN EXCHANGE FOR SELLING PARTIES' AGREEING TO ENTER INTO A TRANSACTION WITH A PARTY SUBJECT TO CERTAIN REGULATORY RESTRICTIONS ON CONSUMMATING THE TRANSACTIONS CONTEMPLATED HEREBY, AND NOT A PENALTY, AND THAT SELLING PARTIES' PAYMENT AMOUNT IS REASONABLE IN LIGHT OF (AND IS INTENDED TO COMPENSATE THE SELLING PARTIES FOR) THE SUBSTANTIAL BUT INDETERMINATE HARM ANTICIPATED TO BE CAUSED BY BUYER'S MATERIAL BREACH OR DEFAULT UNDER THIS AGREEMENT OR THE FAILURE OF THE CLOSING TO OCCUR UNDER THE CIRCUMSTANCES DESCRIBED IN FOREGOING CLAUSE (ii) OF THIS SECTION 10.2(c) (REGARDLESS OF WHETHER BUYER IS IN BREACH HEREUNDER), 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. 54 60 If the terminating party is entitled to terminate this Agreement pursuant to the Subsection of Section 10.1 specified in the termination notice, then termination will be deemed effected pursuant to the specified Subsection notwithstanding that termination could be effected pursuant to more than one such Subsection. 10.4 SELLING PARTIES AS A SINGLE PARTY. For purposes of this Article X, (i) no Selling Party shall in any event constitute an "other party" in relation to any other Selling Party, (ii) all Selling Parties shall together constitute but a single party, and (iii) any breach of this Agreement by one Selling Party shall be deemed to constitute a breach of this Agreement by all Selling Parties. ARTICLE XI CONTROL OF STATIONS Between the date of this Agreement and the Closing Date, Buyer shall not control, manage or supervise the operation of any Station or the conduct of its business, all of which shall remain the sole responsibility and under the control of the applicable Seller, subject to such Seller's compliance with this Agreement. ARTICLE XII EMPLOYMENT MATTERS 12.1 TRANSFER OF EMPLOYEES. (a) Sellers and Buyer shall cooperate in arranging a joint presentation by the Chairman of Buyer and a designated representative of Sellers to Sellers' employees promptly after the date of this Agreement. The form and substance of the presentation shall be subject to the approval of both Sellers and Buyer, which shall not be unreasonably withheld. Upon completion of the Closing, Buyer shall offer employment to each of the employees of the Stations (including those on leave of absence, whether short-term, long-term, family, maternity, disability, paid, unpaid or other, and those hired after the date hereof in the ordinary course of business) at a comparable salary, position and place of employment as held by each such employee immediately prior to the Closing Date (such employees who are given and accept such offers of employment are referred to herein as the "Transferred Employees"). Sellers agree to cooperate fully with Buyer in connection with Buyer's offering to hire any such employees, and Sellers 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) 55 61 prior to the earlier of the Closing Date or termination of this Agreement, Buyer shall not employ or solicit the employment (unless conditioned upon the occurrence of Closing) of any person employed by Sellers at a Station, (ii) all such offers of employment shall be expressly conditioned upon the occurrence of Closing, (iii) if this Agreement is terminated, Buyer shall not, for a period of one year after such termination, employ or solicit the employment of any person employed by any Seller at a Station at any time during the six-month period preceding such termination, and (iv) Sellers shall be permitted to retain (or have hired by an Affiliate of Sellers) any of the employees listed on Schedule 12.1(a), provided that (A) Sellers shall notify Buyer in writing prior to the Closing Date of each such employee who accepts such an offer of Sellers (or their Affiliates), (B) each such employee who accepts such an offer shall not be a Transferred Employee, and (C) any employment or severance agreement covering any such employee shall be an Excluded Asset and shall not be assigned to Buyer or to any extent constitute an Assumed Obligation. Nothing in this Section 12.1(a) is intended to nor shall guarantee employment for any Transferred Employee for any length of time after the Closing Date. (b) Except as provided otherwise in this Article XII, Sellers shall pay, discharge and be responsible for (i) all salary and wages arising out of or relating to the employment of Sellers' employees prior to Closing, and (ii) all liabilities and obligations arising under the Benefit Plans during the period prior to Closing. Buyer shall pay, discharge and be responsible for all salary, wages and benefits arising out of or relating to the employment of Transferred Employees by Buyer upon or after Closing. Buyer shall be responsible for all severance liabilities for any Transferred Employees terminated on or after the Closing Date, including, but not limited to, any such liabilities required to be paid pursuant to the severance agreements listed on Schedule 3.7(b). 12.2 COBRA. Sellers shall comply with the provisions of the Continuation coverage Under Group Health Plan of ERISA, Title I, Part 6, to the extent applicable in connection with any Seller's termination of any of its employees. Buyer 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 Buyer's termination of any of the Transferred Employees. 12.3 BUYER'S EMPLOYEE BENEFIT PLANS. (a) Buyer shall cause all Transferred Employees as of the Closing Date to be eligible to participate in its "employee welfare benefit plans" and "employee pension benefit plans" (as defined in Section 3(1) and 3(2) of ERISA, respectively) of Buyer in which similarly situated employees of Buyer are generally eligible to participate from 56 62 time to time ("Buyer's Plans"); provided, however, that all Transferred Employees and their spouses and dependents shall be eligible for coverage immediately after the Closing Date (and shall not be excluded from coverage on account of any pre-existing condition) under those Buyer's Plans constituting employee welfare benefit plans to the extent permitted under such plans with respect to Transferred Employees. (b) For purposes of any length-of-service requirements, waiting period, vesting periods or differential benefits based on length of service in any Buyer's Plan for which a Transferred Employee may be eligible after the Closing, Buyer shall ensure that, to the extent permitted by law, such Transferred Employee shall be given credit, in accordance with Buyer's prior service credit policy set forth on Schedule 12.3(b), for prior service with Sellers, any Affiliate of Sellers or any prior owner of the Stations. In addition, to the extent permitted under Buyer's Plans, Buyer shall ensure that each Transferred Employee receives credit under any Buyer's Plan constituting a welfare benefit plan for any deductibles or co-payments paid by such Transferred Employee and his or her dependents for the current plan year under the corresponding Benefit Plan, if any, maintained by Sellers or any Affiliate of Sellers. Buyer shall provide vacation or vacation pay (to the extent Buyer provides vacation pay to its employees) to each Transferred Employee to the extent Buyer has received a credit relating to such vacation for such Transferred Employee pursuant to Section 2.7(b)(iv) in determining the Adjustment Amount. If any Transferred Employee asserts a claim against Sellers for accrued vacation that is the responsibility of Buyer under the foregoing sentence, Buyer shall, to the extent of the accrued vacation credit provided to Buyer with respect to such Transferred Employee pursuant to Section 2.7(b)(iv), indemnify, defend and hold harmless Sellers from and against any and all losses, directly or indirectly, as a result of, based upon or arising from any such claim. (c) As soon as practicable following the Closing Date, Buyer shall make available to the Transferred Employees Buyer's 401(k) Plan in accordance with the terms and provisions of such plan. As soon as practicable after the Closing Date, Sellers shall (i) cause the trustee under Sellers' 401(k) Plan to transfer to the trustee under Buyer's 401(k) Plan, in cash, all of the Transferred Employees' individual account balances under the Sellers' 401(k) Plan, except that to the extent such account balances consist of outstanding plan participant loan receivables, such receivables shall be transferred to Buyer's trustee in kind, and (ii) provide Buyer (A) a statement of the account balances as of the Closing Date for each Transferred Employee (including the balance of any plan participant loan receivables), (B) the documentation evidencing, and setting forth the terms and conditions applicable to repayment of, each plan participant loan receivable, and (C) such other information regarding such individual accounts and plan participant loan receivables as reasonably requested by Buyer for the administration of such accounts and receivables under Buyer's 401(k) Plan after Closing. 57 63 12.4 UNION EMPLOYEES. Notwithstanding the other provisions of this Article XII, upon consummation of the Closing, Buyer shall (i) recognize the unions and labor organizations which are parties to the collective bargaining agreements set forth in Schedule 3.7(b); and (ii) assume and be responsible for the liabilities and obligations of each Seller arising under the collective bargaining agreements listed on Schedule 3.7(b), including the Assumed Plans, but only to the extent arising during and relating to any period on or after the Closing Date. 12.5 EMPLOYMENT AGREEMENTS. Buyer acknowledges and agrees that Buyer's obligations pursuant to this Article XII are in addition to, and not in limitation of, Buyer's assumption of Sellers' obligations, to the extent arising during and relating to any period on or after the Closing Date, under the written employment or talent agreements and written severance agreements which are (i) listed on Schedule 3.7(b) or (ii) hereafter entered into by any Seller prior to the Closing Date; provided, however, that notwithstanding anything contained in this Agreement to the contrary, no employment, talent or severance agreement hereafter entered into by any Seller shall constitute a Station Agreement or an Assumed Obligation unless approved by Buyer in writing, which approval will not be unreasonably withheld, delayed or conditioned. 12.6 NO THIRD PARTY BENEFICIARIES. The covenants and agreements set forth in this Article XII shall be solely for the benefit of, and shall only be enforceable by, the parties to this Agreement and their permitted assigns. Without limiting the generality of the foregoing, nothing in this Agreement shall provide or be construed to provide any employees of the Selling Parties with any rights under this Agreement, and no Person, other than the parties to this Agreement, is or shall be entitled to bring any action to enforce any provision of this Agreement. 58 64 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 Filings, the fees for filing the applications with the FCC under Section 5.4, and the Transfer Taxes payable in connection with the transactions contemplated by this Agreement shall be paid fifty percent (50%) by Sellers and fifty percent (50%) by Buyer. (b) Except as otherwise expressly provided in this Agreement, each of the parties shall bear its own expenses, including the fees of any attorneys and accountants engaged by such party, in connection with the transactions contemplated by this Agreement. 13.3 SPECIFIC PERFORMANCE. Selling Parties acknowledge that the Stations are of a special, unique and extraordinary character, and that damages alone are an inadequate remedy for a breach of this Agreement by Selling Parties. Accordingly, as an alternative to termination of this Agreement under Section 10.1, if Buyer is not then in material default hereunder, Buyer shall be entitled, in the event of Selling Parties' 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 Selling Parties to fulfill their obligations under this Agreement. Such right of specific performance or injunctive relief shall be in addition to, and not in lieu of, Buyer's right to recover damages and to pursue any other remedies available to Buyer for Selling Parties' breach. In any action to specifically enforce Selling Parties' obligation to close the transactions contemplated by this Agreement, Selling Parties shall waive the defense that there is an adequate remedy at law or in equity and any requirement that Buyer 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. 59 65 13.4 NOTICES. All notices, payments (unless otherwise specified herein), demands or other communications given hereunder shall be in writing and shall be sufficiently given if delivered by courier (including overnight delivery service), sent by telecopy (with receipt personally confirmed by telephone) 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 Attention: J. Scott Enright, Esq. Emmis Communications Corporation 15821 Ventura Boulevard, Suite 685 Encino, CA 91436 Attention: Gary Kaseff, Esq. Copy to: Bose McKinney & Evans LLP 2700 First Indiana Plaza 135 North Pennsylvania Street Indianapolis, IN 46204 Attention: David L. Wills (b) If to Selling Parties, to: Sinclair Broadcast Group, Inc. 10706 Beaver Dam Road Cockeysville, MD 21030 Attention: President Copies to: Sinclair Communications, Inc. 10706 Beaver Dam Road Cockeysville, MD 21030 60 66 Attention: General Counsel Thomas & Libowitz, P.A. 100 Light Street, Suite 1100 Baltimore, MD 21202-1053 Attention: Steven A. Thomas, Esq. 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, payment, demand or communication shall be deemed to have been given or made (i) if so mailed, on the date indicated on the return receipt, and (ii) if delivered by courier or telecopy, on the date received. 13.5 ENTIRE AGREEMENT. This Agreement, the Schedules, the other Documents, and the Settlement Agreement executed contemporaneously herewith 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 expressly provided in this Agreement, (i) the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors or permitted assigns, and (ii) 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; provided, that no such assignment shall relieve any party of its obligations hereunder; and (b) Buyer may assign all of its rights under this Agreement to one or more direct or indirect wholly-owned subsidiaries of Buyer, provided that (i) the representations and warranties of Buyer hereunder shall be true and correct in all 61 67 respects as applied to each assignee, (ii) both Buyer and the assignees shall execute and deliver to Selling Parties a written instrument in form and substance satisfactory to Selling Parties within their reasonable judgment in which both Buyer and the assignees 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 or expiration or termination of the waiting period under the HSR Act, and (iv) Buyer and the assignees shall deliver such other documents and instruments as reasonably requested by Selling Parties, including appropriate certified resolutions of the boards of directors of Buyer and the assignees. 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, but any such waiver or failure to insist upon strict compliance with any obligation, representation, warranty, covenant, agreement or condition under this Agreement shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 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. 62 68 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. References herein to a "party" shall mean the Selling Parties on one hand and the Buyer on the other. 13.14 SCHEDULES AND EXHIBITS. Unless otherwise specified in this Agreement, each Schedule and Exhibit referenced in this Agreement is attached to, and is incorporated by reference into, this Agreement. 13.15 JOINT AND SEVERAL LIABILITY. Selling Parties shall be jointly and severally liable for each representation, warranty, covenant, agreement, liability or obligation of all or any one of the Selling Parties under this Agreement or any other Document whether or not otherwise indicated in this Agreement or any other Document. 63 69 Executed as of the date first written above. SINCLAIR BROADCAST GROUP, INC. By:________________________________ Printed Name:_______________________ Its:________________________________ "Parent" SINCLAIR RADIO OF ST. LOUIS, INC. By:________________________________ Printed Name:_______________________ Its:________________________________ SINCLAIR RADIO OF ST. LOUIS LICENSEE, LLC By:________________________________ Printed Name:_______________________ Its:________________________________ "Sellers" EMMIS COMMUNICATIONS CORPORATION By:________________________________ Printed Name:_______________________ Its:________________________________ "Buyer" EX-2.3 4 c57890ex2-3.txt ASSET EXCHANGE AGREEMENT 1 EXHIBIT 2.3 10-5-00 ASSET EXCHANGE AGREEMENT BETWEEN EMMIS COMMUNICATIONS CORPORATION EMMIS 106.5 FM BROADCASTING CORPORATION OF ST. LOUIS EMMIS 106.5 FM LICENSE CORPORATION OF ST. LOUIS AND BONNEVILLE INTERNATIONAL CORPORATION BONNEVILLE HOLDING COMPANY OCTOBER __, 2000 2
TABLE OF CONTENTS RECITALS 1 ARTICLE I TERMINOLOGY 1 1.1 Defined Terms. 1 1.2 Additional Defined Terms. 5 ARTICLE II EXCHANGE OF ASSETS 6 2.1 Description of Assets. 7 2.2 Excluded Assets. 8 2.3 Emmis Entities' Assumption of Liabilities. 9 2.4 Bonneville Entities' Assumption of Liabilities. 10 2.5 Exchange of Assets. 10 2.6 Allocation of Asset Values. 10 2.7 Proration Adjustment. 11 2.8 Accounts Receivable. 13 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE EMMIS ENTITIES 14 3.1 Organization, Good Standing and Requisite Power. 14 3.2 Authorization and Binding Effect of Documents. 15 3.3 Absence of Conflicts. 15 3.4 Consents. 15 3.5 Emmis Assets; Title. 15 3.6 Emmis FCC Licenses. 15 3.7 Station Agreements. 17 3.8 Tangible Personal Property. 18 3.9 Emmis Real Property. 18 3.10 Intellectual Property. 19 3.11 [INTENTIONALLY OMITTED] 3.12 Absence of Certain Changes or Events. 20 3.13 Litigation. 21 3.14 Labor Matters 21 3.15 [INTENTIONALLY OMITTED] 3.16 Compliance with Law 22 3.17 [INTENTIONALLY OMITTED.] 22 3.18 Environmental Matters 22 3.19 Broker's or Finder's Fees 23 3.20 Insurance 23 3.21 Transactions with Affiliates 24 3.22 Emmis Subsidiaries' Qualification 24 3.23 WARN Act 24 3.24 Emmis Rights Under Sinclair Agreement. 24 3.25 Exclusivity of Representations. 24 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BONNEVILLE ENTITIES 25 4.1 Organization, Good Standing and Requisite Power. 25 4.2 Authorization and Binding Effect of Documents. 25 4.3 Absence of Conflicts. 25 4.4 Consents. 26 4.5 Bonneville Assets; Title. 26 4.6 Bonneville FCC Licenses. 26 4.7 Station Agreements. 27 4.8 Tangible Personal Property. 29 4.9 Bonneville Real Property. 29 4.10 Intellectual Property. 30 4.11 [INTENTIONALLY OMITTED]
3 4.12 Absence of Certain Changes or Events. 30 4.13 Litigation. 31 4.14 Labor Matters 32 4.15 [INTENTIONALLY OMITTED] 4.16 Compliance with Law 32 4.17 [INTENTIONALLY OMITTED.] 33 4.18 Environmental Matters 33 4.19 Broker's or Finder's Fees 34 4.20 Insurance 34 4.21 Transactions with Affiliates 34 4.22 Bonneville Entities' Qualification 34 4.23 WARN Act 34 4.24 Exclusivity of Representations. 35 ARTICLE V OTHER COVENANTS 35 5.1 Conduct of Each Station's Business Prior to the Closing Date 35 5.2. Notification of Certain Matters 37 5.3 HSR Filings 37 5.4 FCC Filing 37 5.5 Title; Additional Documents 38 5.6 Other Consents 38 5.7 Inspection and Access; Financial Information 38 5.8 Confidentiality 38 5.9 Publicity 39 5.10 Material Adverse Effect 39 5.11 Commercially Reasonable Efforts 39 5.12 FCC Reports and Applications 39 5.13 Tax Returns and Payments 40 5.14 No Solicitation 40 5.15 Audited Financial Statements 40 5.16 Disclosure Schedules. 40 5.17 Bulk Sales Law. 41 5.18 Multi-Station Agreements. 41 5.19 Emmis Station Real Estate. 41 5.20 Sinclair Closing. 42 ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATION OF THE EMMIS ENTITIES TO CLOSE 42 6.1 Accuracy of Representations and Warranties; Closing Certificate. 42 6.2 Performance of Agreement 43 6.3 FCC Order 43 6.4 HSR Act 43 6.5 Opinions of Bonneville Entities' Counsel 43 6.6 Required Consents 44 6.7 Delivery of Closing Documents 44 6.8 No Adverse Proceedings. 44 6.9 Concurrent Conveyances. 44 6.10 Closing Under Sinclair Agreement. 44 ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATION OF THE BONNEVILLE ENTITIES TO CLOSE 44 7.1 Accuracy of Representations and Warranties; Closing Certificate. 44 7.2 Performance of Agreement 45 7.3 FCC Order 45 7.4 HSR Act 45 7.5 Opinions of Emmis Entities' Counsel 45 7.6 Required Consents 46 7.7 Delivery of Closing Documents 46
i 4 7.8 No Adverse Proceedings. 46 7.9 Concurrent Conveyances. 46 7.10 Closing Under the Sinclair Agreement. 46 ARTICLE VIII CLOSING 46 8.1 Time and Place. 46 8.2 Deliveries by the Bonneville Entities 47 8.3 Deliveries by the Emmis Entities 48 ARTICLE IX INDEMNIFICATION 49 9.1 Survival 49 9.2 Indemnification by the Emmis Entities 49 9.3 Indemnification by the Bonneville Entities 50 9.4 Administration of Indemnification 50 9.5 Mitigation and Limitation of Damages 51 ARTICLE X TERMINATION 51 10.1 Right of Termination 51 10.2 Obligations Upon Termination 52 10.3 Termination Notice 52 10.4 Single Party 52 ARTICLE XI CONTROL OF STATIONS 52 ARTICLE XII EMPLOYMENT MATTERS 53 12.1 KZLA Employees 53 12.2 Emmis Stations' Employees 53 ARTICLE XIII MISCELLANEOUS 54 13.1 Further Actions 54 13.2 Payment of Expenses 54 13.3 Specific Performance 54 13.4 Notices 55 13.5 Entire Agreement 56 13.6 Binding Effect; Benefits 56 13.7 Assignment 56 13.8 Governing Law 56 13.9 Amendments and Waivers 56 13.10 Severability 56 13.11 Headings 56 13.12 Counterparts 57 13.13 References 57 13.14 Schedules and Exhibits 57 13.15 Joint and Several Liability 57 13.16 Bonneville Entities Not Responsible for Emmis Entities' Actions Under TBA. 57
SCHEDULES Emmis Entities: ii 5 Schedule 2.2(n) WKKX Morning Show Excluded Property Schedule 2.2(o) WKKX Excluded Equipment Schedule 2.2(r) Excluded Contracts and Employees Schedule 3.1 Qualification to Do Business Schedule 3.3 Absence of Conflicts 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 3.12 Absence of Certain Changes or Events Schedule 3.13 Litigation Schedule 3.14(a) Labor Matters Schedule 3.14(c) List of Employees Schedule 3.16 Compliance with Law Schedule 3.18 Environmental Matters Schedule 3.19 Broker's or Finder's Fees Schedule 3.21 Transactions with Affiliates Schedule 3.22 Emmis Subsidiaries' Qualification Schedule 12.2(a) Excluded Employees Bonneville Entities: Schedule 4.3 Absence of Conflicts Schedule 4.6 FCC Licenses Schedule 4.7(a) Trade Agreements Schedule 4.7(b) Station Agreements Schedule 4.7(c) Affiliate Agreements Schedule 4.7(d) Station Agreement Details Schedule 4.8 Tangible Personal Property Schedule 4.9 Real Property Interests Schedule 4.10 Intellectual Property Schedule 4.11 Financial Statements Schedule 4.12 Absence of Certain Changes or Events Schedule 4.13 Litigation Schedule 4.14(a) Labor Matters Schedule 4.14(c) List of Employees Schedule 4.16 Compliance with Law Schedule 4.18 Environmental Matters Schedule 4.19 Broker's or Finder's Fees Schedule 4.21 Transactions with Affiliates Schedule 4.22 Bonneville Entities' Qualification Schedule 12.2(c) Bonneville Severance Cap Schedule 12.2(e) Bonneville Prior Service Credit Policy EXHIBITS iii 6 Exhibit A Sublease Exhibit B KIHT Sublease iv 7 ASSET EXCHANGE AGREEMENT THIS ASSET EXCHANGE AGREEMENT (the "Agreement"), dated as of October , 2000, among EMMIS COMMUNICATIONS CORPORATION, an Indiana corporation ("Emmis"), EMMIS 106.5 FM BROADCASTING CORPORATION OF ST. LOUIS, an Indiana corporation ("Emmis Operating Subsidiary"), and EMMIS 106.5 FM LICENSE CORPORATION OF ST. LOUIS, a California corporation ("Emmis License Subsidiary", and together with Emmis Operating Subsidiary, the "Emmis Subsidiaries"; and Emmis together with the Emmis Subsidiaries, the "Emmis Entities"); and BONNEVILLE INTERNATIONAL CORPORATION, a Utah corporation ("Bonneville International"), and BONNEVILLE HOLDING COMPANY, a Utah corporation ("Bonneville Holding", and together with Bonneville International, the "Bonneville Entities"). 2 8 RECITALS WHEREAS, Emmis has entered into an Asset Purchase Agreement dated June 21, 2000 (the "Sinclair Agreement") with Sinclair Broadcast Group, Inc. and two of its indirect subsidiaries (collectively, the "Sinclair Entities") pursuant to which Emmis has agreed to buy, and the Sinclair Entities have agreed to sell, among other assets, substantially all of the assets used in the operation of radio stations WRTH (AM), St. Louis, Missouri ("WRTH"), WIL-FM, St. Louis, Missouri ("WIL"), and WVRV (FM), East St. Louis, Illinois ("WVRV", and collectively with WRTH and WIL, the "Sinclair Stations"); WHEREAS, Emmis will (i) assign to Emmis License Subsidiary the right under the Sinclair Agreement to acquire the broadcast licenses used in the operation of the Sinclair Stations, and (ii) assign to Emmis Operating Subsidiary the right under the Sinclair Agreement to acquire substantially all the assets (other than the broadcast licenses) used in the operation of the Sinclair Stations; WHEREAS, Emmis Operating Subsidiary owns and operates radio station WKKX (FM), Granite City, Illinois ("WKKX", and together with the Sinclair Stations, the "Emmis Stations"), and Emmis License Subsidiary holds the broadcast licenses used in the operation of WKKX; WHEREAS, Bonneville International owns and operates radio station KZLA (FM), Los Angeles, California ("KZLA"), and Bonneville Holding holds the broadcast licenses used in the operation of KZLA; WHEREAS, Emmis Operating Subsidiary, BIC and BHC have entered into a Time Brokerage Agreement ("TBA") dated as of July 31, 2000, pursuant to which Emmis Operating Subsidiary purchases airtime on KZLA and provides programming on KZLA; WHEREAS, subject to the terms and conditions of this Agreement, the Emmis Entities desire that the Emmis Subsidiaries convey to the Bonneville Entities all of the Emmis Subsidiaries' right, title and interest in substantially all of the assets of the Emmis Stations, and the Bonneville Entities desire to convey to the Emmis Subsidiaries all of the Bonneville Entities' right, title and interest in substantially all of the assets of KZLA; and WHEREAS, the Emmis Entities and the Bonneville Entities desire that the reciprocal conveyances of like-kind assets contemplated by this Agreement shall constitute like-kind exchanges (collectively, the "Like-Kind Exchange") qualifying for nonrecognition of gain treatment under Section 1031 of the Internal Revenue Code of 1986, as amended, provided that, subject to complying with the terms of this Agreement, no party to this Agreement shall be responsible for the tax consequences of any other party arising from the transactions contemplated by this Agreement. 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. Assets: When used with respect to the Emmis Entities as the Transferring Party, the Emmis Assets; and when used with respect to the Bonneville Entities as the Transferring Party, the Bonneville Assets. 3 9 Assumed Obligations: Either the Emmis Assumed Obligations or the Bonneville Assumed Obligations. Benefit Plans: All compensation or benefit plans, policies, practices, arrangements and agreements covering any employee or former employee of any Emmis Station or KZLA, as applicable, or the beneficiaries or dependents of such employee or former employee, which are or have been established or maintained and are currently in effect, or to which contributions are being made by the owner of such Station or by any other trade or business, whether or not incorporated, which is or has been treated as a single employer together with such owner under Section 414 of the Code (such other trades and businesses referred to collectively as the "Related Persons") or to which any owner or any Related Person is obligated to contribute, including, but not limited to, "employee benefit plans" within the meaning of Section 3(3) of 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. Bonneville Assets: The Bonneville Operating Assets and the Bonneville License Assets collectively, but excluding the Bonneville Excluded Assets. Bonneville Excluded Assets: The assets excluded from the Bonneville Operating Assets pursuant to Section 2.2. Bonneville License Assets: The FCC Licenses used or held for use in the operation of KZLA. Bonneville Operating Assets: All of the tangible and intangible assets used or held for use in the operation of KZLA as operated on June 21, 2000, other than the Bonneville License Assets and the Bonneville Excluded Assets. Code: The Internal Revenue Code of 1986, as amended, together with all regulations and rulings thereunder by any governmental authority. Documents: This Agreement, all Exhibits and Schedules hereto, the TBA and each other agreement, side letter, certificate or instrument delivered in connection with this Agreement. Emmis Assets: The Emmis Operating Assets and the Emmis License Assets collectively, but excluding the Emmis Excluded Assets. Emmis Excluded Assets: The assets excluded from the Emmis Operating Assets pursuant to Section 2.2. Emmis License Assets: The FCC Licenses used or held for use in the operation of the Emmis Stations. Emmis Operating Assets: All of the tangible and intangible assets used or held for use in the operation of the Emmis Stations as operated on June 21, 2000, other than the Emmis License Assets and the Emmis Excluded Assets. FCC: Federal Communications Commission. FCC Licenses: The licenses, permits and other authorizations issued by the FCC (including associated call signs), all applications for modification, extension or renewal thereof, and any applications pending for any new licenses, permits or authorizations. FCC Order: The order or decision of the FCC (or its delegatee) granting its consent to the assignment of all the Emmis FCC Licenses to Bonneville Holding and the assignment of all the Bonneville FCC Licenses to Emmis License Subsidiary. 4 10 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. Knowledge (or any derivative thereof): In the case of the Emmis Entities, exclusively, (i) with respect to the Sinclair Stations, the actual knowledge of the President and Chief Executive Officer or the Chief Financial Officer of Sinclair Broadcast Group, Inc. ("SBGI") or Sinclair Communications, Inc. ("SCI"), any other current or former employee of SBGI or SCI designated as "vice president" or any higher office, any other officer of SBGI, SCI or their subsidiaries that are parties to the Sinclair Agreement, the current or former General Manager, Sales Manager or Chief Engineer of any of the Sinclair Stations, the current or former President and Chief Executive Officer or the Chief Financial Officer of Emmis, any other current or former employee of Emmis designated as "vice president" or any higher office, any other officer of the Emmis Subsidiaries, or any employee, representative or agent of Emmis who conducted due diligence on behalf of Emmis with respect to the Sinclair Stations, and (ii) with respect to WKKX, the actual knowledge of the President and Chief Executive Officer or the Chief Financial Officer of Emmis, any other current or former employee of Emmis designated as "vice president" or any higher officer, any other officer of the Emmis Subsidiaries, and the General Manager, Sales Manager or Chief Engineer of WKKX; and in the case of the Bonneville Entities, exclusively, the actual knowledge of the President and Chief Executive Officer or the Chief Financial Officer of either Bonneville Entity, any other employee of either Bonneville Entity designated as corporate "vice president," a "group vice president" or a "vice president" of the KZLA division, any other corporate officer of either Bonneville Entity, and the General Manager, Sales Manager or Chief Engineer of KZLA; provided, however, that any reference to a "former" employee or officer herein shall mean only those persons whose employment with an Emmis Entity or a Sinclair Entity has been terminated since January 1, 2000. 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 interest or other similar adverse interest, encumbrance, easement, restriction, claim, option, lien or charge of any kind (including any liens of the Pension Benefit Guaranty Corporation, Internal Revenue Service or any governmental agency), 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, financing lease 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, any and all losses, 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 adversely affect or impair, in any material respect, the right of a Recipient Party to the ownership, use, control or operation of any Station to be transferred to the Recipient pursuant to this Agreement; provided, however, that any condition which requires (i) that the Recipient Party or any of its subsidiaries file periodic reports with the FCC regarding compliance with rules and policies of the FCC pertaining to affirmative action and equal opportunity employment, or (ii) that a 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 such Station, shall not be a Material Adverse Condition. 5 11 Material Adverse Effect: A material adverse effect on the assets, business, operations, financial condition or results of operations, in the case of the Emmis Stations, of the Emmis Stations taken as a whole, and in the case of KZLA, of KZLA, except in either case for any such effect resulting from (i) general economic conditions applicable to the radio broadcast industry, (ii) general conditions in the markets in which the applicable Station or Stations operate, or (iii) circumstances that are not likely to recur and either have been substantially remedied or can be substantially remedied without substantial cost or delay. Permitted Lien: (i) Any Lien arising solely by statute (including encumbrances of a landlord) which secures a payment not yet due that arises, and is customarily discharged, in the ordinary course of the applicable Station's business; (ii) Liens arising in connection with operating leases (but not as to financing leases) under the terms of any Station Agreement; or (iii) any other Liens or imperfections in a Transferring Party's title to any Assets or properties that, individually and in the aggregate, are not material in character or amount to the assets or current or future operations of any Station of the Transferring Party and are not reasonably likely to materially detract from the value or materially interfere with the existing or future use of any of such assets in the current or future operation of the applicable Station. Person: Any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. Recipient Party: When used in relation to the Bonneville Entities as the Transferring Party, the Emmis Subsidiaries; and when used in relation to the Emmis Subsidiaries as the Transferring Party, the Bonneville Entities (or Bonneville International or Bonneville Holding, as the case may be). Station, each Station, the Station, a Station or any Station: When used in reference to the Bonneville Entities as the Transferring Party, KZLA; and when used in reference to the Emmis Subsidiaries as the Transferring Party, any of the Emmis Stations. 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). TBA Contracts: The contracts and agreements that Bonneville International assigned to Emmis Operating Subsidiary pursuant to the TBA. TBA Effective Date: The Commencement Date of the TBA as defined in Section 1 of the TBA. Trade Agreements: Station Agreements providing for the sale of time on a Station for other than monetary consideration. Transfer Taxes: All sales, use, conveyance, recording and other similar transfer taxes and fees applicable to, imposed upon or arising out of the conveyance by the Transferring Party and the receipt by 6 12 the Recipient of Assets 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. Transferring Party: Either (i) the Emmis Subsidiaries collectively in their capacity as the transferors of the Emmis Assets under this Agreement, or (ii) the Bonneville Entities collectively in their capacity as the transferors of the Bonneville Assets under this Agreement. 1.2 ADDITIONAL DEFINED TERMS. As used herein, the following terms shall have the meanings defined in the introduction, recitals or section indicated below: Acquisition Proposal Section 5.14 Act Section 3.6(b) Adjustment Amount Section 2.7(a) Agreement Introduction Appraisal Section 2.6(a) Appraisal Report Section 2.6(a) Arbitrating Firm Section 2.7(e) Bonneville Assumed Obligations Section 2.4(c) Bonneville Cap Section 9.2(b) Bonneville FCC Licenses Section 4.6(a) Bonneville Entities Introduction Bonneville Entities' Loss Section 9.2(a) Bonneville Holding Introduction Bonneville Intellectual Property Section 4.10 Bonneville International Introduction Bonneville Leased Real Property Section 4.9(c) Bonneville Owned Real Property Section 4.9(b) Bonneville Real Property Lease Section 4.9(c) Bonneville Severance Cap Section 12.2(c) Bonneville Threshold Section 9.2(b) CERCLA Section 3.18(f) Closing Section 8.1 Closing Date Section 8.1 Collection Period Section 2.8(b) Dispute Notice Section 2.7(d) Emmis Introduction Emmis Assumed Obligations Section 2.3(a) Emmis Cap Section 9.3(b) Emmis Employees Section 12.2(a) Emmis Entities Introduction Emmis Entities' Loss Section 9.3(a) Emmis FCC Licenses Section 3.6(a) Emmis Intellectual Property Section 3.10 Emmis License Subsidiary Introduction Emmis Operating Subsidiary Introduction Emmis Leased Real Property Section 3.9(c) Emmis Owned Real Property Section 3.9(b) Emmis Real Property Lease Section 3.9(c) Emmis Stations Recitals Emmis Subsidiaries Introduction Emmis Threshold Section 9.3(b) ERISA Section 3.15(a) Excluded Assets Section 2.2 7 13 Excluded Employees Section 12.2(a) FCC Section 4.22 FTC Section 3.22 Final Proration Notice Section 2.7(d) HSR Act Section 5.3 HSR Filings Section 5.3 Indemnified Party Section 9.4(a) Indemnifying Party Section 9.4(a) Intellectual Property Section 2.1(e) KIHT Sublease Section 5.19(d) KZLA Recitals Like-Kind Exchange Recitals Manchester Road Premises Section 5.19(a) New Premises Section 5.19(c) New Premises Lease Section 5.19(c) Party Section 13.13 Permits Section 2.1(c) Preliminary Adjustment Report Section 2.7(d) Real Property Section 2.1(b) Retained Receivables Section 2.8(a) Section 1031 Schedule Section 2.6(b) Sinclair Agreement Recitals Sinclair Entities Recitals Sinclair Lawsuit Section 3.13(b) Sinclair Stations Recitals Station Agreements Section 2.1(d) Sublease Section 5.19(b) Survival Period Section 9.1 Tangible Personal Property Section 2.1(a) TBA Recitals Transferred Employees Section 12.2(a) WIL Recitals WKKX Recitals WRTH Recitals WVRV Recitals ARTICLE II EXCHANGE OF ASSETS 2.1 DESCRIPTION OF ASSETS. Upon and subject to the terms and conditions of this Agreement and as set forth in Section 2.5, and except to the extent already effected pursuant to the TBA, on the Closing Date, each Transferring Party shall assign, transfer and convey to the Recipient Party all of the Transferring Party's right, title and interest in, to and under the Assets of the Transferring Party, which shall include any right, title and interest in, to and under the following assets and properties of the Transferring Party: (a) Tangible Personal Property. All transmitter, antenna and other broadcast equipment, studio equipment, furniture, fixtures, parts, computers and office equipment, materials and supplies, inventories, programming library and other tangible personal property (including all promotional, sales, marketing and format specific programming materials and supplies, operating manuals, and warranties from third parties relating to any such tangible personal property) owned or leased by the Transferring Party and used or held for use in connection with any Station of the Transferring Party, including but not 8 14 limited to the items listed on Schedule 3.8 for the Emmis Stations, and the items listed on Schedule 4.8 for KZLA, together with such modifications, replacements, improvements and additional items, and subject to such deletions therefrom, made or acquired collectively between the date hereof and the Closing Date in accordance with the terms and provisions of this Agreement and the TBA that are used in the operation of any Station of the Transferring Party (collectively, the "Tangible Personal Property"). (b) Real Property. The real property listed (together with the interest therein) on Schedule 3.9 for the Emmis Stations, and the real property listed (together with the interest therein) on Schedule 4.9 for KZLA, including in each case all fixtures and improvements thereon and such additional improvements and interests in real property made or acquired by or for the benefit of the Transferring Party between the date hereof and the Closing Date that are used or held for use in the operation of any Station of the Transferring Party, and all easements or other appurtenances for the benefit of such real property (collectively, the "Real Property"). (c) Permits. The FCC Licenses, and all other governmental permits, licenses and authorizations (and any renewals, extensions, amendments or modifications thereof or applications therefor) currently in effect and now held by the Transferring Party, including, but not limited to, those listed on Schedule 3.6 for the Emmis Stations and Schedule 4.6 for KZLA, or hereafter obtained by the Transferring Party between the date hereof and the Closing Date, that are necessary for or related to the operation of any Station of the Transferring Party (the "Permits"). (d) Station Agreements. All contracts, leases (including, but not limited to, real estate use licenses or occupancy agreements), agreements, commitments and other arrangements, and any amendments or modifications, used or held for use in the operation of such any Station of the Transferring Party as of the date hereof (including, but not limited to, those listed on Schedules 3.7(a), 3.7(b) or 3.9 for the Emmis Stations and those listed on Schedule 4.4 of the TBA and Schedules 4.7(a), 4.7(b), or 4.9 for KZLA) or made or entered into by the Transferring Party between the date hereof and the Closing Date in compliance with this Agreement and used or held for use in the operation of any Station of the Transferring Party (collectively, the "Station Agreements"). (e) Intellectual Property. All trade names, trademarks, service marks, copyrights, patents, jingles, slogans, symbols, logos, the applicable call letters, internet addresses, e-mail addresses, websites and domain names, inventions, and any other proprietary material, process, trade secret or trade right principally used by the Transferring Party in the operation of any Station of the Transferring Party, and all registrations, applications and licenses for any of the foregoing, including, without limitation, those set forth on Schedule 3.10 for any of the Emmis Stations, and those set forth on Schedule 4.10 for KZLA; any additional such items acquired or used or held for use by the Transferring Party in connection with the operation of any Station between the date hereof and the Closing Date; and all goodwill associated with any of the foregoing (collectively, the "Intellectual Property"). (f) Records. The originals or true and complete copies of all of the books, records, accounts, files, logs, ledgers, journals, data, plans, maps, engineering records, technical drawings and FCC applications pertaining to or used or held for use in the operation of any Station of the Transferring Party, including, but not limited to, computer-readable disk or tape copies of 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 or held for use by the Transferring Party principally in connection with the operation of any Station of the Transferring Party, including but not limited to all goodwill of each Station, and including all studio and office equipment of KIHT as described in Section 5.19(a). 9 15 2.2 EXCLUDED ASSETS. Notwithstanding any provision of this Agreement to the contrary, the Assets of each Transferring Party shall not include the following assets or property (the "Excluded Assets"): (a) Any and all cash, bank deposits and other cash equivalents, certificates of deposit, securities, cash deposits made on behalf of any Station of the Transferring Party to secure contract obligations (except to the extent the Transferring Party receives a credit therefor in determining the Adjustment Amount under Section 2.7), and all accounts receivable (other than non-cash receivables under Trade Agreements of the Transferring Party) for services performed or for goods sold or delivered by any Station of the Transferring Party prior to the Closing Date; (b) All rights and claims of the Transferring Party whether mature, contingent or otherwise, against third parties with respect to, or which are made under or pursuant to, other Excluded Assets of the Transferring Party or which relate to the period prior to the Closing; (c) All prepaid expenses of the Transferring Party (and rights arising therefrom or related thereto) except to the extent the Transferring Party is given a credit therefor in determining the Adjustment Amount under Section 2.7; (d) All Benefit Plans of the Transferring Party; (e) All Tax Returns (and supporting materials), and all claims of the Transferring Party with respect to any Tax refunds, relating to any Station of the Transferring Party; (f) All of the Transferring Party's rights under or pursuant to this Agreement or the TBA, or any other rights in favor of the Transferring Party pursuant to the other Documents; (g) All loan agreements, letters of credit 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 and pursuant to the terms and provisions of this Agreement; (j) The Transferring Party's corporate minute books, ownership transfer records and other entity records, and any records relating to other Excluded Assets of the Transferring Party and to Liabilities of the Transferring Party other than the Recipient Party's Assumed Obligations; (k) In the case of the Emmis Assets, all rights to the names "Sinclair," "Sinclair Broadcast Group," "Sinclair Communications," "Emmis" and any logo or variation thereof and goodwill associated therewith; and in the case of the Bonneville Assets, all rights to the name "Bonneville" and any logo or variation thereof and goodwill associated therewith; (l) Subject to Section 5.19(b), in the case of the Emmis Assets, the traffic system used in the operation of WVRV at 1215 Cole Street, St. Louis, Missouri, and the real property and other tangible personal property located at 1215 Cole Street, St. Louis, Missouri, other than such tangible personal property used in the operation of WVRV that is specifically listed in Schedule 3.8; (m) In the case of the Emmis Assets, the lease of the studio and office space now used in the operation of WKKX; 10 16 (n) The assets and rights principally related to the Steve and D.C. Morning Show on WKKX as listed on Schedule 2.2(n), including the talent agreements with Steve Shannon and D.C. Chymes, syndication contracts for the syndication of such Morning Show, and the website, e-mail addresses, internet addresses, domain names and other intellectual property rights principally related to such Morning Show as listed on Schedule 2.2(n); (o) Subject to Section 5.19(a), the studio and office equipment used in the operation of WKKX as identified on Schedule 2.2(o); (p) All shares of capital stock, partnership interests, interests in limited liability companies or other equity interest, including, but not limited to, any options, warrants or voting trusts relating thereto which are owned by the Transferring Party and not expressly specified in Section 2.1; and (q) All financial, accounting, management information and network software used or held for use at KZLA or the Emmis Stations; and (r) The contracts and employees listed on Schedule 2.2(r). 2.3 EMMIS ENTITIES' ASSUMPTION OF LIABILITIES. (a) To the extent not already assumed pursuant to the TBA, the Emmis Entities shall at Closing assume and agree to pay, discharge and perform the following Liabilities of the Bonneville Entities (collectively, the "Emmis Assumed Obligations"): (i) All Liabilities arising under all Station Agreements and the Permits assigned and transferred to the Emmis Subsidiaries 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 or under (A) the breach of any Station Agreement by reason of its assignment to the Emmis Subsidiaries without a required consent, (B) any other breach or default by any Bonneville Entity upon or prior to Closing under any Station Agreement unless caused by any Emmis Entity's action or failure to perform under the TBA or (C) any Station Agreement relating to the use of any item of property unless possession of such item and ownership or the right to the use of such item in accordance with the terms of such Station Agreement, are conveyed to an Emmis Entity as part of the Bonneville Assets). (ii) Other Liabilities of the Bonneville Entities to the extent, and only to the extent, the amount thereof is properly included as a credit to the Emmis Subsidiaries in calculating the Adjustment Amount for KZLA pursuant to Section 2.7. (b) Except for the Emmis Assumed Obligations, the Emmis Entities shall not assume or in any manner be liable for any Liabilities of either Bonneville Entity of any kind or nature, all of which each Bonneville Entity shall pay, discharge and perform when due; provided, however, that the Bonneville Entities shall have the right to contest in good faith any Liability of the Bonneville Entities. 2.4 BONNEVILLE ENTITIES' ASSUMPTION OF LIABILITIES. (a) Bonneville International shall at Closing assume and agree to pay, discharge and perform the following Liabilities of the Emmis Entities: (i) All Liabilities arising under all Station Agreements and the Permits (excluding the Emmis FCC Licenses) assigned and transferred to the Bonneville Entities 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 or under (A) the breach of any Station Agreement by reason of its assignment to Bonneville International without a required consent, (B) 11 17 any other breach or default by any Emmis Entity upon or prior to Closing under any Station Agreement or (C) any Station Agreement relating to the use of any item of property unless possession of such item, and ownership or the right to use of such item in accordance with the terms of such Station Agreement, are conveyed to a Bonneville Entity as part of the Emmis Assets). (ii) Other Liabilities of the Emmis Entities to the extent, and only to the extent, the amount thereof is properly included as a credit to the Bonneville Entities in calculating the Adjustment Amount for the Emmis Stations pursuant to Section 2.7. (b) Bonneville Holding shall at Closing assume and agree to pay, discharge and perform when due the Liabilities arising under the Emmis FCC Licenses assigned and transferred to Bonneville Holding 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 any breach or default by any Emmis Entity upon or prior to Closing under the Emmis FCC Licenses). (c) The Liabilities assumed by the Bonneville Entities under this Section 2.4 are collectively referred to herein as the "Bonneville Assumed Obligations." (d) Except for the Bonneville Assumed Obligations, the Bonneville Entities shall not assume or in any manner be liable for any Liabilities of any Emmis Entity of any kind or nature, all of which each Emmis Entity shall pay, discharge and perform when due; provided, however, that the Emmis Entities shall have the right to contest in good faith any Liability of the Emmis Entities. 2.5 EXCHANGE OF ASSETS. (a) In consideration of the Bonneville Entities' conveyance of the Bonneville Assets to the Emmis Subsidiaries and the assumption by the Bonneville Entities of the Bonneville Assumed Obligations, the Emmis Entities agree that at the Closing (i) Emmis Operating Subsidiary shall assign, transfer and convey to Bonneville International, free and clear of any Liens other than Permitted Liens, and Bonneville International shall acquire and accept from Emmis Operating Subsidiary, all right, title and interest of Emmis Operating Subsidiary in, to and under all Emmis Operating Assets, and (ii) Emmis License Subsidiary shall assign, transfer and convey to Bonneville Holding, free and clear of any Liens other than Permitted Liens, and Bonneville Holding shall acquire and accept from Emmis License Subsidiary, all right, title and interest of Emmis License Subsidiary in, to and under all Emmis License Assets. (b) In consideration of the Emmis Subsidiaries' conveyance of the Emmis Assets to the Bonneville Entities and the assumption by the Emmis Entities of the Emmis Assumed Obligations, the Bonneville Entities agree that, to the extent not already effected pursuant to the TBA, at the Closing (i) Bonneville International shall assign, transfer and convey to Emmis Operating Subsidiary, free and clear of any Liens other than Permitted Liens, and Emmis Operating Subsidiary shall acquire and accept from Bonneville International, all right, title and interest of Bonneville International in, to and under all Bonneville Operating Assets, and (ii) Bonneville Holding shall assign, transfer and convey to Emmis License Subsidiary, free and clear of any Liens other than Permitted Liens, and Emmis License Subsidiary shall acquire and accept from Bonneville Holding, all right, title and interest of Bonneville Holding in, to and under all Bonneville License Assets. (c) The parties agree that the value of the Emmis Assets is $185,000,000, and the value of the Bonneville Assets is $185,000,000. 2.6 ALLOCATION OF ASSET VALUES. (a) The fair market value of the Emmis Assets and the Bonneville Assets shall be determined and allocated on the basis of an appraisal (the "Appraisal") prepared by the Appraisal Firm. The 12 18 Appraisal Firm shall be instructed to perform an appraisal of the classes of Assets of each Station and to deliver a report to the Emmis Entities and Bonneville Entities as soon as reasonably practicable (the "Appraisal Report"). The Appraisal Report shall be subject to the approval of the Emmis Entities and Bonneville Entities, which shall cooperate in good faith to resolve any issues relating to the Appraisal Report. The Emmis Entities and Bonneville Entities shall each pay one-half of the fees, costs and expenses of the Appraisal Firm regardless of whether the transactions contemplated by this Agreement are consummated. (b) Within thirty (30) days of receipt of the Appraisal Report, the Emmis Entities and Bonneville Entities shall prepare a schedule setting forth the respective Emmis Assets and Bonneville Assets in each "exchange group" and "residual group" (as each such term is defined in Treas. Reg. Section 1.1031(j)-1(b)(2)) for the Like-Kind Exchange (the "Section 1031 Schedule"). The Emmis Entities and Bonneville Entities shall cooperate in good faith to resolve any issues relating to the Section 1031 Schedule to be filed with their respective federal income Tax Returns. (c) Each party, as necessary, shall prepare IRS Form 8594 and IRS Form 8824 reflecting the fair market value of the Assets that such party has transferred and received as determined in accordance with this Section and shall forward each such form to the other parties within thirty (30) days after reaching agreement with the other parties on the Section 1031 Schedule. Each party shall file its respective federal income Tax Return, if any, required for the tax year in which the Closing occurs with the IRS Form 8594 and IRS Form 8824 as prepared in accordance with this Section. Each party covenants and agrees that such party will not take a position on any income Tax Return that is inconsistent with the terms of this Section. 2.7 PRORATION ADJUSTMENT. (a) All operating revenue and operating expenses of the Emmis Stations shall be adjusted and allocated, and all operating revenue and operating expenses of KZLA shall be adjusted and allocated, in each case between the Transferring Party and the Recipient Party, and an adjustment shall be made as provided in this Section to the extent necessary to reflect the principle that all such revenue and expenses attributable to the operation of the Emmis Stations or KZLA on or before the date preceding the Closing Date shall be for the account of the corresponding Transferring Party, and all such revenue and expenses attributable to the operation of the Emmis Stations or KZLA on and after the Closing Date shall be for the account of the corresponding Recipient Party. As to KZLA, this Section 2.7 shall only apply to the extent the applicable proration or adjustment is not addressed by the provisions included in Section 4.5 of the TBA. The net adjustment amount determined in accordance with this Section with respect to the Emmis Stations, and the separate net amount determined in accordance with this Section with respect to KZLA, is each referred to as an "Adjustment Amount". Notwithstanding the foregoing, the operating revenue to which the Emmis Entities are entitled under the TBA, and the operating expenses required to be paid by the Emmis Entities under the TBA, shall not be taken into account in determining the Adjustment Amount with respect to KZLA. Similarly, the monthly fixed fee payments to be paid to Bonneville International by the Emmis Entities under the TBA shall not be taken into account in determining the Adjustment Amount with respect to KZLA. (b) Without limiting the generality of the foregoing: (i) The Transferring Party shall receive a credit for the unapplied portion, as of Closing, of the security deposits made by the Transferring Party under those Stations Agreements assumed by the Recipient Party at Closing in accordance with Section 2.3 or 2.4. (ii) The Recipient Party shall be given a credit in the amount, if any, by which the contracted value of all advertising time required to be broadcast on the Transferring Party's Station, in the case of KZLA, or Stations, in the case of the Emmis Stations, on or after the Closing Date under the Trade Agreements of the Transferring Party's Station or Stations exceeds by more than $50,000, the contracted value of the goods and services to be received on or after the Closing Date under such Trade Agreements. The Transferring Party shall be given a credit in the amount, if any, by which the contracted value of the goods or services to be received on or after 13 19 the Closing Date under the Trade Agreements of the Transferring Party's Station or Stations exceeds by more than $50,000 the contracted value of any advertising time required to be broadcast under such Trade Agreements on or after the Closing Date. (iii) The Recipient Party shall be given a credit equal to the amount of cash consideration that the Transferring Party has not paid prior to the Closing Date for programming acquired from third parties and run by the Transferring Party's Station or Stations prior to the Closing Date. (iv) With respect to each vacation day or portion thereof earned but not taken before the Closing Date by the employee of the Transferring Party's Station or Stations hired by the Recipient Party, the Recipient Party shall receive a credit equal to the compensation equivalent thereof. (v) An adjustment and proration shall be made in favor of the Transferring Party for the amount, if any, of prepaid expenses, the benefit of which accrues to the Recipient Party, and other current assets acquired by the Recipient Party which are paid by the Transferring Party to the extent such prepaid expenses and other current assets relate to the period after the Closing, provided that the credit given the Transferring Party for each prepaid expense shall not exceed an amount commensurate with the benefit therefrom to be received by the Recipient Party after Closing. (vi) Sales persons' commissions, chargebacks and allocated bonuses shall be prorated. (vii) There shall be no proration for sick leave. (viii) There shall be no proration for any payments made by Interep in connection with obtaining the right to serve as the national sales representative of any of the Emmis Stations. (ix) There shall be no proration for any payments made by Sentry in connection with obtaining the right to serve as the national sales representative of KZLA. (x) There shall be no proration of any FCC regulatory fees applicable to either the Emmis Stations or KZLA. (xi) There shall be no proration of any increase in salary for union employees of a Station that becomes effective after Closing for any period prior to 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, except with regard to any materiality limitations or qualifications imposed thereby. (d) Within sixty (60) days after the Closing Date, each Transferring Party shall provide the Recipient Party with a statement setting forth a detailed computation of the Transferring Party's reasonable and good faith estimate of the Adjustment Amount as of the Closing Date with respect the Transferring Party's Station or Stations (each, a "Preliminary Adjustment Report"). If the Adjustment Amount reflected on the Preliminary Adjustment Report is a credit to the Recipient Party, the Transferring Party shall pay the Recipient Party the amount of the preliminary Adjustment Amount within ten (10) business days of receipt of such Preliminary Adjustment Report, and if the Adjustment Amount reflected on the Preliminary Adjustment Report is a charge to the Recipient Party, the Recipient Party shall pay the Transferring Party the amount of such preliminary Adjustment Amount within ten (10) business days of receipt of such Preliminary Adjustment Report. Within ninety (90) days after the Closing Date, each 14 20 Recipient Party shall deliver to the Transferring Party in writing and in reasonable detail a good faith final determination of the Adjustment Amount determined as of the Closing Date with respect to the Station or Stations transferred by the Transferring Party ("Final Proration Notice"). The Transferring Party shall assist the Recipient Party in making such determination, and the Recipient Party shall provide the Transferring Party with reasonable access to the properties, books and records relating to the applicable Station or Stations for the purpose of determining the applicable Adjustment Amount. The Transferring Party shall have the right to review the computations and workpapers used in connection with the Recipient Party's preparation of the Adjustment Amount. If the Transferring Party disagrees with the amount of the Adjustment Amount determined by the Recipient Party, the Transferring Party shall so notify the Recipient Party in writing (the "Dispute Notice") within thirty (30) days after the date of receipt of the Recipient Party's Final Proration Notice, specifying in detail any point of disagreement. After the receipt of any Dispute Notice, the Recipient Party and the Transferring Party shall negotiate in good faith to resolve any disagreements regarding the applicable Adjustment Amount. If agreement is reached within thirty (30) days after the Recipient Party's receipt of the Dispute Notice, then upon reaching such agreement, the Transferring Party shall pay to the Recipient Party or the Recipient Party shall pay to the Transferring Party, as the case may be, within five (5) days an amount equal to the difference between (i) the agreed Adjustment Amount and (ii) the preliminary Adjustment Amount indicated in the applicable Preliminary Adjustment Report. Any such payment shall be made as provided in Section 2.7(f). If agreement is not reached within such 30-day period with respect to a disputed Adjustment Amount, then the dispute resolutions of Section 2.7(e) shall apply. (e) If the Transferring Party and its auditors and the Recipient Party and its auditors do not, within the 30-day period specified in Section 2.7(d), reach an agreement on an Adjustment Amount as of the Closing Date, then Ernst & Young, LLP (the "Arbitrating Firm") shall resolve the disputed items. The Recipient Party and the Transferring Party shall each inform the Arbitrating Firm in writing as to their respective positions concerning the disputed 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 disputed 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 disputed Adjustment Amount and the basis for its determination. 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 disputed Adjustment Amount, the Transferring Party shall pay to the Recipient Party, or the Recipient Party shall pay to the Transferring Party, as the case may be, an amount equal to the difference between (i) such Adjustment Amount as determined by the Arbitrating Firm and (ii) the preliminary Adjustment Amount indicated in the applicable Preliminary Adjustment Report. Any such payment shall be made as provided in Section 2.7(f). (f) Each payment 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. Any payment not received by the Party entitled thereto within the applicable period provided for in Section 2.7(d) or (e) shall bear interest from such date until paid in full at a rate per annum equal to the prime rate in effect at the end of such period (as published in the Money Rates column of the Eastern Edition of The Wall Street Journal). (g) Solely for purposes of calculating each Adjustment Amount under this Section 2.7, the Closing Date shall be deemed to be October 1, 2000 at 12:01 a.m. For all other purposes under or in connection with this Agreement, including, but not limited to, representations, warranties, covenants, rights to indemnification, risk of loss (other than with respect to operating income and operating expenses allocated in accordance with this Section 2.7), conveyancing documents and closing certificates, the Closing Date shall be, and the Closing shall occur on, the date of this Agreement. 2.8 ACCOUNTS RECEIVABLE. 15 21 (a) Subject to the TBA with respect to KZLA, within ten (10) business days after the Closing Date, each Transferring Party shall furnish to the Recipient Party a true and complete list of the Transferring Party's accounts receivable (other than non-cash receivables under Trade Agreements, which are included as part of the Assets pursuant to Section 2.1(d)) arising from the operation of the Transferring Party's Station or Stations prior to the Closing Date (for each Transferring Party, the "Retained Receivables"), which 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 eighty (180) days after the Closing Date (the "Collection Period"), each Recipient Party will, without charge to the Transferring Party, use its usual and customary procedures (which may include referral to a collection agency) to collect the Retained Receivables as the Transferring Party's agent (but Recipient Party shall not have any fiduciary obligations with respect thereto) for collection, provided that (i) the Recipient Party shall not be required to commence litigation, employ legal counsel or make any other extraordinary collection efforts, and (ii) the Recipient Party's obligation to act as the Transferring Party'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 the Recipient Party with respect to the Retained Receivables of the Transferring Party, 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 (a copy of which the Recipient Party shall provide to the Transferring Party) 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), each Recipient Party shall deliver to the Transferring Party a statement showing all collections of Retained Receivables made on behalf of the Transferring Party since the last previous report and shall pay such collections to the Transferring Party by check, or by wire transfer, as specified by the Transferring Party, at the time such statement is delivered. A Recipient Party shall have no right to setoff amounts owed under this Agreement by the Recipient Party to the Transferring Party against any amounts owed under this Agreement by such Transferring Party to the Recipient Party. (d) No Transferring Party shall engage in any collection efforts against account debtors under its Retained Receivables during the first ninety (90) days of the Collection Period, other than with respect to accounts receivable identified as in dispute as provided in foregoing Section 2.8(b). After the first ninety (90) days of the Collection Period, a Transferring Party shall have the right, at its expense, to assist and participate with the Recipient Party in the collection of such unpaid Retained Receivables, provided, however, that the Transferring Party's collection efforts shall be commercially reasonable and consistent with its past practices. (e) A Recipient Party shall not, without the Transferring Party's prior written consent, compromise or settle for less than full value any of the Transferring Party's Retained Receivables unless the Recipient Party pays the Transferring Party the full amount of any deficiency. A Recipient Party shall be entitled to purchase any Retained Receivable from the Transferring Party for the full amount thereof at any time during or at the expiration of the Collection Period. (f) At the end of the Collection Period, each Recipient Party shall return to the Transferring Party all files concerning the collection or attempts to collect the Retained Receivables of the Transferring Party and the Recipient Party's responsibility for the collection of such Retained Receivables shall cease, provided that the Recipient Party shall promptly pay over to the Transferring Party any amounts received with respect to the Retained Receivables of the Transferring Party after the Collection Period, together with a statement setting forth the components of such amounts. Any payment not received by the Party entitled thereto by the payment date specified in Section 2.8(c) shall bear interest from such date until paid in full at a rate per annum equal to the prime rate in effect on such date plus three percent (3.0%) (as published in the Money Rates column of the Eastern Edition of The Wall Street Journal). 16 22 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE EMMIS ENTITIES The Emmis Entities, jointly and severally, represent and warrant to the Bonneville Entities as follows: 3.1 ORGANIZATION, GOOD STANDING AND REQUISITE POWER. Each of the Emmis Entities is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and has all requisite power to own, operate and lease those Emmis Assets which it owns or at Closing will own and to carry on its business. Each Emmis Entity is duly licensed, qualified to do business and in good standing as a foreign entity under the laws of the jurisdiction listed beside the Emmis Entity's name in Schedule 3.1. 3.2 AUTHORIZATION AND BINDING EFFECT OF DOCUMENTS. Each Emmis Entity 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 and each of the other Documents. The execution and delivery of this Agreement and each of the other Documents by each Emmis Entity (as appropriate) and the consummation by each Emmis Entity of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action (including all necessary shareholder approvals, if any) on the part of each Emmis Entity. This Agreement has been, and each of the other Documents at or prior to Closing will be, duly executed and delivered by each Emmis Entity. This Agreement constitutes (and each of the other Documents, when executed and delivered, will constitute) the valid and binding obligation of each Emmis Entity enforceable against each Emmis Entity in accordance with its terms except as the enforceability of this Agreement or of any of the other Documents may be affected by bankruptcy, insolvency, or similar laws affecting creditors' rights generally and by judicial discretion in the enforcement of equitable remedies. 3.3 ABSENCE OF 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 each Emmis Entity of this Agreement and the other Documents, and consummation by each Emmis Entity of the transactions contemplated hereby and thereby, do not and will not (i) conflict with or result in any breach of any of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in a violation of, (iv) give any third party the right to modify, terminate or accelerate any obligation under, or (v) result in the creation of any Lien upon the Emmis Assets under, the provisions of the organizational documents of such Emmis Entity, any indenture, mortgage, lease, loan agreement or other agreement or instrument to which such Emmis Entity is bound or affected, or any law, statute, rule, judgment, order or decree to which such Emmis Entity is subject. 3.4 CONSENTS. Except as set forth on Schedule 3.7(b) and Schedule 3.9, and except for any necessary clearances or approvals under the HSR Act or the Act, the execution, delivery and performance by each Emmis Entity of this Agreement and the other Documents, and consummation by each Emmis Entity 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. 17 23 3.5 EMMIS ASSETS; TITLE. (a) The Emmis 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, material to, or necessary for, the operation of the Emmis Stations, with the exception of the Emmis Excluded Assets and personnel. (b) Together, the Emmis Subsidiaries at Closing will own and have good (and in the case of real property, marketable) title to, or a valid lessee's or licensee's interest (pursuant to one or more Station Agreements) in, all of the Emmis Assets free and clear of all Liens except (i) Liens described on Schedule 3.5(b) (which the Emmis Subsidiaries shall cause to be released prior to Closing and released of record promptly after Closing) and lack of vehicular access to the WVRV main tower site as noted on Schedule 3.9 and (ii) Permitted Liens. 3.6 EMMIS FCC LICENSES. Except as set forth on Schedule 3.6: (a) At Closing, Emmis License Subsidiary will be the valid and legal holder of each of the FCC Licenses listed on Schedule 3.6 (together as to all Emmis Stations, the "Emmis FCC Licenses"), and any action of the FCC with respect to each Emmis FCC License is a Final Action with the exception of the FCC Order. The expiration date of the term of each main Emmis FCC License is shown on Schedule 3.6. (b) The Emmis FCC Licenses (i) are valid 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 Emmis Stations 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 currently in effect licenses and authorizations, including amendments and modifications thereto, issued by the FCC for the operation of the Emmis Stations. (c) Other than as set forth in the Emmis FCC Licenses or restrictions applicable to the radio broadcast industry generally, none of the Emmis FCC Licenses is subject to any restriction or condition which limits in any material respect the full operation of the applicable Emmis Station as now conducted, and as of the Closing Date, none of the Emmis FCC Licenses shall be subject to any restriction or condition which would limit in any material respect the full operation of such Emmis Station as currently operated. (d) Each Emmis Station is being operated in all material respects in accordance with the terms and conditions of the Emmis FCC Licenses and the Act, including but not limited to those pertaining to RF emissions; and, to the Knowledge of the Emmis Entities, none of the Emmis Stations is causing material interference to other stations, or is experiencing material interference from other stations, in violation of the Act. (e) No applications, complaints or proceedings are pending or, to the Knowledge of any Emmis Entity, are threatened which may result in the revocation, modification, non-renewal or suspension of any of the Emmis FCC Licenses, the denial of any pending applications, the issuance of any cease and desist order or the imposition of any material fines, forfeitures or other administrative actions by the FCC with respect to any Emmis Station or its operation, other than actions or proceedings affecting the radio broadcasting industry in general. (f) To the Knowledge of any Emmis Entity, the Emmis Stations are in compliance in all material respects with all requirements to file registrations, reports, applications and other documents with the FCC with respect to each Emmis Station, and all such registrations, reports, applications and documents are true, correct and complete in all material respects. 18 24 (g) Other than actions or proceedings affecting the radio broadcasting industry in general or facts relating to the Bonneville Entities, no Emmis Entity has 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 Emmis FCC Licenses or the imposition of any material fines or forfeitures by the FCC against any Emmis Entity or any Emmis Station's owner or operator thereof, or (ii) which might reasonably be expected to result in the FCC's denial or delay of approval of the assignment to the Bonneville Entities of any Emmis FCC License or the imposition of any Material Adverse Condition in connection with approval of the transfer to the Bonneville Entities of any Emmis FCC License. (h) There are no unsatisfied or otherwise outstanding citations issued by the FCC with respect to any Emmis Station or its operation. (i) True, complete and accurate copies of all Emmis FCC Licenses material to the operation of each Emmis Station have been delivered by the Emmis Subsidiaries to the Bonneville Entities. (j) Except for the Emmis FCC Licenses and the Emmis Permits identified on Schedule 3.6,there are no material licenses, permits or authorizations from governmental or regulatory authorities required for the lawful operation and conduct of the Emmis Stations as previously and currently operated by the Emmis Subsidiaries. 3.7 STATION AGREEMENTS. (a) Schedule 3.7(a) lists all Trade Agreements of the Emmis Stations as of the date indicated on such Schedule, and sets forth the parties thereto, the contracted value of the remaining time required to be provided from and after the date of such Schedule and the contracted value of the goods or services to be received by the Emmis Stations from and after the date of such Schedule. True and complete copies of all such written Trade Agreements in effect as of such date involving broadcast time of more than $25,000, including all amendments, modifications and supplements thereto, have been delivered to the Bonneville Entities, and each Trade Agreement involving broadcast time on the Emmis Stations of more than $25,000 entered into between the date of this Agreement and Closing shall be promptly delivered to the Bonneville Entities. (b) Schedule 3.7(b) lists all the following types of agreements used in or relating to the operation of each Emmis Station: (i) Agreements for sale of broadcast time on such Emmis Station for monetary consideration that (A) are not terminable by the owner or operator thereof without charge or penalty upon thirty (30) days or less prior written notice and (B) involve broadcast time of more than Twenty-Five Thousand Dollars ($25,000); (ii) All network affiliation agreements; (iii) All sales agency or advertising representation contracts; (iv) Each lease of any Emmis Asset (including a description of the property leased thereunder) other than such agreements not requiring expenditures of more than $25,000 in any calendar year and having a term (after taking into account any cancellation right of the Emmis Station without charge or penalty) of one (1) year or less except for the Emmis Real Property Leases listed on Schedule 3.9; (v) All collective bargaining agreements; (vi) All severance agreements, employment agreements, talent agreements and agreements with independent contractors, other than such agreements that (A) do not provide for any severance payments or benefits, (B) do not require expenditures of more than $25,000 in any 19 25 calendar year and (C) have a term (after taking into account any cancellation right of the Emmis Station without charge or penalty) of one (1) year or less; (vii) All agreements requiring such Emmis Station or the owner or operator thereof, to acquire goods or services exclusively from a single supplier or provider, or prohibiting such Emmis Station or the owner or operator thereof from providing certain goods or services to any Person other than a specified Person; (viii) All agreements that have a remaining term (after taking into account any cancellation rights of the Emmis Station without charge or penalty) of more than one (1) year or involve a commitment of more than $25,000; and (ix) Any other agreement that is material to the business, operations, financial condition or results of operations of any Emmis 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 the Bonneville Entities. The Station Agreements included in the Emmis Assets that are not described in Section 3.7(a) or in the foregoing clauses (i) through (ix) of this Section 3.7(b) (without regard to the monetary thresholds set forth in Section 3.7(a) or in such clauses of Section 3.7(b)) do not involve commitments by parties thereto with an aggregate fair market value of more than One Hundred Fifty Thousand Dollars ($150,000). (c) Schedule 3.7(c) lists all of the contracts and agreements used in or relating to the operation of the Emmis Stations to which an Affiliate of any Emmis Entity or Sinclair Entity is a party. True and complete copies of those in writing have been delivered to the Bonneville Entities, and summaries of those that are oral are set forth on Schedule 3.7(c). (d) With respect to the Station Agreements which are, individually or in the aggregate, material to the assets, business, operations, financial condition or results of operations of an Emmis Station, except as set forth in the Schedules, (i) such Station Agreements are valid, binding, in full force and effect, and enforceable against the relevant Emmis Entity or Sinclair Entity in accordance with their terms except as the enforceability of such Station Agreements may be affected by bankruptcy, insolvency, or similar laws affecting creditors' rights generally and by judicial discretion in the enforcement of equitable remedies; (ii) neither the Emmis Entities or Sinclair Entities nor, to the Knowledge of any Emmis Entity, 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 the Emmis Entities or Sinclair Entities nor any Affiliate of the Emmis Entities or Sinclair Entities has granted or been granted any material waiver or forbearance with respect to any such Station Agreement not reflected in an amendment or modification; (iv) the Emmis Entities or Sinclair Entities hold 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 any Emmis Entity or Sinclair Entity or any Affiliate thereof under any such Station Agreement is subject to termination or modification as a result of the consummation of the transactions contemplated by this Agreement; and (vi) except as set forth on Schedule 3.7(b) or 3.9, no consent or approval by each party to any such Station Agreement is required thereunder for the consummation of the transactions contemplated hereby. 3.8 TANGIBLE PERSONAL PROPERTY. 20 26 (a) Schedule 3.8 lists, as of the date noted on such Schedule, all Tangible Personal Property (other than Emmis Excluded Assets, office supplies and other incidental items) necessary for the conduct of the business and operations of each Emmis 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 each Emmis Station as now operated has been properly maintained in all material respects in accordance with 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 material laws, rules, regulations and ordinances. (c) The Emmis Assets include all assets necessary to operate the Emmis Stations other than personnel and the Emmis Excluded Assets. 3.9 EMMIS 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 are used or held for use by any Sinclair Entity or Emmis Entity to any material extent in the operation of any Emmis Station. (b) Emmis Operating Subsidiary holds or at Closing will hold good and marketable fee simple title to each parcel of Real Property listed in Schedule 3.9 as owned by an Emmis Entity or a Sinclair Entity (the "Emmis Owned Real Property") free and clear of any Liens except (i) Liens described on Schedule 3.5(b) (which the Emmis Subsidiaries shall cause to be released prior to Closing and released of record promptly after Closing) and lack of vehicular access to the WVRV main tower site as noted on Schedule 3.9 and (ii) Permitted Liens. To each Emmis Entity's Knowledge, except as set forth on Schedule 3.9, there is no pending, threatened or contemplated action to take by eminent domain or to condemn any of the Real Property used in the operation of any of the Emmis Stations. (c) Each lease (including all amendments, modifications and supplements) under which any Emmis Subsidiary leases or at Closing will lease an interest in any Real Property (each, an "Emmis Real Property Lease") is specified, and each leased Real Property, including but not limited to studio and office space and each transmitter or antenna site (the "Emmis Leased Real Property"), and its use by any Emmis Station are identified, on Schedule 3.9. Except as set forth on such Schedule, such Emmis Subsidiary holds or at Closing will hold good title to the lessee's interest under each Emmis Real Property Lease free and clear of all Liens except Permitted Liens. True and complete copies of all Emmis Real Property Leases, including all amendments, modifications and supplements, together with all surveys, title policies and real property records in possession of any Emmis Entity or to the Knowledge of any Emmis Entity, after request therefore, any Sinclair Entity related to any Emmis Real Property, have been delivered to the Bonneville Entities. (d) Except as set forth on the Schedule 3.9 hereto, (i) each Emmis Real Property Lease is legal, valid, binding and enforceable against the appropriate Emmis Entity or Sinclair Entity in accordance with its terms; (ii) neither the Emmis Entities nor, to the Knowledge of any Emmis Entity, any other party is in material default under any Emmis Real Property Lease; (iii) to the Knowledge of each Emmis Entity, 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 Emmis Real Property Lease, nor has any Emmis Entity received written notice alleging any such event has occurred; (iv) none of the rights of an Emmis Entity under any Emmis 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 Emmis Real Property Lease is required for the consummation of the transactions contemplated hereby; and (vi) no Emmis Entity has granted or been granted any waiver or forbearance with respect to any Emmis Real Property Lease except as contained in amendments or modifications. 21 27 (e) Except for the crumbling walls of and other structural defects relating thereto in the building on the WVRV main broadcast antenna site at 532 DeBaliviere Avenue, St. louis, Missouri, and the deteriorated condition of the paint on the broadcast tower at such site, (i) all improvements on the Emmis Owned Real Property or Emmis Leased Real Property are in compliance in all material respects with applicable federal, state and local laws, building codes, ordinances and regulations, including but not limited to zoning and land use laws, ordinances and regulations, and the use by any Emmis Station of each portion of the Emmis Owned Real Property or Emmis Leased Real Property complies in all material respects with applicable zoning and land use laws, ordinances and regulations, and (ii) all improvements on the Emmis Owned Real Property and all improvements owned by the lessee on the Emmis Leased Real Property are in good working condition and repair (subject to ordinary wear and tear). 3.10 INTELLECTUAL PROPERTY. Other than Emmis Excluded Assets, Schedule 3.10 lists all material trade retail names, trademarks, service marks, copyrights and patents principally used in the operation of the Emmis Stations, including all registrations, applications and licenses for any of the Intellectual Property (the "Emmis Intellectual Property"). Except as disclosed on Schedule 3.10: (a) To the Knowledge of each Emmis Entity, the Emmis Entities own or at Closing will own, free and clear of Liens other than Permitted Liens, all right and interest in, and right and authority to use, or have or will have a valid license to use, in connection with the conduct of the business of the applicable Emmis Station as presently conducted, all of the Emmis Intellectual Property listed on Schedule 3.10, and all of the rights and properties constituting a part of the Emmis Intellectual Property are in full force and effect. (b) There are no outstanding or, to the Knowledge of any Emmis Entity, threatened judicial or adversary proceedings with respect to any of the Emmis Intellectual Property. (c) No Emmis Entity or Sinclair Entity has granted to any other person or entity any license or other right or interest in or to any of the Emmis Intellectual Property or to the use thereof. (d) No Emmis Entity has Knowledge of any infringement or unlawful use of any of the Emmis Intellectual Property. (e) To each Emmis Entity's Knowledge, no Emmis Subsidiary or Sinclair Entity has violated any provisions of the Copyright Act of 1976, 17 U.S.C. Section 101, et seq., in any material respect. (f) The Emmis Subsidiaries have delivered to the Bonneville Entities 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 Emmis Intellectual Property. 3.11 [INTENTIONALLY OMITTED] 3.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since April 30, 2000 and through the date hereof, other than as described on Schedule 3.12: (a) There has not been any damage, destruction or other casualty loss with respect to the Emmis 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) None of the Emmis Entities or the Emmis Stations 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. 22 28 (c) With respect to the Emmis Stations, no Emmis Entity or Sinclair Entity has: (i) amended, terminated, renewed or taken any action or inaction that would result in a renewal of any Station Agreement except in the ordinary course of business consistent with past practices, or any Emmis Real Property Lease (other than any amendment, noted on Schedule 3.9 hereto); (ii) mortgaged, pledged or subjected to any Lien, any of the Emmis Assets, except for Permitted Liens; (iii) acquired or disposed of any Emmis Assets or entered into any agreement or other arrangement for such acquisition or disposition, except for immaterial amounts in the ordinary course of business consistent with past practices; (iv) entered into any agreement, commitment or other transaction except those that (A) were entered into in the ordinary course of business consistent with past practice or (B) are not material to the assets, business, operations, results of operations or financial condition of any Emmis Station; (v) paid any bonus to any officer, director or employee or granted to any officer, director or employee any other increase in compensation in any form, except in the ordinary course of business consistent with past practices; (vi) adopted, amended or renewed 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 any Emmis Entity or Sinclair Entity; or (viii) operated its business other than in the ordinary course consistent with past practices. 3.13 LITIGATION. (a) Except as described in Schedule 3.13, (i) there are no actions, suits, claims, investigations or administrative or arbitration proceedings pending or, to the Knowledge of any Emmis Entity, threatened against any Emmis Entity or any Sinclair Entity before or by any court, arbitration tribunal or governmental department or agency, domestic or foreign, that relates to any Emmis Station or the Emmis Assets; (ii) neither any Emmis Entity nor, to the Knowledge of any Emmis Entity, any of the officers or employees of any Emmis Entity, has been charged with, or to the Knowledge of any Emmis Entity, is under investigation with respect to, any violation of any provision of any federal, state, foreign or other applicable law or administrative regulation in respect of such officer's or employee's employment at any Emmis Station or with any Emmis Entity; and (iii) neither any Emmis Entity, any properties or assets of any Emmis Entity nor, to the Knowledge of any Emmis Entity, any officer or employee of any Emmis Entity is a party to or bound by any order, arbitration award, judgment or decree of any court, arbitration tribunal or governmental department or agency, domestic or foreign, in respect of any business practices, the acquisition of any property, or the conduct of any business of any Emmis Entity which, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect or materially impair the ability of any Emmis Entity to perform its obligations hereunder and consummate the transactions contemplated hereby. (b) The lawsuit entitled Sinclair Broadcast Group, Inc. v. Emmis Communications Corporation and Barry Baker, Civil Action No. 03-C-00-00475 filed in the Circuit Court for Baltimore 23 29 County, Maryland (the "Sinclair Lawsuit"), has been settled. As part of such settlement, Emmis and the Sinclair Entities have entered into the Sinclair Agreement pursuant to which Emmis has agreed to buy, and the Sinclair Entities have agreed to sell, among other stations, the Sinclair Stations. The Sinclair Agreement contemplates and permits the divestiture by the Emmis Entities of stations purchased by the Emmis Entities under the Sinclair Agreement. Neither the Sinclair Lawsuit nor the manner in which the Sinclair Lawsuit has been settled shall have any adverse effect on the Emmis Stations or the Bonneville Entities as the owners of the Emmis Stations. 3.14 LABOR MATTERS. (a) Except as listed on Schedule 3.14(a): (i) To each Emmis Entity's Knowledge, no present or former employee or independent contractor of any Emmis Station has a pending claim or charge which has been asserted or threatened against any Emmis Subsidiary 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 material 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 material violation of occupational safety or health standards. (ii) There is not pending or, to the Knowledge of any Emmis Entity, threatened any labor dispute, strike or work stoppage that affects or interferes or is reasonably likely to affect or interfere with the operation of any Emmis Station, and no Emmis Entity has Knowledge of any organizational effort currently being made or threatened by or on behalf of any labor union with respect to employees of any Emmis Station. There are no material unresolved unfair labor charges against any Emmis Station, and no Emmis Station has 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) no Emmis Entity is a signatory or a party to, or otherwise bound by, a collective bargaining agreement now in effect which covers employees or former employees of any Emmis Station, (ii) no Emmis Entity or Sinclair Entity has agreed to recognize any union or other collective bargaining unit with respect to any employees of any Emmis Station, and (iii) no union or other collective bargaining unit has been certified as representing any employees of any Emmis 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 in connection with the operation of an Emmis Station who earn more than $15,000 per year, and states for each such employee the date hired, the level of compensation (including any projected bonus) payable to such employee (limited in the case of each employee who is compensated on a commission basis to a description of the manner in which such commissions are determined and the specification of compensation earned by such employee in 1999), and whether such employee is employed under a written contract or is covered by a written severance agreement. Except pursuant to written employment agreements and written severance agreements listed on Schedule 3.7(b), the only severance obligations with respect to Employees at the Emmis Stations are set forth on Schedule 3.14(c). A true and complete copy of any handbook, policy manual or similar written guidelines furnished to employees of any Emmis Station has been delivered to the Bonneville Entities. 3.15 [INTENTIONALLY OMITTED] 24 30 3.16 COMPLIANCE WITH LAW. Except as specified on Schedule 3.16, the Emmis Stations have been operated and are operating in all material respects in compliance with the Act and all other material 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 no owner or operator of any Emmis Station has received any written notice of material noncompliance pertaining to any ownership or operation of any Emmis Station that has not been cured. 3.17 [INTENTIONALLY OMITTED] 3.18 ENVIRONMENTAL MATTERS. (a) Except as set forth on Schedule 3.18, all environmental, health and safety permits necessary for the operation of each Emmis Station have been obtained, all such permits are valid and in full force and effect, and the Emmis Stations are 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 any Emmis Entity'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 Emmis Stations, and to each Emmis Entity's Knowledge, there is no basis for any such proceeding. (c) Except as set forth on Schedule 3.18, to each Emmis Entity's Knowledge, each Emmis Station has operated and is operating in all material respects in compliance with all material 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 such Emmis Station relating to environmental matters. (d) Except as set forth on Schedule 3.18, to each Emmis Entity's Knowledge, there are no conditions or circumstances associated with the Emmis Assets which may give rise to any material liability or material cost under applicable environmental law. Except as listed on Schedule 3.18, no Emmis Station owns or uses 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, including but not limited to, friable asbestos, urea formaldehyde, polychlorinated biphenyls, regulated substances and wastes, radioactive materials, radon, lead and petroleum and petroleum byproducts, including oil or any fraction thereof, but excluding any such substances below applicable governmental action levels, or small quantities of maintenance, cleaning and emergency generator fuel supplies customary for the operation of radio stations, 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 any Emmis Station, no notice has been filed or, to any Emmis Entity's Knowledge, been required to be filed under any applicable material 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. Section 9601, et seq. ("CERCLA") or any other applicable environmental law or regulation has been or, to any Emmis Entity's Knowledge, was required to be filed. (g) Except as set forth on Schedule 3.18, no Emmis Entity or Sinclair Entity has received any notice letter under CERCLA or any other written notice, and, to each Emmis Entity's Knowledge, there is 25 31 no investigation pending or threatened, to the effect that any Emmis Entity 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 any Emmis Entity's Knowledge, does there exist any basis for such investigation. (h) To each Emmis Entity's Knowledge, except as disclosed on Schedule 3.18, or in the environmental site assessments identified in Schedule 3.18, none of the Emmis Operating Assets contains any hazardous materials or underground storage tanks; and no underground storage tank disclosed on Schedule 3.18 leaks or has leaked. The Emmis Entities have furnished to the Bonneville Entities copies of the environment reports, studies or analyses related to the Emmis Operating Assets which are listed on Schedule 3.18. The Emmis Entities are not aware of the existence of any other environmental reports, studies or analyses related to the Emmis Operating Assets. 3.19 BROKER'S OR FINDER'S FEES. Except as set forth on Schedule 3.19, no agent, broker, investment banker or other person or firm acting on behalf of or under the authority of any Emmis Entity or any Affiliate of any Emmis Entity 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. The Emmis Entities have in full force adequate insurance covering the Emmis Operating Assets relating to the Emmis Stations. The Emmis Entities also have in full force adequate workers compensation insurance and general liability insurance in amounts consistent with broadcasting industry standards for similar stations. All of such insurance policies are in full force and effect, and no person is in default with respect to its obligations under any such insurance policy and has not been denied insurance coverage thereunder. 3.21 TRANSACTIONS WITH AFFILIATES. Except as described on Schedule 3.21, no Emmis Entity or Sinclair Entity has been involved in any business arrangement or relationship relating to any Emmis Station with any Affiliate of any Emmis Entity or Sinclair Entity, and no Affiliate of any Emmis Entity or Sinclair Entity owns any property or right, tangible or intangible, which is used in the operation of any Emmis Station or is material to the Emmis Assets or the business, operations, financial condition or results of operations of any Emmis Station. 3.22 EMMIS SUBSIDIARIES' QUALIFICATION. Except as disclosed in Schedule 3.22, the Emmis Subsidiaries are, and at all times between the date hereof and up until and including Closing will be, legally, financially and otherwise qualified under the Act, HSR Act and all rules, regulations and policies of the FCC, the Department of Justice, the Federal Trade Commission (the "FTC") and any other governmental agency, to acquire and operate KZLA. Except as disclosed in Schedule 3.22, to the Knowledge of the Emmis Entities, there are no facts or proceedings which would reasonably be expected to disqualify the Emmis Subsidiaries under the Act or HSR Act or otherwise from acquiring or operating KZLA or would cause the FCC not to approve the assignment of the Bonneville FCC Licenses to Emmis License Subsidiary or the Department of Justice and the FTC not to allow the waiting period under the HSR Act to terminate within thirty (30) days of the filing provided for in Section 5.3. Except as disclosed in Schedule 3.22, the Emmis Entities have no knowledge of any fact or circumstance relating to the Emmis Subsidiaries or any of the Emmis Subsidiaries' Affiliates that would reasonably be expected to (a) cause the filing of any objection to the assignment of the Bonneville FCC Licenses to Emmis License Subsidiary, (b) lead to a material delay in the processing by the FCC of the applications for such assignment or (c) lead to a material delay in the termination of the waiting period required by the HSR Act. Except as disclosed in Schedule 3.22, no waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the 26 32 assignment of the Bonneville FCC Licenses to Emmis License Subsidiary, nor will processing pursuant to any exception or rule of general applicability be requested or required in connection with the consummation of the transactions herein. 3.23 WARN ACT. The Emmis Subsidiaries are not planning or contemplating and have not made or taken any decisions or actions concerning the employees of KZLA after the Closing Date that would require the service of notice under the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar state law. 3.24 EMMIS RIGHTS UNDER SINCLAIR AGREEMENT. The Emmis Entities have not waived any of their rights under the Sinclair Agreement. The Emmis Entities have no Knowledge of any breach or misrepresentation by the Sinclair Entities under the Sinclair Agreement. No provision of the Sinclair Agreement has been waived by Emmis and no consents pursuant to the Sinclair Agreement have been given or requested by Emmis. 3.25 EXCLUSIVITY OF REPRESENTATIONS. THE REPRESENTATIONS AND WARRANTIES MADE BY THE EMMIS ENTITIES IN THIS AGREEMENT OR PURSUANT TO THIS AGREEMENT IN WRITING (AND IN THE TBA) ARE IN LIEU OF AND ARE EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES. THE EMMIS ENTITIES HEREBY DISCLAIM ANY SUCH OTHER IMPLIED REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE BONNEVILLE ENTITIES OR THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION (INCLUDING, WITHOUT LIMITATION, ANY FINANCIAL PROJECTIONS OR OTHER SUPPLEMENTAL DATA). EXCEPT AS SET FORTH IN THIS AGREEMENT, ALL OF THE TANGIBLE PERSONAL PROPERTY INCLUDED IN THE EMMIS OPERATING ASSETS IS TO BE TRANSFERRED TO BONNEVILLE INTERNATIONAL WITHOUT ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR INTENDED USE OR OTHERWISE, ALL OF WHICH IS HEREBY DISCLAIMED. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BONNEVILLE ENTITIES The Bonneville Entities, jointly and severally, represent and warrant to the Emmis Entities as follows: 4.1 ORGANIZATION, GOOD STANDING AND REQUISITE POWER. Each Bonneville Entity is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and has all requisite power to own, operate and lease those Bonneville Assets which it owns and carry on its business. Bonneville International is duly licensed, qualified to do business and in good standing as a foreign entity under the laws of California, Missouri and Illinois. 27 33 4.2 AUTHORIZATION AND BINDING EFFECT OF DOCUMENTS. Each Bonneville Entity 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 and each of the other Documents. The execution and delivery of this Agreement and each of the other Documents by each Bonneville Entity (as appropriate) and the consummation by each Bonneville Entity of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action (including all necessary shareholder approvals, if any) on the part of each Bonneville Entity. This Agreement has been, and each of the other Documents at or prior to Closing will be, duly executed and delivered by the appropriate Bonneville Entity. This Agreement constitutes (and each of the other Documents, when executed and delivered, will constitute) the valid and binding obligation of the appropriate Bonneville Entity enforceable against such Bonneville Entity in accordance with its terms except as the enforceability of this Agreement or of any of the other Documents may be affected by bankruptcy, insolvency, or similar laws affecting creditors' rights generally and by judicial discretion in the enforcement of equitable remedies. 4.3 ABSENCE OF CONFLICTS. Except as set forth on Schedule 4.3, and except for necessary clearances or approvals under the HSR Act or the Act, the execution, delivery and performance by each Bonneville Entity of this Agreement and the other Documents, and consummation by each Bonneville Entity of the transactions contemplated hereby and thereby, do not and will not (i) conflict with or result in any breach of any of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in a violation of, (iv) give any third party the right to modify, terminate or accelerate any obligation under, or (v) result in the creation of any Lien upon the Bonneville Assets under, the provisions of the organizational documents of such Bonneville Entity, any indenture, mortgage, lease, loan agreement or other agreement or instrument to which such Bonneville Entity is bound or affected, or any law, statute, rule, judgment, order or decree to which such Bonneville Entity is subject. 4.4 CONSENTS. Except as set forth on Schedule 4.3, Schedule 4.7(d) or Schedule 4.9, and except for any necessary clearances or approvals under the HSR Act or the Act, the execution, delivery and performance by each Bonneville Entity of this Agreement and the other Documents, and consummation by each Bonneville Entity 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. 4.5 BONNEVILLE ASSETS; TITLE. (a) The Bonneville 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, material to, or necessary for, the operation of KZLA, with the exception of the Bonneville Excluded Assets and personnel. (b) Together, the Bonneville Entities own and have good (and in the case of real property, marketable) title to, or a valid lessee's or licensee's interest (pursuant to one or more Station Agreements included in the Bonneville Assets) in, all of the Bonneville Assets free and clear of all Liens except Permitted Liens. With respect to Bonneville Assets that are TBA Contracts, the representations contained in this Section 4.5(b) shall speak only as of the end of the day prior to the TBA Effective Date. 28 34 4.6 BONNEVILLE FCC LICENSES. Except as set forth on Schedule 4.6: (a) Bonneville Holding is the valid and legal holder of each of the FCC Licenses listed on Schedule 4.6 (collectively, the "Bonneville FCC Licenses"), and any action of the FCC with respect to each Bonneville FCC License is a Final Action with the exception of the FCC Order. The expiration date of the term of each main Bonneville FCC License is shown on Schedule 4.6. (b) The Bonneville FCC Licenses (i) are valid and in full force and effect, and constitute all of the licenses, permits and authorizations used in or required for the current operation of KZLA under the Act, and (ii) constitute all the currently in effect licenses and authorizations, including amendments and modifications thereto, issued by the FCC for the operation of KZLA. (c) Other than as set forth in the Bonneville FCC Licenses or restrictions applicable to the radio broadcast industry generally, none of the Bonneville FCC Licenses is subject to any restriction or condition which limits in any material respect the full operation of KZLA as now conducted, and as of the Closing Date, none of the Bonneville FCC Licenses shall be subject to any restriction or condition which would limit in any material respect the full operation of KZLA as currently operated. (d) Subject to the TBA, KZLA is being operated by Bonneville International in all material respects in accordance with the terms and conditions of the Bonneville FCC Licenses and the Act, including but not limited to those pertaining to RF emissions; and, to the Knowledge of the Bonneville Entities, KZLA is not causing material interference to other stations, and is not experiencing material interference from other stations, in violation of the Act. (e) No applications, complaints or proceedings are pending or, to the Knowledge of any Bonneville Entity, are threatened which may result in the revocation, modification, non-renewal or suspension of any of the Bonneville FCC Licenses, the denial of any pending applications, the issuance of any cease and desist order or the imposition of any material fines, forfeitures or other administrative actions by the FCC with respect to KZLA or its operation, other than actions or proceedings affecting the radio broadcasting industry in general. (f) To the Knowledge of any Bonneville Entity, the Bonneville Entities have complied in all material respects with all requirements to file registrations, reports, applications and other documents with the FCC with respect to KZLA, 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 radio broadcasting industry in general or facts relating to the Emmis Entities, no Bonneville Entity has 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 Bonneville FCC Licenses or the imposition of any material fines or forfeitures by the FCC against any Bonneville Entity, or (ii) which might reasonably be expected to result in the FCC's denial or delay of approval of the assignment to the Emmis Entities of any Bonneville FCC License or the imposition of any Material Adverse Condition in connection with approval of the transfer to the Emmis Entities of any Bonneville FCC License. (h) There are no unsatisfied or otherwise outstanding citations issued by the FCC with respect to KZLA or its operation. (i) True, complete and accurate copies of all Bonneville FCC Licenses material to the operation of KZLA have been delivered by the Bonneville Entities to the Emmis Entities. (j) Except for the Bonneville FCC Licenses and the Bonneville Permits identified on Schedule 4.6, there are no material licenses, permits or authorizations from governmental or regulatory 29 35 authorities required for the lawful operation and conduct of KZLA as previously and currently operated by the Bonneville Entities. 4.7 STATION AGREEMENTS. (a) Schedule 4.7(a) lists all Trade Agreements of KZLA as of the date indicated on such Schedule, and sets forth the parties thereto, the contracted value of the remaining time required to be provided from and after the date of such Schedule and the contracted value of the goods or services to be received by Bonneville International from and after the date of such Schedule. True and complete copies of all such written Trade Agreements in effect as of such date involving broadcast time of more than $25,000, including all amendments, modifications and supplements thereto, have been delivered to the Emmis Entities, and each Trade Agreement involving KZLA broadcast time of more than $25,000 entered into by any Bonneville Entity between the date of this Agreement and Closing shall be promptly delivered to the Emmis Entities. (b) Schedule 4.7(b), together with Schedule 4.4 to the TBA, lists all the following types of agreements used in or relating to the operation of KZLA as of the TBA Effective Date (except with respect to Section 4.7(b)(i) which is as of July 18, 2000): (i) Agreements for sale of broadcast time on KZLA for monetary consideration that (A) are not terminable by the Bonneville Entities without charge or penalty upon thirty (30) days or less prior written notice and (B) involve broadcast time of more than Twenty-Five Thousand Dollars ($25,000); (ii) All network affiliation agreements; (iii) All sales agency or advertising representation contracts; (iv) Each lease of any Bonneville Asset (including a description of the property leased thereunder) other than such agreements not requiring expenditures of more than $25,000 in any calendar year and having a term (after taking into account any cancellation right of the Bonneville Entities without charge or penalty) of one (1) year or less except for the Bonneville Real Property Leases listed on Schedule 4.9; (v) All collective bargaining agreements; (vi) All severance agreements, employment agreements, talent agreements and agreements with independent contractors, other than such agreements that (A) do not provide for any severance payments or benefits, (B) do not require expenditures of more than $25,000 in any calendar year and (C) have a term (after taking into account any cancellation right of the Bonneville Entities without charge or penalty) of one (1) year or less; (vii) All agreements requiring KZLA or either Bonneville Entity to acquire goods or services exclusively from a single supplier or provider, or prohibiting KZLA or either Bonneville Entity from providing certain goods or services to any Person other than a specified Person; (viii) All agreements that have a remaining term (after taking into account any cancellation rights of the Bonneville Entities without charge or penalty) of more than one (1) year or involve a commitment of more than $25,000; and (ix) Any other agreement that is material to the business, operations, financial condition or results of operations of KZLA. 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, 30 36 modifications and supplements, have been delivered to the Emmis Entities. The Station Agreements that are not described in Section 4.7(a) or in the foregoing clauses (i) through (ix) of this Section 4.7(b) (without regard to the monetary thresholds set forth in Section 4.7(a) or in such clauses of Section 4.7(b)) do not involve commitments by parties thereto with an aggregate fair market value of more than One Hundred Fifty Thousand Dollars ($150,000). (c) Schedule 4.7(c), together with Schedule 4.4 to the TBA, lists all of the contracts and agreements used in or relating to the operation of KZLA immediately prior to the TBA Effective Date to which an Affiliate of any Bonneville Entity is a party. True and complete copies of those in writing have been delivered to the Emmis Entities, and summaries of those that are oral are set forth on Schedule 4.7(c) or Schedule 4.4 of the TBA. (d) Except as set forth on Schedule 4.7(d) and any other Schedule that relates to any Bonneville Station Agreement, with respect to the Station Agreements which are, individually or in the aggregate, material to the assets, business, operations, financial condition or results of operations of KZLA, (i) such Station Agreements are valid, binding, in full force and effect, and enforceable against the relevant Bonneville Entity in accordance with their terms except as the enforceability of such Station Agreements may be affected by bankruptcy, insolvency, or similar laws affecting creditors' rights generally and by judicial discretion in the enforcement of equitable remedies; (ii) neither the Bonneville Entities nor, to the Knowledge of any Bonneville Entity, 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 the Bonneville Entities nor any Affiliate of the Bonneville Entities has granted or been granted any material waiver or forbearance with respect to any such Station Agreements not reflected in an amendment or modification; (iv) the Bonneville Entities hold 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 any Bonneville Entity or any Affiliate of any Bonneville Entity 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) except as set forth on Schedule 4.7(a), 4.7(b) or 4.9, no consent or approval by each party to any such Station Agreement is required thereunder for the consummation of the transactions contemplated hereby. The foregoing to the contrary notwithstanding, with respect to Station Agreements that are TBA Contracts, the representations contained in this Section 4.5(d) shall speak only as of the end of the day prior to the TBA Effective Date. (e) During the period commencing on the TBA Effective Date, neither Bonneville Entity has entered into, modified, amended, renewed, extended or terminated any Station Agreement to be assigned to and assumed by the Emmis Entities pursuant to this Agreement. 4.8 TANGIBLE PERSONAL PROPERTY. (a) Schedule 4.8 lists, as of the date noted on such Schedule, all Tangible Personal Property (other than the Bonneville Excluded Assets, office supplies and other incidental items) necessary for the conduct of the business and operations of KZLA as now operated. (b) Except as specified on Schedule 4.8, the equipment constituting a part of the Tangible Personal Property used in or necessary for the operation of KZLA as now operated by any Bonneville Entity has been properly maintained in all material respects in accordance with 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 material laws, rules, regulations and ordinances. (c) The Bonneville Assets include all assets necessary to operate KZLA other than personnel and the Bonneville Excluded Assets. 31 37 4.9 BONNEVILLE REAL PROPERTY. (a) The list of Real Property set forth on Schedule 4.9 is a correct and complete list of all of the interests in real estate which any Bonneville Entity holds or which are used or held for use by any Bonneville Entity to any material extent in the operation of KZLA. (b) Each Bonneville Entity holds good and marketable fee simple title to each parcel of Real Property listed in Schedule 4.9 as owned by the Bonneville Entity (the "Bonneville Owned Real Property") free and clear of any Liens except Permitted Liens. To each Bonneville Entity's Knowledge, except as set forth on Schedule 4.9, there is no pending, threatened or contemplated action to take by eminent domain or to condemn any of the Real Property used in the operation of KZLA. (c) Each lease (including all amendments, modifications and supplements) under which any Bonneville Entity leases an interest in any Real Property (each, a "Bonneville Real Property Lease") is specified, and each leased Real Property, including but not limited to studio and office space and each transmitter or antenna site (the "Bonneville Leased Real Property"), and its use by any Bonneville Entity are identified, on Schedule 4.9. Except as set forth on such Schedule, such Bonneville Entity holds good title to the lessee's interest under each Bonneville Real Property Lease free and clear of all Liens except Permitted Liens. True and complete copies of all Bonneville Real Property Leases, including all amendments, modifications and supplements, together with all surveys, title policies and real property records in possession of any Bonneville Entity related to any Bonneville Real Property, have been delivered to the Emmis Entities. (d) Except as set forth on the Schedules hereto, (i) each Bonneville Real Property Lease is legal, valid, binding and enforceable against the appropriate Bonneville Entity in accordance with its terms; (ii) neither the Bonneville Entities nor, to the Knowledge of any Bonneville Entity, any other party is in material default under any Bonneville Real Property Lease; (iii) to the Knowledge of each Bonneville Entity, 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 Bonneville Real Property Lease, nor has any Bonneville Entity received written notice alleging any such event has occurred; (iv) none of the rights of the Bonneville Entities under any Bonneville 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 Bonneville Real Property Lease is required for the consummation of the transactions contemplated hereby; and (vi) no Bonneville Entity has granted or been granted any waiver or forbearance with respect to any Bonneville Real Property Lease except as contained in amendments or modifications. (e) All improvements on the Bonneville Owned Real Property and all improvements owned by either Bonneville Entity on the Bonneville Leased Real Property are in compliance in all material respects with applicable federal, state and local laws, building codes, ordinances and regulations, including but not limited to zoning and land use laws, ordinances and regulations, and the use by any Bonneville Entity of each portion of the Bonneville Owned Real Property or Bonneville Leased Real Property complies in all material respects with applicable zoning and land use laws, ordinances and regulations. Each Bonneville Entity's improvements on the Bonneville Owned Real Property or Bonneville Leased Real Property are in good working condition and repair (subject to ordinary wear and tear). 4.10 INTELLECTUAL PROPERTY. Other than Bonneville Excluded Assets, Schedule 4.10 lists all material trade names, trademarks, service marks, copyrights and patents principally used in the operation of KZLA, including all registrations, applications and licenses for any of the Intellectual Property (the "Bonneville Intellectual Property"). Except as disclosed on Schedule 4.10: 32 38 (a) To the Knowledge of each Bonneville Entity, the Bonneville Entities own, free and clear of Liens other than Permitted Liens, all right and interest in, and right and authority to use, or has a valid license to use, in connection with the conduct of the business of KZLA as presently conducted, all of the Bonneville Intellectual Property listed on Schedule 4.10, and all of the rights and properties constituting a part of the Bonneville Intellectual Property are in full force and effect. (b) There are no outstanding or, to the Knowledge of any Bonneville Entity, threatened judicial or adversary proceedings with respect to any of the Bonneville Intellectual Property. (c) No Bonneville Entity has granted to any other person or entity any license or other right or interest in or to any of the Bonneville Intellectual Property or to the use thereof. (d) No Bonneville Entity has Knowledge of any infringement or unlawful use of any of the Bonneville Intellectual Property. (e) To each Bonneville Entity's Knowledge, no Bonneville Entity has violated any provisions of the Copyright Act of 1976, 17 U.S.C. Section 101, et seq., in any material respect. (f) The Bonneville Entities have delivered to the Emmis Entities 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 Bonneville Intellectual Property. 4.11 [INTENTIONALLY OMITTED] 4.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since April 30, 2000, and through the date hereof, other than as described on Schedule 4.12 or caused by or arising from any Emmis Entity's action or failure to perform under the TBA: (a) There has not been any damage, destruction or other casualty loss with respect to the Bonneville 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) None of the Bonneville Entities or KZLA 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) With respect to KZLA, no Bonneville Entity has: (i) amended, terminated, renewed or taken any action or inaction that would result in a renewal of any Station Agreement except in the ordinary course of business consistent with past practices, or any Bonneville Real Property Lease (other than any amendment, noted on Schedule 4.9 hereto); (ii) mortgaged, pledged or subjected to any Lien, any of the Bonneville Assets, except for Permitted Liens; (iii) acquired or disposed of any Bonneville Assets or entered into any agreement or other arrangement for such acquisition or disposition, except for immaterial amounts in the ordinary course of business consistent with past practices and except pursuant to the TBA; (iv) entered into any agreement, commitment or other transaction except the TBA and those that (A) were entered into in the ordinary course of business consistent with past practice or (B) are not material to the assets, business, operations, results of operations or financial condition of KZLA; 33 39 (v) paid any bonus to any officer, director or employee or granted to any officer, director or employee any other increase in compensation in any form, except in the ordinary course of business consistent with past practices; (vi) adopted, amended or renewed 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 any Bonneville Entity; or (viii) operated its business other than as contemplated by the TBA and in the ordinary course consistent with past practices. 4.13 LITIGATION. Except as described in Schedule 4.13 or caused by or arising from any Emmis Entity's action or failure to perform under the TBA, (i) there are no actions, suits, claims, investigations or administrative or arbitration proceedings pending or, to the Knowledge of any Bonneville Entity, threatened against any Bonneville Entity before or by any court, arbitration tribunal or governmental department or agency, domestic or foreign, that relates to KZLA or the Bonneville Assets; (ii) neither any Bonneville Entity nor, to the Knowledge of any Bonneville Entity, any of the officers or employees of any Bonneville Entity, has been charged with, or to the Knowledge of any Bonneville Entity, 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 KZLA; and (iii) neither any Bonneville Entity, any properties or assets of any Bonneville Entity nor, to the Knowledge of any Bonneville Entity, any officer or employee of any Bonneville Entity is a party to or bound by any order, arbitration award, judgment or decree of any court, arbitration tribunal or governmental department or agency, domestic or foreign, in respect of any business practices, the acquisition of any property, or the conduct of any business of any Bonneville Entity which, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect or materially impair the ability of any Bonneville Entity to perform its obligations hereunder and consummate the transactions contemplated hereby. 4.14 LABOR MATTERS. (a) Except as listed on Schedule 4.14(a), as of the end of the day immediately preceding the TBA Effective Date: (i) To each Bonneville Entity's Knowledge, no present or former employee or independent contractor of KZLA has a pending claim or charge which has been asserted or threatened against any Bonneville Entity 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 material 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 material violation of occupational safety or health standards. (ii) There is not pending or, to the Knowledge of any Bonneville Entity, threatened against any Bonneville Entity any labor dispute, strike or work stoppage that affects or interferes or is reasonably likely to affect or interfere with the operation of KZLA, and no Bonneville Entity has Knowledge of any organizational effort currently being made or threatened by or on behalf of any labor union with respect to employees of KZLA. There are no material unresolved unfair 34 40 labor charges against any Bonneville Entity, and no Bonneville Entity has experienced any strike, work stoppage or other similar significant labor difficulties within the preceding twelve (12) months with respect to KZLA. (b) Except as set forth on Schedule 4.7(b), (i) no Bonneville Entity is a signatory or a party to, or otherwise bound by, a collective bargaining agreement now in effect which covers employees or former employees of KZLA, (ii) no Bonneville Entity has agreed to recognize any union or other collective bargaining unit with respect to any employees of KZLA, and (iii) no union or other collective bargaining unit has been certified as representing any employees of KZLA. (c) Schedule 4.14(c) sets forth a true and complete list, as of the date set forth on such list, of all persons employed by a Bonneville Entity in connection with the operation of KZLA who earn more than $15,000 per year, and states for each such employee the date hired, the level of compensation (including any projected bonus) payable to such employee (limited in the case of each employee who is compensated on a commission basis to a description of the manner in which such commissions are determined and the specification of compensation earned by such employee in 1999), and whether such employee is employed under a written contract or is covered by a written severance agreement. Except pursuant to written employment agreements and written severance agreements listed on Schedule 4.7(b), and in the schedule referred to in Section 12(c) of the TBA, the only severance obligations of the Bonneville Entities with respect to employees at KZLA are set forth on Schedule 4.14(c). A true and complete copy of any handbook, policy manual or similar written guidelines furnished to employees of KZLA has been delivered to the Emmis Entities. 4.15 [INTENTIONALLY OMITTED] 4.16 COMPLIANCE WITH LAW. Subject to the TBA, and except as specified on Schedule 4.16, the Bonneville Entities have operated and are operating KZLA in all material respects in compliance with the Act and all other material 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, no Bonneville Entity has received any written notice of material noncompliance pertaining to any operation of KZLA that has not been cured. 4.17 [INTENTIONALLY OMITTED] 4.18 ENVIRONMENTAL MATTERS. (a) Except as set forth on Schedule 4.18, the Bonneville Entities have obtained all environmental, health and safety permits necessary for the operation of KZLA, all such permits are valid and in full force and effect, and the Bonneville Entities are in compliance in all material respects with all terms and conditions of such permits. (b) Except as set forth on Schedule 4.18, there is no proceeding pending or, to any Bonneville Entity'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 KZLA, and to each Bonneville Entity's Knowledge, there is no basis for any such proceeding. (c) Except as set forth on Schedule 4.18, to each Bonneville Entity's Knowledge, each Bonneville Entity has operated and is operating in all material respects in compliance with all material 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 such Bonneville Entity relating to environmental matters. 35 41 (d) Except as set forth on Schedule 4.18, to each Bonneville Entity's Knowledge, there are no conditions or circumstances associated with the Bonneville Assets which may give rise to any material liability or material cost under applicable environmental law. Except as listed on Schedule 4.18, no Bonneville Entity owns or uses any electrical or other equipment containing polychlorinated biphenyls. (e) For the purposes of this Section 4.18, (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, including but not limited to, friable asbestos, urea formaldehyde, polychlorinated biphenyls, regulated substances and wastes, radioactive materials, radon, lead and petroleum and petroleum byproducts, including oil or any fraction thereof, but excluding any such substances below applicable governmental action levels, or small quantities of maintenance, cleaning and emergency generator fuel supplies customary for the operation of radio stations, 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 4.18, with respect to the operation of KZLA, no Bonneville Entity has filed or, to any Bonneville Entity's knowledge, been required to file any notice under any applicable material 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 CERCLA or any other applicable environmental law or regulation has been or, to any Bonneville Entity's Knowledge, was required to be filed. (g) Except as set forth on Schedule 4.18, no Bonneville Entity has received any notice letter under CERCLA or any other written notice, and, to each Bonneville Entity's Knowledge, there is no investigation pending or threatened, to the effect that any Bonneville Entity 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 any Bonneville Entity's Knowledge, does there exist any basis for such investigation. (h) To each Bonneville Entity's Knowledge, except as identified on Schedule 4.18, none of the Bonneville Operating Assets contains any hazardous materials or underground storage tanks; and no underground storage tank disclosed on Schedule 4.18 leaks or has leaked. The Bonneville Entities have furnished to the Emmis Entities copies of the environment reports, studies or analyses related to the Bonneville Operating Assets which are listed on Schedule 4.18. The Bonneville Entities are not aware of the existence of any other environmental reports, studies or analyses related to the Bonneville Operating Assets. 4.19 BROKER'S OR FINDER'S FEES. Except as set forth on Schedule 4.19, no agent, broker, investment banker or other person or firm acting on behalf of or under the authority of any Bonneville Entity or any Affiliate of any Bonneville Entity 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. 4.20 INSURANCE. Bonneville International has in full force adequate insurance covering the Bonneville Operating Assets relating to KZLA. Bonneville International also has in full force adequate workers compensation insurance and general liability insurance in amounts consistent with broadcasting industry standards for similar stations. All of such insurance policies are in full force and effect, and no Bonneville Entity is in default with respect to its obligations under any such insurance policy and has not been denied insurance coverage thereunder. 36 42 4.21 TRANSACTIONS WITH AFFILIATES. Except as described on Schedule 4.21, no Bonneville Entity has been involved in any business arrangement or relationship relating to KZLA with any Affiliate of any Bonneville Entity, and no Affiliate of any Bonneville Entity owns any property or right, tangible or intangible, which is used in the operation of KZLA or is material to the Bonneville Assets or the business, operations, financial condition or results of operations of KZLA. 4.22 BONNEVILLE ENTITIES' QUALIFICATION. Except as disclosed in Schedule 4.22 and as provided for in Section 5.3, the Bonneville Entities are, and at all times between the date hereof and up until and including Closing will be, legally, financially and otherwise qualified under the Act, HSR Act and all rules, regulations and policies of the FCC, the Department of Justice, the FTC and any other governmental agency, to acquire and operate the Emmis Stations. Except as disclosed in Schedule 4.22, to the Knowledge of the Bonneville Entities, there are no facts or proceedings which would reasonably be expected to disqualify the Bonneville Entities under the Act or HSR Act or otherwise from acquiring or operating the Emmis Stations or would cause the FCC not to approve the assignment of the Emmis FCC Licenses to the Bonneville Entities or the Department of Justice and the FTC not to allow the waiting period under the HSR Act to terminate within thirty (30) days of the filing provided for in Section 5.3. Except as disclosed in Schedule 4.22, the Bonneville Entities have no knowledge of any fact or circumstance relating to the Bonneville Entities or any of the Bonneville Entities' Affiliates that would reasonably be expected to (a) cause the filing of any objection to the assignment of the Emmis FCC Licenses to the Bonneville Entities, (b) lead to a material delay in the processing by the FCC of the applications for such assignment or (c) lead to a material delay in the termination of the waiting period required by the HSR Act. Except as disclosed in Schedule 4.22, no waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the Emmis FCC Licenses to the Bonneville Entities, nor will processing pursuant to any exception or rule of general applicability be requested or required in connection with the consummation of the transactions herein. 4.23 WARN ACT. The Bonneville Entities are not planning or contemplating and has not made or taken any decisions or actions concerning the employees of the Emmis Stations after the Closing Date that would require the service of notice under the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar state law. 4.24 EXCLUSIVITY OF REPRESENTATIONS. THE REPRESENTATIONS AND WARRANTIES MADE BY THE BONNEVILLE ENTITIES IN THIS AGREEMENT OR PURSUANT TO THIS AGREEMENT IN WRITING (AND IN THE TBA) ARE IN LIEU OF AND ARE EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES. THE BONNEVILLE ENTITIES HEREBY DISCLAIM ANY SUCH OTHER IMPLIED REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE EMMIS ENTITIES OR THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION (INCLUDING, WITHOUT LIMITATION, ANY FINANCIAL PROJECTIONS OR OTHER SUPPLEMENTAL DATA). EXCEPT AS SET FORTH IN THIS AGREEMENT, ALL OF THE TANGIBLE PERSONAL PROPERTY INCLUDED IN THE BONNEVILLE OPERATING ASSETS IS TO BE TRANSFERRED TO EMMIS OPERATING SUBSIDIARY WITHOUT ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR INTENDED USE OR OTHERWISE, ALL OF WHICH IS HEREBY DISCLAIMED. 37 43 ARTICLE V OTHER COVENANTS 5.1 CONDUCT OF EACH STATION'S BUSINESS PRIOR TO THE CLOSING DATE. Subject to the TBA, each Transferring Party covenants and agrees with the Recipient Party that from the date of this Agreement through the Closing Date, or the termination of this Agreement if earlier, unless the Recipient Party otherwise consents in writing (which consent shall not be unreasonably withheld, delayed or conditioned), the Transferring Party shall (and in the case of the Sinclair Stations, Emmis shall cause the Sinclair Entities to): (a) Operate or cause to be operated each Station of the Transferring Party in the ordinary course of business consistent with past practices, including (i) incurring promotional expenses substantially 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, inventory levels, 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 consistent with past practice, and (iv) continuing the Station's usual and customary policy with respect to extending credit, writing of sales orders and collection of accounts receivable and the maintenance of its facilities and equipment; (b) Operate or cause to be operated each Station and otherwise conduct business of the Stations in all material respects in compliance with the terms or conditions of the Station's FCC Licenses, the Act, and all other material rules, regulations, laws and orders of all governmental authorities having jurisdiction over any aspect of the operation of the Station; (c) Maintain or cause to be maintained each Station's books and records in accordance with generally accepted accounting principles on a basis consistent with prior periods; (d) Promptly notify the Recipient Party 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 assets, business, operations, financial condition or results of operations of any Station; (e) Timely comply in all material respects with the Station Agreements which are, individually or in the aggregate, material to the assets, business, operations, financial condition or results of operations of any Station; (f) Not sell, lease, or grant any rights in or to or otherwise dispose of, or agree to sell, lease or otherwise dispose of, any of the Assets used or held for use in connection with any Station 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; (g) Not amend, enter into, renew or extend, except in the ordinary course of business consistent with past practice, any Trade Agreement; 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 that would constitute Station Agreements related to any relevant Station to exceed in the aggregate Twenty-Five Thousand Dollars ($25,000.00); any studio or office lease; antenna or transmitter space lease; network affiliation agreement; programming agreement; or any agreement described in Section 3.7(b)(vii) or Section 4.7(b)(vii); (h) Not enter into, amend, renew or extend any employment or talent contracts or other Station Agreements related to any relevant Station except on terms comparable to those of the 38 44 Transferring Party's Station Agreements now in existence and otherwise in the ordinary course of business consistent with past practices; (i) Maintain or cause to be maintained in good operating condition and repair (except for ordinary wear and tear) the technical equipment that constitutes part of the Assets related to the Station and is currently in use; (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 any Station, except in the ordinary course of business consistent with past practice or as required by an employment or consulting agreement or in connection with and commensurate with a change in responsibility; (k) Not enter into any agreement relating to any Station (other than agreements that will be terminated prior to Closing) with any Affiliate of the owner or operator of the Station; (l) Except as required by law, not voluntarily enter into or amend any collective bargaining agreement applicable to any employees of any Station or otherwise voluntarily recognize any union as the bargaining representative of any such employees; and not enter into or amend any collective bargaining agreement applicable to any employees of any Station to provide that it shall be binding upon any "successor" employer or such employees; and (m) Not take or agree to take any action that would materially delay the consummation of the Closing as contemplated by this Agreement. The foregoing covenants of the Bonneville Entities shall be subject to the TBA and any Emmis Entity's action or failure to perform under the TBA. The Emmis Entities covenant and agree to use, and the foregoing covenants and agreements of the Emmis Entities in this Section shall, to the extent relating to the Sinclair Stations, be interpreted to require the Emmis Entities to enforce the Sinclair Agreement. Emmis shall not waive any of its rights under the Sinclair Agreement without the prior written consent of the Bonneville Entities, which shall not be unreasonably withheld, conditioned, or delayed. 5.2. NOTIFICATION OF CERTAIN MATTERS. Each party to this Agreement shall give prompt notice to the other parties of (a) the occurrence, or failure to occur, of any event that would be likely to cause any of their respective representations and warranties contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Closing Date, and (b) any failure on their respective parts to comply with or satisfy, in any material respect, any covenant, condition or agreement to be complied with or satisfied by any party under this Agreement. The Emmis Entities shall give prompt notice to the Bonneville Entities of any of the above matters or events with respect to the Sinclair Agreement promptly after acquiring knowledge thereof. 39 45 5.3 HSR FILINGS. The Emmis Entities and Bonneville Entities have previously made the filings required 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 Filings"). The Sinclair Entities have previously made the filings required under the HSR Act in connection with the transactions contemplated by the Sinclair Agreement. The HSR Filings were made based on and as prescribed in the letter of intent dated June 21, 2000 between the Emmis Entities and the Bonneville Entities. The Emmis Entities and Bonneville Entities shall use their commercially reasonable efforts to diligently take, or to fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested, in order to comply with the requirements of the HSR Act; provided, however, that the Bonneville Entities shall not be required to disclose financial information regarding the Corporation of the President of the Church of Jesus Christ of Latter-Day Saints and its subsidiaries and affiliates (other than the Bonneville Entities) to any regulatory agency. 5.4 FCC FILING. (a) The Emmis Entities and the Bonneville Entities have previously filed 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 and 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. The Emmis Entities and Bonneville Entities shall oppose and file such papers and pleadings with the FCC or other appropriate forum opposing and objecting to any petitions to deny or other objections filed with respect to the application for the FCC Order and any requests for reconsideration or judicial review of the FCC Order. (b) If the Closing shall not have occurred for any reason within the original effective period of the FCC Order, and neither party shall have terminated this Agreement under Article X, the parties shall jointly request an extension of the effective period of the FCC Order. No extension of the effective period of the FCC Order shall limit the exercise by either party of its right to terminate the Agreement under Article X. (c) The Emmis Entities and the Sinclair Entities have previously filed all applications with the FCC for the transactions contemplated by the Sinclair Agreement and the Emmis Entities shall take all actions set forth in Sections 5.4(a) and (b) above with respect to such applications of the Emmis Entities. 5.5 TITLE; ADDITIONAL DOCUMENTS. Except to the extent already effected pursuant to the TBA, at the Closing, each Transferring Party shall transfer and convey to the Recipient Party good (and, in the case of real property, marketable) title to all of the Assets of the Transferring Party free and clear of any Liens except Permitted Liens. Each Transferring Party shall, upon request of the Recipient Party, execute or cause to be executed such documents, in addition to those delivered at the Closing, or in connection with the TBA, as may be necessary to confirm in the Recipient Party such title to the Assets of the Transferring Party and to carry out the purposes and intent of this Agreement, which documents shall be in a form reasonably acceptable to the Transferring Party and the Recipient Party. Each Recipient Party shall execute or cause to be executed such documents, in addition to those delivered at Closing, or in connection with the TBA, as may be necessary to confirm the Recipient Party's assumption of the Recipient Party's Assumed Obligations, which documents shall be in a form reasonably acceptable to the Transferring Party and the Recipient Party. 40 46 5.6 OTHER CONSENTS. Each Transferring Party shall use its commercially reasonable efforts to obtain the consents or waivers to the transactions contemplated by this Agreement required under the Station Agreements relating to the relevant Station without any condition or modification adverse to the Recipient Party or any Station to be conveyed to the Recipient Party pursuant to this Agreement, and each Recipient Party shall cooperate as reasonably requested by the Transferring Party in assisting the Transferring Party to obtain such consents. Neither the Transferring Party nor the Recipient Party shall be required to pay or grant any material consideration or divulge any confidential information or otherwise unduly prejudice itself in order for the Transferring Party to obtain any such consent or waiver except that the Transferring Party shall be required to obtain releases of Liens (other than Permitted Liens) which encumber any of the Transferring Party's Assets. 5.7 INSPECTION AND ACCESS; FINANCIAL INFORMATION. Each Transferring Party shall, prior to the Closing Date, make available the assets, books, accounting records, correspondence and files of the Emmis Stations and KZLA (to the extent related to the operation thereof) for examination by the Recipient Party, 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 any Station. If Closing occurs, the books, records and files that are not part of but relate to the Assets conveyed by a Transferring Party shall be preserved and maintained by the Transferring Party for four (4) years after the Closing, and the books, records and files that are part of the Assets conveyed to a Recipient Party shall be maintained and preserved by the Recipient Party for a period of four (4) 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. The Emmis Entities covenant and agree, and the foregoing covenants and agreements of the Emmis Entities in this Section shall, to the extent relating to the Sinclair Stations, be interpreted to require the Emmis Entities to enforce the Sinclair Agreement. 5.8 CONFIDENTIALITY. Subject to Section 5.15, all information delivered or made available to a Recipient Party or a Recipient Party's representatives or otherwise disclosed in writing by the Transferring Party (or its representatives) before or after the date of this Agreement, in connection with the transactions contemplated by this Agreement, shall be kept confidential by the Recipient Party and its representatives and shall not be used other than as contemplated by this Agreement, except to the extent (i) such information was otherwise publicly available when received, (ii) is or hereafter becomes lawfully obtainable from third parties not related to the Recipient Party or its Affiliates, (iii) such information is required to be disclosed by law, judicial or other governmental rule or order, or the rules of any stock exchange, or (iv) such duty as to confidentiality is waived in writing by the Transferring Party. The Bonneville Entities shall continue to be bound by the terms and provisions of the confidentiality letter dated June 21, 2000 executed and delivered by Bonneville International to Emmis; and the Emmis Entities shall continue to be bound by the terms and provisions of the Confidentiality Agreement dated June 21, 2000 executed and delivered by Emmis in favor of the Bonneville Entities. 41 47 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 (which will not be unreasonably withheld), except as required by law or applicable regulations, in which case the Party issuing the press release or announcement shall provide the other Party with a copy thereof sufficiently in advance of such issuance to permit the other Party to comment thereon. 5.10 MATERIAL ADVERSE EFFECT. The Emmis Entities and the Bonneville Entities will promptly notify the other Party of any event of which the Emmis Entities or the Bonneville Entities, as the case may be, obtain knowledge which has had or could reasonably be expected to have Material Adverse Effect with respect to either the Emmis Stations or KZLA. 5.11 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and conditions of this Agreement, each Party will use its commercially reasonable 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. Subject to the terms and conditions of the Sinclair Agreement, Emmis will use its commercially reasonable efforts to take all action and to do all things necessary, proper or advisable to satisfy any condition of the Sinclair Agreement in its power to satisfy and to consummate and make effective as soon as practicable the transactions contemplated by the Sinclair Agreement. 5.12 FCC REPORTS AND APPLICATIONS. Each Transferring Party shall file or cause to be filed, 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 each Station of the Transferring Party. In addition, each Transferring Party shall timely file or cause to be filed all applications necessary for renewal of any of the FCC Licenses used in the operation of any Station of the Transferring Party, shall prosecute or cause to be prosecuted each such application with diligence, shall in each case seek or cause to be sought renewal for a full term, and shall diligently oppose or cause to be opposed any objection to, appeal from or petition to reconsider the grant of any such renewal application. The Emmis Entities covenant and agree, and the foregoing covenants and agreements of the Emmis Entities in this Section shall, to the extent relating to the Sinclair Stations, be interpreted to require the Emmis Entities to enforce the Sinclair Agreement. 5.13 TAX RETURNS AND PAYMENTS. Each Transferring Party will timely file or cause to be filed with the appropriate governmental agencies all Tax Returns required to be filed with respect to each Station of the Transferring Party prior to Closing and timely pay or cause to be paid all Taxes reflected on such Tax Returns as owing. 5.14 NO SOLICITATION. From the date hereof until the earlier of Closing or termination of this Agreement, no Transferring Party or any Affiliate of a Transferring Party shall directly or indirectly (i) knowingly discuss, solicit or encourage any proposal or offer from any Person relating specifically to the acquisition or purchase of any interest in the Transferring Party or any material assets of any Station of the Transferring Party, or any merger, consolidation or other business combination with the Transferring Party (each an "Acquisition 42 48 Proposal"), or (ii) otherwise knowingly assist or negotiate with any Person with respect to an Acquisition Proposal. 5.15 AUDITED FINANCIAL STATEMENTS. The Bonneville Entities recognize that Emmis is a publicly reporting company and agrees that Emmis shall be entitled at Emmis' expense to cause audited and unaudited financial statements of KZLA to be prepared for such periods and filed with the Securities and Exchange Commission, and included in a prospectus distributed to prospective investors, as required by laws and regulations applicable to Emmis as a publicly reporting company or registrant. The Bonneville Entities agree to cooperate with Emmis and the auditing accountants as reasonably requested by Emmis in connection with the preparation and filing of such financial statements, including providing a customary management representation letter (to the best of the signatory's knowledge and belief) in the form prescribed by generally accepted auditing standards and using their commercially reasonable efforts to obtain the consent of the Bonneville Entities' independent accounting firm to permit Emmis and Emmis' auditors to have access to such firm's workpapers as they relate solely to KZLA operations. Under no circumstance shall the preparation of any financial statements pursuant to such audit (i) require a Bonneville Entity to change or modify any accounting policy, (ii) cause any unreasonable disruption in the business or operations of KZLA, or (iii) cause any delay that is more than de minimis in any internal reporting requirements of either Bonneville Entity. 5.16 DISCLOSURE SCHEDULES. (a) Each Party will use its commercially reasonable efforts to promptly supplement or amend its Schedules hereto with respect to any matter arising after the date of this Agreement that would have been required to be set forth or described in a Schedule or that is necessary to correct any information in a Schedule or in any representation or warranty; provided that if the other Party fails to object within fifteen (15) days after receipt of such supplement or amendment, such other Party shall be deemed to have waived its rights to object to such proposed supplement or amendment. If such other Party makes a timely objection pursuant to this Section 5.16(a), any such proposed supplement or amendment will not be permitted, except as thereafter mutually agreed. (b) Each Recipient Party acknowledges and agrees that the Transferring Party shall not be liable for the failure of the Transferring Party's Schedules to be accurate as a result of the operation of the Station or Stations of the Transferring Party prior to a Closing in accordance with Section 5.1 of this Agreement. The inclusion of any fact or item on a Schedule referenced by a particular section in this Agreement shall, should the existence of the fact or item or its contents be relevant to any other section, be deemed to be disclosed with respect to such other section whether or not an explicit cross-reference appears in the Schedules if such relevance is readily apparent from examination of such Schedules. 5.17 BULK SALES LAW. Each Recipient Party hereby waives compliance by the Transferring Party with the provisions of any applicable bulk transfer laws in connection with the Transferring Party's conveyances to the Recipient Party as contemplated by this Agreement. 5.18 MULTI-STATION AGREEMENTS. To the extent Station Agreements used in the operation of a Transferring Party's Station or Stations are part of multi-station group contracts with beneficial rates and terms, the Transferring Party shall use its commercially reasonable efforts (excluding, however, the incurrence of material cost or expense) to provide the Recipient Party such beneficial rates and terms, except for the rate payable to any national sales representative which shall be separately negotiated by the Recipient Party and the national sales representative. 43 49 5.19 EMMIS STATION REAL ESTATE. (a) The Emmis Assets will include the Lease Agreement dated as of March 15, 1994 (the "Initial Manchester Road Lease" and the Lease dated September 15, 1995 (the "Supplemental Manchester Road Lease" and together with the Initial Manchester Road Lease, the "Manchester Road Leases") with respect to studio and office space at 8081 Manchester Road, St. Louis, Missouri (the "Manchester Road Premises") now used in the operation of WIL and WRTH. The Manchester Road Premises are also used in the operation of radio station KIHT(FM) which the Emmis Entities are to acquire pursuant to the Sinclair Agreement. Immediately before the Closing under this Agreement, Emmis will cause the studio and office equipment used in the operation of KIHT and located at the Manchester Road Premises to be conveyed to Emmis Operating Subsidiary, and in exchange for such equipment, shall cause Emmis Operating Subsidiary to convey the studio and office equipment located at 800 Union Street, St. Louis, Missouri and now used in operation of WKKX, to the Subsidiary of Emmis that will acquire the assets (other than FCC licenses) of KIHT. The studio and office equipment of KIHT that is conveyed to Emmis Operating Subsidiary will be included in the Emmis Assets to be conveyed to the Bonneville Entities as provided in this Agreement. The result of this exchange of equipment will be that upon Closing, the studio and office equipment of WKKX will be located at the Manchester Road Premises for use in the operation of WKKX pursuant to the terms of the lease of the Manchester Road Premises. Any cost associated with the actions contemplated by this Section 5.19 shall be borne by the Emmis Entities. (b) At Closing, Emmis and Bonneville International will enter into a sublease for a term of eighteen (18) months, terminable by Bonneville International upon thirty (30) days prior written notice, and at the rent specified in and otherwise in the form and substance of Exhibit A, under which Bonneville International will be entitled to use, possession and enjoyment of the portion described in such sublease of the premises at 1215 Cole Street, St. Louis, Missouri for the studio and offices of WVRV (the "Sublease"). (c) Before or after Closing, the Emmis Entities will identify premises in the St. Louis metropolitan area (which may consist of the Manchester Road Premises plus additional space at such location) available for rent and suitable for use as studio and offices for the operation of all the Emmis Stations (the "New Premises") and will negotiate a lease of the New Premises (the "New Premises Lease"), under which Bonneville International will be the tenant, for use as the studio and offices of all the Emmis Stations for a term of at least eight (8) years at a fair market rent for space in the St. Louis metropolitan area suitable for use as studios and offices for the operation of the Emmis Stations. The New Premises, including the configuration, size and location, and the provisions of the New Premises Lease (other than an eight-year (8) term) will be subject to the approval of Bonneville International which will not be unreasonably withheld, conditioned or delayed. The Emmis Entities will use their good faith efforts to negotiate a nondisturbance agreement on commercially reasonable terms with each holder of a mortgage lien superior to the Tenant's rights under the New Premises Lease. Bonneville International will be entitled to participate in the negotiation of the New Premises Lease and any such nondisturbance agreement. The Emmis Entities will diligently perform the foregoing covenants under this Section 5.19(c), and subject to receiving Bonneville International's reasonable cooperation and assistance (which will not, however, include payment by Bonneville International of any cost or expense for which the Emmis Entities are responsible under this Section 5.19(c)), the Emmis Entities will complete such performance no later than necessary to permit Bonneville International to occupy and use the New Premises, within eighteen (18) months after the Closing Date, as the studios and offices for the operation of all the Emmis Stations. In addition, the Emmis Entities shall (i) pay the reasonable cost of tenant finish and leasehold improvements necessary to make the New Premises suitable, within Bonneville International's reasonable judgment, for use as the studios and offices of all the Emmis Stations, and (ii) contemporaneously with the payment thereof by Bonneville International, reimburse Bonneville International for (A) the amount by which the aggregate rent paid by Bonneville International per month under Sections 4 and 6 of the Initial Manchester Road Lease and Sections 4.1 and 9 of the Supplemental Manchester Road Lease exceeds $13,815 per month (in each case prorated for any partial month), (B) 44 50 the cost of terminating the Manchester Road Leases prior to their expiration date, including any termination penalties payable to the landlord, and (C) the reasonable costs to move the studios and offices of all the Emmis Stations to the New Premises, including, but not limited to, any fees and costs incurred for permits and approvals and the reasonable fees and expenses of architects, engineers, brokers, attorneys and other professionals in connection therewith. Subject to the foregoing, Bonneville International shall cooperate as reasonably requested by the Emmis Entities in effecting the termination of the Manchester Road Leases at such time and upon such terms and conditions as approved by the Emmis Entities and Bonneville International, which approval shall not be unreasonably withheld, conditioned or delayed. Such cooperation by Bonneville International shall not require Bonneville International to pay any additional cost or expense or incur any additional obligations. (d) At Closing, Emmis and Bonneville International will enter into a sublease, subject to the consent of the lessor which consent must be obtained by Emmis, at a rent of $1,200 per month for the term specified in and otherwise substantially in the form and substance of Exhibit B, under which Emmis will be entitled to use, possession and enjoyment of an antenna location and a transmitter room for KIHT located at the Manchester Road Premises (the "KIHT Sublease"). (e) The WIL auxiliary broadcast antenna (the "WIL Auxiliary Antenna") is now located at the Manchester Road Premises. In the event the Manchester Road Leases are terminated prior to their current expiration date, Emmis shall use its commercially reasonable efforts to relocate, at Emmis' expense, the WIL Auxiliary Antenna prior to such termination to a location that will permit the broadcast quality of, and the area covered by, the WIL signal to be substantially as adequate for WIL as now provided by the WIL Auxiliary Antenna and auxiliary transmitter at the Manchester Road Premises. The new location for the WIL Auxiliary Antenna, and the terms (including rent at a fair market rate) of the new lease for such location, shall be subject to Bonneville International's prior written approval which will not be unreasonably withheld, conditioned or delayed. At Bonneville's election, Emmis' obligations in connection with such relocation of the WIL Auxiliary Antenna shall include using its commercially reasonable efforts to obtain the necessary FCC license for the new location or Emmis' reimbursement of Bonneville for the reasonable out-of-pocket expenses incurred by Bonneville in obtaining such FCC license. Emmis shall not be obligated to pay any rent or otherwise be liable for any obligations under the new lease for the new location. (f) The lease between Poole Properties, Inc. and Bonneville International dated as of May 29, 1998 and listed as Item 1 on Schedule 4.9 (the "Poole Properties Lease") constitutes one of the KZLA Station Agreements that is being assigned to and assumed by the Emmis Entities as part of the Emmis Assumed Obligations; provided, however, that notwithstanding such assumption by the Emmis Entities, Bonneville International agrees to reimburse the Emmis Entities contemporaneously with the payment thereof by the Emmis Entities for one-half of all rent and other amounts paid by the Emmis Entities pursuant to the terms of the Poole Properties Lease (but not for any period that the Emmis Entities are making use of the properties leased pursuant to the Poole Properties Lease) and any amount paid by the Emmis Entities to the Landlord under the Poole Properties Lease in connection with termination of the Poole Properties Lease. In the event the Emmis Entities sublease the premises under the Poole Properties Lease or otherwise derive revenue from such premises, Bonneville International's reimbursement obligation shall be reduced by one-half of the rent or other revenue received by the Emmis Entities under any such sublease or otherwise derived from the premises under the Poole Properties Lease. In the event such rent or other revenue received by the Emmis Entities exceeds the rent and other amounts paid by the Emmis Entities pursuant to the terms of the Poole Properties Lease, Bonneville International shall be entitled to one-half of such excess. 5.20 SINCLAIR CLOSING. Emmis shall exercise commercially reasonable efforts to close the transactions contemplated in the Sinclair Agreement and shall fully exercise all of its rights under the Sinclair Agreement so as to require Sinclair to close the transactions contemplated in the Sinclair Agreement in accordance with the terms and conditions of the Sinclair Agreement. 45 51 ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATION OF THE EMMIS ENTITIES TO CLOSE The Emmis Entities' obligation under this Agreement to proceed with the Closing is subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, unless waived by the Emmis Entities in writing: 6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES; CLOSING CERTIFICATE. (a) The representations and warranties of the Bonneville Entities contained in this Agreement or in any other Document shall be true and correct in all material respects on the date of this Agreement, and on and as of the Closing Date (except for representations and warranties that speak as of a specific date or time which need only be true and complete as of such date or time) with the same effect as though made on and as of the Closing Date, except for changes permitted under this Agreement or caused by any Emmis Entity's action or failure to perform under the TBA, and except where the failure to be true and complete (determined without regard to any materiality or Knowledge qualifications therein) does not have a Material Adverse Effect with respect to KZLA. (b) The Bonneville Entities shall have delivered to the Emmis Entities on the Closing Date an officer's certificate that the conditions specified in Sections 6.1(a), 6.2, and 6.8 are satisfied as of the Closing Date. 6.2 PERFORMANCE OF AGREEMENT. Each Bonneville Entity shall have performed in all respects all of its covenants, agreements and obligations required by this Agreement to be performed or complied with by it prior to or at Closing. 6.3 FCC ORDER. (a) The FCC Order shall have been granted without any Material Adverse Condition with respect to KZLA notwithstanding that it may not have become a Final Action; provided that if a petition to deny or other third-party objection is filed with the FCC prior to the date on which the FCC Order is issued and becomes effective, and such petition or objection is not withdrawn as of such date and in the reasonable judgment of the Emmis Entities' counsel such objection would reasonably be expected to result in a reversal or rescission of the FCC Order, then the Emmis Entities' obligation to effect the Closing shall be subject to the further condition that the FCC Order shall have become a Final Action. (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 Bonneville FCC Licenses to Emmis License Subsidiary shall have been satisfied. (c) All of the Bonneville FCC Licenses material to the operation of KZLA as conducted as of the date hereof shall be in full force and effect. 6.4 HSR ACT. The waiting period (including any extensions) under the HSR Act applicable to the transactions contemplated by this Agreement shall have expired or been terminated. 6.5 OPINIONS OF BONNEVILLE ENTITIES' COUNSEL. 46 52 The Emmis Entities shall have received (a) the written opinion or opinions of the Bonneville Entities' counsel, dated as of the Closing Date, that (i) each Bonneville Entity is a corporation duly formed and in good standing under the laws of the State of Utah and Bonneville International is in good standing and is duly authorized to transact business as a foreign corporation under the laws of California, Illinois and Missouri, (ii) the execution, delivery and performance of the Agreement and each of the other Documents have been duly authorized by all requisite corporate action (including any necessary shareholder approval) on the part of each Bonneville Entity, and (iii) the Agreement and other Documents have been duly and validly executed and delivered by each Bonneville Entity and constitute valid and legally binding obligations enforceable against each Bonneville Entity 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 the Bonneville Entities' FCC counsel, dated as of the Closing Date, that except as set forth in Schedule 4.6, (i) Bonneville Holding holds the Bonneville FCC Licenses listed in a schedule to such legal opinion, and the Bonneville FCC Licenses (A) are in full force and effect and constitute all of the licenses, permits and authorizations required by the FCC for the operation of KZLA and (B) constitute all of the licenses and authorizations issued by the FCC to the Bonneville Entities for, or in connection with, the operation of KZLA, (ii) all authorizations, approvals and consents of the FCC required under the Act to permit the assignment of the Bonneville FCC Licenses by Bonneville Holding to Emmis License Subsidiary have been obtained, are in effect, and have not been reversed, stayed, enjoined, set aside, annulled or suspended, and (iii) 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 any Bonneville Entity that might result in a revocation, cancellation, suspension, non-renewal, short-term renewal or materially adverse modification of the Bonneville FCC Licenses, except FCC proceedings generally affecting the radio industry. Each opinion may be subject to customary qualifications and limitations. 6.6 REQUIRED CONSENTS. The Bonneville Entities shall have obtained prior to Closing the written consents or waivers to the transactions contemplated by this Agreement, in form reasonably satisfactory to the Emmis Entities' counsel and without any adverse modification or condition that is material to the Emmis Subsidiaries or KZLA, which are required under each Station Agreement indicated with an asterisk on Schedule 4.9. 6.7 DELIVERY OF CLOSING DOCUMENTS. The Bonneville Entities shall have delivered or caused to be delivered to the Emmis Entities on the Closing Date each of the Documents to be delivered pursuant to Section 8.2. 6.8 NO ADVERSE PROCEEDINGS. No judgment or order shall have been rendered and remain in effect, and no action or proceeding by any governmental entity shall be pending, against any of the Bonneville Entities that would make unlawful the purchase and sale of the Bonneville Assets as contemplated by this Agreement. 6.9 CONCURRENT CONVEYANCES. The Bonneville Entities shall have conveyed the Bonneville Assets to the Emmis Subsidiaries as provided in this Agreement concurrently with the Emmis Subsidiaries' conveyance of the Emmis Assets to the Bonneville Entities as provided in this Agreement. 6.10 CLOSING UNDER SINCLAIR AGREEMENT. The Emmis Subsidiaries shall have acquired the Sinclair Stations, including the FCC Licenses (as defined in the Sinclair Agreement) used in the operation of the Sinclair Stations, in accordance with the terms of the Sinclair Agreement. 47 53 ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATION OF THE BONNEVILLE ENTITIES TO CLOSE The Bonneville Entities' obligation under this Agreement to proceed with the Closing is subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, unless waived by the Bonneville Entities in writing: 7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES; CLOSING CERTIFICATE. (a) The representations and warranties of the Emmis Entities in this Agreement or in any other Document and the material representations and warranties of the Sinclair Entities contained in the Sinclair Agreement, shall be true and correct in all material respects on the date of this Agreement and on and as of the Closing Date (except for representations and warranties that speak as of a specific date or time which need only be true and complete as of such date or time) with the same effect as though made on and as of the Closing Date except for changes permitted under this Agreement and except where the failure to be true and complete (determined without regard to any materiality or Knowledge qualifications therein) does not have a Material Adverse Effect with respect to the Emmis Stations. (b) The Emmis Entities shall have delivered to the Bonneville Entities on the Closing Date an officer's certificate that the conditions specified in Sections 7.1(a), 7.2, and 7.8 are satisfied as of the Closing Date and that all documents described in Section 8.3(l) have been delivered. 7.2 PERFORMANCE OF AGREEMENT. Each Emmis Entity and Sinclair Entity shall have performed in all respects all of its covenants, agreements and obligations required by this Agreement and the Sinclair Agreement to be performed or complied with by it prior to or at Closing. 7.3 FCC ORDER. (a) The FCC Order shall have been granted without any Material Adverse Condition with respect to any of the Emmis Stations notwithstanding that it may not have become a Final Action; provided that if a petition to deny or other third-party objection is filed with the FCC prior to the date on which the FCC Order is issued and becomes effective, and such petition or objection is not withdrawn as of such date and in the reasonable judgment of the Bonneville Entities' counsel such objection would reasonably be expected to result in a reversal or rescission of the FCC Order, then the Bonneville Entities' obligation to effect the Closing shall be subject to the further condition that the FCC Order shall have become a Final Action. (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 Emmis FCC Licenses to Bonneville Holding shall have been satisfied. (c) All of the Emmis FCC Licenses material to the operation of any of the Emmis Stations as conducted as of the date hereof shall be in full force and effect. 7.4 HSR ACT. The waiting period (including any extensions) under the HSR Act applicable to the transactions contemplated by this Agreement shall have expired or been terminated. 7.5 OPINIONS OF EMMIS ENTITIES' COUNSEL. 48 54 The Bonneville Entities shall have received (a) the written opinion or opinions of the Emmis Entities' counsel, dated as of the Closing Date, that (i) each Emmis Entity is a corporation duly formed and in good standing under the laws of the state of its formation and is in good standing and is duly authorized to transact business as a foreign corporation under the laws of each applicable jurisdiction, (ii) the execution, delivery and performance of the Agreement and each of the other Documents have been duly authorized by all requisite corporate action (including any necessary shareholder approval) on the part of each Emmis Entity, and (iii) the Agreement and other Documents have been duly and validly executed and delivered by each Emmis Entity and constitute valid and legally binding obligations enforceable against each Emmis Entity 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 the Emmis Entities' FCC counsel, dated as of the Closing Date, that except as set forth in Schedule 3.6, (i) Emmis License Subsidiary holds the Emmis FCC Licenses listed in a schedule to such legal opinion, and the Emmis FCC Licenses (A) are in full force and effect and constitute all of the licenses, permits and authorizations required by the FCC for the operation of the Emmis Stations and (B) constitute all of the licenses and authorizations issued by the FCC to Emmis License Subsidiary for, or in connection with, the operation of the Emmis Stations, (ii) all authorizations, approvals and consents of the FCC required under the Act to permit the assignment of the Emmis FCC Licenses by Emmis License Subsidiary to Bonneville Holding have been obtained, are in effect, and have not been reversed, stayed, enjoined, set aside, annulled or suspended, and (iii) 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 any Emmis Entity that might result in a revocation, cancellation, suspension, non-renewal, short-term renewal or materially adverse modification of the Emmis FCC Licenses, except FCC proceedings generally affecting the radio industry. Each opinion may be subject to customary qualifications and limitations. 7.6 REQUIRED CONSENTS. The Emmis Entities shall have obtained prior to Closing the written consents or waivers to the transactions contemplated by this Agreement, in form reasonably satisfactory to the Bonneville Entities' counsel and without any adverse modification or condition that is material to the Bonneville Entities or any of the Emmis Stations, which are required under each Station Agreement indicated with an asterisk on Schedule 3.9. 7.7 DELIVERY OF CLOSING DOCUMENTS. The Emmis Entities shall have delivered or caused to be delivered to the Bonneville Entities on the Closing Date each of the Documents to be delivered pursuant to Section 8.3. 7.8 NO ADVERSE PROCEEDINGS. No judgment or order shall have been rendered and remain in effect, and no action or proceeding by any governmental entity shall be pending, against any of the Emmis Entities that would make unlawful the purchase and sale of the Emmis Assets as contemplated by this Agreement. 7.9 CONCURRENT CONVEYANCES. The Emmis Subsidiaries shall have conveyed the Emmis Assets to the Bonneville Entities as provided in this Agreement concurrently with the Bonneville Entities' conveyance of the Bonneville Assets to the Emmis Subsidiaries as provided in this Agreement. 7.10 CLOSING UNDER SINCLAIR AGREEMENT. 49 55 The Emmis Subsidiaries shall have acquired the Sinclair Stations, including the FCC Licenses (as defined in the Sinclair Agreement) used in the operation of the Sinclair Stations, in accordance with the terms of the Sinclair Agreement, and Emmis shall not have waived any of its rights under, or amended or modified in any manner, the Sinclair Agreement. ARTICLE VIII CLOSING 8.1 TIME AND PLACE. The closing of the exchange of Assets pursuant to this Agreement (the "Closing") shall take place on the date of this Agreement (the "Closing Date"). 8.2 DELIVERIES BY THE BONNEVILLE ENTITIES. At the Closing, the Bonneville Entities shall deliver to, or cause to be delivered to, the Emmis Entities the following, in each case in form and substance reasonably satisfactory to the Emmis Entities: (a) The opinions of the Bonneville Entities' counsel and FCC counsel, dated the Closing Date, to the effect set forth in Section 6.5; (b) To the extent available from applicable jurisdictions, governmental certificates, dated as of a date as near as reasonably practicable to the Closing Date, showing that each Bonneville Entity is duly organized and in good standing in the State of Utah and, as to Bonneville International, is authorized to transact business as a foreign corporation and in good standing in the States of California, Illinois and Missouri; (c) A certificate of a Secretary or Assistant Secretary of each Bonneville Entity attesting as to the incumbency of each officer of such Bonneville Entity who executes this Agreement and any of the other Documents and to similar customary matters; (d) A bill of sale, special warranty deed, assignments and other instruments of transfer and conveyance transferring the Bonneville Assets (other than those transferred at the Commencement of the TBA) to the Emmis Subsidiaries, in form acceptable to the Emmis Entities in their reasonable judgment; (e) The certificate described in Section 6.1(b); (f) The consents or waivers prescribed in Section 6.6; (g) A certificate for each of the Bonneville Entities dated as of the Closing Date and executed by the Secretary of the Bonneville Entity certifying that the resolutions, as attached to such certificate, were duly adopted by the Bonneville Entity's Board of Directors to duly authorize and approve the execution of this Agreement and the consummation of the transaction contemplated hereby and that such resolutions remain in full force and effect; (h) Affidavits executed by the appropriate Bonneville Entity regarding mechanic's liens sufficient to allow deletion of such liens as a standard exception in final title insurance policies to be issued pursuant to any title insurance commitments which Emmis Operating Subsidiary shall have obtained to insure fee simple title to any of the Bonneville Owned Real Property or leasehold title to any of the Bonneville Leased Real Property; 50 56 (i) An assumption agreement, in form acceptable to the Emmis Entities within their reasonable judgment, pursuant to which the Bonneville Entities shall assume and agree to perform the Bonneville Assumed Obligations; (j) The Sublease and the KIHT Sublease; (k) All keys to and actual possession of all of the Bonneville Operating Assets (other than the Bonneville Excluded Assets); and (l) Such additional information and materials as the Emmis Entities shall have reasonably requested in writing to evidence the satisfaction of the conditions to their obligation to close hereunder, including without limitation, any documents expressly required by this Agreement to be delivered by the Bonneville Entities at Closing. 8.3 DELIVERIES BY THE EMMIS ENTITIES. At the Closing, the Emmis Entities shall deliver to, or cause to be delivered to, the Bonneville Entities the following, in each case in form and substance reasonably satisfactory to the Bonneville Entities: (a) The opinions of the Emmis Entities' counsel and FCC counsel, dated the Closing Date, to the effect set forth in Section 7.5; (b) To the extent available from applicable jurisdictions, governmental certificates, dated as of a date as near as reasonably practicable to the Closing Date, showing that each Emmis Entity is duly organized and in good standing in its state of formation and, as to Emmis Operating Subsidiary, is authorized to transact business as a foreign corporation and in good standing in the States of California and Missouri; (c) A certificate of a Secretary or Assistant Secretary of each Emmis Entity attesting as to the incumbency of each officer of such Emmis Entity who executes this Agreement and any of the other Documents and to similar customary matters; (d) A bill of sale, special warranty deed, assignments and other instruments of transfer and conveyance transferring the Emmis Assets to the Bonneville Entities, and evidence of the termination or release of all Liens (other than Permitted Liens) on the Emmis Assets, in each case in form acceptable to the Bonneville Entities in their reasonable judgment; (e) The certificate described in Section 7.1(b); (f) The consents or waivers prescribed in Section 7.6; (g) A certificate for each of the Emmis Entities dated as of the Closing Date and executed by the Secretary of the Emmis Entity certifying that the resolutions, as attached to such certificate, were duly adopted by the Emmis Entity's Board of Directors to duly authorize and approve the execution of this Agreement and the consummation of the transaction contemplated hereby and that such resolutions remain in full force and effect; (h) Affidavits executed by the appropriate Emmis Entity or Sinclair Entity regarding mechanic's liens sufficient to allow deletion of such liens as a standard exception in final title insurance policies to be issued pursuant to any title insurance commitments which the Bonneville Entities shall have obtained to insure fee simple title to any of the Emmis Owned Real Property or leasehold title to any of the Emmis Leased Real Property; 51 57 (i) An assumption agreement, in form acceptable to the Bonneville Entities within their reasonable judgment, pursuant to which the Emmis Entities shall assume and agree to perform the Emmis Assumed Obligations; (j) The Sublease and the KIHT Sublease; (k) All keys to and actual possession of all of the Emmis Operating Assets (other than the Emmis Excluded Assets); (l) Copies of all material documents delivered to or by the Emmis Entities pursuant to Sections 8.2 and 8.3 of the Sinclair Agreement; and (m) Such additional information and materials as the Bonneville Entities shall have reasonably requested in writing to evidence the satisfaction of the conditions to their obligation to close hereunder, including without limitation, any documents expressly required by this Agreement to be delivered by the Emmis Entities at Closing. ARTICLE IX INDEMNIFICATION 9.1 SURVIVAL. All representations, warranties, covenants and agreements in this Agreement or any other Document shall survive the Closing regardless of any investigation, inquiry or knowledge on the part of 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 Sections 3.18 and 4.18 (Environmental Matters), end eighteen (18) months after the Closing Date, and (ii) in the case of any other representation or warranty, end twelve (12) months after the Closing Date (in each case, the "Survival Period"). The survival of covenants and agreements shall not end. 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 THE EMMIS ENTITIES. (a) Subject to Section 9.2(b), the Emmis Entities shall, jointly and severally, indemnify, defend, and hold harmless the Bonneville Entities and their 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 "Bonneville Entities' Loss") relating to, arising out of or resulting from: (i) Any breach, misrepresentation, failure or omission to perform, or other violations by any Emmis Entity of any of its representations, warranties, covenants or agreements in this Agreement, the TBA or any other Document; or (ii) Any obligation, indebtedness or Liability of any Emmis Entity or Sinclair Entity (other than the Bonneville Assumed Obligations), regardless of whether disclosed to the Bonneville Entities and regardless of whether constituting a breach, misrepresentation, failure or omission to perform, or other violation by an Emmis Entity of any representation, warranty, covenant or agreement hereunder or under any other Document; or 52 58 (iii) Noncompliance by any Emmis Entity with the provisions of any bulk sales act, if applicable, in connection with the transactions contemplated by this Agreement; or (iv) The Sinclair Lawsuit; or (v) An event of default arising solely under and by reason of Section 23(e) of the Initial Manchester Road Lease; or (vi) Any breach, misrepresentation, failure or omission to perform, or other violation by any Emmis Entity or Sinclair Entity of any of their representations, warranties, covenants or agreements in the Sinclair Agreement. (b) If Closing occurs, notwithstanding anything to the contrary contained herein, the Emmis Entities shall not be obligated to indemnify, defend, hold harmless, pay or reimburse the Bonneville Entities except to the extent that (i) the aggregate amount of the Bonneville Entities' Losses exceeds Five Hundred Thousand Dollars ($500,000) (the "Bonneville Threshold") (and then only to the extent the aggregate amount of the Bonneville Entities' Losses exceed Two Hundred Fifty Thousand Dollars ($250,000)) and (ii) the aggregate amount of the Bonneville Entities' Losses is less than Twenty-Two Million Dollars ($22,000,000) (the "Bonneville Cap"), provided that any payment owed by the Emmis Entities to the Bonneville Entities for any of the Bonneville Entities' Losses pursuant to, under or relating to Section 2.7, Section 9.2(a)(ii), (iii), (iv), or (v), Section 13.1, Section 13.2, the Emmis Assumed Obligations, Taxes owed by any Emmis Entity or any Sinclair Entity or constituting a Lien on any Emmis Asset, or Section 12(b) or (c) of the TBA, shall not be counted in determining whether the Bonneville Threshold limitation is satisfied or the Bonneville Cap is reached, and the Bonneville Entities shall have the right to recover any such Bonneville Entities' Losses without regard to the Bonneville Threshold limitation or the Bonneville Cap limitation. No Emmis Entity shall have any indemnification liability for those environmental conditions disclosed on Schedule 3.18 or disclosed pursuant to the reports listed on such schedule. 9.3 INDEMNIFICATION BY THE BONNEVILLE ENTITIES. (a) Subject to Section 9.3(b), the Bonneville Entities shall, jointly and severally, indemnify, defend, and hold harmless the Emmis Entities and their 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, an "Emmis Entities' Loss") relating to, arising out of or resulting from: (i) Any breach, misrepresentation, failure or omission to perform, or other violation by any Bonneville Entity of any of its representations, warranties, covenants or agreements in this Agreement, the TBA or any other Document; or (ii) Any obligation, indebtedness or Liability of any Bonneville Entity (other than the Emmis Assumed Obligations), regardless of whether disclosed to the Emmis Entities and regardless of whether constituting a breach, misrepresentation, failure or omission to perform, or other violation by a Bonneville Entity of any representation, warranty, covenant or agreement hereunder or under any other Document; or (iii) Noncompliance by any Bonneville Subsidiary with the provisions of any bulk sales act, if applicable, in connection with the transactions contemplated by this Agreement. (b) If Closing occurs, notwithstanding anything to the contrary contained herein, the Bonneville Entities shall not be obligated to indemnify, defend, hold harmless, pay or reimburse the Emmis Entities except to the extent that (i) the aggregate amount of the Emmis Entities' Losses exceeds Five Hundred Thousand Dollars ($500,000) (the "Emmis Threshold") (and then only to the extent the aggregate amount of the Emmis Entities' Losses exceed Two Hundred Fifty Thousand Dollars ($250,000)) and (ii) the aggregate amount of the Emmis Entities' Losses is less than Twenty-Two Million 53 59 Dollars ($22,000,000) (the "Emmis Cap"), provided that any payment owed by the Bonneville Entities to the Emmis Entities for any of the Emmis Entities' Losses pursuant to, under or relating to Section 2.7, Section 9.3(a)(ii) or (iii), Section 12.2(b) or (c), Section 13.1, Section 13.2, the Bonneville Assumed Obligations, or Taxes owed by any Bonneville Entity or constituting a Lien on any Bonneville Asset, shall not be counted in determining whether the Emmis Threshold limitation is satisfied or the Emmis Cap is reached, and the Emmis Entities shall have the right to recover any such Emmis Entities' Losses without regard to the Emmis Threshold limitation or the Emmis Cap limitation. No Bonneville Entity shall have any indemnification liability for those environmental conditions disclosed on Schedule 4.18 or disclosed pursuant to the reports listed on such schedule. 9.4 ADMINISTRATION OF INDEMNIFICATION. For purposes of administering the indemnification, defense, hold harmless, payment and reimbursement provisions set forth in Sections 9.2 and 9.3, the following procedure shall apply: (a) Whenever a claim shall arise for indemnification, defense, hold harmless, payment or reimbursement under this Article, the party entitled to indemnification, defense, hold harmless, payment, or reimbursement (the "Indemnified Party") shall reasonably promptly give written notice to the party from whom indemnification, defense, hold harmless, payment, or reimbursement 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, defense, hold harmless payment, or reimbursement hereunder. (b) In the event of any claim for indemnification, defense, hold harmless, payment, or reimbursement 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 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, conditioned or delayed; provided, however, that such defense may be subject to the Indemnifying Party's right to contest the obligation to indemnify, defend, hold harmless, pay or reimburse. 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 (at each such party's own expense) who shall cooperate with one another in defending against such claim. (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 determines is 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; provided, however, that the Indemnifying Party shall have the right to contest through appropriate proceedings its obligation to provide indemnification, defense, hold harmless, payment or reimbursement hereunder. (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 actual loss or prejudice occurs as a result of such failure or delay. A Recipient Party shall not be deemed to have notice of any claim solely by reason of any knowledge acquired on or prior to the Closing Date by an employee of any Station acquired by the Recipient Party pursuant to this Agreement. 54 60 (e) Any indemnification, defense, hold harmless, payment or reimbursement amounts not paid when due under this Article IX shall bear interest from such due date until paid in full at a rate per annum equal to the prime rate at such due date plus three percent (3.0%) (as published in the Money Rates column of the Eastern Edition of The Wall Street Journal). (f) The right to indemnification, defense, hold harmless, payment or reimbursement hereunder shall be the exclusive remedy of any Party after the Closing in connection with any breach by any other Party of its representations, warranties, covenants or agreements. 9.5 MITIGATION AND LIMITATION OF DAMAGES. Each Party hereto agrees to use reasonable efforts to mitigate any Losses which form the basis for any claim for indemnification, defense, hold harmless, payment, or reimbursement hereunder. Notwithstanding anything contained in this Agreement to the contrary, no Party shall be entitled to lost profits, punitive damages or other special or consequential damages regardless of the theory of recovery. ARTICLE X TERMINATION 10.1 RIGHT OF TERMINATION. This Agreement may be terminated prior to Closing: (a) By written agreement of the Emmis Entities and the Bonneville Entities; 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 thirty (30) days after written notice of such breach from the terminating Party is received by the other Party; or (ii) On the date that would otherwise be the Closing Date if any of the conditions precedent to the obligations of the Emmis Entities (in the case of termination by the Emmis Entities) set forth in Sections 6.1(a), 6.1(b), 6.2, 6.5, 6.6 and 6.7 of this Agreement, or any of the conditions precedent to the obligations of the Bonneville Entities (in the case of termination by the Bonneville Entities) set forth in Sections 7.1(a), 7.1(b), 7.2, 7.5, 7.6 and 7.7 of this Agreement, have not been satisfied or waived in writing by the Party with respect to which satisfaction is a condition precedent to its obligation to close (whether or not occurring as the result of the other Party's material breach of any provision of this Agreement); or (iii) Closing does not occur on or before June 20, 2001; or (iv) That Party has terminated the TBA because of a material breach by the other Party thereunder. 10.2 OBLIGATIONS UPON TERMINATION. Sections 5.8, 5.9, 13.2 and 13.4 through 13.15 and Articles IX and X shall survive the termination of this Agreement and remain in full force and effect. Each Party to this Agreement shall remain liable after termination for breach of this Agreement prior to termination. 10.3 TERMINATION NOTICE. 55 61 If the terminating Party is entitled to terminate this Agreement pursuant to the Subsection of Section 10.1 specified in the termination notice, then termination will be deemed effected pursuant to the specified Subsection notwithstanding that termination could be effected pursuant to more than one such Subsection. 10.4 SINGLE PARTY. For purposes of this Article X, (i) no Emmis Entity shall in any event constitute an "other Party" in relation to any other Emmis Entity, (ii) neither Bonneville Entity shall in any event constitute an "other Party" in relation to the other Bonneville Entity, (iii) all Emmis Entities shall together constitute but a single Party, (iv) both Bonneville Entities shall together constitute but a single Party, (v) any breach of this Agreement by one Emmis Entity shall be deemed to constitute a breach of this Agreement by all Emmis Entities, and (vi) any breach of this Agreement by one Bonneville Entity shall be deemed to constitute a breach of this Agreement by both Bonneville Entities. ARTICLE XI CONTROL OF STATIONS Between the date of this Agreement and the Closing Date, (i) the Emmis Entities shall not control, manage or supervise the operation of KZLA or the conduct of its business, all of which shall remain the sole responsibility and under the control of the Bonneville Entities, subject to the Bonneville Entities' compliance with this Agreement and the TBA; and (ii) the Bonneville Entities shall not control, manage or supervise the operation of the Emmis Stations or the conduct of their business, all of which shall remain the sole responsibility and under the control of the Emmis Entities, subject to the Emmis Entities' compliance with this Agreement. ARTICLE XII EMPLOYMENT MATTERS 12.1 KZLA EMPLOYEES. Section 12 of the TBA shall govern employment matters as to employees at KZLA. 12.2 EMMIS STATIONS' EMPLOYEES. (a) Except for the employees listed on Schedule 12.2(a) (the "Excluded Employees"), on the Closing Date, Bonneville International shall offer employment to all employees who perform services for an Emmis Station at a comparable salary, position and place as held by each such employee immediately prior to the Closing Date or in accordance with the expired terms of the two (2) union contracts covering certain of such employees (such contracts being listed on Schedule 3.7(b)). The employees who perform services for and are employed at an Emmis Station immediately prior to the Closing Date (excluding, however, the Excluded Employees) are herein referred to as the "Emmis Employees." The Emmis Entities will cooperate with Bonneville International in its efforts to hire the Emmis Employees. Those Emmis Employees who accept such offer are herein referred to as the "Transferred Employees." Bonneville International shall comply with the terms of any employment contract relating to any Transferred Employee to the extent expressly assumed or required to be assumed by Bonneville International hereunder. (b) Bonneville International will assume responsibility for any severance that may be owed to any Transferred Employee under the two (2) expired union contracts (including credit for prior employment service) and the employment contracts listed on Schedule 3.7(b) in connection with Bonneville International's termination without cause of such Transferred Employee. If the union or any union Emmis Employee makes any demand upon any Emmis Entity (directly or indirectly) for severance 56 62 pay pursuant to either expired union contract, applicable law or any agreement entered into by Bonneville International for (i) any union Transferred Employee terminated by Bonneville International or (ii) for any union Emmis Employee who (A) is terminated by any Emmis Entity or Sinclair Entity as of the Closing Date in connection with this Agreement and (B) does not accept Bonneville International's offer of employment, Bonneville International will defend, indemnify and hold harmless the Emmis Entities against such demand. In addition, Bonneville International shall assume the obligation to bargain with the designated collective bargaining representatives of the Emmis Employees and the operative terms that under applicable law continue in effect under the two (2) expired union contracts listed on Schedule 3.7(b), and promptly after Closing, Bonneville International will notify the relevant unions of its agreement to assume such obligations as provided in this subsection. (c) Bonneville International shall pay the severance described in Schedule 3.14(c) for any (i) other Transferred Employees who are terminated by Bonneville International without cause within one (1) year after being hired by Bonneville International or (ii) except for the Excluded Employees, any other employees that perform services at any Emmis Station to whom Bonneville International either does not offer employment to or to whom Bonneville International offers employment, but such offer is not for a comparable salary, position and place and such offer is rejected by such employee; provided, however, that Bonneville International's total amount of severance obligations in the aggregate shall not exceed the amount of the Bonneville Severance Cap as set forth on Schedule 12.2(c). (d) Bonneville International shall not assume any obligation to pay bonuses to any Excluded Employees (or any other employee whom Bonneville International is not obligated under this Agreement to hire) who are not hired by Bonneville International pursuant to any "Severance/Retention Agreements" or other similar agreements listed on Schedule 3.7(b)(vi) entered into with such employees by any Emmis Entity or Sinclair Entity; provided, however, that Bonneville International shall assume such obligation with respect to each Emmis Employee to whom Bonneville International does not offer employment or to whom Bonneville International offers employment but such offer is not for a comparable salary, position and place and such offer is rejected by such Emmis Employee. (e) Bonneville International shall cause all Transferred Employees to be eligible as of the Closing Date to participate in Bonneville International's employee benefit plans in which similarly situated employees of Bonneville International are generally eligible to participate from time to time; provided, however, Bonneville International represents and agrees that all transferred employees and their spouses and dependents shall be eligible for coverage immediately after the Closing Date under Bonneville International's health insurance plan in accordance with the terms and provisions of such plan and shall not be excluded from coverage under such plan on account of any pre-existing condition except as otherwise provided in Schedule 12.2(e). Each Transferred Employee shall be given credit, to the extent permitted by law, for prior service with any Emmis Entity or Sinclair Entity, any affiliate of such Emmis Entity or Sinclair Entity or any prior owner of the applicable Emmis Station to the extent provided in Schedule 12.2(e) for purposes of determining eligibility to participate in Bonneville International's 401(k) plan, vesting under Bonneville International's Profit Sharing Plan, and vacation earned under Bonneville International's vacation plan. (f) No provisions of this Agreement shall create any third party beneficiary rights of any employees or former employee (including any beneficiary or dependent thereof) of the Emmis Stations in respect of continued employment (or resumed employment) with Bonneville International or Emmis or in respect of any other matter. (g) Except as set forth in Schedule 12.2(a), there are no employees performing services for both an Emmis Station and any other station(s) who will remain employed at such other station(s) and whose services are reasonably necessary for the operation of such Emmis Station. (h) Notwithstanding any other provision herein, Bonneville International does not assume any obligation in any employment contract for Transferred Employees (or any other employees of the Emmis Stations) relating to stock options. 57 63 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. Without limiting the generality of the foregoing, the Transferring Party shall use commercially reasonable efforts after closing to obtain any required consents to the assignment of any Station Agreement used in the operation of a Transferring Party's Station or Stations and to be transferred to the Recipient Party pursuant to this Agreement, and shall keep the Recipient Party informed of any problems or delays in obtaining such required consents. The Emmis Entities acknowledge that Bonneville International will assume any Station Agreement which is indicated on Schedule 3.7 as relating in part to any station other than an Emmis Station only to the extent such Station Agreement relates to an Emmis Station and is not an Emmis Excluded Asset. Emmis and Bonneville International agree to use commercially reasonable efforts to separate each such multi-station Station Agreement into two replacement agreements, with one relating only to the Emmis Stations and one relating only to one or more stations owned by an Emmis Entity or its Affiliates. The Emmis Entities agree to indemnify Bonneville from any expenses, loss, damage, liability or other adverse consequence suffered by Bonneville resulting from breach of any multi-station Station Agreement by stations(s) other than the Emmis Stations, excluding, however, consequential damages. Bonneville agrees to indemnify the Emmis Entities from any expense, loss, damage, liability or other adverse consequence suffered by the Emmis Entities or their Affiliates from breach of any multi-station Station Agreement by Bonneville, excluding, however, consequential damages. 13.2 PAYMENT OF EXPENSES. (a) The fees for the HSR Filings, the fees for filing the applications with the FCC under Section 5.4, and the Transfer Taxes payable in connection with the transactions contemplated by this Agreement shall be paid fifty percent (50%) by the Emmis Entities and fifty percent (50%) by the Bonneville Entities. (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. 58 64 13.3 SPECIFIC PERFORMANCE. Each Transferring Party acknowledges that the Station or Stations of the Transferring Party are of a special, unique and extraordinary character, and that damages alone are an inadequate remedy for a breach of this Agreement by the Transferring Party. Accordingly, as an alternative to termination of this Agreement under Section 10.1, if the Recipient Party is not then in material default hereunder, the Recipient Party shall be entitled, in the event of the Transferring Party'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 the Transferring Party 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, the Recipient Party's right to recover damages and to pursue any other remedies available to the Recipient Party for the Transferring Party's breach. In any action to specifically enforce the Transferring Party's obligation to close the transactions contemplated by this Agreement, the Transferring Party shall waive the defense that there is an adequate remedy at law or in equity and any requirement that the Recipient Party prove actual damages. As a condition to seeking specific performance, the Recipient Party shall not be required to tender the Recipient Party's Assets as contemplated by Section 2.5 but shall be required to demonstrate that the Recipient Party is ready, willing and able to tender the Recipient Party's Assets as contemplated by such Section. 13.4 NOTICES. All notices, payments (unless otherwise specified herein), demands or other communications given hereunder shall be in writing and shall be sufficiently given if delivered by courier (including overnight delivery service), sent by telecopy (with receipt personally confirmed by telephone) or sent by registered or certified mail, first class, postage prepaid, addressed as follows: (a) If to the Emmis Entities, to: Emmis Communications Corporation One Emmis Plaza 40 Monument Circle, Suite 700 Indianapolis, IN 46204 Attention: Jeffrey H. Smulyan, Chairman Attention: J. Scott Enright, Esq. Emmis Communications Corporation 15821 Ventura Boulevard, Suite 685 Encino, CA 91436 Attention: Gary Kaseff, Esq. Copy to: Bose McKinney & Evans LLP 2700 First Indiana Plaza 135 North Pennsylvania Street Indianapolis, IN 46204 Attention: David L. Wills (b) If to the Bonneville Entities, to: Bonneville Holding Company 55 North 300 West, Eighth Floor Salt Lake City, Utah 84180 Attention: President 59 65 Bonneville International Corporation 55 North 300 West, Eighth Floor Salt Lake City, Utah 84180 Attention: President Copy to: Bonneville International Corporation 55 North 300 West, Eighth Floor Salt Lake City, Utah 84180 Attention: General Counsel 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, payment, demand or communication shall be deemed to have been given or made (i) if so mailed, on the date indicated on the return receipt, and (ii) if delivered by courier or telecopy, on the date received. 13.5 ENTIRE AGREEMENT. This Agreement, the Schedules, the Exhibit, the TBA and the other Documents executed contemporaneously herewith 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 expressly provided in this Agreement, (i) the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the Parties to this Agreement and their respective successors or permitted assigns, and (ii) 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, such consent not to be unreasonably withheld, provided that (i) 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 (ii) no such assignment shall relieve any Party of its obligations hereunder. 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, but any such waiver or failure to insist upon strict compliance with any obligation, representation, warranty, covenant, agreement or condition under this Agreement shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 60 66 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. References herein to a "Party" shall mean the Bonneville Entities on one hand and the Emmis Entities on the other. 13.14 SCHEDULES AND EXHIBITS. Unless otherwise specified in this Agreement, each Schedule and Exhibit referenced in this Agreement is attached to, and is incorporated by reference into, this Agreement. 13.15 JOINT AND SEVERAL LIABILITY. The Emmis Entities shall be jointly and severally liable for each representation, warranty, covenant, agreement, liability or obligation of all or any one of the Emmis Entities under this Agreement or any other Document whether or not otherwise indicated in this Agreement or any other Document. The Bonneville Entities shall be jointly and severally liable for each representation, warranty, covenant, agreement, liability or obligation of all or any one of the Bonneville Entities under this Agreement or any other Document whether or not otherwise indicated in this Agreement or any other Document. 13.16 BONNEVILLE ENTITIES NOT RESPONSIBLE FOR EMMIS ENTITIES' ACTIONS UNDER TBA. Notwithstanding anything contained herein to the contrary, the Bonneville Entities shall not be deemed to have breached any representation, warranty, covenant or agreement of the Bonneville Entities contained herein or to have failed to satisfy any condition precedent to the Emmis Entities' obligations under this Agreement (nor shall the Bonneville Entities have any liability or responsibility to the Emmis Entities in respect of any such representation, warranty, covenant, agreement or condition precedent), in each case to the extent that the inaccuracy of any such representation, the breach of any such warranty, covenant or agreement or the inability to satisfy any such condition precedent arises out of or otherwise relates to (i) any actions taken by or under the authorization of any Emmis Entity (or any of its officers, directors, employees, affiliates, agents or representatives) in connection with any Emmis Entity's performance of its obligations under the TBA or (ii) the failure of any Emmis Entity to perform any of its 61 67 obligations under the TBA. The Emmis Entities acknowledge and agree that the Bonneville Entities shall not be deemed to be responsible for, or to have authorized or consented to, any action or failure to act on the part of any Emmis Entity (or any of its officers, directors, employees, affiliates, agents or representatives) in connection with the TBA by reason of the fact that prior to Closing the Bonneville Entities shall have the legal right to control, manage or supervise the operation of KZLA or the conduct of its business. [Signature Page Follows] 62 68 Executed as of the date first written above. BONNEVILLE HOLDING COMPANY By:_________________________________ Printed:____________________________ Its:________________________________ BONNEVILLE INTERNATIONAL COMPANY By:_________________________________ Printed:____________________________ Its:________________________________ "Bonneville Entities" EMMIS COMMUNICATIONS CORPORATION By:_________________________________ Printed: ___________________________ Its:________________________________ EMMIS 106.5 FM BROADCASTING CORPORATION OF ST. LOUIS By:_________________________________ Printed: ___________________________ Its:________________________________ EMMIS 106.5 FM LICENSE CORPORATION OF ST. LOUIS By:_________________________________ Printed: ___________________________ Its:________________________________ "Emmis Entities" 63 EX-10.1 5 c57890ex10-1.txt 3RD AMENDED & RESTATED REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.1 THIRD AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT Dated as of October 2, 2000 Among EMMIS COMMUNICATIONS CORPORATION (F/K/A EMMIS BROADCASTING CORPORATION) as Borrower, THE FINANCIAL INSTITUTIONS NOW OR HEREAFTER PARTIES HERETO, TORONTO DOMINION (TEXAS), INC., as Lead Arranger and Administrative Agent, FLEET NATIONAL BANK (F/K/A BANKBOSTON, N.A.), as Documentation Agent, and FIRST UNION NATIONAL BANK, as Syndication Agent 2 TABLE OF CONTENTS
1. DEFINITIONS AND RULES OF INTERPRETATION...........................................................2 1.1. Definitions..........................................................................2 1.2. Rules of Interpretation.............................................................30 2. THE REVOLVING CREDIT FACILITY....................................................................30 2.1. Tranche A...........................................................................30 2.1.1. Commitment to Lend.........................................................30 2.1.2. Commitment Fee.............................................................31 2.1.3. Reduction of Tranche A Commitment Amount...................................32 2.1.4. The Tranche A Notes........................................................33 2.2. Interest on Revolving Credit Loans..................................................33 2.3. Requests for Revolving Credit Loans.................................................34 2.4. Conversion Options..................................................................34 2.4.1. Conversion to Different Type of Revolving Credit Loan......................34 2.4.2. Continuation of Type of Revolving Credit Loan..............................35 2.4.3. Eurodollar Rate Loans......................................................35 2.5. Funds for Revolving Credit Loans....................................................35 2.5.1. Funding Procedures.........................................................35 2.5.2. Advances by Administrative Agent...........................................36 3. THE TERM LOAN....................................................................................37 3.1. Commitment to Lend..................................................................37 3.1.1. The Tranche B Term Notes...................................................37 3.2. Schedule of Installment Payments of Principal of Tranche B Term Loan................37 Interest on Term Loan........................................................................38 3.3.1. Interest Rates.............................................................38 3.3.2. Notification by Borrower...................................................38 3.3.3. Amounts, etc...............................................................39 4. PREPAYMENTS OF LOANS.............................................................................39 4.1. Optional Repayments of Revolving Credit Loans.......................................39 4.2. Optional Prepayment of the Term Loan................................................39 4.3. Mandatory Repayments of Loans.......................................................40 5. LETTERS OF CREDIT................................................................................43 5.1. Letter of Credit Commitments........................................................43 5.1.1. Commitment to Issue Letters of Credit......................................43 5.1.2. Letter of Credit Applications..............................................43 5.1.3. Terms of Letters of Credit.................................................43 5.1.4. Reimbursement Obligations of Banks.........................................43 5.1.5. Participations of Banks....................................................44
3 -ii- 5.2. Reimbursement Obligation of the Borrower............................................44 5.3. Letter of Credit Payments...........................................................45 5.3.1. Obligations Absolute.......................................................45 5.4. Reliance by Issuer..................................................................46 5.5. Letter of Credit Fee................................................................46 6. CERTAIN GENERAL PROVISIONS.......................................................................47 6.1. Fees................................................................................47 6.1.1. Fee Letter.................................................................47 6.1.2. Extension Fee..............................................................47 6.2. Funds for Payments..................................................................48 6.2.1. Payments to Administrative Agent...........................................48 6.2.2. No Offset, etc.............................................................48 6.2.3. Withholding Tax Exemption..................................................48 6.3. Computations........................................................................49 6.4. Inability to Determine Eurodollar Rate..............................................49 6.5. Illegality..........................................................................49 6.6. Additional Costs, Etc...............................................................50 6.7. Capital Adequacy....................................................................51 6.8. Certificate.........................................................................52 6.9. Indemnity...........................................................................52 6.10. Interest After Default..............................................................52 7. SECURITY AND GUARANTIES..........................................................................53 7.1. Security of Borrower................................................................53 7.2. Guaranties and Security of Subsidiaries.............................................53 8. REPRESENTATIONS AND WARRANTIES...................................................................53 8.1. Corporate Authority.................................................................53 8.1.1. Incorporation; Good Standing...............................................53 8.1.2. Authorization..............................................................54 8.1.3. Enforceability.............................................................54 8.2. Governmental Approvals..............................................................54 8.3. Title to Properties; Leases.........................................................54 8.4. Financial Statements and Projections................................................55 8.4.1. Financial Statements.......................................................55 8.4.2. Projections................................................................55 8.5. No Material Changes, Etc............................................................55 8.6. Franchises, Patents, Copyrights, Etc................................................56 8.7. Litigation..........................................................................56 8.8. No Materially Adverse Contracts, Etc................................................56 8.9. Compliance With Other Instruments, Laws, Etc........................................56 8.10. Tax Status..........................................................................57 8.11. No Event of Default.................................................................57 8.12. Investment Company and Communications Acts..........................................57 8.13. Absence of Financing Statements, Etc................................................57
4 -iii- 8.14. Perfection of Security Interest.....................................................57 8.15. Certain Transactions................................................................58 8.16. Employee Benefit Plans..............................................................58 8.16.1. In General.................................................................58 8.16.2. Terminability of Welfare Plans.............................................58 8.16.3. Guaranteed Pension Plans...................................................58 8.16.4. Multiemployer Plans........................................................59 8.17. Use of Proceeds; Regulations U and X................................................59 8.18. Environmental Compliance............................................................59 8.19. Subsidiaries, etc...................................................................61 8.20. Bank Accounts.......................................................................61 8.21. Licenses and Approvals..............................................................61 8.22. Material Agreements.................................................................62 9. AFFIRMATIVE COVENANTS OF THE BORROWER............................................................63 9.1. Punctual Payment....................................................................63 9.2. Maintenance of Office...............................................................63 9.3. Records and Accounts................................................................63 9.4. Financial Statements, Certificates and Information..................................63 9.5. Notices.............................................................................65 9.5.1. Defaults...................................................................65 9.5.2. Environmental Events.......................................................65 9.5.3. Notification of Claims against Collateral..................................66 9.5.4. Notice of Litigation and Judgments.........................................66 9.6. Corporate Existence; Business Activity; Maintenance of Properties...................66 9.7. Insurance...........................................................................67 9.8. Taxes...............................................................................68 9.9. Inspection of Properties and Books, Etc.............................................68 9.9.1. General....................................................................68 9.9.2. Appraisals.................................................................68 9.9.3. Environmental Assessments..................................................68 9.9.4. Communication with Accountants.............................................69 9.10. Compliance with Laws, Contracts, Licenses, and Permits..............................69 9.11. Employee Benefit Plans..............................................................70 9.12. Use of Proceeds.....................................................................70 9.13. Additional Collateral...............................................................70 9.14. Interest Rate Protection............................................................71 9.15. Further Assurances..................................................................71 10. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.......................................................72 10.1. Restrictions on Indebtedness........................................................72 10.2. Restrictions on Liens...............................................................74 10.3. Restrictions on Investments.........................................................75 10.4. Restricted Payments.................................................................77
5 -iv- 10.5. Mergers, Acquisitions, Dispositions of Assets.......................................78 10.6. Sale and Leaseback..................................................................82 10.7. Compliance with Environmental Laws..................................................82 10.8. Employee Benefit Plans..............................................................83 10.9. Subsidiary Distributions............................................................83 10.10. Conduct of Business Restriction.....................................................83 10.11. Amendments to Subordinated Note Documents...........................................83 11. FINANCIAL COVENANTS OF THE BORROWER..............................................................84 11.1. Consolidated Operating Cash Flow to Consolidated Total Interest Expense.............84 11.2. Total Leverage Ratio................................................................84 Pro Forma Fixed Charge Coverage Ratio........................................................85 11.4. Senior Leverage Ratio...............................................................85 Historical Fixed Charge Coverage Ratio.......................................................85 12. CLOSING CONDITIONS...............................................................................85 12.1. Loan Documents......................................................................85 12.2. Certified Copies of Charter Documents...............................................86 12.3. Corporate Action....................................................................86 12.4. Incumbency Certificate..............................................................86 12.5. Financial Condition.................................................................86 12.6. Validity of Liens...................................................................86 12.7. Perfection Certificates and UCC Search Results......................................87 12.8. Taxes...............................................................................87 12.9. Title Insurance.....................................................................87 12.10. Landlord; Lessor Consents...........................................................87 12.11. Certificates of Insurance...........................................................87 12.12. Opinions of Counsel.................................................................88 12.13. Payment of Fees.....................................................................88 12.14. Assignment and Acceptance...........................................................88 12.15. Disbursement Instructions...........................................................88 12.16. FCC Licenses; Third Party Consents..................................................88 12.17. Accountant's Letter.................................................................89 12.18. Lee Acquisition Documents...........................................................89 13. CONDITIONS TO ALL BORROWINGS.....................................................................89 13.1. Representations True; No Event of Default...........................................89 13.2. No Legal Impediment.................................................................90 13.3. Governmental Regulation.............................................................90 13.4. Proceedings and Documents...........................................................90 14. EVENTS OF DEFAULT; ACCELERATION; ETC.............................................................90 14.1. Events of Default and Acceleration..................................................90 14.2. Termination of Commitments..........................................................95 14.3. Remedies............................................................................95
6 -v- 14.4. Distribution of Collateral Proceeds.................................................96 15. SETOFF...........................................................................................97 16. THE AGENTS.......................................................................................97 16.1. Authorization.......................................................................97 16.2. Employees and Agents................................................................98 16.3. No Liability........................................................................98 16.4. No Representations..................................................................99 16.5. Payments............................................................................99 16.5.1. Payments to Administrative Agent...........................................99 16.5.2. Distribution by Administrative Agent.......................................99 16.5.3. Delinquent Banks..........................................................100 16.6. Holders of Notes...................................................................100 16.7. Indemnity..........................................................................100 16.8. Agents as Banks....................................................................101 16.9. Resignation........................................................................101 16.10. Notification of Defaults and Events of Default.....................................101 16.11. Delegation of Duties...............................................................101 16.12. Documentation Agent and Syndication Agent..........................................102 17. EXPENSES........................................................................................102 18. INDEMNIFICATION.................................................................................102 19. SURVIVAL OF COVENANTS, ETC......................................................................103 20. ASSIGNMENT AND PARTICIPATION....................................................................104 20.1. Conditions to Assignment by Banks..................................................104 20.2. Certain Representations and Warranties; Limitations; Covenants.....................105 20.3. Register...........................................................................105 20.4. New Notes..........................................................................106 20.5. Participations.....................................................................106 20.6. Disclosure.........................................................................107 20.7. Assignee or Participant Affiliated with the Borrower...............................107 20.8. Miscellaneous Assignment Provisions................................................108 20.9. Assignment by Borrower.............................................................108 21. NOTICES, ETC....................................................................................108 22. GOVERNING LAW...................................................................................109 23. HEADINGS........................................................................................109 24. COUNTERPARTS....................................................................................109
7 -vi- 25. ENTIRE AGREEMENT, ETC...........................................................................109 26. WAIVER OF JURY TRIAL............................................................................110 27. CONSENTS, AMENDMENTS, WAIVERS, ETC..............................................................110 28. TRANSITIONAL ARRANGEMENTS.......................................................................111 28.1. Existing Credit Agreement Superseded...............................................111 28.2. Fees Under Existing Credit Agreement...............................................111 29. FCC APPROVAL....................................................................................111 30. CONSENT TO REORGANIZATION.......................................................................112 31. SEVERABILITY....................................................................................113
8 THIRD AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT This THIRD AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of October 2, 2000 by and among (a) EMMIS COMMUNICATIONS CORPORATION (F/K/A EMMIS BROADCASTING CORPORATION), an Indiana corporation (the "Borrower"), (b) the lending institutions listed on Schedule 1 hereto, (c) TORONTO DOMINION (TEXAS), INC., a Delaware corporation, as lead arranger and administrative agent (the "Administrative Agent"), (d) FLEET NATIONAL BANK (F/K/A BANKBOSTON, N.A.), a national banking association, as documentation agent (the "Documentation Agent"), (e) FIRST UNION NATIONAL BANK, a national banking association, as syndication agent (the "Syndication Agent") and (f) such other lending institutions which may become parties hereto from time to time and which are identified on Schedule 1 hereto. WITNESSETH WHEREAS, pursuant to that certain Second Amended and Restated Revolving Credit and Term Loan Agreement, dated as of July 16, 1998 (as amended from time to time, the "Existing Credit Agreement"), by and among the Borrower, the lending institutions party thereto (the "Existing Banks"), the Administrative Agent, the Documentation Agent and the Syndication Agent, the Existing Banks have made available certain financing to the Borrower upon the terms and conditions contained therein; WHEREAS, the Borrower has requested, among other things, additional financing and the Banks (as defined below) are willing to provide such financing on the terms and conditions set forth herein to replace the Existing Credit Agreement; NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the Borrower, the Banks, the Administrative Agent, the Documentation Agent and the Syndication Agent agree that as of the Closing Date (as defined below), the Existing Credit Agreement shall be amended and restated in its entirety as set forth herein: 9 -2- 1. DEFINITIONS AND RULES OF INTERPRETATION. 1.1. DEFINITIONS. The following terms shall have the meanings set forth in this Section 1 or elsewhere in the provisions of this Credit Agreement referred to below: Administrative Agent. Toronto Dominion (Texas), Inc., in its capacity as lead arranger and administrative agent hereunder. Administrative Agent's Head Office. The Administrative Agent's head office located at 909 Fannin, Suite 1700, Houston, Texas 77010 or at such other location as the Administrative Agent may designate from time to time. Affiliate. With respect to the Borrower or a Bank, as the context indicates any Person that would be considered to be an affiliate of the Borrower or such Bank, as applicable, under Rule 144(a) of the Rules and Regulations of the Securities and Exchange Commission, as in effect on the date hereof, if the Borrower or such Bank, as applicable, were issuing securities and with respect to any Bank, a Related Fund. Agents. The Administrative Agent, the Syndication Agent and the Documentation Agent. Agents' Special Counsel. Bingham Dana LLP or such other counsel as may be approved by each of the Agents. Aggregate Facilities Commitment. As of any date, the amount equal to the sum of (a) the aggregate principal amounts of the Term Loan outstanding on such date, plus (b) the Tranche A Commitment Amount as of such date. Applicable Margin. With respect to any Loans, for any fiscal quarter of the Borrower and each Type of Loan, the Applicable Margin shall be the applicable percentage set forth below opposite the Total Leverage Ratio determined as at the last day of the most recently ended period of four (4) consecutive fiscal quarters for which the Borrower has delivered financial statements pursuant to Section 9.4(b) hereof:
Base Rate Applicable Eurodollar Rate Total Leverage Ratio Margin Applicable Margin -------------------- -------------------- ----------------- Greater than or equal to 7.00:1.00 1.625% 2.625% Less than 7.00:1.00 but greater 1.375% 2.375% than or equal to 6.75:1.00
10 -3- Less than 6.75:1.00 but greater 1.125% 2.125% than or equal to 6.50:1.00 Less than 6.50:1.00 but greater 0.875% 1.875% than or equal to 6.00:1.00 Less than 6.00:1.00 but greater 0.875% 1.875% than or equal to 5.50:1.00 Less than 5.50:1.00 but greater 0.875% 1.875% than or equal to 5.00:1.00 Less than 5.00:1.00 but greater 0.875% 1.875% than or equal to 4.50:1.00 Less than 4.50:1.00 0.875% 1.875%
Notwithstanding any of the foregoing, if the Borrower's financial statements are not furnished to the Banks pursuant to Section 9.4(b) within five (5) Business Days after the relevant period of time specified in Section 9.4(b) therefor, the Applicable Margin shall be the highest Applicable Margin set forth above during the period commencing on the date such statements are due and (provided that such financial statements are subsequently furnished to the Banks) ending on the date two (2) days following the delivery to the Administrative Agent of such financial statements. If at any time the financial statements furnished to the Banks pursuant to Section 9.4 hereof indicate that the actual Total Leverage Ratio for any period, was higher than the Total Leverage Ratio previously reported for such period, then the Borrower shall, promptly, but in any event no less than five (5) days after delivery of such financial statements, retroactively pay to the Banks the difference (if any) between the interest rate calculated using the Applicable Margin based on the actual Total Leverage Ratio and the interest rate calculated using the Applicable Margin based on the Total Leverage Ratio as previously reported. Arrangers. Collectively, TD Securities (USA) Inc., First Union Securities, Inc., a Division of Wheat First Securities, Inc. and FleetBoston Robertson Stephens Inc. Assignment and Acceptance. See Section 20.1 hereof. Balance Sheet Date. February 29, 2000. 11 -4- Banks. Collectively, (a) the lending institutions listed on Schedule 1 hereto, and (b) any other Person who becomes an assignee of any rights and obligations of any Bank pursuant to Section 20 hereof. Base Rate. The higher of (a) the annual rate of interest announced from time to time by the Administrative Agent's Head Office in, as its "prime rate", and (b) one-half of one percent (0.50%) above the Federal Funds Effective Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall mean, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three funds brokers of recognized standing selected by the Administrative Agent. Base Rate Loans. Revolving Credit Loans and all or any portion of the Term Loan bearing interest calculated by reference to the Base Rate. Bonneville. Collectively, Bonneville International Corporation, Bonneville Holding Company and any Subsidiary of either Bonneville International Corporation or Bonneville Holding Company. Bonneville Acquisition Documents. Collectively, (a) the Letter of Intent, dated June 21, 2000 between the Borrower and Bonneville, (b) the Time Brokerage Agreement, dated July 31, 2000 among Emmis 106.5 FM Broadcasting Corporation of St. Louis and Bonneville regarding the WKKX-KIHT Exchange, (c) the Asset Exchange Agreement to be entered into pursuant to the Letter of Intent which agreement will be a Bonneville Acquisition Document upon execution, and (d) all other agreements and documents entered into or delivered pursuant to or in connection with the Bonneville Transaction. Bonneville Transaction. The acquisition by the Borrower or one or more of its Subsidiaries (other than an Excluded Subsidiary) from Bonneville of substantially all of the assets (including all FCC licenses) used in connection with radio Station KZLA-FM, Los Angeles, California in exchange for substantially all of the assets (including all FCC licenses) used in connection with radio Stations WVRV-FM, WIL-FM, WKKX-FM (including studio and office property transferred to Emmis 106.5 FM Broadcasting Corporation of St. Louis in the WKKX-KIHT Exchange) and WRTH-AM, all in St. Louis, Missouri, pursuant to the terms of the Bonneville Acquisition Documents. Borrower. As defined in the preamble hereto. 12 -5- Borrower Security Agreement. The Third Amended and Restated Borrower Security Agreement, dated as of the date hereof, as the same may be amended from time to time hereafter, between the Borrower and the Administrative Agent, in form and substance satisfactory to the Banks and the Administrative Agent. Borrower Stock Pledge Agreement. The Third Amended and Restated Borrower Stock Pledge Agreement, dated as of the date hereof, as the same may be amended from time to time hereafter, between the Borrower and the Administrative Agent, in form and substance satisfactory to the Banks and the Administrative Agent. Business Day. Any day on which banking institutions in Houston, Texas and New York, New York are open for the transaction of banking business and, in the case of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day. Calculation Date. See Section 6.1.2 hereof. Capital Assets. Fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as patents, copyrights, trademarks, franchises, licenses and good will); provided that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with generally accepted accounting principles. Capital Expenditures. Amounts paid or indebtedness incurred by the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) in connection with the purchase or lease by the Borrower or any of its Subsidiaries of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with generally accepted accounting principles. Capitalized Leases. Leases under which the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with generally accepted accounting principles. CERCLA. See Section 8.18 hereof. Closing Date. The first date on which the conditions set forth in Section 12 hereof have been satisfied and this Agreement becomes effective and the Term Loan is to be made hereunder. Code. The Internal Revenue Code of 1986, as amended. 13 -6- Collateral. All of the properties, assets, rights and interests of the Borrower and each of its Subsidiaries that are or are intended to be subject to the security interests and mortgages created by the Security Documents. Collateral Assignments of Contracts. Collectively, each collateral assignment of contracts entered into by the Borrower and/or certain of its Subsidiaries pursuant to Sections 10.5(c) and 10.5(g) hereof. Collateral Assignments of Leases. Collectively, the several Collateral Assignment of Station Leases and the several Collateral Assignment of Station Tower Leases identified on Schedule 1.1(a) hereof, each dated as of the date hereof, as the same may be amended from time to time hereafter, from the Borrower and/or certain of its Subsidiaries to the Administrative Agent with respect to the non-recorded leasehold interests of the Borrower and such Subsidiaries in the Stations and the Station towers. Collateral Assignment of Partnership Interests. The Second Amended and Restated Collateral Assignment of Partnership Interests, dated as of the date hereof, as the same may be amended from time to time hereafter, among certain Subsidiaries of the Borrower, on the one hand, and the Administrative Agent on the other hand, in form and substance satisfactory to the Banks and the Administrative Agent. Commitment. The agreement of each Bank, subject to the terms and conditions of this Credit Agreement, to make Loans to, and to participate in the issuance, renewal and extension of Letters of Credit for the account of, the Borrower. Commitment Percentage. With respect to each Bank and each of the Tranche A Loans, the Tranche B Term Loan, the Tranche A Commitment Amount and the Tranche B Commitment Amount, the respective percentages set forth on Schedule 1 as such Bank's percentage of the Loans made or to be made in each Tranche or of such Bank's share of the Tranche A Commitment Amount or Tranche B Commitment Amount as the case may be. Common Stock. The Common Stock of the Borrower, par value $.01 per share. Communications Act. The Communications Act of 1934, as amended, and the rules and regulations of the FCC thereunder as now or hereafter in effect. Consolidated or consolidated. With reference to any term defined herein, shall mean that term as applied to the accounts of the Borrower and its Subsidiaries, consolidated in accordance with generally accepted accounting principles. 14 -7- Consolidated Broadcast Cash Flow. For any period, the sum of consolidated Operating Cash Flow for such period plus Corporate Overhead for such period. Consolidated Current Assets. As of any date, all assets of the Borrower and its Subsidiaries (other than Excluded Subsidiaries) on a consolidated basis that, in accordance with generally accepted accounting principles, are properly classified as current assets as of such date, but excluding cash or cash equivalents. Consolidated Current Liabilities. As of any date, all liabilities of the Borrower and its Subsidiaries (other than Excluded Subsidiaries) on a consolidated basis maturing on demand or within one (1) year from such date, and such other liabilities as of such date as may properly be classified as current liabilities in accordance with generally accepted accounting principles. Consolidated Excess Cash Flow. With respect to the Borrower and its Subsidiaries, other than Excluded Subsidiaries, and any particular fiscal period, an amount equal to (a) Consolidated Operating Cash Flow for such period less (b) the sum of (i) Consolidated Total Interest Expense for such period, plus (ii) any mandatory repayments (whether scheduled or otherwise) of principal on any Indebtedness of the Borrower or any of its Subsidiaries paid or due and payable during such period, plus (iii) any voluntary repayments of principal of the Revolving Credit Loans to the extent that such repayments were accompanied by permanent reductions in the Tranche A Commitment Amount in like amount, plus (iv) cash payments made during such period on account of Capital Expenditures, plus (v) cash taxes paid during such period, plus (vi) the excess of Consolidated Working Capital as at the last day of such period over Consolidated Working Capital as at the first day of such period, if positive, plus (vii) $5,000,000 plus (c) the excess of Consolidated Working Capital as at the first day of such period over Consolidated Working Capital as at the last day of such period, if positive. Consolidated Net Income. For any period, the consolidated net income of the Borrower and its Subsidiaries, other than Excluded Subsidiaries, for such period, after deduction of all expenses, taxes, and other proper charges for such period, determined in accordance with generally accepted accounting principles, after eliminating therefrom (a) all extraordinary nonrecurring gains or losses, including, without limitation, any gains (or losses) from any Sale of any Station or other assets, (b) non-cash dividends or non-cash Distributions received from Investments, (c) income and expenses arising from or in connection with Trades and other non-cash credits to Consolidated Net Income and (d) Programming Cash Payments, in each case to the extent otherwise included in consolidated net income for such period. 15 -8- Consolidated Operating Cash Flow. For any period, an amount equal to (a) the sum of (i) Consolidated Net Income for such period, plus (ii) depreciation, amortization (including Programming Amortization Expense) and all other non-cash charges for such period deducted from Consolidated Net Income, plus (iii) to the extent deducted in the calculation of Consolidated Net Income, Consolidated Total Interest Expense and taxes paid or payable for such period by the Borrower and its Subsidiaries (other than Excluded Subsidiaries) on a consolidated basis, less (b) (i) Corporate Overhead for such period to the extent not deducted in the calculation of Consolidated Net Income and (ii) Programming Cash Payments. For purposes of calculating Consolidated Operating Cash Flow for any period, any Permitted Acquisition or Sale of assets of the Borrower or any of its Subsidiaries which occurred during such period shall be deemed to have occurred immediately prior to the beginning of such period and any indebtedness incurred or repaid, as the case may be, in connection with any such Permitted Acquisition or Sale shall be deemed to have been incurred or repaid at the beginning of such period, with Consolidated Net Income and Consolidated Total Interest Expense adjusted accordingly; provided that, with respect to any such Permitted Acquisition, Consolidated Net Income shall be increased by (i) the amount of any pre-acquisition management fees paid during such period in connection with the operation of any Station subject to such Permitted Acquisition to the extent such fees are not payable after such acquisition, (ii) the amount of any bad debt reserve adjustment associated with any accounts receivable on the books of such acquired Station on the date of acquisition thereof to the extent that such accounts receivable are not acquired by the Borrower or any of such Subsidiaries, (iii) the amount of any bad debt reserve adjustment associated with any accounts receivable on the books of such acquired Station on the date of acquisition thereof and which are acquired by the Borrower or any of such Subsidiaries to the extent such bad debt reserve adjustment exceeds the amount the Borrower would have reserved with respect to such accounts receivable in accordance with its customary reserve practices; and (iv) pro forma expense reductions reasonably anticipated by the Borrower to be realized after the Bonneville Transaction, the Lee Transaction, the Sinclair Broadcast Group Transaction, the Howard Stern Show Cancellations and anticipated reductions in national sales commissions, as the case may be, to the extent such expenses were otherwise deducted from Consolidated Operating Cash Flow for the relevant period prior to such acquisitions, Howard Stern Show Cancellations or reductions in national sales commissions, provided that such pro forma expense reductions permitted to be added back to the Consolidated Operating Cash Flow shall not exceed the amount set forth below for any period of four (4) consecutive fiscal quarters ending on the dates set forth below: 16 -9-
MAXIMUM PRO PERIOD ENDING FORMA EXPENSE REDUCTION ------------- ----------------------- August 31, 2000 $6,000,000 November 30, 2000 $4,500,000 February 28, 2001 $3,000,000 May 31, 2001 $1,500,000
Consolidated Total Interest Expense. For any period, the sum of (a) the aggregate amount of interest required to be paid or accrued by the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) during such period on all Indebtedness of the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) outstanding during all or any part of such period, whether such interest was or is required to be reflected as an item of expense or capitalized (provided that, if such interest is capitalized, only the portion amortized for such period shall be included as interest for such period), including, without limitation, payments consisting of interest in respect of Capitalized Leases, Letter of Credit Fees, commitment fees payable pursuant to this Credit Agreement and similar fees payable in connection with other Indebtedness, plus (b) all scheduled monthly fees payable in connection with LMA agreements or time brokerage agreements. For purposes of determining the Consolidated Total Interest Expense for any period, a portion of which falls prior to and includes the Closing Date, the Consolidated Total Interest Expense for the portion of such period prior to and including the Closing Date (the "Pro-Forma Period") shall be determined as if (a) the Total Funded Debt outstanding as of the Closing Date and after giving effect to the funding of the Loans, the issuance of the Letters of Credit and the application of the Loan proceeds on the Closing Date was outstanding throughout the Pro-Forma Period, (b) the interest rate payable with respect to any particular item of Total Funded Debt during the Pro-Forma Period was at all times during the Pro-Forma Period equal to the interest rate payable on such item of Total Funded Debt on and as of the Closing Date, and any commitment fees and Letter of Credit Fees applicable on the Closing Date were applicable at all times during the Pro Forma Period, and (c) all such interest was payable on a periodic basis throughout the Pro-Forma Period in a manner consistent with the terms of the instruments governing such Total Funded Debt as of the Closing Date. For purposes of determining the Consolidated Total Interest Expenses for any period, any Permitted Acquisition or Sale of assets of the Borrower or its Subsidiaries which occurred during such period as permitted pursuant to Section 10.5 hereof shall be deemed to have occurred immediately prior to such period, and Consolidated Total Interest Expense shall be determined as if (i) any Indebtedness incurred in connection with 17 -10- such Permitted Acquisition or repaid in connection with such Sale was incurred or repaid, as the case may be, immediately prior to such period and (ii) the interest rate payable with respect to any increase in Indebtedness in connection with such Permitted acquisition which was outstanding during all or any part of such period was at all times equal to the rate of interest payable with respect to such Indebtedness on the last day of the period for which Consolidated Total Interest Expense is to be determined or if earlier, the last day on which such Indebtedness was outstanding. Consolidated Working Capital. As of any date, the excess of Consolidated Current Assets over Consolidated Current Liabilities as of such date. Conversion Request. A notice given by the Borrower to the Administrative Agent of the Borrower's election to convert or continue a Loan in accordance with Section 2.4 or 3.3.2 hereof. Copyright Notice. The Second Amended and Restated Memorandum of Grant of Security Interest in Copyrights, dated as of the date hereof, as the same may be amended from time to time hereafter, made by the Borrower in favor of the Administrative Agent, in form and substance satisfactory to the Banks and the Administrative Agent. Corporate Overhead. For any period, that portion of the cash overhead expenses of the Borrower and its Subsidiaries, other than Excluded Subsidiaries, on a consolidated basis, for such period which are not directly allocable to the operations of any of the Stations and other operating assets of the Borrower and its Subsidiaries, other than Excluded Subsidiaries, calculated on a basis consistent with past financial statements of the Borrower, including, without duplication, the amount of salaries and bonuses paid to the management of the Borrower. CPF Letter of Credit. That certain Letter of Credit issued by The Toronto Dominion Bank for the account of the Borrower and the benefit of the New York City District Council of Carpenters Pension Fund in the face amount of $1,086,925. Credit Agreement. This Third Amended and Restated Revolving Credit and Term Loan Agreement, including the Schedules and Exhibits hereto. Default. See Section 14 hereof. Distribution. The declaration or payment of any dividend (whether in cash or otherwise) on or in respect of any shares of any class of capital stock of any Person, other than dividends payable solely in shares of common stock of such Person; the purchase, redemption, or other retirement of any shares 18 -11- of any class of capital stock of any Person, directly or indirectly through a Subsidiary or otherwise; the return of capital by any Person to its shareholders as such; or any other distribution on or in respect of any shares of any class of capital stock of any Person. Documentation Agent. As defined in the preamble hereto. Dollars or $. Dollars in lawful currency of the United States of America. Domestic Lending Office. Initially, the office of each Bank designated as such in Schedule 1 hereto; thereafter, such other office of such Bank, if any, located within the United States of America that will be making or maintaining Base Rate Loans. Drawdown Date. The date on which any Revolving Credit Loan or Term Loan is made or is to be made, and the date on which any Revolving Credit Loan is converted from one Type of Loan to another or continued as a particular Type of Loan in accordance with Section 2.4 hereof, or the Term Loan is converted from one Type of Loan to another or continued as a particular Type of Loan in accordance with Section 3.3.2 hereof. Eligible Assignee. Any of (a) a commercial bank or finance company organized under the laws of the United States of America, any State thereof or the District of Columbia, and having total assets in excess of $1,000,000,000; (b) a savings and loan association or savings bank organized under the laws of the United States of America, any State thereof or the District of Columbia, and having a net worth of at least $100,000,000, calculated in accordance with generally accepted accounting principles; (c) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having total assets in excess of $1,000,000,000; provided that, such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; (d) the central bank of any country which is a member of the OECD; (e) any mutual fund, insurance company or investment fund that is an "accredited investor" (as defined in Regulation D of the Securities Act of 1933, as amended), (f) any Affiliate of a Bank which Bank is already a party hereto and (g) any other bank, insurance company, commercial finance company or other financial institution approved by the Administrative Agent, and so long as no Event of Default has occurred and is then continuing, the Borrower, such approval not to be unreasonably withheld. Employee Benefit Plan. Any employee benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate, other than a Multiemployer Plan. 19 -12- Environmental Laws. See Section 8.18(a) hereof. ERISA. The Employee Retirement Income Security Act of 1974. ERISA Affiliate. Any Person which is treated as a single employer with the Borrower under Section 414 of the Code. ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate Loan, the maximum rate (expressed as a decimal) at which any Bank subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. Eurodollar Business Day. Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London or such other eurodollar interbank market as may be selected by the Administrative Agent in its sole discretion acting in good faith. Eurodollar Lending Office. Initially, the office of each Bank designated as such in Schedule 1 hereto; thereafter, such other office of such Bank, if any, that shall be making or maintaining Eurodollar Rate Loans. Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate Loan, the rate of interest equal to (a) the arithmetic average (rounded upwards to the nearest 1/16 of one percent) of the rates per annum at which the Administrative Agent's Eurodollar Lending Office is offered Dollar deposits two (2) Eurodollar Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations of such Eurodollar Lending Office are customarily conducted at or about 11:00 a.m., New York, New York time, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Rate Loan to which such Interest Period applies, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable. Eurodollar Rate Loans. Revolving Credit Loans and all or any portion of the Term Loan bearing interest calculated by reference to the Eurodollar Rate. 20 -13- Event of Default. See Section 14 hereof. Excluded Subsidiaries. Radio Hungary; Emmis Pledge Corporation, a Delaware corporation, and a wholly owned Subsidiary of the Borrower; Emmis Argentina Broadcasting S.A. and Emmis Buenos Aires Broadcasting, S.A., each an Argentine corporation and a wholly owned Subsidiary of the Borrower; Emmis Latin America Broadcasting Corporation and Emmis South America Broadcasting Corporation, each a California corporation and a wholly owned Subsidiary of the Borrower; Country Sampler Stores, LLC and Game Warden Wildlife Journal Magazine, LLC, each a limited liability company and majority owned Subsidiary of the Borrower; and any other Subsidiary formed or acquired in the future and designated as an Excluded Subsidiary by Borrower, so long as such designation would not cause a Default or Event of Default. Existing Banks. See Preamble. Existing Credit Agreement. See Preamble. Existing Stations. Collectively any of the following Stations and any related satellite Stations, (a) KPWR-FM, Los Angeles, California, (b) WQHT-FM, New York, New York, (c) WKQX-FM, Chicago, Illinois, (d) KSHE-FM, St. Louis, Missouri, (e) WENS-FM, Indianapolis, Indiana, (f) WRKS-FM, New York, New York, (g) WXTM-FM, St. Louis, Missouri, (h) WKKX-FM, St. Louis, Missouri, (i) WNOU-FM, Indianapolis, Indiana, (j) WIBC-AM, Indianapolis, Indiana, (k) WQCD-FM, New York, New York, (l) WTLC-FM, Indianapolis, Indiana, (m) WTLC-AM, Indianapolis, Indiana, (n) WLUK (TV), Channel 11, Green Bay Wisconsin (o) KHON (TV), Channel 2, Honolulu, (p) WALA (TV), Channel 10, Mobile, Alabama, (q) WVUE (TV), Channel 8, New Orleans, Louisiana; (r) WFTX (TV), Channel 4, Cape Coral, Florida, (s) WKCF (TV), Channel 18, Clermont, Florida, (t) KKFR-FM, Glendale, Arizona, (u) KXPK-FM, Evergreen, Colorado, and (v) any other Station acquired by the Borrower or any of its Subsidiaries after the Closing Date pursuant to a Permitted Acquisition. Extension Fees. See Section 6.1.2 hereof. FCC. The Federal Communications Commission (or any successor agency, commission, bureau, department or other political subdivision of the United States of America). FCC License. Any license, permit, certificate of compliance, franchise, approval or authorization granted or issued by the FCC. Fee Letter. The Fee Letter, dated as of August 25, 2000, between the Borrower and the Agents and the Administrative Agent's Fee Letter dated as of the date hereof between the Borrower and the Administrative Agent. 21 -14- First Union. First Union National Bank, a national banking association. generally accepted accounting principles or GAAP. (a) When used in Section 11 hereof, whether directly or indirectly through reference to a capitalized term used therein, means (i) principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and (ii) to the extent consistent with such principles, the accounting practice of the Borrower reflected in its financial statements for the year ended on the Balance Sheet Date, and (b) when used in general, other than as provided above, means principles that are (i) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time and (ii) consistently applied with past financial statements of the Borrower adopting the same principles; provided that in each case referred to in this definition of "generally accepted accounting principles" or "GAAP" a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied. Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. Guaranty. The Fourth Amended and Restated Subsidiary Guaranty, dated as of the date hereof, as the same may be amended from time to time hereafter, made by each of the Subsidiaries of the Borrower named therein in favor of the Banks and the Administrative Agent, in form and substance satisfactory to the Banks and the Administrative Agent. Hazardous Substances. See Section 8.18(b) hereof. Hearst-Argyle. Collectively, Hearst-Argyle Properties, Inc. and any of its Subsidiaries. Hearst-Argyle Acquisition Documents. Collectively, (a) the Option Agreement, dated June 3, 2000 between Hearst-Argyle and the Borrower, the (b) Program Service and Time Brokerage Agreement dated June 5, 2000 between Hearst-Argyle and the Borrower and (c) all other agreements and documents entered into or delivered pursuant to or in connection with the Hearst-Argyle Transaction. 22 -15- Hearst-Argyle Transaction. The acquisition by the Borrower or one or more of its Subsidiaries (other than an Excluded Subsidiary) from Hearst-Argyle of substantially all of the assets (including all FCC licenses) used in connection with three radio Stations KTAR-AM, KMVP-AM and KKLT-FM, all in Phoenix, Arizona in exchange for substantially all of the assets used in connection with television Station WMUR-TV, Manchester, NH, which will be acquired by the Borrower or a Subsidiary of the Borrower immediately prior to such exchange, pursuant to the terms of the Hearst-Argyle Acquisition Documents. Historical Fixed Charge Coverage Ratio. With respect to any date of determination, the ratio of (a) Consolidated Operating Cash Flow for the period of four consecutive fiscal quarters ending on such date to (b) Historical Fixed Charges for such period. Historical Fixed Charges. With respect to the Borrower and its Subsidiaries (other than Excluded Subsidiaries) for any particular fiscal period, the sum of (a) Consolidated Total Interest Expense during such period, plus (b) the sum of all mandatory repayments of principal (whether scheduled or unscheduled) on any Indebtedness of the Borrower (other than the repayment of the Revolving Credit Loan if and to the extent the Revolving Credit Loan is not simultaneously reduced) and any of its Subsidiaries (other than Excluded Subsidiaries) paid or due and payable during such period plus (c) all Capital Expenditures made during such period, plus (d) the aggregate amount of cash taxes paid or required to be paid by the Borrower and/or its Subsidiaries (other than Excluded Subsidiaries) during such period, plus (e) the aggregate amount of all dividends paid or required to be paid by the Borrower during such period on any preferred stock issued by the Borrower. Howard Stern Show Cancellations. The cancellation of Howard Stern shows for any of the Existing Stations. Indebtedness. All obligations, contingent and otherwise, that in accordance with generally accepted accounting principles should be classified upon the obligor's balance sheet as liabilities, or to which reference should be made by footnotes thereto, including in any event and whether or not so classified: (a) all debt and similar monetary obligations, whether direct or indirect; (b) all liabilities secured by any mortgage, pledge, security interest, lien, charge, or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; (c) all guarantees, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness of others, including any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase indebtedness, or to assure the owner of indebtedness against loss, through an agreement to purchase goods, supplies, or services for the purpose of enabling the debtor to make payment of the 23 -16- indebtedness held by such owner or otherwise, and the obligations to reimburse the issuer in respect of any letters of credit; and (d) all obligations under Interest Rate Protection Agreements and every other obligation under any forward contract, futures contract, swap, option or other financing agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices (a "derivative contract"). Instrument of Accession. An Instrument of Accession in the form of Exhibit H hereto. Interest Payment Date. (a) As to any Base Rate Loan, the last day of the calendar quarter which includes the Drawdown Date thereof and the last day of each calendar quarter thereafter; and (b) as to any Eurodollar Rate Loan in respect of which the Interest Period is (i) 3 months or less, the last day of such Interest Period and (ii) more than 3 months, each date that is 3 months from the first day of such Interest Period or the previous Interest Payment Date with respect to such Interest Period if such Interest Period is then continuing and, in addition, the last day of such Interest Period. Interest Period. With respect to each Eurodollar Rate Loan, (a) initially, a period consisting of 1, 2, 3 or 6 months, or if made available by all of the Banks, 9 or 12 months, commencing on the Drawdown Date of such Loan and ending on the last day of such period as selected by the Borrower in a Loan Request; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period with respect to a Eurodollar Rate Loan would otherwise end on a day that is not a Eurodollar Business Day, that Interest Period shall be extended to the next succeeding Eurodollar Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Eurodollar Business Day; (B) if the Borrower shall fail to give notice as provided in Section 2.4 or 3.3.2 hereof, as applicable, the Borrower shall be deemed to have requested a conversion of the affected Eurodollar Rate Loan to a Base Rate Loan on the last day of the then current Interest Period with respect thereto; (C) any Interest Period that begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically 24 -17- corresponding day in the calendar month at the end of such Interest Period) shall end on the last Eurodollar Business Day of a calendar month; and (D) any Interest Period relating to any Eurodollar Rate Loan that would otherwise extend beyond the Maturity Date relating to such loans shall end on the applicable Maturity Date. Interest Rate Protection Agreements. See Section 9.14 hereof. Investments. All expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of stock or Indebtedness of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other commitments as described under Indebtedness) or obligations of, any Person, but excluding accrued interest or earnings thereon. In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (b) there shall be deducted in respect of each such Investment any cash amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (c) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise; and (d) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. Lee Acquisition Documents. Collectively, the Purchase and Sale Agreement, dated as of May 7, 2000 by and among Lee Enterprises and the Borrower and all other agreements and documents entered into or delivered pursuant to or in connection with the Lee Transaction. Lee Enterprises. Collectively, Lee Enterprises, Incorporated, New Mexico Broadcasting Co. and any Subsidiary of either Lee Enterprises, Incorporated or New Mexico Broadcasting Co. Lee Transaction. The acquisition by the Borrower or one or more of its Subsidiaries (other than an Excluded Subsidiary) from Lee Enterprises for a purchase price of not to exceed $562,500,000 plus working capital and closing adjustments made in accordance with the Lee Acquisition Documents of (a) substantially all of the assets (including all FCC licenses and related satellite stations) used in connection with five television Stations, WSAZ-3 (NBC), Huntington/Charleston, West Virginia, KGUN-9 (ABC), Tucson, Arizona, KMTV-3 (CBS), Omaha, Nebraska, KRQE-13 (CBS), Albuquerque, New Mexico and KGMB-9 (CBS), Honolulu, Hawaii, (b) the capital stock of KOIN-TV, Inc., a Delaware corporation which operates television Station KOIN-6 (CBS), Portland, Oregon, and (c) the capital stock of SJL of Kansas 25 -18- Corp., a Kansas corporation which operates directly or through a subsidiary the television Station KSNW-3 (NBC), Wichita, Kansas and its related satellite stations and television Station KSNT-27 (NBC), Topeka, Kansas, pursuant to the terms of the Lee Acquisition Documents. Letter of Credit. See Section 5.1.1 hereof. Letter of Credit Application. See Section 5.1.1 hereof. Letter of Credit Fee. See Section 5.5 hereof. Letter of Credit Participation. See Section 5.1.4 hereof. License Subsidiaries. Collectively, Emmis License Corporation, Emmis License Corporation of New York, Emmis FM License Corporation of St. Louis, Emmis FM License Corporation of Chicago, KPWR License, Inc., Emmis FM License Corporation of Indianapolis, Emmis FM Radio License Corporation of Indianapolis, Emmis AM Radio License Corporation of Indianapolis, Emmis Radio License Corporation of New York, Emmis 104.1 FM Radio License Corporation of St. Louis, Emmis 106.5 FM License Corporation of St. Louis, Emmis 105.7 FM Radio License Corporation of Indianapolis, Emmis 1310 AM Radio License Corporation of Indianapolis, Emmis Television License Corporation of Honolulu, Emmis Television License Corporation of Green Bay, Emmis Television License Corporation of Mobile, Emmis Television License Corporation of New Orleans, Emmis Television License Corporation of Orlando, Emmis Television License Corporation of Terre Haute, Emmis 105.5 FM Radio License Corporation of Terre Haute, Emmis Television License Corporation of Cape Coral, Emmis 99.9 FM Radio License Corporation of Terre Haute, Emmis License Corporation, Emmis License Corporation of Phoenix and Emmis License Corporation of Denver, Emmis Television License Corporation of West Virginia, Emmis Television License Corporation of Tucson, Emmis Television License Corporation of Omaha, Emmis Television License Corporation of Albuquerque, each a California corporation, Wichita License Subsidiary Corp., Topeka License Subsidiary Corp., each a Delaware corporation, and their successors and any new License Subsidiaries formed in connection with the Reorganization permitted hereunder. Loan Documents. Collectively, this Credit Agreement, the Notes, the Letter of Credit Applications, the Letters of Credit, the Security Documents, the Fee Letter, and any other documents, agreements or instruments contemplated hereby or thereby or executed in connection herewith or therewith. Loan Request. See Section 2.3 hereof. Loans. Collectively, the Revolving Credit Loans and the Term Loan. 26 -19- Majority Banks. As of any date, the Banks which hold collectively at least fifty-one percent (51%) of the Aggregate Facilities Commitment. Material Labor Dispute. With respect to any Person, any strike, work stoppage, material unfair labor practice claim or charge, arbitration or other material labor dispute against or affecting such Person. Maturity Date. With respect of Tranche A Loans, the Tranche A Maturity Date; and with respect of Tranche B Term Loan, the Tranche B Maturity Date. Maximum Drawing Amount. The maximum aggregate amount that the beneficiaries may at any time draw under outstanding Letters of credit, as such aggregate amount may be reduced from time to time pursuant to the terms of the Letters of Credit. Mortgaged Property. Any Real Estate which is subject to any Mortgage. Mortgages. Collectively, the several mortgages and deeds of trust identified on Schedule 1.1(b) hereto, as each may be amended from time to time hereafter, from the Borrower and/or its Subsidiaries to the Administrative Agent, in each case with respect to the fee and recorded leasehold interests of the Borrower and such Subsidiaries in the Real Estate. Multiemployer Plan. Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate. Net Proceeds. One hundred percent (100%) of the cash proceeds from a Sale of any assets, less the sum of (a) customary and reasonable amounts paid or payable in respect of brokerage fees, (b) other reasonable closing costs actually paid in connection with such Sale, and (c) sales or other gross receipts, income, or property transfer taxes payable by the Seller in cash, in each case relating to such sale. If the Borrower or any of its Subsidiaries receives any promissory notes or other instruments as part of the consideration for such Sale or if payment in cash of any portion of the consideration for such Sale is otherwise deferred, Net Proceeds shall be deemed to include any cash payments in respect of such notes or instruments or otherwise deferred portion of such consideration when and to the extent received by such Person. Note Record. The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Bank with respect to any Loan referred to in such Note. Notes. The Term Notes and the Revolving Credit Notes. 27 -20- Obligations. All indebtedness, obligations and liabilities of any of the Borrower and its Subsidiaries to any of the Banks (or, with respect to clause (b) below, to any of their Affiliates or to any other financial institution which at the time of entering into the Interest Rate Protection Agreement in question was either a "Bank" hereunder or an affiliate of a Bank) and the Administrative Agent, individually or collectively, existing on the date of this Credit Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under or with respect to (a) this Credit Agreement or any of the other Loan Documents or in respect of any of the Loans made or Reimbursement Obligations incurred or any other instruments at any time evidencing any thereof or (b) the Interest Rate Protection Agreements, or (c) for purposes of the obligations secured by the Security Documents only, the CPF Letter of Credit. Operating Subsidiaries. Collectively, Emmis FM Broadcasting Corporation of Indianapolis, Emmis FM Broadcasting Corporation of Chicago, Emmis FM Broadcasting Corporation of St. Louis, KPWR, Inc., Emmis FM Radio Corporation of Indianapolis, Emmis AM Radio Corporation of Indianapolis, Emmis Radio Corporation of New York, Emmis 104.1 FM Radio Corporation of St. Louis, Emmis 106.5 FM Broadcasting Corporation of St. Louis, Emmis International Corporation, Emmis 105.7 FM Radio Corporation of Indianapolis, Emmis 1310 AM Radio Corporation of Indianapolis, Emmis Publishing Corporation, Emmis International Broadcasting Corporation, Emmis DAR, Inc., Emmis 101.9 FM Radio Corporation of New York, Emmis Broadcasting Corporation of New York, Emmis 1380 AM Radio Corporation of St. Louis, Emmis Meadowlands Corporation, Mediatex Communications Corporation, Emmis FM Holding Corporation of New York, Mediatex Development Corporation, Texas Monthly, Inc., Emmis Broadcasting Corporation of Denver and Emmis Broadcasting Corporation of Phoenix, Big Hit Marketing, Inc., Los Angeles Magazine, Inc., Los Angeles Magazine Holding Company, Inc., KOIN-TV, Inc., SJL of Kansas Corp., Topeka Television Corp. and the Partnership Subsidiaries and their successors and any new Operating Subsidiaries formed in connection with the Reorganization permitted hereunder. outstanding. With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination. Partnership Pledge Agreement. The Second Amended and Restated Collateral Assignment of Partnership Interests, dated as of the date hereof, as the same may be amended from time to time hereafter, among the partners of the Partnership Subsidiaries, on the one hand, and the Administrative Agent, 28 -21- on the other hand, in form and substance satisfactory to the Banks and the Administrative Agent. Partnership Subsidiaries. Collectively, Emmis Indiana Broadcasting, L.P., Emmis Publishing, L.P., and Emmis Television Broadcasting, L.P. PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities. Perfection Certificates. The Perfection Certificates as defined in the Security Agreements. Permitted Acquisition. Any Station Acquisition permitted under Sections 10.5(c) and 10.5(d) and any Related Media Acquisition permitted under Section 10.5(h) hereof. Permitted Liens. Liens, security interests and other encumbrances permitted by Section 10.2 hereof. Person. Any individual, corporation, limited liability company, partnership, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. Pledge Agreements. Collectively, the Borrower Stock Pledge Agreement, the Subsidiary Pledge Agreements and the Partnership Pledge Agreements. Pro Forma Fixed Charge Coverage Ratio. With respect to any date of determination, the ratio of (a) Consolidated Operating Cash Flow for the period of four consecutive fiscal quarters ending on such date to (b) Pro Forma Fixed Charges for the period of four consecutive fiscal quarters commencing on the date following such date of determination. Pro Forma Fixed Charges. With respect to any date of determination, the sum of (a) Consolidated Total Interest Expense required to be paid or accrued by the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) during the period of four (4) consecutive fiscal quarters commencing on the date following such date of determination, plus (b) the sum of all principal scheduled to be paid by each such Person with respect to Total Funded Debt during such four (4) quarter period, plus (c) all Capital Expenditures scheduled to be made by the Borrower and/or its Subsidiaries (other than Excluded Subsidiaries) during such four (4) quarter period, plus (d) the aggregate amount of cash taxes scheduled to be paid by the Borrower and/or its Subsidiaries (other than Excluded Subsidiaries) during such four (4) quarter period, plus (e) the aggregate amount of all dividends that the 29 -22- Borrower projects will be paid during such four (4) quarter period on the preferred stock issued as part of the Secondary Equity Offering. For purposes of the foregoing calculation, (A) the amount of Capital Expenditures scheduled to be made by the Borrower and its Subsidiaries (other than Excluded Subsidiaries) shall be deemed to equal the amount of Capital Expenditures projected to be made during such prospective four (4) quarter period pursuant to the Projections or any updated projections which have been approved by the Banks for use in this definition, (B) the amount of cash taxes scheduled to be paid by the Borrower and its Subsidiaries (other than Excluded Subsidiaries) during such prospective four (4) quarter period shall be deemed to be equal to the aggregate amount of cash taxes paid by the Borrower and its Subsidiaries (other than Excluded Subsidiaries) during the period of the four (4) fiscal quarters ended on such date of determination, after excluding therefrom cash taxes paid during such period with respect to the gain from any Sale of one or more Stations during such period, (c) interest payable hereunder for such prospective four (4) quarter period shall be determined based upon the Type of Loans outstanding as of the date of determination and using the interest rate in effect for each Type of Loan on such date, (D) the principal amount of and the interest rate on any other Indebtedness for borrowed money during such prospective four (4) quarter period shall be the principal amount of and the interest rate on such Indebtedness on the date of determination, (E) the aggregate principal amount of Loans outstanding during each day of such prospective four (4) quarter period shall be deemed, for purposes of calculating interest payable hereunder, to be equal to the sum of (i) the lesser of (x) the average daily principal amount of the Revolving Credit Loans outstanding during the fiscal quarter ending on such date of determination and (y) the Tranche A Commitment Amount in effect on the date of determination adjusted during such period to reflect scheduled reductions in such Tranche A Commitment Amount during such period plus (ii) the aggregate principal amount of the Term Loan outstanding on the date of determination as adjusted to reflect principal payments scheduled to be made during such period, and (F) the aggregate principal amount of Tranche A Loans scheduled to be paid during such prospective four (4) quarter period shall be deemed to be equal to the amount by which the average daily principal amount of the Tranche A Loans outstanding during the fiscal quarter ending on such date of determination exceeds the Tranche A Commitment Amount scheduled to be in effect on the last day of such prospective four (4) quarter period. Program. Any television series or other program produced or distributed for television release (including any syndicated series or other program regardless of its medium of initial exploitation), in each case whether recorded on film, videotape, audiotape, cassette, cartridge, disc or by any other means, method, process or device, whether now known or hereafter developed. 30 -23- Program Contracts. All contracts for television, film, programs, music and related audio rights and syndicated series exhibition rights acquired under license agreements. Program Rights. Any right whether arising under Program Contracts or otherwise, to sell, distribute, subdistribute, exhibit, lease, sublease, license, sublicense or otherwise exploit Programs. Program Rights Costs. The maximum amount which the Borrower and/or any of its Subsidiaries or its or their co-venturers have furnished or have contractually committed to furnish (whether or not such commitments shall be reflected as an asset or liability on the Consolidated balance sheet of the Borrower) toward the production or acquisition by the Borrower and/or any of its Subsidiaries or its or their co-venturers of any Program Rights with respect to any Program. Programming Amortization Expense. For any period, total amortization expense of the Borrower and its Subsidiaries for such period which is directly attributable to Programs, Program Rights or Program Contracts, determined on a consolidated basis in accordance with GAAP. Programming Cash Payments. For any period, the aggregate cash payments actually made by Borrower and its Subsidiaries during such period in respect of Programming Obligations, determined on a consolidated basis in conformity with generally accepted accounting principles. Programming Obligations. For any period, all direct or indirect liabilities (including, but without duplication, any guaranties and other contingent obligations relating to or arising in connection with a Programming Obligation), contingent or otherwise, with respect to Program Contracts, Programs or Program Rights, (including, without limitation, all Program Rights Costs) of the Borrower and/or its Subsidiaries, whether or not reflected on the consolidated balance sheet of the Borrower and its Subsidiaries prepared in conformity with generally accepted accounting principles. Projections. See Section 8.4.2 hereof. Radio Hungary. Slager Radio Rt., a company limited by shares organized under the laws of Hungary. Real Estate. All real property at any time owned or leased (as lessee or sublessee) by the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries). 31 -24- Reimbursement Obligation. The Borrower's obligation to reimburse the Administrative Agent and the Banks for amounts drawn under any Letter of Credit as provided in Section 5.2 hereof. Related Fund. With respect to any Bank which is a fund that invests in loans, any other fund that invests in loans and is managed by the same investment advisor as such Bank or by an Affiliate of such Bank. Related Media Acquisition. Borrower's or a Subsidiary of the Borrower's acquisition of a media related company, or substantially all the assets of such, on terms and conditions acceptable to the Agents and notified to the Banks. Reorganization. See Section 30 hereof. Reorganization Subsidiaries. See Section 30 hereof. Restricted Payments. Collectively, distributions, dividends or other payments in respect of the capital stock of the Borrower, whether in cash or assets, other than distributions of shares of Borrower's common stock; payments, defeasance or repurchases of, or in respect of, any subordinated debt (including, without limitation, any Indebtedness permitted under Sections 10.1(k) or 10.1(l) hereof); and payments of management, consulting or similar fees to affiliates of the Borrower. Revolving Credit Loans. The Tranche A Loans. Revolving Credit Notes. The Tranche A Notes. Sale. Any sale, transfer or other disposition of assets, including by means of a simultaneous exchange of Stations. Secondary Equity Offering. The Borrower's issuance of common stock and preferred stock pursuant to the equity offerings described in Forms S-3, dated October 1, 1999. Security Agreements. Collectively, the Borrower Security Agreement and the Subsidiary Security Agreement. Security Documents. Collectively, the Guaranty, the Security Agreements, the Mortgages, the Trademark Assignments, the Copyright Notice, the Collateral Assignments of Contracts, the Collateral Assignments of Leases and the Pledge Agreements. Senior Debt. At any time of determination, Total Funded Debt minus the principal amount of all indebtedness which is by its terms expressly subordinated to the Obligations of the borrower arising or outstanding under 32 -25- this Credit Agreement or any of the other Loan documents pursuant to subordination provisions satisfactory to the Super Majority Banks and the Agents, including, without limitation, the principal amount of the Indebtedness permitted under Sections 10.1(k) and 10.1(l) hereof outstanding on such date. Senior Leverage Ratio. As of any date of determination, the ratio of (a) Senior Debt as at such date to (b) Consolidated Operating Cash Flow for the period of four (4) consecutive fiscal quarters ending on such date. Sinclair Broadcast Acquisition Documents. Collectively, (a) the Asset Purchase Agreement, dated as of June 21, 2000 among Sinclair Broadcast Group and the Borrower and (b) all other agreements and documents entered into or delivered pursuant to or in connection with the Sinclair Broadcast Group Transaction. Sinclair Broadcast Group. Collectively, Sinclair Broadcast Group, Inc., Sinclair Radio of St. Louis, Inc., Sinclair Radio of St. Louis Licensee, LLC and any Subsidiary of any of Sinclair Broadcast Group, Inc., Sinclair Radio of St. Louis Inc. or Sinclair Radio of St. Louis Licensee, LLC. Sinclair Broadcast Group Transaction. The acquisition by the Borrower or one or more of its Subsidiaries (other than an Excluded Subsidiary) from Sinclair Broadcast Group of substantially all of the assets (including all FCC licenses) used in connection with radio Stations WVRV-FM, WIL-FM, WRTH-AM, KPNT-FM, KIHT-FM and KXOK-FM, all in St. Louis, Missouri for a purchase price not to exceed $220,000,000 plus working capital and closing adjustments made in accordance with the Sinclair Broadcast Acquisition Documents, pursuant to the terms of the Sinclair Broadcast Acquisition Documents. Station. All of the properties, assets and operating rights constituting a system for transmitting radio or television signals from a transmitter licensed by the FCC, together with any subsystem which is ancillary to such system, and including each of the Existing Stations. Station Acquisition. Any transaction (including through a simultaneous exchange of Stations) by which the Borrower or any of its Subsidiaries acquires any Station or the control of a majority of the equity interest in any Person whose primary business is the operation of one or more Stations, as evidenced by the transfer to the Borrower or a Subsidiary of title in the assets so acquired and the receipt of any FCC approval required in connection with the transfer of such assets and the operation of such Station or Stations thereby acquired, whether directly or indirectly through the acquisition of an equity interest in any Person. 33 -26- Stations' cash flow. See Section 10.5(e) hereof. Subordinated Notes. The 8.125% Subordinated Notes due 2009 in the aggregate principal amount of $300,000,000 issued by the Borrower under the Subordinated Note Indenture. Subordinated Note Documents. Each of the documents, instruments (including the Subordinated Notes) and other agreements entered into or delivered by the Borrower (including, without limitation, the Subordinated Note Indenture) and/or any Subsidiary of the Borrower relating to the issuance by the Borrower of the Subordinated Notes and any guaranties or other documents related thereto, as in effect on February 12, 1999 and as the same may be supplemented, amended or modified from time to time in accordance with the terms hereof (including, without limitation, Section 10.11) and thereof. Subordinated Note Indenture. The Indenture, dated as of February 12, 1999, by and between the Borrower and Bank of New York (as successor to IBJ Whitehall Bank & Trust Company), as trustee thereunder, with respect to the Subordinated Notes, as in effect on February 12, 1999 and as the same may be supplemented, amended or modified from time to time in accordance with the terms hereof (including, without limitation, Section 10.11) and thereof. Subordinated Note Proceeds. See Section 4.3(e) hereof. Subsidiary. Any corporation, association, limited liability company, partnership, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Stock, or similar interests entitled to vote or in the case of a partnership, a majority of the economic interest. Subsidiary Pledge Agreement. The Fourth Amended and Restated Pledge Agreement, dated as of the date hereof, as the same may be amended from time to time hereafter, among certain of the Subsidiaries of the Borrower, on the one hand, and the Administrative Agent, on the other hand, in form and substance satisfactory to the Banks and the Administrative Agent. Subsidiary Security Agreement. The Fourth Amended and Restated Subsidiary Security Agreement dated as of the date hereof, as the same may be amended from time to time hereafter, among the Subsidiaries of the Borrower named therein, on the one hand, and the Administrative Agent, on the other hand, in form and substance satisfactory to the Banks and the Administrative Agent. 34 -27- Super Majority Banks. As of any date, the Banks which hold collectively at least seventy percent (70%) of the Aggregate Facilities Commitment. Surplus Proceeds. See Section 4.3(e) hereof. Syndication Agent. As defined in the preamble hereto. TD. Toronto Dominion (Texas), Inc. Term Loan. The Tranche B Term Loan. Term Notes. The Tranche B Term Notes. Title Insurance Company. With respect to each Mortgaged Property, as applicable, Chicago Title Insurance Company; Continental Lawyers Title Insurance Corporation; First American Title Insurance Company, Commonwealth Land Title Insurance Company, and Illinois Commonwealth Property, and collectively if the context requires all such companies. Title Policy. In relation to each Mortgaged Property, an ALTA standard form title insurance policy issued by the Title Insurance Company (with such reinsurance or co-insurance as the Administrative Agent may require, any such reinsurance to be with direct access endorsements) in such amount as may be determined by the Administrative Agent insuring the priority of the Mortgage of such Mortgaged Property and that the Borrower or one of its Subsidiaries holds marketable fee simple or leasehold title (as applicable) to such Mortgaged Property, subject only to the encumbrances permitted by such Mortgage and which shall not contain exceptions for mechanics liens, persons in occupancy or matters which would be shown by a survey (except as may be permitted by such Mortgage), shall not insure over any matter except to the extent that any such affirmative insurance is acceptable to the Administrative Agent in its sole discretion, and shall contain such endorsements and affirmative insurance as the Administrative Agent in its discretion may require, including but not limited to (a) comprehensive endorsement, (b) variable rate of interest endorsement, (c) usury endorsement, (d) revolving credit endorsement, (e) tie-in endorsement, (f) doing business endorsement and (g) ALTA form 3.1 zoning endorsement. Total Funded Debt. At any time of determination, the sum of (a) the outstanding principal amount of the Loans and other Obligations due and payable, plus (b) the outstanding principal amount of any other Indebtedness for borrowed money owed by the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) on a consolidated basis (including, without limitation, the outstanding principal amount of all Indebtedness permitted under Sections 10.1(k) and 10.1(l) hereof), plus (c) to the extent not otherwise 35 -28- included, all obligations (contingent or otherwise) relating to letters of credit issued for the account of the Borrower and/or its Subsidiaries, other than Excluded Subsidiaries, plus (d) to the extent not otherwise included, all liabilities in respect of Capitalized Leases of the Borrower and/or its Subsidiaries, other than Excluded Subsidiaries, on a consolidated basis, plus (e) to the extent not otherwise included, all purchase money indebtedness. Total Leverage Ratio. As of any date of determination, the ratio of (a) Total Funded Debt as at such date to (b) Consolidated Operating Cash Flow for the period of four (4) consecutive fiscal quarters ending on such date. Trademark Assignments. Collectively, the Third Amended and Restated Borrower Trademark Collateral Security and Pledge Agreement, dated as of the date hereof, as the same may be amended from time to time hereafter, between the Borrower and the Administrative Agent, and the Third Amended and Restated Subsidiary Trademark Collateral Security and Pledge Agreement, dated as of the date hereof, as the same may be amended from time to time hereafter, among the Subsidiaries of the Borrower named therein and the Administrative Agent, each in form and substance satisfactory to the Banks and the Administrative Agent. Trades. Those assets and liabilities of the Borrower and any of its Subsidiaries which do not represent the right to receive payment in cash or the obligation to make payment in cash and which arise pursuant to so-called trade or barter transactions. Tranche. Collectively, or individually as the context indicates, the Tranche A Loans if any are outstanding, the Tranche A Commitment Amount, the Tranche B Term Loans, if any are outstanding, and the Tranche B Commitment Amount. Tranche A Commitment. The Commitment of the Bank(s) listed on Schedule 1 as having a Tranche A Commitment Percentage to make Tranche A Loans hereunder pursuant to Section 2.1 hereof up to an aggregate amount equal to the Tranche A Commitment Amount. Tranche A Commitment Amount. $400,000,000, as such amount is reduced pursuant to Sections 2.1.3, 4.3(b), 4.3(c) and 4.3(d) hereof. Tranche A Commitment Percentage. With respect to each Bank, the percentage initially set forth next to such Bank's name on Schedule 1 hereto, as such may be adjusted in accordance with Sections 2.1.3. and 20 hereof. Tranche A Loans. The Tranche A Revolving Credit Loans made or to be made by the Banks to the Borrower pursuant to Section 2.1 hereof. 36 -29- Tranche A Maturity Date. August 31, 2006. Tranche A Notes. See Section 2.1.4 hereof. Tranche A Reduction Dates. Each date on which the Tranche A Commitment Amount is reduced pursuant to Section 2.1.3 hereof. Tranche A Reduction Percentage. The percentage by which the Tranche A Commitment Amount is reduced on the Tranche A Reduction Dates pursuant to Section 2.1.3 hereof. Tranche B Commitment Amount. $600,000,000. Tranche B Commitment Percentage. With respect to each Bank, the percentage initially set forth next to such Bank's name on Schedule 1 hereto. Tranche B Maturity Date. August 31, 2006. Tranche B Reduction Date(s). Each date on which the Tranche B Term Loan is reduced pursuant to Section 3.2. hereof. Tranche B Reduction Percentage. The percentage by which the Tranche B Term Loan outstanding on August 31, 2001 is reduced on the Tranche B Reduction Dates pursuant to Section 3.2 hereof. Tranche B Term Loan. The term loan made or to be made by the Banks to the Borrower on the Closing Date in the aggregate principal amount not to exceed $600,000,000 pursuant to Section 3.1 hereof. Tranche B Term Notes. See Section 3.1.1 hereof. Transaction(s). The Hearst-Argyle Transaction, the Sinclair Broadcast Group Transaction and the Bonneville Transaction. Transaction Documents. As applicable, the Hearst-Argyle Acquisition Documents, the Sinclair Broadcast Group Acquisition Documents and the Bonneville Acquisition Documents. Type. As to any Revolving Credit Loan or all or any portion of the Term Loan, its nature as a Base Rate Loan or a Eurodollar Rate Loan. Uniform Customs. With respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, or any successor version thereto adopted by the Administrative Agent in the ordinary course of its business as a letter of credit issuer and in effect at the time of issuance of such Letter of Credit. 37 -30- Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which the Borrower does not reimburse the Administrative Agent and the Banks on the date specified in, and in accordance with, Section 5.2 hereof. Voting Stock. Stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, limited liability company, association, trust or other business entity involved, whether or not the right so to vote exists by reason of the happening of a contingency. WKKX-KIHT Exchange. The transfer prior to the Bonneville Transaction of studio and office property used in conjunction with the operations of Station WKKX-FM, St. Louis by Emmis 106.5 FM Broadcasting Corporation of St. Louis to Emmis FM Broadcasting Corporation of St. Louis in exchange for studio and office property used in conjunction with the operations of Station KIHT-FM, St. Louis. 1.2. RULES OF INTERPRETATION. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement. (b) The singular includes the plural and the plural includes the singular. (c) A reference to any law includes any amendment or modification to such law. (d) A reference to any Person includes its permitted successors (including in the case of a Bank, any entity resulting from a merger or consolidation) and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in Massachusetts, have the meanings assigned to them therein. (h) Reference to a particular "Section" refers to that section of this Credit Agreement unless otherwise indicated. 38 -31- (i) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Credit Agreement as a whole and not to any particular section or subdivision of this Credit Agreement. 2. THE REVOLVING CREDIT FACILITY. 2.1. TRANCHE A. 2.1.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in this Credit Agreement, each of the Banks severally agrees to lend to the Borrower and the Borrower may borrow, repay, and reborrow from time to time between the Closing Date and the Tranche A Maturity Date upon notice by the Borrower to the Administrative Agent given in accordance with Section 2.3 hereof, such sums as are requested by the Borrower up to a maximum aggregate principal amount outstanding (after giving effect to all amounts requested) at any one time equal to the Tranche A Commitment Amount minus the sum of (a) the Maximum Drawing Amount plus (b) all Unpaid Reimbursement Obligations; provided that, with respect to each Bank, the outstanding amount of the Tranche A Loans (after giving effect to all amounts requested) made by such Bank plus such Bank's Commitment Percentage of the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not at any time exceed such Bank's Commitment Percentage of the Tranche A Commitment Amount. The Tranche A Loans shall be made by each Bank pro rata in accordance with each Bank's applicable Commitment Percentage in respect of Tranche A. Each request for a Tranche A Loan hereunder shall constitute a representation and warranty by the Borrower that the conditions set forth in Sections 12 and 13, in the case of the initial Tranche A Loans, and Section 13, in the case of all other Tranche A Loans, have been satisfied on the date of such request. 2.1.2. COMMITMENT FEE. The Borrower agrees to pay to the Administrative Agent, for the pro rata accounts of the Banks in accordance with their respective Commitment Percentages of the Tranche A Commitment Amount, a commitment fee calculated at the rate of (a) at any time when the Total Leverage Ratio, determined as at the last day of the period of four (4) consecutive fiscal quarters most recently ended, equals or exceeds 6.50:1.00, 0.500% per annum, (b) at any time when the Total Leverage Ratio, determined as at the last day of the period of four (4) consecutive fiscal quarters most recently ended, equals or exceeds 5.00:1.00, but is less than 6.50:1.00, 0.375% per annum, and (c) at any time when the Total Leverage Ratio, determined as at the last day of the period of four (4) consecutive fiscal quarters most recently ended, is less than 5.00:1.00, 0.250% per annum, on the average daily amount during each calendar quarter or portion thereof 39 -32- from the Closing Date to the Tranche A Maturity Date by which the Tranche A Commitment Amount minus the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations, exceeds the amount of the outstanding Tranche A Loans; provided, however, in the event that during any calendar quarter in respect of which a commitment fee is payable the average daily amount of outstanding Tranche A Loans plus the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations is less than fifty percent (50%) of the Tranche A Commitment Amount, then the commitment fee for such calendar quarter for Tranche A Loans shall be increased above the otherwise applicable rate by 0.125% per annum. Notwithstanding the foregoing, if the Borrower's financial statements are not furnished to the Banks pursuant to Section 9.4(b) within five (5) Business Days after the relevant period of time specified in Section 9.4 therefor, the commitment fee shall be 0.500% per annum, during the period commencing on the date such statements are due and (provided such financial statements are subsequently furnished to the Banks) ending on the date two (2) days following the delivery to the Administrative Agent of such financial statements. The commitment fee shall be payable quarterly in arrears on the last day of each calendar quarter, commencing on the first such date following the date hereof, with a final payment on the Tranche A Maturity Date or any earlier date on which the Tranche A Commitment shall terminate. 2.1.3. REDUCTION OF TRANCHE A COMMITMENT AMOUNT. (a) On each of the Tranche A Reduction Dates set forth below, the Tranche A Commitment Amount shall be reduced by the amount equal to the product of the Tranche A Reduction Percentage set forth below opposite such date multiplied by the Tranche A Commitment Amount as in effect on August 31, 2001, with a final reduction on the Tranche A Maturity Date in an amount equal to the remaining Tranche A Commitment Amount:
Tranche A Reduction Date Tranche A Reduction Percentage ------------------------ ------------------------------ August 31, 2001 3.330% November 30, 2001 3.330% February 28, 2002 3.340% May 31, 2002 3.750% August 31, 2002 3.750% November 30, 2002 3.750% February 28, 2003 3.750% May 31, 2003 5.000% August 31, 2003 5.000% November 30, 2003 5.000%
40 -33- February 29, 2004 5.000% May 31, 2004 5.625% August 31, 2004 5.625% November 30, 2004 5.625% February 28, 2005 5.625% May 31, 2005 4.375% August 31, 2005 4.375% November 30, 2005 4.375% February 28, 2006 4.375% May 31, 2006 7.500% Tranche A Maturity Date 7.500%
Each payment required to be made by the Borrower pursuant to this Section 2.1.3 shall be allocated among the Banks pro rata in accordance with each Bank's Commitment Percentage of the Tranche A Commitment Amount. (b) The Borrower shall have the right at any time and from time to time upon five (5) Business Days' prior written notice to the Administrative Agent to reduce by $500,000 or an integral multiple thereof or terminate entirely the unborrowed portion of the Tranche A Commitment Amount, whereupon the Tranche A Commitment Amount shall be reduced pro rata among the Banks in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated. Promptly after receiving any notice of the Borrower delivered pursuant to this Section 2.1.3, the Administrative Agent will notify the Banks of the substance thereof. Upon the effective date of any such reduction or termination, the Borrower shall pay to the Administrative Agent for the respective accounts of the Banks the full amount of any commitment fee then accrued on the amount of the reduction. No reduction of the Tranche A Commitment Amount may be reinstated. 2.1.4. THE TRANCHE A NOTES. The Tranche A Loans shall be evidenced by separate amended and restated promissory notes of the Borrower in substantially the form of Exhibit A hereto (each a "Tranche A Note"), each dated as of the Closing Date and completed with appropriate insertions. One Tranche A Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Commitment Percentage of the Tranche A Commitment Amount or, if less, the outstanding amount of all Tranche A Loans made by such Bank, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes each Bank to make or cause to be made, at or about the time of the Drawdown Date of any Tranche A Loan or at the 41 -34- time of receipt of any payment of principal on such Bank's Tranche A Note, an appropriate notation on such Bank's Note Record reflecting the making of such Tranche A Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Tranche A Loans set forth on such Bank's Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Bank, but the failure to record, or any error in so recording, any such amount on such Bank's Note Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Tranche A Note to make payments of principal of or interest on any Tranche A Note when due. 2.2. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided in Section 6.10 hereof: (a) The unpaid principal balance of each Revolving Credit Loan which is a Base Rate Loan shall bear interest at the Base Rate plus the Applicable Margin. (b) The unpaid principal balance of each Revolving Credit Loan which is a Eurodollar Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the Eurodollar Rate determined for such Interest Period plus the Applicable Margin. (c) The Borrower promises to pay interest on each Loan in arrears on each Interest Payment Date with respect thereto. 2.3. REQUESTS FOR REVOLVING CREDIT LOANS. The Borrower shall give to the Administrative Agent written notice in the form of Exhibit B hereto (or telephonic notice confirmed in a writing in the form of Exhibit B hereto) of each Revolving Credit Loan requested hereunder (a "Loan Request") no less than (a) one (1) Business Day prior to the proposed Drawdown Date of any Base Rate Loan and (b) three (3) Eurodollar Business Days prior to the proposed Drawdown Date of any Eurodollar Rate Loan. Each such notice shall specify (i) the principal amount of the Revolving Credit Loan requested, (ii) the proposed Drawdown Date of such Revolving Credit Loan, (iii) the Type of such Revolving Credit Loan, and (iv) if such Revolving Credit Loan is a Eurodollar Rate Loan, the Interest Period therefor. Promptly upon receipt of any such notice, the Administrative Agent shall notify each of the Banks in writing of such notice and of the contents thereof. Each such notice shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Revolving Credit Loan requested from the Banks on the proposed Drawdown Date. Each Loan Request shall be in a minimum aggregate amount of (a) in the case of Base Rate Loans, $500,000 or in integral multiples of $100,000 in excess thereof and (b) in the case of Eurodollar Rate Loans, $1,000,000 or in integral multiples of $100,000 in excess thereof; 42 -35- provided, that the number of Eurodollar Rate Loans outstanding at any time shall not exceed ten. 2.4. CONVERSION OPTIONS. 2.4.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN. The Borrower may elect from time to time to convert any outstanding Revolving Credit Loan to a Revolving Credit Loan of another Type, provided that (a) with respect to any such conversion of a Eurodollar Rate Loan into a Base Rate Loan, such conversion shall only be made on the last day of the Interest Period with respect thereto; (b) with respect to any such conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower shall give the Administrative Agent at least three (3) Eurodollar Business Days' prior written notice of such election and (c) no Loan may be converted into a Eurodollar Rate Loan when any Default or Event of Default has occurred and is continuing. On the date on which such conversion is being made each Bank shall take such action as is necessary to transfer its Commitment Percentage of such Revolving Credit Loans to its Domestic Lending Office or its Eurodollar Lending Office, as the case may be. All or any part of outstanding Revolving Credit Loans of any Type may be converted as provided herein; provided that partial conversions shall be in a minimum aggregate principal amount of (a) in the case of Base Rate Loans, $500,000 or in integral multiples of $100,000 in excess thereof and (b) in the case of Eurodollar Rate Loans, $1,000,000 or in integral multiples of $100,000 in excess thereof. Each Conversion Request relating to the conversion of a Base Rate Loan to a Eurodollar Rate Loan shall be irrevocable by the Borrower. 2.4.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any Revolving Credit Loans of any Type may be continued as such upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the notice provisions contained in Section 2.4.1; provided that no Eurodollar Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto ending during the continuance of such Default or Event of Default of which the officers of the Administrative Agent active upon the Borrower's account have actual knowledge. In the event that the Borrower fails to provide any such notice with respect to the continuation of any Eurodollar Rate Loan as such, then such Eurodollar Rate Loan shall be automatically converted to a Base Rate Loan on the last day of the then current Interest Period related thereto. The Administrative Agent shall notify the Banks 43 -36- promptly when any such automatic conversion contemplated by this Section 2.4.2 hereof is scheduled to occur. 2.4.3. EURODOLLAR RATE LOANS. Any conversion to or from Eurodollar Rate Loans shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, (a) the aggregate principal amount of all Eurodollar Rate Loans having the same Interest Period shall not be less than $1,000,000 or an integral multiple of $100,000 in excess thereof and (b) the number of Eurodollar Rate Loans outstanding at any time shall not exceed ten. 2.5. FUNDS FOR REVOLVING CREDIT LOANS. 2.5.1. FUNDING PROCEDURES. Not later than 12 o'clock p.m. (Houston, Texas time) on the proposed Drawdown Date of any Revolving Credit Loans, each of the Banks will make available to the Administrative Agent, at its Head Office, in immediately available funds, the amount of such Bank's applicable Commitment Percentage of the amount of the requested Revolving Credit Loans. Upon receipt from each Bank of such amount, and upon receipt of the documents required by Sections 12 and 13 hereof and the satisfaction of the other conditions set forth therein, to the extent applicable, the Administrative Agent will make available to the Borrower the aggregate amount of such Revolving Credit Loans made available to the Administrative Agent by the Banks, subject to the provisions of Section 2.5.2 below. The failure or refusal of any Bank to make available to the Administrative Agent at the aforesaid time and place on any Drawdown Date the amount of its applicable Commitment Percentage of the requested Revolving Credit Loans shall not relieve any other Bank from its several obligation hereunder to make available to the Administrative Agent the amount of such other Bank's applicable Commitment Percentage of any requested Revolving Credit Loans. 2.5.2. ADVANCES BY ADMINISTRATIVE AGENT. The Administrative Agent may, unless notified to the contrary by any Bank prior to a Drawdown Date, assume that such Bank has made available to the Administrative Agent on such Drawdown Date the amount of such Bank's Commitment Percentage of the Revolving Credit Loans to be made on such Drawdown Date, and the Administrative Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If any Bank makes available to the Administrative Agent such amount on a date after such Drawdown Date, such Bank shall pay to the Administrative Agent on demand an amount equal to the product of (a) the average computed for the period referred to in clause (c) below of the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the 44 -37- Administrative Agent during each day included in such period, times (b) the amount of such Bank's Commitment Percentage of such Revolving Credit Loans, times (c) a fraction, the numerator of which is the number of days that elapse from and including such Drawdown Date to the date on which the amount of such Bank's Commitment Percentage of such Revolving Credit Loans shall become immediately available to the Administrative Agent, and the denominator of which is 365. A statement of the Administrative Agent submitted to such Bank with respect to any amounts owing under this paragraph shall be prima facie evidence of the amount due and owing to the Administrative Agent by such Bank. If the amount of such Bank's Commitment Percentage of such Revolving Credit Loans is not made available to the Administrative Agent by such Bank within three (3) Business Days following such Drawdown Date, the Administrative Agent shall be entitled to recover such amount from the Borrower on demand, with interest thereon at the rate per annum applicable to the Revolving Credit Loans made on such Drawdown Date. 3. THE TERM LOAN. 3.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in this Credit Agreement, each Bank agrees to lend to the Borrower on the Closing Date the amount of its Commitment Percentage of the Tranche B Term Loan to be funded on the Closing Date. 3.1.1. THE TRANCHE B TERM NOTES. The Tranche B Term Loan shall be evidenced by separate promissory notes of the Borrower in substantially the form of Exhibit C hereto (each a "Tranche B Term Note"), each dated as of the Closing Date and completed with appropriate insertions. One Tranche B Term Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Commitment Percentage of the Tranche B Term Loan and representing the obligation of the Borrower to pay to such Bank such principal amount or, if less, the outstanding amount of such Bank's Commitment Percentage of the Tranche B Term Loan, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes each Bank to make or cause to be made a notation on such Bank's Note Record reflecting the original principal amount of such Bank's Commitment Percentage of the Tranche B Term Loan and, at or about the time of such Bank's receipt of any principal payment on such Bank's Tranche B Term Note, an appropriate notation on such Bank's Note Record reflecting such payment. The aggregate unpaid amount set forth on such Bank's Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Bank, but the failure to record, or any error in so recording, any such amount on such Bank's 45 -38- Note Record shall not affect the obligations of the Borrower hereunder or under any Tranche B Term Note to make payments of principal of and interest on any Tranche B Term Note when due. 3.2. SCHEDULE OF INSTALLMENT PAYMENTS OF PRINCIPAL OF TRANCHE B TERM LOAN. On each Tranche B Reduction Date, the Borrower promises to pay to the Administrative Agent for the account of the Banks on each of the following dates an amount equal to the product of the Reduction Percentage set forth below opposite such date multiplied by the sum of the principal amount of the Tranche B Term Loan outstanding on August 31, 2001 with the final payment on the Tranche B Maturity Date to be adjusted to equal the entire then unpaid balance of (including principal of, interest on and other amounts payable in respect of) the Tranche B Term Loan:
Tranche B Tranche B Reduction Date Reduction Percentage ----------------- --------------------- August 31, 2001 3.330% November 30, 2001 3.330% February 28, 2002 3.340% May 31, 2002 3.750% August 31, 2002 3.750% November 30, 2002 3.750% February 28, 2003 3.750% May 31, 2003 5.000% August 31, 2003 5.000% November 30, 2003 5.000% February 29, 2004 5.000% May 31, 2004 5.625% August 31, 2004 5.625% November 30, 2004 5.625% February 28, 2005 5.625% May 31, 2005 4.375% August 31, 2005 4.375% November 30, 2005 4.375% February 28, 2006 4.375% May 31, 2006 7.500% Tranche B Maturity Date 7.500%
46 -39- 3.3. INTEREST ON TERM LOAN. 3.3.1. INTEREST RATES. Except as otherwise provided in Section 6.10 hereof, the Term Loan shall bear interest at the following rates: (a) To the extent that all or any portion of any Term Loan is a Base Rate Loan, such Term Loan or such portion shall bear interest at the Base Rate plus the Applicable Margin. (b) To the extent that all or any portion of any Term Loan is a Eurodollar Rate Loan, such Term Loan or such portion shall bear interest during the Interest Period relating thereto at the Eurodollar Rate plus the Applicable Margin. (c) The Borrower promises to pay interest on the Term Loan or any portion thereof outstanding in arrears on each Interest Payment Date. 3.3.2. NOTIFICATION BY BORROWER. The Borrower shall notify the Administrative Agent, such notice to be irrevocable, at least three (3) Eurodollar Business Days prior to the Drawdown Date of any Term Loan if all or any portion of such Loan is to bear interest at the Eurodollar Rate. After any Term Loan has been made, the provisions of Section 2.4 above shall apply mutatis mutandis with respect to all or any portion of such Loan so that the Borrower may have the same interest rate options with respect to all or any portion of such Loan as it would be entitled to with respect to the Revolving Credit Loans. 3.3.3. AMOUNTS, ETC. Any portion of the Term Loan bearing interest at the Eurodollar Rate relating to any Interest Period shall be in the amount of $1,000,000 or in integral multiples of $100,000 in excess thereof. The number of Eurodollar Rate Loans outstanding at any time shall not exceed ten (10). No Interest Period relating to the Term Loan or any portion thereof shall extend beyond the date on which a regularly scheduled installment payment of the principal of such Term Loan is to be made unless a portion of such Term Loan at least equal to such installment payment is either a Base Rate Loan or has an Interest Period ending on such date. 4. PREPAYMENTS OF LOANS. 4.1. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. The Borrower shall have the right, at its election, to repay the outstanding amount of the Revolving Credit Loans, as a whole or in part, at any time without penalty or premium, provided that the full or partial prepayment of the outstanding 47 -40- amount of any Eurodollar Rate Loans pursuant to this Section 4.1 may be made only on the last day of the Interest Period relating thereto. The Borrower shall give the Administrative Agent, no later than 11:00 a.m., Houston, Texas time, at least one (1) Business Day's prior written notice, of any proposed repayment pursuant to this Section 4.1 of Base Rate Loans, and three (3) Eurodollar Business Days' notice of any proposed repayment pursuant to this Section 4.1 of Eurodollar Rate Loans, in each case, specifying the proposed date of payment of Revolving Credit Loans and the principal amount to be paid. Each such partial prepayment of the Loans shall be in the amount of $500,000 or in integral multiples of $100,000 in excess thereof, shall be accompanied by the payment of accrued interest on the principal repaid to the date of payment and shall be applied to the principal of Base Rate Loans or to the principal of Eurodollar Rate Loans, at the Borrower's option. Each partial prepayment shall be allocated among the Banks, in proportion, as nearly as practicable, to the respective unpaid principal amount of each Bank's Tranche A Note at the Borrower's option, with adjustments to the extent practicable to equalize any prior repayments not exactly in proportion. 4.2. OPTIONAL PREPAYMENT OF THE TERM LOAN. The Borrower shall have the right at any time to prepay the Term Notes on or before the Maturity Date relating thereto, as a whole, or in part, upon not less than three (3) Business Days' prior written notice to the Administrative Agent, without premium or penalty; provided that, (a) each partial prepayment shall be in the principal amount of $500,000 or in integral multiples of $100,000 in excess thereof, (b) any portion of the Term Loan bearing interest at the Eurodollar Rate may only be prepaid pursuant to this Section 4.2 on the last day of the Interest Period relating thereto, and (c) each partial prepayment shall be allocated among the Banks, in proportion, as nearly as practicable, to the respective outstanding amount of each Bank's Tranche B Term Note with adjustments to the extent practicable to equalize any prior prepayments not exactly in proportion. Each prepayment of principal of the Term Loan shall include all interest accrued to the date of prepayment and shall be applied against the scheduled installments of principal due on the Tranche B Term Loan in the inverse order of maturity. No amount repaid with respect to the Term Loan may be reborrowed. 4.3. MANDATORY REPAYMENTS OF LOANS. (a) If at any time the sum of the outstanding amount of the Tranche A Loans, the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the Tranche A Commitment Amount, then the Borrower shall immediately pay the amount of such excess to the Administrative Agent for the respective accounts of the Banks for application first to any Unpaid Reimbursement Obligations, 48 -41- second to the Tranche A Loans and third, to be held by the Administrative Agent, as cash collateral for the Maximum Drawing Amount. (b) Within sixty (60) days after the end of each fiscal year of the Borrower commencing with the fiscal year ending February 28, 2002, if the Total Leverage Ratio as at the last day of such fiscal year exceeds 4.50:1.00, the Borrower shall repay the Loans in the aggregate principal amount equal to fifty percent (50%) of Consolidated Excess Cash Flow for such fiscal year. Each such mandatory prepayment of the Loans shall be applied (i) first, to the remaining principal installments of the Tranche B Term Loan and (ii) second, if the Tranche B Term Loan has been repaid in full, to repay the Tranche A Loans. Each such mandatory prepayment shall be allocated among the Banks in proportion, as nearly as practicable, to the respective aggregate amounts outstanding on each Bank's Notes evidencing the applicable Loan or Loans advanced under the applicable Tranche. Any mandatory prepayment of principal of the Loans required hereunder shall be accompanied by a payment of all interest accrued to the date of such prepayment. In the event that any Term Loan is required to be prepaid hereunder, all principal amounts prepaid shall be applied against the scheduled installments of principal due on such Term Loan in the inverse order of maturity. In the event that any Tranche A Loans are required to be prepaid hereunder, the Tranche A Commitment Amount shall be reduced by the amount of such prepayment. (c) If as of the last day of the fiscal quarter most recently ended prior to a Sale of assets of the Borrower or of any of its Subsidiaries pursuant to Section 10.5 hereof, the Total Leverage Ratio calculated for the period of (4) four consecutive fiscal quarters ending on such last day on a pro forma basis after giving effect to such Sale and after giving effect to any repayment of Total Funded Debt to be made with the proceeds of such Sale is greater than or equal to 5.50:1.00, then within ten (10) days after such sale, the Borrower shall prepay the Loans by an amount equal to the net proceeds from such sale. Such Net Proceeds shall be applied (i) to the remaining principal installments of the Tranche B Term Loan and (ii) if the Tranche B Term Loan has been paid in full to repay Tranche A Loans. If such Total Leverage Ratio, calculated as provided above, is less than 5.50:1.00, then the Borrower may use the Net Proceeds from such Sale for the purpose of funding Permitted Acquisitions within the nine (9) month period commencing on the date of such Sale; provided, that any Net Proceeds from such Sale which are not reinvested in a Permitted Acquisition within such nine (9) month period shall be applied according to (i) and (ii) above. Any mandatory prepayment of principal of the Loans required hereunder 49 -42- shall be accompanied by a payment of all interest accrued to the date of such prepayment. Any mandatory prepayment of the Term Loan hereunder shall not reduce the scheduled repayment installments required under Section 3.2 hereof. The Tranche A Commitment Amount shall be permanently reduced by the amount of such Net Proceeds applied to repay Tranche A Loans; provided that, such reduction shall not reduce the scheduled Tranche A Commitment Amount reductions set forth in Section 2.1.3 above. Each such mandatory prepayment shall be allocated among the Banks in proportion, as nearly as practicable, to the respective aggregate amounts outstanding of each Bank's Notes evidencing the Loan or Loans advanced under the applicable Tranche. In the event that any Term Loan is required to be prepaid hereunder, all principal amounts prepaid shall be applied against the scheduled installments of principal due on such Term Loan in the inverse order of maturity. (d) If as of the last day of the fiscal quarter most recently ended prior to the issuance of unsecured and subordinated debt by the Borrower or any of its Subsidiaries pursuant to Section 10.1(l) hereof, the Total Leverage Ratio calculated for the period of four consecutive fiscal quarters ending on such last day as if such unsecured and subordinated debt were outstanding on such date is greater than 6.50:1.00, then within ten (10) days after such issuance the Borrower shall prepay the Loans by an amount equal to fifty percent (50%) of the gross proceeds from such issuance. Such proceeds shall be applied (i) to the remaining principal installments of the Tranche B Term Loan, and (ii) if the Term Loan has been paid in full, to repay Tranche A Loans. If the Term Loan has been paid in full, and all outstanding borrowings under the Revolving Credit Loans have been paid in full, the Tranche A Commitment Amount shall be permanently reduced by the unapplied portion of fifty percent (50%) of such gross proceeds. Any mandatory prepayment of principal of the Loans required hereunder shall be accompanied by a payment of all interest accrued to the date of such prepayment. Any mandatory prepayment of the Term Loan hereunder shall not reduce the scheduled repayment installments required under Section 3.2 hereof. The Tranche A Commitment Amount shall be permanently reduced by the amount of such proceeds applied to repay Tranche A Loans; provided that, such reduction shall not reduce the scheduled Tranche A Commitment Amount reductions set forth in Section 2.1.3 above. Each such mandatory prepayment shall be allocated among the Banks in proportion, as nearly as practicable, to the respective aggregate amounts outstanding on each Bank's Notes evidencing the Loan or Loans advanced under the applicable Tranche. In the event that any Term Loan is required to be prepaid hereunder, all principal amounts prepaid shall be applied 50 -43- against the scheduled installments of principal due on such Term Loan in the inverse order of maturity. (e) In the event the gross proceeds from the Subordinated Notes (the "Subordinated Note Proceeds") exceed $300,000,000, in the aggregate, then within ten (10) days after the issuance of the Subordinated Notes, the Borrower shall prepay the Loans by an amount equal to the difference between the Subordinated Note Proceeds and $300,000,000 (the "Surplus Proceeds"). The Surplus Proceeds shall be applied pro rata to prepay outstanding Loans in all Tranches and to the extent applied to repay Revolving Credit Loans, the Tranche A Commitment Amount shall be permanently reduced by the amount of Revolving Credit Loans which were so repaid. In the event all outstanding Loans have been paid in full, the Tranche A Commitment Amount shall be permanently reduced by the amount of any remaining Surplus Proceeds. Any mandatory prepayment of principal of the Loans required hereunder shall be accompanied by a payment of all interest accrued to the date of such prepayment. Any mandatory prepayment of the Term Loan hereunder shall not reduce the scheduled repayment installments required under Section 3.2 hereof. Any reductions in the Tranche A Commitment Amount shall not reduce the scheduled Tranche A Commitment Amount reductions set forth in Section 2.1.3. Each such mandatory prepayment shall be allocated among the Banks in proportion, as nearly as practicable, to the respective aggregate amounts outstanding on each Bank's Notes evidencing the Loan or Loans advanced under the applicable Tranche. In the event that any Term Loan is required to be prepaid hereunder, all principal amounts prepaid shall be applied against the scheduled installments of principal due on such Term Loan in the inverse order of maturity. 5. LETTERS OF CREDIT. 5.1. LETTER OF CREDIT COMMITMENTS. 5.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and conditions hereof and the execution and delivery by the Borrower of a letter of credit application on the Administrative Agent's customary form (a "Letter of Credit Application"), the Administrative Agent on behalf of the Banks and in reliance upon the agreement of the Banks set forth in Section 5.1.4 below and upon the representations and warranties of the Borrower contained herein, agrees to issue, extend and renew for the account of the Borrower one or more standby letters of credit (individually, each a "Letter of Credit"), in such form as may be requested from time to time by the Borrower and agreed to by the Administrative Agent; provided, however, that, after giving effect to such request, (a) the sum of the aggregate Maximum Drawing Amount 51 -44- and all Unpaid Reimbursement Obligations shall not exceed $50,000,000 at any one time, and (b) the sum of (i) the Maximum Drawing Amount on all Letters of Credit, (ii) all Unpaid Reimbursement Obligations, and (iii) the amount of all Tranche A Loans outstanding shall not exceed the Tranche A Commitment Amount. 5.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit Application shall be completed to the satisfaction of the Administrative Agent. In the event that any provision of any Letter of Credit Application shall be inconsistent with any provision of this Credit Agreement, then the provisions of this Credit Agreement shall, to the extent of any such inconsistency, govern. 5.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued, extended or renewed hereunder shall, among other things, (a) provide for the payment of sight drafts for honor thereunder when presented in accordance with the terms thereof and when accompanied by the documents described therein, and (b) have an expiration date no later than the date which is fourteen (14) days prior to the Tranche A Maturity Date. Each Letter of Credit so issued, extended or renewed shall be subject to the Uniform Customs. 5.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally agrees that it shall be absolutely liable, without regard to the occurrence of any Default or Event of Default or any other condition precedent whatsoever, to the extent of such Bank's Commitment Percentage of all Letters of Credit issued, extended or renewed and all Unpaid Reimbursement Obligations, to reimburse the Administrative Agent on demand for the amount of each draft paid by the Administrative Agent under each Letter of Credit to the extent that such amount is not reimbursed by the Borrower pursuant to Section 5.2 below (such agreement for a Bank being called herein the "Letter of Credit Participation" of such Bank). 5.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a Bank shall be treated as the purchase by such Bank of a participating interest in the Borrower's Reimbursement Obligation under Section 5.2 below in an amount equal to such payment. Each Bank shall share in accordance with its participating interest in any interest which accrues pursuant to Section 5.2. 5.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce the Administrative Agent to issue, extend and renew each Letter of Credit and the Banks to participate therein, the Borrower hereby agrees to reimburse or pay to the Administrative Agent, for the account of the Administrative Agent 52 -45- or (as the case may be) the Banks, with respect to each Letter of Credit issued, extended or renewed by the Administrative Agent hereunder, (a) except as otherwise expressly provided in Sections 5.2(b) and (c) below, on each date that any draft presented under such Letter of Credit is honored by the Administrative Agent, or the Administrative Agent otherwise makes a payment with respect thereto, (i) the amount paid by the Administrative Agent under or with respect to such Letter of Credit, and (ii) the amount of any taxes, fees, charges or other costs and expenses whatsoever incurred by the Administrative Agent or any Bank in connection with any payment made by the Administrative Agent or any Bank under, or with respect to, such Letter of Credit, (b) upon the reduction (but not termination) of the Tranche A Commitment Amount to an amount less than the Maximum Drawing Amount, an amount equal to such difference, which amount shall be held by the Administrative Agent for the benefit of the Banks and the Administrative Agent as cash collateral for all Reimbursement Obligations, and (c) upon the termination of the Tranche A Commitment Amount, or the acceleration of the Reimbursement Obligations with respect to all Letters of Credit in accordance with Section 14 hereof, an amount equal to the then Maximum Drawing Amount on all Letters of Credit, which amount shall be held by the Administrative Agent for the benefit of the Banks and the Administrative Agent as cash collateral for all Reimbursement Obligations. Each such payment shall be made to the Administrative Agent at the Administrative Agent's Head Office in immediately available funds. Interest on any and all amounts remaining unpaid by the Borrower under this Section 5.2, at any time from the date such amounts become due and payable (whether as stated in this Section 5.2, by acceleration or otherwise) until payment in full (whether before or after judgment), shall be payable to the Administrative Agent on demand at the rate specified in Section 6.10 hereof for Base Rate Loans. 5.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the Administrative Agent shall notify the Borrower of the date and amount of the draft presented or of the demand for payment made and of the date and time when it expects to pay such draft or honor such demand for payment. If the Borrower fails to reimburse the Administrative Agent as provided in Section 5.2 above on or before the date that such draft is paid or other payment is made by the Administrative Agent, the Administrative Agent may at any time thereafter notify the Banks of the amount of any such Unpaid Reimbursement 53 -46- Obligation. No later than 4:00 p.m. (Houston, Texas time) on the Business Day next following the receipt of such notice, each Bank shall make available to the Administrative Agent, at its Head Office, in immediately available funds, such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, together with an amount equal to the product of (a) the average, computed for the period referred to in clause (c) below, of the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period, times (b) the amount equal to such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, times (c) a fraction, the numerator of which is the number of days that elapse from and including the date the Administrative Agent paid the draft presented for honor or otherwise made payment to the date on which such Bank's Commitment Percentage of such Unpaid Reimbursement obligation shall become immediately available to the Administrative Agent, and the denominator of which is 365. The responsibility of the Administrative Agent to the Borrower and the Banks shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit. 5.3.1. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this Section 5 shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff, counterclaim or defense to payment which the Borrower may have or have had against the Administrative Agent, any Bank or any beneficiary of a Letter of Credit. The Borrower further agrees with the Administrative Agent and the Banks that the Administrative Agent and the Banks shall not be responsible for, and the Borrower's Reimbursement Obligations under Section 5.2 above shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, the beneficiary of any Letter of Credit or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of the Borrower against the beneficiary of any Letter of Credit or any such transferee. The Administrative Agent and the Banks shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit. The Borrower agrees that any action taken or omitted by the Administrative Agent or any Bank under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith, shall be binding 54 -47- upon the Borrower and shall not result in any liability on the part of the Administrative Agent or any Bank. 5.4. RELIANCE BY ISSUER. To the extent not inconsistent with Section 5.4 above, the Administrative Agent shall be entitled to rely, and shall be fully protected in relying upon, (a) any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and (b) any advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent with due care. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Majority Banks as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Majority Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Banks and all future holders of the Revolving Credit Notes or of a Letter of Credit Participation. 5.5. LETTER OF CREDIT FEE. The Borrower shall, on the date of issuance or of any extension or renewal of any Letter of Credit and at such other time or times as such charges are customarily made by the Administrative Agent, pay in advance an annual fee (in each case, a "Letter of Credit Fee") to the Administrative Agent in an amount equal to the sum of (for each day in such annual period) the product of the Applicable Margin for Revolving Credit Loans which bear interest based on the Eurodollar Rate as in effect on the first day of such annual period times the Maximum Drawing Amount scheduled to be available under such Letter of Credit on such day; provided that should any Letter of Credit be terminated prior to its scheduled expiration date, each Bank and the Administrative Agent shall refund to the Borrower an amount equal to that portion of the annual fee received by it which is attributable to the period after such early termination. A portion of each such Letter of Credit Fee equal to one-eighth percent (0.125%) per annum of the face amount of each such Letter of Credit (and such other issuance, amendment, negotiation, document examination and other administrative processing fees of the Administrative Agent as referred to below) to be for the Administrative Agent's own account, and with the remainder of each such Letter of Credit Fee to be for the accounts of the Banks in accordance with their respective Commitment Percentages of all such Letters of Credit then issued, extended or renewed. The Borrower shall also pay to the Administrative Agent for the Administrative Agent's own 55 -48- account the Administrative Agent's customary issuance, amendment, negotiation, document examination and other administrative processing fees, and the term "Letter of Credit Fee" herein shall include all such other fees of the Administrative Agent. 6. CERTAIN GENERAL PROVISIONS. 6.1. FEES. 6.1.1. FEE LETTER. The Borrower shall pay to the Administrative Agent the fees in accordance with the terms of the Fee Letter. 6.1.2. EXTENSION FEE. At the times specified below, the Borrower shall pay extension fees (the "Extension Fees") in an amount calculated as of March 31, 2001 and as of the last day of each fiscal quarter of the Borrower ending thereafter (each such date, a "Calculation Date") as the percentage set forth below opposite the applicable Calculation Date of the aggregate principal amount outstanding under the Tranche B Term Loans on such Calculation Date:
CALCULATION DATE FEE PERCENTAGE ------------------------------------------------- ----------------------------------------- 3/31/01 through 11/30/01 0.250% ------------------------------------------------- ----------------------------------------- 2/28/02 through 11/30/02 0.375% ------------------------------------------------- ----------------------------------------- 2/28/03 through 11/30/03 0.500% ------------------------------------------------- ----------------------------------------- 2/28/04 through 11/30/04 0.625% ------------------------------------------------- ----------------------------------------- 2/28/05 through 11/30/05 0.750% ------------------------------------------------- ----------------------------------------- 2/28/06 through 8/31/06 0.875% ------------------------------------------------- -----------------------------------------
Each Extension Fee shall be payable on the first Business Day following the immediately preceding Calculation Date, commencing on April 2, 2001 and shall be payable to each Bank then participating in the Tranche B Term Loans pro rata in accordance with such Bank's percentage share of outstanding Tranche B Term Loans. 6.2. FUNDS FOR PAYMENTS. 56 -49- 6.2.1. PAYMENTS TO ADMINISTRATIVE AGENT. All payments of principal, interest, Reimbursement Obligations, commitment fees, Letter of Credit Fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Administrative Agent, for the respective accounts of the Banks and the Administrative Agent, at the Administrative Agent's Head Office or at such other location that the Administrative Agent may from time to time designate, in each case in immediately available funds. 6.2.2. NO OFFSET, ETC. All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. The Borrower will deliver promptly to the Administrative Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document. 6.2.3. WITHHOLDING TAX EXEMPTION. Each Bank that is not organized under the laws of the United States of America or a state thereof agrees that it will deliver to each of the Borrower and the Administrative Agent, two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 (or a successor form), in either case certifying whether such Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United State Federal income taxes or, if such Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and intends to claim exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any subsequent versions thereof or successors thereto (and, if such Non-U.S. Bank delivers a Form W-8, a certificate representing that such Non-U.S. Bank is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code of the Borrower and is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Non U.S. Bank claiming complete exemption from, or a reduced rate of, U.S. Federal withholding tax on payments of interest by the Borrower under this Agreement and the other Loan Documents. 57 -50- 6.3. COMPUTATIONS. All computations of interest on the Loans and of commitment, Letter of Credit and other fees, other than interest calculations on Base Rate Loans, shall be based on a 360-day year and paid for the actual number of days elapsed. All computations of interest on Base Rate Loans shall be based on a 365-day or 366-day year, as the case may be, for the actual number of days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to Eurodollar Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. 6.4. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior to the commencement of any Interest Period relating to any Eurodollar Rate Loan, the Administrative Agent shall determine or be notified by the Majority Banks that adequate and reasonable methods do not exist for ascertaining the Eurodollar Rate that would otherwise determine the rate of interest to be applicable to any Eurodollar Rate Loan during any Interest Period, the Administrative Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower and the Banks) to the Borrower and the Banks. In such event (a) any Loan Request or Conversion Request with respect to Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans, (b) each Eurodollar Rate Loan will automatically, on the last day of the then current Interest Period thereof, become a Base Rate Loan, and (c) the obligations of the Banks to make Eurodollar Rate Loans shall be suspended until the Administrative Agent or the Majority Banks determine that the circumstances giving rise to such suspension no longer exist, whereupon the Administrative Agent or, as the case may be, the Administrative Agent upon the instruction of the Majority Banks, shall so notify the Borrower and the Banks. 6.5. ILLEGALITY. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it unlawful for any Bank to make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice of such circumstances to the Borrower and the other Banks and thereupon (a) the commitment of such Bank to make Eurodollar Rate Loans or convert Loans of another Type to Eurodollar Rate Loans shall forthwith be suspended and (b) such Bank's Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such Eurodollar Rate Loans or within such earlier period as may be required by law. The Borrower hereby agrees promptly to pay the Administrative Agent for the account of such Bank, upon demand by such Bank, any additional amounts necessary to compensate such Bank for any costs incurred by such Bank in making any conversion in accordance with 58 -51- this Section 6.5, including any interest or fees payable by such Bank to lenders of funds obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder. 6.6. ADDITIONAL COSTS, ETC. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives or instructions at any time or from time to time hereafter made upon or otherwise issued to any Bank or the Administrative Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Bank or the Administrative Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Credit Agreement, the other Loan Documents, such Bank's Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Bank or the Administrative Agent), or (b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Bank of the principal of or the interest on any Loans or any other amounts payable to any Bank or the Administrative Agent under this Credit Agreement or the other Loan Documents, or (c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Credit Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of an office of any Bank or the Administrative Agent, or (d) impose on any Bank or the Administrative Agent any other conditions or requirements with respect to this Credit Agreement, the other Loan Documents, the Loans, such Bank's Commitment, or any class of loans or commitments of which any of the Loans or such Bank's Commitment forms a part, and the result of any of the foregoing is (i) to increase the cost to any Bank of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Bank's Commitment or any Letter of Credit, or 59 -52- (ii) to reduce the amount of principal, interest, Reimbursement Obligation or other amount payable to such Bank or to the Administrative Agent hereunder on account of such Bank's Commitment or Notes, any Letter of Credit or any of the Loans, or (iii) to require such Bank or the Administrative Agent to make any payment or to forego any interest or Reimbursement Obligation or other sum payable hereunder, the amount of which payment or foregone interest or Reimbursement Obligation or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Bank or the Administrative Agent from the Borrower hereunder, then, and in each such case, the Borrower will, upon demand made by such Bank or (as the case may be) the Administrative Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Bank or the Administrative Agent such additional amounts as will be sufficient to compensate such Bank or the Administrative Agent for such additional cost, reduction, payment or foregone interest or Reimbursement Obligation or other sum. Each Bank agrees promptly to notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this section and will designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole judgment of such Bank made in good faith, be otherwise disadvantageous to such Bank. 6.7. CAPITAL ADEQUACY. If after the date hereof any Bank determines that (a) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, or (b) compliance by such Bank or any corporation controlling such Bank with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect of reducing the return on such Bank's commitment with respect to any Loans or Letters of Credit to a level below that which such Bank could have achieved but for such adoption, change or compliance (taking into consideration such Bank's then existing policies with respect to capital adequacy and assuming full utilization of such entity's capital) by any amount deemed by such Bank to be material, then such Bank may notify the Borrower of such fact. To the extent that the amount of such reduction in the return on capital is not reflected in the Base Rate, the 60 -53- Borrower agrees to pay such Bank for the amount of such reduction in the return on capital as and when such reduction is determined upon presentation by such Bank of a certificate in accordance with Section 6.8 hereof. Each Bank shall allocate such cost increases among its customers in good faith and on an equitable basis. 6.8. CERTIFICATE. A certificate setting forth any additional amounts payable pursuant to Section 6.6 or 6.7 above and a brief explanation of such amounts which are due, submitted by any Bank or the Administrative Agent to the Borrower, shall be conclusive, absent manifest error, that such amounts are due and owing. 6.9. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold each Bank harmless from and against any loss, cost or expense (including loss of anticipated profits) that such Bank may sustain or incur as a consequence of (a) default by the Borrower in payment of the principal amount of or any interest on any Eurodollar Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its Eurodollar Rate Loans, (b) default by the Borrower in making a borrowing or conversion after the Borrower has given (or is deemed to have given) a Loan Request, notice (in the case of the Term Loan pursuant to Section 3.3.2 above) or a Conversion Request relating thereto in accordance with Section 2.4 above or (c) the making of any payment of a Eurodollar Rate Loan or the making of any conversion of any such Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain any such Loans. 6.10. INTEREST AFTER DEFAULT. During the continuance of a Default or an Event of Default (a) under Section 14.1(a), 14.1(b), 14.1(c) (with respect only to Section 11 hereof), 14.1(g) or 14.1(h) hereof and (b) under any other subsection of Section 14.1 upon the request of the Majority Banks, the principal of the Loans and (to the extent permitted by applicable law) interest and all other amounts payable hereunder or under any of the other Loan Documents shall, until such Default or Event of Default has been cured or remedied or such Default or Event of Default has been waived by the Majority Banks pursuant to Section 27 below, bear interest at a rate per annum equal to two percent (2%) above the rate of interest otherwise applicable to such amounts (the "Default Rate"); provided, that, in the case of a Default or an Event of Default under Section 14.1(c) hereof with respect to Section 11 hereof for a particular fiscal quarter, if, the financial statements furnished to the Banks pursuant to Section 9.4 hereof indicate that such Default or Event of Default does not exist as at the end of any subsequent fiscal quarter then 61 -54- commencing with the first day following the end of such subsequent fiscal quarter the Default Rate shall no longer apply to such amounts. 7. SECURITY AND GUARANTIES. 7.1. SECURITY OF BORROWER. The Obligations shall be secured by (a) a pledge of and perfected first-priority lien on all of the issued and outstanding shares of the capital stock of each of the Borrower's direct Subsidiaries, other than Excluded Subsidiaries, (b) a perfected first-priority security interest (subject only to Permitted Liens entitled to priority under applicable law) in all of the assets and properties (both personal and real) of the Borrower, whether now owned or hereafter acquired, (c) an assignment of all insurance policies concerning the business, assets and properties of the Borrower, and (d) an assignment of all of the Borrower's rights and interests in, to and under (i) each Station lease and Station tower lease to which the Borrower is a party, and (ii) each contract and agreement entered into by the Borrower in connection with the transactions contemplated by Section 10.5 hereof, pursuant to the terms of the Security Documents to which the Borrower is a party. 7.2. GUARANTIES AND SECURITY OF SUBSIDIARIES. The Obligations shall also be guaranteed pursuant to the terms of the Guaranty. The obligations of the Borrower's Subsidiaries, other than Excluded Subsidiaries, under the Guaranty shall be in turn secured by (a) a pledge of and perfected first-priority lien on all of the issued and outstanding shares of the capital stock of each indirect Subsidiary, other than Excluded Subsidiaries, of the Borrower, (b) a perfected first-priority security interest (subject only to Permitted Liens entitled to priority under applicable law) in all of the assets and properties (both personal and real) of each such Subsidiary, whether now owned or hereafter acquired, and (c) an assignment of each such Subsidiary's rights and interests in, to and under each (A) Station lease and Station tower lease to which each such Subsidiary is a party and (B) contract and agreement entered into by each such Subsidiary in connection with the transactions contemplated by Section 10.5 hereof, pursuant to the terms of the Security Documents to which such Subsidiary is a party. 8. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Banks and the Administrative Agent as follows: 8.1. CORPORATE AUTHORITY. 8.1.1. INCORPORATION; GOOD STANDING. Each of the Borrower and its Subsidiaries, (a) is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, (b) has 62 -55- all requisite corporate power to own its property and conduct its business as now conducted and as presently contemplated, and (c) is in good standing as a foreign corporation and is duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified would not have a materially adverse effect on the business, assets or financial condition of the Borrower or its Subsidiaries. 8.1.2. AUTHORIZATION. The execution, delivery and performance of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby (a) are within the corporate authority of such Person, (b) have been duly authorized by all necessary corporate proceedings, (c) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which the Borrower or any of its Subsidiaries is subject or any judgment, order, writ, injunction, license or permit applicable to the Borrower or any of its Subsidiaries and (d) do not conflict with any provision of the corporate charter or bylaws of, or any agreement or other instrument binding upon, the Borrower or any of its Subsidiaries. 8.1.3. ENFORCEABILITY. The execution and delivery of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or is to become a party will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. 8.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by the Borrower and any of its Subsidiaries of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority, including the FCC, other than those already obtained. 8.3. TITLE TO PROPERTIES; LEASES. Except as indicated on Schedule 8.3(a) hereto, the Borrower and its Subsidiaries own all of the assets reflected in the consolidated balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date or acquired since that date (except property and assets which are not integral to the operations of the Existing 63 -56- Stations as such Stations are operated immediately prior to the Balance Sheet Date and which have been sold or otherwise disposed of in the ordinary course of business since that date or property and assets which have been replaced since that date), subject to no rights of others, including any mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens. Except as listed on Schedule 8.3(b) hereto, none of the Borrower or any of its Subsidiaries owns any Real Estate. Except as listed on Schedule 8.3(c) hereto, none of the Borrower or any of its Subsidiaries is party to any lease concerning Real Estate (including any studio or tower leases relating to any Station). None of the leases listed on Schedule 8.3(c) have been recorded in the land records of any jurisdiction or in any other office of any governmental authority. 8.4. FINANCIAL STATEMENTS AND PROJECTIONS. 8.4.1. FINANCIAL STATEMENTS. There has been furnished to the Banks the consolidated and consolidating balance sheets of the Borrower and its Subsidiaries, as at the Balance Sheet Date, and the related, similarly adjusted, consolidated and consolidating statements of income and cash flow for the fiscal year then ended, each, in the case of consolidated financial statements, certified by both the Borrower's independent certified public accountants and an authorized officer of the Borrower. Such balance sheets and statements of income and cash flow have been prepared in accordance with generally accepted accounting principles and fairly present the financial condition of the Borrower and its Subsidiaries, as at the close of business on the date thereof and the results of operations for the fiscal periods then ended. There are no contingent liabilities of the Borrower or any of its Subsidiaries, as of the Closing Date involving material amounts, known to any officer of the Borrower or of any of its Subsidiaries not disclosed in the balance sheet dated the Balance Sheet Date and the related notes thereto other than contingent liabilities disclosed to the Banks in writing. 8.4.2. PROJECTIONS. The projections, dated August 18, 2000 of the annual operating budgets and operating cash flow of the Borrower and its Subsidiaries, on a consolidated and consolidating basis, for the 2000 to 2007 fiscal years, copies of which are attached hereto as Exhibit D (the "Projections"), disclose all assumptions made with respect to general economic, financial and market conditions used in formulating the Projections. To the knowledge of the Borrower or any of its Subsidiaries, no facts exist that (individually or in the aggregate) would result in any material change in any of the Projections. The Projections are based upon reasonable estimates and assumptions, have been prepared on the basis of the assumptions stated therein and 64 -57- reflect the reasonable estimates of the Borrower and its Subsidiaries of the results of operations and other information projected therein. 8.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date there has occurred no materially adverse change in the financial condition or business of the Borrower and its Subsidiaries as shown on or reflected in the consolidated balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date, or the consolidated statement of income for the fiscal year then ended, other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of the Borrower and any of the Operating Subsidiaries and License Subsidiaries taken as a whole. Since the Balance Sheet Date, the Borrower has not made any Distributions, except as set forth on Schedule 8.5 hereto. 8.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Borrower and its Subsidiaries possesses all franchises, patents, copyrights, trademarks, and trade names, and rights in respect of the foregoing, adequate for the conduct of its business substantially as now conducted without known conflict with any rights of others. 8.7. LITIGATION. Except as set forth on Schedule 8.7 hereto, there are no actions, suits, proceedings or investigations of any kind, including without limitation any Material Labor Dispute, pending or, to the Borrower's knowledge, threatened against the Borrower or any of its Subsidiaries before any court, tribunal or administrative agency or board (including the FCC). None of such actions, suits, proceedings or investigations, if adversely determined, might, either in any case or in the aggregate, materially adversely affect the properties, assets, financial condition or business of the Borrower, or the Borrower, its Subsidiaries or any of the Stations owned or operated by the Borrower or any of its Subsidiaries considered as a whole, or materially impair the right of the Borrower and its Subsidiaries, considered as a whole, to carry on business substantially as now conducted by them, or result in any substantial liability not adequately covered by insurance, or for which adequate reserves are not maintained on the consolidated balance sheet of the Borrower and its Subsidiaries, or which question the validity of this Credit Agreement, any of the other Loan Documents, or any action taken or to be taken pursuant hereto or thereto. 8.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Borrower nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business, assets or financial condition of the Borrower or any of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries is a party to any contract or agreement that has or is expected, in the judgment of the Borrower's officers, 65 -58- to have any materially adverse effect on the business of the Borrower or the Borrower and its Subsidiaries considered as a whole. 8.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Borrower nor any of its Subsidiaries is in violation of any provision of its charter documents, bylaws, or any agreement or instrument to which it may be subject or by which it or any of its properties or assets may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of the Borrower or the Borrower and its Subsidiaries considered as a whole. The Obligations of the Borrower and its Subsidiaries arising under this Credit Agreement and the other Loan Documents constitute "Permitted Debt" and "Senior Debt" under and as defined in the Subordinated Note Indenture, and the incurrence of such Obligations will not cause a "Default" or "Event of Default" under and as defined in the Subordinated Note Indenture. 8.10. TAX STATUS. The Borrower and its Subsidiaries, (a) have made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which any of them is subject, (b) have paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) have set aside on their books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Borrower know of no basis for any such claim. 8.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing. 8.12. INVESTMENT COMPANY AND COMMUNICATIONS ACTS. Neither the Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor is it an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. The Borrower and each of its Subsidiaries is in compliance with the Communications Act with regard to alien control or ownership. 8.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to Permitted Liens, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any 66 -59- filing records, registry, or other public office, that purports to cover, affect or give notice of any present or possible future lien on, or security interest in, any assets or property of the Borrower or any of its Subsidiaries, other than Excluded Subsidiaries, or rights thereunder. 8.14. PERFECTION OF SECURITY INTEREST. All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary or advisable, under applicable law, to establish and perfect the Administrative Agent's security interest in the Collateral. The Collateral and the Administrative Agent's rights with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses. The Collateral owned by each of the Borrower and its Subsidiaries is free from any lien, security interest, encumbrance and any other claim or demand, except for Permitted Liens. 8.15. CERTAIN TRANSACTIONS. Except for Investments permitted under Section 10.3, none of the officers, directors, or employees of the Borrower or any of its Subsidiaries is presently a party to any transaction with the Borrower or any of its Subsidiaries, other than for services as employees, officers and directors, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Borrower, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 8.16. EMPLOYEE BENEFIT PLANS. 8.16.1. IN GENERAL. Each Employee Benefit Plan has been maintained and operated in compliance in all material respects with the provisions of ERISA and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions. The Borrower has heretofore delivered to the Administrative Agents the most recently completed annual report, Form 5500, with all required attachments, and actuarial statement required to be submitted under Section 103(d) of ERISA, with respect to each Guaranteed Pension Plan. 8.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit Plan which is an employee welfare benefit plan within the meaning of Section 3(1) or 3(2)(B) of ERISA, no benefits are due unless the event giving rise to the benefit entitlement occurs prior to plan termination (except as required by Title I, Part 6 of ERISA). The Borrower or an ERISA Affiliate, as appropriate, may terminate each such Plan at any time (or at any time subsequent to the expiration of 67 -60- any applicable bargaining agreement) in the discretion of the Borrower or such ERISA Affiliate without liability to any Person. 8.16.3. GUARANTEED PENSION PLANS. Each contribution required to be made to a Guaranteed Pension Plan, whether required to be made to avoid the incurrence of an accumulated funding deficiency, the notice or lien provisions of Section 302(f) of ERISA, or otherwise, has been timely made. No waiver of an accumulated funding deficiency or extension of amortization periods has been received with respect to any Guaranteed Pension Plan. No liability to the PBGC (other than required insurance premiums, all of which have been paid) has been incurred by the Borrower or any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has not been any ERISA Reportable Event, or any other event or condition which presents a material risk of termination of any Guaranteed Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed Pension Plan (which in each case occurred within twelve months of the date of this representation), and on the actuarial methods and assumptions employed for that valuation, the aggregate benefit liabilities of all such Guaranteed Pension Plans within the meaning of Section 4001 of ERISA did not exceed the aggregate value of the assets of all such Guaranteed Pension Plans, disregarding for this purpose the benefit liabilities and assets of any Guaranteed Pension Plan with assets in excess of benefit liabilities. 8.16.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of assets described in Section 4204 of ERISA. Neither the Borrower nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of Section 4241 or 4245 of ERISA or that any Multiemployer Plan intends to terminate or has been terminated under Section 4041A of ERISA. 8.17. USE OF PROCEEDS; REGULATIONS U AND X. The proceeds of the Loans shall be used for the purpose of (a) working capital and general corporate purposes, (b) funding Permitted Acquisitions including, without limitation, the Lee Transaction and (c) funding other Investments permitted hereunder. No portion of any Loan is to be used for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. No portion of any Loan is to be used, and no portion of any Letter of Credit is to be obtained, for an investment in any Subsidiary of the Borrower which is not a party to a Guaranty. 68 -61- 8.18. ENVIRONMENTAL COMPLIANCE. The Borrower has taken all necessary steps to investigate the past and present condition and usage of the Real Estate and the operations conducted thereon and, based upon such diligent investigation, has determined that: (a) none of the Borrower, its Subsidiaries or any operator of the Real Estate or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state or local statute, regulation, ordinance, order or decree relating to health, safety or the environment (hereinafter, collectively, "Environmental Laws"), which violation would have a material adverse effect on the environment or the business, assets or financial condition of the Borrower or any of its Subsidiaries; (b) neither the Borrower nor any of its Subsidiaries has received notice from any third party including, without limitation: any federal, state or local governmental authority, (i) that any one of them has been identified by the United States Environmental Protection Agency ("EPA") as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste, as defined by 42 U.S.C. Section 6903(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) and any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws (collectively, "Hazardous Substances") which any one of them has generated, transported or disposed of has been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that the Borrower or any of its Subsidiaries conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party's incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances; (c) except as set forth on Schedule 8.18 attached hereto: (i) no portion of the Real Estate has been used for the handling, processing, 69 -62- storage or disposal of Hazardous Substances except in accordance with applicable Environmental Laws; and no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Real Estate; (ii) in the course of any activities conducted by the Borrower, its Subsidiaries or operators of its properties, no Hazardous Substances have been generated or are being used on the Real Estate except in accordance with applicable Environmental Laws; (iii) there have been no releases (i.e. any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping) or threatened releases of Hazardous Substances on, upon, into or from the properties of the Borrower or its Subsidiaries, which releases would have a material adverse effect on the value of any of the Real Estate or adjacent properties or the environment; (iv) to the best of the Borrower's knowledge, there have been no releases on, upon, from or into any real property in the vicinity of any of the Real Estate which, through soil or groundwater contamination, may have come to be located on, and which would have a material adverse effect on the value of, the Real Estate; and (v) in addition, any Hazardous Substances that have been generated on any of the Real Estate have been transported offsite only by carriers having an identification number issued by the EPA, treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Borrower's knowledge, operating in compliance with such permits and applicable Environmental Laws; and (d) None of the Borrower, its Subsidiaries, any Mortgaged Property or any of the other Real Estate is subject to any applicable environmental law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any governmental agency or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or as a condition to the recording of any Mortgage or to the effectiveness of any other transactions contemplated hereby. 8.19. SUBSIDIARIES, ETC. Set forth on Schedule 8.19 hereto is a list of all Subsidiaries of the Borrower. Except as set forth on Schedule 8.19, the Borrower owns all of the issued and outstanding shares of capital stock of each such Subsidiary, and neither the Borrower nor any Subsidiary of the Borrower is engaged in any joint venture or partnership with any other person. Emmis International Corporation does not lease or own any real property, employ any employees, agents (other than a registered service agent 70 -63- in its respective state of incorporation) or representatives, or own any assets or personal property of any kind or nature. 8.20. BANK ACCOUNTS. Schedule 8.20 hereto sets forth the account numbers and location of all bank accounts of the Borrower or any of its Subsidiaries. 8.21. LICENSES AND APPROVALS. (a) Each of the Borrower and its Subsidiaries has all requisite power and authority and necessary licenses, permits and approvals, including all FCC Licenses, to hold the FCC Licenses and to own and operate its Stations and to carry on its businesses as now conducted. (b) Set forth in Schedule 8.21 hereto is a complete description of all FCC Licenses of the Borrower and/or its Subsidiaries and the dates on which such FCC Licenses expire. Complete and correct copies of all such FCC licenses have been delivered to the Administrative Agent. Each such FCC License which is necessary to the operation of the business of the Borrower or any of its Subsidiaries is validly issued and in full force and effect. The Borrower and each of its Subsidiaries has fulfilled and performed all of its obligations with respect to each such FCC License. No event has occurred which: (i) has resulted in, or after notice or lapse of time or both would result in, revocation or termination of any FCC License, or (ii) materially and adversely affects or in the future could reasonably be expected to materially adversely affect any of the rights of the Borrower or any of its Subsidiaries thereunder. No license or franchise, other than the FCC Licenses described in Schedule 8.21, is necessary for the operation of the business (including the Stations) of the Borrower or any of its Subsidiaries as now conducted. (c) None of the Borrower or any of its Subsidiaries is a party to or has knowledge of any investigation, notice of violation, order or complaint issued by or before any governmental authority, including the FCC, or of any other proceedings (other than proceedings relating to the radio broadcasting industry generally) which could in any manner threaten or adversely affect the validity or continued effectiveness of the FCC Licenses of the Borrower or any of its Subsidiaries or the business of the Borrower or any of its Subsidiaries. None of the Borrower or any of its Subsidiaries has reason to believe that any of the FCC Licenses described in Schedule 8.21 will not be renewed in the ordinary course. Each of the Borrower and its Subsidiaries has filed all material reports, applications, documents, instruments and information required to be filed by it pursuant to applicable rules and regulations or requests of every regulatory body having jurisdiction over any of its FCC Licenses or the activities or business of such Person with respect thereto. 71 -64- 8.22. MATERIAL AGREEMENTS. Schedule 8.22 hereto accurately and completely lists all agreements among the Borrower and its Subsidiaries (including all agreements between the License Subsidiaries and the Operating Subsidiaries) and all material radio or television network affiliation, programming, engineering, consulting, management, employment and related agreements of the Borrower and its Subsidiaries, if any, which are presently in effect in connection with the conduct of the business of the Borrower or any of its Subsidiaries, including without limitation the operation of any Station by the Borrower or any Subsidiary of the borrower. All of the foregoing agreements are valid, subsisting and in full force and effect and none of the Borrower, any of its Subsidiaries or, to the Borrower's best knowledge, any other Person are in material default thereunder. Copies of all such agreements have been furnished to the Agents. 9. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, until all of the Obligations have been irrevocably paid and satisfied in full, and so long as any Loan, Note or Letter of Credit is outstanding or any Bank has any obligation to make any Loans, or the Administrative Agent has any obligation to issue, extend or renew any Letters of Credit hereunder: 9.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans, all Reimbursement Obligations, the Letter of Credit Fees, the commitment fees and all other fees and amounts provided for in this Credit Agreement, all in accordance with the terms of this Credit Agreement and the other Loan Documents. 9.2. MAINTENANCE OF OFFICE. The Borrower will and will cause each of its Subsidiaries (other than Excluded Subsidiaries and License Subsidiaries) to maintain its chief executive office in Indianapolis, Indiana, or at such other place in the United States of America as the Borrower shall designate upon written notice to the Administrative Agent, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents may be given or made. 9.3. RECORDS AND ACCOUNTS. The Borrower will (a) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles and (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves. 72 -65- 9.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower will deliver to each of the Banks: (a) as soon as practicable, but in any event not later than one hundred and twenty (120) days after the end of each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and its Subsidiaries, and the consolidating balance sheets of the Borrower and its Subsidiaries, each as at the end of such year, and the related consolidated statement of income and consolidated statement of cash flow and consolidating statement of income and consolidating statement of cash flow for such year, each setting forth in comparative form the figures for the previous fiscal year and all such consolidated and consolidating statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and, in the case of all consolidated statements, certified without qualification by Arthur Andersen LLP or Katz Sapper & Miller or by other independent certified public accountants satisfactory to the Agents, together with a written statement from such accountants to the effect that they have read a copy of this Credit Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; provided that such accountants shall not be liable to the Banks for failure to obtain knowledge of any Default or Event of Default; (b) as soon as practicable, but in any event not later than forty-five (45) days after the end of each fiscal quarter of the Borrower commencing with the fiscal quarter ending August 31, 2000, copies of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries, and the unaudited consolidating balance sheet of the Borrower and its Subsidiaries, each as at the end of such quarter, and the related consolidated statement of income and consolidated statement of cash flow and consolidating statement of income and consolidating statement of cash flow for the portion of the Borrower's and Subsidiaries', fiscal year then elapsed, all in reasonable detail and prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officer of the Borrower that the information contained in such financial statements fairly presents the financial position of the Borrower and its Subsidiaries, on the date thereof (subject to year-end adjustments); (c) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement certified by the principal financial or accounting officer of the Borrower in substantially 73 -66- the form of Exhibit E hereto and setting forth in reasonable detail computations evidencing compliance with the covenants contained in Section 11 and (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date; and simultaneously with the delivery of the fiscal year-end financial statements referred to in subsection (a) above, a detailed statement of operating expenses incurred by Emmis International Corporation for such fiscal year in form and substance satisfactory to the Administrative Agent and certified by the principal financial or accounting officer of the Borrower; (d) promptly upon completion thereof and in any event no later than thirty (30) days after the beginning of each fiscal year of the Borrower, the Borrower's annual operating budget in the form of consolidated and consolidating (on a Station-by-Station basis) financial projections for each such fiscal year prepared on a quarterly basis and setting forth projected operating results for each quarter in such fiscal year and for the fiscal year as a whole, including projections of operating cash flow, together with a statement of reasonable assumptions made by the Borrower in preparing such budgets and projections and explanations attached thereto; (e) contemporaneously with the filing or mailing thereof, copies (i) of all material of a financial nature filed with the Securities and Exchange Commission (including any registration statements) or sent to the stockholders of the Borrower and (ii) any periodic or special reports of a material nature filed with the FCC and relating to any Station owned or operated by the Borrower or any of its Subsidiaries; (f) from time to time upon the request therefor of the Agents, projections of the Borrower and its Subsidiaries, updating the Projections or, if applicable, updating any later such projections delivered in response to a request pursuant to this Section 9.4(f); (g) from time to time such other financial data and information (including accountants' management letters) as the Administrative Agent or any Bank may reasonably request; and (h) promptly upon their becoming available, copies of all annual appraisals of the then current business value of the Borrower and its Subsidiaries, other than Excluded Subsidiaries, conducted, commissioned or received by the Borrower, whether prepared by an independent appraiser or otherwise. 9.5. NOTICES. 74 -67- 9.5.1. DEFAULTS. The Borrower will promptly notify the Administrative Agent and each of the Banks in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting a Default or an Event of Default) under this Credit Agreement or any other note, evidence of indebtedness, indenture or other obligation to which or with respect to which the Borrower or any of its Subsidiaries is a party or obligor, whether as principal or surety, the Borrower shall forthwith give written notice thereof to each of the Banks and the Administrative Agent, describing the notice or action and the nature of the claimed default. 9.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly give notice to the Administrative Agent (a) of any violation of any Environmental Law that the Borrower or any of its Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (b) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, or any federal, state or local environmental agency or board, that has the potential to materially affect the business, assets, liabilities, financial conditions or operations of the Borrower or any of its Subsidiaries, or the Administrative Agent's security interests pursuant to the Security Documents. 9.5.3. NOTIFICATION OF CLAIMS AGAINST COLLATERAL. The Borrower will, immediately upon becoming aware thereof, notify the Administrative Agents in writing of any setoff, claims (including, with respect to the Real Estate, environmental claims), withholdings or other defenses to which any of the Collateral, or the Administrative Agent's rights with respect to the Collateral, are subject. 9.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will, and will cause each of its Subsidiaries to, give notice to the Administrative Agent in writing within fifteen (15) days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation or proceedings affecting the Borrower or any of its Subsidiaries or to which the Borrower or any of its Subsidiaries is or becomes a party involving an uninsured claim against the Borrower or any of its Subsidiaries that could reasonably be expected to have a materially adverse effect on the Borrower or any of its Subsidiaries, or on any of such Person's material assets or properties, and stating the nature and status of such litigation or proceedings. The Borrower will, and will cause each of its Subsidiaries to, give notice to the 75 -68- Administrative Agent, in writing, in form and detail satisfactory to the Administrative Agent, within ten (10) days of any judgment not covered by insurance, final or otherwise, against the Borrower or any of its Subsidiaries in an amount in excess of $250,000. 9.6. CORPORATE EXISTENCE; BUSINESS ACTIVITY; MAINTENANCE OF PROPERTIES. The Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises and those of its Subsidiaries. It (a) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (b) will make or cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, (c) will, and will cause each of its Subsidiaries (other than the License Subsidiaries) to, continue to engage primarily in the radio and television broadcasting and/or magazine publishing businesses now conducted by each of them and in related businesses, (d) will cause each of its License Subsidiaries to engage solely in the business of holding the FCC Licenses necessary for the Operating Subsidiaries to operate the Stations operated by each of them and (e) will, and will cause each of its Subsidiaries to, obtain, maintain, preserve, renew, extend and keep in full force and effect all permits, rights, licenses, franchises, authorizations patents, trademarks, copyrights and privileges necessary for the proper conduct of its business, including FCC Licenses; provided that nothing in this Section 9.6 shall prevent the Borrower from discontinuing the operation and maintenance of any of its properties or those of its Subsidiaries if such discontinuance is, in the judgment of the Borrower, desirable in the conduct of its or their business and does not in the aggregate materially adversely affect the business of the Borrower and its Subsidiaries, other than Excluded Subsidiaries, on a consolidated basis. 9.7. INSURANCE. The Borrower will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent and in accordance with the terms of the Security Agreements and written by such companies as may be satisfactory to the Administrative Agent, and to maintain business interruption insurance in form satisfactory in all respects to the Banks and the Administrative Agent and in an amount with respect to each Station owned by the Borrower or any of its Subsidiaries equal to 20% of the operating cash flow of such Station for 76 -69- the previous fiscal year, subject to a maximum of $700,000 for KPWR-FM, Los Angeles, California for business interruption caused by earthquake; provided that, (a) in no event will the deductible amount in respect of any covered loss exceed an amount which is usual and customary for similar businesses engaged in similar activities. All policies of insurance shall be payable to the Administrative Agent as loss payee and additional insured for the benefit of the Administrative Agent and the Lenders and shall provide for thirty (30) days' minimum cancellation notice to the Administrative Agent. In the event of any failure by the Borrower or any of its Subsidiaries to provide and maintain insurance as required herein or in the Security Documents to which such Person is a party, the Administrative Agent may, after notice to the Borrower to such effect, provide such insurance and charge the amount thereof to the Borrower and the Borrower hereby promises to pay to the Administrative Agent on demand the amount of any disbursements made by the Administrative Agent for such purpose. Within ninety (90) days of the end of each fiscal year of the Borrower, the Borrower shall furnish to the Administrative Agent certificates or other evidence satisfactory to the Administrative Agent of compliance with the foregoing provisions. The Borrower will, and will cause each of its Subsidiaries to, maintain insurance on the Mortgaged Properties in accordance with the terms of the Mortgages. 9.8. TAXES. The Borrower will, and will cause each of its Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges (other than taxes, assessments and other governmental charges imposed by foreign jurisdictions that in the aggregate are not material to the business or assets of the Borrower on an individual basis or of the Borrower and its Subsidiaries on a consolidated basis) imposed upon it and its real properties, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property; provided that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or such Subsidiary shall have set aside on its books adequate reserves with respect thereto; and provided further that the Borrower and each Subsidiary of the Borrower will pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor. 9.9. INSPECTION OF PROPERTIES AND BOOKS, ETC. 9.9.1. GENERAL. The Borrower shall permit the Banks, through the Administrative Agent or any of the Banks' other designated representatives, to visit and inspect any of the properties of the 77 -70- Borrower or any of its Subsidiaries to examine the books of account of the Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries with, and to be advised as to the same by, its and their officers, all at such reasonable times and intervals as the Administrative Agent or any Bank may reasonably request. 9.9.2. APPRAISALS. If an Event of Default under Section 14.1(a) or (b) hereof shall have occurred and be continuing, upon the request of the Administrative Agent, the Borrower will obtain and deliver to the Administrative Agent appraisal reports in form and substance and from appraisers satisfactory to the Administrative Agent, stating (a) the then current fair market, orderly liquidation and forced liquidation values of all or any portion of the equipment or real estate owned by the Borrower or any of its Subsidiaries and any Station and (b) the then current business value of each of the Borrower and its Subsidiaries. All such appraisals shall be conducted and made at the expense of the Borrower. 9.9.3. ENVIRONMENTAL ASSESSMENTS. Whether or not an Event of Default shall have occurred, the Administrative Agent may, from time to time, in its discretion for the purpose of assessing and ensuring the value of any Mortgaged Property, obtain one or more environmental assessments or audits of such Mortgaged Property prepared by a hydrogeologist, an independent engineer or other qualified consultant or expert approved by the Administrative Agent to evaluate or confirm (a) whether any Hazardous Substances are present in the soil or water at such Mortgaged Property and (b) whether the use and operation of such Mortgaged Property complies with all Environmental Laws; provided, that such assessments shall be conducted only if in the reasonable judgment of the Administrative Agent or of the Majority Banks there is a basis for believing any such environmental problems may exist. Environmental assessments may include without limitation detailed visual inspections of such Mortgaged Property including any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, surface water samples and ground water samples, as well as such other investigations or analyses as the Administrative Agent deems appropriate. All such environmental assessments shall be conducted and made at the expense of the Borrower. 9.9.4. COMMUNICATION WITH ACCOUNTANTS. The Borrower authorizes the Administrative Agent and, if accompanied or authorized by the Administrative Agent, any of the Banks to communicate directly with the Borrower's independent certified public accountants and 78 -71- authorizes such accountants to disclose to the Administrative Agent and the Banks any and all financial statements and other supporting financial documents and schedules including copies of any management letter with respect to the business, financial condition and other affairs of the Borrower or any of its Subsidiaries. At the request of the Administrative Agent, the Borrower shall deliver a letter addressed to such accountants instructing them to comply with the provisions of this Section 9.9.4. 9.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. (a) The Borrower will, and will cause each of its Subsidiaries to, comply with (i) the applicable laws and regulations wherever its business is conducted, including all Environmental Laws and the Communications Act, unless failure to comply would not result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of the Borrower or the Borrower and its Subsidiaries, taken as a whole, (ii) the provisions of its charter documents and by-laws, (iii) all agreements and instruments by which it or any of its properties may be subject or bound and (iv) all applicable decrees, orders, and judgments, unless failure to comply therewith would not result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of the Borrower or the Borrower and its Subsidiaries, taken as a whole. If at any time any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Borrower may fulfill any of its obligations hereunder, the Borrower will immediately take or cause to be taken all reasonable steps within the power of the Borrower to obtain such authorization, consent, approval, permit or license and furnish the Banks with evidence thereof. (b) The Borrower will, and will cause each of its Subsidiaries to, (i) operate its Stations in all material respects in accordance with and in compliance with the Communications Act, (ii) file in a timely manner all necessary applications for renewal of all FCC Licenses that are material to the operations of its Stations, (iii) use its best efforts to defend any proceedings which could result in the termination, forfeiture or non-renewal of any FCC License, and (iv) promptly furnish or cause to be furnished to the Administrative Agents: (A) a copy of any order or notice of the FCC which designates any of the Borrower's or any of its Subsidiaries' FCC Licenses for a hearing or which refuses renewal or extension thereof, or reverses or suspends its or any of its Subsidiaries' authority to operate a Station, (B) a copy of any competing application filed with respect to any of its franchises, licenses (including FCC 79 -72- Licenses), rights, permits, consents or other authorizations pursuant to which the Borrower or any of the Borrower's Subsidiaries operates any Station, (C) a copy of any citation, notice of violation or order to show cause issued by the FCC in relation to any of the Borrower's or any of its Subsidiaries' Stations and (D) a copy of any notice or application by the Borrower or any of its Subsidiaries requesting authority to cease broadcasting on any Station or to cease operating any Station for any period in excess of five (5) days. 9.11. EMPLOYEE BENEFIT PLANS. The Borrower will (a) promptly upon filing the same with the Department of Labor or Internal Revenue Service, upon request of the Administrative Agent, furnish to the Administrative Agent a copy of the most recent actuarial statement required to be submitted under Section 103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in respect of each Guaranteed Pension Plan, and (b) promptly upon receipt or dispatch, furnish to the Administrative Agent any notice, report or demand sent or received in respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA. 9.12. USE OF PROCEEDS. The Borrower will use the proceeds of the Loans solely for the purposes specified in Section 8.17 above. 9.13. ADDITIONAL COLLATERAL. The Borrower will, and will cause each of its Subsidiaries, other than Excluded Subsidiaries, to, from time to time at its own cost and expense, promptly secure or cause to be secured the Obligations by creating or causing to be created in favor of the Administrative Agent for the benefit of the Banks perfected security interests (subject only to Permitted Liens) with respect to all inventory, receivables, equipment, accounts, copyrights, patents, trademarks, licenses, other general intangibles, real property and other assets of the Borrower and its Subsidiaries, other than Excluded Subsidiaries, now owned or hereafter acquired, to the extent the Administrative Agent shall so request. All such security interests will be created under security agreements, mortgages and other instruments and documents in form and substance satisfactory to the Administrative Agent, and the Borrower shall deliver to the Administrative Agent all such instruments and documents (including, without limitation, legal opinions, title insurance policies and lien searches) as the Administrative Agent shall reasonably request to evidence the satisfaction of the obligations created by this Section 9.13. The Borrower agrees to provide such evidence as the Administrative Agent shall request as to the perfection and priority of such security interests (subject only to Liens permitted by the Security Documents). 80 -73- 9.14. INTEREST RATE PROTECTION. The Borrower shall enter into and maintain in full force and effect prior to July 16, 2001 while any Loans are outstanding or any Commitment remains in effect, on terms and conditions satisfactory to the Agents, agreements and arrangements ("Interest Rate Protection Agreements") as shall be necessary to effectively cap or fix the interest cost to the Borrower with respect to (a) at any time prior to July 16, 2001 when the Total Leverage Ratio, determined as at the last day of the period of four (4) consecutive fiscal quarters most recently ended, equals or exceeds 5.00:1.00, not less than fifty percent (50%) of the amount equal to Total Funded Debt (excluding at all times prior to April 1, 2001 the Tranche B Term Loan) as of the last day of such four (4) quarter period less the Maximum Drawing Amount available under Letters of Credit outstanding during such period and (b) at any time prior to July 16, 2001 when the Total Leverage Ratio, determined as at the last day of the period of four (4) consecutive fiscal quarters most recently ended, is less than 5.00:1.00, not less than twenty-five percent (25%) of the amount equal to Total Funded Debt (excluding at all times prior to April 1, 2001 the Tranche B Term Loan) as of the last day of such four (4) quarter period less the Maximum Drawing Amount available under Letters of Credit outstanding during such period. 9.15. FURTHER ASSURANCES. The Borrower will, and will cause each of its Subsidiaries to, cooperate with the Banks and the Administrative Agent and execute such further instruments and documents as the Banks or the Administrative Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Credit Agreement and the other Loan Documents. 10. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that until all of the Obligations have been irrevocably paid and satisfied in full, and, so long as any Loan, Note or Letter of Credit is outstanding or any Bank has any obligation to make any Loans, or the Administrative Agent has any obligation to issue, extend or renew any Letters of Credit hereunder: 10.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and will not permit any of its Subsidiaries, other than Excluded Subsidiaries, to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (a) Indebtedness to the Banks and the Administrative Agent arising under any of the Loan Documents; (b) current liabilities of the Borrower or such Subsidiary (including under any operating leases and studio and tower leases) incurred in the ordinary course of business not incurred through (i) the 81 -74- borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; (c) Indebtedness in respect of taxes, assessments, governmental charges or levies and (except in the case of the License Subsidiaries) claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 9.8 hereof; (d) Indebtedness in respect of (i) judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Borrower or such Subsidiary (as the case may be) shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review, (ii) final judgments against the Borrower or any of its Subsidiaries that in the aggregate do not exceed $1,000,000 and (iii) claims which are currently being contested in good faith by appropriate proceedings if adequate reserve shall have been set aside with respect thereto; (e) endorsements for collection, deposit or negotiation other than by any License Subsidiary and warranties of products or services, in each case incurred in the ordinary course of business; (f) obligations (other than obligations of any License Subsidiary) under Capitalized Leases not exceeding $10,000,000 in aggregate amount at any time outstanding; (g) additional Indebtedness incurred after the Closing Date in connection with the acquisition of any real or personal property by the Borrower or any Subsidiary of the Borrower (other than any License Subsidiary) after the Closing Date; provided that, the aggregate principal amount of such additional Indebtedness of the Borrower and its Subsidiaries, collectively, shall not exceed (A) the aggregate amount of $6,000,000 at any one time and (B) the lesser of the purchase price for such property or the fair market value of such property at the time of such acquisition; (h) Indebtedness existing on the Closing Date and listed and described on Schedule 10.1 hereto; (i) Indebtedness of a Subsidiary of the Borrower owing to the Borrower or to any wholly-owned Subsidiary, other than Excluded Subsidiaries, of the Borrower; 82 -75- (j) Indebtedness in respect of interest rate protection Agreements entered into pursuant to Section 9.14 above; (k) unsecured Indebtedness in the aggregate principal amount of $300,000,000 evidenced by the Subordinated Notes and guaranteed by certain Subsidiaries of the Borrower which guarantees are junior and subordinated to the obligations of the Subsidiaries (other than the Excluded Subsidiaries) under the Guaranty on the same basis and to the same extent as the Indebtedness evidenced by the Subordinated Notes is subordinated to the Obligations; provided, that the Surplus Proceeds are applied pursuant to Section 4.3(e) of this Credit Agreement; (l) Indebtedness of the Borrower (exclusive of Indebtedness incurred in connection with the Subordinated Notes issued in February of 1999), in an aggregate amount not to exceed $250,000,000; provided that (i) such Indebtedness is unsecured and fully subordinated, on terms satisfactory to the Agents and the Majority Banks, to the Obligations and the Agents' and the Banks' rights hereunder and under the other Loan Documents and is subject to terms and conditions which are in the judgement of the Agents and the Majority Banks, less restrictive to the Borrower and its Subsidiaries than are the terms set forth herein and in the other Loan Documents, (ii) no Default or Event of Default has occurred and is continuing immediately prior to the incurrence thereof and no Default or Event of Default will result therefrom, and (iii) the proceeds of such Indebtedness are applied pursuant to Section 4.3(d) of this Credit Agreement; (m) other Indebtedness, contingent or otherwise, in an aggregate amount outstanding at any one time not to exceed $10,000,000. 10.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit any of its Subsidiaries, other than Excluded Subsidiaries, to, (a) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of such property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (d) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; or (e) 83 -76- sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; provided that the Borrower and any Subsidiary of the Borrower may create or incur or suffer to be created or incurred or to exist: (i) liens to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue; (ii) deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age pensions or other social security obligations; (iii) liens on properties in respect of judgments or awards, the Indebtedness with respect to which is permitted by Section 10.1(d) hereof; (iv) liens of carriers, warehousemen, mechanics and materialmen, and other like liens on properties in existence less than 120 days from the date of creation thereof in respect of obligations not overdue; provided that, such liens are being contested in good faith and by appropriate proceedings; (v) encumbrances on Real Estate consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which the Borrower or a Subsidiary of the Borrower is a party, and other minor liens or encumbrances none of which in the opinion of the Borrower interferes materially with the use of the property affected in the ordinary conduct of the business of the Borrower and its Subsidiaries, which defects do not individually or in the aggregate have a materially adverse effect on the business of the Borrower individually or of the Borrower and its Subsidiaries on a consolidated basis; (vi) liens existing on the Closing Date and listed on Schedule 10.2 hereto; (vii) liens on assets subject to a Capital Lease permitted under Section 10.1(f) hereof; purchase money security interests in or purchase money mortgages on real or personal property acquired after the Closing Date (other than Mortgaged Properties) to secure purchase money Indebtedness of the type and amount permitted by Section 10.1(g) hereof, incurred in connection with 84 -77- the acquisition of such property, which security interests or mortgages cover only the real or personal property so acquired; (viii) liens and encumbrances on each Mortgaged Property as and to the extent permitted by the Mortgage applicable thereto; and (ix) liens in favor of the Administrative Agent for the benefit of the Banks and the Administrative Agent under the Loan Documents. 10.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and will not permit any of its Subsidiaries, other than Excluded Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments in: (a) marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Borrower; (b) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $1,000,000,000; (c) securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than "P 1" as rated by Moody's Investors Services, Inc., and not less than "A 1" as rated by Standard and Poor's; (d) Investments existing on February 12, 1999 and listed on Schedule 10.3 hereto, including the Investments described elsewhere in this Section 10.3 and existing on February 12, 1999; (e) subject to the limitations set forth in Section 10.3(l) hereof, Investments with respect to Indebtedness incurred by a Subsidiary (other than an Excluded Subsidiary) to the extent permitted by Section 10.1(i) so long as such entities remain Subsidiaries (other than Excluded Subsidiaries) of the Borrower; (f) Investments consisting of the Guaranty or, so long as such entities remain Subsidiaries of the Borrower, Investments by the Borrower or by a Subsidiary of the Borrower, in wholly-owned direct or indirect Subsidiaries, other than Excluded Subsidiaries, of the Borrower existing on the Closing Date; 85 -78- (g) Investments consisting of promissory notes received as proceeds of asset dispositions permitted by Section 10.5 below; (h) Investments (in addition to those permitted pursuant to clause (j) below) consisting of loans and advances to executive officers and employees of the Borrower or its Subsidiaries for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed $1,000,000 in the aggregate at any time outstanding; (i) Investments by the Borrower or a Subsidiary of Borrower in non-broadcasting businesses not to exceed $15,000,000 in the aggregate at any time outstanding; (j) Investments on terms and conditions acceptable to the Banks, consisting of loans to executive officers of the Borrower not to exceed the aggregate principal amount of $2,000,000 plus any accrued interest thereon at any time outstanding; provided that, prior to making any such Investment, the Total Leverage Ratio, determined as at the last day of the most recently ended fiscal quarter, is less than 5.50:1.00 and no Event of Default is then continuing; (k) Investments by the Borrower or a Subsidiary of the Borrower in Subsidiaries (other than Excluded Subsidiaries) formed for the purpose of consummating Permitted Acquisitions; (l) additional Investments by the Borrower and any of its Subsidiaries, in broadcasting businesses not to exceed $50,000,000 in aggregate amount at any time outstanding; provided that (unless such Investment is an Excluded Subsidiary) the Administrative Agent has received a pledge of all of the issued and outstanding shares of capital stock of each such Subsidiary and a first-priority security interest in all of the assets and properties of each such Subsidiary prior thereto; (m) Investments by the Borrower in Emmis International Corporation, which Investments shall be limited to (i) Investments in an amount not to exceed the amount of operating expenses incurred by Emmis International Corporation; provided that, the Borrower delivers to each of the Banks on an annual basis, a detailed statement of the operating expenses incurred by Emmis International Corporation as required by Section 9.4(c) above, and (ii) Investments used to finance Investments by Emmis International Corporation in an amount not to exceed the aggregate amount of Investments permitted by Section 10.3(l) above; 86 -79- (n) Investments made after the July 16, 1998 of a character not described under (a) through (n) of this Section 10.3 in an aggregate amount not exceeding $10,000,000 at any time; and provided, however, that, with the exception of Investments referred to in Sections 10.3(a), (b), (c), (d) (other than Emmis Meadowlands Corporation's limited partnership interest in Ten Fifty Limited Partnership, Mediatex Development Corporation's limited partnership interest in Waterloo II Limited Partnership and, to the extent evidenced by an instrument, loans to Jeffrey Smulyan), (e) (if such Investments under subsection (e) are not evidenced by an instrument), (h), (l) (to the extent not required by the terms of such clause), (m)(i), (m)(ii) to the extent not required by the terms of clause (l) of this Section 10.3 and (n) above, such Investments will be considered Investments permitted by this Section 10.3 only if all actions have been taken to the satisfaction of the Administrative Agent to provide to the Administrative Agent, for the benefit of the Banks and the Administrative Agent, a first-priority perfected security interest in all of such Investments free of all encumbrances other than Permitted Liens. 10.4. RESTRICTED PAYMENTS. The Borrower will not, and will not permit any Subsidiary to make any Restricted Payments other than (a) Restricted Payments by any Subsidiary of the borrower to the Borrower or to any other wholly-owned direct or indirect Subsidiary of the borrower, other than an Excluded Subsidiary, (b) payments by the Borrower to its employees pursuant to its profit sharing plan, as in effect on the Closing Date, of cash in exchange for fractional shares of the Borrower's Common Stock, (c) so long as no Default or Event of Default has occurred or is continuing or would occur as a result thereof, payments by the Borrower in an aggregate amount not to exceed $25,000,000 to repurchase shares of the borrower's Common Stock, (d) so long as no Default or Event of Default has occurred or is continuing or would occur as a result thereof, scheduled payments of interest by the Borrower on subordinated Indebtedness permitted by Sections 10.1(k) and 10.1(l) above, and (e) so long as no Default or Event of Default has occurred or is continuing or would occur as a result thereof, the declaration or payment of any scheduled dividend on the preferred stock issued by the Borrower as part of the Secondary Equity Offering. 10.5. MERGERS, ACQUISITIONS, DISPOSITIONS OF ASSETS. Except as permitted by Section 10.3 above, the Borrower will not, and will not permit any of its Subsidiaries to, become a party to any merger or consolidation, or agree to or effect any acquisition or Sale of assets or enter into any local market agreement or time brokerage agreement except: (a) the merger or consolidation of two or more wholly-owned direct or indirect Subsidiaries of the Borrower; 87 -80- (b) the acquisition of assets (other than Station Acquisitions), the disposition of assets (other than Stations or Subsidiaries), and the disposition of items of obsolete equipment which are not material to the operation of the business of the Borrower or its Subsidiaries, in each case in the ordinary course of business consistent with past practices; (c) other than as permitted pursuant to Section 10.5(d), any Station Acquisition (including through a simultaneous exchange of Stations of the type permitted by Section 10.5(f) below) on or after the Closing Date; provided that, (i) either the Total Leverage Ratio, as at the last day of the period of four (4) consecutive fiscal quarters most recently ended prior to such Station Acquisition and after giving pro forma effect to such Station Acquisition, is less than or equal to 5.50:1.00, or the Majority Banks shall have given their prior written consent to such Station Acquisition, (ii) with respect to any acquisition of one or more radio Stations, either seventy-five percent (75%) or more of the cash flow from the radio Stations so acquired as part of such Station Acquisition is by radio Stations in one of the top 50 "areas of dominant influence" as determined by Arbitron Rating Company, or the Majority Banks shall have given their prior written consent to such Station Acquisition; and with respect to any acquisition of one or more television Stations, either seventy-five percent (75%) or more of the cash flow from the television Stations so acquired as part of such Station Acquisition is generated by television Stations in one of the Top 100 "DMA" markets as determined by Neilson Rating Agency, or the Majority Banks shall have given their prior written consent to such Stations Acquisition, (iii) no Default or Event of Default has occurred and is continuing immediately prior to such acquisition or would result therefrom, (iv) the Borrower has delivered to each of the Banks and the Administrative Agent such financial projections as shall be necessary, in the judgment of the Agents, to demonstrate that, after giving effect to such Station Acquisition, all covenants contained herein will be satisfied on a pro forma basis and that the Borrower's ability to satisfy its payment obligations hereunder and under the other Loan Documents will not be impaired in any way, (v) such Station Acquisition is consummated by a Subsidiary of the Borrower (other than an Excluded Subsidiary), whose stock shall have been pledged to the Administrative Agent, any FCC Licenses acquired in the Station Acquisition shall be held in a separate Subsidiary of the Borrower (other than an Excluded Subsidiary) whose shares shall have been pledged to the Administrative Agent and such Subsidiaries shall have executed and delivered a guaranty of the Obligations in favor of the Banks and the Administrative Agent substantially in the form of the Guaranty, (vi) all acquired assets and properties (both personal and real) have been pledged in favor of, or assigned to (as applicable), the Administrative 88 -81- Agent as security for the irrevocable payment and performance in full of the Obligations pursuant to documentation satisfactory to the Administrative Agent and all filings or other actions which the Administrative Agent deems necessary or advisable to create a first-priority lien in such assets and properties in favor of the Administrative Agent have been made or taken, (vii) all of the Borrower's and/or its Subsidiaries' (as the case may be) rights and interests in, to and under each contract and agreement entered into by any such Person in connection with such Station Acquisition have been assigned to the Administrative Agent as additional security for the irrevocable payment and performance in full of the Obligations, pursuant to Collateral Assignment of Contracts in form and substance satisfactory to the Banks and the Administrative Agent, and (viii) the Borrower has delivered to the Administrative Agent a duly executed certificate substantially in the form of Exhibit G hereto; (d) the Hearst-Argyle Transaction, the Lee Transaction, the Sinclair Broadcast Group Transaction and the Bonneville Transaction; provided that, (i) no Default or Event of Default has occurred and is continuing immediately prior to each such Transaction or the Lee Transaction, as applicable or would result therefrom, (ii) the Borrower has demonstrated to the Agents' satisfaction that after giving effect to each such Transaction and the Lee Transaction, as applicable all covenants contained herein will be satisfied on a pro forma basis and that the borrower's ability to satisfy its payment obligations hereunder and under the other Loan Documents will not be impaired in any way, and (iii) each of the conditions specified in Sections 12 and 13 hereof and each of the conditions specified in Schedule 10.5(d) hereof (as applicable to such relevant Transaction) shall have been satisfied; (e) the Sale of any Station (including through a simultaneous exchange of Stations of the type permitted by Section 10.5(f) below) after the Closing Date; provided that, (i) the Net Proceeds from such Sale shall be applied to prepay the Loans pursuant to Section 4.3(c) hereof, (ii) either (A) if the broadcast cash flow of such Station for the previous four (4) consecutive fiscal quarters plus the aggregate broadcast cash flow of all other Stations disposed of by the Borrower (including through a simultaneous exchange of Stations) during such period (collectively, the "Stations' Cash Flow"), does not exceed twenty percent (20%) of the Consolidated Broadcast Cash Flow of the Borrower and its Subsidiaries, other than Excluded Subsidiaries, for such period, the Majority Banks shall have given their prior written consent to such Sale, or (B) if the Stations' Cash Flow exceeds twenty percent (20%) of the Consolidated Broadcast Cash Flow of the Borrower and its Subsidiaries, other than Excluded Subsidiaries, for the previous four (4) consecutive fiscal 89 -82- quarters, the Super Majority Banks shall have given their prior written consent to such Sale, and (iii) such Sale is pursuant to an arm's length transaction for fair market value with a Person who is not an Affiliate of the Borrower; (f) other than as permitted pursuant to Section 10.5(d), the exchange of any Station owned by the borrower or any of its Subsidiaries for another Station or Stations owned by a Person who is not an Affiliate of the borrower; provided that (i) no Default or Event of Default has occurred and is continuing immediately prior to such exchange or would result therefrom, (ii) the Borrower has demonstrated to the Agents' satisfaction that after giving effect to such exchange all covenants contained herein will be satisfied on a pro forma basis and that the Borrower's ability to satisfy its payment obligations hereunder and under the other Loan Documents will not be impaired in any way, (iii) such exchange is pursuant to an arm's-length transaction for fair market value, (iv) the Total Leverage Ratio, determined as at the last day of the period of four (4) consecutive the fiscal quarters most recently ended prior to such exchange, does not exceed 5.50:1.00, and (v) either (A) if the Stations' cash flow does not exceed twenty percent (20%) of the Consolidated Broadcast Cash Flow of the Borrower and its Subsidiaries, other than Excluded Subsidiaries, for the previous four (4) consecutive fiscal quarters, the Majority Banks shall have given their prior written consent to such exchange, or (B) if the Stations' cash flow exceeds twenty percent (20%) of the Consolidated Broadcast Cash Flow of the Borrower and its Subsidiaries, other than Excluded Subsidiaries, for the previous four (4) consecutive fiscal quarters, the Super Majority Banks shall have given their prior written consent to such exchange; (g) Any so-called "local market agreement" or "time brokerage agreement" or any other agreement or arrangement pursuant to which the Borrower or any of its Subsidiaries purchases broadcast time on any other station (other than any Station owned by the Borrower or any of its Subsidiaries) for the purpose of programming such broadcast time; provided that, (i) no Default or Event of Default has occurred and is continuing immediately prior to the effectiveness of such agreement or arrangement, and no Default or Event of Default would result from such agreement or arrangement, (ii) the aggregate amount of payments required by the Borrower and its Subsidiaries under all such agreements and arrangements shall not exceed $10,000,000 during any fiscal year, and (iii) all of the Borrower's and/or its Subsidiaries' (as the case may be) rights and interests in, to and under each such agreement and arrangement have been assigned to the Administrative Agent as security for the irrevocable payment and performance in full of the Obligations, pursuant to Collateral Assignments of Contracts in form 90 -83- and substance satisfactory to the Banks and the Managing Agent; provided further that, if any such agreement or arrangement contemplates a Station Acquisition, such Station Acquisition must satisfy the provisions of Section 10.5(c) above or in the case of the Lee Transaction or the Transactions, Section 10.5(d) above; (h) any Related Media Acquisition after July 16, 1998; provided that (i) the aggregate amount paid by the Borrower and its Subsidiaries for all Related Media Acquisitions shall not exceed $75,000,000 (exclusive of acquisitions permitted under Sections 10.5(c), 10.5(d) above) unless the Total Leverage Ratio, as at the last day of the period of four (4) consecutive fiscal quarters most recently ended prior to such Related Media Acquisition and after giving pro forma effect to such Related Media Acquisition, is less than 5.50:1.00, in which case the aggregate amount permitted to be paid by the Borrower and its Subsidiaries for all Related Media Acquisitions shall increase to $100,000,000 (exclusive of acquisitions permitted under Sections 10.5(c) and 10.5(d) above), (ii) no Default or Event of Default has occurred and is continuing immediately prior to such acquisition or would result therefrom, (iii) the Borrower has delivered to each of the Banks and the Administrative Agent such financial projections as shall be necessary, in the judgment of the Administrative Agent, to demonstrate that, after giving effect to such Related Media Acquisition, all covenants contained herein will be satisfied on a pro forma basis and that the Borrower's ability to satisfy its payment obligations hereunder and under the other Loan Documents will not be impaired in any way, (iv) such Related Media Acquisition is consummated by a Subsidiary of the Borrower (other than an Excluded Subsidiary), whose stock shall have been pledged to the Administrative Agent, any FCC Licenses acquired in such Related Media Acquisition shall be held in a separate Subsidiary of the Borrower (other than an Excluded Subsidiary) whose shares shall have been pledged to the Administrative Agent and such Subsidiaries shall have executed and delivered a guaranty of the Obligations in favor of the Banks and the Administrative Agent substantially in the form of the Guaranty, (v) all acquired assets and properties (both personal and real) have been pledged in favor of, or assigned to (as applicable), the Administrative Agent as security for the irrevocable payment and performance in full of the Obligations pursuant to documentation satisfactory to the Administrative Agent and all filings or other actions which the Administrative Agent deems necessary or advisable to create a first-priority lien in such assets and properties in favor of the Administrative Agent have been made or taken, (vi) all of the Borrower's and/or its Subsidiaries' (as the case may be) rights and interests in, to and under each contract and agreement entered into by any such Person in connection with such Related Media 91 -84- Acquisition have been assigned to the Administrative Agent as additional security for the irrevocable payment and performance in full of the Obligations, pursuant to Collateral Assignment of Contracts in form and substance satisfactory to the Banks and the Administrative Agent, and (vii) the Borrower has delivered to the Administrative Agent a duly executed certificate substantially in the form of Exhibit G hereto; and (i) the dissolution of Emmis Pledge Corporation. 10.6. SALE AND LEASEBACK. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer any property owned by it in order then or thereafter to lease such property or lease other property that the Borrower or any Subsidiary of the Borrower intends to use for substantially the same purpose as the property being sold or transferred. 10.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not, and will not permit any of its Subsidiaries to, (a) use any of the Real Estate or any portion thereof for the handling, processing, storage or disposal of Hazardous Substances, (b) cause or permit to be located on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances, (c) generate any Hazardous Substances on any of the Real Estate, (d) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause a release (i.e., releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) or threatened release of Hazardous Substances on, upon or into the Real Estate or (e) otherwise conduct any activity at any Real Estate or use any Real Estate in any manner that would violate any Environmental Law or bring such Real Estate in violation of any Environmental Law. 10.8. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA Affiliate will: (a) engage in any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code which could result in a material liability for the Borrower or any of its Subsidiaries; or (b) permit any Guaranteed Pension Plan to incur an "accumulated funding deficiency", as such term is defined in Section 302 of ERISA, whether or not such deficiency is or may be waived; or (c) fail to contribute to any Guaranteed Pension Plan to an extent which, or terminate any Guaranteed Pension Plan in a manner 92 -85- which, could result in the imposition of a lien or encumbrance on the assets of the Borrower or any of its Subsidiaries pursuant to Sections 302(f) or 4068 of ERISA; or (d) permit or take any action which would result in the aggregate benefit liabilities (with the meaning of Section 4001 of ERISA) of all Guaranteed Pension Plans exceeding the value of the aggregate assets of such Plans, disregarding for this purpose the benefit liabilities and assets of any such Plan with assets in excess of benefit liabilities. 10.9. SUBSIDIARY DISTRIBUTIONS. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any arrangement or otherwise become subject to any restriction or requirement which has the effect of prohibiting or limiting any Subsidiary's ability to (a) make Distributions to the Borrower, (b) pay any Indebtedness owed to the Borrower or the Borrower's other Subsidiaries (other than an Excluded Subsidiary), (c) make loans or advances to the Borrower or the Borrower's other Subsidiaries (other than an Excluded Subsidiary), or (d) transfer any of its properties or assets to the Borrower or the Borrower's other Subsidiaries (other than an Excluded Subsidiary). 10.10. CONDUCT OF BUSINESS RESTRICTION. Emmis Pledge Corporation shall not conduct any business. Each of Emmis Latin America Broadcasting Corporation and Emmis South America Broadcasting Corporation shall not conduct any business other than business in connection with the ownership of the Excluded Subsidiaries or other assets outside the United States of America. 10.11. AMENDMENTS TO SUBORDINATED NOTE DOCUMENTS. The Borrower will not amend, modify or change the terms of any Subordinated Note Document if the effect of such amendment is to (a) increase the interest rate on the Subordinated Notes, (b) change the dates upon which payments of principal or interest are due on the Subordinated Notes (other than to extend such dates), (c) change any default or event of default relating thereto other than to delete or make less restrictive any default provision therein, or add any covenant with respect to any Subordinated Note Document, (d) change the redemption or prepayment provisions of the Subordinated Notes other than to extend the dates therefor or to reduce the premiums payable in connection therewith, (e) grant any security or liens to secure the Subordinated Notes, (f) change any subordination provisions, terms or conditions, or (g) change or amend any other term if such change or amendment would materially increase the obligations of the obligor or confer additional material rights to the holders of the Subordinated Notes in a manner adverse to the Borrower, its Subsidiaries, the Agents or the Banks. 93 -86- 11. FINANCIAL COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, until all of the Obligations have been irrevocably paid and satisfied in full, and so long as any Loan, Note or Letter of Credit is outstanding or any Bank has any obligation to make any Loans, or the Administrative Agent has any obligation to issue, extend or renew any Letters of Credit hereunder: 11.1. CONSOLIDATED OPERATING CASH FLOW TO CONSOLIDATED TOTAL INTEREST EXPENSE. The Borrower will not permit the ratio of (a) Consolidated Operating Cash Flow for any period of four (4) consecutive fiscal quarters ending during any period described in the table set forth below to (b) Consolidated Total Interest Expense for such period to be less than the ratio set forth opposite the applicable period in such table:
Period Ratio ------ ----- 3/01/00 - 8/31/00 2.00:1.00 9/01/00 - 5/31/01 1.75:1.00 6/01/01 - 8/31/01 2.00:1.00 Thereafter 2.50:1.00
11.2. TOTAL LEVERAGE RATIO. The Borrower will not permit the Total Leverage Ratio, determined as at the last day of any fiscal quarter ending on any date or during any period described in the table set forth below, to exceed the ratio set forth opposite such date or period in such table:
Period Ratio ------ ----- 3/01/00 - 2/28/01 6.50:1.00 3/01/01 - 5/31/01 6.25:1.00 6/01/01 - 2/28/02 6.00:1.00 Thereafter 5.00:1.00
11.3. PRO FORMA FIXED CHARGE COVERAGE RATIO. As at the end of any fiscal quarter ending during any period set forth below, the Borrower will not permit the Pro Forma Fixed Charge Coverage Ratio to be less than the ratio set forth opposite such period in such table:
Period Ratio ------ ----- 12/01/99 - 8/31/00 1.10:1.00 9/01/00 - 8/31/01 Not applicable Thereafter 1.10:1.00
94 -87- 11.4. SENIOR LEVERAGE RATIO. The Borrower will not permit the Senior Leverage Ratio, determined as of the last day of any fiscal quarter ending on any date or during any period described in the table set forth below, to exceed the ratio set forth opposite such date or period in such table:
Period Ratio ------ ----- 3/01/00 - 2/28/01 5.00:1.00 3/01/01 - 8/31/01 4.75:1.00 9/01/01 - 2/28/02 4.50:1.00 Thereafter 3.50:1.00
11.5. HISTORICAL FIXED CHARGE COVERAGE RATIO. As at the end of any fiscal quarter ending during any period set forth below, the Borrower will not permit the Historical Fixed Charge Coverage Ratio to be less than the ratio set forth opposite such period in such table:
Period Ratio ------ ----- 9/01/00 - 8/31/01 1.25:1.00 Thereafter Not applicable
12. CLOSING CONDITIONS. The obligations of the Banks to make the initial Loans, and the Administrative Agent to issue any initial Letters of Credit shall be subject to the satisfaction of the following conditions precedent on or prior to the Closing Date: 12.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Banks. Each Bank shall have received a fully executed copy of each such document. 12.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. The Administrative Agents shall have received from the Borrower and each Subsidiary of the Borrower, other than any Excluded Subsidiary, a copy of each of (a) its charter or other incorporation documents, certified by the Secretary of State of the jurisdiction of incorporation of such Person, as in effect on such date of certification, and (b) its by-laws, certified by a duly authorized officer of such Person to be true and complete on the Closing Date as in effect on such date. 95 -88- 12.3. CORPORATE ACTION. All corporate action necessary for the valid execution, delivery and performance by the Borrower and each of its Subsidiaries of this Credit Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Banks shall have been provided to each of the Banks. 12.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received from the Borrower and each of its Subsidiaries, other than Excluded Subsidiaries, an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of the Borrower or such Subsidiary (as the case may be), and giving the name and bearing a specimen signature of each individual who shall be authorized: (a) to sign, in the name and on behalf of each of the Borrower or such Subsidiary, each of the Loan Documents to which the Borrower or such Subsidiary is or is to become a party; (b) in the case of the Borrower, to make Loan Requests and Conversion Requests and to apply for Letters of Credit; and (c) to give notices and to take other action on its behalf under the Loan Documents. 12.5. FINANCIAL CONDITION. The Agents shall be satisfied that there has been no adverse change in the financial condition, assets or business operations of the Borrower and its Subsidiaries, other than any Excluded Subsidiary, since the Balance Sheet Date. 12.6. VALIDITY OF LIENS. (a) The Security Documents shall be effective to create in favor of the Administrative Agent a legal, valid and enforceable first-priority (except for Permitted Liens entitled to priority under applicable law) security interest in the Collateral. All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Administrative Agent to protect and preserve such security interests shall have been duly effected. The Administrative Agent shall have received evidence thereof in form and substance satisfactory to the Administrative Agent. (b) Each owner of equity interests in any of the Borrower's Subsidiaries, other than Excluded Subsidiaries, shall have delivered to the Administrative Agent the certificated securities, if any, to be pledged pursuant to the applicable Pledge Agreement and such certificated securities shall be either endorsed in blank or with stock powers or other appropriate instruments of transfer therefor executed in blank. 12.7. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Administrative Agent shall have received from each of the Borrower and its Subsidiaries, other than Excluded Subsidiaries, a completed and fully executed Perfection Certificate and the results of UCC searches with respect 96 -89- to the Collateral, indicating no liens other than Permitted Liens and otherwise in form and substance satisfactory to the Administrative Agent. 12.8. TAXES. The Administrative Agent shall have received evidence of payment of real estate taxes and municipal charges on all Real Estate not delinquent on or before the Closing Date. 12.9. TITLE INSURANCE. The Administrative Agent shall have received a Title Policy covering each Mortgaged Property (or commitments to issue such policies, with all conditions to issuance of the Title Policy deleted by an authorized agent of the Title Insurance Company except to the extent acceptable to the Administrative Agent), together with proof of payment of all fees and premiums for such policies, from the Title Insurance Company and in amounts satisfactory to the Administrative Agent, insuring the interest of the Administrative Agent and each of the Banks as mortgagee under the Mortgages as of the Closing Date. 12.10. LANDLORD; LESSOR CONSENTS. The Borrower and its Subsidiaries, other than Excluded Subsidiaries, shall have delivered to the Administrative Agent all consents required for the Administrative Agent to receive, as part of the Security Documents, a collateral assignment of each material leasehold of personal property and each material, non-recorded leasehold of real property, and a mortgage of each material, recorded leasehold of real property, together in each case with such estoppel certificates as the Administrative Agent may request. 12.11. CERTIFICATES OF INSURANCE. The Administrative Agent shall have received (a) a certificate of insurance from an independent insurance broker dated as of the Closing Date, identifying insurers, types of insurance, insurance limits, and policy terms, naming the Administrative Agent as loss payee and otherwise describing the insurance obtained in accordance with the provisions of the Security Agreements and Section 9.7 hereof and (b) certified copies of all policies evidencing such insurance (or certificates therefore signed by the insurer or an agent authorized to bind the insurer). 12.12. OPINIONS OF COUNSEL. Each of the Banks and the Administrative Agent shall have received a favorable opinion addressed to the Banks and the Administrative Agent, dated as of the Closing Date, in form and substance satisfactory to the Banks and the Administrative Agent, from: (a) Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the Borrower and its Subsidiaries; (b) the Borrower's associate general counsel; 97 -90- (c) local counsel to the Borrower and its Subsidiaries as applicable; and (d) FCC counsel to the Borrower and its Subsidiaries. 12.13. PAYMENT OF FEES. The Borrower shall have paid to the Agents and the Banks (as applicable) all fees, costs, expenses and amounts owing and payable to such Persons on the Closing Date under this Credit Agreement, including the fees specified in the Fee Letter which are to be paid on or before the Closing Date and all fees and expenses of the Agents' Special Counsel and the expenses of the Administrative Agent. 12.14. ASSIGNMENT AND ACCEPTANCE. Each of the Existing Banks (as defined in the preamble hereto) shall have entered into an Assignment and Acceptance with the Banks, pursuant to which such Existing Bank shall have assigned to the Banks all of its interests, rights and obligations under the Existing Credit Agreement and the "Notes" (as defined in the Existing Credit Agreement) held by it, such that immediately prior to the Closing Date, the Banks shall be the only "Banks" under the Existing Credit Agreement and each of the Banks shall own and have rights to all interests and rights of the other Existing Banks thereunder. 12.15. DISBURSEMENT INSTRUCTIONS. The Administrative Agent shall have received a notice of borrowing and disbursement instructions from the Borrower with respect to the proceeds of the Loans to be made on the Closing Date. 12.16. FCC LICENSES; THIRD PARTY CONSENTS. (a) The Borrower shall have furnished to the Administrative Agent copies of all FCC Licenses necessary for the operation of the business of each of the Borrower and its Subsidiary or necessary for the operation of any Station. (b) The Borrower shall have furnished to the Administrative Agent copies of all agreements pursuant to which the Operating Subsidiaries shall have acquired the rights to use the FCC Licenses held by the License Subsidiaries, which agreements shall be in form and substance satisfactory to the Banks and the Administrative Agent. (c) All other necessary governmental and third party consents to and notices of the transactions contemplated by the Loan Documents shall have been obtained and given, and evidence thereof satisfactory to the Administrative Agent shall have been provided to the Administrative Agent. 98 -91- 12.17. ACCOUNTANT'S LETTER. The Administrative Agent shall have received a copy of the letter to the Borrower's accountants pursuant to Section 9.9.4 above. 12.18. LEE ACQUISITION DOCUMENTS. The Lee Acquisition Documents shall have been executed by the Borrower and each other party thereto and such Lee Acquisition Documents shall have been delivered to the Agents prior to the Closing Date, shall be certified by the Chief Financial Officer or other officer of the Borrower to be true and complete as of the date thereof, shall be in form and substance satisfactory to the Agents and shall be in full force and effect on the Closing Date and no default in respect of performance by any party thereto of such party's obligations thereunder shall have occurred and be continuing and the Agents shall have received evidence satisfactory to them that simultaneously with the Closing Date the Lee Transaction shall be consummated in accordance with the terms of the Lee Acquisition Documents. 13. CONDITIONS TO ALL BORROWINGS. The obligations of the Banks to make any Loans, and of the Administrative Agent to issue, extend or renew any Letter of Credit, in each case whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent: 13.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the representations and warranties of any of the Borrower and its Subsidiaries contained in this Credit Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection herewith or therewith shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan or the issuance, extension or renewal of such Letter of Credit, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing. 13.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Bank would make it illegal for such Bank to make such Loan or to participate in the issuance, extension or renewal of such Letter of Credit or, in the reasonable opinion of the Administrative Agent, would make it illegal for the Administrative Agent to issue, extend or renew such Letter of Credit. 99 -92- 13.3. GOVERNMENTAL REGULATION. Each Bank shall have received such statements in substance and form reasonably satisfactory to such Bank as such Bank shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System. 13.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the transactions contemplated by this Credit Agreement, the other Loan Documents and all other documents incident hereto or thereto shall be satisfactory in substance and in form to the Banks and to the Administrative Agent and the Agents' Special Counsel, and the Banks, the Administrative Agent and such counsel shall have received all information and such counterpart originals or certified or other copies of such documents as the Administrative Agent may reasonably request. 14. EVENTS OF DEFAULT; ACCELERATION; ETC. 14.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) the Borrower shall fail to pay any principal of the Loans or any Reimbursement Obligations when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) the Borrower shall fail to pay any interest on the Loans, any fee payable hereunder, or other sums due hereunder, under any of the other Loan Documents or under the Fee Letter, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (c) the Borrower shall fail to comply with any of its covenants contained in Sections 9, 10 or 11 hereof or any of the covenants contained in any of the Mortgages after expiration of any applicable grace period provided for in the Mortgages; (d) the Borrower or any of its Subsidiaries, other than Excluded Subsidiaries, shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this Section 14) for fifteen (15) days after written notice of such failure has been given to the Borrower by the Administrative Agent; 100 -93- (e) any representation or warranty of the Borrower or any of its Subsidiaries in this Credit Agreement, any other Loan Document, any Subordinated Note Document or in any other document or instrument delivered pursuant to or in connection with this Credit Agreement shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (f) the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or in respect of any Capitalized Leases, any Interest Rate Protection Agreement or other similar derivative contract of the type described in clause (d) of the definition of Indebtedness, in each case in any amount greater than $250,000, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing borrowed money or credit received or in respect of any Capitalized Leases, in each case in any amount greater than $250,000 for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; (g) the Borrower, any of its Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of the Borrower or any of its Subsidiaries or of any substantial part of the assets of the Borrower or any of its Subsidiaries or shall commence any case or other proceeding relating to the Borrower or any of its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against the Borrower or any of its Subsidiaries and the Borrower or any of its Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein, or if any involuntary proceeding shall be commenced or an involuntary petition shall be filed against the Borrower or any of its Subsidiaries and such proceeding or petition shall continue undismissed for thirty (30) days; (h) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Borrower or any of its Subsidiaries bankrupt or insolvent, or approving a petition in any 101 -94- such case or other proceeding, or a decree or order for relief is entered in respect of the Borrower or any of its Subsidiaries in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (i) there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive, any final judgment against the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) that, with other outstanding final judgments, undischarged, against the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) exceeds in the aggregate $250,000; (j) if any of the Loan Documents shall be canceled, terminated, revoked or rescinded or the Administrative Agent's security interests, mortgages or liens on or in a substantial portion of the Collateral shall cease to be perfected, or shall cease to have the priority contemplated by the Security Documents, in each case otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Administrative Agent and the Banks, or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Borrower or any of its Subsidiaries party thereto or any of their respective stockholders, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof; (k) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Majority Banks shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of the Borrower or any of its Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $250,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Guaranteed Pension Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan; (l) the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) shall be enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory 102 -95- agency from conducting any material part of its business and such order shall continue in effect for more than thirty (30) days; (m) there shall occur any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty, which in any such case causes, for more than fifteen (15) consecutive days, the cessation or substantial curtailment of revenue producing activities at any Station of the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries); (n) there shall occur the loss, suspension or revocation of, or failure to renew, any license or permit (including any FCC License) now held or hereafter acquired by the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) if such loss, suspension, revocation or failure to renew would have a material adverse effect on the business or financial condition of the Borrower or such Subsidiary; (o) the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) shall be indicted for a federal crime, a punishment for which could include the forfeiture of any assets of the Borrower or any of its Subsidiaries (other than Excluded Subsidiaries) having a fair market value in excess of $250,000; (p) at any time, Jeffrey Smulyan shall (i) legally or beneficially own less than 316,950 shares of the common stock of the Borrower, as adjusted pursuant to any stock split, reverse stock split, stock dividend or recapitalization or reclassification of the capital of the Borrower, (ii) cease to own common stock having the right at all times to elect a majority of the Board of Directors of the Borrower or a majority of the Board of Directors of the Borrower shall cease at any time to be comprised of Persons nominated or otherwise approved by Jeffrey Smulyan, or (iii) cease to control the outcome of any vote of the shareholders of the Borrower (except as prohibited by Indiana corporate law to the extent such law requires specific class majorities or unanimity and except with respect to any vote of shareholders to take the Borrower private); (q) the on-the-air broadcasting operations of any Stations owned by the Borrower or any of its Subsidiaries accounting for, in the aggregate, ten percent (10%) or more of the consolidated net operating revenues of the Borrower and its Subsidiaries (i) are interrupted at any time for more than 120 hours during any period of twenty (20) consecutive days and (ii) by the sixtieth day following such period, the Borrower shall not have received the proceeds of business interruption 103 -96- insurance sufficient to cover the aggregate lost operating revenues resulting from such interruption; (r) the commencement of proceedings to suspend, revoke, terminate or substantially and adversely modify any material FCC License of the Borrower, any of its Subsidiaries or of any Stations thereof if such proceeding shall continue uncontested for forty-five (45) days or the Banks shall reasonably believe that the result thereof shall be the termination, revocation, or suspension of such FCC License; or the designation of an application for renewal of any such material FCC License for an evidentiary hearing if the Banks shall reasonably believe that the result thereof shall be the termination, revocation or suspension of such FCC License; (s) any default or event of default shall occur under any documents entered into in connection with the Lee Transaction, the Transactions or any Permitted Acquisition, which such default or event of default is likely to have a material adverse effect on the business or financial condition of the Borrower or any of its Subsidiaries; (t) the holders of any part of the Indebtedness described in Sections 10.1(k) or 10.1(l) hereof shall accelerate the maturity of all or any part of such Indebtedness or such Indebtedness shall be prepaid, defeased, redeemed or repurchased in whole or in part or any default shall occur with respect thereto or if the subordination provisions of such Indebtedness are found by any court, or asserted by the trustee in respect of, or any holder of, Subordinated Debt in a judicial proceeding to be, invalid or unenforceable; and (u) at any time, any of the Borrower's Subsidiaries shall provide a guaranty of the Borrower's obligations under the Subordinated Notes if such Subsidiary is not at such time guarantying the Obligations pursuant to the Guaranty or if such guaranty of the Borrowers obligations under the Subordinated Note is not subordinated to such Subsidiary's Obligations under the Guaranty. then, and in any such event, so long as the same may be continuing, the Administrative Agent may, and upon the request of the Majority Banks shall, by notice in writing to the Borrower declare all amounts owing with respect to this Credit Agreement, the Notes and the other Loan Documents and all Reimbursement Obligations to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in Sections 14.1(g), 14.1(h) or 14.1(t), all such amounts shall become immediately due and payable automatically and without any requirement of 104 -97- notice from the Administrative Agent or any Bank. In addition, the Administrative Agent may direct the Borrower by notice in writing to pay (and the Borrower hereby agrees upon receipt of such notice to pay) to the Administrative Agent such additional amounts of cash, to be held as security for all Reimbursement Obligations, equal to the Maximum Drawing Amount of Letters of Credit then outstanding. 14.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of Default specified in Sections 14.1(g), 14.1(h) or 14.1(t) above shall occur, any unused portion of the credit hereunder shall forthwith terminate and each of the Banks shall be relieved of all obligations to make Loans to the Borrower and the Administrative Agent shall be relieved of all obligations to issue, extend or renew Letters of Credit. If any other Event of Default shall have occurred and be continuing, the Administrative Agent may, and upon the request of the Majority Banks shall, by notice to the Borrower, terminate the unused portion of the credit hereunder, and upon such notice being given, such unused portion of the credit hereunder shall terminate immediately and each of the Banks shall be relieved of all further obligations to make Loans and the Administrative Agent shall be relieved of all further obligations to issue, extend or renew Letters of Credit. If any such notice is given to the Borrower, the Administrative Agent will forthwith furnish a copy thereof to each of the Banks. No termination of the credit hereunder shall relieve the Borrower of any of the Obligations or any of its existing obligations to any of the Banks arising under other agreements or instruments. 14.3. REMEDIES. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Administrative Agent shall have accelerated the maturity of the Loans pursuant to Section 14.1 above, each Bank, if owed any amount with respect to the Loans or the Reimbursement Obligations, may, with the consent of the Majority Banks but not otherwise, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Credit Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Bank are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Bank. No remedy herein conferred upon any Bank or the Administrative Agent or the holder of any Note or the purchaser of any Letter of Credit Participation is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. 105 -98- 14.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that following the occurrence or during the continuance of any Default or Event of Default, the Administrative Agent or any Bank, as the case may be, receives any monies in connection with the enforcement of any of the Security Documents, or otherwise with respect to the realization upon any of the Collateral, such monies shall be distributed for application as follows: (a) First, to the payment of, or (as the case may be) the reimbursement of the Administrative Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Administrative Agent in connection with the collection of such monies by the Administrative Agent, for the exercise, protection or enforcement by the Administrative Agent of all or any of the rights, remedies, powers and privileges of the Administrative Agent under this Credit Agreement or any of the other Loan Documents or in respect of the Collateral and to support the provision of adequate indemnity to the Administrative Agent against all taxes or liens which by law shall have, or may have, priority over the rights of the Administrative Agent to such monies; (b) Second, to all other Obligations in such order or preference as the Majority Banks may determine; provided, however, that distributions in respect of such Obligations owing to the Banks, with respect to each type (such as interest, principal, fees and expenses) of Obligation, and Obligations under any interest rate protection agreement with any Bank or any affiliate of any Bank, shall be made among the Banks pro rata in relation to their share of such type of Obligation; and provided, further, that the Administrative Agent may in its sole discretion make proper allowance to take into account any Obligations not then due and payable and to require that cash collateral be set aside in an amount equal to the Maximum Drawing Amount under any or all Letters of Credit then outstanding (for purposes of this Section 14.4(b), Obligations arising under any interest rate protection agreement with any Bank or any affiliate of any Bank and principal with respect to the Loans shall be treated as the same type of Obligation); (c) Third, upon payment and satisfaction in full or other provisions for payment in full satisfactory to the Banks and the Administrative Agent of all of the Obligations, to the payment of any obligations required to be paid pursuant to Section 9-504(1)(c) of the Uniform Commercial Code of the State of New York; and (d) Fourth, the excess, if any, shall be returned to the Borrower or to such other Persons as are entitled thereto. 106 -99- For purposes of this Section 14.4 only, the term "Obligations" shall include the obligations of the Borrower under the CPF Letter of Credit and such Obligations under the CPF Letter of Credit shall be treated as the same type of Obligation as principal with respect to the Loans. 15. SETOFF. Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits or other sums credited by or due from any of the Banks to the Borrower and any securities or other property of the Borrower in the possession of such Bank may be applied to or set off by such Bank against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower to such Bank. Each of the Banks agrees with each other Bank that (a) if an amount to be set off is to be applied to Indebtedness of the Borrower to such Bank, other than Indebtedness included in the Obligations and owing to such Bank, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness included in the Obligations and owing to such Bank, and (b) if such Bank shall receive from the Borrower, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim in respect of the Obligations owing to such Bank by proceedings against the Borrower at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of Obligations owing to such Bank any amount in excess of its ratable portion of the payments received by all of the Banks with respect to the Obligations owing to all of the Banks, such Bank will make such disposition and arrangements with the other Banks with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Bank receiving in respect of the Obligations owing to it its proportionate payment as contemplated by this Credit Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Bank, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. 16. THE AGENTS. 16.1. AUTHORIZATION. (a) The Administrative Agent is authorized to take such action on behalf of each of the Banks and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Administrative Agent, together with such powers as are reasonably incident thereto; provided that no duties or 107 -100- responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Administrative Agent. (b) The relationship between the Administrative Agent and each of the Banks is that of an independent contractor. The use of the term "Administrative Agent" is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Administrative Agent and each of the Banks. Nothing contained in this Credit Agreement nor the other Loan Documents shall be construed to create an agency, trust or other fiduciary relationship between the Administrative Agent and any of the Banks. (c) As an independent contractor empowered by the Banks to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Loan Documents, the Administrative Agent is nevertheless a "representative" of the Banks, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Banks and the Administrative Agent with respect to all collateral security and guaranties contemplated by the Loan Documents. Such actions include the designation of the Administrative Agent as "secured party", "mortgagee" or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Obligations, all for the benefit of the Banks and the Administrative Agent. 16.2. EMPLOYEES AND AGENTS. The Agents may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Credit Agreement and the other Loan Documents. The Agents may utilize the services of such Persons as the Agents in its sole discretion may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrower. 16.3. NO LIABILITY. None of the Agents, its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agents or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. 108 -101- 16.4. NO REPRESENTATIONS. The Agents shall not be responsible (a) for the execution or validity or enforceability of this Credit Agreement, the Notes, any of the other Loan Documents or any instrument at anytime constituting, or intended to constitute, collateral security for the Notes, (b) for the value of any such collateral security, (c) for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, (d) for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrower or any of its Subsidiaries, (e) to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any instrument at any time constituting, or intended to constitute, collateral security for the Notes, (f) to inspect any of the properties, books or records of the Borrower or any of its Subsidiaries, or (g) to ascertain whether any notice, consent, waiver or request delivered to it by the Borrower or any of its Subsidiaries, or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agents have not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Banks, with respect to the credit worthiness or financial conditions of the Borrower or any of its Subsidiaries. Each Bank acknowledges that it has, independently and without reliance upon the Agents or any other Bank, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Credit Agreement. 16.5. PAYMENTS. 16.5.1. PAYMENTS TO ADMINISTRATIVE AGENT. A payment by the Borrower to the Administrative Agent hereunder or any of the other Loan Documents for the account of any Bank shall constitute a payment to such Bank. The Administrative Agent agrees promptly to distribute to each Bank such Bank's pro rata share of payments received by the Administrative Agent for the account of the Banks except as otherwise expressly provided herein or in any of the other Loan Documents. 16.5.2. DISTRIBUTION BY ADMINISTRATIVE AGENT. If in the opinion of the Administrative Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Administrative Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to 109 -102- the Administrative Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. 16.5.3. DELINQUENT BANKS. Notwithstanding anything to the contrary contained in this Credit Agreement or any of the other Loan Documents, any Bank that fails (a) to make available to the Administrative Agent its pro rata share of any Loan or to purchase any Letter of Credit Participation or (b) to comply with the provisions of Section 16 with respect to making dispositions and arrangements with the other Banks, where such Bank's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Banks, in each case as, when and to the full extent required by the provisions of this Credit Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank until such time as such delinquency is satisfied. A Delinquent Bank shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of outstanding Loans, and Unpaid Reimbursement Obligations, interest, fees or otherwise, to the remaining nondelinquent Banks for application to, and reduction of, their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. The Delinquent Bank hereby authorizes the Administrative Agent to distribute such payments to the nondelinquent Banks in proportion to their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent Bank shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans and Unpaid Reimbursement Obligations of the nondelinquent Banks, the Banks' respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. 16.6. HOLDERS OF NOTES. The Administrative Agent may deem and treat the payee of any Note or the purchaser of any Letter of Credit Participation as the absolute owner thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder. 16.7. INDEMNITY. The Banks ratably in accordance with their outstanding Obligations and Commitment agree hereby to indemnify and hold harmless the Agents from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agents have not been reimbursed by the Borrower as required by Section 17), and liabilities of every nature and 110 -103- character arising out of or related to this Credit Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or any of the Agents' actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agents' willful misconduct or gross negligence. 16.8. AGENTS AS BANKS. In its individual capacity, each of the Agents shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes and as the purchaser of any Letter of Credit Participations, as it would have were it not also an Agent. 16.9. RESIGNATION. The Administrative Agent may resign at any time by giving sixty (60) days' prior written notice thereof to the Banks and the Borrower. Upon any such resignation, the Majority Banks shall have the right to appoint a successor Administrative Agent. Unless a Default or Event of Default shall have occurred and be continuing, such successor Administrative Agent shall be reasonably acceptable to the Borrower. If no successor Administrative Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent's giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a financial institution having a rating of not less than A or its equivalent by Standard & Poor's Corporation and shall be reasonably acceptable to the Borrower. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation, the provisions of this Credit Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. 16.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby agrees that, upon learning of the existence of a Default or an Event of Default, it shall promptly notify the Administrative Agent thereof (however, the failure to do so shall have no effect on the Banks' rights and the Borrower's obligations hereunder). Any written notice or information that the Administrative Agent receives from the Borrower that is not required to be delivered directly to the other Banks by the Borrower will be promptly delivered to the other Banks by the Administrative Agent. 16.11. DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement by or through agents or attorneys-in- 111 -104- fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 16.12. DOCUMENTATION AGENT AND SYNDICATION AGENT. The Documentation Agent and the Syndication Agent and any other agent which may be appointed hereunder shall be entitled to the same protections provided to the Administrative Agent under Sections 16.3, 16.4 and 16.7 hereof and shall not have any right, power, obligation, liability, responsibility or duty under this Credit Agreement or any of the other Loan Documents other than those applicable to all Banks and as otherwise specifically provided for the Documentation Agent, the Syndication Agent or such other agent elsewhere in this Credit Agreement. 17. EXPENSES. The Borrower agrees to pay (a) the reasonable costs of producing and reproducing this Credit Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by the Agents or any of the Banks (other than taxes based upon the Agents' or any Bank's gross or net income) on or with respect to the transactions contemplated by this Credit Agreement (the Borrower hereby agreeing to indemnify the Agents and each Bank with respect thereto), (c) the reasonable fees, expenses and disbursements of the Agents' Special Counsel or any local counsel to the Agents incurred in connection with the preparation, syndication, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (d) the fees, expenses and disbursements of the Agents incurred by the Agents in connection with the preparation, syndication, administration or interpretation of the Loan Documents and other instruments mentioned herein, including all title insurance premiums and surveyor, engineering and appraisal charges, (e) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys' fees and costs, which attorneys may be employees of any Bank or the Agents, and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by any Bank or the Agents in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or any of its Subsidiaries or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to any Bank's or the Agents' relationship with the Borrower or any of its Subsidiaries, and (f) all reasonable fees, expenses and disbursements of any Bank or the Agents incurred in 112 -105- connection with UCC searches, UCC filings or mortgage recordings. The covenants of this Section 17 shall survive payment or satisfaction of payment of amounts owing with respect to the Notes. 18. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Administrative Agent, the Banks and their respective officers, employees, directors, agents, trustees and Affiliates, including, the officers, employees, directors, agents, or trustees of such Affiliates (each an "Indemnified Party") from and against any and all claims, actions and suits whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of this Credit Agreement or any of the other Loan Documents or the transactions contemplated hereby including, without limitation, (a) any actual or proposed use by the Borrower or any of its Subsidiaries of the proceeds of any of the Loans, (b) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Borrower or any of its Subsidiaries comprised in the Collateral, (c) the Borrower or any of its Subsidiaries entering into or performing this Credit Agreement or any of the other Loan Documents or (d) with respect to the Borrower and its Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threatened release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding; provided that the Borrower shall not be liable under this indemnification provision for any losses, claims, damages, costs or expenses incurred by an Indemnified Party which a court of competent jurisdiction has found, in a final, nonappealable order, resulted from such Person's own gross negligence or willful misconduct. In litigation, or the preparation therefor, the Banks and the Administrative Agent shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of no more than one set of such counsel, as selected by the Majority Banks. If, and to the extent that the obligations of the Borrower under this Section 18 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The covenants contained in this Section 18 shall survive the payment and satisfaction in full of all Obligations. 113 -106- 19. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Banks and the Administrative Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Banks of any of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any Letters of Credit or any amount due under this Credit Agreement or the Notes or any of the other Loan Documents remains outstanding or any Bank has any obligation to make any Loans or the Administrative Agent has any obligations to issue, extend or renew any Letter of Credit, and for such further time as may be otherwise expressly specified in this Credit Agreement. All statements contained in any certificate or other paper delivered to any Bank or the Administrative Agent at any time by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by such Person hereunder. 20. ASSIGNMENT AND PARTICIPATION. 20.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein, each Bank may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Credit Agreement (including all or a portion of any of its Commitment Percentages for Loans from any Tranche, its Commitment with respect to any Tranche and the same portion of the Loans at the time owing to it) and the Notes and Letter of Credit Participations held by it; provided that (a) unless such Eligible Assignee is a Bank which is already a party hereto or an Affiliate of such a Bank, the Administrative Agent and (so long as no Event of Default has occurred and is then continuing and such assignment is not to any Federal Reserve Bank) the Borrower shall have given its prior written consent to such assignment, which consent will not be unreasonably withheld, (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Bank's rights and obligations under this Credit Agreement with respect to the Loans and Obligations relating to a particular Tranche, (c) each assignment shall be in an amount that is not less than $5,000,000 and in multiples of $1,000,000 thereafter; provided that such minimum amounts shall not apply if such assignment is to a Bank or an Affiliate of a Bank and (d) the parties to such assignment shall execute and deliver to the Administrative Agent, for recording in the Register (as hereinafter defined), an Assignment and Acceptance, substantially in the form of Exhibit F hereto (an "Assignment and Acceptance"), together with any Notes subject to such assignment. Upon 114 -107- such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (i) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Bank hereunder, and (ii) the assigning Bank shall, to the extent provided in such assignment and upon payment to the Administrative Agent of the registration fee referred to in Section 20.3, be released from its obligations under this Credit Agreement. 20.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By executing and delivering an Assignment and Acceptance, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Bank makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or the attachment, perfection or priority of any security interest or mortgage; (b) the assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Credit Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (c) such assignee confirms that it has received a copy of this Credit Agreement, together with copies of the most recent financial statements referred to in Sections 8.4 and 9.4 above and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (d) such assignee will, independently and without reliance upon the assigning Bank, the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement; (e) such assignee represents and warrants that it is an Eligible Assignee; (f) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Credit Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (g) such assignee agrees that it 115 -108- will perform in accordance with their terms all of the obligations that by the terms of this Credit Agreement and other Loan Documents are required to be performed by it as a Bank; (h) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; and (i) such assignee acknowledges that it has made arrangements with the assigning Bank satisfactory to such assignee with respect to its pro rata share of Letter of Credit Fees in respect of outstanding Letters of Credit. 20.3. REGISTER. The Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register or similar list (the "Register") for the recordation of the names and addresses of the Banks and the Commitment Percentages of, and principal amount of the Loans owing to and Letter of Credit Participations purchased by, the Banks from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrower and the Banks at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Bank agrees to pay to the Administrative Agent a registration fee in the sum of $3,500; provided, however, that no such fee shall be payable in the case of an assignment to an Affiliate of a Bank; and provided further that, in the case of contemporaneous assignments by a Bank to more than one fund managed by the same investment advisor (which funds are not then Banks hereunder), only a single $3,500 such fee shall be payable for all such contemporaneous assignments). 20.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Administrative Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Banks (other than the assigning Bank). Within five (5) Business Days after receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent, in exchange for each surrendered Note, a new Note to the order of such Eligible Assignee in an amount equal to the amount assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank has retained some portion of its obligations hereunder, a new Note to the order of the assigning Bank in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Notes. Within five (5) days of issuance of any new Notes pursuant to this Section 20.4, the Borrower shall deliver an opinion of 116 -109- counsel, addressed to the Banks and the Administrative Agent, relating to the due authorization, execution and delivery of such new Notes and the legality, validity and binding effect thereof, in form and substance satisfactory to the Banks. The surrendered Notes shall be canceled and returned to the Borrower. 20.5. PARTICIPATIONS. Each Bank may sell participations to one or more banks or other entities in all or a portion of such Bank's rights and obligations under this Credit Agreement and the other Loan Documents; provided that (a) each such participation shall be in an amount of not less than $5,000,000, (b) any such sale or participation shall not affect the rights and duties of the selling Bank hereunder to the Borrower and (c) the only rights granted to the participant pursuant to such participation arrangements with respect to waivers, amendments or modifications of the Loan Documents shall be the rights to approve waivers, amendments or modifications that would (i) reduce the principal of or the interest rate on any Loans or on any Reimbursement Obligations, (ii) extend the term or increase the amount of the Commitment of such Bank as it relates to such participant, (iii) reduce the amount of any commitment fees or Letter of Credit Fees to which such participant is entitled, or (iv) extend any regularly scheduled payment date for principal or interest. 20.6. DISCLOSURE. The Borrower agrees that in addition to disclosures made in accordance with standard and customary banking practices, any Bank may disclose information obtained by such Bank pursuant to this Credit Agreement to assignees or participants and potential assignees or participants hereunder; provided that such assignees or participants or potential assignees or participants shall agree (a) to treat in confidence such information unless such information otherwise becomes public knowledge, (b) not to disclose such information to a third party, except as required by law or legal process and (c) not to make use of such information for purposes of transactions unrelated to such contemplated assignment or participation. 20.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall have no right to vote as a Bank hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Section 14.1 or 14.2 hereof, and the determination of the Majority Banks or the Super Majority Banks (as the case may be) shall for all purposes of this Agreement and the other Loan Documents be made without regard to such assignee Bank's interest in any of the Loans. If any Bank sells a participating interest in any of the Loans or Reimbursement Obligations to a participant, and such participant is the Borrower or an Affiliate of the 117 -110- Borrower, then such transferor Bank shall promptly notify the Administrative Agent of the sale of such participation. Such transferor Bank shall have no right to vote as a Bank hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Section 14.1 or 14.2 to the extent that such participation is beneficially owned by the Borrower or any Affiliate of the Borrower, and the determination of the Majority Banks or the Super Majority Banks (as the case may be) shall for all purposes of this Agreement and the other Loan Documents be made without regard to the interest of such transferor Bank in the Loans to the extent of such participation. 20.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall retain its rights to be indemnified pursuant to Section 18 with respect to any claims or actions arising prior to the date of such assignment. If any assignee Bank is not incorporated under the laws of the United States of America or any state thereof, it shall, prior to the date on which any interest or fees are payable hereunder or under any of the other Loan Documents for its account, deliver to the Borrower and the Administrative Agent certification in a form which the Administrative Agent reasonably determines to be sufficient under United States tax laws for purposes of evidencing that such assignee is exempt from deduction or withholding of any United States federal income taxes. Anything contained in this Section 20 to the contrary notwithstanding, any Bank may at any time pledge or assign all or any portion of its interest and rights under this Credit Agreement (including all or any portion of its Notes) to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall release the pledgor Bank from its obligations hereunder or under any of the other Loan Documents. 20.9. ASSIGNMENT BY BORROWER. The Borrower shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of each of the Banks. 21. NOTICES, ETC. Except as otherwise expressly provided in this Credit Agreement, all notices and other communications made or required to be given pursuant to this Credit Agreement or the Notes or any Letter of Credit Applications shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy or telefax and confirmed by delivery via courier or postal service, addressed as follows: 118 -111- (a) if to the Borrower, at 40 Monument Circle, Suite 700, Indianapolis, Indiana 46204, Attention: Jeffrey H. Smulyan, Chairman, with a copy to Scott Enright, Esq., Emmis Communications Corporation, 40 Monument Circle, Suite 700, Indianapolis, Indiana 46204 and Eric Goodison, Esq., Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New York 10019, or at such other address for notice as the Borrower shall last have furnished in writing to the Person giving the notice; (b) if to any Bank or the Administrative Agent, at such Bank's or Administrative Agent's address set forth on Schedule 1 hereto, with a copy to Sula R. Fiszman, Esq., Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts 02110, or such other address for notice as such party shall have last furnished in writing to the Person giving the notice. Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof. 22. GOVERNING LAW. THIS CREDIT AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 21 ABOVE. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. 23. HEADINGS. The captions in this Credit Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 119 -112- 24. COUNTERPARTS. This Credit Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Credit Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. 25. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Credit Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 27 below. 26. WAIVER OF JURY TRIAL. Each of the Administrative Agent, the Banks and the Borrower hereby waives its right to a jury trial with respect to any action or claim arising out of any dispute in connection with this Credit Agreement, the Notes or any of the other Loan Documents, any rights or obligations hereunder or thereunder or the performance of such rights and obligations. The Borrower (a) certifies that no representative, agent or attorney of any Bank or of the Administrative Agent has represented, expressly or otherwise, that such Bank or the Administrative Agent would not, in the event of litigation, seek to enforce the foregoing waivers and (b) acknowledges that the Administrative Agent and the Banks have been induced to enter into this Credit Agreement, the other Loan Documents to which it is a party by, among other things, the waivers and certifications contained herein. 27. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly provided in this Credit Agreement, any consent or approval required or permitted by this Credit Agreement to be given by the Banks may be given, and any term of this Credit Agreement or of any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower of any terms of this Credit Agreement or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Borrower and the written consent of the Majority Banks. Notwithstanding the foregoing, (a)(i) the rate of interest on the Notes (other than interest accruing pursuant to Section 6.10 hereof following the effective date of any waiver by the Majority Banks of the Default or Event of Default 120 -113- relating thereto), (ii) the dates and amounts fixed for any payment of principal or interest or fees on the Notes, Loans or Reimbursement Obligations (including mandatory prepayments) or the application of any payments, including mandatory prepayments or the scheduled dates and amounts for reductions in the Tranche A Commitment Amount or the Tranche B Commitment Amount, (iii) the term of the Notes, (iv) the amount of the aggregate Commitments of the Banks, and (v) the amount (and dates fixed for payment) of any commitment fees or Letter of Credit Fees hereunder, may not be changed without the written consent of the Borrower and all of the Banks; (b)(i) the definitions of Majority Banks and Super Majority Banks, (ii) the provisions of Section 20.9 and this Section 27 and (iii) the aggregate percentage or number of Banks required for any action to be taken under the Loan Documents, may not be amended without the written consent of all of the Banks; (c) the Administrative Agent shall not release any Collateral nor shall any guarantor be released without the written consent of all of the Banks, unless such release is in connection with a transaction permitted by Section 10.5 hereof; and (d) the amount of the Administrative Agent's fee and any Letter of Credit fees payable to the Administrative Agent's account and the provisions of Section 16 hereof, may not be amended without the written consent of the Administrative Agent. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent on any obligation not expressly waived. No course of dealing or delay or omission on the part of any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances. 28. TRANSITIONAL ARRANGEMENTS. 28.1. EXISTING CREDIT AGREEMENT SUPERSEDED. Upon the effectiveness of this Credit Agreement, this Credit Agreement shall supersede the Existing Credit Agreement in its entirety, except as otherwise provided in this Section 28. As of the Closing Date, the rights and obligations of the parties under the Existing Credit Agreement and the "Notes" as defined in the Existing Credit Agreement shall be subsumed within and be governed by this Credit Agreement and the Notes; provided, however, that each of the "Loans" (as defined in the Existing Credit Agreement) advanced by the Existing Banks and outstanding under the Existing Credit Agreement on the Closing Date (after giving effect to the conditions set forth in Section 12.14 hereof) shall, for purposes of this Agreement, be Loans, and shall bear interest at (a) if such Loans are Eurodollar Rate Loans the then applicable Eurodollar Rate plus the Applicable Margin determined hereunder for the remainder of the then current Interest Period, or (b) if such Loans are Base Rate Loans, at the Base Rate plus the Applicable Margin determined hereunder. Interest with respect to Loans outstanding under the Existing Credit Agreement on the Closing 121 -114- Date shall be paid at the times provided herein for Base Rate Loans and Eurodollar Rate Loans. 28.2. FEES UNDER EXISTING CREDIT AGREEMENT. All commitment fees, and other fees and expenses (i) accruing under or in respect of the Existing Credit Agreement shall be deemed to continue as if governed by the Existing Credit Agreement and (ii) owing under or in respect of the Existing Credit Agreement shall be paid as if governed by the Existing Credit Agreement and paid by the Borrower to the Administrative Agent for the accounts, as appropriate, of the Administrative Agent and/or the "Banks" under, and as defined in, the Existing Credit Agreement. 29. FCC APPROVAL. Notwithstanding anything to the contrary contained in this Credit Agreement or in the other Loan Documents, neither the Administrative Agent nor any Bank will take any action pursuant to this Credit Agreement or any of the other Loan Documents, which would constitute or result in a change in control of the Borrower or any of its Subsidiaries requiring the prior approval of the FCC without first obtaining such prior approval of the FCC. After the occurrence of an Event of Default, the Borrower shall take or cause to be taken any action which the Administrative Agent may reasonably request in order to obtain from the FCC such approval as may be necessary to enable the Administrative Agent to exercise and enjoy the full rights and benefits granted to the Administrative Agent, for the benefit of the Administrative Agent and the Banks by this Credit Agreement or any of the other Loan Documents, including, at the Borrower's cost and expense, the use of the Borrower's best efforts to assist in obtaining such approval for any action or transaction contemplated by this Credit Agreement or any of the other Loan Documents for which such approval is required by law, including specifically, without limitation, upon request, to prepare, sign and file with the FCC the assignor's or transferor's portion of any application or applications for the consent to the assignment or transfer of control necessary or appropriate under the FCC's rules and approval of any of the transactions contemplated by this Credit Agreement or any of the other Loan Documents. 30. CONSENT TO REORGANIZATION. The Borrower has informed the Administrative Agent and the Banks of its intention to reorganize the Borrower's existing assets (the "Reorganization") to permit the formation of two new Subsidiaries of the Borrower as follows: (a) a television holding company Subsidiary which shall hold the stock of all Subsidiaries which operate or own television-related or publishing-related assets and (b) a radio holding company Subsidiary which shall hold the stock of all Subsidiaries which operate or own radio broadcasting related assets and in connection therewith the Borrower may or may cause its Subsidiaries to 122 -115- transfer assets to other wholly owned Subsidiaries and may form additional wholly owned Subsidiaries or merge and or liquidate or dissolve Subsidiaries (collectively, the "Reorganization Subsidiaries"). Notwithstanding anything herein to the contrary, the Administrative Agent and the Banks hereby consent to the Reorganization; provided that (a) each such Reorganization Subsidiary and any other Subsidiary formed in connection with the Reorganization shall have entered into (i) a guaranty substantially in the form of the Guaranty pursuant to which such Reorganization Subsidiary and any newly formed Subsidiary shall unconditionally guaranty the irrevocable payment and performance in full of the Obligations, (ii) a security agreement substantially in the form of the Subsidiary Security Agreement pursuant to which such Reorganization Subsidiary and any other newly formed Subsidiary shall grant a first-priority security interest in favor of the Administrative Agent for the benefit of itself and the Banks in all of such Reorganization Subsidiary's assets and properties, (iii) a stock pledge agreement substantially in the form of the Subsidiary Pledge Agreement pursuant to which such Reorganization Subsidiary and any other newly formed Subsidiary shall grant the Administrative Agent for the benefit of itself and the Banks a security interest in all of the issued and outstanding shares of capital stock of each Subsidiary of such Reorganization Subsidiary or such other newly formed Subsidiary, and (iv) if such Reorganization Subsidiary or such other newly formed Subsidiary owns or leases any Real Estate (including any Station or Station tower), a mortgage substantially in the form of the Mortgages (as applicable), related title insurance policies, collateral assignments in the form of the Collateral Assignments of Leases (as applicable) and all necessary consents from each applicable landlord and lessor in form and substance satisfactory to the Administrative Agent, (b) the Borrower shall pledge or cause to be pledged to the Administrative Agent for the benefit of itself and the Banks to secure the Obligations one hundred percent (100%) of the issued and outstanding stock of the Reorganization Subsidiaries and any other newly formed Subsidiaries, and (c) each of the Borrower and its Subsidiaries (other than Excluded Subsidiaries) shall deliver to the Administrative Agent a completed and fully executed Perfection Certificate, and the Borrower and its Subsidiaries (other than Excluded Subsidiaries) shall take all actions necessary or desirable in the opinion of the Administrative Agent to grant a security interest in, and to perfect or maintain the perfection of the Administrative Agent's security interest in all of the assets and properties of the Borrower and its Subsidiaries (other than Excluded Subsidiaries) including Reorganization Subsidiaries, (which shall include, without limitation, the delivery to the Administrative Agent of stock certificates representing all of the issued and outstanding capital stock of each Subsidiary of such Reorganization Subsidiary, duly endorsed in blank or with stock powers attached thereto executed in blank). 123 -116- 31. SEVERABILITY. The provisions of this Credit Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Credit Agreement in any jurisdiction. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 124 IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement as a sealed instrument as of the date first set forth above. EMMIS COMMUNICATIONS CORPORATION (f/k/a Emmis Broadcasting Corporation) By: ------------------------------------------------- Name: J. Scott Enright Title: Vice President and Associate General Counsel [BANK SIGNATURE PAGES FOLLOW] 125 EXHIBIT 23.1 [TO COME] 126 EXHIBIT 23.2 [TO COME] 127 EXHIBIT 23.3 [TO COME] 128 TORONTO DOMINION (TEXAS), INC., individually and as Administrative Agent By: ---------------------------------------- Title: 129 FLEET NATIONAL BANK (F/K/A/ BANKBOSTON, N.A.), individually and as Documentation Agent By: --------------------------------------- Title: 130 FIRST UNION NATIONAL BANK, individually and as Syndication Agent By: --------------------------------------- Title: 131 THE BANK OF NEW YORK By: --------------------------------------- Title: 132 THE BANK OF NEW YORK COMPANY, INC. By: --------------------------------------- Title: 133 BNP PARIBAS (SUCCESSOR TO PARIBAS) By: --------------------------------------- Title: By: --------------------------------------- Title: 134 CREDIT INDUSTRIEL ET COMMERCIAL By: --------------------------------------- Title: By: --------------------------------------- Title: 135 FIRSTAR BANK, N.A. By: --------------------------------------- Title: 136 KEY CORPORATE CAPITAL INC. By: --------------------------------------- Title: 137 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND," NEW YORK BRANCH By: --------------------------------------- Title: By: --------------------------------------- Title: 138 UNION BANK OF CALIFORNIA, N.A. By: --------------------------------------- Title: 139 BANK OF MONTREAL By: --------------------------------------- Title: 140 BANK ONE, NA By: --------------------------------------- Title: 141 SUNTRUST BANK By: --------------------------------------- Title: 142 CITY NATIONAL BANK By: --------------------------------------- Title: 143 CREDIT SUISSE FIRST BOSTON By: --------------------------------------- Title: 144 FIRST HAWAIIAN BANK By: --------------------------------------- Title: 145 NATIONAL CITY BANK OF INDIANA By: --------------------------------------- Title: 146 SUMMIT BANK By: --------------------------------------- Title: 147 BANK OF HAWAII By: --------------------------------------- Title: 148 CIT LENDING SERVICES CORPORATION By: --------------------------------------- Title: 149 THE DAI-ICHI KANGYO BANK, LTD. By: --------------------------------------- Title: 150 THE BANK OF NOVA SCOTIA By: --------------------------------------- Title: 151 NATEXIS BANQUES POPULAIRES By: --------------------------------------- Title: 152 Exhibit H Instrument of Accession The undersigned, _____________, in order to commit to lend to Emmis Communications Corporation f/k/a Emmis Broadcasting Corporation (the "Borrower") any Tranche A Loans and Tranche B Term Loans (each as defined in the Credit Agreement), hereby agrees to become a Bank party to that certain Third Amended and Restated Revolving Credit and Term Loan Agreement, dated as of October 2, 2000 (as amended from time to time and in effect, the "Credit Agreement"), a copy of which is attached hereto. The undersigned hereby agrees to perform all duties and obligations of a Bank under the Credit Agreement. This Instrument of Accession shall become a part of the Credit Agreement. Executed as of the date set forth below under the laws of The State of New York. [BANK] By: ---------------------------------------- Name: Title: Accepted: TORONTO DOMINION (TEXAS), INC., as Administrative Agent By: -------------------------- Name: Title: 153 -2- Schedule 10.5(d) TRANSACTION CLOSING CONDITIONS The Borrower agrees to satisfy and perform in full each of the following conditions precedent relevant to the Transactions prior to or on the closing date of such Transaction: (a) the Borrower shall have delivered to the Administrative Agent such amendments to the Security Documents and executed and delivered such other documents, instruments and writings as are necessary to grant the Administrative Agent for the benefit of itself and the Banks a first-priority security interest in all of the assets and properties acquired by the Borrower or any of its Subsidiaries in connection with the relevant Transaction; (b) the Borrower shall have delivered to the Administrative Agent (i) a completed and fully executed Perfection Certificate for each Subsidiary of the Borrower incorporated for the purpose of facilitating each Transaction or of holding the assets so acquired or the related licenses (each a "New Subsidiary"), each in form and substance satisfactory to the Administrative Agent, and (ii) the results of UCC searches with respect to the Collateral of each such New Subsidiary, indicating no liens other than Permitted Liens; (c) the Borrower shall have filed, recorded and delivered all instruments and taken all other actions necessary or desirable in the opinion of the Administrative Agent to perfect the Administrative Agent's security interest in all of the assets and properties acquired by the borrower or any of its Subsidiaries in connection with each relevant Transaction, and each such filing, recording and delivery shall have been duly effected and the Administrative Agent shall have received evidence thereof in form and substance satisfactory to the Administrative Agent; (d) the Borrower shall have delivered to the Administrative Agent stock certificates representing all of the issued and outstanding capital stock of each New Subsidiary, duly endorsed in blank or with stock powers attached thereto executed in blank; (e) the Borrower shall have caused each New Subsidiary to (i) enter into (A) a guaranty substantially in the form of the Guaranty pursuant to which such New Subsidiary shall unconditionally guaranty the irrevocable payment and performance in full of the Obligations, (B) a security agreement substantially in the form of the Subsidiary Security Agreement pursuant to which such New Subsidiary shall grant a first-priority security interest in favor of the Administrative Agent for the 154 -3- benefit of itself and the Banks in all of such New Subsidiary's assets and properties, (C) a stock pledge agreement substantially in the form of the Subsidiary Pledge Agreement pursuant to which such New Subsidiary shall grant the Administrative Agent for the benefit of itself and the Banks a security interest in all of the issued and outstanding shares of capital stock of each Subsidiary of such New Subsidiary, and (D) if such New Subsidiary owns or leases any Real Estate (including any Station or Station tower), a mortgage substantially in the form of the Mortgages (as applicable), related title insurance policies, collateral assignments in the form of the Collateral Assignments of Leases (as applicable) and all necessary consents from each applicable landlord and lessor in form and substance satisfactory to the Administrative Agent, and (ii) take all actions necessary or desirable in the opinion of the Administrative Agent to perfect the Administrative Agent's security interest in all of the assets and properties of such New Subsidiary (including, without limitation, the delivery to the Administrative Agent of stock certificates representing all of the issued and outstanding capital stock of each Subsidiary of such New Subsidiary, duly endorsed in blank or with stock powers attached thereto executed in blank); (f) the Borrower shall have delivered to the Administrative Agent copies of environmental reports with respect to the Real Estate (if any) in connection with the relevant Transaction, in form and substance satisfactory to the Administrative Agent; (g) the Administrative Agent shall have received from each party to the relevant Transaction (as the case may be) (i) a certificate of the Secretary of State in the jurisdiction of its incorporation as to the legal existence and good standing of such Person, (ii) its charter, certified as of a recent date by the Secretary of State of the jurisdiction of incorporation of such Person, (iii) its by-laws, certified by a duly authorized officer of such Person to be true and complete as of the date of the relevant Transaction (as applicable), (iv) the resolutions of the Board of Directors of such Person and, if required by applicable law, of its stockholders authorizing the execution, delivery and performance of the relevant Transaction Documents to which such Person is a party, certified by a duly authorized officer of such Person, (v) a certificate of an officer of such Person as to the incumbency and signature of officers authorized to execute and deliver such documents, and (vi) a certificate of the Secretary of State in each jurisdiction in which such Person is required to be qualified to do business as to such Person's qualification to do business in such jurisdiction; (h) the Banks and the Administrative Agent shall have received opinions from counsel to the Borrower and its Subsidiaries, counsel to each other Person a party to the Transaction Documents and listed 155 -4- therein as the "Seller", and FCC counsel to the Borrower and its Subsidiaries, in each case as to the relevant Transaction and the relevant Transaction Documents, and each in form and substance satisfactory to the Banks and the Administrative Agent; (i) the Borrower shall have delivered to the Administrative Agent evidence satisfactory to the Administrative Agent that all liens and encumbrances with respect to the properties and assets of each New Subsidiary, other than Permitted liens, have been discharged in full; (j) the Borrower shall have delivered to the Administrative Agent (i) evidence that the Borrower has completed each Transaction in accordance with the terms of the relevant Transaction Documents (as the case may be), and (ii) certified copies of all such documents; (k) either (i) the FCC shall have issued orders approving or consenting to each Transaction and such FCC consent shall be in full force and effect on the Closing Date and such FCC consent shall have become final in the sense that it is no longer subject to any further judicial or administrative reconsideration or review, or (ii) the FCC shall have approved the transfer of such FCC licenses contemplated by the Transaction Documents by staff action and no petitions or appeals shall be pending before the FCC or threatened with respect to the transfer of such FCC licenses; and (l) the Borrower shall have furnished to the Administrative Agent a duly executed certificate substantially in the form of Exhibit G hereto. EX-10.2 6 c57890ex10-2.txt ASSET PURCHASE AGREEMENT 1 EXHIBIT 10.2 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of June 19, 2000 among the company or companies designated as Seller on the signature page hereto (collectively, "Seller") and the company or companies designated as Buyer on the signature page hereto (collectively, "Buyer"). RECITALS A. Seller owns and operates the following radio broadcast stations (the "Stations" and each a "Station") pursuant to certain authorizations issued by the Federal Communications Commission (the "FCC"): KKFR(FM), Glendale, Arizona KXPK-FM, Evergreen, Colorado B. Subject to the terms and conditions set forth herein, Buyer desires to acquire the Station Assets (defined below). C. Clear Channel Communications, Inc, CCU Merger Sub, Inc. and AMFM Inc. (Seller's parent) are parties to an Agreement and Plan of Merger dated October 2, 1999 (the "AMFM Agreement"). AGREEMENT NOW, THEREFORE, taking the foregoing into account, and in consideration of the mutual covenants and agreements set forth herein, the parties, intending to be legally bound, hereby agree as follows: ARTICLE 1: PURCHASE OF ASSETS 0.1. Station Assets. On the terms and subject to the conditions hereof, on the Closing Date (defined below), Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and acquire from Seller, all of the right, title and interest of Seller in and to all of the assets, properties, interests and rights of Seller of whatsoever kind and nature, real and personal, tangible and intangible, which are used exclusively in the operation of the Stations and specifically described in this Section 1.1, but excluding the Excluded Assets as hereafter defined (the "Station Assets"): (1) all licenses, permits and other authorizations which are issued to Seller by the FCC with respect to the Stations (the "FCC Licenses") and described on Schedule 1.1(a), including any renewals or modifications thereof between the date hereof and Closing; 2 (2) all equipment, electrical devices, antennae, cables, tools, hardware, office furniture and fixtures, office materials and supplies, inventory, motor vehicles, spare parts and other tangible personal property of every kind and description which are used exclusively in the operation of the Stations and listed on Schedule 1.1(b), except any retirements or dispositions thereof made between the date hereof and Closing in the ordinary course of business and consistent with past practices of Seller (the "Tangible Personal Property"); (3) all Time Sales Agreements and Trade Agreements (both defined in Section 2.1), Real Property Leases (defined in Section 7.7), and other contracts, agreements, and leases which are used in the operation of the Stations and listed on Schedule 1.1(c), together with all contracts, agreements, and leases made between the date hereof and Closing in the ordinary course of business that are used in the operation of the Stations (the "Station Contracts"); (4) all of Seller's rights in and to the Stations' call letters and Seller's rights in and to the trademarks, trade names, service marks, franchises, copyrights, computer software, programs and programming material, jingles, slogans, logos, and other intangible property, and goodwill related thereto, which are used exclusively in the operation of the Stations and listed on Schedule 1.1(d) (the "Intangible Property"); (5) Seller's rights in and to all the files, documents, records, and books of account (or copies thereof) relating exclusively to the operation of the Stations, including the Stations' local public files, programming information and studies, blueprints, technical information and engineering data and logs, but excluding records relating to Excluded Assets (defined below); and (6) any real property which is used in the operation of the Stations (including any of Seller's appurtenant easements and improvements located thereon) and described on Schedule 1.1(f) (the "Real Property"). The Station Assets shall be transferred to Buyer free and clear of liens, claims and encumbrances ("Liens") except for (i) Assumed Obligations (defined in Section 2.1), (ii) liens for taxes not yet due and payable and for which Buyer receives a credit pursuant to Section 3.3, (iii) such liens, easements, rights of way, building and use restrictions, exceptions, reservations and limitations that do not in any material respect detract from the value of the property subject thereto or impair the use thereof in the ordinary course of the business of the Stations, and (iv) any items listed on Schedule 1.1(b) (collectively, "Permitted Liens"). 1.2. Excluded Assets. Notwithstanding anything to the contrary contained herein, the Station Assets shall not include the following assets along with all rights, title and interest therein (the "Excluded Assets"): (1) all cash and cash equivalents of Seller, including without limitation certificates of deposit, commercial paper, treasury bills, marketable securities, asset or money market accounts and all such similar accounts or investments; (2) all accounts receivable or notes receivable arising in the operation of the Stations prior to Closing; 3 (3) all tangible and intangible personal property of Seller disposed of or consumed in the ordinary course of business of Seller between the date of this Agreement and Closing; (4) all Station Contracts that terminate or expire prior to Closing in the ordinary course of business of Seller; (5) Seller's name, corporate minute books, charter documents, corporate stock record books and such other books and records as pertain to the organization, existence or share capitalization of Seller, duplicate copies of the records of the Stations, and all records not relating exclusively to the operation of the Stations; (6) contracts of insurance, and all insurance proceeds or claims made thereunder; (7) except as provided in Section 10.4, all pension, profit sharing or cash or deferred (Section 401(k)) plans and trusts and the assets thereof and any other employee benefit plan or arrangement and the assets thereof, if any, maintained by Seller; and (8) all of Seller's rights, properties and assets described on Schedule 1.2(h), and all rights, properties and assets not specifically described in Section 1.1. ARTICLE 2: ASSUMPTION OF OBLIGATIONS 2.1. Assumed Obligations. On the Closing Date, Buyer shall assume the obligations of Seller (the "Assumed Obligations") arising after Closing under the Station Contracts, including without limitation all agreements for the sale of advertising time on the Stations for cash in the ordinary course of business ("Time Sales Agreements") and all agreements for the sale of advertising time on the Stations for non-cash consideration ("Trade Agreements"). 2.2. Retained Obligations. Buyer does not assume or agree to discharge or perform and will not be deemed by reason of the execution and delivery of this Agreement or any agreement, instrument or document delivered pursuant to or in connection with this Agreement or otherwise by reason of the consummation of the transactions contemplated hereby, to have assumed or to have agreed to discharge or perform, any liabilities, obligations or commitments of Seller of any nature whatsoever whether accrued, absolute, contingent or otherwise and whether or not disclosed to Buyer, other than the Assumed Obligations (the "Retained Obligations"). ARTICLE 3: PURCHASE PRICE 3.1. Purchase Price. In consideration for the sale of the Station Assets to Buyer, in addition to the assumption of the Assumed Obligations, Buyer shall at Closing (defined below) deliver to Seller by wire transfer of immediately available funds the sum of (i) ONE HUNDRED EIGHT MILLION DOLLARS ($108,000,000), subject to adjustment pursuant to Sections 3.3, plus (ii) the Reserve Adjustment (as defined in Section 3.5 below) (the "Purchase Price"). 3.2. Deposit. Within three (3) business days from the date of this Agreement with no Cure Period as defined below, Buyer shall deposit an amount in cash equal to 10% of the Purchase 4 Price (the "Deposit") with NationsBank/Bank of America (the "Escrow Agent") pursuant to the Escrow Agreement (the "Escrow Agreement") of even date herewith among Buyer, Seller and the Escrow Agent. At Closing, the Deposit shall be applied to the Purchase Price and any interest accrued thereon shall be disbursed to Buyer. If this Agreement is terminated by Seller due to Buyer's failure to consummate the Closing on the Closing Date in accordance with this Agreement or if this Agreement is otherwise terminated by Seller pursuant to Section 16.1(c), the Deposit and any interest accrued thereon shall be disbursed to Seller as partial payment of liquidated damages pursuant to Section 16.3. If this Agreement is terminated for any other reason, the Deposit and any interest accrued thereon shall be disbursed to Buyer. 3.3. Prorations and Adjustments. Except as otherwise provided herein, all deposits, reserves and prepaid and deferred income and expenses relating to the Stations Assets or the Assumed Obligations and arising from the conduct of the business and operations of the Stations shall be prorated between Buyer and Seller in accordance with generally accepted accounting principles as of 11:59 p.m. on the date immediately preceding the Closing Date. Such prorations shall include, without limitation, all ad valorem, real estate and other property taxes (but excluding taxes arising by reason of the transfer of the Stations Assets as contemplated hereby which shall be paid as set forth in Section 13.1), business and license fees, music and other license fees (including any retroactive adjustments thereof), utility expenses, amounts due or to become due under Stations Contracts, rents, lease payments and similar prepaid and deferred items. Real estate taxes shall be apportioned on the basis of taxes assessed for the preceding year, with a reapportionment, if any, as soon as the new tax rate and valuation can be ascertained. Except as otherwise provided herein, the prorations and adjustments contemplated by this Section 3.3, to the extent practicable, shall be made on the Closing Date. As to those prorations and adjustments not capable of being ascertained on the Closing Date, an adjustment and proration shall be made within ninety (90) calendar days of the Closing Date. In the event of any disputes between the parties as to such adjustments, the amounts not in dispute shall nonetheless be paid at the time provided herein and such disputes shall be determined by an independent certified public accountant mutually acceptable to the parties, and the fees and expenses of such accountant shall be paid one-half by Seller and one-half by Buyer. 3.4. Allocation. The Purchase Price shall be allocated among the Stations Assets in a manner as mutually agreed between the parties based upon an appraisal prepared by Bond & Pecaro (whose fees shall be paid one-half by Seller and one-half by Buyer). Seller and Buyer agree to use the allocations determined pursuant to this Section 3.4 for all tax purposes, including without limitation, those matters subject to Section 1060 of the Internal Revenue Code of 1986, as amended. 3.5. Reserve. At the Closing, Seller shall set aside and pay to Buyer a portion of the Purchase Price (the "Reserve") equal to the sum of (i) One Million Dollars ($1,000,000) , plus (ii) the Reserve Adjustment. Buyer shall be entitled to use the Reserve in its sole discretion in order to satisfy certain obligations assumed under the Time Sales Agreements, Trade Agreements and Station Contracts. The Buyer shall be entitled to retain any amounts of the Reserve which are not so used. As used herein, the "Reserve Adjustment" shall be the amount in excess of $1,000,000 which Buyer reasonably estimates to be the cost of terminating the Time Sales Agreements, Trade Agreements and Station Contracts which Buyer would not otherwise assume but for the convenience of Seller 5 hereunder. Buyer will provide Seller with written notification of its preliminary calculation of the amount of the Reserve Adjustment at least three (3) days prior to Closing and will pay such amount to Seller as part of the Purchase Price. Buyer will complete its calculation of the Reserve Adjustment within ninety (90) days after the Closing. To the extent such final calculation of the Reserve Adjustment is higher than the preliminary calculation, Buyer will remit such excess to Seller as additional Purchase Price, and Seller will set aside and pay such amount to Buyer as additional Reserve. ARTICLE 4: CLOSING 4.1. Closing. The consummation of the sale and purchase of the Stations Assets (the "Closing") shall occur on a date (the "Closing Date") and at a time and place designated solely by Seller after FCC Consent (defined below), subject to satisfaction or waiver of the conditions to Closing contained herein (other than those to be satisfied at Closing). Seller shall provide Buyer with notice of the Closing Date at least three (3) business days prior to Closing, however, Seller reserves the right to extend the Closing Date without penalty. If requested by Seller, prior to Closing the parties shall hold a pre-closing conference at a time and place designated by Seller, at which the parties shall provide (for review only) all documents to be delivered at Closing under this Agreement, each duly executed but undated, and otherwise confirm their ability to timely consummate the Closing. ARTICLE 5: GOVERNMENTAL CONSENTS Closing is subject to and conditioned upon (i) prior FCC consent (the "FCC Consent") to the assignment of the FCC Licenses to Buyer, (ii) United States Department of Justice ("DOJ") prior approval (the "DOJ Consent") of the transactions contemplated hereby, including without limitation any such approval as may be necessary to enable Seller to consummate the merger under the AMFM Agreement, and (iii) expiration or termination of any applicable waiting period ("HSR Clearance") under the HSR Act (defined below). 5.1. FCC. On a date designated by Seller, Buyer and Seller shall file an application with the FCC (the "FCC Application") requesting the FCC Consent. Buyer and Seller shall diligently prosecute the FCC Application and otherwise use their best efforts to obtain the FCC Consent as soon as possible. If the FCC Consent imposes upon Buyer any condition (including without limitation any divestiture condition), Buyer shall timely comply therewith. 5.2. HSR. If not previously filed, then on a date designated by Seller after the execution of this Agreement, Buyer and Seller shall make any required filings with the Federal Trade Commission and the DOJ pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") with respect to the transactions contemplated hereby (including a request for early termination of the waiting period thereunder), and shall thereafter promptly respond to all requests received from such agencies for additional information or documentation. 5.3. General. Buyer and Seller shall notify each other of all documents filed with or received from any governmental agency with respect to this Agreement or the transactions 6 contemplated hereby. Buyer and Seller shall furnish each other with such information and assistance as such the other may reasonably request in connection with their preparation of any governmental filing hereunder. If Buyer becomes aware of any fact relating to it which would prevent or delay the FCC Consent, the DOJ Consent or HSR Clearance, Buyer shall promptly notify Seller thereof and take such steps as necessary to remove such impediment, including but not limited to divesting any Stations and terminating any agreements to acquire or program or market any Stations. ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby makes the following representations and warranties to Seller: 6.1. Organization and Standing. Buyer is or will be as of the Closing Date duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and is qualified to do business in each jurisdiction in which the Station Assets are located. Buyer has the requisite power and authority to execute and deliver this Agreement and all of the other agreements and instruments to be executed and delivered by Buyer pursuant hereto (collectively, the "Buyer Ancillary Agreements"), to consummate the transactions contemplated hereby and thereby and to comply with the terms, conditions and provisions hereof and thereof. 6.2. Authorization. The execution, delivery and performance of this Agreement and the Buyer Ancillary Agreements by Buyer have been duly authorized and approved by all necessary action of Buyer and do not require any further authorization or consent of Buyer. This Agreement is, and each Buyer Ancillary Agreement when executed and delivered by Buyer and the other parties thereto will be, a legal, valid and binding agreement of Buyer enforceable in accordance with its respective terms, except in each case as such enforceability may be limited by bankruptcy, moratorium, insolvency, reorganization or other similar laws affecting or limiting the enforcement of creditors' rights generally and except as such enforceability is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 6.3. No Conflicts. Neither the execution and delivery by Buyer of this Agreement and the Buyer Ancillary Agreements or the consummation by Buyer of any of the transactions contemplated hereby or thereby nor compliance by Buyer with or fulfillment by Buyer of the terms, conditions and provisions hereof or thereof will: (i) conflict with any organizational documents of Buyer or any law, judgment, order or decree to which Buyer is subject; or (ii) require the approval, consent, authorization or act of, or the making by Buyer of any declaration, filing or registration with, any third party or any foreign, federal, state or local court, governmental or regulatory authority or body, except the FCC Consent and DOJ Consent, and, if applicable, HSR Clearance. 6.4. Qualification. Buyer is legally, financially and otherwise qualified to be the licensee of, acquire, own and operate the Stations under the Communications Act of 1934, as amended (the "Communications Act") and the rules, regulations and policies of the FCC. There are no facts that would, under existing law and the existing rules, regulations, policies and procedures of the FCC, disqualify Buyer as an assignee of the FCC Licenses or as the owner and operator of the Stations. 7 No waiver of any FCC rule or policy is necessary for the FCC Consent to be obtained. There is no action, suit or proceeding pending or threatened against Buyer which questions the legality or propriety of the transactions contemplated by this Agreement or could materially adversely affect Buyer's ability to perform its obligations hereunder. Buyer has and will have available on the Closing Date sufficient funds to enable it to consummate the transactions contemplated hereby. 6.5. No Finder. No broker, finder or other person is entitled to a commission, brokerage fee or other similar payment in connection with this Agreement or the transactions contemplated hereby as a result of any agreement or action of Buyer or any party acting on Buyer's behalf. ARTICLE 7: REPRESENTATIONS AND WARRANTIES OF SELLER Seller makes the following representations and warranties to Buyer: 7.1. Organization. Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and is qualified to do business in each jurisdiction in which the Station Assets are located. Seller has the requisite power and authority to execute and deliver this Agreement and all of the other agreements and instruments to be executed and delivered by Seller pursuant hereto (collectively, the "Seller Ancillary Agreements"), to consummate the transactions contemplated hereby and thereby and to comply with the terms, conditions and provisions hereof and thereof. 7.2. Authorization. The execution, delivery and performance of this Agreement and the Seller Ancillary Agreements by Seller have been duly authorized and approved by all necessary action of Seller and do not require any further authorization or consent of Seller. This Agreement is, and each Seller Ancillary Agreement when executed and delivered by Seller and the other parties thereto will be, a legal, valid and binding agreement of Seller enforceable in accordance with its respective terms, except in each case as such enforceability may be limited by bankruptcy, moratorium, insolvency, reorganization or other similar laws affecting or limiting the enforcement of creditors' rights generally and except as such enforceability is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 7.3. No Conflicts. Neither the execution and delivery by Seller of this Agreement and the Seller Ancillary Agreements or the consummation by Seller of any of the transactions contemplated hereby or thereby nor compliance by Seller with or fulfillment by Seller of the terms, conditions and provisions hereof or thereof will: (i) conflict with any organizational documents of Seller or any law, judgment, order, or decree to which Seller is subject or, except as set forth on Schedule 1.1(c), any Station Contract; or (ii) require the approval, consent, authorization or act of, or the making by Seller of any declaration, filing or registration with, any third party or any foreign, federal, state or local court, governmental or regulatory authority or body, except the FCC Consent and DOJ Consent and, if applicable, HSR Clearance. 7.4. FCC Licenses. Seller (or one of the companies comprising Seller) is the holder of the FCC Licenses described on Schedule 1.1(a). The FCC Licenses comprise all of those licenses from the FCC materially necessary to operate the Stations as currently operated, are in full force and 8 effect and have not been revoked, suspended, canceled, rescinded or terminated and have not expired. There is not pending any action by or before the FCC to revoke, suspend, cancel, rescind or materially adversely modify any of the FCC Licenses (other than proceedings to amend FCC rules of general applicability), and there is not now issued or outstanding, by or before the FCC, any order to show cause, notice of violation, notice of apparent liability, or notice of forfeiture against Seller with respect to the Stations. The Stations are operating in compliance in all material respects with the FCC Licenses, the Communications Act, and the rules, regulations and policies of the FCC. 7.5. Taxes. Seller has, in respect of the Stations' business, filed all foreign, federal, state, county and local income, excise, property, sales, use, franchise and other tax returns and reports which are required to have been filed by it under applicable law and has paid all taxes which have become due pursuant to such returns or pursuant to any assessments which have become payable. 7.6. Personal Property. Schedule 1.1(b) contains a list of all material items of Tangible Personal Property included in the Station Assets. Seller has title to the Tangible Personal Property free and clear of Liens other than Permitted Liens. The Tangible Personal Property is in good condition and working order. 7.7. Real Property. Schedule 1.1(f) contains a description of all Real Property included in the Station Assets. Seller has fee simple title to the owned Real Property ("Owned Real Property") free and clear of Liens other than Permitted Liens. Schedule 1.1(f) includes a description of each lease of Real Property or similar agreement included in the Station Assets (the "Real Property Leases"). The Owned Real Property includes, and the Real Property Leases provide, access to the Stations' facilities. To Seller's knowledge, the Real Property is not subject to any suit for condemnation or other taking by any public authority. 7.8. Contracts. Each of the Station Contracts (including without limitation each of the Real Property Leases) is in effect and is binding upon Seller and, to Seller's knowledge, the other parties thereto (subject to bankruptcy, insolvency, reorganization or other similar laws relating to or affecting the enforcement of creditors' rights generally). Seller has performed its obligations under each of the Station Contracts in all material respects, and is not in material default thereunder, and to Seller's knowledge, no other party to any of the Station Contracts is in default thereunder in any material respect. 7.9. Environmental. Except as set forth in any environmental report delivered by Seller to Buyer prior to the date of this Agreement and except as set forth on Schedule 1.1(f), to Seller's knowledge, no hazardous or toxic substance or waste regulated under any applicable environmental, health or safety law has been generated, stored, transported or released on, in, from or to the Real Property included in the Station Assets. Except as set forth in any environmental report delivered by Seller to Buyer prior to the date of this Agreement and except as set forth on Schedule 1.1(f), to Seller's knowledge, Seller has complied in all material respects with all environmental, health and safety laws applicable to the Stations. 9 7.10. Intangible Property. Schedule 1.1(d) contains a description of the material Intangible Property included in the Station Assets. Except as set forth on Schedule 1.1(d), Seller has received no notice of any claim that its use of the Intangible Property infringes upon any third party rights. Except as set forth on Schedule 1.1(d), Seller owns or has the right to use the Intangible Property free and clear of Liens other than Permitted Liens. 7.11. Compliance with Law. Seller has complied in all material respects with all laws, regulations, rules, writs, injunctions, ordinances, franchises, decrees or orders of any court or of any foreign, federal, state, municipal or other governmental authority which are applicable to the operation of the Stations. There is no action, suit or proceeding pending or threatened against Seller in respect of the Stations that will subject Buyer to liability or which questions the legality or propriety of the transactions contemplated by this Agreement. To Seller's knowledge, there are no governmental claims or investigations pending or threatened against Seller in respect of the Stations (except those affecting the industry generally). 7.12. No Finder. No broker, finder or other person is entitled to a commission, brokerage fee or other similar payment in connection with this Agreement or the transactions contemplated hereby as a result of any agreement or action of Seller or any party acting on Seller's behalf. 7.13. Financial Statements. Seller has delivered to Buyer copies of the unaudited results of operations of the Stations for the twelve months ended December 31, 1999 and copies of unaudited balance sheets of the Stations as of four months ended April 30, 2000, prepared in accordance with the books and records of the Stations. ARTICLE 8: ACCOUNTS RECEIVABLE 8.1. Accounts Receivable. All accounts receivable arising prior to the Closing Date in connection with the operation of the Stations (other than non-cash receivables under Trade Agreements), including but not limited to accounts receivable for advertising revenues for programs and announcements performed prior to the Closing Date and other broadcast revenues for services performed prior to the Closing Date, shall remain the property of Seller (the "Accounts Receivable") and Buyer shall not acquire any right or interest therein. For a period of six months from Closing (the "Collection Period"), Buyer shall collect the Accounts Receivable in the normal and ordinary course of Buyer's business and shall apply all such amounts collected to the debtor's oldest account receivable first. Buyer's obligation shall not extend to the institution of litigation, employment of counsel or a collection agency or any other extraordinary means of collection. During the Collection Period, neither Seller or its agents shall make any direct solicitation of any such account debtor for collection purposes or institute litigation for the collection of amounts due. Any amounts relating to the Accounts Receivable that are paid directly to Seller shall be retained by Seller. Within ten calendar days after the end of each month, Buyer shall make a payment to Seller equal to the amount of all collections of Accounts Receivable during the preceding month. At the end of the Collection Period, any remaining Accounts Receivable shall be returned to Seller for collection. 10 ARTICLE 9: COVENANTS OF SELLER 9.1. Seller's Covenants. Seller covenants and agrees with respect to the Stations that, between the date hereof and Closing, except as permitted by this Agreement or with the prior written consent of Buyer, which shall not be unreasonably withheld, Seller shall: (1) operate the Stations in the ordinary course of business consistent with past practice and in all material respects in accordance with FCC rules and regulations and with all other applicable laws, regulations, rules and orders; (2) not, other than in the ordinary course of business in accordance with past practice, sell, lease or dispose of or agree to sell, lease or dispose of any of the Station Assets, or create, assume or permit to exist any Liens upon the Station Assets, except for Permitted Liens; (3) furnish Buyer with such information, including monthly unaudited financial statements, relating to the Station Assets, and provide Buyer with such access to the Stations, as Buyer may reasonably request with Seller's prior approval which shall not be unreasonably withheld, at Buyer's expense and provided such request does not interfere unreasonably with the business of the Stations; (4) give or cause the Stations to give Buyer and Buyer's accountants, at Buyer's expense, and reasonable request and upon reasonable notice, full and reasonable access during normal business hours to Seller's financial records that Buyer may reasonably request. The rights of Buyer under this Section shall not be exercised in such a manner as to interfere unreasonably with the business of the Stations. Any investigation by Buyer in accordance with the foregoing shall not diminish or negate, in any way, any of the representations or warranties of Seller set forth in this Agreement or in connection herewith; (5) cooperate, and use its reasonable best efforts to cause its independent auditors to reasonably cooperate, with Buyer in order to enable Buyer to have independent auditors selected by Buyer, and at Buyer's expense, prepare audited financial statements for the Stations for the three (3) most recently completed fiscal year-ends and any quarter and related year to date period during the current fiscal year. Without limiting the generality of the foregoing, Seller agrees that it will: (i) consent to the use of and execute documents in support of such audited financial statements in any registration statement or other document filed by Buyer under Securities Act of 1933 and the Securities and Exchange Act of 1934 or any document relating to a private placement of Buyer's securities; (6) not enter into new Station Contracts with a term greater than one year and an aggregate value greater than $25,000 which cannot be canceled with ninety (90) days prior written notice or that is with an affiliate of Seller (unless the terms are no less favorable to the Stations than could be obtained on an arms-length basis from an unaffiliated third party), without providing prior written notice to Buyer, or enter into Trade Agreements which in the aggregate exceed related barter assets; 9.2. Real Property. Buyer may at its expense conduct an environmental review of the owned Real Property and a title review of the owned Real Property prior to Closing. If it is 11 established prior to Closing that there exists a material adverse violation of, or condition requiring remediation under, applicable environmental law at any of the Stations' owned Real Property (an "Environmental Condition"), then Buyer may elect to designate the affected owned Real Property as an Excluded Assets (but such exclusion shall not deprive Buyer of any other Station Assets at such site to which it is entitled upon Closing), and upon Closing the parties shall cooperate to facilitate Buyer's transition from such site to a new location at Buyer's expense and without delay of Closing. If it is established prior to Closing that Seller's title to any owned Real Property currently used by Seller in the operation of the Stations is subject to a title defect or deficiency that materially adversely affects the operation of a Station located thereon as currently operated, them, except for Permitted Liens, Seller shall remedy such defect in all material respects, but the Closing shall not be delayed and Seller may remedy any such condition after Closing. ARTICLE 10: JOINT COVENANTS Buyer and Seller hereby covenant and agree that between the date hereof and Closing: 10.1. Cooperation. Subject to express limitations contained elsewhere herein, each party (i) shall cooperate fully with one another in taking any reasonable actions (including without limitation, reasonable actions to obtain the required consent of any governmental instrumentality or any third party) necessary or helpful to accomplish the transactions contemplated by this Agreement, including but not limited to the prompt satisfaction of any condition to Closing set forth herein, and (ii) shall not take any action that conflicts with its obligations hereunder or that causes its representations and warranties to become untrue in any material respect. 10.2. Control of Stations. Buyer shall not, directly or indirectly, control, supervise or direct the operations of the Stations prior to Closing. Such operations, including complete control and supervision of all Stations' programs, employees and policies, shall be the sole responsibility of Seller. 10.3. Consents to Assignment. The parties shall use commercially reasonable efforts to obtain any third party consents necessary for the assignment of any Station Contract (which shall not require any payment to any such third party). To the extent that any Station Contract may not be assigned without the consent of any third party, and such consent is not obtained prior to Closing, this Agreement and any assignment executed pursuant hereto shall not constitute an assignment thereof, but to the extent permitted by law shall constitute an equitable assignment by Seller and assumption by Buyer of Seller's rights and obligations under the applicable Station Contract, with Seller making available to Buyer the benefits thereof and Buyer performing the obligations thereunder on Seller's behalf; provided, however, that Seller shall indemnify Buyer from and against all costs, expenses and damages incurred by Buyer as a result of Seller's failure to have obtained a consent to assignment with respect to any of the leases for the main transmitter sites listed on Schedule 1.1(f) from which the Stations' signals are broadcast. Seller shall be released from all indemnification obligations with respect to Seller's failure to have obtained a consent to assignment with respect to any of the leases for the main transmitter sites from which the Stations' signals are broadcast six (6) months after the Closing Date, except to the extent that written notice of such indemnification claim is given by Buyer to Seller within the six month time period. 12 10.4. Employee Matters. (1) Prior to Closing, Seller shall deliver to Buyer a list of substantially all the employees who work for the Stations. Buyer may interview and elect to hire such listed employees, but not any other employees of Seller. Buyer is obligated to hire only those employees that are under employment contracts (and assume Seller's obligations and liabilities under such employment contracts) which are included in the Station Contracts. With respect to employees hired by Buyer ("Transferred Employees"), to the extent permitted by law, Seller shall provide Buyer access to its personnel records and such other information as Buyer may reasonably request prior to Closing. With respect to Transferred Employees, Seller shall be responsible for the payment of all compensation payable by it until Closing and thereafter Buyer shall be responsible for all such obligations payable by Buyer. Buyer shall cause all Transferred Employees to be eligible to participate in its "employee welfare benefit plans" and "employee pension benefit plans" (as defined in Section 3(1) and 3(2) of ERISA, respectively) in which similarly situated employees are generally eligible to participate; provided, however, that all such employees and their spouses and dependents shall be eligible for coverage immediately after Closing (and shall not be excluded from coverage on account of any pre-existing condition) to the extent provided under such plans. For purposes of any length of service requirements, waiting periods, vesting periods or differential benefits based on length of service in any such plan for which Transferred Employees may be eligible after Closing, Buyer shall ensure that service with Seller shall be deemed to have been service with the Buyer to the extent provided under applicable plans. In addition, Buyer shall ensure that each of the Transferred Employees receives credit under any welfare benefit plan of Buyer to the extent provided under applicable plans for any deductibles or co-payments paid by such employees and dependents for the current plan year under a plan maintained by Seller. Notwithstanding any other provision contained herein, Buyer shall grant credit (but no cash payment) to each of the Transferred Employee for all unused sick leave accrued as of Closing as an employee of Seller. Buyer shall assume and discharge Seller's liabilities for the payment of all unused vacation leave accrued by such employees as of Closing to extent Buyer receives a credit therefor from Seller. (2) As of the Closing Date, Buyer shall cause its 401(k) plan to permit Transferred Employees who participate in the Seller's 401(k) plan to elect to make direct rollovers by trustee to trustee transfer of their account balances in Seller's 401(k) plan into the Buyer's 401(k) plan, including, the direct rollover of any outstanding loan balances such that they will continue to make payments under the terms of such loans under the Buyer's 401(k) plan; provided, that, such action is in full compliance with all applicable law and regulations, including the Code, as of the date of the proposed rollover and Buyer receives appropriate information with respect to such account balance and loan balances. 10.5. 1031 Exchange. At or prior to Closing, Seller may assign its rights under this Agreement (in whole or in part) to a qualified intermediary (as defined in Treasury regulation section 1.1031(k)-1(g)(4)) or similar entity or arrangement ("Qualified Intermediary"). Upon any such assignment, Seller shall promptly give written notice thereof to Buyer, and Buyer shall cooperate with the reasonable requests of Seller and any Qualified Intermediary in connection therewith. Without limiting the generality of the foregoing, if Seller gives notice of such assignment, Buyer 13 shall (i) promptly provide Seller with written acknowledgment of such notice and (ii) at Closing, pay the Purchase Price (or any portion thereof designated by the Qualified Intermediary) to or on behalf of the Qualified Intermediary (which payment shall, to the extent thereof, satisfy the obligations of Buyer to make such payment hereunder). Seller's assignment to a Qualified Intermediary will not relieve Seller of any of its duties or obligations herein. Except for the obligations of Buyer set forth in this Section, Buyer shall not have any liability or obligation to Seller for the failure of the contemplated exchange to qualify as a like-kind exchange under Section 1031 of the Internal Revenue Code unless such failure is the result of the material breach or default by Buyer under this Agreement. 10.6. Trust. Notwithstanding anything in this Agreement to the contrary, Seller may at it option assign this Agreement (in whole or part) and assign and transfer the Station Assets (in whole or in part) to a trustee to hold and operate pursuant to a trust agreement, provided such trustee assumes Seller's duties and obligations hereunder with respect to the Station Assets held in such trust. ARTICLE 11: CONDITIONS OF CLOSING BY BUYER The obligations of Buyer hereunder are, at its option, subject to satisfaction, at or prior to Closing, of each of the following conditions: 11.1. Representations, Warranties and Covenants. The representations and warranties of Seller made in this Agreement shall be true and correct in all material respects as of the Closing Date except for changes permitted or contemplated by the terms of this Agreement, and the covenants and agreements to be complied with and performed by Seller at or prior to Closing shall have been complied with or performed in all material respects. Buyer shall have received a certificate dated as of the Closing Date from Seller, executed by an authorized officer of Seller to the effect that the conditions set forth in this Section have been satisfied. 11.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if applicable, HSR Clearance, shall have been obtained, and no court or governmental order prohibiting Closing shall be in effect. ARTICLE 12: CONDITIONS OF CLOSING BY SELLER The obligations of Seller hereunder are, at its option, subject to satisfaction, at or prior to Closing, of each of the following conditions: 12.1. Representations, Warranties and Covenants. The representations and warranties of Buyer made in this Agreement shall be true and correct in all material respects as of the Closing Date except for changes permitted or contemplated by the terms of this Agreement, and the covenants and agreements to be complied with and performed by Buyer at or prior to Closing shall have been complied with or performed in all material respects. Seller shall have received a certificate dated as of the Closing Date from Buyer, executed by an authorized officer of Buyer, to the effect that the conditions set forth in this Section have been satisfied. 14 12.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if applicable, HSR Clearance, shall have been obtained, and no court or governmental order prohibiting Closing shall be in effect. 12.3. AMFM Closing. The closing under the AMFM Agreement shall have been consummated. ARTICLE 13: EXPENSES 13.1. Expenses. Each party shall be solely responsible for all costs and expenses incurred by it in connection with the negotiation, preparation and performance of and compliance with the terms of this Agreement, except that (i) all recordation, transfer and documentary taxes, fees and charges, and any excise, sales or use taxes, applicable to the transfer of the Station Assets shall be paid equally by Buyer and Seller, (ii) all FCC filing fees shall be paid equally by Buyer and Seller, and (iii) all HSR Act filing fees and expenses shall be paid equally by Buyer and Seller. ARTICLE 14: DOCUMENTS TO BE DELIVERED AT CLOSING 14.1. Seller's Documents. At Closing, Seller shall deliver or cause to be delivered to Buyer: (i) certified copies of resolutions authorizing its execution, delivery and performance of this Agreement, including the consummation of the transactions contemplated hereby; (ii) the certificate described in Section 11.1; and (iii) such bills of sale, assignments, special warranty deeds, documents of title and other instruments of conveyance, assignment and transfer as may be necessary to convey, transfer and assign the Station Assets to Buyer, free and clear of Liens, except for Permitted Liens. 14.2. Buyer's Documents. At Closing, Buyer shall deliver or cause to be delivered to Seller: (i) the certified copies of resolutions authorizing its execution, delivery and performance of this Agreement, including the consummation of the transactions contemplated hereby; (ii) the certificate described in Section 12.1; and (iii) such documents and instruments of assumption as may be necessary to assume the Assumed Obligations, and the Purchase Price in accordance with Section 3.1 hereof. ARTICLE 15: SURVIVAL; INDEMNIFICATION. 15.1. Survival. The covenants, agreements, representations and warranties in this Agreement shall survive Closing for a period of twelve (12) months from the Closing Date 15 whereupon they shall expire and be of no further force or effect, except those under (i) this Article 15 that relate to Damages (defined below) for which written notice is given by the indemnified party to the indemnifying party prior to the expiration, which shall survive until resolved and (ii) the following provisions (the "Expense Provisions"): Sections 2.1 (Assumed Obligations), 2.2 (Retained Obligations), 3.3 (Adjustments), 3.4 (Allocation), 8.1 (Accounts Receivable), 13.1 (Expenses) and 17.1 (Casualty Loss), and indemnification obligations with respect to such provisions, which shall survive until performed. 15.2. Indemnification. (1) From and after the Closing, Seller shall defend, indemnify and hold harmless Buyer from and against any and all losses, costs, damages, liabilities and expenses, including reasonable attorneys' fees and expenses ("Damages") incurred by Buyer arising out of or resulting from: (i) any breach or default by Seller under this Agreement; (ii) the Retained Obligations; or (iii) the business or operation of the Stations before Closing; provided, however, that after Closing, except for Expenses Provisions (which shall not be subject to such limitations), (i) Seller shall have no liability to Buyer hereunder until, and only to the extent that, Buyer's aggregate Damages exceed $500,000 and (ii) the maximum liability of Seller hereunder shall be $10,000,000. (2) From and after the Closing, Buyer shall defend, indemnify and hold harmless Seller from and against any and all Damages incurred by Seller arising out of or resulting from: (i) any breach or default by Buyer under this Agreement; (ii) the Assumed Obligations; or (iii) the business or operation of the Stations after Closing; provided however, that after Closing, except for the Expense Provisions (which shall not be subject to such limitations), (i) Buyer shall have no liability to Seller hereunder until, and only to the extent that, Seller's aggregate Damages exceed $500,000 and (ii) the maximum liability of Buyer hereunder shall be $10,000,000. 15.3. Procedures. The indemnified party shall give prompt written notice to the indemnifying party of any demand, suit, claim or assertion of liability by third parties or other circumstances that could give rise to an indemnification obligation hereunder against the indemnifying party (a "Claim"), but a failure to give such notice or delaying such notice shall not affect the indemnified party's right to indemnification and the indemnifying party's obligation to indemnify as set forth in this Agreement, except to the extent the indemnifying party's ability to remedy, contest, defend or settle with respect to such Claim is thereby prejudiced. The obligations and liabilities of the parties with respect to any Claim shall be subject to the following additional terms and conditions: (1) The indemnifying party shall have the right to undertake, by counsel or other representatives of its own choosing, the defense or opposition to such Claim. (2) In the event that the indemnifying party shall elect not to undertake such defense or opposition, or, within twenty (20) days after written notice (which shall include sufficient description of background information explaining the basis for such Claim) of any such Claim from the indemnified party, the indemnifying party shall fail to undertake to defend or oppose, the indemnified party (upon further written notice to the indemnifying party) shall have the right to 16 undertake the defense, opposition, compromise or settlement of such Claim, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the indemnifying party (subject to the right of the indemnifying party to assume defense of or opposition to such Claim at any time prior to settlement, compromise or final determination thereof). (3) Anything herein to the contrary notwithstanding: (i) the indemnified party shall have the right, at its own cost and expense, to participate in the defense, opposition, compromise or settlement of the Claim; (ii) the indemnifying party shall not, without the indemnified party's written consent, settle or compromise any Claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such Claim; and (iii) in the event that the indemnifying party undertakes defense of or opposition to any Claim, the indemnified party, by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with the indemnifying party and its counsel or other representatives concerning such Claim and the indemnifying party and the indemnified party and their respective counsel or other representatives shall cooperate in good faith with respect to such Claim. (4) All claims not disputed shall be paid by the indemnifying party within thirty (30) days after receiving notice of the Claim. "Disputed Claims" shall mean claims for Damages by an indemnified party which the indemnifying party objects to in writing within thirty (30) days after receiving notice of the Claim. In the event there is a Disputed Claim with respect to any Damages, the indemnifying party shall be required to pay the indemnified party the amount of such Damages for which the indemnifying party has, pursuant to a final determination, been found liable within ten (10) days after there is a final determination with respect to such Disputed Claim. A final determination of a Disputed Claim shall be (i) a judgment of any court determining the validity of a Disputed Claim, if no appeal is pending from such judgment and if the time to appeal therefrom has elapsed; (ii) an award of any arbitration determining the validity of such disputed claim, if there is not pending any motion to set aside such award and if the time within which to move to set aside such award has elapsed; (iii) a written termination of the dispute with respect to such claim signed by the parties thereto or their attorneys; (iv) a written acknowledgment of the indemnifying party that it no longer disputes the validity of such claim; or (v) such other evidence of final determination of a disputed claim as shall be acceptable to the parties. No undertaking of defense or opposition to a Claim shall be construed as an acknowledgment by such party that it is liable to the party claiming indemnification with respect to the Claim at issue or other similar Claims. ARTICLE 16: TERMINATION 16.1. Termination. This Agreement may be terminated at any time prior to Closing as follows: (1) by mutual written consent of Buyer and Seller; (2) by written notice of Buyer to Seller if Seller (i) does not satisfy the conditions or perform the obligations to be satisfied or performed by it on the Closing Date; or (ii) otherwise 17 breaches in any material respect any of its representations or warranties or defaults in any material respect in the performance of any of its covenants or agreements herein contained and such breach or default is not cured within the Cure Period (defined below); (3) by written notice of Seller to Buyer if Buyer (i) does not satisfy the conditions or perform the obligations to be satisfied or performed by it on the Closing Date; or (ii) otherwise breaches in any material respect any of its representations or warranties or defaults in any material respect in the performance of any of its covenants or agreements herein contained and such breach or default is not cured within the Cure Period (defined below); (4) by written notice of Buyer to Seller, or by Seller to Buyer, if the FCC denies the FCC Application; (5) by written notice of Seller to Buyer on or after the closing date of the AMFM Agreement, provided that DOJ Consent, FCC Consent or HSR Clearance have not been received; or (6) by written notice of Seller to Buyer if the AMFM Agreement is terminated or expires. The term "Cure Period" as used herein means a period commencing the date Buyer or Seller receives from the other written notice of breach or default hereunder and continuing until the earlier of (i) thirty (30) days thereafter or (ii) the Closing Date; provided, however, that if the breach or default cannot reasonably be cured within such period but can be cured before the Closing Date, and if diligent efforts to cure promptly commence, then the Cure Period shall continue as long as such diligent efforts to cure continue, but not beyond the Closing Date. Except as set forth below, the termination of this Agreement shall not relieve any party of any liability for breach or default under this Agreement prior to the date of termination. Notwithstanding anything contained herein to the contrary, Section 13.1 shall survive any termination of this Agreement. 16.2. Remedies. The parties recognize that if either party refuses to consummate the Closing pursuant to the provisions of this Agreement or either party otherwise breaches or defaults such that the Closing has not occurred ("Breaching Party"), monetary damages alone will not be adequate to compensate the non-breaching party ("Non-Breaching Party") for its injury. Such Non-Breaching Party shall therefore be entitled to obtain specific performance of the terms of this Agreement in lieu of, and not in addition to, any other remedies, including but not limited to monetary damages, that may be available to it; provided however, that Seller may elect to recover liquidated damages in lieu of obtaining specific performance. If any action is brought by the Non-Breaching Party to enforce this Agreement, the Breaching Party shall waive the defense that there is an adequate remedy at law. In the event of a default by the Breaching Party which results in the filing of a lawsuit for damages, specific performance, or other remedy, the Non-Breaching Party shall be entitled to reimbursement by the Breaching Party of reasonable legal fees and expenses incurred by the Non-Breaching Party, provided that the Non-Breaching Party is successful in such lawsuit. 18 16.3. Liquidated Damages. If Seller terminates this Agreement due to Buyer's failure to consummate the Closing on the Closing Date or if this Agreement is otherwise terminated by Seller pursuant to Section 16.1(c), then Buyer shall pay Seller as liquidated damages an amount equal to 25% of the Purchase Price. It is understood and agreed that such liquidated damages amount represents Buyer's and Seller's reasonable estimate of actual damages and does not constitute a penalty. ARTICLE 17: MISCELLANEOUS PROVISIONS 17.1. Casualty Loss. In the event any loss or damage of the Station Assets exists on the Closing Date, Buyer and Seller shall consummate the Closing and Seller shall assign to Buyer the proceeds of any insurance payable to Seller on account of such damage or loss. 17.2. Further Assurances. After the Closing, Seller shall from time to time, at the request of and without further cost or expense to Buyer, execute and deliver such other instruments of conveyance and transfer and take such other actions as may reasonably be requested in order to more effectively consummate and implement the transactions contemplated hereby to vest in Buyer good title to the Station Assets, and Buyer shall from time to time, at the request of and without further cost or expense to Seller, execute and deliver such other instruments and take such other actions as may reasonably be requested in order more effectively to relieve Seller of any obligations being assumed by Buyer hereunder. 17.3. Assignment. Except as set forth in Sections 10.5 (1031 Exchange) and 10.6 (Trust), neither party may assign this Agreement without the prior written consent of the other party hereto; provided, however, that either party may assign this Agreement to one or more direct or indirect subsidiaries so long as (i) the assigning party remains liable hereunder, and (ii) such assignment will not delay any consent required to be obtained hereunder, including but not limited to HSR Clearance, DOJ Consent and FCC Consent, or delay the Closing in any respect. With respect to any permitted assignment, the parties shall take all such actions as are reasonably necessary to effectuate such assignment, including but not limited to cooperating in any appropriate filings with the FCC or other governmental authorities. All covenants, agreements, statements, representations, warranties and indemnities in this Agreement by and on behalf of any of the parties hereto shall bind and inure to the benefit of their respective successors and permitted assigns of the parties hereto. 17.4. Amendments. No amendment, waiver of compliance with any provision or condition hereof or consent pursuant to this Agreement shall be effective unless evidenced by an instrument in writing signed by the party against whom enforcement of any waiver, amendment, change, extension or discharge is sought. 17.5. Headings. The headings set forth in this Agreement are for convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. 17.6. Governing Law. The construction and performance of this Agreement shall be governed by the laws of the State of New York without giving effect to the choice of law provisions thereof. 19 17.7. Notices. Any notice, demand or request required or permitted to be given under the provisions of this Agreement shall be in writing, including by facsimile, and shall be deemed to have been received on the date of personal delivery, on the third day after deposit in the U.S. mail if mailed by registered or certified mail, postage prepaid and return receipt requested, on the day after delivery to a nationally recognized overnight courier service if sent by an overnight delivery service for next morning delivery or when delivered by facsimile transmission, and shall be addressed as follows (or to such other address as any party may request by written notice): if to Seller: c/o Clear Channel Broadcasting, Inc. 200 Concord Plaza, Suite 600 San Antonio, Texas 78216 Attention: President Facsimile: (210) 822-2299 with a copy (which shall not constitute notice) to: Graydon, Head & Ritchey 1900 Fifth Third Center 511 Walnut Street Cincinnati, Ohio 45202 Attention: John J. Kropp, Esq. Facsimile: (513) 651-3836 if to Buyer: Emmis Communications Corporation One Emmis Plaza 40 Monument Circle, Suite 700 Indianapolis, Indiana 46204 Attention: Jeffrey H. Smulyan Facsimile: (317) 631-3750 with a copy (which shall not constitute notice) to: Emmis Communications Corporation One Emmis Plaza 40 Monument Circle, Suite 700 Indianapolis, Indiana 46204 Attention: J. Scott Enright Facsimile: (317) 684-5583 17.8. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument. 17.9. No Third Party Beneficiaries. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity other than the parties hereto and their successors or permitted assigns, any rights or remedies under or by reason of this Agreement. 17.10. Severability. The parties agree that if one or more provisions contained in this Agreement shall be deemed or held to be invalid, illegal or unenforceable in any respect under any applicable law, this Agreement shall be construed with the invalid, illegal or unenforceable provision deleted, and the validity, legality and enforceability of the remaining provisions contained herein shall not be affected or impaired thereby. 17.11. Entire Agreement. This Agreement embodies the entire agreement and understanding of the parties hereto and supersedes any and all prior agreements, arrangements and understandings relating to the matters provided for herein. This Agreement does not supersede any confidentiality agreement relating to the Stations. [SIGNATURE PAGE FOLLOWS] 20 SIGNATURE PAGE(S) TO ASSET PURCHASE AGREEMENT IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. SELLER: AMFM HOUSTON, INC. By: ------------------------------------------------- William S. Banowsky Jr., Executive Vice President AMFM OHIO, INC. By: ------------------------------------------------- William S. Banowsky Jr., Executive Vice President AMFM RADIO LICENSES, LLC By: ------------------------------------------------- William S. Banowsky, Jr., Executive Vice President BUYER: EMMIS COMMUNICATIONS CORPORATION By: -------------------------------------------------- Jeffrey H. Smulyan, CEO 21 Schedules 1.1(a) - FCC Licenses 1.1(b) - Tangible Personal Property 1.1(c) - Station Contracts 1.1(d) - Intangible Property 1.1(f) - Real Property 1.2(h) - Excluded Assets EX-23.1 7 c57890ex23-1.txt CONSENT OF MCGLADRY & PULLEN LLP 1 EXHIBIT 23.1 [MCGLADREY & PULLEN, LLP LETTERHEAD] [RSM LOGO] Board of Directors Emmis Communications Corporation Indianapolis, Indiana We hereby consent to the incorporation of our report, dated August 14, 2000, relating to the combined financial statements of Lee Enterprises Certain Broadcasting Enterprises (Albuquerque, NM; Charleston-Huntington, WV; Honolulu, HI; Omaha, NE; Portland, OR; Topeka, KS; Tucson, AZ; Wichita, KS) in this Form 8-K in the previously filed Registration Statements of Emmis Communications Corporation on Form S-8 (No. 333-42878, 333-14657, and 33-83890). /s/ McGladrey & Pullen, LLP Davenport, Iowa October 13, 2000 EX-23.2 8 c57890ex23-2.txt CONSENT OF ARTHUR ANDERSEN LLP 1 Exhibit 23.2 [ARTHUR ANDERSEN LOGO] CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 8-K into the Company's previously filed Registration Statements File No. 333-42878, 333-14657, and 33-83890. /s/ ARTHUR ANDERSEN LLP Baltimore, Maryland October 13, 2000 EX-99.1 9 c57890ex99-1.txt PRESS RELEASE DATED OCTOBER 2, 2000 1 EXHIBIT 99.1 PRESS RELEASE LEE COMPLETES SALE OF TV STATIONS TO EMMIS DAVENPORT, Iowa--(BUSINESS WIRE)--Oct. 2, 2000--Lee Enterprises, Incorporated, (NYSE:LEE - news) has completed the sale of eight network-affiliated and seven satellite stations to Emmis Communications Corporation (Nasdaq:EMMS - news). The closing, effective Oct. 1, was announced by Richard D. Gottlieb, chairman and chief executive officer of Lee Enterprises, and Jeffrey H. Smulyan, chairman and chief executive officer of Emmis Communications. They had announced the agreement in May. The final adjusted purchase price was $559.5 million plus working capital. Emmis Communications, which is based in Indianapolis, Ind., also owns seven other television stations in addition to 24 radio stations that serve the country's largest markets. In addition, Emmis owns two radio networks, three international radio stations, several large regional and specialty magazines, and related businesses in sales and publishing. "We are excited to have such great properties and people become part of the Emmis family," Smulyan said. "This is a challenging, yet exciting time in the television business and we are pleased to see our company grow to the next level." Gottlieb said the sale will allow Lee Enterprises to focus on continuing to expand in publishing, online and information services. Lee owns 23 daily newspapers and half interest in five others. Lee also owns more than 100 weekly newspapers, shoppers and classified and specialty publications, along with associated Internet sites. The Lee television stations purchased by Emmis Communications are: - - KOIN-6 (CBS), Portland, Oregon, and MIRA Mobile Television video production services. - - KRQE-13 (CBS), Albuquerque, New Mexico; and satellite stations KREZ-6 (CBS), Durango, Colorado / Farmington, New Mexico; and KBIM-10 (CBS), Roswell, New Mexico. - - WSAZ-3 (NBC), Huntington / Charleston, West Virginia. - - KSNW-3 (NBC), Wichita, Kansas; and satellite stations KSNG-11 (NBC), Garden City, Kansas; KSNC-2 (NBC), Great Bend, Kansas; and KSNK-8 (NBC), Oberlin, Kansas. - - KGMB-9 (CBS), Honolulu, Hawaii; and satellite stations KGMD-9 (CBS), Hilo, Hawaii; and KGMV-3 (CBS), Wailuku, Maui, Hawaii. - - KGUN-9 (ABC), Tucson, Arizona. - - KMTV-3 (CBS), Omaha, Nebraska. - - KSNT-27 (NBC), Topeka, Kansas. 2 The Emmis purchase does not include Lee's remaining television station, KMAZ-48 (Telemundo), El Paso, Texas, which will be sold separately. A copy of this news release and more information about Lee Enterprises is available at www.lee.net. EX-99.2 10 c57890ex99-2.txt PRESS RELEASE DATED OCTOBER 6, 2000 1 EXHIBIT 99.2 PRESS RELEASE SOURCE: EMMIS Communications Corporation EMMIS COMPLETES ACQUISITION OF SINCLAIR AND BONNEVILLE RADIO PROPERTIES DEALS GIVE EMMIS 2 RADIO STATIONS IN LA; 5 RADIO STATIONS IN ST. LOUIS; 24 TOTAL RADIO STATIONS INDIANAPOLIS, Oct. 6 /PRNewswire/ -- EMMIS Communications Corporation (Nasdaq: EMMS - news) today announced that it has completed its previously-announced acquisition from Sinclair Broadcast Group Inc. (Nasdaq: SBGI - news) of six St. Louis radio stations for $220 million. Also announced today was the completion of EMMIS' swap with Bonneville International Corporation of four EMMIS' St. Louis properties -- WKKX-FM and newly-acquired-from-Sinclair WIL-FM, WRTH-AM, WVRV-FM -- in exchange for KZLA-FM in the nation's #2 market, Los Angeles. In Los Angeles, EMMIS will now own KPWR-FM (Power 106) and KZLA-FM (Country 93.9). In St. Louis, EMMIS will now own KSHE-FM (KSHE95), KPNT-FM (105.7 The Point), KXOK-FM (The Rock), KIHT-FM (K-Hits 96) and WXTM-FM (104.1 THE MALL). EMMIS Communications is an Indianapolis-based diversified media firm with radio broadcasting, television broadcasting and magazine publishing operations. EMMIS' 20 FM and 4 AM radio stations serve the nation's largest markets of New York, Los Angeles and Chicago as well as Denver, Phoenix, St. Louis, Indianapolis and Terre Haute, IN. In addition, EMMIS owns two radio networks, three international radio stations, 15 television stations, award-winning regional and specialty magazines and ancillary businesses in broadcast sales and publishing. SOURCE: EMMIS Communications Corporation -----END PRIVACY-ENHANCED MESSAGE-----