EXHIBIT 10.2
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BONNEVILLE INTERNATIONAL CORPORATION
BONNEVILLE HOLDING COMPANY
May 5, 2006
Emmis Radio, LLC
Emmis Radio License, LLC
One Emmis Plaza
00 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Re: KKFR-FM, Phoenix, Arizona ("Station")
Dear Sirs:
The purpose of this letter agreement is to set forth, on behalf of
Bonneville Holding Company ("BHC") and Bonneville International Corporation
("BIC" and together with BHC, "Bonneville"), the terms under which Bonneville
will purchase substantially all the assets of the Station (the "Sale Assets")
from Emmis Radio, LLC ("Emmis Radio") and Emmis Radio License, LLC ("Emmis
License" and together with Emmis Radio, "Emmis") for a purchase price of
$77,500,000 (the "Transaction").
1. DEFINITIVE AGREEMENT
Following execution of this letter agreement, Bonneville and Emmis
will proceed expeditiously and in good faith to complete and execute, ideally
no later than 21 days after the later of the filing of the license assignment
applications with the FCC and Bonneville's completion of reasonable due
diligence, an Asset Purchase Agreement regarding the sale and purchase of the
Sale Assets (the "Asset Purchase Agreement").
2. REGULATORY APPROVALS
Bonneville and Emmis will each proceed expeditiously to prepare and
file the appropriate license assignment applications with the Federal
Communications Commission ("FCC") on or before May 18, 2006, and the necessary
notification under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976
("HSR") with the Federal Trade Commission on or before May 31, 2006. Such
filings will include copies of this fully executed letter agreement. The
regulatory fees for the HSR and FCC filings will be shared equally between
Bonneville and Emmis.
3. ASSET PURCHASE AGREEMENT
(a) GENERAL TERMS. Pursuant to the terms of the definitive Asset
Purchase Agreement, Bonneville will (i) acquire the Sale Assets, which will
consist of substantially all the
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assets (including, but not limited to, contractual and other rights) used in
the operation of the Station, and (ii) assume certain liabilities arising from
the operation of the Station. The FCC licenses associated with the Station
will be transferred by Emmis License to BHC.
The Sale Assets will be transferred free and clear of all liens,
claims and encumbrances of every kind (other than customary permitted
encumbrances). The terms and conditions of the Asset Purchase Agreement,
including but not limited to representations and warranties and trade and
barter limitations (adjusted pro rata), will be substantially similar to those
relating to the Emmis Assets under and as defined in the Asset Exchange
Agreement between Bonneville and Emmis, dated January 14, 2005 (the "Asset
Exchange Agreement"), except as otherwise negotiated to address the
differences in this Transaction from the transaction under the Asset Exchange
Agreement and subject to the results of Bonneville's due diligence under
Section 5.
(b) SALE ASSETS. Subject to SECTION 4, the Sale Assets will
include all of the assets used or held for use in the operation of the
Station, including without limitation:
(i) all of the licenses, permits and other
authorizations issued for the Station by the FCC and other
authorities (the "Station Permits");
(ii) all transmitter equipment and transmission lines,
antenna and other broadcast equipment, rolling stock, materials and
supplies, inventories, spare parts, office furniture and equipment,
computer hardware and software and other tangible personal property
and the Station-related information contained thereon (including such
information on any personal computers that are excluded assets
hereunder), including all promotional, sales, marketing and
format-specific programming materials, supplies, inventories, and
property used or held for use in the operation of the Station;
(iii) all contracts, leases, agreements, commitments and
other arrangements principally used or held for use in the operation
of the Station that are either (A) identified in the Asset Purchase
Agreement or (B) subsequently entered into, and identified to
Bonneville, prior to closing in compliance with the Asset Purchase
Agreement, including, without limitation, antenna leases and tower
site occupancy and use rights (the "Station Contracts");
(iv) all rights in and to trademarks, trade names, and
service marks, including registrations and applications for
registration of any of them, privileges, trade secrets, call signs
and other similar intangible property and interests principally
relating to the Station;
(v) all intellectual property, content and other rights
principally used in the operation of the Station's Internet and
on-line activities, including, without limitation, station-related
e-mail addresses, websites, Internet addresses and domain names; and
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(vi) all books, records, accounts, files, logs, plans,
and drawings and other information principally pertaining to or used
or held for use in the operation of the Station.
(c) EXCLUDED ASSETS. The Sale Assets will not include (i) cash,
cash equivalents, accounts receivable, securities, investments, deposits,
prepayments or refunds of taxes for periods prior to the closing of the Asset
Purchase Agreement, (ii) the Station's studio and office lease, (iii) employee
benefit plans, (iv) insurance contracts, proceeds or claims, (v) certain
financial, accounting and management information software and related
contractual rights, (vi) the right to use the Emmis logo, the "Emmis" xxxx or
any xxxx containing the word "Emmis", (vii) the Station's traffic and
automation systems, including the related computer hardware and software;
(viii) all personal computers except those principally used by Station
employees hired by Bonneville, (ix) all Microsoft software licenses, (x) any
tangible personal property not located in the Phoenix, Arizona metropolitan
area, and (xi) all rights, claims and records relating to such excluded
assets.
(d) ASSUMED LIABILITIES. Subject to the provisions of SECTION 5,
BIC will assume all liabilities under the Station Contracts and Station
Permits (other than the FCC licenses), to the extent such liabilities arise
during and relate to any period following the closing of the Asset Purchase
Agreement. BHC will assume the liabilities under the FCC licenses assigned and
transferred to BHC to the extent such liabilities arise during and relate to
any period after the closing of the Asset Purchase Agreement.
(e) EXCLUDED LIABILITIES. Subject to SECTION 4, Bonneville will
not assume any of Emmis' obligations or liabilities relating to the Station
except those expressly assumed under the Asset Purchase Agreement. Without
limiting the foregoing and subject to SECTION 4, Bonneville will not assume
any liabilities relating to or arising from or under (i) any Station
activities prior to the closing of the Asset Purchase Agreement, (ii) the
Station's studio and office lease, (iii) any advertising, barter or other
agreements with or related to casinos, casino operations or lotteries, (iv)
the termination of any employees or other personal service providers, or (v)
the breach of any contract by reason of its assignment by Emmis to BIC without
a required consent, or any other breach or default by Emmis under any contract
prior to the closing of the Asset Purchase Agreement.
(f) INDEMNIFICATION. The Asset Purchase Agreement will contain
indemnification covenants substantially similar in scope and substance as the
indemnification covenants contained in the Asset Exchange Agreement for Emmis
as a transferor (I.E., seller) and for Bonneville as a transferee (I.E.,
buyer); provided, however, that such indemnification will apply once the
aggregate amount of indemnity claims exceeds $200,000, and then only to the
extent such claims exceed $100,000, and subject to a cap of $10,000,000,
except that claims relating to: (i) environmental conditions, (ii) proration
adjustments of revenue and expenses, (iii) liabilities not assumed, (iv)
noncompliance with applicable bulk sales requirements, (v) taxes owed by the
other party or constituting a lien on the Sale Assets, or (vi) liabilities
expressly assumed, will not
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be counted for purposes of such thresholds or cap. Claims for breach of any
representation or warranty must be brought within 18 months following closing
of the Asset Purchase Agreement.
(g) PRORATIONS. As of 12:01 a.m. local time on the closing date
of the Asset Purchase Agreement, all operating income (as defined by generally
accepted accounting principles ("GAAP") but excluding depreciation of
property, plant and equipment, amortization of definite-lived intangibles, and
impairment charges, if any, relating to goodwill and FCC licenses) relating to
the Station will be prorated between BIC and Emmis in accordance with GAAP.
Such prorations will be based upon the principle that the seller is entitled
to all operating revenue earned and is responsible for operating expenses
accruing in connection with the Station's operations, assigned contracts and
transferred employees prior to the closing date; and the buyer is entitled to
such operating revenue earned, and is responsible for such operating expenses
(but excluding depreciation of property, plant and equipment, amortization of
definite-lived intangibles, impairment charges, if any, relating to goodwill
and FCC licenses, and obligations related to transferred employees), accruing,
on and after the closing date. The parties will identify such prorations in
accordance with the procedure and within the time period, and pay to the
appropriate party any proration amounts due and owing on or before the date,
provided in the Asset Purchase Agreement. Such prorations will include,
without limitation, (i) any security deposits made under real property leases
included in the Sale Assets, and (ii) any FCC annual regulatory fees relating
to the Station.
(h) EMPLOYEES AND EMPLOYMENT BENEFITS.
(i) Except for those four employees designated by Emmis
as retained employees in the Asset Purchase Agreement, BIC will be
entitled, but not obligated, to offer employment to any employees (or
personal service providers) of the Station effective as of the
closing date, and as reasonably requested by BIC, Emmis Radio will
cooperate with BIC in its efforts to hire any such employees. Those
employees of the Station who accept such offer are referred to in
this letter agreement as the "transferred employees."
(ii) Emmis Radio will be responsible for severance,
COBRA and other obligations (including WARN notice, if applicable)
upon termination of Station employees (or other personal service
providers), and indemnify Bonneville against any claims related
thereto. The parties agree to cooperate in good faith to avoid
duplication of employee payments and benefits and to coordinate the
most efficient transfer of such employees.
(iii) No provisions of this letter agreement will create
any third party beneficiary rights of any employee or former employee
of Emmis Radio (including any beneficiary or dependent of any such
employee) in respect of continued employment (or resumed employment)
with BIC or Emmis Radio or in respect of any other matter.
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(i) TERMINATION. In addition to customary termination
provisions, the Asset Purchase Agreement will terminate if the Transaction
does not close on or before one year after the execution date of the Asset
Purchase Agreement.
4. RESALE OF FORMAT
(a) Emmis acknowledges that Bonneville may not wish to continue
operating the Station after closing in its current on-air format (the "Current
Format") Accordingly, Emmis agrees to cooperate as reasonably requested by
Bonneville in facilitating Bonneville's resale of certain of the Sale Assets
selected by Bonneville related to the Current Format (such as the Station's
call letters, slogans, programming and other intellectual property related to
the Current Format, the Station's music library related to the Current Format,
and the advertising, content, programming and other Station contracts and
relationships related to the Current Format, but excluding any FCC licenses),
provided that (i) closing of the resale occurs on or after, but not prior to,
closing of the sale of the Sale Assets to Bonneville, (ii) the resale does not
delay or interfere with closing of the Transaction, and (iii) Emmis will not
be required to enter into any agreement with, or consent to Bonneville's
assignment of any of its rights under the Asset Purchase Agreement to, the
third-party purchaser. Bonneville's ability to resell any of the Sale Assets
to a third party will not be a condition to its obligation to close the
Transaction under the Asset Purchase Agreement.
(b) Emmis agrees that the Asset Purchase Agreement will permit
Bonneville (without further consideration) to elect, by giving written notice
to Emmis no later than three business days prior to closing of the
Transaction, that the Station's studio and office lease be included as a Sale
Asset and assumed by Bonneville as a Station Contract as provided in SECTION
3(D).
5. DUE DILIGENCE
(a) Immediately following the public announcement of the
Transaction, Emmis will provide Bonneville with full access to all financial,
operating, legal and other reasonably requested information and documents
relating to the Station and its assets and liabilities, as well as reasonable
access to the management and personnel of the Station. Bonneville's
satisfaction with its due diligence investigation will not be a condition to
closing of the Asset Purchase Agreement. Instead, to the extent a dispute
arises regarding the treatment of any asset or liability of the Station, the
following resolution mechanism will apply during the period prior to the
execution of the Asset Purchase Agreement: (i) such dispute will first be
referred for resolution to Xxxxx Xxxx (Bonneville's representative) and Xxxxx
Xxxxxxx (Emmis' representative); (ii) if the foregoing representatives are
unable to resolve the dispute within 10 business days, the dispute will be
referred for resolution to the parties' respective Chief Executive Officers;
and (iii) if the parties' Chief Executive Officers are unable to resolve the
dispute within 20 business days, the dispute will be settled by arbitration
administered by the American Arbitration Association ("AAA"). The venue of the
arbitration will be in Chicago, Illinois; there will be three arbitrators
selected by the AAA; the arbitration will be conducted under the Commercial
Arbitration Rules of the AAA; and the decision or award of the arbitrators
will be final and binding upon the
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parties and may be enforced in any court having jurisdiction over the party
against whom enforcement is sought.
(b) Emmis acknowledges that Bonneville has received limited due
diligence materials with respect to this Transaction. Upon the reasonable
request of Bonneville, Emmis will cooperate with Bonneville with respect to
any new facts or information that Bonneville receives and consider with
Bonneville appropriate treatment of such new information in the Asset Purchase
Agreement. In particular, Emmis agrees to cooperate with Bonneville in
identifying, minimizing or reducing, to the extent possible, Bonneville's
obligations under those Station Contracts which are unreasonably burdensome or
otherwise beyond the scope of those agreements typically entered into in the
ordinary course of business.
6. EXCLUSIVITY
In consideration of the effort and expense to be incurred by
Bonneville between the date of this letter agreement and the date of the
execution by the parties of the Asset Purchase Agreement, Emmis agrees that,
prior to July 1, 2006, Emmis will not, directly or indirectly, solicit,
encourage or consider alternative offers for the sale of all or part of the
Sale Assets. During this period, Emmis agrees to use its good faith efforts to
disclose promptly to Bonneville any inquiries that it receives for the
Station.
7. NON-DISCLOSURE
Each party acknowledges that it will be bound by the provisions of
the Confidentiality Agreement (the "Confidentiality Agreement") among the
parties dated as of April 25, 2006, and that the Confidentiality Agreement is
intended to protect the information exchanged by the parties pursuant to this
letter agreement and continued negotiation of the Transaction. The parties
anticipate the Transaction will be announced in separate press releases
approved by both BIC and Emmis. Such press releases will not be distributed,
and no other disclosure of the Transaction to non-management Station employees
will made, prior to May 8, 2006. Except as required by law or otherwise agreed
to by Bonneville and Emmis, the parties will not make any further public
disclosures regarding this letter agreement or the Transaction that contains
information other than that included in the press releases. Emmis agrees to
cooperate as reasonably requested by Bonneville in managing Emmis' disclosures
to the Station's management and employees in an effort to facilitate retention
of Station employees and on-air talent whom Bonneville desires to hire or
retain effective as of closing of the Asset Purchase Agreement.
8. GENERAL PROVISIONS
(a) TERMINATION. This letter agreement will terminate upon the
execution of the Asset Purchase Agreement. It may also be earlier terminated
by (i) either Emmis or Bonneville if the Asset Purchase Agreement is not
executed on or before July 1, 2006; (ii) by Bonneville if there is a material
adverse change in the business or operations of the Station after the date of
this letter
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agreement; or (iii) by Bonneville upon written notice if for any reason in
connection with this letter agreement, any definitive agreement, or
consummation of the transaction contemplated by either such agreement,
Bonneville would be required to disclose financial information regarding the
Corporation of the President of The Church of Xxxxx Xxxxxx of Latter-Day
Saints or any subsidiary or affiliate thereof (other than Bonneville) to any
third party. Upon termination, all rights and obligations of the parties will
terminate without any liability of any party to any other party (except for
any liability of any party then in breach), provided, however, the
non-solicitation and non-disclosure obligations between the parties and this
SECTION 7 will survive such termination.
(b) ENTIRE AGREEMENT. This letter agreement and the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter of such documents. Any prior written or
oral negotiations, correspondence, or understandings relating to such subject
matter are superseded by this letter agreement and the Confidentiality
Agreement and will have no force or effect. Except as otherwise provided in
this letter agreement, its terms may be amended or modified only by a writing
executed by all of the parties.
(c) EXPENSES. Except as otherwise provided in this letter
agreement, the parties will each pay their own expenses and fees incurred in
connection with Transaction, including all legal and accounting fees and
expenses, whether or not the Transaction is consummated.
(d) ATTORNEYS' FEES. In the event any legal proceedings are
brought by a party to resolve a dispute under this letter agreement, the party
prevailing in such legal proceedings will be entitled to recover its
reasonable attorneys' fees and costs in such action.
(e) GOVERNING LAW; BINDING EFFECT. This letter agreement will be
governed by the substantive laws (and not the laws of conflict) of the State
of Arizona. This letter agreement may be executed in any number of
counterparts, and by any party on separate counterparts, each of which will
constitute an original, and all of which together will constitute one and the
same document. An executed counterpart of this letter agreement faxed, or
scanned and emailed, by a party to another party will constitute delivery by
the sending party to the recipient party, may be treated by the recipient
party as an original, and will be admissible as evidence of such executed and
delivered counterpart.
(f) REFERENCES. All references in this letter agreement to
sections are to sections contained in this letter agreement unless a different
document is expressly specified.
[signature page follows]
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We believe this letter agreement sets forth an appropriate basis for
proceeding forward. If you concur, please execute and return it to Bonneville.
Very truly yours,
BONNEVILLE INTERNATIONAL CORPORATION
By:
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BONNEVILLE HOLDING COMPANY
By:
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ACCEPTED AND AGREED TO:
EMMIS RADIO, LLC
EMMIS RADIO LICENSE, LLC
By Emmis Operating Company, Manager
By:
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