EXHIBIT 10.1
Bonneville International Corporation
Bonneville Holding Company
55 North 300 West
Salt Lake City, Utah 84180
October 4, 2004
Emmis Radio, LLC
One Emmis Plaza
40 Monument Circle, Suite 700
Indianapolis, IN 46204
Re: Bonneville/Emmis
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/or
their assigns (collectively, "Bonneville"), the terms under which Bonneville
will enter into a multiple-stage transaction (the "Transaction") with Emmis
Radio, LLC ("Emmis Radio") and Emmis Radio License, LLC ("Emmis License") and/or
their assigns (collectively, "Emmis") for the primary purpose of (a) Emmis'
transferring to Bonneville substantially all of the assets and certain of the
liabilities associated with the operations of Phoenix, Arizona radio stations
KTAR (AM), KMVP (AM) and KKLT (FM) (the "Emmis Stations"), in exchange for
(b) Bonneville's transferring to Emmis certain of the assets and liabilities
associated with the operation of Chicago, Illinois radio station WLUP-FM (the
"Bonneville Station") and paying Emmis $66,000,000 in cash upon the consummation
of the Transaction. The Emmis Stations and the Bonneville Station are sometimes
referred to collectively as the "Stations."
1. Definitive Agreements
Following execution of this letter agreement, Bonneville and Emmis will
proceed expeditiously and in good faith to complete and execute the following
definitive agreements evidencing the Transaction: (a) a Time Brokerage Agreement
under which Emmis Radio will, among other things, program the Bonneville
Station, assume certain obligations of BIC related thereto, and hire certain
employees of the Bonneville Station, as described in Section 3 below (the
"Bonneville Station TBA"); and (b) another Time Brokerage Agreement under which
BIC will, among other things, program the Emmis Stations, assume certain
obligations of Emmis related thereto, and hire certain employees of the Emmis
Stations, as described in Section 3 below (the "Emmis Stations TBA" and, with
the Bonneville Station TBA, the "TBAs"). In addition, Bonneville and Emmis will
proceed expeditiously and in good faith to complete and execute, ideally no
later than 21 days after filing of the license assignment applications with the
FCC, an Asset Exchange Agreement under which Emmis and Bonneville will, among
other
things, exchange ownership of those assets and certain liabilities associated
with the Stations not previously transferred under the TBAs, and enter into
certain related arrangements, as described in Section 4 below (the "Asset
Exchange Agreement").
2. Regulatory Approvals
On October 5, 2004, Bonneville and Emmis will each file the necessary
pre-merger notification under the Hart-Scott-Rodino Antitrust Improvement Act of
1976 ("HSR") with the Federal Trade Commission and the appropriate license
assignment applications with the Federal Communications Commission ("FCC")
(provided there is no FCC application filing freeze at that time, in which case
FCC applications will be filed as soon as possible after the freeze is lifted).
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. Time Brokerage Agreements
(a) Effective Date and Termination. The TBAs will be completed and executed
as soon as practicable following the date of this letter agreement. The TBAs
will become effective at 12:01 A.M. local time for the applicable Station on
December 1, 2004, assuming the HSR waiting period for the Transaction (and any
extensions thereof) has expired or otherwise been terminated. If such HSR
waiting period expiration or termination has not occurred by such date, the TBAs
will become effective five (5) business days after such expiration or
termination or on such earlier or later date as the parties may agree. The TBAs
will both terminate upon the closing or termination of the Asset Exchange
Agreement, absent earlier termination as provided therein.
(b) Broadcast Time. Pursuant to the terms of the TBAs, Emmis Radio will (with
respect to the Bonneville Station) and BIC will (with respect to the Emmis
Stations), among other things: (i) purchase substantially all of the broadcast
time on the other's Station(s); (ii) provide programming for such broadcast
time; (iii) assume responsibility for and retain all revenues for the sale of
advertising time for the other's Station(s); and (iv) assume advertising,
employment, union and other operating contracts, and certain related obligations
relating to the other's Station(s). Except as described in this letter
agreement, the terms and conditions of the TBAs will be substantially the same
as those of that certain Time Brokerage Agreement between Bonneville and Emmis
106.5 FM Broadcasting Corporation of St. Louis, dated July 31, 2001.
(c) Employees. Upon the effective date of the Bonneville Station TBA, Emmis
Radio will offer employment to each employee of the Bonneville Station
identified in a side letter between Emmis and BIC executed concurrently with
this letter agreement (the "Employee Side Letter") at a comparable salary,
position and place as held by such employee immediately prior to the effective
date of the TBA (or in accordance with applicable, union, employment and/or
severance contracts and obligations assumed by Emmis Radio), and with such
benefits as are offered to other comparable Emmis Radio employees. Upon the
effective date of the Emmis Stations TBA, BIC will offer employment to the
employees of the Emmis Stations identified in
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the Employee Side Letter at a comparable salary, position and place as held by
such employee immediately prior to the effective date of the TBA (or in
accordance with applicable, union, employment and/or severance contracts and
obligations assumed by BIC), and with such benefits as are offered to other
comparable BIC employees.
The collective bargaining agreement, dated December 1, 2000, between BIC and
the American Federation of Television and Radio Artists ("AFTRA") covering
employees at the Bonneville Station has expired, and is currently being
renegotiated. Upon the effective date of the Bonneville Station TBA, Emmis Radio
will assume the bargaining obligation and, except as varied in terms of health
and welfare benefits in its offers of employment, will assume the statutory
obligation to maintain the status quo in terms and conditions of employment,
including that of severance pay. For the purposes of severance pay, Emmis Radio
will use the service credit currently used by the Bonneville Station. If a
collective bargaining agreement is reached between BIC and AFTRA for the
Bonneville Station prior to the effective date of the Bonneville Station TBA,
Emmis Radio will assume such collective bargaining agreement, provided that
Emmis Radio shall have previously furnished its written approval of such
agreement to Bonneville, which approval will not be unreasonably withheld,
conditioned or delayed.
(d) TBA Payments. For the rights granted to Emmis under the Bonneville
Station TBA, Emmis will pay Bonneville the amounts at the times set forth in a
side letter between Emmis and Bonneville executed concurrently with this letter
(the "TBA Payment Side Letter"). For the rights granted to Bonneville under the
Emmis Stations TBA, Bonneville will pay Emmis the amounts at the times set forth
the TBA Payment Side Letter.
(e) Prorations. As of 12:01 a.m. local time on the effective date of the
TBAs, 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) arising from the conduct of the business
and operations of the applicable Stations will be prorated between BIC and Emmis
Radio in accordance with GAAP. Such prorations shall be based upon the principle
that the party selling its broadcast time under the TBAs is entitled to all
operating revenue earned and is responsible for operating expenses accruing in
connection with each of its Station's operations, assigned contracts and
transferred employees prior to the effective date, and the party acquiring the
broadcast time 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, and impairment charges,
if any, relating to goodwill and FCC licenses) accruing, on and after the
effective date for so long as the applicable TBA remains in effect. 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 TBAs. Without limiting the
generality of the foregoing, the TBA prorations shall include prepayments made
under Emmis' Amended and Restated Broadcast Agreement, dated June 30, 2004, with
AZPB Limited Partnership relating to the Arizona Diamondbacks.
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(f) Non-Competition. During the term of the Emmis Stations TBA, Emmis will be
prohibited from owning, operating or programming any radio stations transmitting
an over-the-air signal from a broadcast antenna located within the Phoenix,
Arizona Metro Survey Area (as defined by Arbitron, Inc.) which offer a
programming format known in the industry and classified by Arbitron, Inc. as:
(i) Adult Contemporary, including Hot AC, Modern AC and Soft AC; (ii) All News;
(iii) News/Talk/Information; (iv) All Sports; (v) Modern Rock; and (vi) All
Talk. The non-compete restrictions will be binding upon only Emmis and its
affiliates and will not apply to any purchaser of any other Emmis radio station
serving the Phoenix, Arizona metropolitan market.
(g) Right to Move Operations. Emmis will have the right during the term of
the Bonneville Station TBA to move the studios and offices of the Bonneville
Station; provided, however, that following such move and until termination of
the Bonneville TBA: (i) Bonneville will maintain full authority, power and
control over the operation of the Bonneville Station at any new studio and
office location; (ii) BIC will enter into a mutually agreeable sublease with
Emmis for such new studios and offices for the Bonneville Station, which
sublease will accommodate BIC's rights and obligations under the Bonneville
Station TBA, will be at no cost to Bonneville, and will terminate upon
termination of such TBA; and (iii) Emmis shall reimburse BIC for the expense of
such sublease.
4. Asset Exchange Agreement
(a) General Terms. In addition to the transactions, assignments, assumptions
and other matters addressed under the TBAs, pursuant to the terms of the
definitive Asset Exchange Agreement: (i) Bonneville will acquire substantially
all of the remaining assets (including, but not limited to, contractual and
other rights) principally used in the operations of the Emmis Stations (as
described more thoroughly below, the "Emmis Assets") and assume certain other
liabilities arising from the operations of the Emmis Stations; and (ii) Emmis
will acquire certain of the remaining assets (including, but not limited to,
contractual and other rights) used in the operations of the Bonneville Station
(as described more thoroughly below, the "Bonneville Assets"), and assume
certain other liabilities arising from the operations of the Bonneville Station.
Further, at closing of the Asset Exchange Agreement, Bonneville will pay Emmis
$66,000,000 in cash. The FCC licenses associated with the Stations will be
transferred to and from BHC and Emmis License, and the non-FCC license assets
will be transferred to and from BIC and Emmis Radio.
The Emmis Assets and the Bonneville Assets will each be transferred free and
clear of all liens, claims and encumbrances of every kind (other than customary
permitted encumbrances). Except as described in this letter agreement, the terms
and conditions of the Asset Exchange Agreement will be substantially the same as
those of the Asset Exchange Agreement among Bonneville, Emmis Communications
Corporation, Emmis 106.5 Broadcasting Corporation of St. Louis, and Emmis 106.5
License Corporation of St. Louis, dated October 6, 2001.
(b) Emmis Assets. The Emmis Assets will include:
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(i) all of the licenses, permits and other authorizations issued for any of
the Emmis Stations by the FCC and other authorities, as well as the license for
the Starlink digital STL used by radio station KKFR (the "Emmis Permits");
(ii) all real property, together with all improvements thereon, owned by
Emmis and used in the operation of any of the Emmis Stations, including, without
limitation: (A) the Central Avenue office and studio real property and
improvements; and (B) the KTAR (AM) tower site real property and improvements;
(iii) all transmitter equipment and transmission lines, antenna and other
broadcast equipment (including the KKLT/KKFR community antenna and transmitter
building on South Mountain but excluding any such equipment and transmission
lines principally used in the operations of radio station KKFR), and all studio
equipment, office equipment, office furniture, fixtures, rolling stock,
materials and supplies, inventories, spare parts and other tangible personal
property, including all promotional, sales, marketing and format-specific
programming materials, supplies, inventories, and property principally used in
the operation of any of the Emmis Stations, all computer hardware and software
principally used in the operation of the Emmis Stations' traffic, automation,
continuity, information technology (network, e-mail, print, file, etc.) and
office business systems, and all personal computers (and the software and
content thereon) used by those employees to be hired by BIC under the Emmis
Stations TBA (provided that Emmis may cleanse such personal computers of
proprietary Emmis information unrelated to the Emmis Stations);
(iv) subject to Section 5 of this letter agreement, all contracts, leases,
agreements, commitments and other arrangements principally used or held for use
in the operation of any of the Emmis Stations (and not otherwise assumed by BIC
under the Emmis Station TBA), including, without limitation, the real property
leases and occupancy and use rights to (A) the South Mountain tower site used by
KKLT (FM) and KKFR (FM); (B) the tower site used by KMVP (AM), and (C) the tower
site used by KTAR (AM) (the "Emmis Contracts");
(v) 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 any of the Emmis Stations;
(vi) all intellectual property, content and other rights principally used in
the operation of any of the Emmis Stations' Internet and on-line activities,
including, without limitation, station-related e-mail addresses, websites,
Internet addresses and domain names; and
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(vii) 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 any of the Emmis Stations.
(c) Bonneville Assets. The Bonneville Assets will include:
(i) all of the licenses, permits and other authorizations issued for the
Bonneville Station by the FCC and other authorities (the "Bonneville Permits");
(ii) certain limited studio equipment and other personal property identified
in a side letter between Emmis and BIC executed concurrently with this letter
agreement ("Bonneville Assets Side Letter"), and all rolling stock, transmitter
equipment and transmission lines principally used in the operation of the
Bonneville Station;
(iii) all promotional, sales, marketing and format-specific programming
materials, supplies, inventories, and property, principally used in the
operation of the Bonneville Station;
(iv) subject to Section 5 of this letter agreement, all contracts, leases,
agreements, commitments and other arrangements principally used or held for use
in the operation of the Bonneville Station (and not otherwise assumed by Emmis
Radio under the Bonneville Station TBA), including that certain FM Broadcast
Lease and License Agreement between BIC and SRI Michigan Avenue Venture, LLC,
dated October 1, 1999, regarding location of the main and auxiliary antennas for
the Bonneville Station on the John Hancock Center and the location of the
transmitter and combiner therefor (the "Bonneville Contracts");
(v) that portion of BIC's membership interest in FM Broadcasters, LLC
relating to the Bonneville Station (the entity holding certain rights to the
main antenna used by the Bonneville Station located on the John Hancock Center);
(vi) all rights in and to trademarks, trade names, 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 Bonneville Station;
(vii) all intellectual property, content and rights principally used in the
operation of the Bonneville Station's Internet and on-line activities,
including, without limitation, station related e-mail addresses, websites,
Internet addresses and domain names; and
(viii) all books, records, accounts, files, logs, plans, and drawings and
other information principally pertaining to or principally used or held for use
in the operation of the Bonneville Station.
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(d) Excluded Assets. The Emmis Assets and the Bonneville Assets will not
include cash, cash equivalents, accounts receivable, securities, investments,
deposits, prepayments, refunds of taxes for periods prior to the closing of the
Asset Exchange Agreement, employee benefit plans or contracts of insurance, the
proceeds thereof or claims thereunder, certain financial, accounting, and
management information software and contractual rights, and rights, claims and
records relating to such excluded assets. The Bonneville Assets will also not
include (i) the right to use the Bonneville logo, the "Bonneville" mark or any
mark containing the word "Bonneville", or (ii) any computer hardware or software
systems used in the hosting and operation of the Bonneville Station's website or
traffic, automation, continuity, information technology (network, email, print,
file, etc.) and office business systems. The Emmis Assets will also not include
(i) the right to use the Emmis logo, the "Emmis" mark or any mark containing the
word "Emmis", (ii) any computer hardware or software systems used in the hosting
and operation of the Emmis Stations' websites, (iii) except as otherwise
provided herein, those tangible assets principally used in the operation of
station KKFR (FM) or principally used by its employees, (iv) any Microsoft
software licenses, or (v) those assets used in the operation of the Emmis
Stations that are identified as excluded assets in a side letter between Emmis
and BIC executed concurrently with this letter agreement ("Emmis Excluded Assets
Side Letter").
(e) Assumed Emmis Stations Liabilities. Subject to the provisions of
Section 5 of this letter agreement, BIC will assume all liabilities under the
Emmis Contracts and Emmis Permits (other than the Emmis Stations FCC licenses),
to the extent such liabilities arise during and relate to any period following
the closing of the Asset Exchange Agreement. BHC will assume the liabilities
under the Emmis Stations 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 Exchange Agreement.
(f) Assumed Bonneville Station Liabilities. Subject to the provisions of
Section 5 of this letter agreement, Emmis Radio will assume all liabilities
under the Bonneville Contracts and Bonneville Permits (other than the Bonneville
Station FCC licenses), to the extent such liabilities arise during and relate to
any period following the closing of the Asset Exchange Agreement. Emmis License
will assume the liabilities under the Bonneville Station FCC licenses assigned
and transferred to Emmis to the extent such liabilities arise during and relate
to any period after the closing of the Asset Exchange Agreement.
(g) Excluded Liabilities. Neither party will assume any obligations or
liabilities under the Asset Exchange Agreement except for those expressly
assumed thereunder. Without limiting the foregoing: (i) neither party will
assume any liabilities relating to activities prior to the closing of the Asset
Exchange Agreement (unless previously assumed under the TBAs); (ii) Emmis will
not assume BIC's office and studio lease in the John Hancock Center in Chicago,
Illinois; (iii) BIC will not assume any advertising, barter or other agreements
with or related to casinos, casino operations or lotteries (except for the
broadcast of such advertising required under the Amended and Restated Broadcast
Agreement, dated June 30, 2004, between Emmis and AZPB Limited Partnership
relating to the Arizona Diamondbacks); and (iv) neither party
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will assume any liability arising from or under an assumed contract due to (A)
the breach of such contract by reason of its assignment without a required
consent, or (B) any other breach or default of a party's contract prior to the
closing of the Asset Exchange Agreement unless caused by the other party's
action or failure to perform under the applicable TBA.
(h) Transition Services Agreements.
(A) Emmis and BIC will enter into a Transition Services Agreement ("Phoenix
Transition Services Agreement") at the closing of the Asset Exchange Agreement
wherein Emmis will have a limited right to use the current Emmis Stations
facilities located on Central Avenue for the purpose of operating radio station
KKFR (FM) while arranging for an alternative location to conduct operations of
such station. The term of the Phoenix Transition Services Agreement will begin
on the closing of the Transaction and continue until the later to occur of:
(i) the first anniversary of the effective date of the TBAs; or (ii) six months
following the closing of the Transaction.
(B) If the Transaction closes prior to the first anniversary of the
effective date of the TBAs, Emmis and BIC will also enter into a Transition
Services Agreement ("Chicago Transition Services Agreement" and together with
the Phoenix Transition Services Agreement, the "Transition Services Agreements")
wherein Emmis will have a limited right for the remainder of that one-year
period to use the current Bonneville Station facilities and equipment located on
the 37th floor of the John Hancock Center for the purpose of operating WLUP
(FM) while arranging for an alternative location to conduct such operations.
(C) In the case of both Transition Service Agreements, the operations of
the transitioning stations will approximate ordinary historical use subject to
reasonable accommodations for the allocation of services and equipment use among
each party's radio station(s) at such locations. Emmis' cost under the
Transition Services Agreements will be set forth in a side letter between Emmis
and BIC executed concurrently with this letter agreement ("TSA Side Letter").
(i) Non-Competition. The Asset Exchange Agreement will provide that, for a
period of two (2) years after the closing of the Asset Exchange Agreement, Emmis
will be prohibited from owning, operating or programming any radio stations
transmitting an over-the-air signal from a broadcast antenna located within the
Phoenix, Arizona Metro Survey Area (as defined by Arbitron, Inc.) which offer a
programming format known in the industry and classified by Arbitron, Inc. as:
(i) Adult Contemporary, including Hot AC, Modern AC and Soft AC; (ii) All News;
(iii) News/Talk/ Information; (iv) All Sports; (v) Modern Rock; and (vi) All
Talk. In exchange for such prohibition, and in addition to the purchase price
payable under the Asset Exchange Agreement, Bonneville will pay Emmis $4,000,000
at the closing of the Asset Exchange Agreement.
(j) South Mountain Sublicense. BIC and Emmis Radio will enter into a
sublicense upon closing of the Asset Exchange Agreement granting Emmis Radio (or
its assignee) the right
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to continue station KKFR (FM)'s prior use of the main community antenna, the
tower position for location of its auxiliary antenna and associated transmitter
space at the South Mountain facility. The sublicense will have a term of five
years from the closing of the Asset Exchange Agreement. BIC will not charge
Emmis for the sublicense during the five-year term unless the landlord increases
BIC's fees as result of the sublicense. Any subsequent sublicense for use of the
facility after the initial five-year sublicense entered into between Emmis (or
its assignee) and BIC will be at a license rate equal to fair market value. The
sublicense will be assignable to any subsequent owner of station KKFR (FM) upon
BIC's consent, which consent will not be unreasonably withheld, conditioned or
delayed, and will be terminable by the licensee upon ninety days prior written
notice. Emmis and Bonneville acknowledge that the foregoing sublease arrangement
will be in addition to a lease that Emmis must obtain directly from the landlord
for use of the South Mountain facility, the terms of which shall not impact the
terms of the sublicense from BIC.
(k) AON Building Antenna. Upon closing of the Asset Exchange Agreement, BIC
will grant to Emmis an option for WLUP-FM to license space for an auxiliary
antenna on the antenna tower that is under construction on the AON Building,
which option must be exercised by Emmis within 60 days following written notice
from BIC that the tower construction is complete. The license fee will be 25% of
the all-inclusive cost of construction of the antenna and 25% of the on-going
maintenance and operating expenses, subject to a decrease in such percentage if
the antenna tower is used by more than one station for a main antenna or more
than two stations (including WLUP-FM) for an auxiliary antenna.
(l) Indemnification. The Asset Exchange Agreement will provide that each
party will indemnify the other party for claims under the Asset Exchange
Agreement, the TBAs and for third-party claims. Such indemnification shall apply
once the aggregate amount of such claims exceeds $500,000, and then only to the
extent such claims exceed $250,000, and subject to a cap of $25,000,000, 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 assets; or (vi) liabilities expressly
assumed, will not 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 Exchange Agreement.
(m) Prorations. As of 12:01 a.m. local time on the closing date of the Asset
Exchange Agreement, all operating income (as defined by 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 each Station will be prorated between BIC and Emmis in
accordance with GAAP to the extent not previously prorated as of the effective
date of the TBAs. 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
Exchange Agreement. Such prorations shall include, without limitation: (i) any
security deposits made under real property leases; and (ii) any FCC annual
regulatory fees relating to any Station paid or payable by either party.
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(n) Termination. In addition to customary termination provisions, the Asset
Exchange Agreement will terminate if the closing thereunder does not occur on or
before January 1, 2006.
5. Due Diligence
To date, Bonneville and Emmis have worked to provide each other with certain
information about their respective assets and liabilities to be exchanged in the
Transaction. Due to the their mutual desire to maintain strict confidentiality
of their negotiations prior to the public disclosure of this letter agreement,
however, both parties acknowledge certain other, material information about such
assets and liabilities was not available for disclosure. Therefore, following
the anticipated public announcement of the Transaction on the date of this
letter agreement, each party will provide the other with full access to all
financial, operating, legal and other reasonably requested information and
documents relating to the Stations and the applicable assets and liabilities, as
well as reasonable access to the management and personnel of the Stations. A
party's satisfaction with its due diligence investigation will not be a
condition to the execution of the TBAs or the execution or closing of the Asset
Exchange Agreement. Instead, to the extent a dispute arises regarding the
treatment of any asset or liability of either party under the TBAs or Asset
Exchange Agreement (except with respect to those individual, specific assets or
liabilities addressed in this letter agreement by name and not category), the
following resolution mechanism shall apply during the period prior to the
execution of the Asset Exchange Agreement and TBAs: (i) such dispute shall first
be referred for resolution to Drew Horowitz (Bonneville's representative) and
Marv Nyren (Emmis' representative); (ii) if the foregoing representatives are
unable to resolve the dispute within 10 business days, the dispute shall 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 parties and may be enforced in any court having jurisdiction over the
party against whom enforcement is sought.
To the extent that a party acquires rights under a Station contract that
applies to the other party's continuing radio operations (such as a
multi-station contract), the other party agrees to use commercially reasonable
efforts (excluding, however, the incurrence of material expense) to provide the
acquiring party with the benefits of such contract through a subcontract or new
contract arrangement.
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6. Exclusivity
In consideration of the effort and expense to be incurred by Bonneville and
Emmis between the date of this letter agreement and the date of the execution by
the parties of the Asset Exchange Agreement, the parties agree that, prior to
December 1, 2004, they will not, directly or indirectly, solicit, encourage or
consider alternative offers for the sale of all or part of the Bonneville Assets
or the Emmis Assets.
7. Tax Treatment
The parties will undertake reasonable efforts to structure the Transaction so
that it qualifies to the maximum extent possible with respect to the Bonneville
Station and the Emmis Stations as a tax-deferred exchange under Section 1031 of
the Internal Revenue Code of 1986, as amended; provided, however: (i) none of
the parties hereto will have any responsibility for the tax consequences to any
other party hereunder for the Transaction; (ii) the Transaction is not
conditioned on such qualification; and (iii) BHC may elect to treat the exchange
of FCC licenses as a taxable event, as to BHC.
Further, either party may elect to assign all or a portion of its interests
and obligations hereunder or under the Asset Exchange Agreement to a "qualified
intermediary" in order to qualify for Section 1031 exchange treatment.
8. Non-Disclosure
Each party acknowledges that it has entered into and remains bound by the
provisions of that certain Mutual Confidentiality Agreement, dated August 23,
2004, and that such agreement is intended to protect the information exchanged
by the parties pursuant to this letter agreement and continued negotiation of
the Transaction. In conjunction with the execution of this letter agreement, the
parties anticipate the joint preparation and release of a press release that has
been approved by Emmis and BIC. 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 release, provided that the
parties recognize the public availability of certain information that may be
provided pursuant to the HSR and FCC filings contemplated herein.
9. General Provisions
(a) Termination. This letter agreement shall terminate upon the execution of
both the Asset Exchange and the TBAs. It may also be earlier terminated by:
(i) either party if the Asset Exchange Agreement and TBAs are not all executed
on or before December 1, 2004; (ii) the party acquiring a Station if there is a
material adverse change in the business or operations of a Station being
acquired; or (iii) Bonneville upon written notice if for any reason in
connection with this letter agreement, any definitive agreement, or consummation
of any of the transactions contemplated hereunder or thereunder Bonneville would
be required to disclose financial information regarding the Corporation of the
President of The Church of Jesus Christ of Latter-
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Day Saints or any subsidiary or affiliate thereof (other than Bonneville) to any
third party. Upon termination, all rights and obligations of the parties shall
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 9 shall
survive such termination.
(b) Entire Agreement. This letter agreement, together with the side letters
referred to herein and the Mutual Confidentiality Agreement between the parties,
constitutes the entire agreement in full between the parties. Any prior written
or oral negotiations, correspondence, or understandings relating to the subject
matter hereof shall be superseded by this letter agreement and shall have no
force or effect. Except as otherwise provided herein, the terms of this letter
agreement may be amended or modified only by a writing executed by all of the
parties.
(c) Expenses. Except as set forth herein, the parties shall 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 shall be entitled to recover its reasonable attorneys'
fees and costs in such action.
(e) Governing Law; Binding Effect. This letter agreement shall be governed by
the substantive laws (and not the laws of conflict) of the State of Illinois.
This letter agreement may be executed in two or more counterparts (any of which
may be by facsimile signature), all of which taken together will constitute one
binding agreement among the parties hereto and their successors and assigns.
[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: /s/ Bruce T. Reece
BONNEVILLE HOLDING COMPANY
By: /s/ M. Farrell Benson
ACCEPTED AND AGREED TO:
EMMIS RADIO, LLC
EMMIS RADIO LICENSE, LLC
By Emmis Operating Company, Manager
By: /s/ Jeffrey H. Smulyan
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