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SECURITIES AND EXCHANGE COMMISSION
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Filed by a Party other than the Registranto
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o Definitive Proxy Statement
o Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
þ | No fee required. | |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12. |
(1) | Title of each class of securities to which transaction applies: | ||
(2) | Aggregate number of securities to which transaction applies: | ||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): | ||
(4) | Proposed maximum aggregate value of transaction: | ||
(5) | Total fee paid: | ||
o | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: | ||
(2) | Form, Schedule or Registration Statement No.: | ||
(3) | Filing Party: | ||
(4) | Date Filed: | ||
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• | A cash tender offer (the “JS Acquisition Tender Offer”) by JS Acquisition for all of the shares of Emmis Class A Common Stock for $2.40 per share in cash (without interest and less any applicable withholding taxes).JS Acquisition has distributed to holders of Class A Common Stock a separate Offer to Purchase with respect to the JS Acquisition Tender Offer. This Proxy Statement/Offer to Exchange is not the Offer to Purchase for the JS Acquisition Tender Offer. |
• | An “Exchange Offer” by Emmis to issue up to $84.275 million of new 12% PIK Senior Subordinated Notes due 2017 (the “New Notes”) in exchange for its existing 6.25% Series A Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Existing Preferred Stock”) at a rate of $30.00 principal amount of New Notes for each $50.00 liquidation preference of Existing Preferred Stock.This Proxy Statement/Offer to Exchange describes the Exchange Offer. | |
• | The solicitation of proxies with respect to a special meeting of the holders of Emmis Common Stock and Existing Preferred Stock, which will be held on , 2010, at local time, at One Emmis Plaza, 40 Monument Circle, Indianapolis, Indiana 46204, to vote on a proposal to adopt certain amendments (the “Proposed Amendments”) to the terms of the Existing Preferred Stock, which are necessary for the completion of the Transactions. The Proposed Amendments will not become effective unless all conditions precedent to the Completion of the Exchange Offer (other than the adoption and effectiveness of the Proposed Amendments) have been satisfied or waived.This Proxy Statement/Offer to Exchange describes the Proposed Amendments. | |
• | If the other Transactions are completed, a merger of JS Acquisition with and into Emmis (the “Merger”), in which, among other things, each outstanding share of Class A Common Stock that is not owned by JS Acquisition will be converted into the right to receive from Emmis $2.40 in cash (without interest and less any applicable withholding taxes), and each share of Existing Preferred Stock owned by anyone other than Alden will be converted into the right to receive from Emmis $5.856 in cash (without interest and less any applicable withholding taxes), which is equal to the conversion rate of the Existing Preferred Stock of 2.44 shares of Class A Common Stock per share times the $2.40 in cash (without interest and less any applicable withholding taxes) per share of Class A Common Stock that is being offered in the JS Acquisition Tender Offer.This Proxy Statement/Offer to Exchange does not pertain to the Merger. The Merger will not be considered at the special meeting. |
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• | determining that it was advisable and fair to and in the best interests of Emmis and the unaffiliated shareholders who hold Class A Common Stock for JS Parent to acquire Emmis on the terms and subject to the conditions set forth in the Merger Agreement; |
• | approving and adopting the Merger Agreement, the JS Acquisition Tender Offer and the Merger; and |
• | recommending that the unaffiliated shareholders who hold Class A Common Stock accept the JS Acquisition Tender Offer, tender their shares of Class A Common Stock in the JS Acquisition Tender Offer and approve the Merger and the Merger Agreement, |
• | FOR HOLDERS OF COMMON STOCK: With this document, you are only being asked to vote on the Proposed Amendments at the special meeting. The tender of your shares will be addressed through the JS Acquisition Tender Offer documents. Please complete, sign, date and return the enclosed proxy card as soon as possible, even if you currently plan to attend the meeting. Returning a proxy card will not prevent you from attending the special meeting and voting in person but will ensure that your vote is counted if you are unable to attend the meeting. |
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• | FOR HOLDERS OF EXISTING PREFERRED STOCK: You are being asked to vote on the Proposed Amendment at the special meeting. You are also being asked to consider an offer by Emmis to issue New Notes in exchange for your Existing Preferred Stock. |
° | To vote your Existing Preferred Stock, please complete, sign, date and return the enclosed proxy card as soon as possible, even if you currently plan to attend the meeting. Returning a proxy card will not prevent you from attending the special meeting and voting in person but will ensure that your vote is counted if you are unable to attend the meeting. | |
° | To tender your Existing Preferred Stock, you must tender your shares in accordance with the letters of transmittal and instruction letters you will be receiving in a separate package. You must tender your shares as you have been instructed in order to validly tender your shares into the Exchange Offer. | |
° | Voting your shares of Existing Preferred Stock in favor of the Proposed Amendments is not sufficient to tender your shares of Existing Preferred Stock into the Exchange Offer. Similarly, tendering your shares of Existing Preferred Stock in the Exchange Offer is not sufficient to vote those shares in favor of the Proposed Amendments. |
Executive Vice President, General Counsel and Secretary
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INDIANAPOLIS, INDIANA
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
(1) | a proposal to amend the terms of the Existing Preferred Stock that are set forth in Emmis’ second amended and restated articles of incorporation (the “Articles of Incorporation”) to: |
• | eliminate the rights of the holders of the Existing Preferred Stock to require Emmis to redeem all or a portion of their shares on the first anniversary after the occurrence of certain going private transactions and to nominate directors to Emmis’ board of directors; and | |
• | provide for the automatic conversion upon the proposed merger of JS Acquisition with and into Emmis, with Emmis surviving the merger (the “Merger”) (i) of the Existing Preferred Stock (other than the Existing Preferred Stock held by Alden Global Capital and its affiliates (collectively, “Alden”)) not exchanged for the new 12% PIK Senior Subordinated Notes due 2017 (the “New Notes”) into that amount of consideration that would be paid to holders of Class A Common Stock into which the Existing Preferred Stock was convertible immediately prior to the Merger and (ii) of the Existing Preferred Stock held by Alden into the New Notes at a rate of $30.00 principal amount of New Notes per $50.00 of liquidation preference of Existing Preferred Stock, as described in the accompanying Proxy Statement/Offer to Exchange; and |
(2) | transaction of any other business that may properly come before the meeting and any adjournments or postponements of the meeting. |
• | more shares of Common Stock, voting together as a single class, voting in favor than against the Proposed Amendments, assuming a quorum is present and | |
• | holders of at least 2/3 of the outstanding Existing Preferred Stock, voting as a separate class, will be required in order to adopt the Proposed Amendments. The text of the Proposed Amendments is attached to this Proxy Statement/Offer to Exchange as Schedule B. You should read the text of the Proposed Amendments in their entirety. |
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Executive Vice President,
General Counsel and Secretary
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This Proxy Statement/Offer to Exchange is preliminary and may be changed. |
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• | obtaining the requisite 2/3 vote of the holders of Existing Preferred Stock and the affirmative vote of more shares of Emmis common stock voting in favor than against the Proposed Amendments, which are described in more detail in this Proxy Statement/Offer to Exchange, and |
• | the minimum number of shares of Class A Common Stock, which as of May 17, 2010 would equal 32.8% of the outstanding shares of Class A Common Stock, having been validly tendered and not withdrawn in the JS Acquisition Tender Offer. |
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SCHEDULES | ||||||||
— | Information Concerning the Directors and Executive Officers of JS Acquisition and JS Parent | A-1 | ||||||
— | Text of Proposed Amendments | B | ||||||
APPENDICES | ||||||||
— | Emmis’ Annual Report onForm 10-K for the fiscal year ended February 28, 2010 | I | ||||||
— | Securities Purchase Agreement, dated May 24, 2010, by and among Alden Global Distressed Opportunities Master Fund, L.P., Alden Global Value Recovery Master Fund, L.P., Alden Media Holdings, LLC, JS Parent and Jeffrey H. Smulyan | II | ||||||
— | Form of Amended and Restated Operating Agreement, to be entered into by and among Alden Media Holdings, LLC, Jeffrey H. Smulyan, JS Parent and certain other parties | III | ||||||
— | Agreement and Plan of Merger, dated May 25, 2010, by and among Emmis, JS Parent and JS Acquisition | IV | ||||||
Appendix V | — | Amendment and Consent Letter Agreement, dated June 23, 2010, by and among Alden Global Distressed Opportunities Master Fund, L.P., Alden Global Value Recovery Master Fund, L.P., Alden Media Holdings, LLC, JS Acquisition, LLC and Jeffrey H. Smulyan | V |
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• | JS Acquisition Tender Offer (pages to ): On June 2, 2010, JS Acquisition commenced a tender offer (the “JS Acquisition Tender Offer”) for all of the outstanding shares of Class A Common Stock. The offer price is $2.40 per share in cash (without interest and less any applicable withholding taxes). The completion of the JS Acquisition Tender Offer is conditioned on, among other things: |
° | the effectiveness of the Proposed Amendments, and |
° | the valid tender without a valid withdrawal of shares of Class A Common Stock, that, when combined with the Rollover Shares and the shares of Common Stock beneficially owned by JS Parent, JS Acquisition, Mr. Smulyan and his affiliates (collectively, the “Purchaser Group”) and the Alden Fund, will constitute a majority of the votes able to be cast with respect to the Merger (as defined below). Based on the number of outstanding shares as of May 17, 2010, a minimum of approximately 32.8% of our Class A Common Stock would need to be tendered and not withdrawn for this condition to be satisfied; |
• | Alden Purchase Agreement (pages to ): Simultaneously with completion of the JS Acquisition Tender Offer, Alden Media will provide all necessary funds for the JS Acquisition Tender Offer and the other Transactions under the Alden Purchase Agreement, under which it will purchase for an aggregate of $90 million in cash, subject to adjustment as described below: |
° | Series A Convertible Redeemable PIK Preferred Interests (the “JS Parent Preferred Interests”) of JS Parent, with an initial preferred unrecovered balance of $96.9 million and having a preferred return of 5% per annum until the second anniversary of the closing and 15% per annum thereafter; and |
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° | common interests (the “JS Parent Common Interests”) of JS Parent initially having a percentage interest of JS Parent equal to 24%, subject to adjustment as provided in the JS Parent operating agreement; |
• | Exchange Offer (pages to ): In this Exchange Offer, we are offering to issue an aggregate of $84,275,100 principal amount of new 12% PIK Senior Subordinated Notes due 2017 (the “New Notes”), which will be offered in exchange for all of the outstanding 6.25% Series A Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Existing Preferred Stock”) at a rate of $30.00 principal amount of New Notes for each $50.00 of liquidation preference (excluding accrued and unpaid dividends) of Existing Preferred Stock, as described in more detail in this Proxy Statement/Offer to Exchange, which is conditioned on, among other things: |
° | obtaining the requisite 2/3 vote of the holders of Existing Preferred Stock and the affirmative vote of more shares of Class A Common Stock and Class B common stock, par value $0.01 per share (“Class B Common Stock,” and, together with the Class A Common Stock, the “Common Stock”), voting together as a single class (with each share of Class A Common Stock entitled to one vote per share and each share of Class B Common Stock entitled to 10 votes per share), voting in favor than against the Proposed Amendments, assuming a quorum is present, (collectively, the “Required Vote”), and |
° | the minimum number of shares of Class A Common Stock, which as of May 17, 2010 would equal 32.8% of the outstanding shares of Class A Common Stock, having been validly tendered and not validly withdrawn in the JS Acquisition Tender Offer; |
• | Proxy Solicitations (pages to ): Using this Proxy Statement/Offer to Exchange, we are also soliciting proxies (the “Proxy Solicitations”) from holders of Existing Preferred Stock and Common Stock to vote for the Proposed Amendments, as described in more detail in this Proxy Statement/Offer to Exchange. We are not seeking proxies with respect to the Merger (as defined below). As of the date of this Proxy Statement/Offer to Exchange, Mr. Smulyan directly owns shares of Common Stock entitling him to cast approximately 60.0% of the votes able to be cast by holders of Common Stock at the special meeting, and the Alden Fund directly owns shares of Common Stock entitling it to cast approximately 1.7% of the votes able to be cast by holders of Common Stock at the special meeting. Under the Alden Purchase Agreement, Mr. Smulyan has agreed to vote his shares of Common Stock in favor of the proposal to adopt the Proposed Amendments, and the Alden Fund has agreed to vote its shares of Common Stock in favor of the proposal to adopt the Proposed Amendments, so the proposal will be approved by the holders of the Common Stock. As of the date of this Proxy Statement/Offer to Exchange, the Alden Fund directly owns approximately 41.4% of the outstanding Existing Preferred Stock. Under the Alden Purchase Agreement, the Alden Fund has agreed to vote its shares of Existing Preferred Stock in favor of the proposal to adopt the Proposed Amendments; | |
• | Merger Proxy Solicitation (pages to ): If the JS Acquisition Tender Offer and this Exchange Offer are completed and the Proposed Amendments are adopted and effected, to the extent required by Indiana law, we will seek the affirmative votes of holders of Common Stock (a majority of which will be beneficially owned, following the JS Acquisition Tender Offer, by JS Acquisition) to approve a merger of JS Acquisition with and into Emmis, with Emmis surviving the merger as a subsidiary of JS Parent, with Mr. Smulyan holding all of the shares of a newly issued class of voting common stock of Emmis and JS Parent holding all of the shares of a newly issued class of non-voting common stock of Emmis. |
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• | The Merger (pages to ): Once the Merger is approved, we will complete the Merger, in which: |
° | immediately prior to the effective time of the Merger: |
– | Mr. Smulyan will retain 9,755 shares of Class A Common Stock directly, 190,245 shares of Class B Common Stock directly (which he will convert into Class A Common Stock immediately prior to the Merger) and 8,441 shares of Class A Common Stock in Emmis’ 401(k) plan, and The Smulyan Family Foundation will retain 30,625 shares of Class A Common Stock (collectively, the “Retained Shares”); | |
– | all shares of Class A Common stock held by the Purchaser Group (other than Retained Shares) and each Rollover Share of the Rolling Shareholders will be contributed to Emmis and cancelled, in satisfaction of each’s respective obligations under the Alden Purchase Agreement and the Rollover Agreement and in consideration for JS Parent Common Interests; and | |
– | all shares of Class B Common Stock (other than Retained Shares), all of which are held by Mr. Smulyan, and all of the stock options held by Mr. Smulyan, will be contributed to Emmis and cancelled, in satisfaction of his obligations to under the Alden Purchase Agreement, and in consideration for JS Parent Common Interests. |
° | each share of Class A Common Stock remaining outstanding, including the Retained Shares, will be converted into the right to receive $2.40 in cash (without interest and less any applicable withholding taxes) from Emmis; | |
° | all remaining outstanding options to purchase Class A Common Stock, will vest if unvested, and each option with an exercise price of less than $2.40 per share (without interest and less any applicable withholding taxes) will be converted into the right to receive an amount of cash per option equal to $2.40 (without interest and less any applicable withholding taxes) minus the exercise price of the option, and all other options will be cancelled; | |
° | each outstanding share of Existing Preferred Stock held by the Alden Fund will be converted into New Notes at a rate of $30.00 principal amount of New Notes per $50.00 of liquidation preference of Existing Preferred Stock, excluding accrued and unpaid dividends; | |
° | each other outstanding share of Existing Preferred Stock will be converted into the right to receive $5.856 in cash (without interest and less any applicable withholding taxes) from Emmis, which is equal to the conversion rate of the Existing Preferred Stock of 2.44 shares of Class A Common Stock per share times the $2.40 in cash (without interest and less any applicable withholding taxes) per share of Class A Common Stock that is being offered in the JS Acquisition Tender Offer; | |
° | each share of JS Acquisition Class A Common Stock will be converted into one share of new nonvoting common stock of Emmis; and | |
° | each share of JS Acquisition Class B Common Stock will be converted into one share of new voting common stock of Emmis. |
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Class A | Class B | Existing | ||||||||||
Common Stock | Common Stock | Preferred Stock | ||||||||||
JS Parent | — | — | — | |||||||||
JS Acquisition | — | — | — | |||||||||
Jeffrey H. Smulyan | 62,941 | (1) | 4,930,680 | — | ||||||||
Rolling Shareholders | 1,718,446 | (1) | — | — | ||||||||
The Alden Fund | 1,406,500 | (2) | — | 1,162,737 |
(1) | Does not include any shares underlying any options. See “Principal Shareholders” for more information regarding these shares. |
(2) | Does not include shares of Class A Common Stock beneficially owned that underlie outstanding Existing Preferred Stock or other derivatives. See “Principal Shareholders” for more information regarding these shares. |
• | each share of Class A Common Stock held by the Alden Fund will be converted into the right to receive $2.40 in cash (without interest and less any applicable withholding taxes) from Emmis, which is equivalent to the consideration offered by JS Acquisition in the JS Acquisition Tender Offer, and | |
• | each share of Existing Preferred Stock held by the Alden Fund will be converted into New Notes at the same rate as in the Exchange Offer. |
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(1) | As of February 28, 2010, there were $339.2 million of term loans, $2.0 million of revolving borrowings and $0.9 million of outstanding letters of credit under the Credit Facility, with $17.1 million available for borrowing under the revolving facility. |
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(1) | As of February 28, 2010, there were $339.2 million of term loans, $2.0 million of revolving borrowings and $0.9 million of outstanding letters of credit under the Credit Facility, with $17.1 million available for borrowing under the revolving facility. |
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THE TRANSACTIONS AND THE SPECIAL MEETING
Q: | What is this document, and why am I receiving it? |
Q: | What is Emmis seeking to accomplish? |
• | a cash tender offer by JS Acquisition, a company indirectly owned by Mr. Smulyan, for all of the outstanding shares of Emmis Class A Common Stock for $2.40 per share in cash (without interest and less any applicable withholding taxes); |
• | the purchase of preferred equity interests in JS Parent by Alden Media in order to finance the tender offer by JS Acquisition and the other Transactions, which amount will be adjusted, to the extent funds are required to provide cash consideration to holders of Existing Preferred Stock that do not tender their shares in the Exchange Offerand/or to pay various expenses in connection with the Transactions; | |
• | the “Exchange Offer” to issue New Notes to holders of Existing Preferred Stock that is described in this Proxy Statement/Offer to Exchange; |
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• | the solicitation of proxies from holders of Common Stock and Existing Preferred Stock to vote in favor of a proposal to adopt the Proposed Amendments to the terms of the Existing Preferred Stock, as described in this Proxy Statement/Offer to Exchange; and | |
• | if the other Transactions are completed, the Merger of JS Acquisition with and into Emmis, in which, among other things, most shares of Class A Common Stock not held by the Purchaser Group will be converted into the right to receive $2.40 in cash (without interest and less any applicable withholding taxes) from Emmis, and each share of Existing Preferred Stock owned by anyone other than the Alden Fund will be converted into the right to receive $5.856 in cash (without interest and less any applicable withholding taxes) from Emmis, which is equal to the conversion rate of the Existing Preferred Stock of 2.44 shares of Class A Common Stock per share times the $2.40 in cash (without interest and less any applicable withholding taxes) per share of Class A Common Stock that is being offered in the JS Acquisition Tender Offer, and each share of Existing Preferred stock owned by the Alden Fund will be converted into the right to receive New Notes at the same rate as in the Exchange Offer. |
Q: | When are the Transactions expected to be completed? |
Q: | Are the Transactions conditioned on one other, and if so, how? |
• | obtaining the required votes for the Proposed Amendments; | |
• | the adoption and effectiveness of the Proposed Amendments; |
• | the minimum number of shares of Class A Common Stock, which as of May 17, 2010 would equal 32.8% of the outstanding shares of Class A Common Stock, having been validly tendered and not withdrawn in the JS Acquisition Tender Offer; and |
• | the Alden Purchase Agreement remaining in full force and effect and the conditions to the closing of the transactions under the Alden Purchase Agreement having been satisfied or waived. |
• | there being validly tendered and not withdrawn prior to the expiration of the JS Acquisition Tender Offer a minimum number of shares, which as of May 17, 2010 would equal at least 32.8% of the outstanding Class A Common Stock; |
• | the Alden Purchase Agreement remaining in full force and effect and the conditions to the closing of the transactions under the Alden Purchase Agreement having been satisfied or waived; |
• | obtaining the required votes for the Proposed Amendments; and | |
• | the adoption and effectiveness of the Proposed Amendments. |
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Q: | What are the Proposed Amendments? |
• | eliminate the rights of the holders of the Existing Preferred Stock to require Emmis to redeem all or a portion of their shares on the first anniversary after the occurrence of certain going private transactions and nominate directors to Emmis’ board of directors; and | |
• | provide for the automatic conversion, upon the Merger, (i) of the Existing Preferred Stock (other than the Existing Preferred Stock held by Alden) not exchanged for the New Notes into that amount of consideration that would be paid to holders of Class A Common Stock into which the Existing Preferred Stock was convertible immediately prior to the Merger and (ii) of the Existing Preferred Stock held by Alden into the New Notes, as described in this Proxy Statement/Offer to Exchange. |
Q: | What shareholder vote is required to adopt the proposal to make the Proposed Amendments? |
• | more shares of Common Stock, voting together as a single class, voting in favor than against the Proposed Amendments, assuming a quorum is present, with the shares of Class B Common Stock being entitled to ten votes per share, and | |
• | holders of at least 2/3 of the outstanding Existing Preferred Stock, voting as a separate class. |
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Q: | Am I being asked to vote to approve the Merger? |
Q: | Has a special committee of the Emmis board of directors been formed? Is Mr. Smulyan voting on or participating in any of the deliberations of the Emmis board of directors with respect to the Transactions? |
Q: | Do the Transactions involve any conflicts of interest? |
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Q: | Has the Committee made any fairness determination or recommendation with respect to the Exchange Offer or the Proxy Solicitation? |
Q: | Has the full board of directors made any fairness determination or recommendation with respect to the Exchange Offer or the Proxy Solicitation? |
Q: | Has JS Acquisition or Mr. Smulyan made any fairness determination or recommendation with respect to the Exchange Offer or the Proxy Solicitation? |
Q: | Did the board of directors and the Committee consider alternatives to the Transactions? |
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Q: | Will Mr. Smulyan be willing to complete only some of the Transactions? |
Q: | Will Mr. Smulyan be willing to support a competing transaction? |
Q: | Will Emmis be willing to complete only some of the Transactions? |
Q: | Will the Transactions result in a change of control of Emmis? |
Q. | Why has Mr. Heath Freeman been appointed to the board of directors of Emmis? Did he vote on or participate in any of the deliberations with respect to the Transactions? |
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Q: | Do Mr. Smulyan, JS Acquisition or Alden own shares of stock that can be voted at the special meeting? Will they vote their shares in favor of the proposal to adopt the Proposed Amendments? |
Class A | Class B | Existing | ||||||||||
Common Stock | Common Stock | Preferred Stock | ||||||||||
JS Acquisition, LLC | — | — | — | |||||||||
JS Acquisition, Inc. | — | — | — | |||||||||
Jeffrey H. Smulyan | 62,941 | (1) | 4,930,680 | — | ||||||||
The Rolling Shareholders | 1,718,446 | (1) | — | — | ||||||||
The Alden Fund | 1,406,500 | (2) | — | 1,162,730 |
(1) | Does not include any shares underlying any options. See “Principal Shareholders” for more information regarding these shares. |
(2) | Does not include shares of Class A Common Stock beneficially owned that underlie outstanding Existing Preferred Stock or other derivatives. See “Principal Shareholders” for more information regarding these shares. |
Q: | What effect will the Transactions have on the listing and Exchange Act registration of the securities of Emmis? Will Emmis be a reporting company under the Exchange Act after the closing of the Transactions? |
Q: | Will anything happen to my Class A Common Stock if I vote in favor of the Proposed Amendments? |
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Q: | Can I tender my shares of Class A Common Stock into the JS Acquisition Tender Offer and still submit a proxy or vote my shares at the special meeting? |
Q: | Will the Class A Common Stock vote on the proposal separately from the Class B Common Stock? |
Q: | What happens to outstanding stock options? |
Q: | What happens to restricted stock and restricted stock units? |
Q: | Where is the means to tender my Existing Preferred Stock? |
Q: | If I tender my shares of Existing Preferred Stock into the Exchange Offer, will that also constitute a vote in favor of the Proposed Amendments? |
Q: | Will the Proposed Amendments become effective if the Exchange Offer is not completed? |
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Q: | Will anything happen to my Existing Preferred Stock if I vote in favor of the Proposed Amendments? |
Q: | If I do not tender my shares of Existing Preferred Stock, what will happen to those shares? |
Q: | Will there be significant differences between the rights and privileges of the New Notes, compared to the rights and privileges of the Existing Preferred Stock? |
Q: | Will holders of Existing Preferred Stock be entitled to dissenters’ rights? |
Q: | Who will serve as the information agent with respect to the special meeting and the Exchange Offer? Who will serve as Exchange Agent with respect to the Exchange Offer? |
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Q: | When and where is the special meeting? |
Q: | What will be voted on at the special meeting? |
Q: | Who is entitled to vote at the special meeting? |
Q: | How do I vote? |
Q: | If my shares are held in “street name” by my broker, will my broker vote my shares for me? |
Q: | What does it mean if I get more than one proxy card? |
Q: | What are the voting rights of the Class A Common Stock and the Class B Common Stock? |
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Q: | What are the voting rights of the Existing Preferred Stock? |
Q: | What constitutes a quorum? |
Q: | What do I need to do now? |
Q: | May I Change My Vote After I Have Mailed In My Signed Proxy Card Or Otherwise Voted? |
• | send in a later-dated, signed proxy card or a written revocation before the special meeting; or | |
• | attend the meeting in person and give oral notice of your intention to vote in person. |
Q: | What do I do if I have additional questions? |
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Securities Sought | We are offering to issue New Notes in exchange for any and all outstanding shares of Existing Preferred Stock. As of May 17, 2010, there were 2,809,170 shares of Existing Preferred Stock outstanding. | |
The Existing Preferred Stock is listed on the NASDAQ Global Select Market under the ticker symbol, “EMMSP.” See “Price Range and Other Information with Respect to the Existing Preferred Stock” for trading price, dividend and other information regarding the Existing Preferred Stock. | ||
Is it Sufficient to Send in a Proxy Card if I Wish to Participate in the Exchange Offer? | Voting your shares of Existing Preferred Stock in favor of the Proposed Amendments is NOT sufficient to tender your shares of Existing Preferred Stock into the Exchange Offer. In order to participate in the Exchange Offer, you must tender your shares of Existing Preferred Stock as instructed. | |
Exchange Ratio | We will issue New Notes at a rate of $30.00 aggregate principal amount of New Notes for each $50.00 liquidation preference of Existing Preferred Stock (excluding accrued and unpaid dividends). | |
Accrued and Unpaid Dividends | Accrued and unpaid dividends will not be paid on any shares of Existing Preferred Stock tendered into the Exchange Offer, and you will no longer have the right to receive such dividends after your shares of Existing Preferred Stock are accepted and paid for in the Exchange Offer. As of April 15, 2010, $4.87 per share of unpaid dividends had accrued on the Existing Preferred Stock. |
Fairness; Recommendation | The full Emmis board of directors unanimously determined that the Exchange Offer is fair to unaffiliated shareholders who hold Existing Preferred Stock and unaffiliated shareholders who hold Class A Common Stock. Nevertheless, the Emmis board of directors is not making any recommendation as to whether holders of Existing Preferred Stock should participate in the Exchange Offer or vote for the Proposed Amendments. |
The Emmis board of directors believes that, because of the circumstances surrounding the Transactions, including the background of the Transactions, the conflicts of interest inherent in the Transactions and the lack of a recommendation by the Emmis board of directors, each holder of Existing Preferred Stock should not rely on the fairness determination of the Emmis board of directors and should make its own independent analysis. | ||
Proposed Amendments | We are simultaneously soliciting proxies from holders of at least2/3 of outstanding Existing Preferred Stock to vote in favor of the Proposed Amendments at the special meeting. Holders of Existing Preferred Stock must submit proxies in the Preferred Proxy Solicitation in order to vote in favor of the Proposed Amendments. |
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Under the Alden Purchase Agreement, the Alden Fund, which holds approximately 41.4% of the votes eligible to be cast by holders of the Existing Preferred Stock with respect to the Proposed Amendments, has agreed to vote in favor of the Proposed Amendments. | ||
We are also simultaneously soliciting proxies to obtain the affirmative votes of more shares of Common Stock, voting together as a single class, voting in favor than against the Proposed Amendments, assuming a quorum is present, at the special meeting. We will not complete the Exchange Offer unless the Required Vote for the Proposed Amendments is received and the Proposed Amendments are effected. As of the date of this Proxy Statement/Offer to Exchange, Mr. Smulyan directly owns shares of Common Stock entitling him to cast approximately 60.0% of the votes able to be cast by holders of Common Stock at the special meeting, and the Alden Fund directly owns shares of Common Stock entitling it to cast approximately 1.7% of the votes able to be cast by holders of Common Stock at the special meeting. Under the Alden Purchase Agreement, Mr. Smulyan has agreed to vote his shares of Common Stock in favor of the proposal to adopt the Proposed Amendments, and the Alden Fund has agreed to vote its shares of Common Stock in favor of the proposal to adopt the Proposed Amendments, so the proposal will be approved by the holders of the Common Stock. | ||
We will not complete the Exchange Offer unless the Proposed Amendments are adopted and effected. | ||
Conditions to the Exchange Offer | Our obligation to complete this Exchange Offer, to accept your shares of Existing Preferred Stock tendered in the Exchange Offer and to issue the New Notes in exchange for such shares of Existing Preferred Stock is conditioned on, among other things: | |
• the Proposed Amendments having been adopted by the holders of Common Stock and Existing Preferred Stock; |
• not less than a minimum number of shares, which as of May 17, 2010 would equal 32.8% of the outstanding shares of Class A Common Stock, having been validly tendered and not validly withdrawn in the JS Acquisition Tender Offer and having been simultaneously accepted for payment by JS Acquisition; |
• the Alden Purchase Agreement remaining in full force and effect and the conditions to the closing of the transactions under the Alden Purchase Agreement having been satisfied or waived; and |
• other customary conditions precedent. | ||
See “The Exchange Offer — Conditions to the Exchange Offer.” | ||
Eligible Offerees; Transfer Restrictions | The Exchange Offer will be exempt from registration under the Securities Act under Section 3(a)(9) of that Act. All holders of Existing Preferred Stock are eligible to participate in the Exchange Offer. |
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If your shares of Existing Preferred Stock are freely transferable without registration under the Securities Act, any New Notes you receive in the Exchange Offer will also be freely transferable. | ||
Expiration Date | The offers will expire at 11:59 p.m., New York City time, on , 2010, unless extended by Emmis with respect to any or all series of old notes (such date and time, as the same may be extended, the “Expiration Date”). We, in our sole discretion, may extend the Expiration Date for any offer for any purpose, including in order to permit the satisfaction or waiver of any or all conditions to any offer. See “The Exchange Offer — Expiration Time, Extensions, Termination and Amendments.” |
Settlement Date | The settlement date for the Exchange Offers will be promptly following the Expiration Date. |
Procedures for Tendering | The means to tender your shares of Existing Preferred Stock may be sent to you separately from the proxy card and proxy instructions. Voting your shares of Existing Preferred Stock in favor of the Proposed Amendments is not sufficient to tender your shares of Existing Preferred Stock into the Exchange Offer. If you wish to participate in the Exchange Offer and your Existing Preferred Stock is held by a custodial entity, such as a bank, broker, dealer, trust company or other nominee, you must instruct that custodial entity to tender your Existing Preferred Stock on your behalf pursuant to the procedures of that custodial entity. If your Existing Preferred Stock is registered in your name, you must complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal, according to the instructions contained in this Proxy Statement/Offer to Exchange and the letter of transmittal. See “The Exchange Offer — How to Tender.” | |
Withdrawal Deadline | You may withdraw your tendered shares of Existing Preferred Stock at any time prior to the Expiration Date. | |
Withdrawal of Tenders and Revocation of Proxies | You may withdraw the tender of your Existing Preferred Stock prior to the Expiration Date by submitting a notice of withdrawal to the exchange agent using ATOP procedures and/or upon compliance with the other procedures described in this Proxy Statement/Offer to Exchange. | |
Proper withdrawal of your Existing Preferred Stock will not be deemed to revoke the related proxy in favor of the Proposed Amendments. You must separately revoke your proxy in order to not have your shares of Existing Preferred Stock voted in favor of the Proposed Amendments. | ||
Consequences of Failure to Tender | If the Exchange Offer is completed, a failure to tender your shares of Existing Preferred Stock in the Exchange Offer could have the following consequences, among others: | |
• claims with respect to your shares of Existing Preferred Stock would be junior in right of payment to all of the New Notes issued in the Exchange Offer; |
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• your Existing Preferred Stock would no longer have the covenant protections, such as the right to nominate directors and protections against going private transactions, that were removed by the Proposed Amendments; and | ||
• if the Merger is completed, you will not receive New Notes for your shares of Existing Preferred Stock, but, instead, each share of your Existing Preferred Stock will be converted into the right to receive $5.856 in cash (without interest and less any applicable withholding taxes), which is equal to the conversion rate of the Existing Preferred Stock of 2.44 shares of Class A Common Stock per share times the $2.40 in cash (without interest and less any applicable withholding taxes) per share of Class A Common Stock that is being offered in the JS Acquisition Tender Offer. | ||
For a description of the consequences of failing to exchange your old notes, see “Risk Factors — Risks Applicable to Existing Preferred Stock Not Tendered in the Exchange Offer.” | ||
Taxation | For a summary of the material U.S. federal income tax consequences of the Exchange Offer, see “Certain Material U.S. Federal Income Tax Consequences.” | |
Accounting Treatment | The Transactions will not be accounted for as a purchase, because there is no change of ownership involved. Mr. Jeffrey H. Smulyan, who beneficially owned approximately 60.0% of the total voting power of the outstanding Common Stock of Emmis as of May 17, 2010, will own all of Emmis’ voting stock after the completion of the Transactions. | |
Interests of Certain Persons in the Transactions | A number of directors and executive officers of Emmis have interests in the Transactions, which may be different from yours. See “The Exchange Offer — Executive Officer and Director Participation; Interests of Certain Persons in the Transactions.” | |
Dealer Managers and Solicitation Agents | No dealer managers or solicitation agents have been retained to solicit tenders or proxies. | |
Exchange Agent and Information Agent | BNY Mellon Shareowner Services. The addresses and telephone numbers of BNY Mellon Shareowner Services are listed on the back cover page of this Proxy Statement/Offer to Exchange. |
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Special Meeting | The special meeting of the shareholders of Emmis Communications Corporation will be held on , , 2010, at , local time, at One Emmis Plaza, 40 Monument Circle, Indianapolis, Indiana 46204. The shareholders of Emmis will consider the Proposed Amendments at the special meeting. The text of the Proposed Amendments is attached to this Proxy Statement/Offer to Exchange as Schedule B. Shareholders should read the text of the Proposed Amendments in their entirety. | |
Does a Tender of my Existing Preferred Stock in the ExchangeOffer Constitute a Vote in Favorof the Proposed Amendments? | Unlike a tender offer/consent solicitation relating to debt securities, in order to vote your shares of Existing Preferred Stock, you must also sign and mail in the provided proxy card or follow the instructions given to you by your broker or other nominee in order to vote in favor of the Proposed Amendments.Failure to vote your shares of Existing Preferred Stock in favor of the Proposed Amendments will make it less likely that the Exchange Offer will be completed. |
Recommendation | The full Emmis board of directors unanimously determined that the Exchange Offer is fair to unaffiliated shareholders who hold Existing Preferred Stock and unaffiliated shareholders who hold Class A Common Stock. Nevertheless, the Emmis board of directors is not making any recommendation as to whether holders of Existing Preferred Stock should participate in the Exchange Offer or vote for the Proposed Amendments. |
The Emmis board of directors believes that, because of the circumstances surrounding the Transactions, including the background of the Transactions, the conflicts of interest inherent in the Transactions and the lack of a recommendation by the Emmis board of directors, each holder of Existing Preferred Stock should not rely on the fairness determination of the Emmis board of directors and should make its own independent analysis. | ||
Record Date | Holders of record of Class A Common Stock, Class B Common Stock and/or Preferred Stock as of , 2010 will be entitled to vote those shares of stock at the special meeting. | |
Condition to Effectiveness of the Proposed Amendments | The Proposed Amendments will not become effective unless all conditions precedent to the completion of the Exchange Offer (other than the adoption and effectiveness of the Proposed Amendments) have been satisfied or waived. | |
Existing Preferred Stock | We are soliciting proxies from holders of record, as of , 2010, of the Existing Preferred Stock to vote at the special meeting in favor of the following Proposed Amendments: |
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• to eliminate the rights of the holders of the Existing Preferred Stock to require Emmis to redeem all or a portion of their shares on the first anniversary after the occurrence of certain going private transactions and nominate directors to Emmis’ board of directors; and | ||
• provide for the automatic conversion upon the proposed merger of JS Acquisition with and into Emmis, with Emmis surviving the merger (i) of the Existing Preferred Stock (other than the Existing Preferred Stock held by Alden) not exchanged for the New Notes into that amount of consideration that would be paid to holders of Class A Common Stock into which the Existing Preferred Stock was convertible immediately prior to the Merger and (ii) of the Existing Preferred Stock held by Alden into the New Notes. | ||
The affirmative vote of holders of at least 2/3 of the outstanding shares of Existing Preferred Stock will be required in order to adopt the Proposed Amendments. Holders of Existing Preferred Stock must submit proxies in the Proxy Solicitation in order to vote in favor of the Proposed Amendments. As of the record date, there were 2,809,170 shares of Existing Preferred Stock outstanding. | ||
Under the Alden Purchase Agreement, the Alden Fund, which holds approximately 41.4% of the votes eligible to be cast by holders of the Existing Preferred Stock with respect to the Proposed Amendments, has agreed to vote in favor of the Proposed Amendments. | ||
Common Stock | We are also soliciting proxies from holders of record, as of , 2010, of Class A and Class B Common Stock, voting together as a single class, to vote at the special meeting in favor of the following Proposed Amendments: | |
• to eliminate the rights of the holders of the Existing Preferred Stock to require Emmis to redeem all or a portion of their shares on the first anniversary after the occurrence of certain going private transactions and nominate directors to Emmis’ board of directors; and | ||
• provide for the automatic conversion upon the proposed merger of JS Acquisition with and into Emmis, with Emmis surviving the merger (i) of the Existing Preferred Stock (other than the Existing Preferred Stock held by Alden) not exchanged for the New Notes into that amount of consideration that would be paid to holders of Class A Common Stock into which the Existing Preferred Stock was convertible immediately prior to the Merger and (ii) of the Existing Preferred Stock held by Alden into the New Notes. | ||
The affirmative vote of more shares of Common Stock, voting together as a single class, voting in favor than against the Proposed Amendments, assuming a quorum is present, will be required in order to adopt the Proposed Amendments. As of the record date, there were outstanding shares of Class A Common Stock, with one vote per share on the Proposed Amendments, and |
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shares of Class B Common Stock, with ten votes per share on the Proposed Amendments. | ||
As of the date of this Proxy Statement/Offer to Exchange, Mr. Smulyan directly owns shares of Common Stock entitling him to cast approximately 60.0% of the votes able to be cast by holders of Common Stock at the special meeting, and the Alden Fund directly owns shares of Common Stock entitling it to cast approximately 1.7% of the votes able to be cast by holders of Common Stock at the special meeting. Under the Alden Purchase Agreement, Mr. Smulyan has agreed to vote his shares of Common Stock in favor of the proposal to adopt the Proposed Amendments, and the Alden Fund has agreed to vote its shares of Common Stock in favor of the proposal to adopt the Proposed Amendments, so the proposal will be approved by the holders of the Common Stock. | ||
Abstentions and Broker Non-Votes | If you mark “abstain” on your proxy card, your shares will be counted as present for purposes of determining the presence of a quorum. If your shares of Common Stock or Existing Preferred Stock are held in “street name” or through nominees, brokers and other nominees will not be permitted to vote on the Proposed Amendments unless instructed by you since the Proposed Amendments are not “routine matters” for purposes of the NASDAQ rules. Proxies submitted by brokers and other nominees who do not indicate a vote for the proposal because the holders do not have discretionary voting authority and have not received instructions from the beneficial owners on how to vote on those proposals are called “broker non-votes.” Abstentions and broker non-votes will not affect the voting on the Proposed Amendments for shares of Class A and Class B Common Stock, but will have the same effect as voting against the Proposed Amendments for shares of Existing Preferred Stock. | |
Required Vote in order to Complete the Exchange Offer | In order to adopt the Proposed Amendments, the requisite vote of holders of both the Existing Preferred Stock and the Common Stock, as described above, will be required.It is a condition precedent to the completion of the Exchange Offer that the Required Vote be obtained and the Proposed Amendments be adopted and effected. | |
Revocation of Proxies | You may change your vote if you send in a later-dated, signed proxy card or a written revocation with respect to your shares of Common Stock or Existing Preferred Stock, as applicable, prior to the special meeting. You can also attend the special meeting in person and give oral notice of your intention to vote in person. |
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Issuer | Emmis Communications Corporation | |
Title of Security | 12% PIK Senior Subordinated Notes due 2017 | |
Maximum Aggregate Principal Amount | $84,275,100, assuming all holders of the Existing Preferred Stock tender their shares. | |
Maturity | , 2017, unless redeemed earlier by Emmis as described under the heading “Description of the New Notes — Optional Redemption.” | |
Interest | 12.00% per annum accruing from the date of issuance, payable in- kind, in arrears, annually on each , beginning on , 2011. | |
Subsidiary Guarantees | The New Notes will not be guaranteed by any of Emmis’ subsidiaries. | |
Security | The New Notes will not be secured by any assets. | |
Mandatory Redemption | Except as provided below, Emmis is not required to make mandatory redemption or sinking fund payments with respect to the New Notes. |
If the New Notes would otherwise constitute “applicable high yield discount obligations” within the meaning of Section 163(i)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), at the end of each accrual period ending after the fifth anniversary of the New Notes’ issuance (each, an “AHYDO Redemption Date”), Emmis will be required to redeem for cash a portion of each New Note then outstanding equal to the “mandatory principal redemption amount” (such redemption, a “mandatory principal redemption”). The redemption price for the portion of each New Note redeemed pursuant to a mandatory principal redemption will be 100% of the principal amount of such portion plus any accrued interest thereon to the date of redemption. The “mandatory principal redemption amount” means the portion of a New Note required to be redeemed to prevent such New Note from being treated as an “applicable high yield discount obligation” within the meaning of Section 163(i)(1) of the Code. No partial redemption or repurchase of the New Notes prior to any AHYDO Redemption Date pursuant to any other provision of the indenture governing the New Notes will alter Emmis’ obligations to make the mandatory principal redemption with respect to any New Notes that remain outstanding on any AHYDO Redemption Date. |
Optional Redemption | Emmis may redeem the New Notes, in whole at any time or in part from time to time, at its option on not less than 30 nor more than 60 days’ notice, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but not including, the date of |
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redemption. See “Description of the New Notes — Optional Redemption.” | ||
Ranking | The New Notes will be senior subordinated obligations of Emmis and will rank upon liquidation: | |
• senior in right of payment to any of Emmis’ existing and future indebtedness that is expressly subordinated in right of payment to the New Notes, including the 15% PIK Junior Subordinated Notes due 2017 (“Junior Subordinated Notes”) that may be issued in connection with a redemption of the Exchanged ECC Shares; | ||
• senior in right of payment to any shares of Existing Preferred Stock not tendered in the Exchange Offer; | ||
• subordinated in right of payment to any of Emmis’ existing and future senior indebtedness, including Emmis’ guarantee of the Credit Facility; | ||
• equal in right of payment with any of Emmis’ existing and future senior subordinated indebtedness; | ||
• effectively subordinated to any of Emmis’ future secured indebtedness, to the extent of the assets securing such indebtedness; and | ||
• effectively subordinated to all indebtedness, liabilities (including trade payables) and preferred stock of Emmis’ subsidiaries, including under the Credit Facility. | ||
On an as-adjusted basis, as of February 28, 2010, the New Notes would be effectively subordinated to $341.2 million of indebtedness under the Credit Facility, with $17.1 million of additional indebtedness available for borrowing under the Credit Facility, net of $0.9 million of letters of credit, and $146.1 million of other liabilities. Because of Emmis’ guarantee of the Credit Facility, the New Notes would also be subordinated in right of payment to that guarantee. | ||
The ability of Emmis to prepay the New Notes (including its right to optionally redeem New Notes or the requirement that it mandatorily redeem the New Notes) is also subject to limitations, as described under “Description of the New Notes — Subordination.” | ||
Covenants | The indenture for the New Notes will not contain any material restrictive covenants. See “Description of the New Notes.” | |
Reports | The indenture for the New Notes will not contain any requirement to file with the SEC or provide periodic or current reports, except as may be required under the Trust Indenture Act of 1939. Based on currently applicable interpretations of the TIA and the lack of rules promulgated thereunder, we would not be required to file or provide any such reports. See “Risk Factors — Risks Related to the Exchange Notes — After completion of the Transactions, we may no longer be a company that has any classes of securities listed on a stock exchange or registered under the Exchange Act, and we |
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will not be required, under the indenture governing the New Notes, to provide any such reports to holders of the New Notes.” | ||
Effects on Rights of Holders | The rights of holders of New Notes, which will be indebtedness of Emmis, will be significantly different from those of holders of Existing Preferred Stock, which are equity securities of Emmis. For more information on these differences, please see “The Exchange Offer — Comparison of Rights of Holders of Existing Preferred Stock to Rights of Holders of New Notes.” | |
Form and Denomination | The New Notes will be represented by one or more global notes, deposited with a trustee as a custodian for the Depository Trust Company and registered in the name of Cede & Co., DTC’s nominee. Beneficial interests in the global notes will be shown on, and any transfers will be effective only through, records maintained by DTC and its participants. Interests in the global notes will be issued in minimum denominations of $1.00 and integral multiples of $1.00. No cash will be paid in lieu of any fractional New Notes that would otherwise be issuable. | |
Securities Law Restrictions | The Exchange Offer will be exempt from registration under the Securities Act under Section 3(a)(9) of that Act. All holders of Existing Preferred Stock are eligible to participate in the Exchange Offer. | |
If your shares of Existing Preferred Stock are freely transferable without registration under the Securities Act, any New Notes you receive in the Exchange Offer will also be freely transferable. | ||
No Registration Rights | The New Notes will not have any registration rights. |
Trust Indenture Act of 1939 | The indenture governing the New Notes will be qualified under the Trust Indenture Act of 1939 (the “TIA”), and the terms of the New Notes and the indenture governing the New Notes will include those stated in the New Notes and such indenture and those made part of such indenture by reference to the TIA. Emmis has filed an application onForm T-3 to qualify the indenture under the TIA. |
No Listing | We will not list the New Notes for trading on any securities exchange or automated quotation system. | |
Use of Proceeds | We will not receive any proceeds from the Exchange Offer. | |
Governing Law | The indenture for the New Notes will be governed by New York law. |
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By: | Jeffrey H. Smulyan |
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• | determining that it was advisable and fair to and in the best interests of Emmis and unaffiliated shareholders who hold Class A Common Stock for JS Parent to acquire Emmis on the terms and subject to the conditions set forth in the Merger Agreement, |
• | approving and adopting the Merger Agreement, the JS Acquisition Tender Offer and the Merger, and |
• | recommending that unaffiliated shareholders who hold Class A Common Stock accept the JS Acquisition Offer, tender their shares of Class A Common Stock in the JS Acquisition Tender Offer and approve the Merger and the Merger Agreement. |
• | determined that it was advisable and fair to and in the best interests of Emmis and unaffiliated shareholders who own Common Stock for JS Parent to acquire Emmis on the terms and subject to the conditions set forth in the Merger Agreement, |
• | approved and adopted the Merger Agreement and the Merger and |
• | recommended that unaffiliated shareholders who own Class A Common Stock accept the JS Acquisition Tender Offer, tender their shares of Class A Common Stock in the JS Acquisition Tender Offer and approve the Merger and the Merger Agreement. At that same meeting, the board of directors of Emmis also unanimously adopted various other resolutions and granted authority and approval with respect to various other matters in connection with the Transactions including, among other things, the determinations required under the Merger Agreement with respect to the Indiana anti-takeover statutes. |
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Existing Preferred Stock | New Notes | |
Equity; liquidation preference senior to that of Common Stock, but subordinated in right of payment to indebtedness and other liabilities, including trade payables, of Emmis, including the New Notes and the Junior Subordinated Notes, if any. | Debt; holders have a right to receive a specified principal amount that is senior in right of payment to holders of Emmis’ equity, including the Existing Preferred Stock, | |
No maturity date. | The New Notes mature on , 2017, unless redeemed earlier by Emmis. A failure to pay principal when due is an event of default under the New Notes. |
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Existing Preferred Stock | New Notes | |
No interest is payable on the Existing Preferred Stock, but, holders of Existing Preferred Stock are entitled to cumulative cash dividends prior to any payment of dividends on Common Stock; Emmis is in arrears in the payment of dividends to holders of the Existing Preferred Stock and is currently precluded from paying dividends under the Credit Facility. There is no remedy for the failure to pay dividends on the Existing Preferred Stock other than the right to nominate directors to the Emmis board of directors, as described below. | Interest will accrue at 12.00% per annum from the date of issuance, payable in arrears, payable in kind, annually on each , beginning on , 2011. A failure to pay interest when due may result in an event of default under the New Notes if not cured within the applicable grace period. | |
As of April 15, 2010, an aggregate of $4.87 of dividends per share of Existing Preferred Stock had accrued and had not been paid. | Any holder of Existing Preferred Stock who is issued New Notes in the Exchange Offer will not be paid any accrued and unpaid dividends on the Existing Preferred Stock that is tendered into the Exchange Offer. | |
Holders of Existing Preferred Stock have the right to require Emmis to redeem all or a portion of their shares on the first anniversary after the occurrence of certain going private transactions. This right is proposed to be removed as part of the Proposed Amendments. | Holders of New Notes will have no corresponding right. | |
Holders of Existing Preferred Stock have the right to nominate directors to Emmis’ board of directors if the dividends payable on the Existing Preferred Stock are in arrears for six consecutive quarterly periods. This right is proposed to be removed as part of the Proposed Amendments. | Holders of New Notes will have no corresponding right, although a failure to pay interest when due may result in an event of default under the New Notes if not cured within the applicable grace period. | |
Holders of Existing Preferred Stock have the right to convert each share of Existing Preferred Stock into 2.44 shares of Class A Common Stock. The Proposed Amendments will add a provision that will, upon a merger, cause each share of Existing Preferred Stock to be converted automatically into the consideration to which the holder of such share would be entitled had it converted such share into Class A Common Stock immediately prior to such merger. | Holders of New Notes will have no conversion rights and will not be subject to any mandatory conversion provisions. | |
Holders of Existing Preferred Stock have voting rights on certain matters submitted to shareholders of Emmis. | Holders of New Notes will have no voting rights with respect to matters submitted to shareholders of Emmis. | |
The Existing Preferred Stock is listed on the NASDAQ Global Select Market. | The New Notes will not be listed on any securities exchange or automated quotation system, and there is no assurance that a liquid trading market in the New Notes will develop. |
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• | the effectiveness of the Proposed Amendments are a condition to the JS Acquisition Tender Offer which can only occur if the Proposed Amendments are adopted; | |
• | the Exchange Offer is designed to increase the likelihood that the Proposed Amendments will be adopted; |
• | The $30.00 principal amount of New Notes per $50.00 of liquidation preference of Existing Preferred Stock represents a premium of approximately 43% over the closing price of the Existing Preferred Stock on April 23, 2010, the last day prior to the public announcement of JS Acquisition’s intent to make the Exchange Offer, and a premium of approximately 73% over the average closing price of the Existing Preferred Stock for the 30 trading days immediately preceding that date and a 133% premium over the average closing price of the Existing Preferred Stock for the 180 trading days immediately proceeding that date. In 1999, the Existing Preferred Stock reached an all time high closing price of $82.59 per share, and in 2009, the Existing Preferred Stock reached an all time low closing price of $0.95 per share. |
• | the possible decline in the market price of our Existing Preferred Stock if the JS Acquisition Tender Offer is withdrawn and the Transactions are abandoned; |
• | over the past two years, the Existing Preferred Stock has never traded at a per share price above the $30.00 principal amount of New Notes to be delivered in respect of each share of Existing Preferred Stock in the Exchange Offer; |
• | the stated interest rate on the New Notes is significantly higher than the present dividend rate on our Existing Preferred Stock; |
• | the improved contractual ranking, as a debt claim, upon liquidation of the New Notes compared to the Existing Preferred Stock and the fixed contractual maturity date of the New Notes compared to the perpetual nature of the Existing Preferred Stock; |
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• | the fact that the indenture for the New Notes contain events of default, acceleration provisions and other customary remedies available to subordinated debt holders, compared to the power to elect board members as the sole remedy for failure to pay dividends on the Existing Preferred Stock; | |
• | the fact that, except in the Exchange Offer, holders of our Existing Preferred Stock will not likely have an opportunity in the foreseeable future to dispose of their shares at prices other than those available in private or open market transactions (to the limited extent that our trading market may continue to exist) because we plan to continue to operate Emmis as a going concern and have no current plans of disposing of the entire business or causing a liquidation of our assets; | |
• | the fact that Emmis is unable to achieve a going private transaction or a liquidation of all or substantially all of our assets without the approval of Mr. Smulyan, in his capacity as controlling shareholder, and Mr. Smulyan has stated that, in such capacity, he will not approve a competing transaction to the Transaction; | |
• | the fact that Emmis had received no firm offers for the acquisition of Emmis in the past two years; | |
• | the extremely limited trading market for the Existing Preferred Stock, including limited liquidity, relatively low prices and trading volume; | |
• | the considerable costs associated with remaining a public company and maintaining the NASDAQ listing of the Existing Preferred Stock and that based on the current number of holders of our Existing Preferred Stock we would be permitted to terminate our Exchange Act registration and the NASDAQ listing of the Existing Preferred Stock even without the Exchange Offer or the Proposed Amendments; | |
• | the likely further reduction in the liquidity for our Existing Preferred Stock should we terminate our Exchange Act registration; | |
• | the fact that Emmis is presently prohibited from paying dividends on the Existing Preferred Stock as a result of restrictions in Emmis Operating’s Credit Facility and that it is unlikely that the holders of our Existing Preferred Stock will receive payment of dividends or that Emmis will have the ability to redeem the Existing Preferred Stock in the foreseeable future; | |
• | the fact that the Exchange Offer is a voluntary transaction in which the holders of two-thirds of the Existing Preferred Stock, voting as a separate class, may choose whether to participate; | |
• | the Exchange Offer and Proposed Amendments fully comply with the provisions of our amended and restated articles of incorporation governing the rights of holders of our Existing Preferred Stock; | |
• | no dissenters’ or appraisal rights are available to holders of Existing Preferred Stock who do not participate in the Exchange Offer; | |
• | the fact that, based on public filings, more than 80% of our Existing Preferred Stock is held by just 11 institutional owners who are capable of evaluating the financial and other ramifications of both the Exchange Offer and the Proposed Amendments; |
• | the possible significant decrease in the value of the Existing Preferred Stock following the completion of the Exchange Offer; | |
• | the likely reduction in the liquidity for any remaining shares of our Existing Preferred Stock and the potential significant reduction in the value of our Existing Preferred Stock that remains pending the Merger; | |
• | the fact that Emmis will likely no longer be a company required to file current or periodic reports with the SEC following completion of the Transactions; |
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• | holders of our Existing Preferred Stock who do not participate in the Exchange Offer will receive a different type of consideration in the Merger than those who participate which could be considerably less than the value of the New Notes received by those who participate in the Exchange Offer; | |
• | that if the Proposed Amendments are adopted and effected, the Merger will result in the conversion of each share of Existing Preferred Stock, other than the shares held by the Alden Fund, into the right to receive $5.856 in cash (without interest and less any applicable withholding taxes), which is equal to the $2.40 in cash (without interest and less any applicable withholding taxes) per share that holders of the Class A Common Stock will receive in the Merger times 2.44, which is the number of shares of Class A Common Stock into which each share of Existing Preferred Stock can be converted and that such amount may be less than the value of the New Notes offered in the Exchange Offer; | |
• | that if the Proposed Amendments are adopted and effected, holders of the Existing Preferred Stock will no longer be entitled to appoint directors to our board of directors if sufficient dividends on the Existing Preferred Stock are accrued and unpaid; | |
• | that the Proposed Amendments would also remove the requirement for Emmis to redeem the Existing Preferred Stock following specified going-private transactions; | |
• | that the New Notes may be considered to have been issued with original issue discount for U.S. federal income tax purposes, in which case U.S. holders will be required to include such OID in gross income on a constant yield to maturity basis in advance of the receipt of cash payment thereof and regardless of such holder’s method of accounting. See “Certain Material U.S. Federal Income Tax Consequences”; | |
• | that the New Notes, like the Existing Preferred Stock, contain no material restrictive covenants; | |
• | that the New Notes contain no cash payment requirement prior to maturity; and | |
• | the conflicts of interest involved in the Transaction and the fact that the terms of Exchange Offer and Proposed Amendments were delivered to the board of directors of Emmis by JS Acquisition as a condition of the JS Acquisition Tender Offer and did not result from arm’s-length negotiations, and no representative of any of the holders of Existing Preferred Stock was involved in the deliberations of the board of directors of Emmis. |
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• | an extraordinary corporate transaction, such as a merger, reorganization or liquidation involving Emmis, | |
• | any material change in the present dividend rate or policy or indebtedness or capitalization of Emmis or | |
• | any other material change in Emmis’ corporate structure or business. |
• | as a privately-held company, Emmis will have greater ability to take larger risks and more aggressively pursue opportunities in the industry than it is able to do while being a public company without risk-adjusted capital investments; |
• | as a privately-held company, Emmis will have greater flexibility to operate with a view to long-term goals and strategies without focusing on short-term operating earnings and its associated implications to |
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public shareholders, and such long-term focus will allow Emmis to make investments in digital media and make other long-term capital expenditures; |
• | by ceasing to be a public company, Emmis will benefit from the elimination of the additional burdens on Emmis’ management, as well as the expenses associated with being a public company, including the burdens of preparing periodic reports under federal securities laws and complying with other applicable securities law requirements (including the Sarbanes-Oxley Act of 2002), complying with stock exchange listing requirements and maintaining investor relations functions; and | |
• | as a privately-held company, less information will be required to be provided publicly for use by Emmis’ competitors. |
• | a cash tender offer followed by a merger is a transaction structure that is commonly used to effect an acquisition of the majority interests in a publicly traded company by a controlling shareholder; | |
• | Emmis’ shareholders that tender their shares of Common Stock in the JS Acquisition Tender Offer or that tender their shares of Existing Preferred Stock in the Exchange Offer would likely receive their consideration sooner in a tender offer than in a negotiated merger transaction with Emmis that is not preceded by a tender offer; | |
• | the JS Acquisition Tender Offer does not compel any Emmis shareholder to sell its Shares, and the JS Acquisition Tender Offer and the Merger will not be effected unless a minimum tender condition is satisfied; |
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• | for a controlling shareholder, such as Mr. Smulyan, who is seeking to acquire shares of Common Stock from a large number of public shareholders, open-market or privately-negotiated purchases would be less efficient, more complex and more time consuming than a tender offer; and | |
• | an exchange offer, such as the Exchange Offer, could be an inducement for holders of Existing Preferred Stock to vote in favor of the Proposed Amendments, which are necessary for the Transactions to be completed. |
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Name | Position | |
Jeffrey H. Smulyan | Director, Chairman of the Board of Directors, Chief Executive Officer and President | |
Patrick M. Walsh | Director, Executive Vice President, Chief Financial Officer and Chief Operating Officer | |
Richard F. Cummings | President of Radio Programming | |
J. Scott Enright | Executive Vice President, General Counsel and Secretary | |
Gregory T. Loewen | Chief Strategy Officer and President — Publishing Division |
Class A Common | Merger Cash | |||||||||||
Name | Stock Options | Exercise Price | Consideration | |||||||||
Bayh, Susan B. | 7,317 | 0.28 | $ | 15,512 | ||||||||
7,317 | 1.70 | 5,122 |
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Class A Common | Merger Cash | |||||||||||
Name | Stock Options | Exercise Price | Consideration | |||||||||
7,317 | 8.71 | 0 | ||||||||||
7,317 | 8.84 | 0 | ||||||||||
7,317 | 12.19 | 0 | ||||||||||
14,635 | 13.56 | 0 | ||||||||||
14,635 | 14.21 | 0 | ||||||||||
14,635 | 15.48 | 0 | ||||||||||
Cummings, Richard F. | 87,500 | 0.30 | $ | 184,188 | ||||||||
87,500 | 1.14 | 110.250 | ||||||||||
43,904 | 2.95 | 0 | ||||||||||
43,904 | 8.21 | 0 | ||||||||||
43,904 | 11.17 | 0 | ||||||||||
73,174 | 11.21 | 0 | ||||||||||
43,904 | 12.80 | 0 | ||||||||||
73,174 | 17.44 | 0 | ||||||||||
73,174 | 19.82 | 0 | ||||||||||
73,174 | 19.90 | 0 | ||||||||||
Enright, J. Scott | 30,000 | 0.30 | $ | 63,150.00 | ||||||||
120,000 | 0.36 | 245,400.00 | ||||||||||
10,000 | 2.95 | 0 | ||||||||||
7,900 | 8.21 | 0 | ||||||||||
7,317 | 11.17 | 0 | ||||||||||
13,903 | 11.22 | 0 | ||||||||||
7,317 | 12.81 | 0 | ||||||||||
14,378 | 17.45 | 0 | ||||||||||
11,707 | 19.82 | 0 | ||||||||||
13,170 | 19.90 | 0 | ||||||||||
Fiddick, Paul W. | 55,000 | 0.30 | $ | 115,775 | ||||||||
55,000 | 1.14 | 69,300 | ||||||||||
21,952 | 2.95 | 0 | ||||||||||
21,952 | 8.21 | 0 | ||||||||||
21,952 | 11.17 | 0 | ||||||||||
10,976 | 11.21 | 0 | ||||||||||
38,416 | 12.80 | 0 | ||||||||||
38,416 | 17.44 | 0 | ||||||||||
Kaseff, Gary L. | 175,000 | 0.30 | $ | 368,375 | ||||||||
36,587 | 2.95 | 0 | ||||||||||
36,587 | 8.21 | 0 | ||||||||||
36,587 | 11.17 | 0 | ||||||||||
73,174 | 11.21 | 0 | ||||||||||
36,587 | 12.80 | 0 | ||||||||||
73,174 | 17.44 | 0 | ||||||||||
58,539 | 19.82 | 0 | ||||||||||
73,174 | 19.90 | 0 | ||||||||||
58,539 | 24.17 | 0 | ||||||||||
Leventhal, Richard A. | 7,317 | 0.28 | $ | 15,512 | ||||||||
7,317 | 1.70 | 5,122 | ||||||||||
7,317 | 8.71 | 0 | ||||||||||
7,317 | 8.84 | 0 | ||||||||||
7,317 | 12.19 | 0 | ||||||||||
14,635 | 13.56 | 0 | ||||||||||
14,635 | 14.21 | 0 | ||||||||||
14,635 | 15.48 | 0 |
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Class A Common | Merger Cash | |||||||||||
Name | Stock Options | Exercise Price | Consideration | |||||||||
Loewen, Gregory | 40,000 | 0.30 | $ | 84,200 | ||||||||
70,000 | 0.90 | 105,000 | ||||||||||
40,000 | 1.14 | 50,000 | ||||||||||
16,500 | 2.95 | 0 | ||||||||||
16,500 | 8.21 | 0 | ||||||||||
Lund, Peter | 7,317 | 0.28 | $ | 15,512 | ||||||||
7,317 | 1.70 | 5,122 | ||||||||||
7,317 | 8.71 | 0 | ||||||||||
7,317 | 8.84 | 0 | ||||||||||
7,317 | 12.19 | 0 | ||||||||||
14,635 | 14.21 | 0 | ||||||||||
14,635 | 15.48 | 0 | ||||||||||
Nathanson, Greg | 7,317 | 0.28 | $ | 15,512 | ||||||||
7,317 | 1.70 | 5,122 | ||||||||||
7,317 | 8.71 | 0 | ||||||||||
7,317 | 8.84 | 0 | ||||||||||
7,317 | 12.19 | 0 | ||||||||||
14,635 | 13.56 | 0 | ||||||||||
14,635 | 14.21 | 0 | ||||||||||
14,635 | 15.48 | 0 | ||||||||||
14,635 | 19.82 | 0 | ||||||||||
Smulyan, Jeffrey(1) | 150,000 | 0.30 | $ | 315,750 | ||||||||
150,000 | 1.14 | 189,000 | ||||||||||
146,349 | 2.95 | 0 | ||||||||||
146,349 | 8.21 | 0 | ||||||||||
292,699 | 11.17 | 0 | ||||||||||
292,699 | 12.80 | 0 | ||||||||||
439,049 | 17.44 | 0 | ||||||||||
Sorrel, Lawrence B. | 7,317 | 0.28 | $ | 15,512 | ||||||||
7,317 | 1.70 | 5,122 | ||||||||||
7,317 | 8.71 | 0 | ||||||||||
7,317 | 8.84 | 0 | ||||||||||
7,317 | 12.19 | 0 | ||||||||||
14,635 | 13.56 | 0 | ||||||||||
14,635 | 14.21 | 0 | ||||||||||
14,635 | 15.48 | 0 | ||||||||||
Thoe, Gary A. | 35,000 | 0.30 | $ | 73,675 | ||||||||
35,000 | 1.14 | 44,100 | ||||||||||
12,806 | 2.95 | 0 | ||||||||||
12,806 | 8.21 | 0 | ||||||||||
10,976 | 11.17 | 0 | ||||||||||
21,953 | 11.21 | 0 | ||||||||||
10,976 | 12.80 | 0 | ||||||||||
21,953 | 17.44 | 0 | ||||||||||
14,635 | 19.82 | 0 | ||||||||||
14,635 | 19.90 | 0 | ||||||||||
Walsh, Patrick M. | 250,000 | 0.42 | $ | 493,750 | ||||||||
29,269 | 2.95 | 0 | ||||||||||
29,269 | 8.21 | 0 | ||||||||||
14,635 | 8.30 | 0 |
(1) | All of the stock options held by Mr. Smulyan will be contributed to Emmis and cancelled immediately prior to the effective time of the Merger. |
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Number of | Possible | |||||||||||||
Shares of | Consideration if | |||||||||||||
Class A | Tendered in | |||||||||||||
Common | JS Acquisition | Number of | ||||||||||||
Name | Ownership Form | Stock Held | Tender Offer | Rollover Shares | ||||||||||
Bayh, Susan B. | Direct | 59,200 | $ | 142,080.00 | 0 | |||||||||
Cummings, Richard F. | Indirect (For the Benefit of Children) | 8,260 | $ | 19,824.00 | 0 | |||||||||
Indirect (By 401(k) Plan) | 6,429 | 15,430.18 | 0 | |||||||||||
Direct | 155,840 | 374,016.00 | 142,669 | |||||||||||
Enright, J. Scott | Indirect (By 401(k) Plan) | 3,402 | $ | 8,165.37 | 0 | |||||||||
Direct | 9,528 | 22,867.20 | 6,528 | |||||||||||
Fiddick, Paul W. | Indirect (By 401(k) Plan) | 739 | $ | 1,772.40 | 0 | |||||||||
Direct | 36,133 | 86,719.20 | 29,548 | |||||||||||
Kaseff, Gary L. | Indirect (For the Benefit of Children) | 1,346 | $ | 3,230.40 | 0 | |||||||||
Indirect (For the Benefit of Spouse) | 3,411 | 8,186.40 | 3,411 | (1) | ||||||||||
Indirect (By 401(k) Plan) | 2,395 | $ | 5,748.74 | 0 | ||||||||||
Direct | 134,887 | 323,728.80 | 123,911 | |||||||||||
Leventhal, Richard A. | Indirect (By Spouse) | 3,000 | $ | 7,200.00 | 3,000 | (2) | ||||||||
Indirect (By Davstan Trading) | 17,600 | $ | 42,240.00 | 0 | ||||||||||
Direct | 196,321 | 471,170.40 | 191,931 | |||||||||||
Loewen, Gregory | Indirect (By 401(k) Plan) | 223 | $ | 535.06 | 0 | |||||||||
Direct | 25,378 | 60,907.20 | 20,428 | |||||||||||
Lund, Peter | Direct | 190,905 | $ | 458,172.00 | 0 | |||||||||
Nathanson, Greg | Indirect (By Trusts for Children) | 44,000 | $ | 105,600.00 | 0 | |||||||||
Indirect (By Family Trust) | 256,312 | 615,149.00 | 256,312 | |||||||||||
Direct | 82,861 | 198,866.40 | 76,276 | |||||||||||
Smulyan, Jeffrey | Direct | 9,755 | $ | 23,412.00 | 0 | |||||||||
Indirect (By 401(k) Plan) | 8,441 | 20,259.38 | 0 | |||||||||||
Indirect (By Trusts for Children) | 11,120 | 26,688.00 | 0 | |||||||||||
Indirect (by Trusts for Niece) | 3,000 | 7,200.00 | 0 | |||||||||||
Smulyan Family Foundation | 30,625 | 73,500.00 | 0 | |||||||||||
Sorrel, Lawrence B. | Direct | 219,866 | $ | 527,678.40 | 0 | |||||||||
Thoe, Gary A. | Indirect (By 401(k) Plan) | 650 | $ | 1,559.47 | 0 | |||||||||
Direct | 30,664 | 73,593.60 | 0 | |||||||||||
Walsh, Patrick M. | Direct | 39,608 | $ | 95,059.20 | 30,828 | |||||||||
Indirect (By 401(k) Plan) | 4,017 | 9,641.36 | 0 | |||||||||||
(1) | Rollover shares held by Vicky Myers-Kaseff. | |
(2) | Rollover shares held by Barbara Leventhal. |
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Legal, Accounting and Other Professional Fees | $ | 500,000 | ||
Printing and Mailing Costs | $ | 100,000 | ||
Information Agent | $ | 40,000 | ||
Filings Fees | $ | 25,000 | ||
Miscellaneous | $ | 35,000 | ||
Total | $ | 700,000 | ||
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Year Ending February 28,(1) | ||||||||||||
2011 Projected | 2011 Budget | 2010 Actual | ||||||||||
(Dollars in thousands) | ||||||||||||
Revenues: | ||||||||||||
Radio | $ | 187,013 | $ | 189,467 | $ | 177,566 | ||||||
Publishing | 66,672 | 65,685 | 65,000 | |||||||||
Total Revenues | 253,685 | 255,152 | 242,566 | |||||||||
Station Operating Expenses: | ||||||||||||
Radio | 135,440 | 136,314 | 138,780 | |||||||||
Publishing | 62,758 | 62,638 | 62,745 | |||||||||
Total Station Operating Expenses | 198,198 | 198,952 | 201,525 | |||||||||
Less: Corporate Overhead | 11,514 | 10,909 | 11,594 | |||||||||
Less: Minority Interest | 4,391 | 4,241 | 4,176 | |||||||||
Non-GAAP EBITDA | $ | 39,582 | $ | 41,050 | $ | 25,271 | ||||||
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(1) | The financial information reflected above is not prepared in accordance with generally accepted accounting principles (GAAP). The expenses shown above do not include depreciation and amortization expense of $12,000 for the projected and budget 2011 fiscal year or noncash compensation expense of $2,400 for the projected and budget 2011 fiscal year. The financial information for fiscal 2011 does not include expenses detailed under “— Fees and Expenses” and transaction expenses associated with the work of the Committee. Also, for comparison purposes, we have excluded severance-related costs totaling $7,584 in the actual year ended February 28, 2010. |
Projected Market | Projected Emmis | |||||||
Revenue Growth Rate | Revenue Growth Rate | |||||||
New York | 3 | % | 8 | % | ||||
Los Angeles | 3 | % | 9 | % | ||||
Chicago | 2 | % | 2 | % | ||||
Austin | 2 | % | 3 | % | ||||
St. Louis | 1 | % | 3 | % | ||||
Indianapolis | (2 | )% | 8 | % | ||||
Terre Haute | 2 | % | 4 | % |
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• | require Emmis to dedicate a substantial portion of our cash flow from operations to interest and principal payments on our indebtedness, reducing the availability of our cash flow for other purposes, such as capital expenditures, acquisitions or working capital; | |
• | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; | |
• | increase our vulnerability to general adverse economic and industry conditions; | |
• | place Emmis at a disadvantage compared to our competitors who have less debt; and | |
• | limit our ability to borrow additional funds. |
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• | any merger, liquidation or sale of all or substantially all assets of JS Parent, Emmis or Emmis Operating Company (“Emmis Operating”); | |
• | the incurrence of indebtedness by JS Parent, Emmis, Emmis Operating, or any of their subsidiaries or the issuance of equity securities by Emmis or Emmis Operating, or any of their subsidiaries, except in specified circumstances including indebtedness incurred or equity securities issued to redeem or otherwise refinance the Credit Facility, the Junior Subordinated Notes, the New Notes, the JS Parent Preferred Interests or the JS Parent Common Interests; | |
• | amendments to the operating agreement, charter, by-laws or similar document of JS Parent, Emmis or Emmis Operating; |
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• | as long as Alden Media and its permitted transferees own JS Parent Preferred Interests or own or have the right to acquire Junior Subordinated Notes, the payment of distributions by JS Parent; | |
• | commencing any proceedings in bankruptcy with respect to JS Parent, Emmis, Emmis Operating or any subsidiary of Emmis Operating; | |
• | transactions with affiliates (other than existing arrangements and amendments and replacements of those arrangements) other than Emmis and its subsidiaries; | |
• | any redemption or repurchase of equity securities of JS Parent or Emmis, subject to specified exceptions; | |
• | acquiring specified assets, including any assets or businesses for an aggregate price in excess of $5 million; | |
• | any sale of assets other than in the ordinary course of business or as permitted under and applied in accordance with the Credit Facility in which the net cash proceeds are used to repay, redeem, exchange or refinance the Credit Facility, the New Notes, the Junior Subordinated Notes or the JS Parent Preferred Interests; and | |
• | permitting liens on any of the common stock of Emmis or any of its subsidiaries, except in specified circumstances, any activity which would pose a material risk that JS Parent may be treated as engaged in a trade or business for federal income tax purposes. |
• | incur additional indebtedness; | |
• | incur liens; | |
• | enter into negative pledges; | |
• | make investments; | |
• | make restricted payments; | |
• | amend, prepay, redeem or repurchase indebtedness; | |
• | merge, consolidate or sell assets or enter into other business combination transactions; | |
• | enter into sale and leaseback arrangements; | |
• | use land or permit land to be used in violation of environmental law; and | |
• | enter into transactions with affiliates. |
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• | incurring additional indebtedness; | |
• | making dividends, including to pay dividends on, or to repurchase or retire, the JS Parent Preferred or JS Parent Common Interests; | |
• | repurchasing or retiring our or our direct or indirect parents’ equity interests, including the JS Parent Preferred Interests; | |
• | prepaying or paying cash interest on, junior indebtedness, including the Junior Subordinated Notes; | |
• | incurring liens; | |
• | making investments; | |
• | selling or otherwise disposing of assets; | |
• | acquiring assets or businesses; | |
• | permitting restrictions on dividends by subsidiaries of Emmis; | |
• | entering into transactions with affiliates; | |
• | merging, consolidating or selling all or substantially all of our assets; | |
• | experiencing a change of control; or | |
• | entering additional lines of business. |
• | our operating performance and financial condition; | |
• | the interest of securities dealers in making a market; and | |
• | the market for similar securities. |
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• | received less than reasonably equivalent value or fair consideration for the issuance of the New Notes or the incurrence of the guarantee and was insolvent or rendered insolvent by reason of such issuance or incurrence; | |
• | was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or | |
• | intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they mature. |
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• | the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; | |
• | the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or | |
• | it could not pay its debts as they become due. |
• | the original issue price for the Notes; and | |
• | that portion of the original issue discount that does not constitute “unmatured interest” for purposes of the U.S. Bankruptcy Code. |
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• | of the Existing Preferred Stock (other than the Existing Preferred Stock held by Alden) not exchanged for the New Notes into that amount of consideration that would be paid to holders of Class A Common Stock into which the Existing Preferred Stock was convertible immediately prior to the Merger, and | |
• | of the Existing Preferred Stock held by Alden into the New Notes. |
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• | satellite-delivered digital audio radio service, which has resulted in subscriber-based satellite radio services with numerous niche formats; | |
• | audio programming by cable systems, direct-broadcast satellite systems, personal communications systems, Internet content providers and other digital audio broadcast formats; | |
• | personal digital audio devices (e.g., audio via Wi-Fi, mobile phones, iPods®, iPhones®, WiMAX, the Internet and MP3 players); | |
• | in-band on-channel digital radio (i.e., HD digital radio), which provides multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services; and | |
• | low-power FM radio, which could result in additional FM radio broadcast outlets. |
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• | changing regulatory or taxation policies, including changes in tax policies that have been proposed by the Obama Administration related to foreign earnings; |
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• | currency exchange risks; | |
• | changes in diplomatic relations or hostility from local populations; | |
• | seizure of our property by the government or restrictions on our ability to transfer our property or earnings out of the foreign country; | |
• | potential instability of foreign governments, which might result in losses against which we are not insured; and | |
• | difficulty of enforcing agreements and collecting receivables through some foreign legal systems. |
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• | the Merger agreement not having been terminated in accordance with its terms; | |
• | no material breach by Emmis of its representations and warranties under the Merger agreement having occurred; | |
• | Emmis having performed and complied in all material respects with all covenants and agreements required by the Merger agreement; |
• | the valid tender without a valid withdrawal of shares of Class A Common Stock, that, when combined with the Rollover Shares and the shares of Common Stock beneficially owned by the Purchaser Group and the Alden Fund, will constitute a majority of the votes able to be cast with respect to the Merger (as defined below). Based on the number of outstanding shares as of May 17, 2010, a minimum of approximately 32.8% of our Class A Common Stock would need to be tendered and not withdrawn for this condition to be satisfied; |
• | the Committee not having made an adverse recommendation or an adverse change in its recommendation with respect to the JS Acquisition Tender Offer; |
• | the Alden Purchase Agreement remaining in full force and effect and the conditions to the closing of the transactions under the Alden Purchase Agreement having been satisfied or waived; |
• | obtaining the required votes for the Proposed Amendments; |
• | the effectiveness of the Proposed Amendments; |
• | there shall not have been instituted any action, proceeding or application by any U.S. or non-US. court, government or governmental authority or other U.S. or non-US. regulatory or administrative agency or commission (each, a “Governmental Entity”) which, directly or indirectly: |
° | challenges the acquisition by JS Acquisition of the Class A Common Stock, seeks to restrain, delay, enjoin, make illegal or otherwise prohibit the consummation of the JS Acquisition Tender Offer, the Exchange Offer or the Merger or seeks to obtain any material damages as a result of, or otherwise adversely affects, the JS Acquisition Tender Offer, the Exchange Offer or the Merger, | |
° | seeks to prohibit or impose material limitations on JS Acquisition’s acquisition, ownership or operation of all or any material portion of its or Emmis’ business or assets (including the business or assets of their respective affiliates and subsidiaries), or of all or any of the Class A Common Stock |
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(including, without limitation, the right to vote the Class A Common Stock purchased by JS Acquisition, on an equal basis with all other shares of Class A Common Stock, on all matters presented to the shareholders of Emmis), or seeks to compel JS Acquisition to dispose of or hold separate all or any material portion of its own or Emmis’ business or assets (including the business or assets of their respective affiliates and subsidiaries) as a result of the JS Acquisition Tender Offer, the Exchange Offer or the Merger, |
° | reasonably would be expected to have a material adverse effect on Emmis, or result in a diminution in the value of the Class A Common Stock or in the value of Emmis’ or JS Acquisition’s assets, in each case by more than $5 million or | |
° | seeks to impose any condition to the JS Acquisition Tender Offer, the Exchange Offer or the Merger that is materially burdensome to JS Acquisition; |
• | there shall not have been entered or issued any preliminary or permanent judgment, order, decree, ruling or injunction or any other action taken by any Governmental Entity which, directly or indirectly: |
° | restrains, delays, enjoins, makes illegal or otherwise prohibits the consummation of the JS Acquisition Tender Offer or the Merger or awards material damages as a result of, or otherwise adversely affects, the JS Acquisition Tender Offer, the Exchange Offer or the Merger, |
° | prohibits or imposes material limitations on JS Acquisition’s acquisition, ownership or operation of all or any material portion of its or Emmis’ business or assets (including the business or assets of their respective affiliates and subsidiaries), or of all or any of the Class A Common Stock (including, without limitation, the right to vote the Class A Common Stock purchased by JS Acquisition, on an equal basis with all other shares of Class A Common Stock, on all matters presented to the shareholders of Emmis), or compels JS Acquisition to dispose of or hold separate all or any material portion of its own or Emmis’ business or assets (including the business or assets of their respective affiliates and subsidiaries) as a result of the JS Acquisition Tender Offer, the Exchange Offer or the Merger, | |
° | reasonably would be expected to have a material adverse effect on Emmis, or result in a diminution in the value of the Class A Common Stock or in the value of Emmis’ or JS Acquisition’s assets, in each case by more than $5 million or | |
° | imposes any condition to the JS Acquisition Tender Offer, the Exchange Offer or the Merger that is materially burdensome to JS Acquisition; |
• | there shall not have been any statute, including without limitation any state anti-takeover statute, or any rule, decree, regulation, order or injunction, that is enacted, entered, enforced or deemed applicable or has become applicable or is asserted to be applicable directly or indirectly to the JS Acquisition Tender Offer, the Exchange Offer or the Merger that would, directly or indirectly, result in any of the consequences referred to in thesub-bullets of the preceding bullet; | |
• | JS Acquisition shall not have become aware that governmental or third-party consents, waivers or approvals necessary for the consummation of the JS Acquisition Tender Offer, the Exchange Offer or the Merger have not been obtained and the failure to obtain such consents, waivers or approvals would reasonably be expected to have a material adverse effect on Emmis; or | |
• | there shall have occurred any change, event or occurrence arising since the date that the JS Acquisition Tender Offer commenced that had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on Emmis. |
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• | due organization, valid existence and, to the extent applicable, good standing; | |
• | corporate power and authority to enter into and perform its obligations under, and the enforceability of, the Alden Purchase Agreement; | |
• | the absence of conflicts with or defaults under organizational documents, other contracts and applicable law; | |
• | the absence of governmental authorization needed to approve the Alden Purchase Agreement and the Transactions; | |
• | the absence of litigation that would materially impair its ability to complete the Transactions; | |
• | the absence of any agreement to pay broker or other similar fees; and | |
• | the exclusivity of the representations and warranties made. |
• | its capital structure; | |
• | the operations of newly-formed entities; | |
• | the organization and qualification of Emmis and its subsidiaries; | |
• | the capital structure and existence of Emmis and its subsidiaries and the absence of conflicts with or defaults under applicable law or the organizational documents, by-laws or governmental permits of Emmis or its subsidiaries; | |
• | the completeness and accuracy of Emmis’ filings with the SEC; | |
• | the absence of certain related party transactions; | |
• | the filing of material tax returns and payment of taxes by Emmis and its subsidiaries; | |
• | the controls and procedures that Emmis maintains with respect to financial reporting; | |
• | the ownership of or possession of valid licenses to use various intellectual property that is material to the business of Emmis and its subsidiaries; |
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• | the validity of Emmis and its subsidiaries’ ownership interests in their respective owned properties, assets and rights and the validity of their leasehold or licensed interests in their respective leasehold or licensed properties, assets and rights; | |
• | the absence of any material changes in the business of Emmis and its subsidiaries; | |
• | the absence of any undisclosed liabilities on the balance sheets of Emmis or its subsidiaries that are required to be disclosed by generally accepted accounting principles in the United States; | |
• | the absence of litigation involving Emmis or its subsidiaries that would have a materially adverse effect on JS Parent, Emmis or any of Emmis’ subsidiaries; and | |
• | the sufficiency of the assets of Emmis and its subsidiaries to operate and conduct their business. |
• | it and its affiliates have good title to their shares of Class A Common Stock and that they have full power and authority to vote them; | |
• | it has, and the Alden Funds will cause Alden Media to have sufficient cash on handand/or unexpired and unconditioned capital commitments from its investors that are sufficient to enable it to pay the purchase price; and | |
• | it meets the necessary requirements to own the JS Parent Preferred Interests and the JS Parent Common Interests. |
• | amending certain organizational documents, | |
• | issuing certain new equity interests, | |
• | paying certain dividends or distributions, | |
• | making changes to governmental permits, | |
• | granting severance or termination pay, | |
• | making certain acquisitions, | |
• | incurring certain indebtedness, | |
• | making certain changes to their accounting practices, | |
• | making certain changes to their capital structures, | |
• | making certain capital expenditures, | |
• | settling certain claims, | |
• | adopting a plan of liquidation, dissolution, merger or other reorganization or commencing any proceedings in bankruptcy, | |
• | transferring or encumbering certain assets, or |
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• | entering into transactions with affiliates or engaging in activity which would pose a material risk that JS Parent may be treated, for U.S. federal income tax purposes, as engaged in a trade or business. |
• | by mutual agreement of JS Acquisition and Alden Media (with the consent of Emmis); | |
• | by JS Acquisition or Alden Media upon prior written notice, if (i) JS Parent has not commenced the JS Acquisition Tender Offer or (ii) Emmis has not commenced the Exchange Offer, in each case as of the close of business on the date which is ten (10) business days after the effective date of the Alden Purchase Agreement; | |
• | by JS Parent or Alden Media upon prior written notice, if any of the conditions have not been satisfied as of the close of business on September 24, 2010 (the “Outside Date”); | |
• | by JS Parent or Alden Media if any final, non-appealable order, decree or ruling is issued that prohibits the consummation of any of the transactions contemplated by the Alden Purchase Agreement; | |
• | by JS Parent or Alden Media if there has been a material inaccuracy in or material breach by the other of any representation or warranty or material breach of any covenant or agreement that causes any condition to be incapable of being satisfied by the Outside Date; or |
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• | by JS Parent, if as a result of the action or inaction by Alden Media, the closing of the transactions contemplated by the Alden Purchase Agreement has not occurred on or prior to two (2) business days after the satisfaction or waiver of the conditions. |
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• | decrease the amount or change the form of the consideration to be paid or decrease the number of shares of Class A Common Stock sought in the JS Acquisition Tender Offer; | |
• | waive the Minimum Tender Condition; |
• | amend any other term of the JS Acquisition Tender Offer in a manner adverse to unaffiliated shareholders who hold Class A Common Stock; |
• | add to, amend or modify the conditions to the JS Acquisition Tender Offer in a manner adverse to the unaffiliated shareholders who hold Class A Common Stock; |
• | extend the expiration date of the JS Acquisition Tender Offer, other than (i) for successive periods not to exceed 10 business days each, until the conditions to the JS Acquisition Tender Offer are satisfied or waived, if any of the conditions is not satisfied or waived on any scheduled expiration date of the JS Acquisition Tender Offer, and (ii) for the minimum period required by any rule, regulation, interpretation or position of the SEC applicable to the JS Acquisition Tender Offer or any period otherwise required by applicable law, but in no event beyond the End Date (as defined below). |
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• | decrease the amount or change the form of the consideration to be paid or decrease the number of shares of Existing Preferred Stock sought in the Exchange Offer; |
• | add to, amend or modify the conditions to the Exchange Offer in a manner adverse to unaffiliated shareholders who hold Class A Common Stock and the holders of Existing Preferred Stock (other than Alden); |
• | amend any other term of the Exchange Offer in a manner adverse to unaffiliated shareholders who hold Class A Common Stock and the holders of shares of Existing Preferred Stock (other than Alden); and |
• | extend the expiration date of the Exchange Offer, other than (i) from time to time for successive periods not to exceed 10 business days each, until the conditions to the Exchange Offer are satisfied or waived if any of the conditions is not satisfied or waived on any scheduled expiration date of the Exchange Offer, and (ii) for the minimum period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Exchange Offer or any period otherwise required by applicable law, but in no event may Emmis extend the Exchange Offer beyond the End Date (as defined below). |
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• | each share of Class A Common Stock held by the Purchaser Group (except for the Retained Shares) and each Rollover Share of the Rolling Shareholders will be contributed to Emmis and cancelled in consideration for JS Parent Common Interests; and |
• | all shares of Class B Common Stock (other than the Retained Shares), all of which are held by Mr. Smulyan, will be contributed to Emmis and cancelled, in consideration for JS Parent Common Interests. |
• | each share of Class A Common Stock remaining outstanding, including outstanding restricted stock with respect to shares of Class A Common Stock that became fully vested immediately prior to the Effective Time (other than Class A Common Stock held by JS Parent or Emmis), will be converted into the right to receive $2.40 in cash (without interest and less any applicable withholding taxes) from Emmis (“Common Merger Consideration”); | |
• | each outstanding share of Existing Preferred Stock held by the Alden Fund will be converted into New Notes at a rate of $30.00 principal amount of New Notes per $50.00 of liquidation preference of Existing Preferred Stock, excluding accrued and unpaid dividends (“Alden Preferred Merger Consideration”); | |
• | each other outstanding share of Existing Preferred Stock will be converted into the right to receive $5.856 in cash (without interest and less any applicable withholding taxes) from Emmis, which is equal to the conversion rate of the Existing Preferred Stock of 2.44 shares of Class A Common Stock per share times the $2.40 in cash (without interest and less any applicable withholding taxes) per share of Class A Common Stock that is being offered in the JS Acquisition Tender Offer (the “Preferred Merger Consideration”, and together with the Common Merger Consideration, the “Cash Merger Consideration” and the Cash Merger Consideration together with the Alden Preferred Merger Consideration, the “Merger Consideration”); | |
• | each share of Class A Common Stock and each share of Class B Common Stock held by JS Acquisition or Emmis shall be cancelled without consideration; | |
• | each share of JS Acquisition Class A Common Stock will be converted into one share of new nonvoting common stock of Emmis; and | |
• | each share of JS Acquisition Class B Common Stock will be converted into one share of new voting common stock of Emmis. |
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• | due organization, valid existence and, to the extent applicable, good standing; | |
• | corporate power and authority to enter into and perform its obligations under, and the enforceability of, the Merger Agreement; | |
• | the absence of governmental authorization needed to approve the Merger Agreement and the transactions contemplated thereby; | |
• | the absence of conflicts with or defaults under organizational documents, other contracts and applicable law; and | |
• | the absence of any agreement to pay finders’ fees or other similar fees. |
• | its capital structure and the capital structure of its subsidiaries; | |
• | Emmis’ SEC filings, including the Exchange Offer Documents and other disclosure documents to be filed by Emmis in connection with the Merger Agreement; | |
• | the Committee Recommendation and the Board Recommendation; | |
• | the absence of certain related party transactions; | |
• | the filing of material tax returns and payment of taxes by Emmis and its subsidiaries; | |
• | the controls and procedures that Emmis maintains with respect to financial reporting; |
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• | the ownership of or possession of valid licenses to use various intellectual property that is material to the business of Emmis and its subsidiaries; | |
• | the validity of Emmis and its subsidiaries’ ownership interests in their respective owned properties, assets and rights and the validity of their leasehold or licensed interests in their respective leasehold or licensed properties, assets and rights; | |
• | the absence of any material changes in the business of Emmis and its subsidiaries; | |
• | the absence of any undisclosed liabilities on the balance sheets of Emmis or its subsidiaries that are required to be disclosed by generally accepted accounting principles in the United States; | |
• | the absence of litigation involving Emmis or its subsidiaries that would have a materially adverse effect on Emmis or any of Emmis’ subsidiaries; |
• | the receipt by the Committee of an opinion of the financial advisor to the Committee to the effect that, as of the date of such opinion, the Offer Price to be received by the Unaffiliated Shareholders (as defined in the Merger Agreement) pursuant to the JS Acquisition Tender Offer and the Merger is fair from a financial point of view to such Shareholders; |
• | the inapplicability of state takeover statutes or regulations to the JS Acquisition Tender Offer or the Merger; | |
• | the sufficiency of the assets of Emmis and its subsidiaries to operate and conduct their business; | |
• | the adoption by the Board of certain resolutions; and | |
• | the exclusivity of the representations and warranties made. |
• | JS Parent and JS Acquisition’s SEC filings, including the JS Acquisition Tender Offer Documents and other disclosure documents to be filed by JS Parent and JS Acquisition; | |
• | information furnished to Emmis to be included in its SEC filings, including the Exchange Offer Documents and other disclosure documents to be filed by Emmis in connection with the Merger Agreement; and | |
• | sufficiency of funds to complete the JS Acquisition Tender Offer, the Merger and the other transactions contemplated by the Merger Agreement, and payment of all fees and expenses relating to such transactions. |
• | amendments to the Articles of Incorporation, the By-laws or other similar organizational documents, except with respect to the Proposed Amendments; | |
• | sales or issuances of additional shares of capital stock, any securities convertible into, or any rights, warrants or options to acquire, any such shares of capital stock; | |
• | dividends, distributions or redemptions of stock; | |
• | changes in its maintenance of governmental permits; |
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• | the modification of employee benefits, compensation or other employment arrangements; | |
• | any acquisition of assets or businesses for a purchase price in excess of $10 million individually, or $20 million in the aggregate; | |
• | the incurrence of indebtedness for borrowed money; | |
• | changes in financial accounting principles; | |
• | changes to the terms of its capital stock; | |
• | the incurrence of capital expenditures in excess of $5 million in the aggregate; | |
• | the waiver, release, assignment, settlement or compromise of certain claims; | |
• | the adoption of a plan of liquidation; | |
• | the transfer or encumbrance of any of its assets; | |
• | entering into certain transactions with affiliates; or | |
• | resolutions, commitments or agreements to do any of the foregoing. |
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• | obtaining shareholder approval of the Merger at the Merger Meeting; | |
• | the absence of any law, order or injunction prohibiting the consummation of the Merger; and | |
• | JS Acquisition having purchased shares of Class A Common Stock pursuant to the JS Acquisition Tender Offer. |
• | by mutual written agreement of Emmis and JS Parent; |
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• | by Emmis or JS Parent upon prior written notice if the Acceptance Date has not occurred on or before September 24, 2010 (the “End Date”); | |
• | by Emmis or JS Parent if any final, non-appealable order, decree or ruling is issued that prohibits the consummation of JS Acquisition Tender Offer and the Merger; | |
• | by JS Parent, if prior to the Acceptance Date, the Board has made an Adverse Recommendation Change; or |
• | by JS Parent, if prior to the Acceptance Date, Emmis has breached any representation or warranty or failed to perform any covenant or agreement that would cause certain conditions to the JS Acquisition Tender Offer to exist and be incapable of being cured by the End Date. |
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• | any merger, liquidation or sale of all or substantially all assets of JS Parent, Emmis or Emmis Operating; | |
• | the incurrence of indebtedness by JS Acquisition, Emmis, Emmis Operating, or any of their subsidiaries or the issuance of equity securities by Emmis or Emmis Operating, or any of their subsidiaries, except in specified circumstances including indebtedness incurred or equity securities issued to redeem or otherwise refinance the Credit Facility, the Junior Subordinated Notes, the New Notes, the JS Parent Preferred Interests or the JS Parent Common Interests; | |
• | amendments to the operating agreement, charter, by-laws or similar document of JS Parent, Emmis or Emmis Operating; | |
• | as long as the Alden Members own and JS Parent Preferred Interests or own or have the right to acquire Junior Subordinated Notes, the payment of distributions by JS Parent; | |
• | commencing any proceedings in bankruptcy with respect to JS Parent, Emmis, Emmis Operating or any subsidiary of Emmis Operating; | |
• | transactions with affiliates (other than existing arrangements and amendments and replacements of those arrangements) other than Emmis and its subsidiaries; | |
• | any redemption or repurchase of equity securities of JS Parent or Emmis, subject to specified exceptions; | |
• | acquiring specified assets, including any assets or businesses for an aggregate price in excess of $5 million; | |
• | any sale of assets other than in the ordinary course of business or as permitted under and applied in accordance with the Credit Facility in which the net cash proceeds are used to repay, redeem, exchange or refinance the Credit Facility, the New Notes, the Junior Subordinated Notes or the JS Parent Preferred Interests; | |
• | permitting liens on any of the common stock of Emmis or any of its subsidiaries, except in specified circumstances; and | |
• | any activity which would pose a material risk that JS Parent may be treated as engaged in a trade or business for federal income tax purposes. |
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• | in favor of the approval and adoption of the Merger Agreement; |
• | in favor of any proposal to adjourn or postpone any shareholders meeting at which the Merger Agreement is submitted for a vote if there are not sufficient votes for the approval of the Merger Agreement on the date on which the meeting is held; |
• | against (A) any proposal by any person other than JS Parent, its affiliates or Mr. Smulyan to acquire Emmis through any transactions that would result in a change of control of Emmis, (B) any reorganization, recapitalization, liquidation orwinding-up of Emmis or any other extraordinary transaction involving Emmis or (C) any corporate action that would frustrate, prevent or delay the Merger Agreement. |
• | grant any proxies or enter into any other agreements with respect to the voting of any Rollover Shares, or | |
• | encumber any Rollover Shares, during the term of the Rollover Agreement. In addition, the Rolling Shareholders will not knowingly: |
° | solicit or initiate any Emmis acquisition proposal, or |
° | disclose or afford access to information to any person that is considering making, or has made, or has agreed to endorse an Emmis acquisition proposal. |
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Rolling Shareholder | Rollover Shares | |||
Greg Nathanson and Teresa Nathanson TTEES the Nathanson Family TR DTD 12/23/05 | 256,312 | |||
Greg A. Nathanson | 76,276 | |||
Dale M. Friedlander | 310,228 | |||
Richard A. Leventhal | 191,931 | |||
Barbara Leventhal | 3,000 | |||
John F. Dille III | 178,800 | |||
Richard F. Cummings | 142,669 | |||
Janine J. Smulyan | 151,000 | |||
Gary L. Kaseff | 123,911 | |||
Vicky Myers-Kaseff | 3,411 | |||
Randall D. Bongarten | 46,117 | |||
James R. Riggs | 33,609 | |||
Patrick M. Walsh | 30,828 | |||
Natalie J. Smulyan | 30,350 | |||
Paul W. Fiddick | 29,548 | |||
Robin L. Rene | 21,451 | |||
Gregory T. Loewen | 20,428 | |||
Deborah D. Paul | 19,928 | |||
Michael Levitan | 18,511 | |||
Valerie C. Maki | 8,094 | |||
David R. Newcomer | 7,295 | |||
John R. Beck | 4,045 | |||
J. Scott Enright | 6,528 | |||
Ryan A. Hornaday | 2,613 | |||
Norman H. Gurwitz | 1,563 | |||
Total | 1,718,446 |
• | Fritzi Ross, on behalf of herself and all others similarly situated vs. Jeffrey H. Smulyan, Susan B. Bayh, Gary L. Kaseff, Richard A. Leventhal, Peter A. Lund, Greg A. Nathanson, Lawrence B. Sorrel, Patrick M. Walsh, Emmis Communications Corporation, JS Acquisition, Inc., and Alden Global Capital; Cause No. 49D13 1004 MF 019005, filed April 27, 2010; |
• | Charles Hinkle, on behalf of himself and all others similarly situated vs. Susan Bayh, Gary Kaseff, Richard Leventhal, Peter Lund, Greg Nathanson, Jeffrey H. Smulyan, Lawrence Sorrel, Patrick Walsh, and Emmis Communications Corporation; Cause No. 49D10 1004 PL 019747, filed April 30, 2010; |
• | William McQueen, on behalf of himself and all others similarly situated vs. Jeffrey H. Smulyan, Susan B. Bayh, Gary L. Kaseff, Richard A. Leventhal, Peter A. Lund, Greg A. Nathanson, Lawrence B. Sorrel, Patrick M. Walsh, JS Acquisition, Inc., and Alden Global Capital; Cause No. 49D02 1005 MF 020013, filed May 3, 2010; |
• | David Jarosclawicz, on behalf of himself and all others similarly situated vs. Jeffrey H. Smulyan, Susan B. Bayh,Gary L. Kaseff, Richard A. Leventhal, Peter A. Lund, Greg A. Nathanson, Lawrence B. Sorrel, Patrick M. Walsh, JS Acquisition, Incorporated, and Emmis Communications Corporation; Cause No. 49D03 1005 PL 020506, filed May 6, 2010; |
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• | Timothy Stabosz, on behalf of himself and all others similarly situated vs. Susan Bayh, Gary Kaseff, Richard Leventhal, Peter Lund, Greg Nathanson, Jeffrey H. Smulyan, Lawrence Sorrel, Patrick Walsh, and Emmis Communications Corporation; Cause No. 49D11 1005 PL 021432, filed May 12, 2010; |
• | Richard Frank, on behalf of himself and all others similarly situated v. Jeffrey H. Smulyan, Susan Bayh, Gary Kaseff, Richard Leventhal, Peter Lund, Greg Nathanson, Lawrence Sorrel, Patrick Walsh, Emmis Communications Corporation, JS Acquisition, Inc., JS Acquisition, LLC, and Alden Global Capital; Cause No. 49D10 1006 PL 025149, filed June 4, 2010; and |
• | Ted Primich, on behalf of himself and all others similarly situated v. Jeffrey Smulyan, Patrick Walsh, Susan Bayh, Gary Kaseff, Richard Leventhal, Lawrence Sorrel, Greg Nathanson, Peter Lund, Emmis Communications Corporation, JS Acquisition, Inc., and JS Acquisition, LLC; ActionNo. 1:10-cv-0782SEB-TAB, in the United States District Court for the Southern District of Indiana, filed June 18, 2010. |
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(1) | a proposal to amend the terms of the Existing Preferred Stock that are set forth in Emmis’ second amended and restated articles of incorporation to: |
• | eliminate the rights of the holders of the Existing Preferred Stock to require Emmis to redeem at a redemption price per share equal to $50.00 plus accrued and accumulated dividends, all or a portion of their shares on the first anniversary after the occurrence of certain going private transactions and nominate directors to Emmis’ board of directors; and |
• | provide for the automatic conversion upon the proposed merger of JS Acquisition with and into Emmis, with Emmis surviving the merger (i) of the Existing Preferred Stock (other than the Existing Preferred Stock held by Alden) not exchanged for the New Notes into that amount of consideration that would be paid to holders of Class A Common Stock into which the Existing Preferred Stock was convertible immediately prior to the Merger and (ii) of the Existing Preferred Stock held by Alden into the New Notes, as described in this Proxy Statement/Offer to Exchange; and |
(2) | transaction of any other business that may properly come before the meeting and any adjournments or postponements of the meeting. |
• | more shares of Common Stock, voting together as a single class, voting in favor than against the Proposed Amendments, assuming a quorum is present, and | |
• | holders of at least 2/3 of the outstanding Existing Preferred Stock, voting as a separate class. |
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• | more shares of Common Stock, voting together as a single class, voting in favor than against the Proposed Amendments, assuming a quorum is present, and | |
• | holders of at least 2/3 of the outstanding Existing Preferred Stock, voting as a separate class. |
• | eliminate the rights of the holders of the Existing Preferred Stock to require Emmis to redeem all or a portion of their shares on the first anniversary after the occurrence of certain going private transactions at a redemption price per share equal to $50.00 plus accrued and accumulated dividends and nominate directors to Emmis’ board of directors; and |
• | provide for the automatic conversion upon the proposed merger of JS Acquisition with and into Emmis, with Emmis surviving the merger (i) of the Existing Preferred Stock (other than the Existing Preferred Stock held by Alden) not exchanged for the New Notes into that amount of consideration that would be paid to holders of Class A Common Stock into which the Existing Preferred Stock was convertible immediately prior to the Merger and (ii) of the Existing Preferred Stock held by Alden into the New Notes, as described in this Proxy Statement/Offer to Exchange. |
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• | DTC has received an express acknowledgement from each participant in DTC tendering the Existing Preferred Stock; | |
• | shareholders have received the letter of transmittal and agree to be bound by the terms of the letter of transmittal; and | |
• | Emmis may enforce the terms of the letter of transmittal against the shareholder. |
• | prior to the Expiration Time, the Exchange Agent receives through the DTC ATOP system a notice setting forth the name(s) and address(es) of the holder(s) and the number and series of shares being tendered, and stating that the tender is being made thereby and guaranteeing that the Exchange Agent will receive within three business days after the date of the notice, an Agent’s Message and confirmation of book-entry transfer of the Existing Preferred Stock into the Exchange Agent’s account with DTC, and any other documents required by the letter of transmittal; and | |
• | within three business days after the date of the DTC ATOP notice, the Exchange Agent receives a Book-Entry Confirmation of the transfer of the Existing Preferred Stock into the Exchange Agent’s account at DTC as described above and a properly transmitted Agent’s Message. |
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• | at any time prior to the Expiration Time; or | |
• | if not yet accepted for payment, after , 2010. |
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• | the Proposed Amendments are adopted by the holders of Common Stock and Existing Preferred Stock; |
• | the tender of shares of Class A Common Stock, that, when combined with the Rollover Shares and the shares of Common Stock beneficially owned by the Purchaser Group and the Alden Fund, will constitute a majority of the votes able to be cast with respect to the Merger. Based on the number of outstanding shares as of May 17, 2010, a minimum of approximately 32.8% of our Class A Common Stock would need to be tendered and not withdrawn for this condition to be satisfied; |
• | the Alden Purchase Agreement remains in full force and effect and the conditions to the closing of the transactions under the Alden Purchase Agreement have been satisfied or waived; |
• | there is no change in the laws and regulations which would reasonably be expected to impair Emmis’ ability to proceed with the Exchange Offer; |
• | the indenture under which the New Notes will be issued is qualified under the Trust Indenture Act of 1939; |
• | there is no action or proceeding instituted or threatened in any court or before any governmental agency or body that would reasonably be expected to prohibit, prevent or otherwise impair Emmis’ ability to proceed with the Exchange Offer; and | |
• | we obtain all governmental approvals that we deem in our sole discretion necessary to complete the Exchange Offer. |
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Stock Prices | ||||||||
Existing Preferred Stock | ||||||||
High | Low | |||||||
2008 | ||||||||
1st Quarter | $ | 38.84 | $ | 24.00 | ||||
2nd Quarter | 27.38 | 23.05 | ||||||
3rd Quarter | 25.25 | 16.00 | ||||||
4th Quarter | 18.40 | 1.21 | ||||||
2009 | ||||||||
1st Quarter | $ | 3.29 | $ | 0.90 | ||||
2nd Quarter | 2.70 | 0.90 | ||||||
3rd Quarter | 11.00 | 1.23 | ||||||
4th Quarter | 17.43 | 6.36 | ||||||
2010 | ||||||||
1st Quarter | $ | 17.14 | $ | 12.56 | ||||
2nd Quarter (through June 21, 2010) | 29.88 | 15.61 |
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As of February 28, 2010 | ||||||||
As Adjusted | ||||||||
Actual | (Unaudited) | |||||||
(Dollars in thousands) | ||||||||
Cash and cash equivalents | $ | 6,814 | $ | 6,814 | ||||
Deferred debt issuance costs, net of accumulated amortization | 4,227 | 4,437 | ||||||
Indebtedness of Emmis Operating and its subsidiaries: | ||||||||
Credit Facility (including current maturities)(1): | ||||||||
Revolving facility | $ | 2,000 | $ | 2,000 | ||||
Term loans | 339,150 | 339,150 | ||||||
Capitalized lease obligations | 24 | 24 | ||||||
Other indebtedness of Emmis Communications Corporation: | ||||||||
New Notes | — | 84,275 | ||||||
Total consolidated indebtedness | $ | 341,174 | $ | 425,449 | ||||
Existing Preferred Stock, $0.01 par value, $50.00 liquidation preference per share, 2,809,170 actual shares outstanding, no shares outstanding as-adjusted | $ | 140,459 | — | |||||
Shareholders’ deficit: | ||||||||
Class A Common Stock, $0.01 par value, 32,661,550 actual shares outstanding, no shares outstanding as-adjusted | $ | 327 | $ | — | ||||
Class B Common Stock, $0.01 par value, 4,930,680 actual shares outstanding, no shares outstanding as-adjusted | 49 | — | ||||||
New Voting Common Stock, $0.01 par value, no actual shares outstanding, 10 shares outstanding as-adjusted | — | — | ||||||
New Non-Voting Common Stock, $0.01 par value, no actual shares outstanding, 1,000,000 shares outstanding as-adjusted | — | 10 | ||||||
Additional paid-in capital | 527,120 | 538,224 | ||||||
Accumulated deficit | (705,135 | ) | (659,479 | ) | ||||
Accumulated other comprehensive loss | (1,320 | ) | (1,320 | ) | ||||
Total shareholders’ deficit | $ | (178,959 | ) | $ | (122,565 | ) | ||
Total capitalization | $ | 302,674 | $ | 302,884 | ||||
(1) | The Credit Facility consists of a $20,000 revolving facility, with $2,000 outstanding and $17,100 available for borrowing, net of $900 of outstanding letters of credit, and $339,150 of term loans. The revolving facility and the term loans mature on November 2, 2012 and November 1, 2013, respectively. The term loans are subject to quarterly amortization payments of $848. |
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For the Years Ended | ||||||||
February 28, | ||||||||
2009 | 2010 | |||||||
(In thousands, except | ||||||||
per share data) | ||||||||
Operating Data: | ||||||||
Net Revenues | $ | 307,931 | $ | 242,566 | ||||
Station operating expenses excluding depreciation and amortization expense | 239,007 | 206,160 | ||||||
Corporate expenses excluding depreciation and amortization expense | 18,503 | 13,634 | ||||||
Depreciation and amortization | 12,403 | 10,393 | ||||||
Impairment losses(1) | 373,137 | 174,642 | ||||||
Restructuring charge | 4,208 | 3,350 | ||||||
(Gain) loss on disposal of fixed assets | 14 | (127 | ) | |||||
Operating loss | (339,341 | ) | (165,486 | ) | ||||
Interest expense | 25,067 | 24,820 | ||||||
Gain on debt extinguishment(2) | — | (31,362 | ) | |||||
Other (income) expense, net | 1,315 | (170 | ) | |||||
Loss before income taxes and discontinued operations | (365,723 | ) | (158,774 | ) | ||||
Loss from continuing operations | (299,875 | ) | (118,934 | ) | ||||
Discontinued operations(3) | 4,922 | 442 | ||||||
Consolidated net loss | (294,953 | ) | (118,492 | ) | ||||
Net loss available to common shareholders | (309,202 | ) | (131,777 | ) | ||||
Basic and diluted net income (loss) per share attributable to common shareholders: | ||||||||
Continuing operations | $ | (8.57 | ) | $ | (3.56 | ) | ||
Discontinued operations | 0.07 | — | ||||||
Net loss attributable to common shareholders | $ | (8.50 | ) | $ | (3.56 | ) | ||
Weighted average common shares outstanding: | ||||||||
Basic | 36,374 | 37,041 | ||||||
Diluted | 36,374 | 37,041 |
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For the Years Ended | ||||||||
February 28, | ||||||||
2009 | 2010 | |||||||
(In thousands, except | ||||||||
per share data) | ||||||||
Other Data: | ||||||||
Cash flows provided by (used in): | ||||||||
Operating activities | $ | 43,639 | $ | 25,662 | ||||
Investing activities | 17,701 | (603 | ) | |||||
Financing activities | (33,277 | ) | (58,328 | ) | ||||
Net repayments of long-term debt | 17,338 | 47,425 | ||||||
Capital expenditures | 20,518 | 4,779 | ||||||
Cash paid for interest | 27,488 | 22,396 |
As of February 28, | ||||||||
2009 | 2010 | |||||||
(In thousands) | ||||||||
Balance Sheet Data: | ||||||||
Cash(4) | $ | 40,746 | $ | 6,814 | ||||
Working Capital | 71,382 | 17,722 | ||||||
Net intangible assets | 536,413 | 363,809 | ||||||
Total assets | 739,211 | 498,168 | ||||||
Credit Facility debt | 421,355 | 341,150 | ||||||
Shareholders’ deficit | (60,000 | ) | (178,959 | ) |
(1) | The impairment losses in fiscal 2009 and fiscal 2010 mostly related to Emmis’ interim and annual impairment tests conducted in accordance with Accounting Standards Codification Topic 350. | |
(2) | In April 2009, Emmis commenced a series of Dutch auction tenders to purchase term loans of Emmis Operating under the Amended and Restated Revolving Credit and Term Loan Agreement, by and among Emmis Operating, Emmis, the lenders thereto, Bank of America, N.A., as administrative agent for itself and other lenders, Deutsche Bank Trust Company Americas, as syndication agent, General Electric Capital Corporation, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., New York Branch and SunTrust Bank, as co-documentation agents. The cumulative effect of all of the debt tenders resulted in the purchase of $78.5 million in face amount of Emmis Operating’s outstanding term loans for $44.7 million in cash. As a result of these purchases, Emmis recognized a gain on extinguishment of debt of $31.9 million in the quarter ended May 31, 2009, which is net of transaction costs of $1.0 million and a write-off of deferred debt costs. In August 2009, Emmis reduced its revolver and recorded a loss on debt extinguishment of $0.5 million related to the write-off of deferred debt costs. | |
(3) | Emmis’ television division, Tu Ciudad Los Angeles, Emmis Books and our international radio operations in Belgium and Hungary have been classified as discontinued operations. | |
(4) | Cash held at February 28, 2009 was mostly used to fund Emmis’ Dutch auction tenders that commenced in April 2009. |
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For the Years Ended | ||||||||
February 28, | ||||||||
2009 | 2010 | |||||||
(Unaudited, in thousands) | ||||||||
Earnings: | ||||||||
Pre-tax loss from continuing operations before adjustment for income or loss from equity investees | $ | (299,922 | ) | $ | (118,275 | ) | ||
Add: | ||||||||
Fixed charges | 36,575 | 36,660 | ||||||
Less: | ||||||||
Preferred stock dividends | 8,933 | 9,123 | ||||||
Earnings | $ | (272,280 | ) | $ | (90,738 | ) | ||
Fixed Charges: | ||||||||
Interest expense (including amortization of debt expenses) | $ | 25,067 | $ | 24,820 | ||||
Portion of rents representative of the interest factor | 2,575 | 2,717 | ||||||
Preferred stock dividends | 8,933 | 9,123 | ||||||
Fixed Charges | $ | 36,575 | $ | 36,660 | ||||
Ratio of Earnings to Fixed Charges | N/A | N/A | ||||||
Deficiency | $ | 308,855 | $ | 127,398 |
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Name | Age | Position | ||||
Jeffrey H. Smulyan | 63 | Chairman of the Board of Directors, Chief Executive Officer and President | ||||
Patrick M. Walsh | 43 | Director, Executive Vice President, Chief Operating Officer and Chief Financial Officer | ||||
Richard F. Cummings | 58 | President of Radio Programming | ||||
J. Scott Enright | 47 | Executive Vice President, General Counsel and Secretary | ||||
Gregory T. Loewen | 39 | Chief Strategy Officer and President — Publishing Division | ||||
Susan B. Bayh | 50 | Director | ||||
Heath B. Freeman | 30 | Director | ||||
Gary L. Kaseff | 62 | Director | ||||
Richard A. Leventhal | 63 | Director | ||||
Peter A. Lund | 69 | Director | ||||
Greg A. Nathanson | 63 | Director | ||||
Lawrence B. Sorrel | 51 | Director |
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• | chief executive officers or senior executives, particularly those with experience in broadcasting, finance, marketing and information technology. | |
• | individuals representing diversity in gender and ethnicity. | |
• | individuals who meet the current criteria to be considered as independent directors. |
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Fees Earned | ||||||||||||||||||||
or Paid | Stock | Option | All Other | |||||||||||||||||
Name | in Cash | Awards(1)(2) | Awards(3) | Compensation(4) | Total | |||||||||||||||
Susan B. Bayh | $ | 36,000 | $ | 160,645 | $ | 1,627 | $ | — | $ | 162,272 | ||||||||||
Gary L. Kaseff | 30,000 | 84,000 | — | 1,253,745 | 1,337,745 | |||||||||||||||
Richard A. Leventhal | 40,000 | 162,645 | 1,627 | — | 164,272 | |||||||||||||||
Peter A. Lund | 35,000 | 162,645 | 1,627 | — | 164,272 | |||||||||||||||
Lawrence B. Sorrel | 30,000 | 186,645 | 1,627 | — | 188,272 | |||||||||||||||
Greg A. Nathanson | 30,000 | 90,645 | 1,627 | — | 92,272 |
(1) | On July 14, 2009, each director named in the table above other than Mr. Kaseff received a grant of 2,195 restricted shares, having an aggregate date of grant fair value of $645. The following table includes information regarding the number of unrestricted shares each named director received on January 4, 2010, for meeting fees for the fiscal year ended 2010: |
Name | Shares | |||
Mrs. Bayh | 129,032 | |||
Mr. Kaseff | 67,742 | |||
Mr. Leventhal | 130,645 | |||
Mr. Lund | 130,645 | |||
Mr. Sorrel | 150,000 | |||
Mr. Nathanson | 72,581 |
(2) | At February 28, 2010, each named director other than Mrs. Bayh, Mr. Kaseff and Mr. Nathanson held restricted stock awards for an aggregate of 4,390 shares, having an aggregate fair market value of $3,951. Mrs. Bayh and Mr. Nathanson each held 6,585 restricted shares having a fair market value of $5,927. As of February 28, 2010, Mr. Kaseff had not received any restricted stock awards in his capacity as a director. Restricted stock awards vest on the earlier of the end of the director’s three-year term or the third anniversary of the date of grant. With respect to Mrs. Bayh and Mr. Nathanson, 2,195 restricted shares will vest on the earlier of July 11, 2010, or the day before the Emmis annual meeting for fiscal year 2010, 2,195 will vest on the earlier of July 15, 2011, or the day before the Emmis annual meeting for fiscal year 2011, and 2,195 will vest on the earlier of July 14, 2012, or the day before the Emmis annual meeting for fiscal year 2012. With respect to each of Messrs. Leventhal, Lund and Sorrel, 2,195 restricted shares will vest on the earlier of July 15, 2011, or the day before the Emmis annual meeting for fiscal year 2011, and 2,195 will vest on the earlier of July 14, 2012, or the day before the Emmis annual meeting for fiscal year 2012. | |
(3) | The following table includes information regarding options held by each named director as of February 28, 2010. Options vest on the earlier of the dates shown, or the day before the Emmis annual meeting for the fiscal year in which the date shown falls. |
Number of Shares | ||||||||||||||||
Underlying | Option Exercise | Option Expiration | ||||||||||||||
Name | Options # | Price $ | Date | Option Vesting Date | ||||||||||||
Mrs. Bayh | 7,317 | 0.28 | 7/14/19 | 1/3 on each of 7/14/10, ’11 & ’12 | ||||||||||||
7,317 | 1.70 | 7/15/18 | 1/3 on each of 7/15/09, ’10 & ’11 | |||||||||||||
7,317 | 8.84 | 7/11/17 | 1/3 on each of 7/11/08, ’09 & ’10 | |||||||||||||
7,317 | 8.71 | 2/13/17 | Fully Vested | |||||||||||||
7,317 | 12.19 | 7/13/15 | Fully Vested | |||||||||||||
14,635 | 14.21 | 6/30/14 | Fully Vested | |||||||||||||
14,635 | 15.48 | 6/5/13 | Fully Vested | |||||||||||||
14,635 | 13.56 | 6/24/12 | Fully Vested |
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Number of Shares | ||||||||||||||||
Underlying | Option Exercise | Option Expiration | ||||||||||||||
Name | Options # | Price $ | Date | Option Vesting Date | ||||||||||||
Mr. Kaseff | 175,000 | 0.295 | 3/2/19 | 3/2/2012 | ||||||||||||
36,587 | 2.95 | 3/1/18 | 1/3 on each of 3/1/09, ’10 & ’11 | |||||||||||||
36,587 | 8.21 | 3/1/17 | 1/3 on each of 3/1/08, ’09 & ’10 | |||||||||||||
36,587 | 11.17 | 3/1/16 | Fully Vested | |||||||||||||
36,587 | 12.81 | 3/1/15 | Fully Vested | |||||||||||||
73,174 | 17.45 | 3/1/14 | Fully Vested | |||||||||||||
73,174 | 11.22 | 3/4/13 | Fully Vested | |||||||||||||
73,174 | 19.90 | 3/1/12 | Fully Vested | |||||||||||||
58,539 | 19.82 | 3/1/11 | Fully Vested | |||||||||||||
58,539 | 24.18 | 3/1/10 | Fully Vested | |||||||||||||
Mr. Leventhal | 7,317 | 0.28 | 7/14/19 | 1/3 on each of 7/14/10, ’11 & ’12 | ||||||||||||
7,317 | 1.70 | 7/15/18 | 1/3 on each of 7/15/09, ’10 & ’11 | |||||||||||||
7,317 | 8.84 | 7/11/17 | 1/3 on each of 7/11/08, ’09 & ’10 | |||||||||||||
7,317 | 8.71 | 2/13/17 | Fully Vested | |||||||||||||
7,317 | 12.19 | 7/13/15 | Fully Vested | |||||||||||||
14,635 | 14.21 | 6/30/14 | Fully Vested | |||||||||||||
14,635 | 15.48 | 6/5/13 | Fully Vested | |||||||||||||
14,635 | 13.56 | 6/24/12 | Fully Vested | |||||||||||||
Mr. Lund | 7,317 | 0.28 | 7/14/19 | 1/3 on each of 7/14/10, ’11 & ’12 | ||||||||||||
7,317 | 1.70 | 7/15/18 | 1/3 on each of 7/15/09, ’10 & ’11 | |||||||||||||
7,317 | 8.84 | 7/11/17 | 1/3 on each of 7/11/08, ’09 & ’10 | |||||||||||||
7,317 | 8.71 | 2/13/17 | Fully Vested | |||||||||||||
7,317 | 12.19 | 7/13/15 | Fully Vested | |||||||||||||
14,635 | 14.21 | 6/30/14 | Fully Vested | |||||||||||||
14,635 | 15.48 | 6/5/13 | Fully Vested | |||||||||||||
Mr. Nathanson | 7,317 | 0.28 | 7/14/19 | 1/3 on each of 7/14/10, ’11 & ’12 | ||||||||||||
7,317 | 1.70 | 7/15/18 | 1/3 on each of 7/15/09, ’10 & ’11 | |||||||||||||
7,317 | 8.84 | 7/11/17 | 1/3 on each of 7/11/08, ’09 & ’10 | |||||||||||||
7,317 | 8.71 | 2/13/17 | Fully Vested | |||||||||||||
7,317 | 12.19 | 7/13/15 | Fully Vested | |||||||||||||
14,635 | 14.21 | 6/30/14 | Fully Vested | |||||||||||||
14,635 | 15.48 | 6/5/13 | Fully Vested | |||||||||||||
14,635 | 13.56 | 6/24/12 | Fully Vested | |||||||||||||
14,634 | 19.82 | 8/01/11 | Fully Vested | |||||||||||||
Mr. Sorrel | 7,317 | 0.28 | 7/14/19 | 1/3 on each of 7/14/10, ’11 & ’12 | ||||||||||||
7,317 | 1.70 | 7/15/18 | 1/3 on each of 7/15/09, ’10 & ’11 | |||||||||||||
7,317 | 8.84 | 7/11/17 | 1/3 on each of 7/11/08, ’09 & ’10 | |||||||||||||
7,317 | 8.71 | 2/13/17 | Fully Vested | |||||||||||||
7,317 | 12.19 | 7/13/15 | Fully Vested | |||||||||||||
14,635 | 14.21 | 6/30/14 | Fully Vested | |||||||||||||
14,635 | 15.48 | 6/05/13 | Fully Vested | |||||||||||||
14,635 | 13.56 | 6/24/12 | Fully Vested |
(4) | For Mr. Kaseff, who was an employee but not an officer during the fiscal year ended 2010, this total included a 401(k) match in the amount of $398 and severance payments in the amount of $1,253,347. |
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Non-Equity | ||||||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | All Other | |||||||||||||||||||||||||||||
Salary(3) | Bonus(4)(5) | Awards(6) | Awards(6) | Compensation(4) | Compensation(7) | Total | ||||||||||||||||||||||||||
Name and Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||
Jeffrey H. Smulyan, | 2010 | 613,322 | 407,384 | — | 27,181 | — | 39,483 | 1,087,370 | ||||||||||||||||||||||||
Chief Executive Officer | 2009 | 459,711 | 438,213 | — | 212,791 | — | 65,844 | 1,176,559 | ||||||||||||||||||||||||
2008 | 1 | 339,375 | — | 619,056 | — | 73,391 | 1,031,823 | |||||||||||||||||||||||||
Patrick M. Walsh, | 2010 | 387,051 | 326,115 | — | — | — | 17,378 | 730,544 | ||||||||||||||||||||||||
Executive Vice President, | 2009 | 214,912 | 427,989 | 25,901 | 103,332 | — | 18,474 | 790,608 | ||||||||||||||||||||||||
Chief Financial Officer and Chief Operating Officer | 2008 | 400,000 | 60,000 | 72,962 | 123,808 | — | 110,268 | 767,038 | ||||||||||||||||||||||||
Richard F. Cummings, | 2010 | 330,327 | 274,277 | — | 89,381 | — | 12,000 | 705,985 | ||||||||||||||||||||||||
President — Radio | 2009 | 264,231 | 236,288 | 38,854 | 63,836 | — | 18,074 | 621,283 | ||||||||||||||||||||||||
Programming | 2008 | 495,000 | 102,450 | 109,451 | 185,714 | — | 19,074 | 911,689 | ||||||||||||||||||||||||
Paul W. Fiddick, | 2010 | 174,626 | 80,219 | — | 56,183 | — | 575,008 | 886,036 | ||||||||||||||||||||||||
Former International | 2009 | 193,942 | 172,500 | 19,426 | 31,918 | 196,686 | 1,000 | 615,472 | ||||||||||||||||||||||||
Division President | 2008 | 350,000 | 242,583 | 54,271 | 92,587 | — | 6,111 | 745,552 | ||||||||||||||||||||||||
Gary A. Thoe, | 2010 | 137,172 | 61,047 | — | 35,753 | — | 547,613 | 781,585 | ||||||||||||||||||||||||
Former President — Publishing Division(2) |
(1) | Emmis has adjusted the exercise prices and numbers of shares subject to options referred to in this and the following tables and accompanying text and footnotes for the effect of the $4.00 per share special dividend Emmis paid on November 22, 2006. Emmis has also adjusted the numbers of restricted shares granted or to be granted after that date to reflect a 2 for 1 stock split in 2000. The shares Emmis refers to in this and the following tables are the shares of Class A Common Stock of Emmis, except with respect to Mr. Smulyan, whose shares are shares of Class B Common Stock for fiscal 2008, and Class A shares for fiscal 2009 and 2010. | |
(2) | Mr. Thoe was not a named executive officer prior to the fiscal year ended 2010. | |
(3) | In fiscal 2008, Mr. Smulyan elected to voluntarily forgo all but $1 of his contractual base salary of $905,000. | |
(4) | Under the Emmis 2008 Corporate Incentive Plan, Emmis paid discretionary performance bonuses and non-equity incentive plan awards to executive officers in stock valued at the fair market value of Emmis’ shares on the day the shares are issued. The number of shares issued to each executive officer under the plan, is as follows: Mr. Smulyan, 102,841; Mr. Walsh, 18,182; Mr. Cummings, 31,045; and Mr. Fiddick, 73,510. Under the Emmis 2009 Corporate Incentive Plan and 2010 Corporate Incentive Plan, no executive officer received a discretionary performance bonus for the fiscal years ended 2009 or 2010. During the fiscal year ended 2010, Mr. Smulyan received a $200,000 cash signing bonus in connection with his new employment agreement. | |
(5) | Under the Emmis TV Proceeds Quarterly Bonus Program, Emmis paid quarterly bonuses to certain employees to offset salary reductions. All of Emmis’ executive officers participated in the TV Proceeds Quarterly Bonus Program. Effective September 1, 2008, Emmis reduced to approximately $15,000 the salaries of certain of Emmis’ highly compensated employees, including Emmis’ named executive officers, in order to increase defined consolidated operating cash flow under Emmis’ Credit Facility. Under the TV Proceeds Quarterly Bonus Program, Emmis paid the employees affected by the salary reduction quarterly bonuses in amounts equivalent to the forgone salary. The bonus was paid at the beginning of each fiscal quarter either (i) in cash out of the net proceeds from the sale ofWVUE-TV if certain performance targets from a prior quarter were met, or (ii) in shares of Emmis’ Class A Common Stock under Emmis’ 2004 Equity Compensation Plan if the performance targets were not met. In fiscal 2009 and 2010, all amounts |
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paid under the TV Proceeds Quarterly Bonus Program were paid in cash. The TV Proceeds Quarterly Bonus Plan was terminated as of June 1, 2009. The amount paid in fiscal 2009 to each executive officer under the TV Proceeds Quarterly Bonus Program was as follows: Mr. Smulyan, $438,213; Mr. Walsh, $221,589; Mr. Cummings, $236,288; and Mr. Fiddick, $172,500. The amount paid in fiscal 2010 to each executive officer under the TV Proceeds Quarterly Bonus Program was as follows: Mr. Smulyan, $207,384; Mr. Walsh, $126,115; Mr. Cummings, $109,277; Mr. Fiddick, $80,219; and Mr. Thoe, $61,047. | ||
(6) | A discussion of the assumptions used in calculating these values may be found in Note 4 to the Emmis audited financial statements beginning on page 72 of the Emmis annual report on Form10-K for the fiscal year ended February 28, 2010 for fiscal year 2010 awards, in Note 5 to the Emmis audited financial statements beginning on page 78 of the Emmis annual report on Form10-K for the fiscal year ended February 28, 2009 for fiscal year 2009 awards and in Note 5 to the Emmis audited financial statements beginning on page 79 of the Emmis annual report on Form10-K for the fiscal year ended February 29, 2008 for fiscal year 2008 awards. | |
(7) | The following table sets forth the items comprising “All Other Compensation” for each named executive officer. |
Company | ||||||||||||||||||||||||||||||||
Contributions | ||||||||||||||||||||||||||||||||
Perquisites | to Retirement | Dividends | ||||||||||||||||||||||||||||||
and Other | and | Paid on | ||||||||||||||||||||||||||||||
Personal | Tax | Insurance | 401(k) Plans | Restricted | Severance | |||||||||||||||||||||||||||
Name | Year | Benefits(A) ($) | Reimbursements ($) | Premiums(B) ($) | ($) | Stock(C) ($) | Payments($) | Total ($) | ||||||||||||||||||||||||
Jeffrey H. Smulyan | 2010 | 27,655 | 201 | 10,000 | 1,627 | — | — | 39,483 | ||||||||||||||||||||||||
2009 | 64,144 | 700 | — | 1,000 | — | — | 65,844 | |||||||||||||||||||||||||
2008 | 70,794 | 759 | — | 1,838 | — | — | 73,391 | |||||||||||||||||||||||||
Patrick M. Walsh | 2010 | 13,218 | 110 | 1,896 | 2,154 | — | — | 17,378 | ||||||||||||||||||||||||
2009 | 13,793 | 61 | 3,620 | 1,000 | — | — | 18,474 | |||||||||||||||||||||||||
2008 | 83,741 | 24,124 | 403 | 2,000 | — | — | 110,268 | |||||||||||||||||||||||||
Richard F. Cummings | 2010 | 12,000 | — | — | — | — | — | 12,000 | ||||||||||||||||||||||||
2009 | 12,000 | 74 | 5,000 | 1,000 | — | — | 18,074 | |||||||||||||||||||||||||
2008 | 12,000 | 74 | 5,000 | 2,000 | — | — | 19,074 | |||||||||||||||||||||||||
Paul W. Fiddick | 2010 | 9,000 | — | — | 7,260 | 46,089 | 512,659 | 575,008 | ||||||||||||||||||||||||
2009 | — | — | — | 1,000 | — | — | 1,000 | |||||||||||||||||||||||||
2008 | 4,051 | 60 | — | 2,000 | — | — | 6,111 | |||||||||||||||||||||||||
Gary A. Thoe | 2010 | 1,000 | — | — | — | — | 546,613 | 547,613 |
(A) | Perquisites and other personal benefits for named executive officers other than Mr. Fiddick includes an automobile allowance. The 2008 figures for Mr. Walsh include relocation expenses, including approximately $8,000 of relocation expenses that were over and above the amount included in Mr. Walsh’s contract. This additional amount, which was approved by the Compensation Committee, was reimbursement for unanticipated rent and travel expenses incurred by Mr. Walsh due to a delay in selling his primary residence. The 2008 and 2009 figures for Messrs. Smulyan and Walsh include the incremental cost to Emmis of personal use of Emmis’ airplane. From time to time, family members and guests of the named executives accompanied the executives on business flights on Emmis’ airplane, at no incremental cost to Emmis. | |
(B) | Emmis paid premiums for life, disability or long-term care insurance for Messrs. Walsh and Cummings. | |
(C) | The figure shown reflects dividends paid on restricted shares held by the named executive that were not included in the calculation of compensation expense set forth in the “Stock Awards” column above. |
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Option Awards | Stock Awards | |||||||||||||||||||||||
Market | ||||||||||||||||||||||||
Number of | Value of | |||||||||||||||||||||||
Number of | Number of | Shares or | Shares or | |||||||||||||||||||||
Securities | Securities | Units of | Units of | |||||||||||||||||||||
Underlying | Underlying | Option | Option | Stock That | Stock That | |||||||||||||||||||
Unexercised | Unexercised | Exercise | Expiration | Have Not | Have Not | |||||||||||||||||||
Name | Options (#) | Options(1) (#) | Price ($) | Date | Vested (#) | Vested(4) ($) | ||||||||||||||||||
Exercisable | Unexercisable | |||||||||||||||||||||||
Jeffrey H. Smulyan | 150,000 | 0.295 | 3/02/19 | |||||||||||||||||||||
150,000 | 1.14 | 11/02/19 | ||||||||||||||||||||||
48,783 | 97,566 | 2.95 | 3/01/18 | |||||||||||||||||||||
97,566 | 48,783 | 8.21 | 3/01/17 | |||||||||||||||||||||
292,699 | 11.17 | 3/01/16 | ||||||||||||||||||||||
292,699 | 12.81 | 3/01/15 | ||||||||||||||||||||||
439,049 | 17.45 | 3/01/14 | ||||||||||||||||||||||
Patrick M. Walsh | 250,000 | 0.425 | 12/15/18 | |||||||||||||||||||||
9,756 | 19,513 | 2.95 | 3/01/18 | |||||||||||||||||||||
19,513 | 9,756 | 8.21 | 3/01/17 | |||||||||||||||||||||
14,635 | 8.30 | 9/04/16 | ||||||||||||||||||||||
8,780 | (2) | 7,902 | ||||||||||||||||||||||
8,780 | (3) | 7,902 | ||||||||||||||||||||||
Richard F. Cummings | 87,500 | 0.295 | 3/02/19 | |||||||||||||||||||||
87,500 | 1.14 | 11/02/19 | ||||||||||||||||||||||
14,635 | 29,269 | 2.95 | 3/01/18 | |||||||||||||||||||||
29,269 | 14,635 | 8.21 | 3/01/17 | |||||||||||||||||||||
43,904 | 11.17 | 3/01/16 | ||||||||||||||||||||||
43,904 | 12.81 | 3/01/15 | ||||||||||||||||||||||
73,174 | 17.45 | 3/01/14 | ||||||||||||||||||||||
73,174 | 11.22 | 3/04/13 | ||||||||||||||||||||||
73,174 | 19.90 | 3/06/12 | ||||||||||||||||||||||
73,174 | 19.82 | 3/01/11 | ||||||||||||||||||||||
13,171 | (2) | 11,854 | ||||||||||||||||||||||
13,171 | (3) | 11,854 | ||||||||||||||||||||||
Paul W. Fiddick | 55,000 | 0.295 | 3/02/19 | |||||||||||||||||||||
55,000 | 1.14 | 11/02/19 | ||||||||||||||||||||||
13,169 | 26,339 | 2.95 | 3/01/18 | |||||||||||||||||||||
14,634 | 7,318 | 8.21 | 3/01/17 | |||||||||||||||||||||
21,952 | 11.17 | 3/01/16 | ||||||||||||||||||||||
38,416 | 12.81 | 3/01/15 | ||||||||||||||||||||||
38,416 | 17.45 | 3/01/14 | ||||||||||||||||||||||
10,976 | 11.22 | 3/04/13 | ||||||||||||||||||||||
6,585 | (2) | 5,927 | ||||||||||||||||||||||
6,585 | (3) | 5,927 | ||||||||||||||||||||||
Gary A. Thoe | 35,000 | 0.295 | 3/02/19 | |||||||||||||||||||||
35,000 | 1.14 | 11/02/19 | ||||||||||||||||||||||
4,269 | 8,537 | 2.95 | 3/01/18 | |||||||||||||||||||||
8,537 | 4,269 | 8.21 | 3/01/17 | |||||||||||||||||||||
10,976 | 11.17 | 3/01/16 | ||||||||||||||||||||||
10,976 | 12.81 | 3/01/15 | ||||||||||||||||||||||
21,952 | 17.45 | 3/01/14 | ||||||||||||||||||||||
21,952 | 11.22 | 3/04/13 | ||||||||||||||||||||||
14,634 | 19.90 | 3/06/12 | ||||||||||||||||||||||
14,634 | 19.82 | 3/01/11 | ||||||||||||||||||||||
14,634 | 24.18 | 3/01/10 | ||||||||||||||||||||||
4,940 | (2) | 4,446 | ||||||||||||||||||||||
3,842 | (3) | 3,458 |
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(1) | Options expiring 3/01/18 became exercisable 1/3 on March 1, 2009, and 1/3 on March 1, 2010, and will become exercisable 1/3 on March 1, 2011. Options expiring 3/01/17 became exercisable 1/3 on March 1, 2008, 1/3 on March 1, 2009, and 1/3 on March 1, 2010. Options expiring 3/01/16 became exercisable 1/3 on March 1, 2007, 1/3 on March 1, 2008, and 1/3 on March 1, 2009. Options expiring 3/2/19 and 11/2/19 become exercisable on March 2, 2012. Mr. Walsh’s options expiring 9/04/16 became exercisable 1/3 on September 4, 2007, 1/3 on September 4, 2008, and 1/3 on September 4, 2009. Mr. Walsh’s options expiring 12/15/18 will become exercisable on September 3, 2011. | |
(2) | Shares vest on March 1, 2011. | |
(3) | Shares vest on March 1, 2010. | |
(4) | Calculated based on the $0.90 per share closing market price of Emmis shares on February 26, 2010. |
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• | any individual, entity or group other than Mr. Smulyan or his affiliates becomes the beneficial owner of 35% or more of Emmis’ outstanding shares, or of the voting power of the outstanding shares; | |
• | the current members of the board of directors of Emmis (or persons approved by two-thirds of the current directors) cease to constitute at least a majority of the board; | |
• | Emmis is a party to a merger that results in less than 60% of the outstanding shares or voting power of the surviving corporation being held by persons who were not Emmis shareholders immediately prior to the merger; | |
• | Emmis shareholders approve a liquidation or dissolution of Emmis; or | |
• | any other event is determined by the Emmis board to constitute a change in control. |
• | the willful and continual failure of the executive to perform substantially his duties; or | |
• | the willful engaging in illegal conduct or gross misconduct which is materially injurious to Emmis. |
• | any materially adverse change in the duties or responsibilities of the executive; | |
• | a material breach by Emmis of the executive’s employment agreement or Change in Control Severance Agreement; | |
• | a material reduction or series of reductions that result in the executive’s annual base salary being decreased by more than 5%; | |
• | any requirement that the executive relocate more than 35 miles from the office where the executive works; and | |
• | except with respect to Mr. Fiddick and Mr. Thoe, voluntary termination by the executive during a30-day period commencing one year after the occurrence of a change in control. |
• | to avoid or settle litigation with the executive; | |
• | to reduce an adverse financial effect on Emmis; | |
• | to reduce adverse tax consequences on the executive; or | |
• | to reward meritorious service by the executive. |
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Class A | Class B | |||||||||||||||||||
Common Stock | Common Stock | |||||||||||||||||||
Amount and | Amount and | Percent of | ||||||||||||||||||
Five Percent Shareholders, | Nature of | Nature of | Total | |||||||||||||||||
Directors and Certain | Beneficial | Percent | Beneficial | Percent | Voting | |||||||||||||||
Executive Officers | Ownership | of Class | Ownership | of Class | Power | |||||||||||||||
Jeffrey H. Smulyan | 6,122,530 | (1) | 17.1 | % | 6,101,476 | (20) | 100.0 | % | 69.3 | % | ||||||||||
Susan B. Bayh | 132,374 | (2) | * | — | — | * | ||||||||||||||
Richard F. Cummings | 624,206 | (3) | 1.9 | % | — | — | * | |||||||||||||
J. Scott Enright | 95,289 | (4) | * | — | — | * | ||||||||||||||
Paul W. Fiddick | 183,219 | (5) | * | — | — | * | ||||||||||||||
Gary L. Kaseff | 612,791 | (6) | 1.8 | % | — | — | * | |||||||||||||
Richard A. Leventhal | 290,095 | (7) | * | — | — | * | ||||||||||||||
Gregory T. Loewen | 53,101 | (8) | * | — | — | * | ||||||||||||||
Peter A. Lund | 249,444 | (9) | * | — | — | * | ||||||||||||||
Greg A. Nathanson | 470,980 | (10) | 1.4 | % | — | — | * | |||||||||||||
Lawrence B. Sorrel | 293,040 | (11) | * | — | — | * | ||||||||||||||
Gary A. Thoe | 147,785 | (12) | * | — | — | * | ||||||||||||||
Patrick M. Walsh | 107,042 | (13) | * | — | — | * | ||||||||||||||
Martin Capital Management, LLP | 1,428,259 | (14) | 4.3 | % | — | — | 1.7 | % | ||||||||||||
Luther King Capital Management Corporation | 3,009,896 | (15) | 9.1 | % | — | — | 3.7 | % | ||||||||||||
Amalgamated Gadget, L.P. | 1,882,426 | (16) | 5.6 | % | — | — | 2.3 | % | ||||||||||||
Alden Global Capital Limited | 6,122,530 | (17) | 17.1 | % | 6,101,476 | (17) | 100 | % | 69.3 | % | ||||||||||
Dimensional Fund Advisors LP | 1,756,575 | (18) | 5.3 | % | — | — | 2.1 | % | ||||||||||||
All Executive Officers and Directors as a Group (13 persons) | 9,381,896 | (19) | 25.0 | % | 6,101,476 | (20) | 100.0 | % | 71.4 | % |
* | Less than 1%. | |
(1) | The shares shown as beneficially owned and the calculated percentages of ownership of Class A Common Stock and Class B Common Stock and total voting power include shares beneficially owned by Alden and the Rollover Shareholders because Mr. Smulyan and Alden, and the Rollover Shareholders (with respect to Rollover Shares) might be considered a “group” within the meaning of applicable regulations under the Securities Exchange Act of 1934. Mr. Smulyan disclaims beneficial ownership of all shares of |
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Class A Common Stock and Existing Preferred Stock owned by Alden and all shares of Class A Common Stock owned by the Rollover Shareholders. The balance of 160,506 shares of Class A Common Stock includes 8,441 shares held in the 401(k) Plan, 9,755 shares owned individually, 11,120 shares held by Mr. Smulyan as trustee for his children over which Mr. Smulyan exercises or shares voting control, 3,000 shares held by Mr. Smulyan as trustee for his niece over which Mr. Smulyan exercises or shares voting control, 30,625 shares held by The Smulyan Family Foundation, over which Mr. Smulyan shares voting control and 97,566 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. |
(2) | Consists of 59,200 shares owned individually and 73,174 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 2,195 are restricted stock subject to forfeiture if certain conditions are not satisfied. |
(3) | Consists of 155,840 shares owned individually, 8,260 shares owned for the benefit of Mr. Cummings’ children, 6,429 shares held in the 401(k) Plan and 453,677 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 13,171 are restricted stock subject to forfeiture if certain employment agreement or other conditions are not satisfied. |
(4) | Consists of 9,528 shares owned individually, 3,402 shares held in the 401(k) Plan and 82,359 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 3,000 are restricted stock subject to forfeiture if certain employment agreement or other conditions are not satisfied. |
(5) | Mr. Fiddick is no longer employed by Emmis. Information concerning these shares was obtained from Mr. Fiddick and current share ownership records available to Emmis in connection with employee benefit plan shares. Based on this information, these holdings consist of 36,133 shares owned individually, 739 shares held in the 401(k) Plan and 146,347 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 6,585 are restricted stock subject to forfeiture if certain employment agreement or other conditions are not satisfied. |
(6) | Consists of 134,887 shares owned individually by Mr. Kaseff, 3,411 shares owned by Mr. Kaseff’s spouse, 1,346 shares held by Mr. Kaseff’s spouse for the benefit of their children, 2,395 shares held in the 401(k) Plan, and 470,752 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 10,976 are restricted stock subject to forfeiture if certain employment agreement or other conditions are not satisfied. | |
(7) | Consists of 196,321 shares owned individually, 3,000 shares owned by Mr. Leventhal’s spouse, 17,600 shares owned by a corporation of which Mr. Leventhal is a 50% shareholder and 73,174 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 4,390 are restricted stock subject to forfeiture if certain conditions are not satisfied. |
(8) | Consists of 25,378 shares owned individually, 223 shares held in the 401(k) Plan and 27,500 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 4,950 are restricted stock subject to forfeiture if certain employment agreement or other conditions are not satisfied. |
(9) | Consists of 190,905 shares owned individually and 58,539 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 4,390 are restricted stock subject to forfeiture if certain conditions are not satisfied. | |
(10) | Consists of 339,173 shares owned individually or jointly with his spouse, 44,000 shares owned by trusts for the benefit of Mr. Nathanson’s children and 87,807 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 6,585 are restricted stock subject to forfeiture if certain conditions are not satisfied. |
(11) | Consists of 219,866 shares owned individually and 73,174 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 4,390 are restricted stock subject to forfeiture if certain conditions are not satisfied. |
(12) | Mr. Thoe is no longer employed by Emmis. Information concerning these shares was obtained from the last ownership filings made by Mr. Thoe and current share ownership records available to Emmis in |
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connection with employee benefit plan shares. Based on this information, these holdings consist of 30,664 shares owned individually, 650 shares held in the 401(k) Plan and 116,471 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 4,940 are restricted stock subject to forfeiture if certain employment agreement or other conditions are not satisfied. | ||
(13) | Consists of 39,608 shares owned individually, 4,017 shares held in the 401(k) Plan and 63,417 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. Of the shares owned individually, 8,780 are restricted stock subject to forfeiture if certain employment agreement or other conditions are not satisfied. | |
(14) | Information concerning these shares was obtained from a Schedule 13D/A filed on May 11, 2010 by Martin Capital Management, LLP on behalf of itself and various affiliates (including Frank K. Martin), each of which has a mailing address of 300 NIBCO Parkway, Suite 301, Elkhart, Indiana 46516. | |
(15) | Information concerning these shares was obtained from a Schedule 13D/A filed on January 6, 2010, by Luther King Capital Management Corporation on behalf of itself and various affiliates, each of which has a mailing address of 301 Commerce Street, Suite 1600, Fort Worth, Texas 76102. The shares shown as beneficially owned include 2,765,934 shares of Class A Common Stock owned directly and 243,962 shares of Class A Common Stock issuable upon conversion of 100,000 shares of Existing Preferred Stock. | |
(16) | Information concerning these shares was obtained from a Schedule 13G/A filed on May 6, 2010, by Amalgamated Gadget, L.P., on behalf of itself, R2 Investments, LDC and various affiliates, each of which has a mailing address of 800 Brazos, Suite 1100, Austin, Texas 78701. The shares shown as beneficially owned include 1,060,153 shares of Class A Common Stock owned directly and 822,273 shares of Class A Common Stock issuable upon conversion of 337,050 shares of Existing Preferred Stock. | |
(17) | Information concerning these shares was obtained from a Schedule 13D/A filed on May 27, 2010, by Alden Global Capital Limited on behalf of itself and various affiliates, which has a mailing address of First Floor, Liberation Station, Esplanade, St. Helier, Jersey, JE2 3AS and each of which affiliate has a mailing address of 885 Third Avenue, New York, New York 10022. The shares shown as beneficially owned and the calculated percentages of ownership of Class A Common Stock and total voting power include the shares beneficially owned by Jeffrey H. Smulyan and the Rollover Shareholders because the reporting persons and Mr. Smulyan and the Rollover Shareholders might be considered to be a “group” within the meaning of applicable regulations under the Securities Exchange Act of 1934. The balance attributable to Alden of 4,243,578 shares of Class A Common Stock consist of 1,406,500 shares that Alden holds and 2,837,078 shares issuable upon conversion of 1,162,737 shares of Existing Preferred Stock. Alden disclaims beneficial ownership of all shares of Class A Common Stock and Class B Common Stock owned by Mr. Smulyan and all shares of Class A Common Stock owned by the Rollover Shareholders. If Mr. Smulyan’s and the Rollover Shareholders’ shares are excluded, Alden would beneficially own 10.7% of the Class A Common Stock (assuming the conversion of all Existing Preferred Stock outstanding into Class A Common Stock) and have 4.8% of the total voting power. | |
(18) | Information concerning these shares was obtained from an amended Schedule 13G/A filed on February 8, 2010, by Dimensional Fund Advisors LP, on behalf of itself and various affiliates, each of which has a mailing address of Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas 78746. |
(19) | The shares shown as beneficially owned and the calculated percentages of ownership of Class A Common Stock and total voting power include the shares beneficially owned by Alden and the Rollover Shares because Mr. Smulyan and Alden and Mr. Smulyan and the Rolling Shareholders (with respect to the Rollover Shares) might be considered a “group” within the meaning of applicable regulations under the Securities Exchange Act of 1934. The balance also includes 1,823,957 shares represented by stock options exercisable currently or within 60 days of May 17, 2010 and 2,837,078 shares issuable upon conversion of 1,162,737 shares of Existing Preferred Stock held by Alden. |
(20) | Consists of 4,930,680 shares owned individually and 1,170,796 shares represented by stock options exercisable currently or within 60 days of May 17, 2010. |
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2009 | 2010 | |||||||
Revolver | $ | — | $ | 2,000 | ||||
Term Loan B | 421,355 | 339,150 | ||||||
421,355 | 341,150 | |||||||
Less: current maturities | (4,214 | ) | (3,392 | ) | ||||
$ | 417,141 | $ | 337,758 | |||||
• | permitted Emmis to purchase a portion of the Tranche B Term Loan (as defined in the Credit Facility) at an amount less than par for an aggregate purchase price not to exceed $50 million, | |
• | reduced the Total Revolving Credit Commitment (as defined in the Credit Facility) from $145 million to $75 million, | |
• | excluded from Consolidated Operating Cash Flow (as defined in the Credit Facility) up to $10 million in cash severance and contract termination expenses incurred for the period commencing March 1, 2008 and ending February 28, 2010, | |
• | made Revolving Credit Loans (as defined in the Credit Facility) subject to a pro forma incurrence test, and | |
• | tightened the restrictions on the ability of Emmis to perform certain activities, including restricting the amount that can be used to fund our TV Proceeds Quarterly Bonus Program, and of Emmis Operating to conduct transactions with affiliates. |
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• | suspends the applicability of the total leverage ratio and the fixed charge coverage ratio financial covenants for a suspension period that will end no later than September 1, 2011, | |
• | provides that during the suspension period, Emmis Operating must maintain Minimum Consolidated EBITDA (as defined by the Credit Facility) for the trailing twelve month periods as follows: |
Period Ended | Amount (in 000’s) | |||
August 31, 2009 | $ | 22,800 | ||
November 30, 2009 | $ | 21,600 | ||
February 28, 2010 | $ | 23,400 | ||
May 31, 2010 | $ | 23,200 | ||
August 31, 2010 | $ | 22,400 | ||
November 30, 2010 | $ | 22,700 | ||
February 28, 2011 | $ | 22,900 | ||
May 31, 2011 | $ | 23,600 | ||
August 31, 2011 | $ | 25,000 |
• | provides that during the suspension period, Emmis Operating will not permit Liquidity (as defined in the Credit Facility) as of the last day of each fiscal quarter of Emmis Operating ending during the Suspension Period to be less than $5 million, | |
• | reduces the total revolving credit commitment from $75 million to $20 million, | |
• | sets the applicable margin at 3% per annum for base rate loans and at 4% per annum for Eurodollar rate loans, | |
• | provides that during the suspension period, Emmis Operating: (1) must make certain prepayments from funds attributable to debt or equity issuances, asset sales and extraordinary receipts, and (2) must make quarterly payments of certain excess cash, | |
• | provides that during the suspension period, Emmis Operating may not: (1) make certain investments or effect material acquisitions, (2) make certain restricted payments (including but not limited to restricted payments to fund equity repurchases or dividends on Existing Preferred Stock), or (3) access the additional financing provisions of the Credit Facility (though Emmis Operating has access to the total revolving credit commitment of $20 million), | |
• | excludes from the definition of Consolidated EBITDA up to an additional $5 million in severance and contract termination expenses incurred after the effective date of the Second Amendment, | |
• | grants the lenders a security interest in certain previously excluded real estate and other assets, |
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• | permits the repurchase of debt under the Credit Facility at a discount using proceeds of certain equity issuances, and | |
• | modifies certain financial definitions and other restrictions on Emmis and Emmis Operating. |
Year Ended | Revolver | Term Loan B | Total | |||||||||
February 28 (29), | Amortization | Amortization | Amortization | |||||||||
2011 | $ | — | $ | 3,392 | $ | 3,392 | ||||||
2012 | — | 3,392 | 3,392 | |||||||||
2013 | 2,000 | 3,392 | 5,392 | |||||||||
2014 | — | 328,974 | 328,974 | |||||||||
Total | $ | 2,000 | $ | 339,150 | $ | 341,150 | ||||||
As of February 28, 2010 | ||||||||
Actual Trailing | ||||||||
Covenant | Twelve-Month | |||||||
Requirement | Consolidated EBITDA | |||||||
Trailing Twelve-month consolidated EBITDA (as defined in the Credit Facility) | $ | 23,400 | $ | 25,925 |
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• | will be general unsecured obligations of Emmis; | |
• | will be subordinated in right of payment to all existing and future Senior Debt of Emmis, including, without limitation, Obligations under the Credit Facility; | |
• | will be pari passu in right of payment to any additional senior subordinated Indebtedness incurred by Emmis in the future; | |
• | will be senior in right of payment to any future subordinated Indebtedness of Emmis that expressly provides by its terms that it is subordinated in right of payment to the New Notes, including, without limitation, any Junior Subordinated Notes; and | |
• | will be effectively junior to (i) all liabilities of Emmis’ subsidiaries and (ii) all secured obligations, to the extent of the collateral securing such obligations, including any borrowings under any future secured credit facilities of Emmis. |
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Present Principal Occupation or Employment | ||
Name and Citizenship | and Five-Year Employment History | |
Jeffrey H. Smulyan | • Director, President, Treasurer and Secretary of JS Acquisition, Inc. (since 2010) | |
• Manager, President, Treasurer and Secretary of JS Acquisition, LLC (since 2010) | ||
• Chairman, Chief Executive Officer and President of Emmis Communications Corporation (since 1979) |
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OF THE
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
EMMIS COMMUNICATIONS CORPORATION
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6.25% Series A | ||||||||||||
Cumulative | ||||||||||||
Convertible | ||||||||||||
Class | Class A Common | Class B Common | Preferred | |||||||||
Shares entitled to vote | ||||||||||||
Number of shares represented at the meeting | ||||||||||||
Shares voted in favor | ||||||||||||
Shares voted against |
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Washington, D.C. 20549
(Mark One) | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
for the Fiscal Year Ended February 28, 2010 | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
for the Transition Period from to . |
INDIANA | 0-23264 | 35-1542018 | ||
(State of incorporation or organization) | (Commission file number) | (I.R.S. Employer Identification No.) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
32,905,904 | Class A Common Shares, $.01 par value | |
4,930,680 | Class B Common Shares, $.01 par value | |
0 | Class C Common Shares, $.01 par value |
Documents | Form 10-K Reference | |
Proxy Statement for 2010 Annual Meeting expected to be filed within 120 days | Part III |
FORM 10-K
Page | ||||||
Business | I-4 | |||||
Risk Factors | I-16 | |||||
Unresolved Staff Comments | I-22 | |||||
Properties | I-23 | |||||
Legal Proceedings | I-23 | |||||
(Removed and Reserved) | I-23 | |||||
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | I-24 | |||||
Selected Financial Data | I-25 | |||||
Management’s Discussion and Analysis of Financial Condition and Results of Operation | I-25 | |||||
Quantitative and Qualitative Disclosures About Market Risk | I-48 | |||||
Financial Statements and Supplementary Data | I-49 | |||||
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | I-94 | |||||
Controls and Procedures | I-94 | |||||
Other Information | I-94 | |||||
Directors and Executive Officers of the Registrant | I-94 | |||||
Executive Compensation | I-94 | |||||
Security Ownership of Certain Beneficial Owners, and Management, and Related Stockholder Matters | I-94 | |||||
Certain Relationships and Related Transactions | I-95 | |||||
Principal Accountant Fees and Services | I-95 | |||||
Exhibits and Financial Statement Schedules | I-95 | |||||
I-98 |
I-2
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I-3
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ITEM 1. | BUSINESS. |
I-4
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I-5
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Ranking in | ||||||||||||||||||
Market | Primary | Primary | Station | |||||||||||||||
Rank by | Demographic | Demographic | Audience | |||||||||||||||
Station and Market | Revenue | Format | Target Ages | Target | Share | |||||||||||||
Los Angeles, CA 1 | 1 | |||||||||||||||||
KPWR-FM | Hip-Hop | 18-34 | 2 | 6.8 | ||||||||||||||
New York, NY | 2 | |||||||||||||||||
WRKS-FM | Classic Soul/Today’s R&B | 25-54 | 7 | t | 3.7 | |||||||||||||
WQHT-FM | Hip-Hop | 18-34 | 2 | 7.9 | ||||||||||||||
WRXP-FM | Adult Album Alternative | 25-54 | 15 | t | 3.0 | |||||||||||||
Chicago, IL | 3 | |||||||||||||||||
WLUP-FM | Classic Rock | 25-54 | 11 | t | 3.2 | |||||||||||||
WKQX-FM | Alternative Rock | 18-34 | 5 | 5.4 | ||||||||||||||
St. Louis, MO | 21 | |||||||||||||||||
KPNT-FM | Alternative Rock | 18-34 | 1 | 13.2 | ||||||||||||||
KSHE-FM | Album Oriented Rock | 25-54 | 2 | 8.2 | ||||||||||||||
KIHT-FM | Classic Hits | 25-54 | 4 | 7.2 | ||||||||||||||
KFTK-FM | Talk | 25-54 | 14 | 2.9 | ||||||||||||||
Austin, TX | 32 | |||||||||||||||||
KLBJ-AM | News/Talk | 25-54 | 7 | 4.8 | ||||||||||||||
KLZT-FM 2 | Mexican Regional | 18-34 | 13 | t | 1.8 | |||||||||||||
KBPA-FM | Adult Hits | 25-54 | 4 | t | 5.4 | |||||||||||||
KLBJ-FM | Album Oriented Rock | 25-54 | 3 | 5.6 | ||||||||||||||
KGSR-FM | Adult Album Alternative | 25-54 | 8 | 4.4 | ||||||||||||||
KROX-FM | Alternative Rock | 18-34 | 6 | 5.8 | ||||||||||||||
Indianapolis, IN | 36 | |||||||||||||||||
WFNI-AM | Sports Talk | 25-54 | 15 | 2.5 | ||||||||||||||
WYXB-FM | Soft Adult Contemporary | 25-54 | 8 | 4.7 | ||||||||||||||
WLHK-FM | Country | 25-54 | 4 | 5.7 | ||||||||||||||
WIBC-FM | News/Talk | 35-64 | 2 | 7.5 | ||||||||||||||
Terre Haute, IN | 237 | |||||||||||||||||
WTHI-FM | Country | 25-54 | 1 | 21.2 | ||||||||||||||
WWVR-FM | Classic Rock | 25-54 | 3 | 7.6 |
(1) | Our second station in Los Angeles,KXOS-FM, is operating pursuant to a Local Marketing Agreement (LMA). Under the terms of the LMA, Grupo Radio Centro, S.A.B. de C.V provides the programming for the station and sells all advertising within that programming. Emmis continues to own and operateKXOS-FM. In connection with the LMA, the call letters of the station were changed fromKMVN-FM toKXOS-FM. | |
(2) | KLZT-FM, changed its format from Hip-Hop to Mexican Regional in December 2009. The ratings forKLZT-FM are for the month of January 2010, the first month of ratings available for the Mexican Regional format. |
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Monthly | ||||
Paid & Verified | ||||
Circulation(1) | ||||
Regional Magazines: | ||||
Texas Monthly | 301,100 | |||
Los Angeles | 140,000 | |||
Atlanta | 63,100 | |||
Orange Coast | 52,500 | |||
Indianapolis Monthly | 42,400 | |||
Cincinnati | 39,300 | |||
Specialty Magazines(2): | ||||
Country Sampler | 339,900 | |||
Country Business | 21,900 |
(1) | Source: Publisher’s Statement subject to audit by the Audit Bureau of Circulations (as of December 31, 2009) | |
(2) | Our specialty magazines are circulated bimonthly |
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Height Above | ||||||||||||||||||||
Average | ||||||||||||||||||||
Expiration Date | FCC | Terrain | Power | |||||||||||||||||
Radio Market | Stations | City of License | Frequency | of License(1) | Class | (in feet) | (in Kilowatts) | |||||||||||||
Los Angeles, CA | KPWR-FM | Los Angeles, CA | 105.9 | December 2013 | B | 3035 | 25 | |||||||||||||
KXOS-FM | Los Angeles, CA | 93.9 | December 2013 | B | 3009 | 18.5 | ||||||||||||||
New York, NY | WRXP-FM | New York, NY | 101.9 | June 2014 | B | 1355 | 6.2 | |||||||||||||
WQHT-FM | New York, NY | 97.1 | June 2014 | B | 1339 | 6.7 | ||||||||||||||
WRKS-FM | New York, NY | 98.7 | June 2014 | B | 1362 | 6 | ||||||||||||||
Chicago, IL | WKQX-FM | Chicago, IL | 101.1 | December 2004(2) | B | 1394 | 5.7 | |||||||||||||
WLUP-FM | Chicago, IL | 97.9 | December 2012 | B | 1394 | 4 | ||||||||||||||
St. Louis, MO | KFTK-FM | Florissant, MO | 97.1 | February 2013 | C1 | 561 | 100 | |||||||||||||
KIHT-FM | St. Louis, MO | 96.3 | February 2013 | C1 | 1027 | 80 | ||||||||||||||
KPNT-FM(3) | Collinsville, IL | 105.7 | February 2005(2) | C | 1375 | 100 | ||||||||||||||
KSHE-FM | Crestwood, MO | 94.7 | February 2013 | C0 | 1027 | 100 | ||||||||||||||
Austin, TX | KBPA-FM | San Marcos, TX | 103.5 | August 2013 | C0 | 1257 | 100 | |||||||||||||
KGSR-FM | Cedar Park, TX | 93.3 | August 2013 | C | 1926 | 100 | ||||||||||||||
KLZT-FM | Bastrop, TX | 107.1 | August 2013 | C2 | 499 | 49 | ||||||||||||||
KLBJ-AM | Austin, TX | 590 | August 2013 | B | N/A | 5 D/1 N | ||||||||||||||
KLBJ-FM | Austin, TX | 93.7 | August 2013 | C | 1050 | 97 | ||||||||||||||
KROX-FM | Buda, TX | 101.5 | August 2013 | C2 | 843 | 12.5 | ||||||||||||||
Indianapolis, IN | WFNI-AM | Indianapolis, IN | 1070 | August 2012 | B | N/A | 50 D/10 N | |||||||||||||
WLHK-FM | Shelbyville, IN | 97.1 | August 2012 | B | 732 | 23 | ||||||||||||||
WIBC-FM | Indianapolis, IN | 93.1 | August 2004(2) | B | 991 | 13.5 | ||||||||||||||
WYXB-FM | Indianapolis, IN | 105.7 | August 2012 | B | 492 | 50 | ||||||||||||||
Terre Haute, IN | WTHI-FM | Terre Haute, IN | 99.9 | August 2012 | B | 489 | 50 | |||||||||||||
WWVR-FM | West Terre Haute, IN | 105.5 | August 2012 | A | 295 | 3.3 |
(1) | Under the Communications Act, a license expiration date is extended automatically pending action on the renewal application. | |
(2) | Renewal application is pending. | |
(3) | The FCC has authorized changes in technical facilities forKPNT-FM at a new transmitter site as follows: FCC Class, C1; Height Above Average Terrain, 751 ft; and Effective Radiated Power, 64 kW. The station is authorized to continue operation with its existing facilities until the new facilities are constructed. TheKPNT-FM changes require change of the city of license of stationKSEF-FM from Farmington to St. Genevieve, MO, which the FCC has approved. |
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• | has served the public interest, convenience and necessity; | |
• | has committed no serious violations of the Communications Act or the FCC rules; and | |
• | has committed no other violations of the Communications Act or the FCC rules which would constitute a pattern of abuse. |
• | if the market has 45 or more radio stations, one entity may own up to eight stations, not more than five of which may be in the same service (AM or FM); | |
• | if the market has between 30 and 44 radio stations, one entity may own up to seven stations, not more than four of which may be in the same service; |
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• | if the market has between 15 and 29 radio stations, one entity may own up to six stations, not more than four of which may be in the same service; and | |
• | if the market has 14 or fewer radio stations, one entity may own up to five stations, not more than three of which may be in the same service, however one entity may not own more than 50% of the stations in the market. |
• | up to two commercial television stations and six commercial radio stations or one commercial television station and seven commercial radio stations in a market where at least 20 independent media voices will remain post-merger; | |
• | up to two commercial television stations and four commercial radio stations in a market where at least 10 independent media voices will remain post-merger; and |
• | two commercial television stations and one commercial radio station in a market with less than 10 independent media voices that will remain post-merger. |
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• | all officer and director positions in a licensee or its direct/indirect parent(s); | |
• | voting stock interests of at least 5% (or 20%, if the holder is a passive institutional investor,i.e., a mutual fund, insurance company or bank); | |
• | any equity interest in a limited partnership or limited liability company where the limited partner or member is “materially involved” in the media-related activities of the LP or LLC and has not been “insulated” from such activities pursuant to specific FCC criteria; | |
• | equityand/or debt interests which, in the aggregate, exceed 33% of the total asset value of a station or other media entity (the “equity/debt plus policy”), if the interest holder supplies more than 15% of the station’s total weekly programming (usually pursuant to a time brokerage, local marketing or network affiliation agreement) or is a same-market media entity (i.e., broadcast company or newspaper). In December of 2007, the FCC increased these limits under certain circumstances where the equityand/or debt interests are in a small business meeting certain requirements. |
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• | proposals to impose spectrum use or other fees on FCC licensees; | |
• | proposals to repeal or modify some or all of the FCC’s multiple ownership rulesand/or policies; | |
• | proposals to change rules relating to political broadcasting; | |
• | technical and frequency allocation matters; | |
• | AM stereo broadcasting; | |
• | proposals to modify service and technical rules for digital radio, including possible additional public interest requirements for terrestrial digital audio broadcasters; | |
• | proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages; | |
• | proposals to tighten safety guidelines relating to radio frequency radiation exposure; | |
• | proposals permitting FM stations to accept formerly impermissible interference; | |
• | proposals to reinstate holding periods for licenses; | |
• | changes to broadcast technical requirements, including those relative to the implementation of SDARS and DAB; | |
• | proposals to reallocate spectrum associated with TV channels 5 and 6 for FM radio broadcasting; | |
• | proposals to modify broadcasters’ public interest obligations; | |
• | proposals to limit the tax deductibility of advertising expenses by advertisers; and | |
• | proposals to regulate violence in broadcasts. |
Property | Country | Regulator | Expiration | |||
Radio Expres | Slovakia | Council for Broadcasting and Retransmission | February 2013 | |||
Radio FM+ | Bulgaria | The Council for Electronic Media | February 2013 | |||
Radio Fresh | Bulgaria | The Council for Electronic Media | February 2013 | |||
Star FM | Bulgaria | The Council for Electronic Media | January 2013 |
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Year Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(Amounts in thousands) | ||||||||||||
Net Revenues: | ||||||||||||
Domestic | $ | 316,895 | $ | 285,878 | $ | 226,373 | ||||||
International | 18,782 | 22,053 | 16,193 | |||||||||
Total | $ | 335,677 | $ | 307,931 | $ | 242,566 | ||||||
As of February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(Amounts in thousands) | ||||||||||||
Noncurrent Assets: | ||||||||||||
Domestic | $ | 953,025 | $ | 594,034 | $ | 412,977 | ||||||
International | 26,134 | 13,687 | 10,490 | |||||||||
Total | $ | 979,159 | $ | 607,721 | $ | 423,467 | ||||||
ITEM 1A. | RISK FACTORS. |
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• | satellite-delivered digital audio radio service, which has resulted in subscriber-based satellite radio services with numerous niche formats; | |
• | audio programming by cable systems, direct-broadcast satellite systems, personal communications systems, Internet content providers and other digital audio broadcast formats; | |
• | personal digital audio devices (e.g., audio via Wi-Fi, mobile phones, iPods®, iPhones®, WiMAX, the Internet and MP3 players); |
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• | in-band on-channel digital radio (i.e., HD digital radio), which provides multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services; and | |
• | low-power FM radio, which could result in additional FM radio broadcast outlets. |
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• | changing regulatory or taxation policies, including changes in tax policies that have been proposed by the Obama Administration related to foreign earnings; | |
• | currency exchange risks; | |
• | changes in diplomatic relations or hostility from local populations; | |
• | seizure of our property by the government or restrictions on our ability to transfer our property or earnings out of the foreign country; | |
• | potential instability of foreign governments, which might result in losses against which we are not insured; and | |
• | difficulty of enforcing agreements and collecting receivables through some foreign legal systems. |
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• | make it more difficult for us to satisfy our obligations with respect to our indebtedness; | |
• | increase our vulnerability to generally adverse economic and industry conditions; | |
• | require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes; | |
• | result in higher interest expense in the event of increases in interest rates because some of our debt is at variable rates of interest; | |
• | limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate; | |
• | place us at a competitive disadvantage compared to our competitors that have less debt; and | |
• | limit, along with the financial and other restrictive covenants in our Credit Agreement, our ability to borrow additional funds. |
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ITEM 1B. | UNRESOLVED STAFF COMMENTS. |
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ITEM 2. | PROPERTIES. |
ITEM 3. | LEGAL PROCEEDINGS. |
Age at | ||||||||||
February 28, | Year First | |||||||||
Name | Position | 2010 | Elected Officer | |||||||
Richard F. Cummings | President — Radio Programming | 59 | 1984 | |||||||
J. Scott Enright | Executive Vice President, General Counsel and Secretary | 47 | 1998 | |||||||
Gregory T. Loewen | President — Publishing Division and Chief Strategy Officer | 38 | 2007 |
ITEM 4. | (REMOVED AND RESERVED) |
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ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
Quarter Ended | High | Low | ||||||
May 2008 | 3.74 | 2.62 | ||||||
August 2008 | 3.24 | 1.49 | ||||||
November 2008 | 2.50 | 0.25 | ||||||
February 2009 | 0.65 | 0.27 | ||||||
May 2009 | 0.78 | 0.25 | ||||||
August 2009 | 1.11 | 0.24 | ||||||
November 2009 | 1.62 | 0.63 | ||||||
February 2010 | 1.44 | 0.82 |
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(c) | ||||||||||||||||
Total | (d) | |||||||||||||||
Number of | Maximum | |||||||||||||||
Shares | Approximate | |||||||||||||||
Purchased as | Dollar Value of | |||||||||||||||
(a) | Part of Publicly | Shares That May | ||||||||||||||
Total Number of | (b) | Announced | Yet Be Purchased | |||||||||||||
Shares | Average Price | Plans or | Under the Plans or | |||||||||||||
Period | Purchased | Paid per Share | Programs | Programs | ||||||||||||
December 1, 2009 — December 31, 2009 | 427 | $ | 1.19 | — | $ | 36,150,565 | ||||||||||
January 1, 2010 — January 31, 2010 | 29,500 | $ | 1.24 | — | $ | 36,150,565 | ||||||||||
February 1, 2010 — February 28, 2010 | 290 | $ | 0.90 | — | $ | 36,150,565 | ||||||||||
30,217 | — | |||||||||||||||
ITEM 6. | SELECTED FINANCIAL DATA. |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. |
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Year Ended February 28, | ||||||||||||||||||||||||
2008 | % of Total | 2009 | % of Total | 2010 | % of Total | |||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||
Local | $ | 210,704 | 62.8 | % | $ | 184,134 | 59.8 | % | $ | 143,924 | 59.3 | % | ||||||||||||
National | 62,083 | 18.5 | % | 57,753 | 18.8 | % | 31,572 | 13.0 | % | |||||||||||||||
Political | 33 | 0.0 | % | 1,466 | 0.5 | % | 410 | 0.2 | % | |||||||||||||||
Publication Sales | 14,220 | 4.2 | % | 14,006 | 4.5 | % | 12,844 | 5.3 | % | |||||||||||||||
Non Traditional | 21,591 | 6.4 | % | 18,973 | 6.2 | % | 17,903 | 7.4 | % | |||||||||||||||
Other | 27,046 | 8.1 | % | 31,599 | 10.2 | % | 35,913 | 14.8 | % | |||||||||||||||
Total net revenues | $ | 335,677 | $ | 307,931 | $ | 242,566 | ||||||||||||||||||
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December 1, 2007 | October 1, 2008 | December 1, 2008 | August 1, 2009 | December 1, 2009 | ||||||
Discount Rate | 10.5% - 11.1% | 11.7% - 12.1% | 11.5% - 11.9% | 12.6% - 13.0% | 12.7% - 13.1% | |||||
Long-term Revenue Growth Rate (Years 4-8) | 1.5% - 4.0% | 2.0% - 3.5% | 2.0% - 3.3% | 2.0% - 3.3% | 2.0% - 3.5% | |||||
Revenue Growth Rate (All Years) | 1.5% - 4.4% | 1.5% - 3.4% | 0.7% - 3.3% | 1.5% - 3.2% | 2.0% - 3.4% | |||||
Mature Market Share | 6.7% - 31.0% | 6.3% - 30.8% | 6.3% - 30.5% | 6.3% - 30.6% | 6.2% - 30.0% | |||||
Operating Profit margin | 30.1% - 50.7% | 27.7% - 43.7% | 27.1% - 42.7% | 26.5% - 42.7% | 26.0% - 40.9% |
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Radio Broadcasting Licenses | ||||||||||||
Percentage by | ||||||||||||
Which Fair | ||||||||||||
As of | Value Exceeds | |||||||||||
February 28, 2010 | December 1, 2009 | Carrying | ||||||||||
Unit of Accounting | Carrying Value | Fair Value | Value | |||||||||
New York Cluster | 145,588 | 156,080 | 7.2 | % | ||||||||
KXOS-FM (Los Angeles) | 52,333 | 55,281 | 5.6 | % | ||||||||
Austin Cluster | 46,030 | 46,511 | 1.0 | % | ||||||||
Chicago Cluster | 44,292 | 46,385 | 4.7 | % | ||||||||
St. Louis Cluster | 27,692 | 29,196 | 5.4 | % | ||||||||
Indianapolis Cluster | 17,274 | 18,051 | 4.5 | % | ||||||||
KPWR-FM (Los Angeles) | 2,018 | 55,281 | 2,639.4 | % | ||||||||
Terre Haute Cluster | 574 | 586 | 2.1 | % | ||||||||
Total | 335,801 | 407,371 | 21.3 | % | ||||||||
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For the Years Ended | ||||||||||||||||
February 28, | ||||||||||||||||
2009 | 2010 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Net revenues: | ||||||||||||||||
Radio | $ | 224,941 | $ | 177,566 | $ | (47,375 | ) | (21.1 | )% | |||||||
Publishing | 82,990 | 65,000 | (17,990 | ) | (21.7 | )% | ||||||||||
Total net revenues | $ | 307,931 | $ | 242,566 | $ | (65,365 | ) | (21.2 | )% | |||||||
For the Years Ended | ||||||||||||||||
February 28, | ||||||||||||||||
2009 | 2010 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Station operating expenses, excluding depreciation and amortization expense: | ||||||||||||||||
Radio | $ | 162,685 | $ | 141,557 | $ | (21,128 | ) | (13.0 | )% | |||||||
Publishing | 76,322 | 64,603 | (11,719 | ) | (15.4 | )% | ||||||||||
Total station operating expenses, excluding depreciation and amortization expense | $ | 239,007 | $ | 206,160 | $ | (32,847 | ) | (13.7 | )% | |||||||
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For the Years Ended | ||||||||||||||||
February 28, | ||||||||||||||||
2009 | 2010 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Corporate expenses excluding depreciation and amortization expense | $ | 18,503 | $ | 13,634 | $ | (4,869 | ) | (26.3 | )% |
For the Year Ended | ||||||||||||||||
February 28, | ||||||||||||||||
2009 | 2010 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Restructuring charge | $ | 4,208 | $ | 3,350 | $ | (858 | ) | (20.4 | )% |
For the Year Ended | ||||||||||||||||
February 28, | ||||||||||||||||
2009 | 2010 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Impairment loss | $ | 373,137 | $ | 174,642 | $ | (198,495 | ) | (53.2 | )% |
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For the Years Ended | ||||||||||||||||
February 28, | ||||||||||||||||
2009 | 2010 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Depreciation and amortization: | ||||||||||||||||
Radio | $ | 9,020 | $ | 8,128 | $ | (892 | ) | (9.9 | )% | |||||||
Publishing | 1,231 | 772 | (459 | ) | (37.3 | )% | ||||||||||
Corporate | 2,152 | 1,493 | (659 | ) | (30.6 | )% | ||||||||||
Total depreciation and amortization | $ | 12,403 | $ | 10,393 | $ | (2,010 | ) | (16.2 | )% | |||||||
For the Years Ended | ||||||||||||||||
February 28, | ||||||||||||||||
2009 | 2010 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Operating loss: | ||||||||||||||||
Radio | $ | (281,774 | ) | $ | (140,120 | ) | $ | 141,654 | 50.3 | % | ||||||
Publishing | (27,585 | ) | (9,200 | ) | 18,385 | 66.6 | % | |||||||||
Corporate | (29,982 | ) | (16,166 | ) | 13,816 | 46.1 | % | |||||||||
Total operating loss | $ | (339,341 | ) | $ | (165,486 | ) | $ | 173,855 | 51.2 | % | ||||||
For the Years Ended | ||||||||||||||||
February 28, | ||||||||||||||||
2009 | 2010 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Interest expense | $ | 25,067 | $ | 24,820 | $ | (247 | ) | (1.0 | )% |
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For the Years Ended | ||||||||||||
February 28, | ||||||||||||
2009 | 2010 | $ Change | ||||||||||
(As reported, amounts in thousands) | ||||||||||||
Gain on debt extinguishment | $ | — | $ | 31,362 | $ | 31,362 |
For the Years Ended | ||||||||||||||||
February 28, | ||||||||||||||||
2009 | 2010 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Benefit for income taxes | $ | (65,848 | ) | $ | (39,840 | ) | $ | 26,008 | (39.5 | )% |
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For the Years Ended | ||||||||||||||||
February 28, | ||||||||||||||||
2009 | 2010 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Income from discontinued operations, net of tax | $ | 4,922 | $ | 442 | $ | (4,480 | ) | (91.0 | )% |
Year Ended February 28, | ||||||||
2009 | 2010 | |||||||
Income (loss) from operations: | ||||||||
Television | $ | 5,007 | $ | — | ||||
Slager Radio (Hungary) | 10,311 | 1,404 | ||||||
Belgium | (3,635 | ) | (944 | ) | ||||
Tu Ciudad | (1,890 | ) | (15 | ) | ||||
Emmis Books | (103 | ) | (22 | ) | ||||
Total | 9,690 | 423 | ||||||
Provision for income taxes | 4,188 | 401 | ||||||
Income from operations, net of tax | 5,502 | 22 | ||||||
Gain (loss) on sale of discontinued operations: | ||||||||
Television | (1,017 | ) | — | |||||
Belgium | — | 420 | ||||||
Total | (1,017 | ) | 420 | |||||
Benefit for income taxes | (437 | ) | — | |||||
Gain (loss) on sale of discontinued operations, net of tax | (580 | ) | 420 | |||||
Income from discontinued operations, net of tax | $ | 4,922 | $ | 442 | ||||
For the Years Ended | ||||||||||||||||
February 28, | ||||||||||||||||
2009 | 2010 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Consolidated net loss | $ | (294,953 | ) | $ | (118,492 | ) | $ | 176,461 | (59.8 | )% |
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Year Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Reported net revenues | ||||||||||||||||
Radio | $ | 243,738 | $ | 224,941 | $ | (18,797 | ) | (7.7 | )% | |||||||
Publishing | 91,939 | 82,990 | (8,949 | ) | (9.7 | )% | ||||||||||
Total | 335,677 | 307,931 | (27,746 | ) | (8.3 | )% | ||||||||||
Plus: Net revenues from stations acquired | ||||||||||||||||
Radio | 604 | — | ||||||||||||||
Publishing | 2,774 | — | ||||||||||||||
Total | 3,378 | — | ||||||||||||||
Pro forma net revenues | ||||||||||||||||
Radio | 244,342 | 224,941 | (19,401 | ) | (7.9 | )% | ||||||||||
Publishing | 94,713 | 82,990 | (11,723 | ) | (12.4 | )% | ||||||||||
Total | $ | 339,055 | $ | 307,931 | $ | (31,124 | ) | (9.2 | )% | |||||||
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Year Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Reported station operating expenses excluding depreciation and amortization expense | ||||||||||||||||
Radio | $ | 171,534 | $ | 162,685 | $ | (8,849 | ) | (5.2 | )% | |||||||
Publishing | 78,258 | 76,322 | (1,936 | ) | (2.5 | )% | ||||||||||
Total | 249,792 | 239,007 | (10,785 | ) | (4.3 | )% | ||||||||||
Plus: Station operating expenses excluding depreciation and amortization expense from stations acquired: | ||||||||||||||||
Radio | 567 | — | ||||||||||||||
Publishing | 2,894 | — | ||||||||||||||
Total | 3,461 | — | ||||||||||||||
Pro forma station operating expenses excluding depreciation and amortization expense | ||||||||||||||||
Radio | 172,101 | 162,685 | (9,416 | ) | (5.5 | )% | ||||||||||
Publishing | 81,152 | 76,322 | (4,830 | ) | (6.0 | )% | ||||||||||
Total | $ | 253,253 | $ | 239,007 | $ | (14,246 | ) | (5.6 | )% | |||||||
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For the Years Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Corporate expenses excluding depreciation and amortization expense | $ | 20,883 | $ | 18,503 | $ | (2,380 | ) | (11.4 | )% |
For the Year Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Restructuring charge | $ | — | $ | 4,208 | $ | 4,208 | N/A |
For the Year Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Impairment loss | $ | 18,068 | $ | 373,137 | $ | 355,069 | 1,965.2 | % |
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For the Year Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Contract termination fee | $ | 15,252 | $ | — | $ | (15,252 | ) | (100.0 | )% |
For the Years Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Depreciation and amortization: | ||||||||||||||||
Radio | $ | 8,361 | $ | 9,020 | $ | 659 | 7.9 | % | ||||||||
Publishing | 971 | 1,231 | 260 | 26.8 | % | |||||||||||
Corporate | 2,471 | 2,152 | (319 | ) | (12.9 | )% | ||||||||||
Total depreciation and amortization | $ | 11,803 | $ | 12,403 | $ | 600 | 5.1 | % | ||||||||
For the Years Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Operating income (loss): | ||||||||||||||||
Radio | $ | 30,627 | $ | (281,774 | ) | $ | (312,401 | ) | (1,020.0 | )% | ||||||
Publishing | 12,710 | (27,585 | ) | (40,295 | ) | (317.0 | )% | |||||||||
Corporate | (23,354 | ) | (29,982 | ) | (6,628 | ) | 28.4 | % | ||||||||
Total operating income (loss) | $ | 19,983 | $ | (339,341 | ) | $ | (359,324 | ) | (1,798.1 | )% | ||||||
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For the Years Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Interest expense | $ | 34,319 | $ | 25,067 | $ | (9,252 | ) | (27.0 | )% |
For the Years Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Loss before income taxes and discontinued operations | $ | (14,566 | ) | $ | (365,723 | ) | $ | (351,157 | ) | 2,410.8 | % |
For the Years Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Benefit for income taxes | $ | (3,526 | ) | $ | (65,848 | ) | $ | (62,322 | ) | 1,767.5 | % |
For the Year Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Income from discontinued operations, net of tax | $ | 14,920 | $ | 4,922 | $ | (9,998 | ) | (67.0 | )% |
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Year Ended | ||||||||
February 28 (29), | ||||||||
2008 | 2009 | |||||||
Income (loss) from operations: | ||||||||
Television | $ | 13,300 | $ | 5,007 | ||||
Slager Radio (Hungary) | 6,030 | 10,311 | ||||||
Belgium | (6,585 | ) | (3,635 | ) | ||||
Tu Ciudad | (2,137 | ) | (1,890 | ) | ||||
Emmis Books | (15 | ) | (103 | ) | ||||
Total | 10,593 | 9,690 | ||||||
Provision for income taxes | 5,763 | 4,188 | ||||||
Income from operations, net of tax | 4,830 | 5,502 | ||||||
Gain (loss) on sale of discontinued operations: | ||||||||
Television | 18,237 | (1,017 | ) | |||||
Belgium | — | — | ||||||
Total | 18,237 | (1,017 | ) | |||||
Provision (benefit) for income taxes | 8,147 | (437 | ) | |||||
Gain (loss) on sale of discontinued operations, net of tax | 10,090 | (580 | ) | |||||
Income from discontinued operations, net of tax | $ | 14,920 | $ | 4,922 | ||||
For the Years Ended | ||||||||||||||||
February 28 (29), | ||||||||||||||||
2008 | 2009 | $ Change | % Change | |||||||||||||
(As reported, amounts in thousands) | ||||||||||||||||
Consolidated net income (loss) | $ | 3,880 | $ | (294,953 | ) | $ | (298,833 | ) | (7701.9 | )% |
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• | suspends the applicability of the Total Leverage Ratio and the Fixed Charge Coverage Ratio financial covenants (each as defined in the Credit Agreement) for a period that will end no later than September 1, 2011 (the “Suspension Period”), | |
• | provides that during the Suspension Period, the Borrower must maintain Minimum Consolidated EBITDA (as defined by the Credit Agreement) for the trailing twelve month periods as follows: |
Period Ending | Amount | |||
(In 000’s) | ||||
August 31, 2009 | $ | 22,800 | ||
November 30, 2009 | $ | 21,600 | ||
February 28, 2010 | $ | 23,400 | ||
May 31, 2010 | $ | 23,200 | ||
August 31, 2010 | $ | 22,400 | ||
November 30, 2010 | $ | 22,700 | ||
February 28, 2011 | $ | 22,900 | ||
May 31, 2011 | $ | 23,600 | ||
August 31, 2011 | $ | 25,000 |
• | provides that during the Suspension Period, the Borrower will not permit Liquidity (as defined in the Credit Agreement) as of the last day of each fiscal quarter of the Borrower ending during the Suspension Period to be less than $5 million, | |
• | reduces the Total Revolving Credit Commitment (as defined in the Credit Agreement) from $75 million to $20 million, | |
• | sets the applicable margin at 3% per annum for base rate loans and at 4% per annum for Eurodollar rate loans, | |
• | provides that during the Suspension Period, the Borrower: (1) must make certain prepayments from funds attributable to debt or equity issuances, asset sales and extraordinary receipts, and (2) must make quarterly payments of Suspension Period Excess Cash (as defined in the Credit Agreement), | |
• | provides that during the Suspension Period, the Borrower maynot: (1) make certain investments or effect material acquisitions, (2) make certain restricted payments (including but not limited to restricted payments to fund equity repurchases or dividends on Emmis’ 6.25% Series A Cumulative Convertible Preferred Stock), or (3) access the additional financing provisions of the Credit Agreement (though Borrower has access to the Total Revolving Credit Commitment of $20 million), | |
• | excludes from the definition of Consolidated EBITDA up to an additional $5 million in severance and contract termination expenses incurred after the effective date of the Second Amendment, | |
• | grants the lenders a security interest in certain previously excluded real estate and other assets, | |
• | permits the repurchase of debt under the Credit Agreement at a discount using proceeds of certain equity issuances, and | |
• | modifies certain financial definitions and other restrictions on ECC and the Borrower. |
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As of February 28, 2010 | ||||||||
Actual Trailing | ||||||||
Twelve-Month | ||||||||
Covenant | Consolidated | |||||||
Requirement | EBITDA(1) | |||||||
Trailing Twelve-month Consolidated EBITDA(1) | $ | 23,400 | $ | 25,925 |
(1) | (as defined in the Credit Agreement) |
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ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
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ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
/s/ Jeffrey H. Smulyan | /s/ Patrick M. Walsh | |
Jeffrey H. Smulyan Chairman, President and Chief Executive Officer | Patrick M. Walsh Executive Vice President, Chief Operating Officer and Chief Financial Officer |
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CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(Dollars in thousands, except per share data) | ||||||||||||
NET REVENUES | $ | 335,677 | $ | 307,931 | $ | 242,566 | ||||||
OPERATING EXPENSES: | ||||||||||||
Station operating expenses excluding depreciation and amortization expense of $9,332 $10,251 and $8,900, respectively | 249,792 | 239,007 | 206,160 | |||||||||
Corporate expenses excluding depreciation and amortization expense of $2,471, $2,152 and $1,493, respectively | 20,883 | 18,503 | 13,634 | |||||||||
Restructuring charge | — | 4,208 | 3,350 | |||||||||
Impairment loss | 18,068 | 373,137 | 174,642 | |||||||||
Contract termination fee | 15,252 | — | — | |||||||||
Depreciation and amortization | 11,803 | 12,403 | 10,393 | |||||||||
(Gain) loss on disposal of assets | (104 | ) | 14 | (127 | ) | |||||||
Total operating expenses | 315,694 | 647,272 | 408,052 | |||||||||
OPERATING INCOME (LOSS) | 19,983 | (339,341 | ) | (165,486 | ) | |||||||
OTHER INCOME (EXPENSE): | ||||||||||||
Interest expense | (34,319 | ) | (25,067 | ) | (24,820 | ) | ||||||
Gain on debt extinguishment | — | — | 31,362 | |||||||||
Other income (expense), net | (230 | ) | (1,315 | ) | 170 | |||||||
Total other income (expense) | (34,549 | ) | (26,382 | ) | 6,712 | |||||||
LOSS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS | (14,566 | ) | (365,723 | ) | (158,774 | ) | ||||||
BENEFIT FOR INCOME TAXES | (3,526 | ) | (65,848 | ) | (39,840 | ) | ||||||
LOSS FROM CONTINUING OPERATIONS | (11,040 | ) | (299,875 | ) | (118,934 | ) | ||||||
GAIN FROM DISCONTINUED OPERATIONS, NET OF TAX | (14,920 | ) | (4,922 | ) | (442 | ) | ||||||
CONSOLIDATED NET INCOME (LOSS) | 3,880 | (294,953 | ) | (118,492 | ) | |||||||
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | 5,230 | 5,316 | 4,162 | |||||||||
NET LOSS ATTRIBUTABLE TO THE COMPANY | (1,350 | ) | (300,269 | ) | (122,654 | ) | ||||||
PREFERRED STOCK DIVIDENDS | 8,984 | 8,933 | 9,123 | |||||||||
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (10,334 | ) | $ | (309,202 | ) | $ | (131,777 | ) | |||
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For the Years Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(Dollars in thousands, except per share data) | ||||||||||||
Amounts attributable to common shareholders: | ||||||||||||
Continuing operations | $ | (23,556 | ) | $ | (311,742 | ) | $ | (131,821 | ) | |||
Discontinued operations | 13,222 | 2,540 | 44 | |||||||||
Net loss attributable to common shareholders | $ | (10,334 | ) | $ | (309,202 | ) | $ | (131,777 | ) | |||
Basic net income (loss) per share attributable to common shareholders: | ||||||||||||
Continuing operations | $ | (0.64 | ) | $ | (8.57 | ) | $ | (3.56 | ) | |||
Discontinued operations | 0.36 | 0.07 | — | |||||||||
Net loss attributable to common shareholders | $ | (0.28 | ) | $ | (8.50 | ) | $ | (3.56 | ) | |||
Basic weighted average common shares outstanding | 36,551 | 36,374 | 37,041 | |||||||||
Diluted net income (loss) per share attributable to common shareholders: | ||||||||||||
Continuing operations | $ | (0.64 | ) | $ | (8.57 | ) | $ | (3.56 | ) | |||
Discontinued operations | 0.36 | 0.07 | — | |||||||||
Net loss attributable to common shareholders | $ | (0.28 | ) | $ | (8.50 | ) | $ | (3.56 | ) | |||
Diluted weighted average common shares outstanding | 36,551 | 36,374 | 37,041 |
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CONSOLIDATED BALANCE SHEETS
February 28, | ||||||||
2009 | 2010 | |||||||
(Dollars in thousands, | ||||||||
except share data) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 40,746 | $ | 6,814 | ||||
Accounts receivable, net of allowance for doubtful accounts of $2,062 and $1,967, respectively | 42,825 | 36,834 | ||||||
Prepaid expenses | 16,945 | 15,248 | ||||||
Income tax receivable | 158 | 8,618 | ||||||
Other | 13,924 | 997 | ||||||
Current assets — discontinued operations | 14,743 | 6,052 | ||||||
Total current assets | 129,341 | 74,563 | ||||||
PROPERTY AND EQUIPMENT: | ||||||||
Land and buildings | 29,409 | 29,443 | ||||||
Leasehold improvements | 19,607 | 19,258 | ||||||
Broadcasting equipment | 56,773 | 61,288 | ||||||
Office equipment and automobiles | 41,906 | 42,337 | ||||||
Construction in progress | 212 | 973 | ||||||
147,907 | 153,299 | |||||||
Less-accumulated depreciation and amortization | 93,387 | 103,095 | ||||||
Total property and equipment, net | 54,520 | 50,204 | ||||||
INTANGIBLE ASSETS: | ||||||||
Indefinite lived intangibles | 496,711 | 335,801 | ||||||
Goodwill | 29,442 | 24,175 | ||||||
Other intangibles | 18,881 | 10,153 | ||||||
545,034 | 370,129 | |||||||
Less-accumulated amortization | 8,621 | 6,320 | ||||||
Total intangible assets, net | 536,413 | 363,809 | ||||||
OTHER ASSETS: | ||||||||
Deferred debt issuance costs, net of accumulated amortization of $1,763 and $1,399, respectively | 2,734 | 4,227 | ||||||
Investments | 3,155 | 3,122 | ||||||
Deposits and other | 1,999 | 2,105 | ||||||
Total other assets, net | 7,888 | 9,454 | ||||||
Noncurrent assets — held for sale | 8,900 | — | ||||||
Noncurrent assets — discontinued operations | 2,149 | 138 | ||||||
Total assets | $ | 739,211 | $ | 498,168 | ||||
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February 28, | ||||||||
2009 | 2010 | |||||||
(Dollars in thousands, | ||||||||
except share data) | ||||||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable and accrued expenses | $ | 13,216 | $ | 10,062 | ||||
Current maturities of long-term debt | 4,260 | 3,413 | ||||||
Accrued salaries and commissions | 7,244 | 6,475 | ||||||
Accrued interest | 2,895 | 4,513 | ||||||
Deferred revenue | 17,480 | 24,269 | ||||||
Other | 6,899 | 5,728 | ||||||
Current liabilities — discontinued operations | 5,965 | 2,381 | ||||||
Total current liabilities | 57,959 | 56,841 | ||||||
CREDIT FACILITY DEBT, NET OF CURRENT PORTION | 417,141 | 337,758 | ||||||
OTHER NONCURRENT LIABILITIES | 22,929 | 19,342 | ||||||
DEFERRED INCOME TAXES | 107,722 | 73,305 | ||||||
Total liabilities | 605,751 | 487,246 | ||||||
COMMITMENTS AND CONTINGENCIES (NOTE 11) | ||||||||
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK, $0.01 PAR VALUE; $50.00 LIQUIDATION PREFERENCE; AUTHORIZED 10,000,000 SHARES; ISSUED AND OUTSTANDING 2,809,170 SHARES IN 2009 AND 2010, RESPECTIVELY | 140,459 | 140,459 | ||||||
SHAREHOLDERS’ DEFICIT: | ||||||||
Class A common stock, $0.01 par value; authorized 170,000,000 shares; issued and outstanding 31,912,656 shares and 32,661,550 shares in 2009 and 2010, respectively | 319 | 327 | ||||||
Class B common stock, $0.01 par value; authorized 30,000,000 shares; issued and outstanding 4,956,305 and 4,930,680 shares in 2009 and 2010, respectively | 50 | 49 | ||||||
Class C common stock, $0.01 par value; authorized 30,000,000 shares; none issued | — | — | ||||||
Additional paid-in capital | 524,776 | 527,120 | ||||||
Accumulated deficit | (582,481 | ) | (705,135 | ) | ||||
Accumulated other comprehensive loss | (2,664 | ) | (1,320 | ) | ||||
Total shareholders’ deficit | (60,000 | ) | (178,959 | ) | ||||
NONCONTROLLING INTERESTS | 53,001 | 49,422 | ||||||
Total deficit | (6,999 | ) | (129,537 | ) | ||||
Total liabilities and deficit | $ | 739,211 | $ | 498,168 | ||||
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED FEBRUARY 28, 2010
Class A | Class B | |||||||||||||||
Common Stock | Common Stock | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
(Dollars in thousands, except share data) | ||||||||||||||||
BALANCE, FEBRUARY 28, 2007 | 32,488,863 | $ | 325 | 4,930,267 | $ | 49 | ||||||||||
Exercise of stock options and related income tax benefits | — | — | — | — | ||||||||||||
Issuance of Common Stock to employees and officers and related income tax benefits | 343,893 | 3 | 26,038 | 1 | ||||||||||||
Purchases of common stock | (2,225,092 | ) | (22 | ) | — | — | ||||||||||
Preferred stock dividends | — | — | — | — | ||||||||||||
Cumulative impact of adoption of ASC Topic740-10 | — | — | — | — | ||||||||||||
Payments of dividends and distributions to noncontrolling interests | — | — | — | — | ||||||||||||
Other | — | — | — | — | ||||||||||||
Comprehensive Loss: | ||||||||||||||||
Net loss | — | — | — | — | ||||||||||||
Change in value of derivative instrument | — | — | — | — | ||||||||||||
Cumulative translation adjustment | — | — | — | — | ||||||||||||
Total comprehensive loss | — | — | — | — | ||||||||||||
BALANCE, FEBRUARY 29, 2008 | 30,607,664 | $ | 306 | 4,956,305 | $ | 50 | ||||||||||
Issuance of Common Stock to employees and officers and related income tax benefits | 1,144,367 | 11 | — | — | ||||||||||||
Preferred stock dividends | — | — | — | — | ||||||||||||
Tax benefit on stock based compensation | — | — | — | — | ||||||||||||
Conversion of preferred stock to common stock | 160,625 | 2 | — | — | ||||||||||||
Payments of dividends and distributions to noncontrolling interests | — | — | — | — | ||||||||||||
Comprehensive Loss: | ||||||||||||||||
Net loss | — | — | — | — | ||||||||||||
Change in value of derivative instrument | — | — | — | — | ||||||||||||
Cumulative translation adjustment | — | — | — | — | ||||||||||||
Total comprehensive loss | — | — | — | — | ||||||||||||
BALANCE, FEBRUARY 28, 2009 | 31,912,656 | 319 | 4,956,305 | 50 | ||||||||||||
Exercise of stock options and related income tax benefits | 5,000 | — | — | — | ||||||||||||
Issuance of Common Stock to employees and officers and related income tax benefits | 718,269 | 7 | — | — | ||||||||||||
Conversion of Class B Common Stock to Class A Common Stock | 25,625 | 1 | (25,625 | ) | (1 | ) | ||||||||||
Payments of dividends and distributions to noncontrolling interests | — | — | — | — | ||||||||||||
Comprehensive Loss: | ||||||||||||||||
Net loss | — | — | — | — | ||||||||||||
Change in value of derivative instrument | — | — | — | — | ||||||||||||
Cumulative translation adjustment | — | — | — | — | ||||||||||||
Total comprehensive loss | — | — | — | — | ||||||||||||
BALANCE, FEBRUARY 28, 2010 | 32,661,550 | 327 | 4,930,680 | 49 | ||||||||||||
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Accumulated | ||||||||||||||||||||
Additional | Other | Total | ||||||||||||||||||
Paid-In | Accumulated | Comprehensive | Noncontrolling | Equity | ||||||||||||||||
Capital | Deficit | Income (Loss) | Interests | (Deficit) | ||||||||||||||||
(Dollars in thousands, except share data) | ||||||||||||||||||||
BALANCE, FEBRUARY 28, 2007 | $ | 522,655 | $ | (291,443 | ) | $ | 316 | $ | 50,780 | $ | 282,682 | |||||||||
Exercise of stock options and related income tax benefits | (460 | ) | — | — | — | (460 | ) | |||||||||||||
Issuance of Common Stock to employees and officers and related income tax benefits | 6,992 | — | — | — | 6,996 | |||||||||||||||
Purchases of common stock | (13,846 | ) | — | — | — | (13,868 | ) | |||||||||||||
Preferred stock dividends | — | (8,984 | ) | — | — | (8,984 | ) | |||||||||||||
Cumulative impact of adoption of ASC Topic740-10 | — | 25,180 | — | — | 25,180 | |||||||||||||||
Payments of dividends and distributions to noncontrolling interests | — | — | — | (5,044 | ) | (5,044 | ) | |||||||||||||
Other | — | — | — | (148 | ) | (148 | ) | |||||||||||||
Comprehensive Income: | ||||||||||||||||||||
Net loss | — | (1,350 | ) | — | 8,199 | |||||||||||||||
Cumulative translation adjustment | — | — | 2,541 | (29 | ) | |||||||||||||||
Change in fair value of derivative instrument | — | — | (4,472 | ) | — | |||||||||||||||
Total comprehensive loss | — | — | — | — | 4,889 | |||||||||||||||
BALANCE, FEBRUARY 29, 2008 | $ | 515,341 | $ | (276,597 | ) | $ | (1,615 | ) | $ | 53,758 | $ | 291,243 | ||||||||
Issuance of Common Stock to employees and officers and related income tax benefits | 6,282 | — | — | — | 6,293 | |||||||||||||||
Preferred stock dividends | — | (5,615 | ) | — | — | (5,615 | ) | |||||||||||||
Tax benefit on stock based compensation | (138 | ) | — | — | — | (138 | ) | |||||||||||||
Conversion of preferred stock to common stock | 3,291 | — | — | — | 3,293 | |||||||||||||||
Payments of dividends and distributions to noncontrolling interests | — | — | — | (8,516 | ) | (8,516 | ) | |||||||||||||
Comprehensive Income: | ||||||||||||||||||||
Net loss | — | (300,269 | ) | — | 7,855 | |||||||||||||||
Cumulative translation adjustment | — | — | (1,523 | ) | (96 | ) | ||||||||||||||
Change in fair value of derivative instrument | — | — | 474 | — | ||||||||||||||||
Total comprehensive loss | — | — | — | — | (293,559 | ) | ||||||||||||||
BALANCE, FEBRUARY 28, 2009 | $ | 524,776 | $ | (582,481 | ) | $ | (2,664 | ) | $ | 53,001 | $ | (6,999 | ) | |||||||
Exercise of stock options and related income tax benefits | 1 | — | — | — | 1 | |||||||||||||||
Issuance of Common Stock to employees and officers and related income tax benefits | 2,343 | — | — | — | 2,350 | |||||||||||||||
Conversion of Class B Common Stock to Class A Common Stock | — | — | — | — | — | |||||||||||||||
Payments of dividends and distributions to noncontrolling interests | — | — | — | (7,211 | ) | (7,211 | ) | |||||||||||||
Comprehensive Loss: | ||||||||||||||||||||
Net loss | — | (122,654 | ) | — | 4,162 | |||||||||||||||
Cumulative translation adjustment | — | — | (1,365 | ) | (530 | ) | ||||||||||||||
Change in value of derivative instrument | — | — | 2,709 | — | ||||||||||||||||
Total comprehensive loss | — | — | — | — | (117,678 | ) | ||||||||||||||
BALANCE, FEBRUARY 28, 2010 | $ | 527,120 | $ | (705,135 | ) | $ | (1,320 | ) | $ | 49,422 | $ | (129,537 | ) | |||||||
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For the Years Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(Dollars in thousands) | ||||||||||||
OPERATING ACTIVITIES: | ||||||||||||
Consolidated net income (loss) | $ | 3,880 | $ | (294,953 | ) | $ | (118,492 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities — | ||||||||||||
Discontinued operations | (14,920 | ) | (4,922 | ) | (442 | ) | ||||||
Impairment losses | 18,068 | 373,137 | 174,642 | |||||||||
Gain on debt extinguishment | — | — | (31,362 | ) | ||||||||
Depreciation and amortization | 12,817 | 13,034 | 11,255 | |||||||||
Provision for bad debts | 1,809 | 3,122 | 1,899 | |||||||||
Benefit for deferred income taxes | (4,504 | ) | (67,440 | ) | (34,341 | ) | ||||||
Noncash compensation | 7,200 | 5,822 | 2,441 | |||||||||
Contract termination fee | 15,252 | — | — | |||||||||
(Gain) loss on disposal of fixed assets | (104 | ) | 14 | (127 | ) | |||||||
Other | (357 | ) | — | — | ||||||||
Changes in assets and liabilities — | ||||||||||||
Accounts receivable | (403 | ) | 11,238 | 4,124 | ||||||||
Prepaid expenses and other current assets | (4,181 | ) | (8,926 | ) | 14,610 | |||||||
Other assets | 4,269 | 5,740 | (723 | ) | ||||||||
Accounts payable and accrued liabilities | (161 | ) | (224 | ) | (2,497 | ) | ||||||
Deferred revenue | 1,333 | 1,174 | 6,789 | |||||||||
Income taxes | 2,337 | 1,168 | (10,239 | ) | ||||||||
Other liabilities | (152 | ) | (3,521 | ) | 2,943 | |||||||
Net cash provided by operating activities — discontinued operations | 6,259 | 9,176 | 5,182 | |||||||||
Net cash provided by operating activities | 48,442 | 43,639 | 25,662 | |||||||||
INVESTING ACTIVITIES: | ||||||||||||
Purchases of property and equipment | (6,244 | ) | (20,518 | ) | (4,779 | ) | ||||||
Proceeds from the sale of assets | — | 9 | 9,109 | |||||||||
Cash paid for acquisitions | (15,309 | ) | (335 | ) | (4,882 | ) | ||||||
Deposits on acquisitions and other | (568 | ) | (230 | ) | 102 | |||||||
Net cash provided by (used in) investing activities — discontinued operations | 55,727 | 38,775 | (153 | ) | ||||||||
Net cash provided by (used in) investing activities | 33,606 | 17,701 | (603 | ) | ||||||||
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For the Years Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(Dollars in thousands) | ||||||||||||
FINANCING ACTIVITIES: | ||||||||||||
Payments on long-term debt | (100,307 | ) | (23,338 | ) | (130,660 | ) | ||||||
Proceeds from long-term debt | 41,000 | 6,000 | 83,235 | |||||||||
Settlement of tax withholding obligations | (612 | ) | (547 | ) | (69 | ) | ||||||
Dividends and distributions paid to noncontrolling interests | (5,044 | ) | (6,283 | ) | (3,947 | ) | ||||||
Purchases of the Company’s Class A Common Stock, including transaction costs | (13,868 | ) | — | — | ||||||||
Proceeds from exercise of stock options and employee stock purchases | 61 | — | 1 | |||||||||
Payments for debt related costs | — | — | (4,846 | ) | ||||||||
Adjusted tax benefit on stock-based compensation | (460 | ) | (138 | ) | — | |||||||
Net cash used in financing activities — discontinued operations | — | (2,233 | ) | (2,042 | ) | |||||||
Preferred stock dividends | (8,984 | ) | (6,738 | ) | — | |||||||
Net cash used in financing activities | (88,214 | ) | (33,277 | ) | (58,328 | ) | ||||||
Effect of exchange rate on cash and cash equivalents | 1,645 | (714 | ) | (663 | ) | |||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (4,521 | ) | 27,349 | (33,932 | ) | |||||||
CASH AND CASH EQUIVALENTS: | ||||||||||||
Beginning of period | 17,918 | 13,397 | 40,746 | |||||||||
End of period | $ | 13,397 | $ | 40,746 | $ | 6,814 | ||||||
SUPPLEMENTAL DISCLOSURES: | ||||||||||||
Cash paid for — | ||||||||||||
Interest | $ | 29,008 | $ | 27,488 | $ | 22,396 | ||||||
Income taxes, net of refunds | 4,010 | 4,484 | 5,110 | |||||||||
Non-cash financing transactions — | ||||||||||||
Value of stock issued to employees under stock compensation program and to satisfy accrued incentives | 7,087 | 10,120 | 2,412 | |||||||||
ACQUISITION OF ORANGE COAST | ||||||||||||
Fair value of assets acquired | $ | 7,911 | $ | — | ||||||||
Purchase price withheld (see Note 9) | (335 | ) | 335 | |||||||||
Cash paid | (6,522 | ) | (335 | ) | ||||||||
Liabilities recorded | $ | 1,054 | $ | — | ||||||||
ACQUISITION OF RADIO NETWORK IN BULGARIA | ||||||||||||
Fair value of assets acquired | $ | 9,212 | ||||||||||
Cash paid | (8,787 | ) | ||||||||||
Liabilities recorded | $ | 425 | ||||||||||
ACQUISITION OF NONCONTROLLING BULGARIAN RADIO INTERESTS | ||||||||||||
Fair value of assets acquired | $ | 4,882 | ||||||||||
Cash paid | (4,882 | ) | ||||||||||
Liabilities recorded | $ | — | ||||||||||
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1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
a. | Principles of Consolidation |
b. | Organization |
c. | Revenue Recognition |
d. | Allowance for Doubtful Accounts |
Balance at | Balance at | |||||||||||||||
Beginning of | End of | |||||||||||||||
Year | Provision | Write-Offs | Year | |||||||||||||
Year ended February 29, 2008 | 1,551 | 1,809 | (1,673 | ) | 1,687 | |||||||||||
Year ended February 28, 2009 | 1,687 | 3,122 | (2,747 | ) | 2,062 | |||||||||||
Year ended February 28, 2010 | 2,062 | 1,899 | (1,994 | ) | 1,967 |
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e. | Local Programming and Marketing Agreement Fees |
f. | Share-based Compensation |
g. | Cash and Cash Equivalents |
h. | Property and Equipment |
i. | Intangible Assets and Goodwill |
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j. | Discontinued operations and assets held for sale |
Year Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Income (loss) from operations: | ||||||||||||
Television | $ | 13,300 | $ | 5,007 | $ | — | ||||||
Slager Radio (Hungary) | 6,030 | 10,311 | 1,404 | |||||||||
Belgium | (6,585 | ) | (3,635 | ) | (944 | ) | ||||||
Tu Ciudad | (2,137 | ) | (1,890 | ) | (15 | ) | ||||||
Emmis Books | (15 | ) | (103 | ) | (22 | ) | ||||||
Total | 10,593 | 9,690 | 423 | |||||||||
Provision for income taxes | 5,763 | 4,188 | 401 | |||||||||
Income from operations, net of tax | 4,830 | 5,502 | 22 | |||||||||
Gain (loss) on sale of discontinued operations: | ||||||||||||
Television | 18,237 | (1,017 | ) | — | ||||||||
Belgium | — | — | 420 | |||||||||
Total | 18,237 | (1,017 | ) | 420 | ||||||||
Provision (benefit) for income taxes | 8,147 | (437 | ) | — | ||||||||
Gain (loss) on sale of discontinued operations, net of tax | 10,090 | (580 | ) | 420 | ||||||||
Income from discontinued operations, net of tax | $ | 14,920 | $ | 4,922 | $ | 442 | ||||||
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Year Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net revenues | $ | 20,579 | $ | 23,911 | $ | 12,914 | ||||||
Station operating expenses, excluding depreciation and amortization expense | 12,701 | 13,517 | 10,534 | |||||||||
Depreciation and amortization | 1,822 | 1,548 | 1,837 | |||||||||
Interest expense | 239 | — | 58 | |||||||||
Other income | 213 | 1,465 | 919 | |||||||||
Income before taxes | 6,030 | 10,311 | 1,404 | |||||||||
Provision for income taxes | 1,083 | 1,821 | 401 | |||||||||
Net income attributable to minority interests | 1,698 | 2,382 | 398 |
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 8,985 | $ | — | ||||
Accounts receivable, net | 3,523 | 3,299 | ||||||
Prepaid expenses | 1,170 | 180 | ||||||
Other current assets | 415 | 2,573 | ||||||
Total current assets | 14,093 | 6,052 | ||||||
Noncurrent assets: | ||||||||
Property and equipment, net | 523 | — | ||||||
Other intangibles, net | 1,460 | — | ||||||
Other noncurrent assets | 127 | 138 | ||||||
Total noncurrent assets | 2,110 | 138 | ||||||
Total assets | $ | 16,203 | $ | 6,190 | ||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 2,149 | $ | 1,565 | ||||
Current maturities of long-term debt | 1,003 | — | ||||||
Accrued salaries and commissions | 407 | — | ||||||
Deferred revenues | 1,325 | 513 | ||||||
Total current liabilities | $ | 4,884 | $ | 2,078 | ||||
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For the Year Ended February 28 (29,) | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net revenues | $ | 1,803 | $ | 2,031 | $ | 703 | ||||||
Station operating expenses, excluding depreciation and amortization expense | 4,205 | 4,547 | 1,647 | |||||||||
Depreciation and amortization | 764 | 387 | — | |||||||||
Impairment loss | 3,157 | 271 | — | |||||||||
Interest expense | 279 | 484 | — | |||||||||
Other income, net | 10 | 23 | — | |||||||||
Loss before income taxes | 6,585 | 3,635 | 944 |
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Current assets: | ||||||||
Accounts receivable, net | $ | 446 | $ | — | ||||
Prepaid expenses | 136 | — | ||||||
Other | 18 | — | ||||||
Total current assets | 600 | — | ||||||
Noncurrent assets: | ||||||||
Other noncurrent assets | 34 | — | ||||||
Total noncurrent assets | 34 | — | ||||||
Total assets | $ | 634 | $ | — | ||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 542 | $ | — | ||||
Accrued salaries and commissions | 116 | — | ||||||
Deferred revenue | 80 | — | ||||||
Total current liabilities | $ | 738 | $ | — | ||||
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Year Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net revenues | $ | 22,929 | $ | 7,364 | $ | — | ||||||
Station operating expenses excluding depreciation and amortization expense | 14,114 | 2,365 | — | |||||||||
Impairment loss | — | — | — | |||||||||
Income before taxes | 13,300 | 5,007 | — | |||||||||
Provision for income taxes | 5,561 | 3,181 | — | |||||||||
Gain (loss) on sale of stations, net of tax | 10,090 | (580 | ) | — |
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Current assets: | ||||||||
Other | $ | 5 | $ | — | ||||
Total current assets | 5 | — | ||||||
Total assets | $ | 5 | $ | — | ||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 303 | $ | 303 | ||||
Total current liabilities | 303 | 303 | ||||||
Total liabilities | $ | 303 | $ | 303 | ||||
Year Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net revenues | $ | 3,004 | $ | 818 | $ | — | ||||||
Station operating expenses, excluding depreciation and amortization expense | 5,093 | 2,596 | 15 | |||||||||
Depreciation and amortization | 48 | 22 | — | |||||||||
Loss before taxes | 2,137 | 1,890 | 15 | |||||||||
Benefit for income taxes | 875 | 772 | — |
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February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Noncurrent assets: | ||||||||
Other noncurrent assets | $ | 5 | $ | — | ||||
Total noncurrent assets | 5 | — | ||||||
Total assets | $ | 5 | $ | — | ||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 10 | $ | — | ||||
Other | 3 | — | ||||||
Total current liabilities | 13 | — | ||||||
Total liabilities | $ | 13 | $ | — | ||||
Year Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net revenues | $ | 149 | $ | 57 | $ | (7 | ) | |||||
Station operating expenses, excluding depreciation and amortization expense | 150 | 146 | 15 | |||||||||
Depreciation and amortization | 14 | 5 | — | |||||||||
Loss before taxes | 15 | 103 | 22 | |||||||||
Benefit for income taxes | 6 | 42 | — |
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February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Current assets: | ||||||||
Accounts receivable, net | $ | 45 | $ | — | ||||
Prepaid expenses | — | — | ||||||
Total current assets | 45 | — | ||||||
Noncurrent assets: | ||||||||
Property and equipment, net | — | — | ||||||
Other noncurrent assets | — | — | ||||||
Total noncurrent assets | — | — | ||||||
Total assets | $ | 45 | $ | — | ||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 27 | $ | — | ||||
Total current liabilities | $ | 27 | $ | — | ||||
k. | Advertising and Subscription Acquisition Costs |
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l. | Investments |
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Broadcast tower site investment — New Jersey | $ | 1,150 | $ | 1,150 | ||||
Broadcast tower site investment — Texas | 1,337 | 1,340 | ||||||
Other — continuing operations | 215 | 180 | ||||||
Total equity method investments | $ | 2,702 | $ | 2,670 | ||||
m. | Deferred Revenue and Barter Transactions |
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n. | Foreign Currency Translation |
Functional | For the Years Ended February 28 (29), | |||||||||||||
Currency | 2008 | 2009 | 2010 | |||||||||||
Hungary | Forint | $ | 703 | $ | (759 | ) | $ | (1,018 | ) | |||||
Belgium | Euro | 338 | 47 | (538 | ) | |||||||||
Slovakia | Koruna(1) | 1,871 | 1,680 | (99 | ) | |||||||||
Bulgaria | Leva | (371 | ) | (2,491 | ) | 290 | ||||||||
$ | 2,541 | $ | (1,523 | ) | $ | (1,365 | ) | |||||||
(1) | In Slovakia, the Euro became the official currency on January 1, 2009 |
o. | Earnings Per Share |
For the Year Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(Shares in 000’s) | ||||||||||||
6.25% Series A cumulative convertible preferred stock | 7,015 | 6,854 | 6,854 | |||||||||
Stock options and restricted stock awards | 8,115 | 8,628 | 8,650 | |||||||||
Antidilutive common share equivalents | 15,130 | 15,482 | 15,504 | |||||||||
p. | Income Taxes |
q. | Long-Lived Tangible Assets |
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r. | Estimates |
s. | National Representation Agreement |
t. | Liquidity |
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u. | Recent Accounting Pronouncements |
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v. | Reclassifications |
2. | COMMON STOCK |
3. | REDEEMABLE PREFERRED STOCK |
4. | SHARE-BASED PAYMENTS |
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Year Ended February 28 (29), | ||||||
2008 | 2009 | 2010 | ||||
Risk-Free Interest Rate: | 4.4% — 4.9% | 1.7% — 3.5% | 2.3% — 2.8% | |||
Expected Dividend Yield: | 0% | 0% | 0% | |||
Expected Life (Years): | 6.0 | 6.0 — 6.5 | 6.0 — 6.5 | |||
Expected Volatility: | 46.1% — 47.5% | 48.6% — 70.1% | 72.3% — 100.4% |
Weighted Average | Aggregate | |||||||||||||||
Remaining | Intrinsic | |||||||||||||||
Options | Price | Contractual Term | Value | |||||||||||||
Outstanding, beginning of year | 8,350,802 | $ | 14.60 | |||||||||||||
Granted | 2,419,085 | 0.62 | ||||||||||||||
Exercised | 5,000 | 0.30 | ||||||||||||||
Forfeited | 62,164 | 3.05 | ||||||||||||||
Expired | 1,664,647 | 18.76 | ||||||||||||||
Outstanding, end of year | 9,038,076 | 10.18 | 5.5 | $ | 993 | |||||||||||
Exercisable, end of year | 5,802,338 | 15.11 | 3.6 | $ | — |
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Weighted | ||||||||
Average | ||||||||
Grant Date | ||||||||
Options | Fair Value | |||||||
Nonvested, beginning of year | 1,536,094 | $ | 2.73 | |||||
Granted | 2,419,085 | 0.44 | ||||||
Vested | 657,277 | 4.06 | ||||||
Forfeited | 62,164 | 1.57 | ||||||
Nonvested, end of year | 3,235,738 | 0.78 | ||||||
Awards | Price | |||||||
Grants outstanding, beginning of year | 644,084 | $ | 7.08 | |||||
Granted | 711,620 | 1.20 | ||||||
Vested (restriction lapsed) | 928,413 | 3.54 | ||||||
Forfeited | 28,928 | 4.57 | ||||||
Grants outstanding, end of year | 398,363 | 5.02 | ||||||
Year Ended February 28 (29), | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Station operating expenses excluding depreciation and amortization expense | $ | 2,874 | $ | 2,539 | $ | 701 | ||||||
Corporate expenses | 4,326 | 3,283 | 1,740 | |||||||||
Stock-based compensation expense included in operating expenses | 7,200 | 5,822 | 2,441 | |||||||||
Tax benefit | (2,952 | ) | (2,387 | ) | — | |||||||
Recognized stock-based compensation expense, net of tax | $ | 4,248 | $ | 3,435 | $ | 2,441 | ||||||
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5. | CREDIT AGREEMENT AND RELATED DEFERRED DEBT ISSUANCE COSTS |
2009 | 2010 | |||||||
Revolver | $ | — | $ | 2,000 | ||||
Term Loan B | 421,355 | 339,150 | ||||||
421,355 | 341,150 | |||||||
Less: current maturities | (4,214 | ) | (3,392 | ) | ||||
$ | 417,141 | $ | 337,758 | |||||
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• | suspends the applicability of the Total Leverage Ratio and the Fixed Charge Coverage Ratio financial covenants (each as defined in the Credit Agreement) for a period that will end no later than September 1, 2011 (the “Suspension Period”), | |
• | provides that during the Suspension Period, the Borrower must maintain Minimum Consolidated EBITDA (as defined by the Credit Agreement) for the trailing twelve month periods as follows: |
Period Ended | Amount | |||
(In 000’s) | ||||
August 31, 2009 | $ | 22,800 | ||
November 30, 2009 | $ | 21,600 | ||
February 28, 2010 | $ | 23,400 | ||
May 31, 2010 | $ | 23,200 | ||
August 31, 2010 | $ | 22,400 | ||
November 30, 2010 | $ | 22,700 | ||
February 28, 2011 | $ | 22,900 | ||
May 31, 2011 | $ | 23,600 | ||
August 31, 2011 | $ | 25,000 |
• | provides that during the Suspension Period, the Borrower will not permit Liquidity (as defined in the Credit Agreement) as of the last day of each fiscal quarter of the Borrower ending during the Suspension Period to be less than $5 million, | |
• | reduces the Total Revolving Credit Commitment (as defined in the Credit Agreement) from $75 million to $20 million, | |
• | sets the applicable margin at 3% per annum for base rate loans and at 4% per annum for Eurodollar rate loans, | |
• | provides that during the Suspension Period, the Borrower: (1) must make certain prepayments from funds attributable to debt or equity issuances, asset sales and extraordinary receipts, and (2) must make quarterly payments of Suspension Period Excess Cash (as defined in the Credit Agreement), | |
• | provides that during the Suspension Period, the Borrower maynot: (1) make certain investments or effect material acquisitions, (2) make certain restricted payments (including but not limited to restricted payments to fund equity repurchases or dividends on Emmis’ 6.25% Series A Cumulative Convertible Preferred Stock), or (3) access the additional financing provisions of the Credit Agreement (though Borrower has access to the Total Revolving Credit Commitment of $20 million), | |
• | excludes from the definition of Consolidated EBITDA up to an additional $5 million in severance and contract termination expenses incurred after the effective date of the Second Amendment, | |
• | grants the lenders a security interest in certain previously excluded real estate and other assets, | |
• | permits the repurchase of debt under the Credit Agreement at a discount using proceeds of certain equity issuances, and | |
• | modifies certain financial definitions and other restrictions on ECC and the Borrower. |
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Revolver | Term Loan B | Total | ||||||||||
Year Ended February 28 (29), | Amortization | Amortization | Amortization | |||||||||
2011 | — | 3,392 | 3,392 | |||||||||
2012 | — | 3,392 | 3,392 | |||||||||
2013 | 2,000 | 3,392 | 5,392 | |||||||||
2014 | — | 328,974 | 328,974 | |||||||||
Total | $ | 2,000 | $ | 339,150 | $ | 341,150 | ||||||
As of February 28, 2010 | ||||||||
Actual Trailing | ||||||||
Twelve-Month | ||||||||
Covenant | Consolidated | |||||||
Requirement | EBITDA(1) | |||||||
Trailing Twelve-month Consolidated EBITDA(1) | $ | 23,400 | $ | 25,925 |
(1) | (as defined in the Credit Agreement) |
6. | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
• | manage current and forecasted interest rate risk while maintaining optimal financial flexibility and solvency | |
• | proactively manage the Company’s cost of capital to ensure the Company can effectively manage operations and execute its business strategy, thereby maintaining a competitive advantage and enhancing shareholder value | |
• | comply with covenant requirements in the Company’s Credit Agreement |
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Number of | ||||||||
Interest Rate Derivative | Instruments | Notional | ||||||
Interest Rate Swaps | 3 | $ | 340,000 |
Tabular Disclosure of Fair Values of Derivative Instruments | ||||||||||||||||||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||
As of February 28, | As of February 28, | As of February 28, | As of February 28, | |||||||||||||||||||||||||
2009 | 2010 | 2009 | 2010 | |||||||||||||||||||||||||
Balance Sheet | Fair | Balance Sheet | Fair | Balance Sheet | Fair | Balance Sheet | Fair | |||||||||||||||||||||
Location | Value | Location | Value | Location | Value | Location | Value | |||||||||||||||||||||
Derivatives designated as hedging instruments Interest Rate Swap Agreements (Current Portion) | N/A | $ | — | N/A | $ | — | N/A | $ | — | Other Current Liabilities | $ | 569 | ||||||||||||||||
Interest Rate Swap Agreements (Long Term Portion) | N/A | — | N/A | — | Other Noncurrent Liabilities | 6,777 | Other Noncurrent Liabilities | 3,499 | ||||||||||||||||||||
Total derivatives designated as hedging instruments | $ | — | $ | — | $ | 6,777 | $ | 4,068 | ||||||||||||||||||||
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Amount of | ||||||||||||||||||||||||||||||||||||||||||||
Gain or (Loss) | ||||||||||||||||||||||||||||||||||||||||||||
Recognized in | ||||||||||||||||||||||||||||||||||||||||||||
Location of | Income on | |||||||||||||||||||||||||||||||||||||||||||
Gain or (Loss) | Derivative | |||||||||||||||||||||||||||||||||||||||||||
Amount of | Recognized in | (Ineffective | ||||||||||||||||||||||||||||||||||||||||||
Location of | Gain or (Loss) | Income on | Portion and | |||||||||||||||||||||||||||||||||||||||||
Amount of Gain or (Loss) | Gain or (Loss) | Reclassified from | Derivative | Amount | ||||||||||||||||||||||||||||||||||||||||
Recognized in OCI on | Reclassified from | Accumulated OCI into | (Ineffective | Excluded from | ||||||||||||||||||||||||||||||||||||||||
Derivative (Effective | Accumulated | Income (Effective | Portion and Amount | Effectiveness | ||||||||||||||||||||||||||||||||||||||||
Derivatives in Cash Flow | Portion) | OCI into Income | Portion) | Excluded from | Testing) | |||||||||||||||||||||||||||||||||||||||
Hedging Relationships | 2008 | 2009 | 2010 | (Effective Portion) | 2008 | 2009 | 2010 | Effectiveness Testing) | 2008 | 2009 | 2010 | |||||||||||||||||||||||||||||||||
Interest Rate Swap Agreements | $ | (5,126 | ) | $ | (2,793 | ) | $ | (7,271 | ) | Interest expense | $ | 654 | $ | (3,267 | ) | $ | (9,980 | ) | N/A | $ | — | $ | — | $ | — | |||||||||||||||||||
Total | $ | (5,126 | ) | $ | (2,793 | ) | $ | (7,271 | ) | $ | 654 | $ | (3,267 | ) | $ | (9,980 | ) | $ | — | $ | — | $ | — | |||||||||||||||||||||
7. | FAIR VALUE MEASUREMENTS |
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As of February 28, 2010 | ||||||||||||||||
Level 1 | ||||||||||||||||
Quoted Prices in | Level 2 | |||||||||||||||
Active | Significant | Level 3 | ||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical Assets or | Observable | Unobservable | ||||||||||||||
Liabilities | Inputs | Inputs | Total | |||||||||||||
Available for sale securities | $ | — | $ | — | $ | 452 | $ | 452 | ||||||||
Total assets measured at fair value on a recurring basis | $ | — | $ | — | $ | 452 | $ | 452 | ||||||||
Interest rate swap agreements | $ | — | $ | — | $ | 4,068 | $ | 4,068 | ||||||||
Total liabilities measured at fair value on a recurring basis | $ | — | $ | — | $ | 4,068 | $ | 4,068 | ||||||||
As of February 28, 2009 | ||||||||||||||||
Level 1 | ||||||||||||||||
Quoted Prices in | Level 2 | |||||||||||||||
Active | Significant | Level 3 | ||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical Assets or | Observable | Unobservable | ||||||||||||||
Liabilities | Inputs | Inputs | Total | |||||||||||||
Cash equivalents | $ | — | $ | 24,415 | $ | — | $ | 24,415 | ||||||||
Available for sale securities | — | — | 452 | 452 | ||||||||||||
Total assets measured at fair value on a recurring basis | $ | — | $ | 24,415 | $ | 452 | $ | 24,867 | ||||||||
Interest rate swap agreements | — | — | 6,777 | 6,777 | ||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | — | $ | — | $ | 6,777 | $ | 6,777 | ||||||||
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For the Year Ended | For the Year Ended | |||||||||||||||
February 28, 2009 | February 28, 2010 | |||||||||||||||
Available | Available | |||||||||||||||
For Sale | Derivative | For Sale | Derivative | |||||||||||||
Securities | Instruments | Securities | Instruments | |||||||||||||
Beginning Balance | $ | 1,452 | $ | — | $ | 452 | $ | 6,777 | ||||||||
Purchases | 250 | — | — | — | ||||||||||||
Transfers in | — | 8,823 | — | — | ||||||||||||
Other than temporary impairment loss | (1,250 | ) | — | — | — | |||||||||||
Unrealized gains in other comprehensive income | — | (2,046 | ) | — | (2,709 | ) | ||||||||||
Ending Balance | $ | 452 | $ | 6,777 | $ | 452 | $ | 4,068 | ||||||||
As of February 28, 2010 | ||||||||||||||||||||
Level 1 | ||||||||||||||||||||
Quoted Prices in | Level 2 | |||||||||||||||||||
Active | Significant | Level 3 | ||||||||||||||||||
Markets for | Other | Significant | Year Ended | |||||||||||||||||
Identical Assets or | Observable | Unobservable | February 28, 2010 | |||||||||||||||||
Liabilities | Inputs | Inputs | Total | Impairment Loss | ||||||||||||||||
Indefinite-lived intangibles | $ | — | $ | — | $ | 335,801 | $ | 335,801 | $ | 160,910 | ||||||||||
Goodwill(1) | — | — | — | — | 8,928 | |||||||||||||||
Other intangibles, net | — | — | 3,833 | 3,833 | 4,804 | |||||||||||||||
Total | $ | — | $ | — | $ | 339,634 | $ | 339,634 | $ | 174,642 | ||||||||||
(1) | Pursuant to ASC Topic350-20-35, the fair value of goodwill is assessed only when the carrying value of the reporting unit exceeds its fair value. On December 1, 2009, the fair value of each of our reporting units exceeded their respective carrying values, thus fair value of goodwill was not assessed. |
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• | Cash and cash equivalents, accounts receivable and accounts payable, including accrued liabilities: The carrying amount of these assets and liabilities approximates fair value because of the short maturity of these instruments. | |
• | Credit Agreement debt: As of February 28, 2009 and 2010, the fair value of the Company’s Credit Agreement debt based on bid prices as of those dates was $183.3 million and $283.2 million, respectively, while the carrying value was $421.4 million and $341.2 million, respectively. | |
• | 6.25% Series A cumulative convertible preferred stock: As of February 28, 2009 and 2010, the fair value of the Company’s 6.25% Series A cumulative convertible preferred stock based on quoted market prices was $5.6 million and $41.0 million, respectively, while the carrying value was $140.5 million for both periods. |
8. | ACQUISITIONS, DISPOSITIONS AND INVESTMENTS |
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Asset Description | Amount | Asset Lives | ||||
Accounts receivable | $ | 24 | Less than one year | |||
Other current assets | 58 | Less than one year | ||||
Broadcasting equipment | 324 | 5 years | ||||
International broadcast license | 1,471 | 60 months | ||||
Goodwill | 7,335 | Indefinite | ||||
Accounts payable and accrued expenses | (385 | ) | ||||
Other current liabilities | (40 | ) | ||||
Total purchase price | $ | 8,787 | ||||
Asset Description | Amount | Asset Lives | ||||
Accounts receivable | $ | 570 | Less than one year | |||
Other current assets | 73 | Less than one year | ||||
Furniture and fixtures | 20 | 5 years | ||||
Goodwill | 2,852 | Indefinite | ||||
Trademark | 2,922 | 15 years | ||||
Advertiser list | 1,162 | 4 years | ||||
Other definite lived intangibles | 312 | 3 years | ||||
Other current liabilities | (564 | ) | ||||
Deferred income taxes | (490 | ) | ||||
Total purchase price | $ | 6,857 | ||||
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9. | INTANGIBLE ASSETS AND GOODWILL |
Interim Assessment | Annual Assessment | |||||||||||||||||||||||||||
FCC | FCC | |||||||||||||||||||||||||||
Licenses | Goodwill | Definite-lived | Licenses | Goodwill | Definite-lived | Total | ||||||||||||||||||||||
Year Ended February 29, 2008 | N/A | N/A | N/A | 18,068 | — | 3,157 | 21,225 | |||||||||||||||||||||
Year Ended February 28, 2009 | 187,580 | 22,585 | — | 116,980 | 35,684 | 3,056 | 365,885 | |||||||||||||||||||||
Year Ended February 28, 2010 | 160,910 | 8,928 | 4,804 | — | — | — | 174,642 |
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December 1, | October 1, | December 1, | August 1, | December 1, | ||||||
2007 | 2008 | 2008 | 2009 | 2009 | ||||||
Discount Rate | 10.5% - 11.1% | 11.7% - 12.1% | 11.5% - 11.9% | 12.6% - 13.0% | 12.7% -13.1% | |||||
Long-term Revenue Growth Rate (Years 4-8) | 1.5% - 4.0% | 2.0% - 3.5% | 2.0% - 3.3% | 2.0% -3.3% | 2.0% - 3.5% | |||||
Revenue Growth Rate (All Years) | 1.5% - 4.4% | 1.5% - 3.4% | 0.7% - 3.3% | 1.5% - 3.2% | 2.0% - 3.4% | |||||
Mature Market Share | 6.7% - 31.0% | 6.3% - 30.8% | 6.3% - 30.5% | 6.3% - 30.6% | 6.2% - 30.0% | |||||
Operating Profit margin | 30.1% - 50.7% | 27.7% - 43.7% | 27.1% - 42.7% | 26.5% - 42.7% | 26.0% - 40.9% |
Change in FCC License Carrying Values | ||||||||||||||||
As of | As of | |||||||||||||||
February 28, | Interim | Annual | February 28, | |||||||||||||
Unit of Accounting | 2009 | Impairment | Impairment | 2010 | ||||||||||||
New York Cluster | $ | 210,570 | $ | (64,982 | ) | $ | — | $ | 145,588 | |||||||
KXOS-FM (Los Angeles) | 75,059 | (22,726 | ) | — | 52,333 | |||||||||||
Austin Cluster | 73,421 | (27,391 | ) | — | 46,030 | |||||||||||
Chicago Cluster | 66,749 | (22,457 | ) | — | 44,292 | |||||||||||
St. Louis Cluster | 43,289 | (15,597 | ) | — | 27,692 | |||||||||||
Indianapolis Cluster | 24,527 | (7,253 | ) | — | 17,274 | |||||||||||
KPWR-FM (Los Angeles) | 2,018 | — | — | 2,018 | ||||||||||||
Terre Haute Cluster | 1,078 | (504 | ) | — | 574 | |||||||||||
Total | $ | 496,711 | $ | (160,910 | ) | $ | — | $ | 335,801 | |||||||
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Change in Goodwill Carrying Values | ||||||||||||||||||||
As of | As of | |||||||||||||||||||
February 28, | Interim | Annual | February 28, | |||||||||||||||||
Unit of Accounting | 2009 | Acquisition | Impairment | Impairment | 2010 | |||||||||||||||
Indianapolis Cluster | $ | 265 | $ | — | $ | — | $ | — | $ | 265 | ||||||||||
Austin Cluster | 4,338 | — | — | — | 4,338 | |||||||||||||||
Bulgaria | — | 3,661 | (3,661 | ) | — | |||||||||||||||
Slovakia | 1,703 | — | — | — | 1,703 | |||||||||||||||
Total Radio Segment | 6,306 | 3,661 | (3,661 | ) | — | 6,306 | ||||||||||||||
Los Angeles Magazine | 5,267 | — | (5,267 | ) | — | — | ||||||||||||||
Country Sampler | 9,385 | — | — | — | 9,385 | |||||||||||||||
Indianapolis Monthly | 448 | — | — | — | 448 | |||||||||||||||
Texas Monthly | 8,036 | — | — | — | 8,036 | |||||||||||||||
Total Publishing Segment | 23,136 | — | (5,267 | ) | — | 17,869 | ||||||||||||||
Grand Total | $ | 29,442 | $ | 3,661 | $ | (8,928 | ) | $ | — | $ | 24,175 | |||||||||
Weighted | February 28, 2009 | February 28, 2010 | ||||||||||||||||||||||||||
Average | Gross | Net | Gross | Net | ||||||||||||||||||||||||
Useful Life | Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | ||||||||||||||||||||||
(in years) | Amount | Amortization | Amount | Amount | Amortization | Amount | ||||||||||||||||||||||
Foreign broadcasting licenses | 7.8 | $ | 13,502 | $ | 6,638 | $ | 6,864 | $ | 8,716 | $ | 5,230 | $ | 3,486 | |||||||||||||||
Favorable office leases | 6.4 | 688 | 605 | 83 | 688 | 632 | 56 | |||||||||||||||||||||
Trademarks | 37.8 | 3,687 | 754 | 2,933 | 749 | 458 | 291 | |||||||||||||||||||||
Customer list | N/A | 692 | 460 | 232 | — | — | — | |||||||||||||||||||||
Noncompete and other | N/A | 312 | 164 | 148 | — | — | — | |||||||||||||||||||||
TOTAL | $ | 18,881 | $ | 8,621 | $ | 10,260 | $ | 10,153 | $ | 6,320 | $ | 3,833 | ||||||||||||||||
YEAR ENDED FEBRUARY 28 (29), | ||||||||
2011 | $ | 1,177 | ||||||
2012 | 1,177 | |||||||
2013 | 1,166 | |||||||
2014 | 113 | |||||||
2015 | 18 |
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10. | EMPLOYEE BENEFIT PLANS |
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11. | OTHER COMMITMENTS AND CONTINGENCIES |
Operating | Syndicated | Employment | Other | |||||||||||||||||
Year Ending February 28 (29), | Leases | Programming | Agreements | Contracts | Total | |||||||||||||||
2011 | $ | 8,168 | $ | 896 | $ | 13,868 | $ | 8,732 | $ | 31,664 | ||||||||||
2012 | 8,058 | 730 | 4,439 | 9,141 | 22,368 | |||||||||||||||
2013 | 7,294 | 334 | 1,265 | 8,598 | 17,491 | |||||||||||||||
2014 | 6,318 | — | — | 10,164 | 16,482 | |||||||||||||||
2015 | 5,871 | — | — | 3,606 | 9,477 | |||||||||||||||
Thereafter | 22,903 | — | — | 656 | 23,559 | |||||||||||||||
Total | $ | 58,612 | $ | 1,960 | $ | 19,572 | $ | 40,897 | $ | 121,041 | ||||||||||
12. | INCOME TAXES |
2008 | 2009 | 2010 | ||||||||||
United States | $ | (19,658 | ) | $ | (360,059 | ) | $ | (155,785 | ) | |||
Foreign | 5,092 | (5,664 | ) | (2,989 | ) | |||||||
Loss before income taxes | $ | (14,566 | ) | $ | (365,723 | ) | $ | (158,774 | ) | |||
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2008 | 2009 | 2010 | ||||||||||
Current: | ||||||||||||
Federal | $ | — | $ | — | $ | (6,794 | ) | |||||
State | — | — | 527 | |||||||||
Foreign | 886 | 1,529 | 990 | |||||||||
886 | 1,529 | (5,277 | ) | |||||||||
Deferred: | ||||||||||||
Federal | (5,235 | ) | (58,346 | ) | (28,759 | ) | ||||||
State | 474 | (8,581 | ) | (5,438 | ) | |||||||
Foreign | 349 | (450 | ) | (366 | ) | |||||||
(4,412 | ) | (67,377 | ) | (34,563 | ) | |||||||
Benefit for income taxes | $ | (3,526 | ) | $ | (65,848 | ) | $ | (39,840 | ) | |||
Other Tax Related Information: | ||||||||||||
Taxes associated with noncontrolling interest earnings | (2,763 | ) | (2,539 | ) | — | |||||||
Tax provision of discontinued operations | 13,909 | 3,751 | 401 |
2008 | 2009 | 2010 | ||||||||||
Computed income tax benefit at 35% | $ | (5,292 | ) | $ | (125,666 | ) | $ | (55,571 | ) | |||
State income tax | 474 | (8,581 | ) | (4,911 | ) | |||||||
Foreign taxes | (369 | ) | (2,075 | ) | (533 | ) | ||||||
Federal net operating loss carryback | — | — | (6,793 | ) | ||||||||
Nondeductible stock compensation and Section 162 disallowance | 1,021 | 1,486 | 1,154 | |||||||||
Entertainment disallowance | 677 | 620 | 546 | |||||||||
Increase in valuation allowance | — | 54,061 | 20,988 | |||||||||
Tax attributed to noncontrolling interest | — | — | (1,318 | ) | ||||||||
Impairment charges on goodwill with no tax basis | — | 14,030 | 3,825 | |||||||||
Forgiveness of intercompany foreign loans | — | — | 2,548 | |||||||||
Other | (37 | ) | 277 | 225 | ||||||||
Benefit for income taxes | $ | (3,526 | ) | $ | (65,848 | ) | $ | (39,840 | ) | |||
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2009 | 2010 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carryforwards | $ | 23,836 | $ | 30,245 | ||||
Intangible assets | 29,975 | 48,314 | ||||||
Compensation relating to stock options | 3,487 | 3,062 | ||||||
Interest rate exchange agreement | 2,779 | 1,668 | ||||||
Deferred revenue | 5,491 | 8,109 | ||||||
Tax credits | 5,883 | 1,405 | ||||||
Investments in subsidiairies | 1,751 | 1,796 | ||||||
Other | 4,615 | 3,487 | ||||||
Valuation allowance | (63,990 | ) | (71,089 | ) | ||||
Total deferred tax assets | 13,827 | 26,997 | ||||||
Deferred tax liabilities | ||||||||
Indefinite-lived intangible assets | (110,692 | ) | (76,565 | ) | ||||
Fixed assets | (539 | ) | (2,587 | ) | ||||
Foreign unremitted earnings | (9,775 | ) | (7,925 | ) | ||||
Cancellation of debt income | — | (12,858 | ) | |||||
Other | (543 | ) | (367 | ) | ||||
Total deferred tax liabilities | (121,549 | ) | (100,302 | ) | ||||
Net deferred tax liabilities | $ | (107,722 | ) | $ | (73,305 | ) | ||
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For the Year Ending | ||||||||
February 28, | ||||||||
2009 | 2010 | |||||||
Gross unrecognized tax benefit — opening balance | $ | 864 | $ | 1,739 | ||||
Gross increases — tax positions in prior periods | 875 | 100 | ||||||
Gross decreases — settlements with taxing authorities | — | (600 | ) | |||||
Gross decreases — lapse of applicable statute of limitations | — | (582 | ) | |||||
Gross unrecognized tax benefit — ending balance | $ | 1,739 | $ | 657 | ||||
13. | SEGMENT INFORMATION |
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Net Revenues for the Year Ended February 28 (29), | Long-Lived Assets as of February 28 (29), | |||||||||||||||||||||||
2008 | 2009 | 2010 | 2008 | 2009 | 2010 | |||||||||||||||||||
Continuing Operations: | ||||||||||||||||||||||||
Slovakia | 14,839 | 18,195 | 14,090 | 10,843 | 9,965 | 9,371 | ||||||||||||||||||
Bulgaria | 3,943 | 3,858 | 2,103 | 15,291 | 3,722 | 1,119 | ||||||||||||||||||
Discontinued Operations: | ||||||||||||||||||||||||
Hungary | 20,579 | 23,911 | 12,914 | 4,261 | 2,110 | 138 | ||||||||||||||||||
Belgium | 1,803 | 2,031 | 703 | 684 | 34 | — |
Year Ended February 28, 2010 | Radio | Publishing | Corporate | Consolidated | ||||||||||||
Net revenues | $ | 177,566 | $ | 65,000 | $ | — | $ | 242,566 | ||||||||
Station operating expenses excluding depreciation and amortization expense | 141,557 | 64,603 | — | 206,160 | ||||||||||||
Corporate expenses excluding depreciation and amortization expense | — | — | 13,634 | 13,634 | ||||||||||||
Depreciation and amortization | 8,128 | 772 | 1,493 | 10,393 | ||||||||||||
Impairment loss | 166,571 | 8,071 | — | 174,642 | ||||||||||||
Restructuring charge | 1,412 | 741 | 1,197 | 3,350 | ||||||||||||
(Gain) loss on disposal of fixed assets | 18 | 13 | (158 | ) | (127 | ) | ||||||||||
Operating loss | $ | (140,120 | ) | $ | (9,200 | ) | $ | (16,166 | ) | $ | (165,486 | ) | ||||
Assets — continuing operations | $ | 418,259 | $ | 39,431 | $ | 34,288 | $ | 491,978 | ||||||||
Assets — discontinued operations | 6,190 | — | — | 6,190 | ||||||||||||
Total assets | $ | 424,449 | $ | 39,431 | $ | 34,288 | $ | 498,168 | ||||||||
Year Ended February 28, 2009 | Radio | Publishing | Corporate | Consolidated | ||||||||||||
Net revenues | $ | 224,941 | $ | 82,990 | $ | — | $ | 307,931 | ||||||||
Station operating expenses excluding depreciation and amortization expense | 162,685 | 76,322 | — | 239,007 | ||||||||||||
Corporate expenses excluding depreciation and amortization expense | — | — | 18,503 | 18,503 | ||||||||||||
Depreciation and amortization | 9,020 | 1,231 | 2,152 | 12,403 | ||||||||||||
Impairment loss | 333,464 | 32,422 | 7,251 | 373,137 | ||||||||||||
Restructuring charge | 1,521 | 599 | 2,088 | 4,208 | ||||||||||||
(Gain) loss on disposal of fixed assets | 25 | 1 | (12 | ) | 14 | |||||||||||
Operating loss | $ | (281,774 | ) | $ | (27,585 | ) | $ | (29,982 | ) | $ | (339,341 | ) | ||||
Assets — continuing operations | $ | 610,866 | $ | 52,263 | $ | 59,190 | $ | 722,319 | ||||||||
Assets — discontinued operations | 16,837 | 50 | 5 | 16,892 | ||||||||||||
Total assets | $ | 627,703 | $ | 52,313 | $ | 59,195 | $ | 739,211 | ||||||||
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Year Ended February 29, 2008 | Radio | Publishing | Corporate | Consolidated | ||||||||||||
Net revenues | $ | 243,738 | $ | 91,939 | $ | — | $ | 335,677 | ||||||||
Station operating expenses excluding depreciation and amortization expense | 171,534 | �� | 78,258 | — | 249,792 | |||||||||||
Corporate expenses excluding depreciation and amortization expense | — | — | 20,883 | 20,883 | ||||||||||||
Depreciation and amortization | 8,361 | 971 | 2,471 | 11,803 | ||||||||||||
Impairment loss | 18,068 | — | — | 18,068 | ||||||||||||
Contract termination fee | 15,252 | — | — | 15,252 | ||||||||||||
Gain on disposal of fixed assets | (104 | ) | — | — | (104 | ) | ||||||||||
Operating income (loss) | $ | 30,627 | $ | 12,710 | $ | (23,354 | ) | $ | 19,983 | |||||||
14. | RESTRUCTURING CHARGE |
15. | PRO FORMA FINANCIAL INFORMATION |
For the | ||||
Year Ended | ||||
February 29, | ||||
2008 | ||||
Pro Forma | ||||
Net revenues | $ | 339,055 | ||
Loss from continuing operations | $ | (13,425 | ) | |
Net loss available to common shareholders | $ | (12,719 | ) | |
Net loss per share available to common shareholders: | ||||
Basic | $ | (0.35 | ) | |
Diluted | $ | (0.35 | ) | |
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16. | RELATED PARTY TRANSACTIONS |
17. | SUBSEQUENT EVENT |
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ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
ITEM 9B. | OTHER INFORMATION. |
ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. |
ITEM 11. | EXECUTIVE COMPENSATION. |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. |
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Number of | Number of Securities | |||||||||||
Securities to be | Remaining | |||||||||||
Issued | Available for Future | |||||||||||
Upon Exercise of | Weighted-Average | Issuance under | ||||||||||
Outstanding | Exercise Price of | Equity Compensation Plans | ||||||||||
Options, Warrants | Outstanding Options, | (Excluding Securities | ||||||||||
and Rights | Warrants and Rights | Reflected in Column (A)) | ||||||||||
Plan Category | (A) | (B) | (C) | |||||||||
Equity Compensation Plans Approved by Security Holders | 9,038,076 | $ | 10.18 | 314,865 | ||||||||
Equity Compensation Plans Not Approved by Security Holders | — | — | — | |||||||||
Total | 9,038,076 | $ | 10.18 | 314,865 |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
3 | .1 | Second Amended and Restated Articles of Incorporation of Emmis Communications Corporation, as amended effective June 13, 2005 incorporated by reference from Exhibit 3.1 to the Company’sForm 10-K for the fiscal year ended February 28, 2006. | ||
3 | .2 | Amended and Restated By-Laws of Emmis Communications Corporation incorporated by reference from Exhibit 3.2 to the Company’sForm 10-Q for the quarter ended August 31, 2009. | ||
4 | .1 | Form of stock certificate for Class A common stock, incorporated by reference from Exhibit 3.5 to the 1994 Emmis Registration Statement onForm S-1, FileNo. 33-73218 (the “1994 Registration Statement”). | ||
10 | .1 | Amended and Restated Credit and Term Loan Agreement dated November 2, 2006, incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K filed on November 7, 2006 and First Amendment and Consent to Amended and Restated Revolving Credit and Term Loan Agreement, incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K filed on March 6, 2009 and Second Amendment to Amended and Restated Revolving Credit and Term Loan Agreement, incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K filed on August 19, 2009. | ||
10 | .2 | Emmis Communications Corporation 2004 Equity Compensation Plan as Amended and Restated in 2008, incorporated by reference to Exhibit 10.14 to the Company’sForm 8-K filed January 7, 2009.++ |
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10 | .3 | Tax Sharing Agreement dated May 10, 2004, by and between Emmis Communications Corporation and Emmis Operating Company, incorporated by reference to Exhibit 10.32 to the Company’sForm 10-K for the year ended February 29, 2004. | ||
10 | .4 | Form of Stock Option Grant Agreement, incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K filed March 7, 2005.++ | ||
10 | .5 | Form of Restricted Stock Option Grant Agreement, incorporated by reference to Exhibit 10.2 to the Company’sForm 8-K filed March 7, 2005.++ | ||
10 | .6 | Director Compensation Policy effective May 13, 2005, incorporated by reference from Exhibit 10.36 to the Company’sForm 10-K for the year ended February 28, 2005.++ | ||
10 | .7 | Change in Control Severance Agreement, dated as of January 1, 2008, by and between Emmis Communications Corporation and Jeffrey H. Smulyan, incorporated by reference from Exhibit 10.7 to the Company’sForm 8-K filed on January 7, 2009.++ | ||
10 | .8 | Employment Agreement, dated as of December 15, 2009, by and between Emmis Operating Company and Jeffrey H. Smulyan.*++ | ||
10 | .9 | Change in Control Severance Agreement, dated as of January 1, 2008, by and between Emmis Communications Corporation and Patrick M. Walsh, incorporated by reference from Exhibit 10.13 to the Company’sForm 8-K filed on January 7, 2009.++ | ||
10 | .10 | Employment Agreement, dated as of December 15, 2008, by and between Emmis Operating Company and Patrick M. Walsh incorporated by reference from Exhibit 10.1 to the Company’sForm 8-K filed December 15, 2008.++ | ||
10 | .11 | Change in Control Severance Agreement, dated as of January 1, 2008, by and between Emmis Communications Corporation and Richard F. Cummings, incorporated by reference from Exhibit 10.8 to the Company’sForm 8-K filed on January 7, 2009.++ | ||
10 | .12 | Employment Agreement, dated as of March 1, 2009, by and between Emmis Operating Company and Richard F. Cummings incorporated by reference from Exhibit 10.2 to the Company’sForm 8-K filed March 6, 2009.++ | ||
10 | .13 | Employment Agreement, dated as of March 1, 2010, by and between Emmis Operating Company and Richard F. Cummings incorporated by reference from Exhibit 10.1 to the Company’sForm 8-K filed March 3, 2010.++ | ||
10 | .14 | Employment Agreement, effective as of March 3, 2009, by and between Emmis Operating Company and Gary L. Kaseff incorporated by reference from Exhibit 10.31 to the Company’sForm 10-K/A filed October 9, 2009.++ | ||
10 | .15 | Change in Control Severance Agreement, dated as of January 1, 2008, by and between Emmis Communications Corporation and Gary A. Thoe, incorporated by reference from Exhibit 10.12 to the Company’sForm 8-K filed on January 7, 2009.++ | ||
10 | .16 | Employment Agreement, dated as of March 1, 2008, by and between Emmis Operating Company and Gary A. Thoe incorporated by reference from Exhibit 10.5 to the Company’sForm 8-K filed March 6, 2008.++ | ||
10 | .17 | Amendment to Employment Agreement, dated as of January 1, 2008, by and between Emmis Operating Company and Gary A. Thoe incorporated by reference from Exhibit 10.6 to the Company’sForm 8-K filed on January 7, 2009.++ | ||
10 | .18 | Separation and Release Agreement, dated as of December 22, 2009, by and between Emmis Operating Company and Gary A. Thoe.*++ | ||
10 | .19 | Change in Control Severance Agreement, dated as of January 1, 2008, by and between Emmis Communications Corporation and Paul W. Fiddick, incorporated by reference from Exhibit 10.9 to the Company’sForm 8-K filed on January 7, 2009.++ | ||
10 | .20 | Employment Agreement, effective as of March 1, 2009, by and between Emmis Operating Company and Paul W. Fiddick, incorporated by reference from Exhibit 10.1 to the Company’Form 10-Q for the quarter ended August 31, 2008.++ |
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10 | .21 | Separation and Release Agreement, dated as of December 15, 2009, by and between Emmis Operating Company and Paul W. Fiddick.*++ | ||
10 | .22 | Local Programming and Marketing Agreement, dated as of April 3, 2009, among KMVN, LLC, KMVN License, LLC, Grupo Radio Centro LA, LLC and Grupo Radio Centro S.A.B. de C.V., incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K filed April 8, 2009. | ||
10 | .23 | Put and Call Agreement, dated as of April 3, 2009, among KMVN, LLC, KMVN License, LLC, Grupo Radio Centro LA, LLC and Grupo Radio Centro S.A.B. de C.V., incorporated by reference to Exhibit 10.2 to the Company’sForm 8-K filed April 8, 2009. | ||
21 | Subsidiaries of Emmis.* | |||
23 | Consent of Independent Registered Public Accounting Firm.* | |||
24 | Powers of Attorney.* | |||
31 | .1 | Certification of Principal Executive Officer of Emmis Communications Corporation pursuant toRule 13a-14(a) under the Exchange Act.* | ||
31 | .2 | Certification of Principal Financial Officer of Emmis Communications Corporation pursuant toRule 13a-14(a) under the Exchange Act.* | ||
32 | .1 | Certification of Principal Executive Officer of Emmis Communications Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | ||
32 | .2 | Certification of Principal Financial Officer of Emmis Communications Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
* | Filed with this report. | |
++ | Management contract or compensatory plan or arrangement. |
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By: | /s/ Jeffrey H. Smulyan |
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Signature | Title | |||||
/s/ Jeffrey H. Smulyan Jeffrey H. Smulyan | President, Chairman of the Board and Director (Principal Executive Officer) | Date: May 7, 2010 | ||||
/s/ Patrick M. Walsh Patrick M. Walsh | Executive Vice President, Chief Financial Officer, Chief Operating Officer and Director (Principal Financial Officer and Principal Accounting Officer) | Date: May 7, 2010 | ||||
Susan B. Bayh* Susan B. Bayh | Director | Date: May 7, 2010 | ||||
Gary L. Kaseff* Gary L. Kaseff | Director | Date: May 7, 2010 | ||||
Richard A. Leventhal* Richard A. Leventhal | Director | Date: May 7, 2010 | ||||
Peter A. Lund* Peter A. Lund | Director | Date: May 7, 2010 | ||||
Greg A. Nathanson* Greg A. Nathanson | Director | Date: May 7, 2010 | ||||
Lawrence B. Sorrel* Lawrence B. Sorrel | Director | Date: May 7, 2010 | ||||
*By: /s/ J. Scott Enright J. Scott Enright Attorney-in-Fact |
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by and among
ALDEN GLOBAL DISTRESSED OPPORTUNITIES MASTER FUND, L.P.,
ALDEN GLOBAL VALUE RECOVERY MASTER FUND, L.P.,
ALDEN MEDIA HOLDINGS, LLC,
JS ACQUISITION, LLC
and
(solely with respect to
Sections 2.3, 5.1, 5.2, 5.3, 5.4, 5.5 and 5.8 and Article X)
JEFFREY H. SMULYAN
Dated as of May 24, 2010
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Page | ||||||
ARTICLE I DEFINITIONS | II-2 | |||||
1.1 | Defined Terms | II-2 | ||||
ARTICLE II PURCHASE AND ISSUANCE OF SECURITIES; PURCHASE PRICE | II-7 | |||||
2.1 | Issuance and Purchase of Securities | II-7 | ||||
2.2 | Closing; Closing Date | II-7 | ||||
2.3 | Deliveries At Closing | II-7 | ||||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY | II-7 | |||||
3.1 | Due Organization; Authority to Execute and Perform Agreement | II-7 | ||||
3.2 | No Defaults or Conflicts | II-8 | ||||
3.3 | No Governmental Authorization Required | II-8 | ||||
3.4 | Capitalization | II-8 | ||||
3.5 | Absence of Litigation | II-8 | ||||
3.6 | Newly-Formed Entities | II-8 | ||||
3.7 | Organization and Qualification; Subsidiaries | II-9 | ||||
3.8 | Capitalization; Existence; Articles of Incorporation and By-laws | II-9 | ||||
3.9 | Compliance with Laws; Governmental Permits; No Conflict | II-10 | ||||
3.10 | ECC SEC Documents | II-11 | ||||
3.11 | Related Party Transactions | II-11 | ||||
3.12 | Taxes | II-12 | ||||
3.13 | Controls and Procedures | II-12 | ||||
3.14 | Intellectual Property | II-13 | ||||
3.15 | Real Estate | II-13 | ||||
3.16 | Absence of Certain Changes or Events | II-14 | ||||
3.17 | No Undisclosed Liabilities | II-14 | ||||
3.18 | ECC Absence of Litigation | II-14 | ||||
3.19 | Brokers | II-14 | ||||
3.20 | Sufficiency of Assets | II-14 | ||||
3.21 | Adoption of Resolutions | II-14 | ||||
3.22 | Exclusivity of Representations | II-14 | ||||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE INVESTOR AND ALDEN | II-14 | |||||
4.1 | Due Organization; Authority to Execute and Perform Agreement | II-14 | ||||
4.2 | No Defaults or Conflicts | II-15 | ||||
4.3 | No Governmental Authorization Required | II-15 | ||||
4.4 | Absence of Litigation | II-15 | ||||
4.5 | Title to the Investor ECC Shares | II-15 | ||||
4.6 | Purchase for Investment | II-15 | ||||
4.7 | Financial Ability | II-15 | ||||
4.8 | Brokers | II-15 | ||||
4.9 | Ownership Requirements | II-15 | ||||
4.10 | Exclusivity of Representations | II-16 | ||||
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ARTICLE V COVENANTS AND AGREEMENTS | II-16 | |||||
5.1 | Conduct of the Business | II-16 | ||||
5.2 | Filings and Authorizations; Consummation | II-18 | ||||
5.3 | Efforts | II-18 | ||||
5.4 | ECC Capital Stock | II-18 | ||||
5.5 | Offer to Purchase | II-19 | ||||
5.6 | Confidentiality | II-19 | ||||
5.7 | Tender Offeror | II-19 | ||||
5.8 | Obligations of the Controlling Stockholder | II-20 | ||||
ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATION OF THE INVESTOR TO CLOSE | II-20 | |||||
6.1 | Representations and Covenants | II-20 | ||||
6.2 | No Orders | II-20 | ||||
6.3 | Tender Conditions | II-20 | ||||
6.4 | Employment Agreement | II-20 | ||||
6.5 | Articles Amendments | II-20 | ||||
6.6 | Opinion | II-20 | ||||
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE | II-21 | |||||
7.1 | Representations and Covenants | II-21 | ||||
7.2 | No Orders | II-21 | ||||
7.3 | Tender Conditions | II-21 | ||||
ARTICLE VIII TERMINATION OF AGREEMENT | II-21 | |||||
8.1 | Termination | II-21 | ||||
8.2 | Survival After Termination | II-22 | ||||
ARTICLE IX INDEMNIFICATION | II-22 | |||||
9.1 | Indemnification by the Company | II-22 | ||||
9.2 | Indemnification by the Investor | II-23 | ||||
9.3 | Termination of Indemnification | II-24 | ||||
9.4 | Procedures | II-24 | ||||
ARTICLE X MISCELLANEOUS | II-25 | |||||
10.1 | Expenses | II-25 | ||||
10.2 | Specific Performance | II-26 | ||||
10.3 | Notices | II-26 | ||||
10.4 | Entire Agreement | II-27 | ||||
10.5 | Waivers and Amendments | II-27 | ||||
10.6 | Governing Law | II-27 | ||||
10.7 | Binding Effect; Assignment | II-27 | ||||
10.8 | Usage | II-27 | ||||
10.9 | Articles and Sections | II-28 | ||||
10.10 | Interpretation | II-28 | ||||
10.11 | Severability of Provisions | II-28 |
II-ii
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Page | ||||||
10.12 | Counterparts | II-28 | ||||
10.13 | No Personal Liability | II-28 | ||||
10.14 | No Third Party Beneficiaries | II-28 | ||||
10.15 | Consent to Jurisdiction; Service of Process; Waiver of Jury Trial | II-28 |
Annexes | ||||||
Annex 5.4(a) | Investor ECC Shares | |||||
Annex 5.4(b) | Controlling Stockholder ECC Shares | |||||
Annex 10.1(b) | Expenses | |||||
Exhibits | ||||||
Exhibit A | Form of Amendments to Articles of Incorporation of ECC | |||||
Exhibit B | Form of Amended and Restated Operating Agreement | |||||
Exhibit C | Form of Registration Rights Agreement | |||||
Exhibit D | Rollover Agreement | |||||
Exhibit E | Distribution Letter | |||||
Exhibit F | Tender Conditions | |||||
Exhibit G | Opinion | |||||
Exhibit H | ECC Board Resolutions | |||||
Exhibit I | Merger Agreement |
II-iii
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II-2
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II-3
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II-4
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Term | Section | |
Agreement | Preamble | |
Alden | Preamble | |
Articles | Recitals | |
Articles Amendments | Recitals | |
Back-End Merger | Recitals | |
Closing | 2.1 | |
Closing Date | 2.2 | |
Company | Preamble | |
Company Disclosure Schedule | III | |
Controlling Stockholder | Preamble | |
Controlling Stockholder ECC Shares | 5.4(b) | |
Deductible Amount | 9.1(b)(i) | |
Early Termination Date | 8.1(b) | |
ECC | Recitals | |
ECC10-K | III | |
ECC Class A Common Stock | Recitals | |
ECC Intellectual Property Rights | 3.14(a) | |
ECC Preferred Stock | Recitals |
II-5
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Term | Section | |
ECC SEC Documents | 3.10(a) | |
ECC Subordinated Notes | Recitals | |
Exchange Closing | Recitals | |
Exchange Offer | Recitals | |
Governmental Permits | 3.9(a) | |
indemnified party | 9.4(a) | |
indemnifying party | 9.4(a) | |
Initial Governing Documents | Recitals | |
Initial Operating Agreement | Recitals | |
Intellectual Property Rights | 3.14(a) | |
Investor | Preamble | |
Investor ECC Shares | 5.4(a) | |
Investor Indemnified Party | 9.1 | |
Investor Specified Representations | 9.2(b)(i) | |
Lease | 3.15(b) | |
Leases | 3.15(b) | |
Merger Agreement | 6.06 | |
Mergerco | Recitals | |
Mergerco Non-Voting Shares | Recitals | |
Mergerco Voting Shares | Recitals | |
Offer Price | Recitals | |
Operating Agreement | Recitals | |
Opinion | 2.3(b)(ii) | |
Other Members | Recitals | |
Outside Date | 8.1(c) | |
Owned Intellectual Property Rights | 3.14(a) | |
Parties | Preamble | |
Permitted Liens | 3.7(b) | |
Proxy Solicitations | Recitals | |
Recipient | 5.6 | |
Registration Rights Agreement | Recitals | |
Rollover | Recitals | |
Rollover Agreement | Recitals | |
Securities | Recitals | |
Securities Purchase | Recitals | |
Seller Specified Representations | 9.1(b)(i) | |
Senior Preferred Stock | 3.8(a) | |
Stations | 3.9(a) | |
Tender Closing | Recitals | |
Tender Offer | Recitals | |
Third Party Claim | 9.4(a) | |
Transaction Expenses | 10.1(b) | |
Transactions | Recitals |
II-6
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II-8
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II-9
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II-10
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II-11
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II-12
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II-13
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II-14
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II-15
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II-16
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II-17
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885 Third Avenue
New York, NY 10022
Attention: Jim Plohg
Facsimile:(212) 702-0145
Four Times Square
New York, New York 10036
Attention: Stephen M. Banker
Facsimile:(917) 777-2760
c/o James A. Strain
Taft Stettinius & Hollister LLP
One Indiana Square, Suite 3500
Indianapolis, Indiana 46204
Facsimile:(317) 713-3699
Attention: | James M. Dubin |
II-26
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c/o James A. Strain
Taft Stettinius & Hollister LLP
One Indiana Square, Suite 3500
Indianapolis, Indiana 46204
Facsimile:(317) 713-3699
Attention: | James M. Dubin |
II-27
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II-28
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II-29
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(solely with respect to Sections 2.3, 5.2, 5.3, 5.4,
5.5 and 5.8, and Article IV, Article IX and Article X)
By: | /s/ Jim Plohg |
Name: | Jim Plohg |
Title: | Authorized Signatory |
By: | /s/ Jim Plohg |
Name: | Jim Plohg |
Title: | Authorized Signatory |
By: | /s/ Jim Plohg |
Title: | Vice President |
By: | /s/ Jeffrey H. Smulyan |
Name: | Jeffrey H. Smulyan |
Title: | Manager |
(solely with respect to Sections 2.3, 5.1, 5.2, 5.3,
5.4, 5.5 and 5.8 and Article X)
II-30
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ECC Class A | ECC Preferred | |||||||
Common Stock | Stock | |||||||
Alden Global Distressed Opportunities Master Fund, L.P. | 1,406,500 | 1,162,737 |
(1) | Alden and its Affiliates disclaim any beneficial ownership in securities that may be referenced in cash-settled equity swap contracts or that may be held from time to time by any counterparties to the contracts. |
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ECC Class A | ECC Class B | |||||||
Common Stock | Common Stock | |||||||
Jeffrey H. Smulyan | 29,752.0745(1 | ) | 4,930,680(2 | ) | ||||
The Smulyan Family Foundation | 30,625(3 | ) | 0 | |||||
Controlling Stockholder Options | 97,565(4 | ) | 1,170,796(5 | ) |
(1) | Consists of (i) 5,877.0745 shares of ECC Class A Common Stock held in the Controlling Stockholder’s 401(k) Plan, (ii) 9,755 shares of ECC Class A Common Stock held by the Controlling Stockholder individually, (iii) 11,120 shares of ECC Class A Common Stock held by the Controlling Stockholder as trustee for his children and (iv) 3,000 shares of ECC Class A Common Stock held by the Controlling Stockholder as trustee for his niece. | |
(2) | Consists of 4,930,680 shares of ECC Class B Common Stock held by the Controlling Stockholder individually. | |
(3) | Consists of 30,625 shares of ECC Class A Common Stock held by The Smulyan Family Foundation, as to which the Controlling Stockholder shares voting and dispositive control. | |
(4) | Consists of options to purchase 97,565 shares of Class A Common Stock held by the Controlling Stockholder directly. | |
(5) | Consists of options to purchase 1,170,796 shares of Class B Common Stock held by the Controlling Stockholder directly. |
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BIA Capital Strategies, LLC | $ | 0.5 million | ||
Paul, Weiss, Rifkind, Wharton & Garrison LLP | $ | 2.0 million1 | ||
Total | $ | 2.5 million |
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Page | ||||||
ARTICLE I DEFINITIONS | III-1 | |||||
1.1 | Defined Terms | III-1 | ||||
ARTICLE II THE COMPANY | III-10 | |||||
2.1 | Name | III-10 | ||||
2.2 | Term | III-10 | ||||
2.3 | Registered Agent and Registered Office | III-10 | ||||
2.4 | Purposes | III-10 | ||||
2.5 | Powers of the Company | III-10 | ||||
ARTICLE III MANAGEMENT AND GOVERNANCE | III-10 | |||||
3.1 | Board of Directors | III-10 | ||||
3.2 | Composition of the Board | III-10 | ||||
3.3 | Meetings | III-11 | ||||
3.4 | Quorum; Voting | III-11 | ||||
3.5 | Matters Requiring Certain Approval | III-11 | ||||
3.6 | Compensation of Directors | III-13 | ||||
3.7 | Officers | III-13 | ||||
3.8 | ECC Governance | III-13 | ||||
3.9 | Action by Members | III-13 | ||||
ARTICLE IV MEMBERS | III-13 | |||||
4.1 | Limitations | III-13 | ||||
4.2 | Liability | III-14 | ||||
4.3 | Priority | III-14 | ||||
4.4 | Additional Members | III-14 | ||||
4.5 | Non-Transferability of Rights and Obligations | III-14 | ||||
ARTICLE V TAX, ACCOUNTING AND FINANCIAL INFORMATION | III-14 | |||||
5.1 | Fiscal Year | III-14 | ||||
5.2 | Accounting Method | III-14 | ||||
5.3 | Tax Returns | III-14 | ||||
5.4 | Inconsistent Positions | III-14 | ||||
5.5 | Books and Records | III-14 | ||||
5.6 | Financial Reports | III-15 | ||||
5.7 | Tax Matters Partner | III-15 | ||||
ARTICLE VI OWNERSHIP INTERESTS; CAPITAL CONTRIBUTIONS | III-15 | |||||
6.1 | Common Interests; Series A Preferred Interests; Capital Contributions | III-15 | ||||
6.2 | Capital Accounts | III-16 | ||||
6.3 | Withdrawal of Contributions | III-16 | ||||
6.4 | No Interest | III-16 | ||||
ARTICLE VII ALLOCATIONS | III-16 | |||||
7.1 | General | III-16 | ||||
7.2 | Other Allocation Provisions | III-17 | ||||
7.3 | Allocations for Income Tax Purposes | III-19 |
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Page | ||||||
ARTICLE VIII DISTRIBUTIONS | III-19 | |||||
8.1 | Distributions | III-19 | ||||
8.2 | Tax Withholding; Withholding Advances | III-19 | ||||
8.3 | Limitations on Distributions | III-20 | ||||
8.4 | Reserves | III-20 | ||||
8.5 | Distribution Demands | III-20 | ||||
8.6 | Distribution of ECC Shares | III-20 | ||||
ARTICLE IX TRANSFER RESTRICTIONS; LIQUIDITY RIGHTS | III-21 | |||||
9.1 | General Restrictions on Transfers | III-21 | ||||
9.2 | Restrictions on Transfers by Members | III-22 | ||||
9.3 | Exceptions to Transfer Restrictions | III-22 | ||||
9.4 | Tag-Along Rights | III-22 | ||||
9.5 | Drag-Along Rights | III-23 | ||||
9.6 | Right of First Offer | III-24 | ||||
9.7 | Buy/Sell Agreement | III-25 | ||||
9.8 | Put and Call Rights | III-28 | ||||
9.9 | Ownership Restrictions | III-30 | ||||
ARTICLE X ADDITIONAL MATTERS | III-32 | |||||
10.1 | Adjustment of Alden Percentage Interest | III-32 | ||||
10.2 | IPO; Registration Rights | III-33 | ||||
10.3 | Series A Redemption | III-34 | ||||
10.4 | Credit Agreement Refinancing and Refinancing Redemption | III-34 | ||||
10.5 | Exchanged ECC Shares | III-35 | ||||
10.6 | Subordinated Notes | III-35 | ||||
10.7 | Key-Man Policy | III-35 | ||||
10.8 | Member Loans | III-35 | ||||
ARTICLE XI INDEMNIFICATION | III-36 | |||||
11.1 | Indemnification by the Company | III-36 | ||||
11.2 | Survival | III-37 | ||||
ARTICLE XII DISSOLUTION AND TERMINATION | III-37 | |||||
12.1 | Withdrawal of Members | III-37 | ||||
12.2 | Dissolution of Company | III-37 | ||||
12.3 | Distribution in Liquidation | III-38 | ||||
12.4 | Final Reports | III-39 | ||||
12.5 | Rights of Members | III-39 | ||||
12.6 | Deficit Restoration | III-39 | ||||
12.7 | Termination | III-39 | ||||
ARTICLE XIII CONFIDENTIALITY; PUBLICITY | III-39 | |||||
13.1 | Confidentiality; Publicity | III-39 | ||||
ARTICLE XIV MISCELLANEOUS | III-40 | |||||
14.1 | Further Instruments | III-40 | ||||
14.2 | Notices | III-40 |
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14.3 | Entire Agreement | III-40 | ||||
14.4 | Amendment and Wavier | III-41 | ||||
14.5 | Governing Law | III-41 | ||||
14.6 | Binding Effect; Assignment | III-41 | ||||
14.7 | Usage | III-41 | ||||
14.8 | Articles and Sections | III-41 | ||||
14.9 | Interpretation | III-41 | ||||
14.10 | Severability of Provisions | III-41 | ||||
14.11 | Counterparts | III-42 | ||||
14.12 | No Personal Liability | III-42 | ||||
14.13 | No Third Party Beneficiaries | III-42 | ||||
14.14 | Consent to Jurisdiction; Service of Process; Waiver of Jury Trial | III-42 |
Annexes | ||
Annex 3.5(g) | A-Affiliate Arrangements | |
Annex 6.1(c) | A-Ownership Interests | |
Annex 6.2(d) | A-Capital Accounts | |
Annex 9.7(g) | A-Buy/Sell Financing | |
Annex 9.8(f) | A-Put/Call Financing | |
Annex 14.2(c) | A-Other Member Notice | |
Exhibits | ||
Exhibit A | A-Form of Junior Subordinated Notes Indenture | |
Exhibit B | A-Form of Seller Note | |
Exhibit C | A-Form of Senior Subordinated Notes Indenture |
III-iii
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OPERATING AGREEMENT
OF JS ACQUISITION, LLC
III-1
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III-2
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III-3
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III-4
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III-5
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Term | Section | |
Acceptance Notice | 9.6(c) | |
Accepting Party | 9.6(d) | |
Accreted Percentage | 10.1(c)(v) | |
Additional Percentages | 10.1(c)(v) |
III-6
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Term | Section | |
Adjusted Capital Account | 7.2(b) | |
Agreement | Preamble | |
Alden | Preamble | |
Alden Common Interests | 9.7(a) | |
Alden Common Percentage | 10.1(c)(i) | |
Alden Common Rights | 9.7(a) | |
Alden Directors | 3.2(a) | |
Alden Future Rights | 9.7(a) | |
Alden Offer | 9.7(a) | |
Alden Percentage Interest | 10.1(a) | |
Appraised Price | 10.7 | |
Attribution Rules | 9.9(g) | |
Board | 3.1 | |
Buy/Sell Financing Period | 9.7(g) | |
Buy/Sell Offer | 9.7(a) | |
Buy/Sell Ratio | 9.7(b) | |
Call Notice | 9.8(a) | |
Call Sale | 9.8(a) | |
Capital Account | 6.2(a) | |
CEO | 3.7(a) | |
Claim Notice | 11.1(b) | |
Common Interest Issuances | 10.1(c)(ii) | |
Common Interest Repurchase | 10.1(c)(iii) | |
Communications Laws | 9.9(a) | |
Company | Preamble | |
Credit Agreement Refinancing | 10.4(a) | |
Deal Fee | 10.4(c) | |
Director | 3.1 | |
Distribution | 8.1(a) | |
Drag-Along Notice | 9.5(a) | |
Drag-Along Sale | 9.5(a) | |
ECC | Recitals | |
ECC Distribution | 8.6 | |
ECC Distribution Notice | 8.6 | |
ECC Non-Voting Shares | 3.8 | |
ECC Share Demand | 8.6 | |
ECC Voting Shares | 3.8 | |
Fiscal Year | 5.1 | |
Foreign Ownership Rules | 9.9(a) | |
Full Price | 10.1(c)(v) | |
HSR Act | 9.4(c) | |
HSR Act | Recitals | |
Indemnitee | 11.1(a) | |
Independent Appraiser | 9.8(c) |
III-7
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Term | Section | |
Indiana Act | 2.3 | |
Initial Operating Agreement | Recitals | |
Initial Percentage | 10.1(c)(iv) | |
Insurance Proceeds | 10.7 | |
Key-Man Policy | 10.7 | |
Liquidator | 12.2(b) | |
Losses | 11.1(a) | |
Media Company | 9.9(g) | |
Member Loans | 10.8(a) | |
Members | Preamble | |
Minority Common Interests | 9.8(a) | |
Multiple Ownership Rules | 9.9(g) | |
Negotiation Period | 9.8(c) | |
Newco | 10.2(a) | |
Non-Selling Member | 9.4(a) | |
Offer | 9.6(a) | |
Offer Notice | 9.6(a) | |
Offer Percentage | 9.7(a) | |
Offer Period | 9.6(b) | |
Offer Price | 9.6(a) | |
Offeree Holder | 9.7(a) | |
Offering Holder | 9.7(a) | |
Officers | 3.7(a) | |
Operative Agreements | 13.1 | |
Other Members | Preamble | |
Party Appraiser | 9.8(c) | |
Per Share Cash Value | 8.6 | |
Per Share Exchange Value | 10.5 | |
Preferred Proceeds | 8.6 | |
Put Notice | 9.8(b) | |
Put Sale | 9.8(b) | |
Put/Call Financing Period | 9.8(f) | |
Put/Call Members | 9.8(a) | |
Put/Call Party | 9.8(c) | |
Put/Call Price | 9.8(c) | |
Put/Call Sale | 9.8(b) | |
Recipient | 13.1 | |
Redemption Note | 9.9(c)(iii) | |
Refinancing Redemption | 10.4(a) | |
Restricted Transferee | 9.9(a) | |
Rollover Agreement | Recitals | |
Securities Purchase Agreement | Recitals | |
Selling Members | 9.4(a) | |
Series A Redemption | 10.3 |
III-8
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Term | Section | |
Smulyan | Preamble | |
Smulyan Directors | 3.2(a) | |
Smulyan Offer | 9.7(a) | |
Tag-Along Sale | 9.4(a) | |
Tax Matters Partner | 5.7 | |
Taxable Members | 7.2(g) | |
transfer | 9.1(a) | |
Transfer Consideration | 9.6(b) | |
Transfer Notice | 9.4(a) | |
Transfer Period | 9.6(g) | |
Transfer Securities | 9.6(a) | |
Unit Price | 9.7(a) | |
Violation | 9.9(c) | |
Withholding Advances | 8.2(b) |
III-9
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III-10
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III-11
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III-12
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Name | Title | |
Jeffrey H. Smulyan | Chairman of the Board, President and Chief Executive Officer | |
J. Scott Enright | Executive Vice President, General Counsel and Secretary | |
Patrick M. Walsh | Executive Vice President, Chief Financial Officer and Chief Operating Officer | |
Ryan A. Hornaday | Senior Vice President — Finance and Treasurer |
III-13
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Additional | ||||||||
Anniversary | Percentage* | |||||||
2nd | 10 | % | ||||||
3rd | 5 | % | ||||||
4th | 5 | % | ||||||
5th | 5 | % | ||||||
6th | 5 | % | ||||||
7th | 5 | % |
* | Additional Percentages subject to adjustment to reflect any Common Interest Issuance or Common Interest Repurchase, which Additional Percentages shall be adjusted in proportion to the adjustment to the Alden |
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Common Percentage resulting from such Common Interest Issuance or Common Interest Repurchase (e.g., if the Alden Common Percentage is reduced from 40% to 20% as a result of a Common Interest Issuance, each Additional Percentage applied thereafter would also be reduced by one-half and if the Alden Common Percentage is doubled from 20% to 40% as a result of a Common Interest Repurchase, each Additional Percentage applied thereafter would also be doubled.) |
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By: |
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By: |
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Annex 3.5(g) — Page 1
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Member | Percentage Interest | |
Alden | [ ]%(1) | |
Smulyan | [ ]%(2) | |
[Other Members]4 | [ ]%(3) |
Capital | Preferred | |||||||
Member | Contributions | Unrecovered Capital | ||||||
Alden | $ | [ ] | $ | [ ](4 | ) |
(3 x Smulyan Shares) + All Other Member Shares
(3 x Smulyan Shares) + All Other Member Shares
Section 10.1(a) of the Securities Purchase Agreement exceeds $10,280,000.
Annex 6.1(c) — Page 1
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Member | Capital Account: | |||
Alden | [$ | ] | ||
Smulyan | [$ | ] | ||
[Other Members] | [$ | ] |
Annex 6.2(d) — Page 1
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Annex 9.7(g) — Page 1
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Annex 9.7(f) — Page 1
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Annex 14.2(b) — Page 1
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dated as of
May 25, 2010,
by and among
EMMIS COMMUNICATIONS CORPORATION,
JS ACQUISITION, LLC
and
JS ACQUISITION, INC.
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Page | ||||||
Article 1 The Offer and the Exchange Offer | IV-2 | |||||
Section1.01. | The Offer | IV-2 | ||||
Section1.02. | Company Action | IV-3 | ||||
Section1.03. | Directors | IV-4 | ||||
Section1.04. | The Exchange Offer | IV-5 | ||||
Article 2 The Merger | IV-6 | |||||
Section2.01. | The Merger | IV-6 | ||||
Section2.02. | Conversion of Shares | IV-6 | ||||
Section2.03. | Surrender and Payment | IV-7 | ||||
Section2.04. | Dissenting Shares | IV-8 | ||||
Section2.05. | Company Stock Options; Company RSUs | IV-8 | ||||
Section2.06. | Adjustments | IV-9 | ||||
Section2.07. | Withholding Rights | IV-9 | ||||
Section2.08. | Lost Certificates | IV-9 | ||||
Article 3 The Surviving Corporation | IV-9 | |||||
Section3.01. | Articles of Incorporation | IV-9 | ||||
Section3.02. | By-laws | IV-9 | ||||
Section3.03. | Directors and Officers | IV-9 | ||||
Article 4 Representations and Warranties of the Company | IV-10 | |||||
Section4.01. | Organization and Qualification; Subsidiaries | IV-10 | ||||
Section4.02. | Corporate Authorization | IV-10 | ||||
Section4.03. | Governmental Authorization | IV-11 | ||||
Section4.04. | No Defaults or Conflicts; Compliance with Laws; Governmental Permits | IV-11 | ||||
Section4.05. | Capitalization; Existence; Articles of Incorporation and By-laws | IV-12 | ||||
Section4.06. | Company Disclosure Documents; Company SEC Documents | IV-13 | ||||
Section4.07. | Related Party Transactions | IV-14 | ||||
Section4.08. | Taxes | IV-14 | ||||
Section4.09. | Controls and Procedures | IV-15 | ||||
Section4.10. | Intellectual Property | IV-15 | ||||
Section4.11. | Real Estate | IV-16 | ||||
Section4.12. | Absence of Certain Changes or Events | IV-16 | ||||
Section4.13. | No Undisclosed Liabilities | IV-16 | ||||
Section4.14. | Absence of Litigation | IV-16 | ||||
Section4.15. | Finders’ Fees | IV-16 | ||||
Section4.16. | Opinion of Committee Financial Advisor | IV-17 | ||||
Section4.17. | Anti-takeover Statutes | IV-17 | ||||
Section4.18. | Sufficiency of Assets | IV-17 | ||||
Section4.19. | Adoption of Resolutions | IV-17 | ||||
Section4.20. | Exclusivity of Representations | IV-17 | ||||
Article 5 Representations and Warranties of Parent and Merger Subsidiary | IV-17 | |||||
Section5.01. | Due Organization; Authority to Execute and Perform Agreement | IV-17 | ||||
Section5.02. | Governmental Authorization | IV-17 |
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Section5.03. | No Defaults or Conflicts | IV-18 | ||||
Section5.04. | Disclosure Documents | IV-18 | ||||
Section5.05. | Finders’ Fees | IV-18 | ||||
Section5.06. | Funds | IV-18 | ||||
Article 6 Covenants of the Company | IV-18 | |||||
Section6.01. | Conduct of the Company | IV-18 | ||||
Section6.02. | Adverse Recommendation Change | IV-20 | ||||
Section6.03. | Access to Information | IV-20 | ||||
Section6.04. | Notices of Certain Events | IV-21 | ||||
Section6.05. | Proxy Statement | IV-21 | ||||
Article 7 Covenants of Parent and Merger Subsidiary | IV-22 | |||||
Section7.01. | Obligations of Merger Subsidiary | IV-22 | ||||
Section7.02. | Voting of Shares | IV-22 | ||||
Section7.03. | Director and Officer Liability | IV-22 | ||||
Section7.04. | Termination of Securities Purchase Agreement | IV-24 | ||||
Article 8 Covenants of Parent and the Company | IV-24 | |||||
Section8.01. | Reasonable Best Efforts | IV-24 | ||||
Section8.02. | Cooperation | IV-24 | ||||
Section8.03. | Public Announcements | IV-24 | ||||
Section8.04. | Further Assurances | IV-24 | ||||
Section8.05. | Stock Exchange Delisting | IV-24 | ||||
Section8.06. | Section 16 Matters | IV-24 | ||||
Article 9 Conditions to the Merger | IV-25 | |||||
Section9.01. | Conditions to the Obligations of Each Party | IV-25 | ||||
Article 10 Termination | IV-25 | |||||
Section10.01. | Termination | IV-25 | ||||
Section10.02. | Effect of Termination | IV-26 | ||||
Article 11 Miscellaneous. | IV-26 | |||||
Section11.01. | Notices | IV-26 | ||||
Section11.02. | Survival of Representations and Warranties | IV-27 | ||||
Section11.03. | Amendments and Waivers | IV-27 | ||||
Section11.04. | Expenses | IV-27 | ||||
Section11.05. | Disclosure Schedule References and SEC Document References | IV-27 | ||||
Section11.06. | Binding Effect, Benefit; Assignment | IV-27 | ||||
Section11.07. | Governing Law | IV-28 | ||||
Section11.08. | Jurisdiction | IV-28 | ||||
Section11.09. | WAIVER OF JURY TRIAL | IV-28 | ||||
Section11.10. | Counterparts; Effectiveness | IV-28 | ||||
Section11.11. | Entire Agreement | IV-28 | ||||
Section11.12. | Severability | IV-28 | ||||
Section11.13. | Specific Performance | IV-29 |
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Article 12 Definitions | IV-29 | |||||
Section12.01. | Definitions | IV-29 | ||||
Section12.02. | Other Definitional and Interpretative Provisions | IV-34 | ||||
Annex I | Conditions to the Offer | |||||
Annex II | Conditions to the Exchange Offer | |||||
Annex III | Company Board Resolutions | |||||
Schedule I | Retained Shares | |||||
Schedule II | Finder’s Fees |
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Term | Section | |
Acceptance Date | 1.01(c) | |
Adverse Recommendation Change | 6.03 | |
Agreement | Preamble | |
Alden | Recitals | |
Alden Preferred Merger Consideration | Section 2.02(b)(ii) | |
Articles of Incorporation | Recitals | |
By-laws | 1.03 | |
Cash Merger Consideration | 2.02(b)(iii) | |
Certificates | 2.03(a) | |
Class B Shares | Recitals | |
Class C Shares | Section 4.05(a) | |
Closing | 2.01(b) | |
Committee Recommendation | Section 4.02(b) | |
Common Merger Consideration | Section 2.02(b)(i) | |
Company | Preamble | |
Company10-K | 4 | |
Company Board | Recitals | |
Company Board Recommendation | Section 4.02(c) | |
Company Common Stock | Section 4.05(a) | |
Company Disclosure Documents | 4.06(a) | |
Company Disclosure Schedule | 4 | |
Committee Financial Advisor | 4.15(a) |
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Term | Section | |
Company SEC Documents | Section 4.06(c) | |
Company Intellectual Property Rights | Section 4.10(a) | |
Company RSU | Section 2.05(b) | |
Company Shareholder Approval | 4.02(a) | |
Company Shareholders’ Meeting | 6.05 | |
Company Stock Option | 2.05(a) | |
Effective Time | 2.01(c) | |
End Date | 10.01(b)(i) | |
Exchange Offer | Recitals | |
Exchange Offer Documents | Recitals | |
Governmental Permits | Section 4.04(b) | |
IBCL | Recitals | |
Indemnified Person | 7.03(a) | |
Indiana Law | Recitals | |
Intellectual Property Rights | Section 4.10(a) | |
Lease | Section 4.11(b) | |
Merger | 2.01(a) | |
Merger Consideration | 2.02(b)(iii) | |
Merger Subsidiary | Preamble | |
Minimum Tender Condition | Recitals | |
New Notes | Recitals | |
Offer | Recitals | |
Offer Documents | Recitals | |
Offer Price | Recitals | |
Owned Intellectual Property Rights | Section 4.10(a) | |
Parent | Preamble | |
Paying Agent | 2.03(a) | |
Preferred Amendments | Recitals | |
Preferred Merger Consideration | 2.02(b)(iii) | |
Preferred Shares | Recitals | |
Proxy Statement | 6.05 | |
Proxy Statement/Offer to Exchange | Recitals | |
Purchaser Group | Recitals | |
Representatives | 6.03 | |
Schedule 14D-9 | Section 1.02(b) | |
Schedule TO | Recitals | |
SEC | Recitals | |
Senior Preferred Shares | Section 4.05(a) | |
Shares | Recitals | |
Smulyan | Preamble | |
Stations | Section 4.04(b) | |
Subsequent Offering Period | 1.01(b)(v) | |
Surviving Corporation | 2.01(a) | |
Uncertificated Shares | 2.03(a) |
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By: | /s/ J. Scott Enright |
Title: | General Counsel, Executive Vice |
By: | /s/ Jeffrey H. Smulyan |
Title: | President, Treasurer and Secretary |
By: | /s/ Jeffrey H. Smulyan |
Title: | President, Treasurer and Secretary |
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EXECUTION COPY
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ALDEN GLOBAL DISTRESSED OPPORTUNITIES MASTER FUND, L.P. | ||||||
By: AGDOF MASTER GP, LTD. | ||||||
By: | /s/ Jim Plohg | |||||
Name: Jim Plohg | ||||||
Title: Authorized Signatory | ||||||
ALDEN GLOBAL VALUE RECOVERY MASTER FUND, L.P. | ||||||
By: AGVRF MASTER GP, LTD. | ||||||
By: | /s/ Jim Plohg | |||||
Name: Jim Plohg | ||||||
Title: Authorized Signatory | ||||||
ALDEN MEDIA HOLDINGS, LLC | ||||||
By: | /s/ Jim Plohg | |||||
Name: Jim Plohg | ||||||
Title: Vice President |
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JS ACQUISITION, LLC | ||||||
By: | /s/ Jeffrey H. Smulyan | |||||
Name: Jeffrey H. Smulyan | ||||||
Title: Manager | ||||||
JEFFREY H. SMULYAN | ||||||
/s/ Jeffrey H. Smulyan | ||||||
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Rolling Shareholder | Contributed Shares | |||
Greg Nathanson and Teresa Nathanson TTEES the Nathanson Family TR DTD 12/23/05 | 256,312 | |||
Greg A. Nathanson | 76,276 | |||
Dale M. Friedlander | 310,228 | |||
Richard A. Leventhal | 191,931 | |||
Barbara Leventhal | 3,000 | |||
John F. Dille III | 178,800 | |||
Richard F. Cummings | 142,669 | |||
Janine J. Smulyan | 151,000 | |||
Gary L. Kaseff | 123,911 | |||
Vicky Myers-Kaseff | 3,411 | |||
Randall D. Bongarten | 46,117 | |||
James R. Riggs | 33,609 | |||
Patrick M. Walsh | 30,828 | |||
Natalie J. Smulyan | 30,350 | |||
Paul W. Fiddick | 29,548 | |||
Robin L. Rene | 21,451 | |||
Gregory T. Loewen | 20,428 | |||
Deborah D. Paul | 19,928 | |||
Michael Levitan | 18,511 | |||
Valerie C. Maki | 8,094 | |||
David R. Newcomer | 7,295 | |||
John R. Beck | 4,045 | |||
J. Scott Enright | 6,528 | |||
Ryan A. Hornaday | 2,613 | |||
Norman H. Gurwitz | 1,563 | |||
Total | 1,718,446 |
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your proxy card in the
envelope provided as soon
as possible.
FOR | AGAINST | ABSTAIN | ||||||
1. | PROPOSAL TO APPROVE THE PROPOSED AMENDMENTS TO THE ARTICLES OF INCORPORATION | o | o | o | ||||
2. | In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. |
This proxy is solicited on behalf of the Emmis Communications Corporation Board of Directors.This proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted FOR Proposals 1 and 2. | ||
The undersigned acknowledges receipt, prior to the execution of this proxy, of notice of the meeting and the Proxy Statement/Offer to Exchange. | ||
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | o | |
Signature of Shareholder | Date: | Signature of Shareholder | Date: |
Note: | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
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40 Monument Circle
Indianapolis, Indiana 46204
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your proxy card in the
envelope provided as soon
as possible.
FOR | AGAINST | ABSTAIN | ||||||
1. | PROPOSAL TO APPROVE THE PROPOSED AMENDMENTS TO THE ARTICLES OF INCORPORATION | o | o | o | ||||
2. | In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. |
This proxy is solicited on behalf of the Emmis Communications Corporation Board of Directors.This proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted FOR Proposals 1 and 2. | ||
The undersigned acknowledges receipt, prior to the execution of this proxy, of notice of the meeting and the Proxy Statement/Offer to Exchange. | ||
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | o | |
Signature of Shareholder | Date: | Signature of Shareholder | Date: |
Note: | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
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40 Monument Circle
Indianapolis, Indiana 46204
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your proxy card in the
envelope provided as soon
as possible.
FOR | AGAINST | ABSTAIN | ||||||
1. | PROPOSAL TO APPROVE THE PROPOSED AMENDMENTS TO THE ARTICLES OF INCORPORATION | o | o | o | ||||
2. | In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. |
This proxy is solicited on behalf of the Emmis Communications Corporation Board of Directors.This proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted FOR Proposals 1 and 2. | ||
The undersigned acknowledges receipt, prior to the execution of this proxy, of notice of the meeting and the Proxy Statement/Offer to Exchange. | ||
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | o | |
Signature of Shareholder | Date: | Signature of Shareholder | Date: |
Note: | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
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40 Monument Circle
Indianapolis, Indiana 46204