<PAGE> 1
================================================================================
REGISTRATION NO. 333-52029
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
EMMIS BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA
(State or other jurisdiction of
incorporation or organization)
35-1542018
(I.R.S. Employer
Identification No.)
950 NORTH MERIDIAN STREET
SUITE 1200
INDIANAPOLIS, INDIANA 46204
(317) 266-0100
(Address, including zip code and telephone number,
including area code, of principal executive offices)
HOWARD L. SCHROTT
EXECUTIVE VICE PRESIDENT AND TREASURER
EMMIS BROADCASTING CORPORATION
950 NORTH MERIDIAN STREET, SUITE 1200
INDIANAPOLIS, INDIANA 46204
(317) 266-0100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------------
COPY TO:
ALAN W. BECKER, ESQ.
BOSE MCKINNEY & EVANS
135 NORTH PENNSYLVANIA STREET, SUITE 2700
INDIANAPOLIS, INDIANA 46204
(317) 684-5000
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Post-Effective Amendment.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-------------------------
THIS POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE UPON THE ORDER OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
SECTION 8(C) OF THE SECURITIES ACT OF 1933, AS AMENDED.
================================================================================
<PAGE> 2
PROSPECTUS
4,000,000 Shares
EMMIS LOGO
Emmis Broadcasting Corporation
CLASS A COMMON STOCK
------------------------
ALL OF THE SHARES OF CLASS A COMMON STOCK BEING OFFERED HEREBY ARE BEING SOLD BY
EMMIS BROADCASTING CORPORATION, AN INDIANA CORPORATION (THE "COMPANY" OR
"EMMIS"). OF THE SHARES BEING OFFERED, 3,200,000 SHARES ARE BEING OFFERED
INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS (THE "U.S.
OFFERING") AND 800,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED
STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS (THE "INTERNATIONAL
OFFERING" AND, TOGETHER WITH THE U.S. OFFERING, THE "OFFERING"). SEE
"UNDERWRITERS." THE CLASS A COMMON STOCK IS TRADED ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "EMMS." THE LAST REPORTED SALE PRICE FOR THE CLASS A COMMON
STOCK ON MAY 28, 1998 WAS $43 1/8 PER SHARE.
------------------------
THE COMPANY'S OUTSTANDING CAPITAL STOCK CONSISTS OF CLASS A COMMON STOCK, PAR
VALUE $.01 PER SHARE (THE "CLASS A COMMON STOCK"), AND CLASS B COMMON STOCK, PAR
VALUE $.01 PER SHARE (THE "CLASS B COMMON STOCK" AND TOGETHER WITH THE CLASS A
COMMON STOCK, THE "COMMON STOCK"). EACH SHARE OF CLASS A COMMON STOCK ENTITLES
ITS HOLDER TO ONE VOTE, WHEREAS EACH SHARE OF CLASS B COMMON STOCK GENERALLY
ENTITLES ITS HOLDER TO TEN VOTES. THE HOLDERS OF CLASS A COMMON STOCK, VOTING AS
A SEPARATE CLASS, ARE ENTITLED TO ELECT TWO OF THE COMPANY'S DIRECTORS.
IMMEDIATELY AFTER THIS OFFERING, JEFFREY H. SMULYAN, AS HOLDER OF ALL OF THE
CLASS B COMMON STOCK, WILL HAVE APPROXIMATELY 70.4% OF THE COMBINED VOTING POWER
IN RESPECT OF SUBSTANTIALLY ALL MATTERS SUBMITTED FOR THE VOTE OF ALL
SHAREHOLDERS. SEE "RISK FACTORS" AND "DESCRIPTION OF CAPITAL STOCK."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE $42 A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------
<S> <C> <C> <C>
Per Share................................................ $42.00 $2.10 $39.90
Total (3)................................................ $168,000,000 $8,400,000 $159,600,000
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $1.6
million.
(3) The Company has granted the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
600,000 additional shares at the Price to Public less Underwriting
Discounts and Commissions, for the purpose of covering over-allotments,
if any. If the U.S. Underwriters exercise such option in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $193,200,000, $9,660,000 and $183,540,000, respectively.
See "Underwriters."
------------------------
The shares of Class A Common Stock are offered, subject to prior sale,
when, as and if accepted by the Underwriters named herein and subject to
approval of certain legal matters by Dow, Lohnes & Albertson, PLLC, counsel for
the Underwriters. It is expected that delivery of the shares of Class A Common
Stock will be made on or about June 4, 1998, at the office of Morgan Stanley &
Co. Incorporated, New York, N.Y., against payment therefor in immediately
available funds.
------------------------
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON DONALDSON, LUFKIN & JENRETTE LEHMAN BROTHERS
Securities Corporation
A.G. EDWARDS & SONS, INC.
GOLDMAN, SACHS & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
SCHRODER & CO. INC.
May 29, 1998
<PAGE> 3
[PICTURES]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE
OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF THE CLASS A COMMON STOCK IN
THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
2
<PAGE> 4
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL
UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------------
No action has been or will be taken in any jurisdiction by the Company or
by any Underwriter that would permit a public offering of the Class A Common
Stock or possession or distribution of this Prospectus in any jurisdiction where
action for that purpose is required, other than in the United States.
In this Prospectus references to "dollars" and "$" are to United States
dollars, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
Unless the context otherwise requires, references herein to the Company
include its subsidiaries.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 4
Incorporation of Certain Documents by
Reference........................... 4
Prospectus Summary.................... 5
Risk Factors.......................... 13
The Company........................... 17
Recent Developments................... 18
Use of Proceeds....................... 22
Price Range of Class A Common Stock
and Dividends....................... 23
Capitalization........................ 24
Selected Consolidated Financial and
Other Data.......................... 25
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Pro Forma Condensed Consoli-
dated Financial Information......... 27
Business.............................. 31
Management............................ 40
Principal Shareholders................ 42
Description of Capital Stock.......... 44
Certain U.S. Federal Tax
Considerations for Non-U.S. Holders
of Class A Common Stock............. 46
Underwriters.......................... 50
Legal Matters......................... 53
Experts............................... 53
</TABLE>
CAUTIONARY STATEMENT REGARDING
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL STATEMENTS REGARDING THE
COMPANY'S AND ITS SUBSIDIARIES' EXPECTED FINANCIAL POSITION, BUSINESS AND
FINANCING PLANS ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY AND ITS
SUBSIDIARIES BELIEVE THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE REASONABLE, THEY CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS
WILL PROVE TO HAVE BEEN CORRECT. ACTUAL RESULTS IN THE FUTURE COULD DIFFER
MATERIALLY AND ADVERSELY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH
EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS,
INCLUDING, WITHOUT LIMITATION, IN CONJUNCTION WITH THE FORWARD-LOOKING
STATEMENTS INCLUDED IN THIS PROSPECTUS AND UNDER "RISK FACTORS." ALL SUBSEQUENT
WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY, ITS
SUBSIDIARIES OR PERSONS ACTING ON BEHALF OF ANY OF THEM ARE EXPRESSLY QUALIFIED
IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
3
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the Commission's regional offices at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained at prescribed rates upon request from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material
may also be accessed through the Commission's Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR"), which is publicly available through the
Commission's Web site on the Internet at http://www.sec.gov. Reports and other
information concerning the Company may be inspected at the offices of the Nasdaq
National Market, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Class A Common Stock offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information contained in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or other documents filed as an exhibit to the Registration
Statement or otherwise filed with the Commission are not necessarily complete,
and in each instance, reference is made to the copy of such contract or
documents so filed. Each such statement is qualified in its entirety by such
reference. The Registration Statement and the exhibits thereto may be inspected
without charge at the offices of the Commission or on EDGAR or copies thereof
may be obtained at prescribed rates from the Public Reference Section of the
Commission at the address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company under the Exchange Act with
the Commission are incorporated in this Prospectus by reference and are made a
part hereof:
1. The Company's Annual Report on Form 10-K (file no. 0-23264) for the
year ended February 28, 1998.
2. The Company's Current Report on Form 8-K (file no. 0-23264) filed May
7, 1998.
3. The description of the Class A Common Stock contained in the
Company's registration statement on Form 8-A (file no. 0-23264), as
amended.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the Offering of all Class A Common Stock to which this Prospectus relates
shall be deemed to be incorporated by reference in this Prospectus and shall be
part hereof from the date of filing of such document. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus (in the
case of a statement in a previously-filed document incorporated or deemed to be
incorporated by reference herein) or in any other subsequently filed document
that is also incorporated or deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus. Subject to the foregoing, all information
appearing in this Prospectus is qualified in its entirety by the information
appearing in the documents incorporated by reference.
The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, upon written or oral
request of such person, a copy of the documents incorporated by reference
herein, other than exhibits to such documents not specifically incorporated by
reference. Such requests should be directed to Emmis Broadcasting Corporation,
950 North Meridian Street, Suite 1200, Indianapolis, Indiana 46204, Attention:
Howard L. Schrott/Telephone (317) 266-0100.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
related notes included elsewhere in this Prospectus. Investors should carefully
consider the information set forth in "Risk Factors" in evaluating the Company,
its business and an investment in the Class A Common Stock. Unless the context
otherwise requires, all references in this Prospectus to "Emmis" or the
"Company" are to Emmis Broadcasting Corporation and, where appropriate, its
subsidiaries.
THE COMPANY
GENERAL
The Company is a diversified media company with radio broadcasting and
magazine publishing operations and, following the consummation of two pending
acquisitions, television broadcasting operations. In 1997 the Company ranked as
the eighth largest radio broadcaster in the United States based on total number
of listeners and the ninth largest radio broadcaster in the United States based
on total revenue. The eleven FM radio stations and two AM radio stations owned
or operated by the Company in the United States (collectively, the "Radio
Stations") serve the nation's three largest radio markets of New York City, Los
Angeles and Chicago, as well as St. Louis and Indianapolis. These markets
accounted for approximately $1.7 billion in radio advertising revenues in
calendar year 1997 as reported in Duncan's Radio Market Guide (1998 ed.). The
Company has entered into agreements to purchase six network-affiliated
television stations (collectively, the "Television Stations") located in New
Orleans, Louisiana, Mobile, Alabama, Green Bay, Wisconsin, and Honolulu, Hawaii
(the "SF TV Stations"), and in Fort Myers, Florida and Terre Haute, Indiana (the
"Wabash Valley TV Stations"). All of the Television Stations are VHF stations
except the Fort Myers station, which is a UHF station. The markets served by the
Television Stations accounted for approximately $360 million in television
advertising revenue in calendar year 1997 as reported in BIA's Investing in
Television Market Report (1998 ed.) (the "1998 BIA Report"). The Company expects
to complete the purchase of the Television Stations in the second half of 1998.
Through a combination of acquisitions and internal growth, the Company's
broadcast cash flow has grown from $15.3 million (when the Company owned five
radio stations) in fiscal 1993 to $81.4 million in fiscal 1998 (on a pro forma
basis after giving effect to the Acquisition Transactions, as defined below, and
the radio stations acquired by the Company during fiscal 1998). The Company has
successfully created top-performing radio stations that are ranked, in terms of
primary demographic target audience share, among the top ten stations in the New
York City, Los Angeles, Chicago, St. Louis and Indianapolis radio markets
according to the Winter 1998 Ratings (the "Winter 1998 Arbitron Survey")
published by The Arbitron Company ("Arbitron"). This success, along with awards
from organizations such as the National Association of Broadcasters and
Billboard and Rolling Stone magazines, has come primarily as a result of the
Company's ability to attract and retain an experienced team of broadcast
professionals who have focused on creating innovative programming and developing
effective marketing and advertising sales programs. In addition, the Company
believes that the location of its Radio Stations in large markets makes it
attractive to radio advertisers and that the diversity of its radio markets
reduces its dependence on any one economic sector or specific advertiser.
The Company's overall strategy is to acquire underdeveloped media
properties in desirable markets and then to create value for the Company's
shareholders by developing those properties to enhance their cash flow. The
Company has successfully implemented this strategy with radio broadcasting
stations and with city magazines. The Company believes that it will be able to
utilize its expertise in broadcast operations, programming and advertising sales
in applying this strategy to the Television Stations which, like the radio
stations previously acquired by the Company, are underdeveloped properties
located in desirable markets, which can benefit from innovative, research-based
programming and the Company's experienced management team. Each of the SF TV
Stations experienced ratings declines following a change in affiliation to the
Fox television network from affiliation with other networks. The Company
believes that the ratings and broadcast
5
<PAGE> 7
cash flow of the Television Stations can be improved with a more market-focused,
research-based programming approach and other related strategies. See "Business
- -- Business Strategy."
The following table sets forth certain information regarding the Radio
Stations operated by the Company and their broadcast markets.
<TABLE>
<CAPTION>
RANKING IN
STATION MARKET STATION PRIMARY PRIMARY
AND RANK BY AUDIENCE DEMOGRAPHIC DEMOGRAPHIC
MARKET REVENUE(1) SHARE(2) TARGET AGES FORMAT TARGET(3)
------- ---------- -------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Los Angeles.................. 1
KPWR-FM................. 4.0 12-24 Dance/Contemporary Hit 1
New York..................... 2
WQHT-FM................. 5.5 12-24 Dance/Contemporary Hit 1
WRKS-FM................. 4.2 25-54 Classic Soul/Smooth R&B 3
WQCD-FM(4).............. 3.2 25-54 Contemporary Jazz 6t
Chicago...................... 3
WKQX-FM................. 3.0 18-34 New Rock 4
St Louis..................... 18
KSHE-FM................. 5.0 18-34 Album Oriented Rock 4
WKKX-FM................. 4.2 18-34 Country 5
WALC-FM................. 2.9 18-44 Modern Adult Contemporary 7t
Indianapolis................. 30
WENS-FM................. 5.5 25-54 Adult Contemporary 4
WIBC-AM................. 8.5 35-64 News/Talk 3
WNAP-FM................. 4.7 25-54 Classic Rock 5
WTLC-FM................. 5.5 25-34 Urban Contemporary 2
WTLC-AM................. 1.2 25-54 Solid Gold Soul, Gospel 18
and Talk
</TABLE>
- -------------------------
(1) "Market Rank by Revenue" is the ranking of the market revenue size of the
principal radio market served by the station among all radio markets in the
United States. Market revenue and ranking figures are from Duncan's Radio
Market Guide (1998 ed.). The Company owns a 40% equity interest in the
publisher of Duncan's Radio Market Guide.
(2) "Station Audience Share" is from the Winter 1998 Arbitron Survey. The
generally accepted method of measuring the relative size of a radio
station's audience is by reference to total persons, age 12 and older,
Monday -- Sunday, 6 a.m. -- Midnight Average Quarter Hour ("AQH") shares as
published by Arbitron. Arbitron periodically samples radio listeners in
defined market areas, principally through the use of diaries returned by
selected listeners. A station's AQH share is a percentage computed by
dividing the average number of persons listening to a particular station for
at least five minutes during an average quarter hour in a given time period
by the average number of such persons for all stations in the market area.
Arbitron compiles ratings data for various demographic groups as well as for
total persons age 12 and older.
(3) "Ranking in Primary Demographic Target" is the ranking of the station among
all radio stations in its market and is based on the station's AQH share in
the primary demographic target according to the Winter 1998 Arbitron Survey.
A "t" indicates the station tied with another station for the stated
ranking.
(4) This station is currently being operated by the Company under a time
brokerage agreement pending its purchase by the Company. See "Recent
Developments -- WQCD Acquisition."
6
<PAGE> 8
Upon consummation of the purchase of the Television Stations, the Company
plans to create a separate television division. The Company has signed a letter
of intent with Greg Nathanson, currently President of Programming and
Development at Twentieth Television, to manage the Company's television
division. See "Recent Developments -- New Television Management Structure."
BUSINESS STRATEGY
The Company is committed to maintaining its leadership positions in
broadcasting, enhancing the performance of its broadcast properties, and
distinguishing itself through the quality of its operations. The Company intends
to selectively grow through acquisition. The Company has a successful track
record of acquiring underperforming radio stations in attractive markets and
improving their ratings, revenues and broadcast cash flow by utilizing its
programming and marketing skills. The Company believes that its strategy of
acquiring underperforming radio broadcast properties and improving their
operational and financial performance is also applicable to television broadcast
properties.
The key components of the Company's radio broadcasting strategy include the
following:
- Pursuit of strategic acquisitions of individual radio stations or
groups of radio stations in new markets where the Company expects that
it can ultimately achieve a leadership position or in those of its
current markets where it believes increases in broadcast cash flow are
obtainable.
- Strategic grouping of stations within each market to optimize
operational performance and best position the properties within that
market to establish and maintain leadership positions.
- Innovative programming to improve ratings and create complementary
programming at station groups in a single market.
- A focused marketing strategy in which the Company tailors its
programming in each market to appeal to specific demographic groups
which it considers particularly attractive to advertisers.
- An entrepreneurial management approach involving decentralized station
operations by experienced local managers with performance-based
compensation and an equity stake in the Company who understand the
programming tastes, demographics and competitive opportunities of
their particular market and who work closely with senior management of
the Company to implement the Company's programming and marketing
strategies.
The key components of the Company's television broadcasting strategy
include the following:
- Pursuit of strategic acquisitions of underperforming television
stations which offer the potential for significant improvement in
ratings and broadcast cash flow as a result of a more focused,
research-based programming approach and application of the Company's
sales and marketing experience.
- A programming strategy involving market-specific demographic research,
selection and scheduling of syndicated programming to appeal to
targeted demographic groups.
- Maximization of advertising inventory value by scheduling
complementary programming around each television station's most
successful programs in order to increase advertising revenue.
- An entrepreneurial management approach involving decentralized station
operations by experienced local managers with performance-based
compensation and an equity stake in the Company who understand the
programming tastes, demographics and competitive opportunities of
their particular market and who work closely with senior management of
the Company to implement the Company's programming and marketing
strategies.
7
<PAGE> 9
RECENT DEVELOPMENTS
PENDING TRANSACTIONS
Effective March 30, 1998, the Company entered into a definitive agreement
to acquire the SF TV Stations, consisting of WVUE-TV, New Orleans, Louisiana;
WALA-TV, Mobile, Alabama; WLUK-TV, Green Bay, Wisconsin; and KHON-TV, Honolulu,
Hawaii, for approximately $307 million, with $257 million payable in cash at
closing, $25 million payable at closing in either cash or Class A Common Stock
at the Company's option, and $25 million with interest at 8% per annum payable
one year after closing in either cash or Class A Common Stock at the Company's
option (the "SF Acquisition"). The Company currently anticipates that it will
pay all of the purchase price in cash. See "Recent Developments -- SF
Acquisition."
Effective March 20, 1998, the Company entered into a definitive agreement
to acquire the Wabash Valley TV Stations, consisting of WFTX-TV, Fort Myers,
Florida and WTHI-TV, Terre Haute, Indiana, as well as radio stations WTHI-FM,
WTHI-AM and WWVR-FM in Terre Haute, Indiana, for approximately $90 million in
cash (the "Wabash Valley Acquisition"). See "Recent Developments -- Wabash
Valley Acquisition."
The following table sets forth certain information regarding the Television
Stations and the markets in which they operate:
<TABLE>
<CAPTION>
NUMBER OF STATION
TELEVISION METROPOLITAN AFFILIATION/ HOUSEHOLDS DMA STATIONS STATION AUDIENCE
STATION AREA SERVED CHANNEL IN DMA(1) RANK(1) IN MARKET(2) RANK(3) SHARE(4)
- ---------- ------------ ------------ ---------- ------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WVUE-TV New Orleans, LA Fox/8 623,000 41 6 4 8
WALA-TV Mobile, AL-Pensacola, FL Fox/10 450,000 62 5 3 10
WLUK-TV(5) Green Bay, WI Fox/11 381,000 70 5 4 9
KHON-TV(5) Honolulu, HI Fox/2 380,000 71 6 2 15
WFTX-TV Fort Myers, FL Fox/36 320,000 83 5 4 7
WTHI-TV Terre Haute, IN CBS/10 157,000 140 3 1 29
</TABLE>
- -------------------------
(1) Estimated by the A. C. Nielsen Company ("Nielsen") as of January 1998.
Rankings are based on the relative size of a station's market among the 211
generally recognized Designated Market Area, as defined by Nielsen ("DMAs").
(2) Represents the number of television stations ("Reportable Stations")
designated by Nielsen as "local" to the DMA, excluding public television
stations and stations which do not meet minimum Nielsen reporting standards
(i.e., a weekly cumulative audience of less than 2.5%) for reporting in the
Sunday through Saturday, 9:00 a.m. to midnight time period.
(3) Reflects the station's rank relative to other Reportable Stations based upon
the DMA rating as reported by Nielsen from 9:00 a.m. to midnight, Sunday
through Saturday during February 1998.
(4) Reflects an estimate of the share of DMA households viewing television
received by a local commercial station in comparison to other local
commercial stations in the market as measured from 9:00 a.m. to midnight,
Sunday through Saturday.
(5) As part of the SF Acquisition, the Company will also acquire KAII-TV and
KHAW-TV, which operate as satellite stations of KHON-TV and primarily
re-broadcast the signal of KHON-TV. The stations are considered one station
for FCC multiple ownership purposes. Low power television translators W40AN
and K55D2 retransmit stations WLUK-TV and KHON-TV, respectively.
On May 15, 1997, the Company entered into an agreement to acquire radio
station WQCD-FM in New York City (the "WQCD Acquisition" and, together with the
SF Acquisition and the Wabash Valley Acquisition, the "Acquisition
Transactions"). Starting in July 1997 and until the purchase of the station is
completed, the Company has operated and will continue to operate the station
pursuant to a time brokerage agreement under which the Company pays the current
owner a monthly fee of approximately $700,000. As a result, the operating
results of WQCD-FM are included in the Company's operating results beginning
July 1,
8
<PAGE> 10
1997. Under the acquisition agreement, the current owner had the option to
require the Company to purchase the station, which it exercised in December
1997. The current WQCD-FM owner also exercised its right under the acquisition
agreement to require the Company to purchase certain TV stations that are to be
transferred by the Company to the current WQCD-FM owner in exchange for WQCD-FM.
The purchase price for the WQCD Acquisition will be approximately $141 million
after adjustments. The Company anticipates that it will complete the acquisition
in mid-1998. There can be no assurance, however, with respect to the timing or
completion of the WQCD Acquisition, which is subject to certain conditions,
including the concurrent acquisition and exchange of the TV stations specified
by the current WQCD-FM owner and obtaining the necessary regulatory approvals.
See "Recent Developments -- WQCD Acquisition."
INTERNATIONAL BROADCASTING OPERATIONS
In November 1997, Radio Hungaria Co., Ltd., d/b/a Slager Radio, a Hungarian
subsidiary in which the Company owns a 54% interest, was awarded a license to
operate a national radio station in Hungary. The license has an initial term of
seven years and may be renewed at the Hungarian radio authority's discretion for
an additional five years subject to payment of a renewal fee to be negotiated.
Slager Radio began broadcasting on February 16, 1998. The programming, based on
market research, consists primarily of hit music from the 1960's and 1970's,
together with news and public affairs programming. Gallup Research Ratings for
March 1998, the first full month of the station's operation, indicate that
Slager Radio reaches more than 21% of the Hungarian population daily, which is
comparable to other major Hungarian radio networks and stations. A second and
more widely used ratings service, Szonda Ipsos, showed similar results. Based
upon a ratings survey by Szonda Ipsos during the end of the fifth week and the
beginning of the sixth week Slager Radio was on the air, the station already
ranked second among all stations listed with a 21% daily national cumulative
rating among all persons 15 years of age and older. Management of the Company
believes that these initial audience ratings will contribute to advertiser
acceptance of the station.
ACQUISITION OF TEXAS MONTHLY MAGAZINE
The Company acquired Texas Monthly magazine in February 1998. The
critically acclaimed magazine, which has received eight National Magazine
Awards, has a paid monthly circulation of approximately 300,000 and is believed
by the Company to have monthly readership of more than 2,436,000. It marked its
25th anniversary with the publication of the February 1998 issue, which set a
single issue advertising record. The Company plans to increase Texas Monthly's
operating efficiencies while leaving the highly-regarded editorial product
intact.
NEW CREDIT FACILITY
The Company is negotiating and anticipates receiving a commitment from
certain of its current lenders or their affiliates for a new $750 million credit
facility (the "New Credit Facility"), which may be increased up to $1.0 billion.
The New Credit Facility, which is expected to close in mid-1998, will amend and
restate the Company's current $500 million credit facility (the "Existing Credit
Facility"). The New Credit Facility consists of a $150 million senior secured
8-year revolving credit facility, a $250 million senior secured 8-year
amortizing term loan, a $250 million 8.5-year amortizing term loan and a $100
million 8-year senior secured acquisition revolving credit/term loan facility.
Amounts borrowed under the New Credit Facility are expected to bear interest at
a variable rate based on an index chosen by the Company. The commitments under
the 8-year revolving credit facility, 8-year term loan and acquisition facility
will be subject to scheduled annual reductions beginning in 2001 and additional
reductions from certain sources such as the net proceeds of asset sales. The
acquisition facility commitment will terminate and convert to a term loan one
year after closing of the New Credit Facility.
The New Credit Facility will contain various financial and operating
covenants and other restrictions and will be secured by a perfected first
priority security interest in substantially all of the Company's and its
subsidiaries' tangible and intangible assets. The lenders' obligation to fund
under the New Credit Facility will be subject to various conditions, including
completion of the Offering, completion of loan documentation acceptable to the
lenders, and other customary conditions for similar lines of credit.
9
<PAGE> 11
PROPOSED NAME CHANGE
Consistent with diversification of the Company's businesses, its Board of
Directors recently proposed to the Company's shareholders that the name of the
Company be changed to "Emmis Communications Corporation." The Company's
shareholders will vote on the proposed name change at the annual shareholders'
meeting scheduled for June 23, 1998, and the Company expects that the name
change will become effective sometime in mid-1998.
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock Offered.........
4,000,000 shares(1)
U.S. Offering...................... 3,200,000 shares
International Offering............. 800,000 shares
----------
Total........................... 4,000,000 shares(1)
Common Stock to be outstanding after
the Offering....................... 15,030,560 shares(2), consisting of:
12,469,666 shares of Class A Common Stock
2,560,894 shares of Class B Common Stock
Use of Proceeds...................... To reduce the amount outstanding under the Existing Credit
Facility and, together with borrowings under the New Credit
Facility, to fund the Acquisition Transactions and New
Credit Facility and acquisition-related expenses. See "Use
of Proceeds."
Voting Rights........................ Each class of Common Stock has identical rights, except with
respect to voting. The Class A Common Stock entitles its
holders to one vote per share on all matters submitted to a
vote of the holders of the Company's common stock. In
addition, the holders of Class A Common Stock, voting as a
separate class, are entitled to elect two of the Company's
directors. The Class B Common Stock entitles its holders to
ten votes per share on all matters submitted to a vote of
the holders of the Company's common stock, except (i) in
connection with any proposed "going private" transaction
between the Company and Jeffrey H. Smulyan (the holder of
all of the Class B Common Stock) or an affiliate of Mr.
Smulyan and (ii) as otherwise provided by law. See
"Principal Shareholders" and "Description of Capital Stock."
</TABLE>
- -------------------------
(1) Assumes no exercise of the U.S. Underwriters' over-allotment option. See
"Underwriters."
(2) Includes 8,469,666 shares of Class A Common Stock and 2,560,894 shares of
Class B Common Stock outstanding as of April 29, 1998 and assumes that the
U. S. Underwriters' over-allotment option is not exercised. Excludes
1,490,992 shares of Class A Common Stock and 375,000 shares of Class B
Common Stock reserved for issuance in respect of stock options outstanding
as of April 29, 1998.
RISK FACTORS
Prospective investors should consider carefully certain matters relating to
the Company, its business and an investment in the Class A Common Stock. See
"Risk Factors."
10
<PAGE> 12
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The summary consolidated financial and other data has been derived, except
as otherwise noted, from the consolidated financial statements of the Company
for the years ended February (29) 28, 1994, 1995, 1996, 1997 and 1998 audited by
Arthur Andersen LLP. The unaudited pro forma as adjusted operating and other
data reflects adjustments to the condensed consolidated historical operating
data of the Company to give effect to (i) the acquisition of WKKX-FM, WALC-FM,
WALC-AM, WTLC-FM, WTLC-AM and Texas Monthly (the "Consummated Acquisitions") and
the disposition of WALC-AM, all of which occurred during the year ended February
28, 1998, (ii) the Offering and the New Credit Facility, (iii) the WQCD
Acquisition, (iv) the SF Acquisition, and (v) the Wabash Valley Acquisition, as
if such transactions had occurred at the beginning of the year presented. The
unaudited pro forma as adjusted balance sheet data reflects (i) the Offering and
the costs incurred in connection with entering into the New Credit Facility,
(ii) the WQCD Acquisition, (iii) the SF Acquisition and (iv) the Wabash Valley
Acquisition, as if such transactions had occurred on February 28, 1998. The
summary consolidated financial and other data presented below should be read in
conjunction with, and is qualified in its entirety by reference to, the
Company's consolidated financial statements for the years ended February (29)
28, 1996, 1997, and 1998 (the "Consolidated Financial Statements") and related
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," incorporated by reference in this Prospectus, and to the
"Unaudited Pro Forma Condensed Consolidated Financial Information" and notes
thereto contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY (29) 28,
----------------------------------------------------------------------------
PRO FORMA
AS ADJUSTED
1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net broadcasting revenues..................... $ 50,311 $ 66,815 $ 99,830 $ 103,292 $ 125,855 $ 204,675
Broadcasting operating expenses............... 29,368 38,794 53,948 52,839 67,646 118,618
Publication and other revenue, net of
operating expenses.......................... 657 593 896 834 1,204 3,776
International business development expenses... -- 313 1,264 1,164 999 999
Corporate expenses............................ 2,765 3,700 4,419 5,929 6,846 9,286
Time brokerage fee............................ -- -- -- -- 5,667 --
Amortization of television program rights..... -- -- -- -- -- 5,901
Depreciation and amortization................. 2,812 3,827 5,677 5,481 7,536 30,434
Noncash compensation.......................... 1,725 600 3,667 3,465 4,882 4,882
Operating income.............................. 14,298 20,174 31,751 35,248 33,483 38,331
Interest expense(1)........................... 13,588 7,849 13,540 9,633 13,772 49,289
Loss on donation of radio station............. -- -- -- -- 4,833 --
Other income (expense), net................... (367) (170) (303) 325 6 61
Income (loss) before income taxes and
extraordinary item.......................... 343 12,155 17,908 25,940 14,884 (10,897)
Income (loss) before extraordinary item....... (957) 7,627 10,308 15,440 8,984 (6,484)
Net income (loss)............................. $ (4,365) $ 7,627 $ 10,308 $ 15,440 $ 8,984 $ (6,484)
Basic net income (loss) per share............. (2) $ .72 $ .96 $ 1.41 $ .82 $ (.44)
Diluted net income (loss) per share........... (2) $ .70 $ .93 $ 1.37 $ .79 $ (.44)
Weighted average common shares outstanding --
Basic....................................... 10,557,328 10,690,677 10,942,996 10,903,333 14,903,333
Weighted average common shares outstanding --
Diluted..................................... 10,831,695 11,083,504 11,291,225 11,377,765 14,903,333
OTHER DATA:
Broadcast cash flow(3).......................... $ 20,943 $ 28,021 $ 45,882 $ 50,453 $ 58,209 $ 81,422
Broadcast cash flow margin(4)................... 41.6% 41.9% 46.0% 48.8% 46.3% 39.8%
EBITDA(5)....................................... 18,836 24,601 41,095 44,194 51,568 74,913
Capital expenditures(6)......................... 659 1,081 1,396 7,559 16,991 20,876
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY (29) 28,
----------------------------------------------------------------------------
PRO FORMA
AS ADJUSTED
1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 1,607 $ 3,205 $ 1,218 $ 1,191 $ 5,785 $ 3,364
Working capital................................. 6,210 10,088 14,761 15,463 23,083 25,028
Net intangible assets (7)....................... 30,751 139,729 135,830 131,743 234,558 789,424
Total assets.................................... 57,849 183,441 176,566 189,716 333,388 939,083
Total debt, including current portion........... 92,345 152,322 124,257 115,172 231,422 621,422
Redeemable preferred stock...................... 11,250 -- -- -- -- --
Shareholders' equity (deficit).................. (54,229) (2,661) 13,884 34,422 45,210 200,926
</TABLE>
(footnotes appear on following page)
11
<PAGE> 13
(footnotes from previous page)
- -------------------------
(1) Includes debt issuance cost and interest rate cap amortization of $3,263,
$660, $1,742, $1,071 and $2,183 for the years ended February (29) 28, 1994
through 1998, respectively, and $1,253 on a pro forma basis for the year
ended February 28, 1998.
(2) On March 1, 1994, the Company closed on its initial public offering of its
Class A Common Stock. Accordingly, basic and diluted net income per share
information is not applicable for the year ended February 28, 1994.
(3) The performance of a broadcast group, such as Emmis, is customarily measured
by the ability of its stations to generate broadcast cash flow. Broadcast
cash flow is not a measure of liquidity or of performance calculated in
accordance with generally accepted accounting principles, and should be
viewed as a supplement to and not as a substitute for the Company's results
of operations presented on the basis of generally accepted accounting
principles. The Company believes that broadcast cash flow is useful because
it is generally recognized by the broadcasting industry as a measure of
performance and is used by analysts who report on the performance of
broadcasting companies. However, broadcast cash flow is not a standardized
measure and may be calculated in a number of ways. Emmis defines broadcast
cash flow as advertising revenues net of agency commissions, less
broadcasting operating expenses and cash paid for television program rights.
The primary source of advertising revenues is the sale of advertising time
to local and national advertisers. The most significant broadcasting
operating expenses are employee salaries and commissions, costs associated
with programming, advertising and promotion, and station general and
administrative costs.
(4) Broadcast cash flow margin is defined as broadcast cash flow divided by net
broadcasting revenues.
(5) EBITDA is defined as broadcast cash flow plus publication and other revenue,
net of operating expenses, less international business development expenses
and corporate expenses.
(6) Capital expenditures for the year ended February 28, 1998 includes progress
payments totaling $11,775 in connection with the construction of the
Company's new Indianapolis office and studio facility.
(7) Net intangible assets consist primarily of FCC licenses and excess of cost
over fair value of net assets of purchased businesses, net of accumulated
amortization.
12
<PAGE> 14
RISK FACTORS
An investment in the shares of Class A Common Stock offered hereby involves
a significant degree of risk. In determining whether to make an investment in
shares of Class A Common Stock, prospective purchasers should consider carefully
all of the information set forth in this Prospectus and, in particular, the
following factors.
CONSUMMATION OF PENDING ACQUISITIONS
Consummation of each of the pending acquisitions (the WQCD Acquisition, the
SF Acquisition and the Wabash Valley Acquisition) is subject to numerous closing
conditions, including the receipt of all required regulatory approvals. There
can be no assurance that any of these transactions will be consummated in a
timely manner or on the terms described in this Prospectus, if at all. See
"Recent Developments."
NEW LINE OF BUSINESS
To date, the Company has concentrated its business operations in radio
broadcasting and magazine publishing and has not operated television stations.
Although the Company has entered into a letter of intent with a manager who has
substantial television experience to manage its television stations once the SF
Acquisition and the Wabash Valley Acquisition are consummated, the Company has
no established operating history in the television industry and the Company will
be required to assimilate the operations of these television properties into the
operations of the Company. In addition, due to the need to purchase syndicated
programming and develop original programming substantially in advance of the
date it is first broadcast, there will likely be a significant delay between the
date the Company completes its acquisition of the Television Stations and any
material improvements in their audience ratings or broadcast cash flow. If the
Company experiences losses of key personnel at the Television Stations or
certain types of programming cannot be obtained or developed by the Company at
an acceptable cost, or at all, such improvements in audience ratings or
broadcast cash flow could be further delayed or diminished. There can be no
assurance that the management of the Company will be able to integrate
successfully the Television Stations into its business. Any delays or unexpected
costs incurred in connection with such integration could have an adverse effect
on the Company's business, operating results or financial condition.
RELIANCE ON PROGRAMMING
Among the Company's most significant operating costs for the Television
Stations will be syndicated programming. Future increases in syndicated
programming costs may adversely affect the Company's operating results.
Acquisition of program rights are often made two or three years in advance,
making it difficult to accurately predict how a program will perform. In some
instances, programs must be replaced before their costs have been fully
amortized, resulting in write-offs that increase operating costs.
NETWORK AFFILIATION AGREEMENTS
Five of the Television Stations are affiliated with Fox and one with CBS.
Each of these networks generally provides these stations with prime time
programming for a prescribed number of hours per week. In return, the stations
broadcast network-inserted commercials during such programming and receive cash
compensation from the network or the right to broadcast a specified amount of
station-inserted commercials during the network programming. Although network
affiliates generally have achieved higher ratings than unaffiliated independent
stations in the same market, there can be no assurance as to the future success
of each network's programming or the continuation of such programming. The
network affiliation agreements are subject to termination by the networks under
certain circumstances. The Company believes that it enjoys a good relationship
with both Fox and CBS. However, there can be no assurance that the affiliation
agreements will remain in place or that each network will continue to provide
programming or compensation to affiliates on the same basis as currently
provided. The non-renewal or termination of a network affiliation agreement
could have a material adverse effect on the affected Television Station's
operations and broadcast cash flow.
13
<PAGE> 15
LIMITATIONS ON ACQUISITION STRATEGY
The Company intends to pursue growth through the acquisition of radio
station groups, individual radio stations and television stations as management
believes appropriate and in keeping with the factors set forth in "Business --
Business Strategy." Accordingly, the Company's future performance will depend,
in part, upon its ability to successfully implement its acquisition strategy,
evaluate markets, secure financing and obtain required governmental
authorizations, all in a timely manner, at reasonable costs and on satisfactory
terms and conditions. The Company competes and will continue to compete with
many other buyers for the acquisition of radio and television stations. Many of
those competitors have significantly greater financial and other resources than
those of the Company. The Company cannot predict whether it will be successful
in pursuing acquisition opportunities or what the consequences of any
acquisitions will be. Moreover, a significant element of the Company's
acquisition strategy involves acquiring underperforming broadcast properties and
using the Company's experience to improve their financial and operational
performance. Thus, it is likely that most of the benefits to the Company from
any particular acquisition will be realized over time, rather than immediately,
and that the Company will be required to incur initial costs, which may be
significant, in connection with implementing its operating strategies at
broadcast properties it acquires. See "Business -- Business Strategy."
COMPETITIVE NATURE OF BROADCASTING
The broadcasting industry is a highly competitive business. The success of
each of the Company's stations is dependent, to a significant degree, upon its
audience ratings and share of the overall advertising revenue within its
markets. The Company's stations compete for audiences and advertising revenue
directly with other radio and television stations, some of whose owners have
greater financial resources than the Company, as well as with other media,
within their respective markets, including cable television, newspapers,
magazines, direct mail, compact discs, music videos, the internet and outdoor
advertising. Although the Company believes that each of its stations is able to
compete effectively in its broadcast area, there can be no assurance that any
one of the Company's stations will be able to maintain or increase its current
audience ratings or advertising revenue market share. In addition, from time to
time other stations may change their format or programming to compete directly
with the Company's stations for audience and advertisers, or engage in
aggressive promotional campaigns, which could result in lower ratings and
advertising revenue, increased promotion and other expenses and, consequently,
lower broadcast cash flow for the Company.
KEY PERSONNEL
The Company's business is dependent upon the performance of certain key
employees, including its Chief Executive Officer and President. The Company has
employment agreements with its Chief Executive Officer and President and certain
other key employees but does not maintain key-man life insurance. The Company
employs several on-air personalities with significant loyal audiences in their
respective broadcast areas. The Company generally enters into long-term
employment agreements with its key on-air talent to protect its interest in
those relationships, but there can be no assurance that all of these on-air
personalities will remain with the Company. In addition, the Company's success
in operating the Television Stations will be dependent in significant part upon
the performance of Greg Nathanson, with whom the Company has entered into a
letter of intent to manage its television division. See "Recent Developments --
New Television Management Structure."
CONTROL OF THE COMPANY
Jeffrey H. Smulyan, the Chief Executive Officer and President of the
Company, will hold immediately following the Offering shares representing
approximately 70.4% of the outstanding combined voting power of all classes of
the Common Stock. As a result of his voting power, Mr. Smulyan can control the
outcome of most matters submitted to a vote of the holders of the Common Stock,
including the election of a majority of the directors.
14
<PAGE> 16
ABILITY TO SERVICE INDEBTEDNESS
At February 28, 1998, on a pro forma basis, after giving effect to the
Acquisition Transactions, the Offering and the New Credit Facility, the Company
would have had $621.4 million of total debt. Subject to restrictions in the New
Credit Facility, the Company may incur additional indebtedness from time to time
to finance acquisitions or for other corporate purposes. Interest expense for
the fiscal years ended February (29) 28, 1996, 1997 and 1998 was $13.5 million,
$9.6 million and $13.8 million, respectively, and pro forma interest expense for
the fiscal year ended February 28, 1998 was $49.3 million.
The level of the Company's indebtedness could have important consequences
to stockholders, including the need to dedicate broadcast cash flow to debt
service, the possibility that future acquisitions or capital expenditures by the
Company could be restricted, and the increased vulnerability of the Company to
economic downturns or competitive pressures. Certain of the Company's
competitors currently operate on a less leveraged basis and may have
significantly greater operating and financing flexibility than the Company. The
Company expects that its revenues will be sufficient to meet its operating
expenses and to service its debt requirements as they become due. If the Company
is unable to service its indebtedness, however, it will be forced to adopt an
alternative strategy that may include actions such as reducing or delaying
capital expenditures, selling assets, restructuring or refinancing its
indebtedness or seeking additional equity capital. There can be no assurance
that any of these strategies could be implemented on satisfactory terms, if at
all, and the implementation of any of these alternative strategies could have a
negative impact on the value of the Class A Common Stock.
NEW TECHNOLOGIES
The broadcasting industry is subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems, by direct broadcast satellite
("DBS") systems, by digital audio broadcasting ("DAB"), by digital television
("DTV") and by satellite digital audio radio service ("satellite DARS" or
"SDARS"). DBS systems provide programming on a subscription basis to those who
have purchased and installed a satellite signal receiving dish and associated
decoder equipment. DBS systems claim to provide visual picture quality
comparable to that found in movie theaters and aural quality comparable to
digital audio compact discs. DBS systems do not, except in certain instances,
provide the signals of traditional over-the-air broadcast stations, and thus are
generally restricted to providing the programming of premium services such as
HBO and other traditionally cable-oriented satellite programming services. DAB
and SDARS provide for the delivery by terrestrial and satellite means,
respectively, of multiple new, high-quality audio programming formats to local
and national audiences. DAB technology may be used in the future by radio
broadcast stations either on existing or alternate broadcasting frequencies or
on new frequency bands. DTV will provide additional channels to television
broadcasters which can be used for such services as multiple standard definition
program channels, data transfer, subscription video, interactive materials and
audio signals as well as digital video programming. Under current rules of the
Federal Communications Commission (the "FCC"), television broadcasters will be
required to broadcast a digital signal by specified dates based on the size of
their respective markets and then to return their analog channel to the FCC. The
Television Stations will be required to broadcast a digital signal by May 2001.
The Company cannot predict at this time the effect, if any, that any such new
technologies may have on the radio or television broadcasting industry. However,
assuming the Acquisition Transactions occur, the Company will incur considerable
expense in the conversion of the SF TV Stations and the Wabash Valley TV
Stations to DTV and is unable to predict the extent or timing of consumer demand
for any such DTV services.
BROADCASTING INDUSTRY SUBJECT TO FEDERAL REGULATION
The broadcasting industry is subject to extensive and changing regulation
by the FCC under (among other laws) the Communications Act of 1934, as amended
(and, as amended by the Telecommunications Act of 1996 (the "1996 Act"), the
"Communications Act"). Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and operating
power of stations; issues, renews, revokes and modifies station licenses;
determines whether to approve changes in ownership or control
15
<PAGE> 17
of station licenses; regulates equipment used by stations; and adopts and
implements regulations and policies that directly affect the ownership,
operation and employment practices of stations. The FCC has the power to impose
penalties for violation of its rules or the Communications Act. In particular,
the Company's business will be dependent upon continuing to hold broadcasting
licenses from the FCC that are issued for terms of up to eight years. While in
the vast majority of cases such licenses are renewed by the FCC, there can be no
assurance that any of the Company's stations' licenses will be renewed at their
expiration date, or that renewals, if granted, will not include conditions or
qualifications that could adversely affect the Company's operations. In
addition, the Communications Act and FCC rules restrict ownership by non-U.S.
persons and voting of capital stock of, and participation in the affairs of the
Company. Moreover, laws and governmental regulations and policies may be changed
significantly over time and there can be no assurance that such changes will not
have a material adverse effect on the business, financial condition and results
of operation of the Company. The Company's Articles of Incorporation contain
provisions which permit restrictions on the ownership, voting and transfer of
the Company's capital stock in accordance with the Communications Act and the
rules and regulations of the FCC.
The 1996 Act, which amended the Communications Act in a number of important
respects, has created significant new opportunities for broadcasters, but also
has created uncertainties as to how the FCC and the courts will enforce and
interpret the 1996 Act. Although the 1996 Act eliminated the national ownership
ceiling previously applicable to radio broadcasters, eliminated most
restrictions on the national ownership of television stations and loosened
restrictions previously applicable to ownership of radio stations within single
markets, significant restrictions remain on permitted levels of local ownership.
In addition, the limitations on the number of radio stations the Company may
acquire in any market may vary depending upon whether the interests in other
radio stations and television stations or certain other media properties of
certain individuals affiliated with the Company are attributable to those
individuals under FCC rules. The FCC's rules also generally prohibit a single
entity from owning radio stations and television stations in the same local
market, which may limit the Company's ability to acquire additional stations.
Moreover, under the FCC's cross-interest policy, the FCC in certain instances
may prohibit one party from acquiring an attributable interest in one media
outlet and substantial non-attributable economic interest in another media
outlet in the same market, thereby prohibiting a particular acquisition by the
Company.
INTERNATIONAL BUSINESS RISKS
The Company currently conducts radio broadcasting operations in Hungary and
intends to pursue additional broadcasting opportunities in other foreign
countries. The risks of doing business in foreign countries include changing
regulatory policies, potential adverse changes in the diplomatic relations of
foreign countries with the United States, hostility from local populations,
adverse effects of currency exchange controls, restrictions on the withdrawal of
foreign investment and earnings, government policies against businesses owned by
non-nationals, expropriations of property, the potential instability of foreign
governments and the risk of insurrections that could result in losses against
which the Company is not insured. The Company's international operations also
are subject to economic uncertainties, including, among others, risks of
renegotiation, modification or termination of existing agreements or
arrangements with governmental authorities, foreign exchange restrictions,
changes in taxation structure and currency exchange rate risk.
FORWARD LOOKING STATEMENTS
This Prospectus contains forward-looking statements which can be identified
by terminology such as "believes," "anticipates," "intends," "expects" and
similar words. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, events or
developments to be materially different from future results, events or
developments expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, both nationally and in the regions in which the Company operates;
technology changes; competition; changes in business strategy or development
plans; the high leverage of the Company; the Company's ability to attract and
retain qualified personnel; existing governmental regulations and changes in, or
the failure to comply with, governmental regulations; liability and other claims
asserted against the
16
<PAGE> 18
Company; and other factors referenced in this Prospectus, including, without
limitation, under the captions "Prospectus Summary," "Risk Factors," and
"Business." GIVEN THESE UNCERTAINTIES, PROSPECTIVE INVESTORS ARE CAUTIONED NOT
TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. The Company
disclaims any obligation to update any such factors or to publicly announce the
results of any revisions to any of the forward-looking statements contained in
this Prospectus to reflect future results, events or developments.
THE COMPANY
The Company is a diversified media company with radio broadcasting and
magazine publishing operations and, following the consummation of two pending
acquisitions, television broadcasting operations. In 1997 the Company ranked as
the eighth largest radio broadcaster in the United States based on total number
of listeners and the ninth largest radio broadcaster in the United States based
on total revenue. The Radio Stations, consisting of eleven FM radio stations and
two AM radio stations owned or operated by the Company in the United States,
serve the nation's three largest radio markets of New York City, Los Angeles and
Chicago, as well as St. Louis and Indianapolis. These markets accounted for
approximately $1.7 billion in radio advertising revenues in calendar year 1997
as reported in Duncan's Radio Market Guide (1998 ed.). The Company has entered
into agreements to purchase the Television Stations, consisting of six
network-affiliated television stations located in New Orleans, Louisiana,
Mobile, Alabama, Green Bay, Wisconsin, Honolulu, Hawaii, Fort Myers, Florida and
Terre Haute, Indiana. All of the Television Stations are VHF stations except the
Fort Myers station, which is a UHF station. The markets served by the Television
Stations accounted for approximately $360 million in television advertising
revenue in calendar year 1997 as reported in the 1998 BIA Report. The Company
expects to complete the purchase of the Television Stations in the second half
of 1998.
The Company also operates a national radio station in Hungary and news and
agriculture information networks in Indiana, publishes Indianapolis Monthly,
Atlanta, Cincinnati and Texas Monthly magazines and engages in various
businesses ancillary to its broadcasting business, such as consulting and
broadcast tower leasing.
The Company's principal executive offices are located at 950 North Meridian
Street, Suite 1200, Indianapolis, Indiana 46204, and its telephone number is
(317) 266-0100.
17
<PAGE> 19
RECENT DEVELOPMENTS
SF ACQUISITION
Effective March 30, 1998, the Company entered into a definitive agreement
to acquire the SF Stations, consisting of televisions stations WVUE-TV, New
Orleans, Louisiana; WALA-TV, Mobile, Alabama; WLUK-TV, Green Bay, Wisconsin; and
KHON-TV, Honolulu, Hawaii, for approximately $307 million, with $257 million
payable in cash at closing, $25 million payable at closing in either cash or
Class A Common stock at the Company's option, and $25 million with interest at
8% per annum payable one year after closing in either cash or Class A Common
Stock at the Company's option. The Company currently anticipates that it will
pay all of the purchase price in cash. The following table sets forth certain
information regarding the SF TV Stations and the markets in which they operate:
<TABLE>
<CAPTION>
NUMBER OF STATION LICENSE
TELEVISION METROPOLITAN AFFILIATION/ HOUSEHOLDS DMA STATIONS STATION AUDIENCE EXPIRATION
STATION AREA SERVED CHANNEL IN DMA(1) RANK(1) IN MARKET(2) RANK(3) SHARE(4) DATE
- ---------- ------------ ------------ ---------- ------- ------------ ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WVUE-TV New Orleans, LA Fox/8 623,000 41 6 4 8 6/1/05
WALA-TV Mobile, AL-Pensacola, FL Fox/10 450,000 62 5 3 10 4/1/05
WLUK-TV(5) Green Bay, WI Fox/11 381,000 70 5 4 9 12/1/05
KHON-TV(5) Honolulu, HI Fox/2 380,000 71 6 2 15 2/1/99
</TABLE>
- -------------------------
(1) Estimated by the Nielsen as of January 1998. Rankings are based on the
relative size of a station's market among the 211 generally recognized DMAs.
(2) Represents the number of television stations designated by Nielsen as
"local" to the DMA, excluding public television stations and stations which
do not meet minimum Nielsen reporting standards (i.e., a weekly cumulative
audience of less than 2.5%) for reporting in the Sunday through Saturday,
9:00 a.m. to midnight time period.
(3) Reflects the station's rank relative to other Reportable Stations based upon
the DMA rating as reported by Nielsen from 9:00 a.m. to midnight, Sunday
through Saturday during February 1998.
(4) Reflects an estimate of the share of DMA households viewing television
received by a local commercial station in comparison to other local
commercial stations in the market as measured from 9:00 a.m. to midnight,
Sunday through Saturday.
(5) As part of the SF Acquisition, the Company will also acquire KAII-TV and
KHAW-TV, which operate as satellite stations of KHON-TV and primarily
re-broadcast the signal of KHON-TV. The stations are considered one station
for FCC multiple ownership purposes. Low power television translators W40AN
and K55D2 retransmit stations WLUK-TV and KHON-TV, respectively.
Network Affiliation. Each of the SF TV Stations is an affiliate of the Fox
television network pursuant to an affiliation agreement with Fox Broadcasting
Company ("Fox"). As part of the SF Acquisition, the Company will enter into new
affiliation agreements with Fox (the "Fox Affiliation Agreements") which will
terminate in August 2006, subject to earlier termination (as described below).
Fox may extend the initial term of each of the Fox Affiliation Agreements for
additional successive periods of two years if it gives the requisite written
notice to the relevant SF TV Station and such SF TV Station fails to give Fox
written notice within a prescribed time period that it rejects such an
extension. Pursuant to the Fox Affiliation Agreements, Fox is to provide the SF
TV Stations with programming in return for the stations' broadcasting of
Fox-inserted commercials in such programming. The SF TV Stations also retain the
right to include a limited amount of commercials during Fox programming. Each of
the Fox Affiliation Agreements is subject to termination by Fox in certain
instances, including termination in the event (i) a station makes unauthorized
preemptions of Fox programming; (ii) there is a material change in certain
aspects of the stations' operations, making the affiliation (as of the date of
the applicable agreement) less valuable to Fox; (iii) Fox or an affiliate
acquires a significant ownership interest in a television station within the
affected SF TV Station's market; or (iv) there are certain transfers of control
of a station's FCC licenses.
18
<PAGE> 20
WABASH VALLEY ACQUISITION
Effective March 20, 1998, the Company entered into a definitive agreement
to acquire the Wabash Valley TV Stations, consisting of television stations
WFTX-TV, Fort Myers, Florida and WTHI-TV, Terre Haute, Indiana, as well as three
radio stations, for approximately $90 million in cash. The following table sets
forth certain information regarding the Wabash Valley TV Stations and the
markets in which they operate:
<TABLE>
<CAPTION>
HOUSEHOLDS NUMBER OF STATION LICENSE
TELEVISION METROPOLITAN AFFILIATION/ IN DMA DMA STATIONS STATION AUDIENCE EXPIRATION
STATION AREA SERVED CHANNEL (1) BANK(1) IN MARKET(2) BANK(3) SHARE(4) DATE
---------- ------------ ------------ ---------- ------- ------------ ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fort Myers,
WFTX-TV FL............. Fox/36 320,000 83 5 4 7 2/1/05
Terre Haute,
WTHI-TV IN............. CBS/10 157,000 140 3 1 29 8/1/05
</TABLE>
- -------------------------
(1) Estimated by Nielsen as of January 1998. Rankings are based on the relative
size of a station's market among the 211 generally recognized DMAs.
(2) Represents the number of television stations designated by Nielsen as
"local" to the DMA, excluding public television stations and stations which
do not meet minimum Nielsen reporting standards (i.e., a weekly cumulative
audience of less than 2.5%) for reporting in the Sunday through Saturday,
9:00 a.m. to midnight time period.
(3) Reflects the station's rank relative to other Reportable Stations based upon
the DMA rating as reported by Nielsen from 9:00 a.m. to midnight, Sunday
through Saturday during February 1998.
(4) Reflects an estimate of the share of DMA households viewing television
received by a local commercial station in comparison to other local
commercial stations in the market as measured from 9:00 a.m. to midnight,
Sunday through Saturday.
Network Affiliation. WFTX-TV is an affiliate of the Fox television network
pursuant to an affiliation agreement which will terminate on August 31, 1998.
The Company has been advised by Fox that Fox is willing to enter into a new
network affiliation agreement on terms and conditions substantially similar to
the Fox Affiliation Agreements for the SF TV Stations. WTHI-TV is a CBS
affiliate under an affiliation agreement extending through December 2005,
subject to earlier termination in certain instances, including transfer of
control of the affiliated station's FCC licenses. The Company has received
assurances from CBS that the Company's purchase of WTHI-TV will not result in
termination of the station's affiliation agreement. Under the terms of this
agreement, CBS makes available network programming which the station may accept
or reject. In consideration of network programming accepted and broadcast by the
station, CBS pays the station cash compensation calculated under a formula which
is a function of several factors, including the day and time of the broadcast,
the length of the program and the amount of the network-inserted commercials
during the program.
Wabash Valley Radio Stations. The three radio stations included in the
Wabash Valley Acquisition are WTHI-FM, WTHI-AM and WWVR-FM in Terre Haute,
Indiana. WTHI-FM currently operates in a Country format and was the number one
station in the Terre Haute market, according to the Fall 1997 Ratings published
by Arbitron (the "Fall 1997 Arbitron Survey"), which is the most recent ratings
information available for this market. WTHI-AM currently operates in a Talk
format and was tied for the number eight station overall in the Terre Haute
market according to the Fall 1997 Arbitron Survey. The combined broadcast cash
flow for WTHI-FM and WTHI-AM was approximately $555,000 in 1997. WWVR-FM (which
is now in the process of being acquired by the seller under the Wabash Valley
Acquisition agreement) currently operates in a Religious format and was the
number seven station overall in the Terre Haute market according to the Fall
1997 Arbitron Survey. The Company does not expect WWVR-FM to have a material
effect on the Company's broadcast cash flow or net income in the near term. The
Company's ownership of these Terre Haute radio stations together with television
station WTHI-TV, will require a waiver of the FCC's multiple ownership rules.
The Company has applied for the waiver, but if not granted by the FCC, the
Company may be required to divest its ownership of one or more of the Terre
Haute radio stations. Terre Haute ranks 172nd by radio advertising revenue
according to Duncan's Radio Market Guide (1998 ed.).
NEW TELEVISION MANAGEMENT STRUCTURE
The Company plans to create a separate television division to manage the SF
TV Stations and the Wabash Valley TV Stations. The Company has entered into a
letter of intent with Greg Nathanson to manage
19
<PAGE> 21
the Company's television division. Mr. Nathanson has nearly 30 years of
television broadcasting experience and is currently the President of Programming
and Development for Twentieth Television. Previously, he has served as President
of Fox Television Stations, where he oversaw the operation of Fox Television's
owned and operated stations in seven cities, as Vice President of Prime Time
Scheduling for ABC Entertainment, as Senior Vice President of Programming at
Showtime, where he was responsible for the acquisition and scheduling of films
and the development and production of original programs, and as Vice President
of Programming for Premier, a pay television network. He has also served at
various times as the General Manager and as Vice President of Programming for
various television stations.
WQCD ACQUISITION
On May 15, 1997, the Company entered into an agreement to acquire radio
station WQCD-FM in New York City. Starting in July 1997 and until the purchase
of the station is completed, the Company has operated and will continue to
operate the station pursuant to a time brokerage agreement under which the
Company pays the current owner a monthly fee of approximately $700,000. As a
result, the operating results of WQCD-FM are included in the Company's operating
results beginning July 1, 1997. Under the acquisition agreement, the current
owner had the option to require the Company to purchase the station, which it
exercised in December 1997. The current WQCD-FM owner also exercised its right
under the agreement to require the Company to purchase certain TV stations that
are to be transferred by the Company to the current WQCD-FM owner in exchange
for WQCD-FM. The purchase price for the WQCD Acquisition will be approximately
$141 million after adjustments. The Company anticipates that it will complete
the acquisition in mid-1998. There can be no assurance, however, with respect to
the timing or completion of the WQCD Acquisition, which is subject to certain
conditions, including the concurrent acquisition and exchange of the TV stations
specified by the current WQCD-FM owner and obtaining the necessary regulatory
approvals.
INTERNATIONAL BROADCASTING OPERATIONS
In November 1997, Radio Hungaria Co. Ltd., d/b/a Slager Radio, a Hungarian
subsidiary in which the Company owns a 54% interest, was awarded a license to
operate a national radio station in Hungary. The cost of the license was
approximately $19.2 million, of which approximately $7.3 million had been paid
as of February 28, 1998. The license has an initial term of seven years and may
be renewed at the Hungarian radio authority's discretion for an additional five
years subject to payment of a renewal fee to be negotiated. Slager Radio began
broadcasting on February 16, 1998. The programming, based on market research,
consists primarily of hit music from the 1960's and 1970's, together with news
and public affairs programming. Gallup Research Ratings for March 1998, the
first full month of the station's operation, indicate that Slager Radio reaches
more than 21% of the Hungarian population daily, which is comparable to other
major Hungarian radio networks and stations. A second and more widely used
ratings service, Szonda Ipsos, showed similar results. Based upon a ratings
survey by Szonda Ipsos during the end of the fifth week and the beginning of the
sixth week Slager Radio was on the air, the station already ranked second among
all stations listed with a 21% daily national cumulative rating among all
persons 15 years of age and older. Management of the Company believes that these
initial audience ratings will contribute to advertiser acceptance of the
station.
ACQUISITION OF TEXAS MONTHLY MAGAZINE
The Company acquired Texas Monthly magazine in February 1998. The
critically acclaimed magazine, which has received eight National Magazine
Awards, has a paid monthly circulation of approximately 300,000 and is believed
by the Company to have a monthly readership of more than 2,436,000. It marked
its 25th anniversary with the publication of the February 1998 issue, which set
a single issue advertising record. The Company plans to increase Texas Monthly's
operating efficiencies while leaving the highly regarded editorial product
intact.
NEW CREDIT FACILITY
The Company is negotiating and anticipates receiving a commitment from TD
Securities (USA) Inc., First Union Capital Markets and BankBoston, N.A.
(together with any additional lending institutions which may later provide a
portion of the credit, the "Lenders") for the $750 million New Credit Facility,
which may
20
<PAGE> 22
be increased up to $1.0 billion with the consent of the Lenders. The New Credit
Facility consists of a $150 million senior secured 8-year revolving credit
facility, a $250 million senior secured 8-year amortizing term loan, a $250
million 8.5-year amortizing term loan and a $100 million 8-year senior secured
acquisition revolving credit/term loan facility. The acquisition facility
commitment will terminate and convert to a term loan one year after closing of
the New Credit Facility. The New Credit Facility, which is expected to close in
mid-1998, will replace the $500 million Existing Credit Facility.
Amounts borrowed under the New Credit Facility are expected to bear
interest, at the option of the Company, at a rate equal to the London Interbank
Offered Rate ("LIBOR") or a "base rate" equal to the higher of the Federal Funds
rate or the prime rate, plus a margin. The commitments under the 8-year
revolving credit facility, 8-year term loan and acquisition facility will be
subject to scheduled annual reductions ranging from 10.0% to 22.5% during the
period from 2001 to 2006, and additional reductions from certain sources such as
the net proceeds of asset sales.
The New Credit Facility will contain various financial and operating
covenants and other restrictions and will be secured by a first priority
security interest in substantially all of the Company's and its subsidiaries'
tangible and intangible assets. The Lenders' obligation to fund under the New
Credit Facility will be subject to various conditions, including completion of
the Offering, completion of loan documentation acceptable to the Lenders, and
other customary conditions for similar lines of credit.
PROPOSED NAME CHANGE
Consistent with diversification of the Company's businesses, its Board of
Directors recently proposed to the Company's shareholders that the name of the
Company be changed to "Emmis Communications Corporation." The Company's
shareholders will vote on the proposed name change at the annual shareholders'
meeting scheduled for June 23, 1998, and the Company expects that the name
change will become effective sometime in mid-1998.
RECENT OPERATING RESULTS
Net broadcasting revenue for the SF TV Stations was $11,819,000 for the
three months ended March 29, 1998 compared to $11,820,000 for the same period in
1997. Although net broadcasting revenues remained relatively consistent with the
same period in the prior year, increases in Green Bay and Mobile were offset by
decreases in net broadcasting revenue in New Orleans and Honolulu. According to
current station management, the decrease in net broadcasting revenues in New
Orleans and Honolulu was primarily due to a decrease in national sales in the
New Orleans market and a softening of economic conditions in Hawaii. Broadcast
operating expenses were $9,134,000 for the three months ended March 29, 1998
compared to $9,083,000 for the same period in 1997. Program license rights
payments increased to $1,548,000 for the three months ended March 29, 1998 from
$653,000 for the same period in 1997 primarily, according to current station
management, as a result of the addition of football specialty programming at the
New Orleans station and planned additions to program inventory. Broadcast cash
flow decreased to $1,137,000 for the three months ended March 29, 1998 from
$2,084,000 for the same period in 1997 as a consequence of budgeted-for
increases in program license rights payments.
Net broadcasting revenue for the Wabash Valley TV Stations increased to
$4,382,000 for the three months ended March 31, 1998 from $4,255,000 for the
same period in 1997, according to current station management, as a result of
improved market conditions and improved station performance in Ft. Myers.
Broadcast operating expenses increased to $2,920,000 for the three months ended
March 31, 1998 from $2,619,000 for the same period in 1997 primarily, according
to current station management, as a result of enhancements made to the
production of news in Ft. Myers and the adoption of a management incentive plan
by the current owners. Program license rights payments were $411,000 for the
three months ended March 31, 1998 compared to $427,000 for the same period in
1997 and broadcast cash flow decreased to $1,051,000 for the three months ended
March 31, 1998 from $1,209,000 for the same period in 1997 as a result of the
increase in broadcast operating expenses in excess of the increase in net
broadcasting revenue.
21
<PAGE> 23
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Class A
Common Stock offered hereby (after Offering expenses of approximately $1.6
million) are expected to be approximately $158.0 million (approximately $181.9
million if the U. S. Underwriters' over-allotment option is exercised in full).
The Company currently intends to use all of such net proceeds to partially repay
amounts outstanding under the Existing Credit Facility (approximately $257
million as of May 28, 1998) and, together with borrowings under the New Credit
Facility, to fund the Acquisition Transactions and New Credit Facility and
acquisition-related expenses. Borrowings under the Existing Credit Facility bear
interest at a floating rate, which averaged 6.60% during the year ended February
28, 1998.
The following table summarizes the estimated sources and uses of funds
assuming consummation of the Offering and the Acquisition Transactions and
borrowings under the New Credit Facility necessary to consummate the Acquisition
Transactions.
<TABLE>
<CAPTION>
AMOUNT
------
(IN THOUSANDS)
<S> <C>
Sources:
Net proceeds to the Company from the Class A Common Stock
Offering (after Offering expenses of approximately $1.6
million)............................................... $158,000
Borrowings under New Credit Facility...................... 605,000
--------
Total sources.......................................... $763,000
========
Uses:
Repayment of Existing Credit Facility..................... $215,000
WQCD Acquisition.......................................... 141,000
SF Acquisition............................................ 309,500(1)
Wabash Valley Acquisition................................. 91,000
New Credit Facility expenses.............................. 6,500
--------
Total uses............................................. $763,000
========
</TABLE>
- -------------------------
(1) This assumes the entire purchase price for the SF Acquisition is paid in
cash. See "Recent Developments -- SF Acquisition."
22
<PAGE> 24
PRICE RANGE OF CLASS A COMMON STOCK AND DIVIDENDS
The Class A Common Stock is traded on The NASDAQ National Market under the
symbol EMMS. The following table sets forth the high and low sale prices of the
Class A Common Stock for the periods indicated.
<TABLE>
<CAPTION>
PRICES
PER SHARE
------------------
QUARTERLY PERIOD HIGH LOW
---------------- ---- ---
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED FEBRUARY 28, 1997
First Quarter............................................. $46 3/4 $35
Second Quarter............................................ 52 1/2 41 1/4
Third Quarter............................................. 53 1/2 31 3/4
Fourth Quarter............................................ 39 1/2 30
FISCAL YEAR ENDED FEBRUARY 28, 1998
First Quarter............................................. 39 1/4 33 3/4
Second Quarter............................................ 49 3/4 36 1/2
Third Quarter............................................. 47 7/8 43 1/4
Fourth Quarter............................................ 49 1/2 44
FISCAL YEAR ENDED FEBRUARY 28, 1999
First Quarter (through May 28, 1998)...................... 57 1/8 43
</TABLE>
The last reported sale price of the Class A Common Stock on The NASDAQ
National Market on May 28, 1998 was $43 1/8 per share. As of May 28, 1998, there
were 623 registered holders of Class A Common Stock.
The Company has followed a policy of retaining earnings for use in its
business rather than paying any dividends, has not paid dividends and does not
anticipate paying any dividends on shares of its Common Stock in the foreseeable
future. Under the Existing Credit Facility, the Company is restricted in its
ability to pay cash dividends on its Common Stock.
23
<PAGE> 25
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
February 28, 1998 on an actual basis and on a pro forma basis as adjusted giving
effect to (i) the Offering and the costs incurred in connection with entering
into the New Credit Facility, (ii) the WQCD Acquisition, (iii) the SF
Acquisition and (iv) the Wabash Valley Acquisition, as if such transactions had
occurred on February 28, 1998. The following table should be read in conjunction
with the Company's Consolidated Financial Statements and the notes thereto
incorporated by reference herein.
<TABLE>
<CAPTION>
FEBRUARY 28, 1998
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities(1)............ $ 51 $ 51
======== ========
Long-term debt, excluding current maturities:
Credit facility........................................... $215,000 $605,000
Capital leases............................................ 127 127
Hungarian radio debt(2)................................... 16,244 16,244
-------- --------
Total long-term debt, excluding current maturities... 231,371 621,371
-------- --------
Shareholders' equity:
Class A Common Stock, $.01 par value, authorized
34,000,000 shares, issued and outstanding 8,430,660
shares, 12,430,660 shares as adjusted.................. 84 124
Class B Common Stock, $.01 par value, authorized 6,000,000
shares, issued and outstanding 2,560,894 shares........ 26 26
Additional paid-in capital................................ 72,753 230,713
Accumulated deficit....................................... (27,653) (29,937)
-------- --------
Total shareholders' equity........................... 45,210 200,926
-------- --------
Total capitalization.............................. $276,581 $822,297
======== ========
</TABLE>
- -------------------------
(1) Includes current portion of capital leases.
(2) Includes license fee obligation to the Hungarian government and bonds and
notes payable to minority shareholders of the Company's Hungarian
subsidiary.
24
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The selected consolidated financial and other data has been derived, except
as otherwise noted, from the consolidated financial statements of the Company
for the years ended February (29) 28, 1994, 1995, 1996, 1997 and 1998 audited by
Arthur Andersen LLP. The unaudited pro forma as adjusted operating and other
data reflects adjustments to the condensed consolidated historical operating
data of the Company to give effect to (i) the Consummated Acquisitions and the
disposition of WALC-AM, all of which occurred during the year ended February 28,
1998, (ii) the Offering and the New Credit Facility, (iii) the WQCD Acquisition,
(iv) the SF Acquisition, and (v) the Wabash Valley Acquisition, as if such
transactions had occurred at the beginning of the year presented. The unaudited
pro forma as adjusted balance sheet data reflects (i) the Offering and the costs
incurred in connection with entering into the New Credit Facility, (ii) the WQCD
Acquisition, (iii) the SF Acquisition and (iv) the Wabash Valley Acquisition, as
if such transactions had occurred on February 28, 1998. The selected
consolidated financial and other data presented below should be read in
conjunction with, and is qualified in its entirety by reference to, the
Company's consolidated financial statements for the years ended February (29)
28, 1996, 1997, and 1998 (the "Consolidated Financial Statements") and related
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," incorporated by reference in this Prospectus, and to the
"Unaudited Pro Forma Condensed Consolidated Financial Information" and notes
thereto contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY (29) 28,
----------------------------------------------------------------------------
PRO FORMA
AS ADJUSTED
1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net broadcasting revenues..................... $ 50,311 $ 66,815 $ 99,830 $ 103,292 $ 125,855 $ 204,675
Broadcasting operating expenses............... 29,368 38,794 53,948 52,839 67,646 118,618
Publication and other revenue, net of
operating expenses.......................... 657 593 896 834 1,204 3,776
International business development expenses... -- 313 1,264 1,164 999 999
Corporate expenses............................ 2,765 3,700 4,419 5,929 6,846 9,286
Time brokerage fee............................ -- -- -- -- 5,667 --
Amortization of television program rights..... -- -- -- -- -- 5,901
Depreciation and amortization................. 2,812 3,827 5,677 5,481 7,536 30,434
Noncash compensation.......................... 1,725 600 3,667 3,465 4,882 4,882
Operating income.............................. 14,298 20,174 31,751 35,248 33,483 38,331
Interest expense(1)........................... 13,588 7,849 13,540 9,633 13,772 49,289
Loss on donation of radio station............. -- -- -- -- 4,833 --
Other income (expense), net................... (367) (170) (303) 325 6 61
Income (loss) before income taxes and
extraordinary item.......................... 343 12,155 17,908 25,940 14,884 (10,897)
Income (loss) before extraordinary item....... (957) 7,627 10,308 15,440 8,984 (6,484)
Net income (loss)............................. $ (4,365) $ 7,627 $ 10,308 $ 15,440 $ 8,984 $ (6,484)
Basic net income (loss) per share............. (2) $ .72 $ .96 $ 1.41 $ .82 $ (.44)
Diluted net income (loss) per share........... (2) $ .70 $ .93 $ 1.37 $ .79 $ (.44)
Weighted average common shares outstanding --
Basic....................................... 10,557,328 10,690,677 10,942,996 10,903,333 14,903,333
Weighted average common shares outstanding --
Diluted..................................... 10,831,695 11,083,504 11,291,225 11,377,765 14,903,333
OTHER DATA:
Broadcast cash flow(3).......................... 20,943 28,021 45,882 50,453 58,209 81,422
Broadcast cash flow margin(4)................... 41.6% 41.9% 46.0% 48.8% 46.3% 39.8%
EBITDA(5)....................................... 18,836 24,601 41,095 44,194 51,568 74,913
Capital expenditures(6)......................... 659 1,081 1,396 7,559 16,991 20,876
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY (29) 28,
----------------------------------------------------------------------------
PRO FORMA
AS ADJUSTED
1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 1,607 $ 3,205 $ 1,218 $ 1,191 $ 5,785 $ 3,364
Working capital................................. 6,210 10,088 14,761 15,463 23,083 25,028
Net intangible assets(7)........................ 30,751 139,729 135,830 131,743 234,558 789,424
Total assets.................................... 57,849 183,441 176,566 189,716 333,388 939,083
Total debt, including current portion........... 92,345 152,322 124,257 115,172 231,422 621,422
Redeemable preferred stock...................... 11,250 -- -- -- -- --
Shareholders' equity (deficit).................. (54,229) (2,661) 13,884 34,422 45,210 200,926
</TABLE>
(footnotes appear on following page)
25
<PAGE> 27
(footnotes from previous page)
- -------------------------
(1) Includes debt issuance cost and interest rate cap amortization of $3,263,
$660, $1,742, $1,071 and $2,183 for the years ended February (29) 28, 1994
through 1998, respectively, and $1,253 on a pro forma basis for the year
ended February 28, 1998.
(2) On March 1, 1994, the Company closed on its initial public offering of its
Class A Common Stock. Accordingly, basic and diluted net income per share
information is not applicable for the year ended February 24, 1994.
(3) The performance of a broadcast group, such as Emmis, is customarily measured
by the ability of its stations to generate broadcast cash flow. Broadcast
cash flow is not a measure of liquidity or of performance calculated in
accordance with generally accepted accounting principles, and should be
viewed as a supplement to and not as a substitute for the Company's results
of operations presented on the basis of generally accepted accounting
principles. The Company believes that broadcast cash flow is useful because
it is generally recognized by the broadcasting industry as a measure of
performance and is used by analysts who report on the performance of
broadcasting companies. However, broadcast cash flow is not a standardized
measure and may be calculated in a number of ways. Emmis defines broadcast
cash flow as advertising revenues net of agency commissions, less
broadcasting operating expenses and cash paid for television program rights.
The primary source of advertising revenues is the sale of advertising time
to local and national advertisers. The most significant broadcasting
operating expenses are employee salaries and commissions, costs associated
with programming, advertising and promotion, and station general and
administrative costs.
(4) Broadcast cash flow margin is defined as broadcast cash flow divided by net
broadcasting revenues.
(5) EBITDA is defined as broadcast cash flow plus publication and other revenue,
net of operating expenses, less international business development expenses
and corporate expenses.
(6) Capital expenditures for the year ended February 28, 1998 includes progress
payments totaling $11,775 in connection with the construction of the
Company's new Indianapolis office and studio facility.
(7) Net intangible assets consist primarily of FCC licenses and excess of cost
over fair value of net assets of purchased businesses, net of accumulated
amortization.
26
<PAGE> 28
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information reflects the unaudited pro forma condensed consolidated balance
sheet of the Company as of February 28, 1998 and the unaudited pro forma
condensed consolidated results of operations of the Company for the year ended
February 28, 1998. The unaudited pro forma condensed consolidated balance sheet
reflects (i) the Offering and the costs incurred in connection with entering
into the New Credit Facility, (ii) the WQCD Acquisition, (iii) the SF
Acquisition and (iv) the Wabash Valley Acquisition, as if such transactions had
occurred on February 28, 1998. The unaudited pro forma condensed consolidated
statement of operations reflects adjustments to the condensed consolidated
historical operating data of the Company to give effect to (i) the Consummated
Acquisitions and the disposition of WALC-AM, all of which occurred during the
year ended February 28, 1998, (ii) the New Credit Facility, and the Offering,
(iii) the WQCD Acquisition, (iv) the SF Acquisition, and (v) the Wabash Valley
Acquisition, as if such transactions had occurred at the beginning of the year
presented. Except as otherwise noted, the unaudited pro forma condensed
consolidated financial information is based on historical consolidated financial
statements of the Company and the entities from which assets were acquired or
are expected to be acquired in connection with certain of the transactions
referred to above, and should be read in conjunction with the Company's
consolidated financial statements for the year ended February 28, 1998, the
financial statements for Tribune New York Radio, Inc. (WQCD-FM) for the year
ended December 28, 1997, and the combined financial statements of SF
Broadcasting for the year ended December 28, 1997, each of which has been
incorporated by reference in this Prospectus. In the opinion of management, all
adjustments necessary to fairly present pro forma information have been made.
The unaudited pro forma information is presented for illustrative purposes
only and is not indicative of the operating results or financial position that
would have occurred if the transactions referred to above had been consummated
on the dates indicated, nor is it indicative of future operating results or
financial position if the pending transactions referred to above were completed.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
FEBRUARY 28, 1998
------------------------------------------------------------------------------------------
NEW CREDIT WABASH
FACILITY WQCD SF VALLEY
ACTUAL AND OFFERING ACQUISITION ACQUISITION ACQUISITION PRO FORMA
------ ------------ ----------- ----------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents.......... $ 5,785 $ (2,421)(1) $ -- $ -- $ -- $ 3,364
Accounts receivable, net........... 32,120 -- -- -- -- 32,120
Prepaid expenses................... 4,900 -- -- -- -- 4,900
Income tax refunds receivable...... 4,968 1,522(2) -- -- -- 6,490
Other.............................. 3,379 -- -- 5,781(5) 1,642(5) 10,802
-------- --------- -------- -------- ------- --------
Total current assets........... 51,152 (899) -- 5,781 1,642 57,676
Property and equipment, net.......... 33,446 -- 5,925(4) 18,386(5) 14,090(5) 71,847
Intangible assets, net............... 234,558 -- 197,475(4) 283,878(5) 73,513(5) 789,424
Other assets, net.................... 14,232 6,500(2) -- 1,455(5) 1,755(5) 20,136
-------- -------- -------- ------- --------
(3,806)(2)
---------
Total assets................... $333,388 $ 1,795 $203,400 $309,500 $91,000 $939,083
======== ========= ======== ======== ======= ========
Current Liabilities
Current maturities of long-term
debt............................. $ 51 $ -- $ -- $ -- $ -- $ 51
Accounts payable................... 13,140 -- -- -- 13,140
Accrued salaries and commissions... 2,893 -- -- -- -- 2,893
Accrued interest................... 2,421 (2,421)(1) -- -- -- --
Deferred revenue................... 7,985 -- -- -- -- 7,985
Other current liabilities.......... 1,579 -- 7,000(4) -- -- 8,579
-------- --------- -------- -------- ------- --------
Total current liabilities...... 28,069 (2,421) 7,000 -- -- 32,648
Long-term debt, net of current
maturities......................... 231,371 (151,500)(3) 141,000(4) 309,500(5) 91,000(5) 621,371
Other noncurrent liabilities......... 604 -- -- -- -- 604
Minority interest.................... 1,875 -- -- -- -- 1,875
Deferred income taxes................ 26,259 -- 55,400(4) -- -- 81,659
-------- --------- -------- -------- ------- --------
Total liabilities.............. 288,178 (153,921) 203,400 309,500 91,000 738,157
-------- --------- -------- -------- ------- --------
Shareholders' Equity
Class A Common Stock............... 84 40(3) -- -- -- 124
Class B Common Stock............... 26 -- -- -- -- 26
Additional paid-in capital......... 72,753 157,960(3) -- -- -- 230,713
Accumulated deficit................ (27,653) (2,284)(2) -- -- -- (29,937)
-------- --------- -------- -------- ------- --------
Total shareholders' equity..... 45,210 155,716 -- -- 200,926
-------- --------- -------- -------- ------- --------
Total liabilities and
shareholders' equity......... $333,388 $ 1,795 $203,400 $309,500 $91,000 $939,083
======== ========= ======== ======== ======= ========
</TABLE>
(footnotes appear on following page)
27
<PAGE> 29
(footnotes from previous page)
- -------------------------
(1) Reflects payment of accrued interest for the debt retired.
(2) Reflects (i) write off of deferred debt issuance costs due to entering into
the New Credit Facility ($3,806) and the tax effects thereof ($1,522) and
(ii) deferral of estimated debt issuance costs incurred in connection with
entering into the New Credit Facility ($6,500).
(3) Reflects application of the $158,000 net proceeds from the Offering
resulting from the issuance of 4.0 million shares of Class A Common Stock at
$42.00 per share to partially repay ($151,500) amounts outstanding under the
Existing Credit Facility and to pay costs associated with the New Credit
Facility ($6,500).
(4) Reflects the WQCD Acquisition for an assumed cash purchase price of $141.0
million plus $7.0 million of net current liabilities assumed and $55.4
million of deferred tax liabilities resulting from the transaction. The
funding of the purchase price reflects $141.0 million in borrowings under
the New Credit Facility. Acquisition costs have been allocated to property
and equipment at 100% of predecessor company's carrying value at December
28, 1997. The remaining residual purchase price is allocated to broadcast
licenses.
(5) Reflects the SF Acquisition for a cash purchase price of $307.0 million plus
estimated acquisition-related costs of $2.5 million and the Wabash Valley
Acquisition for a cash purchase price of $90.0 million plus estimated
acquisition-related costs of $1.0 million. Assumes the acquisition cost was
funded 100% by borrowings under the New Credit Facility. Acquisition costs
are allocated to property and equipment at 90% of the predecessor company's
historical cost at December 28, 1997. Acquisition cost allocated to program
rights, included in other current assets and other noncurrent assets, is
reflected at the predecessor company's carrying value at December 28, 1997.
The remaining residual purchase price is allocated to broadcast licenses.
28
<PAGE> 30
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28, 1998
-----------------------------------------------------------
NEW CREDIT
CONSUMMATED FACILITY
ACQUISITIONS/ AND WQCD
ACTUAL DISPOSITION OFFERING ACQUISITION
------ ------------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net broadcasting revenues.... $ 125,855 $ 1,975(3) $ -- $ 6,773(7)
Broadcasting operating
expenses................... 67,646 1,430(3) -- 3,570(7)
Publication and other
revenue, net of operating
expenses................... 1,204 2,572(3) -- --
International business
development expenses....... 999 -- -- --
Corporate expenses........... 6,846 -- -- --
Time brokerage fee........... 5,667 -- -- (5,667)(7)
Amortization of television
program rights............. -- -- -- --
Depreciation and
amortization............... 7,536 3,540(3) -- 5,783(8)
Noncash compensation......... 4,882 -- -- --
---------- ------- --------- --------
Operating income (loss)...... 33,483 (423) -- 3,087
---------- ------- --------- --------
Other income (expense):
Interest expense(1)........ (13,772) (3,713)(3) 12,434(4) (11,193)(9)
(1,253)(5)
Loss on donation of radio
station.................. (4,833) 4,833(3) -- --
Other income, net.......... 6 -- -- --
---------- ------- --------- --------
Total other income
(expense).............. (18,599) 1,120 11,181 (11,193)
---------- ------- --------- --------
Income (loss) before income
taxes...................... 14,884 697 11,181 (8,106)
Provision (benefit) for
income taxes(2)............ 5,900 279 4,472 (3,242)
---------- ------- --------- --------
Net income (loss)............ $ 8,984 $ 418 $ 6,709 $ (4,864)
========== ======= ========= ========
Basic net income (loss) per
share...................... $ .82
==========
Diluted net income (loss) per
share...................... $ .79
==========
Weighted average common
shares outstanding:
Basic...................... 10,903,333 -- 4,000,000(6) --
Diluted.................... 11,377,765 -- 4,000,000(6) --
OTHER DATA:
Cash paid for television
program rights............. $ -- $ -- $ -- $ --
Broadcast cash flow.......... 58,209 545 -- 3,203
EBITDA....................... 51,568 3,117 -- 3,203
Capital expenditures......... 16,991 227 -- --
<CAPTION>
YEAR ENDED FEBRUARY 28, 1998
--------------------------------------------
WABASH
SF VALLEY
ACQUISITION ACQUISITION PRO FORMA
----------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net broadcasting revenues.... $ 52,934(10) $17,138(13) $ 204,675
Broadcasting operating
expenses................... 35,247(10) 10,725(13) 118,618
Publication and other
revenue, net of operating
expenses................... -- -- 3,776
International business
development expenses....... -- -- 999
Corporate expenses........... 1,940(10) 500(13) 9,286
Time brokerage fee........... -- -- --
Amortization of television
program rights............. 4,199(10) 1,702(13) 5,901
Depreciation and
amortization............... 9,724(11) 3,851(11) 30,434
Noncash compensation......... -- -- 4,882
-------- ------- ----------
Operating income (loss)...... 1,824 360 38,331
-------- ------- ----------
Other income (expense):
Interest expense(1)........ (24,568)(12) (7,224)(14) (49,289)
Loss on donation of radio
station.................. -- -- --
Other income, net.......... 55(10) -- 61
-------- ------- ----------
Total other income
(expense).............. (24,513) (7,224) (49,228)
-------- ------- ----------
Income (loss) before income
taxes...................... (22,689) (6,864) (10,897)
Provision (benefit) for
income taxes(2)............ (9,076) (2,746) (4,413)
-------- ------- ----------
Net income (loss)............ $(13,613) $(4,118) $ (6,484)
======== ======= ==========
Basic net income (loss) per
share...................... $ (.44)
==========
Diluted net income (loss) per
share...................... $ (.44)
==========
Weighted average common
shares outstanding:
Basic...................... -- -- 14,903,333
Diluted.................... -- -- 14,903,333(15)
OTHER DATA:
Cash paid for television
program rights............. $ 3,030 $ 1,605 $ 4,635
Broadcast cash flow.......... 14,657 4,808 81,422
EBITDA....................... 12,717 4,308 74,913
Capital expenditures......... 3,274 384 20,876
</TABLE>
- -------------------------
(1) Reflects pro forma interest expense for the year ended February 28, 1998
resulting from borrowings under the New Credit Facility assuming all
probable acquisitions had occurred as of the beginning of the year and
assuming an interest rate of 7.938%.
(2) Assumes an effective tax rate of approximately 40% on all adjustments.
(3) Includes the Consummated Acquisitions and the disposition of WALC-AM,
assuming the acquisitions and disposition occurred at the beginning of the
year.
(4) Reflects elimination of interest expense and amortization of debt issuance
costs and interest rate caps resulting from repayment of borrowings under
the Existing Credit Facility by application of $151.5 million of the assumed
net proceeds of the Offering and repayment of the remaining borrowings under
the Existing Credit Facility ($63.5 million) by borrowings under the New
Credit Facility.
29
<PAGE> 31
(5) Reflects amortization of debt issuance costs and interest rate caps related
to entering into the New Credit Facility.
(6) Reflects issuance of 4.0 million shares of Class A Common Stock at $42.00
per share resulting from the Offering.
(7) Reflects the historical results of WQCD-FM in New York City for the period
from March 1, 1997 to June 30, 1997. Actual operating results for the period
from July 1, 1997 to February 28, 1998 are reflected in historical
operations because the Company began operating the station on July 1, 1997
under a time brokerage agreement. The time brokerage fees for pro forma
purposes have been eliminated.
(8) Reflects pro forma depreciation of property and equipment and amortization
expense for the year ended February 28, 1998 resulting from the allocation
of the acquisition cost of the station.
(9) Pro forma interest expense reflects the cash purchase price of the radio
station of $141.0 million assuming the purchase price was funded 100% by
borrowings under the New Credit Facility.
(10) Reflects the historical operating results of the SF TV Stations for the
year ended December 28, 1997, exclusive of depreciation and amortization.
(11) Reflects twelve months of pro forma depreciation of property and equipment
and amortization expense resulting from the allocation of the purchase
price of the television stations.
(12) Pro forma interest expense reflects the cash purchase price of the stations
of $307.0 million plus estimated acquisition-related costs of $2.5 million
assuming the acquisition costs were funded 100% by borrowings under the
Credit Facility.
(13) Reflects the historical operating results of the Wabash Valley TV Stations
for the year ended December 28, 1997, exclusive of depreciation and
amortization.
(14) Pro forma interest expense reflects the cash purchase price of the stations
of $90.0 million plus estimated acquisition-related costs of $1.0 million.
(15) Due to net loss, weighted average common shares outstanding for diluted net
income (loss) per share is the same as weighted average common shares
outstanding for basic net income (loss) per share.
30
<PAGE> 32
BUSINESS
The Company is a diversified media company with radio broadcasting and
magazine publishing operations and, following the consummation of two pending
acquisitions, television broadcasting operations. In 1997 the Company ranked as
the eighth largest radio broadcaster in the United States based on total number
of listeners and the ninth largest radio broadcaster in the United States based
on total revenue. The Radio Stations, consisting of eleven FM radio stations and
two AM radio stations owned or operated by the Company in the United States,
serve the nation's three largest radio markets of New York City, Los Angeles and
Chicago, as well as St. Louis and Indianapolis. These markets accounted for
approximately $1.7 billion in radio advertising revenues in calendar year 1997
as reported in Duncan's Radio Market Guide (1998 ed.). The Company has entered
into agreements to purchase the Television Stations, consisting of six
network-affiliated television stations located in New Orleans, Louisiana,
Mobile, Alabama, Green Bay, Wisconsin, Honolulu, Hawaii, Fort Myers, Florida and
Terre Haute, Indiana. All of the Television Stations are VHF stations except the
Fort Myers station, which is a UHF station. The markets served by the Television
Stations accounted for approximately $360 million in television advertising
revenue in calendar year 1997 as reported in the 1998 BIA Report. The Company
expects to complete the purchase of the Television Stations in the second half
of 1998.
The Company also operates a national radio station in Hungary and news and
agriculture information networks in Indiana, publishes Indianapolis Monthly,
Atlanta, Cincinnati and Texas Monthly magazines and engages in various
businesses ancillary to its broadcasting business, such as consulting and
broadcast tower leasing.
Through a combination of acquisitions and internal growth, the Company's
broadcast cash flow has grown from $15.3 million (when the Company owned five
radio stations) in fiscal 1993 to $81.4 million in fiscal 1998 (on a pro forma
basis after giving effect to the Acquisition Transactions) and the radio
stations acquired by the Company during fiscal 1998. The Company has
successfully created top-performing radio stations that are ranked, in terms of
primary demographic target audience share, among the top ten stations in the New
York City, Los Angeles, Chicago, St. Louis and Indianapolis radio markets
according to the Winter 1998 Arbitron Survey published by Arbitron. This
success, along with awards from organizations such as the National Association
of Broadcasters and Billboard and Rolling Stone magazines, has come primarily as
a result of the Company's ability to attract and retain an experienced team of
broadcast professionals who have focused on creating innovative programming and
developing effective marketing and advertising sales programs. In addition, the
Company believes that the location of its Radio Stations in large markets makes
it attractive to radio advertisers and that the diversity of its radio markets
reduces its dependence on any one economic sector or specific advertiser.
The Company's overall strategy is to acquire underdeveloped media
properties in desirable markets and then to create value for the Company's
shareholders by developing those properties to enhance their cash flow. The
Company has successfully implemented this strategy with radio broadcasting
stations and with city magazines. The Company believes that it will be able to
utilize its expertise in broadcast operations, programming and advertising sales
in applying this strategy to the Television Stations which, like the radio
stations previously acquired by the Company, are underdeveloped properties
located in desirable markets, which can benefit from innovative, research-based
programming and the Company's experienced management team. Each of the SF TV
Stations experienced ratings declines following a change in affiliation to the
Fox television network from affiliation with other networks. The Company
believes that the ratings and broadcast cash flow of the Television Stations can
be improved with a more market-focused, research-based programming approach and
other related strategies. See "-- Business Strategy."
Upon consummation of the purchase of the Television Stations, the Company
plans to create a separate television division. The Company has signed a letter
of intent with Greg Nathanson, President of Programming and Development at
Twentieth Television, to manage the Company's television division. See "Recent
Developments -- New Television Management Structure."
31
<PAGE> 33
RADIO STATIONS
The following table sets forth certain information regarding the Radio
Stations operated by the Company and their broadcast markets:
<TABLE>
<CAPTION>
RANKING IN
STATION MARKET STATION PRIMARY PRIMARY
AND RANK BY AUDIENCE DEMOGRAPHIC DEMOGRAPHIC
MARKET REVENUE(1) SHARE(2) TARGET AGES FORMAT TARGET(3)
------- ---------- -------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Los Angeles.............. 1
KPWR-FM................ 4.0 12-24 Dance/Contemporary Hit 1
New York................. 2
WQHT-FM................ 5.5 12-24 Dance/Contemporary Hit 1
WRKS-FM................ 4.2 25-54 Classic Soul/Smooth R&B 5
WQCD-FM(4)............. 3.2 25-54 Contemporary Jazz 6t
Chicago.................. 3
WKQX-FM................ 3.0 18-34 New Rock 4
St. Louis................ 18
KSHE-FM................ 5.0 18-34 Album Oriented Rock 4
WKKX-FM................ 4.2 18-34 Country 5
WALC-FM................ 2.9 18-44 Modern Adult Contemporary 7t
Indianapolis............. 30
WENS-FM................ 5.5 25-54 Adult Contemporary 4
WIBC-AM................ 8.5 35-64 News/Talk 3
WNAP-FM................ 4.7 25-54 Classic Rock 5
WTLC-FM................ 5.5 25-34 Urban Contemporary 2
WTLC-AM................ 1.2 25-54 Solid Gold Soul, Gospel
and Talk 18
</TABLE>
- -------------------------
(1) "Market Rank by Revenue" is the ranking of the market revenue size of the
principal radio market served by the station among all radio markets in the
United States. Market revenue and ranking figures are from Duncan's Radio
Market Guide (1998 ed.). The Company owns a 40% equity interest in the
publisher of Duncan's Radio Market Guide.
(2) "Station Audience Share" is from the Winter 1998 Arbitron Survey. The
generally accepted method of measuring the relative size of a radio
station's audience is by reference to total persons, age 12 and older,
Monday-Sunday, 6 a.m.-Midnight Average Quarter Hour ("AQH") shares as
published by Arbitron. Arbitron periodically samples radio listeners in
defined market areas, principally through the use of diaries returned by
selected listeners. A station's AQH share is a percentage computed by
dividing the average number of persons listening to a particular station for
at least five minutes during an average quarter hour in a given time period
by the average number of such persons for all stations in the market area.
Arbitron compiles ratings data for various demographic groups as well as for
total persons age 12 and older.
(3) "Ranking in Primary Demographic Target" is the ranking of the station among
all radio stations in its market and is based on the station's AQH share in
the primary demographic target according to the Winter 1998 Arbitron Survey.
A "t" indicates the station tied with another station for the stated
ranking.
(4) This station is currently being operated by the Company under a time
brokerage agreement pending its purchase by the Company. See "Recent
Developments -- WQCD Acquisition."
TELEVISION STATIONS
Effective March 30, 1998, the Company entered into a definitive agreement
to acquire the SF TV Stations, consisting of televisions stations WVUE-TV, New
Orleans, Louisiana; WALA-TV, Mobile,
32
<PAGE> 34
Alabama; WLUK-TV, Green Bay, Wisconsin; and KHON-TV, Honolulu, Hawaii, for
approximately $307 million, with $257 million payable in cash at closing, $25
million payable at closing in either cash or Class A Common Stock at the
Company's option, and $25 million with interest at 8% per annum payable one year
after closing in either cash or Class A Common Stock at the Company's option.
The Company currently anticipates that it will pay all of the purchase price in
cash. The following table sets forth certain information regarding the SF TV
Stations and the markets in which they operate:
<TABLE>
<CAPTION>
NUMBER OF STATION LICENSE
TELEVISION METROPOLITAN AFFILIATION/ HOUSEHOLDS DMA STATIONS STATION AUDIENCE EXPIRATION
STATION AREA SERVED CHANNEL IN DMA(1) RANK(1) IN MARKET(2) RANK(3) SHARE(4) DATE
- ---------- ------------ ------------ ---------- ------- ------------ ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WVUE-TV New Orleans, LA Fox/8 623,000 41 6 4 8 6/1/05
WALA-TV Mobile, AL-Pensacola, FL Fox/10 450,000 62 5 3 10 4/1/05
WLUK-TV(5) Green Bay, WI Fox/11 381,000 70 5 4 9 12/1/05
KHON-TV(5) Honolulu, HI Fox/2 380,000 71 6 2 15 2/1/99
</TABLE>
- -------------------------
(1) Estimated by the Nielsen as of January 1998. Rankings are based on the
relative size of a station's market among the 211 generally recognized DMAs.
(2) Represents the number of television stations designated by Nielsen as
'local' to the DMA, excluding public television stations and stations which
do not meet minimum Nielsen reporting standards (i.e., a weekly cumulative
audience of less than 2.5%) for reporting in the Sunday through Saturday,
9:00 a.m. to midnight time period.
(3) Reflects the station's rank relative to other Reportable Stations based upon
the DMA rating as reported by Nielsen from 9:00 a.m. to midnight, Sunday
through Saturday during February 1998.
(4) Reflects an estimate of the share of DMA households viewing television
received by a local commercial station in comparison to other local
commercial stations in the market as measured from 9:00 a.m. to midnight,
Sunday through Saturday.
(5) As part of the SF Acquisition, the Company will also acquire KAII-TV and
KHAW-TV, which operate as satellite stations of KHON-TV and primarily
re-broadcast the signal of KHON-TV. The stations are considered one station
for FCC multiple ownership purposes. Low power television translators W40AN
and K55D2 retransmit stations WLUK-TV and KHON-TV, respectively.
Effective March 20, 1998, the Company entered into a definitive agreement
to acquire the Wabash Valley TV Stations, consisting of television stations
WFTX-TV, Fort Myers, Florida and WTHI-TV, Terre Haute, Indiana, as well as three
radio stations, for approximately $90 million in cash. The following table sets
forth certain information regarding the Wabash Valley TV Stations and the
markets in which they operate:
<TABLE>
<CAPTION>
NUMBER OF STATION LICENSE
TELEVISION METROPOLITAN AFFILIATION/ HOUSEHOLDS DMA STATIONS STATION AUDIENCE EXPIRATION
STATION AREA SERVED CHANNEL IN DMA(1) RANK(1) IN MARKET(2) RANK(3) SHARE(4) DATE
- ---------- ------------ ------------ ---------- ------- ------------ ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WFTX-TV Fort Myers, FL Fox/36 320,000 83 5 4 7 2/1/05
WTHI-TV Terre Haute, IN CBS/10 157,000 140 3 1 29 8/1/05
</TABLE>
- -------------------------
(1) Estimated by Nielsen as of January 1998. Rankings are based on the relative
size of a station's market among the 211 generally recognized DMAs.
(2) Represents the number of television stations designated by Nielsen as
"local" to the DMA, excluding public television stations and stations which
do not meet minimum Nielsen reporting standards (i.e., a weekly cumulative
audience of less than 2.5%) for reporting in the Sunday through Saturday,
9:00 a.m. to midnight time period.
(3) Reflects the station's rank relative to other Reportable Stations based upon
the DMA rating as reported by Nielsen from 9:00 a.m. to midnight, Sunday
through Saturday during February 1998.
(4) Reflects an estimate of the share of DMA households viewing television
received by a local commercial station in comparison to other local
commercial stations in the market as measured from 9:00 a.m. to midnight,
Sunday through Saturday.
33
<PAGE> 35
The three radio stations included in the Wabash Valley Acquisition are
WTHI-FM, WTHI-AM and WWVR-FM in Terre Haute, Indiana. WTHI-FM currently operates
in a Country format and was the number one station in the Terre Haute market,
according to the Fall 1997 Arbitron Survey, which is the most recent ratings
information available for this market. WTHI-AM currently operates in a Talk
format and was tied for the number eight station overall in the Terre Haute
market according to the Fall 1997 Arbitron Survey. WWVR-FM (which is now in the
process of being acquired by the seller under the Wabash Valley Acquisition
agreement currently operates in a Religious format and was the number seven
station overall in the Terre Haute market according to the Fall 1997 Arbitron
Survey. The Company's ownership of these Terre Haute radio stations, together
with television station WTHI-TV, will require a waiver of the FCC's multiple
ownership rules. The Company has applied for the waiver, but if not granted by
the FCC, the Company may be required to divest its ownership of one or more of
the Terre Haute radio stations. Terre Haute ranks 172nd by radio advertising
revenue according to Duncan's Radio Market Guide (1998 ed.).
BUSINESS STRATEGY
The Company is committed to maintaining its leadership positions in
broadcasting, enhancing the performance of its broadcast properties, and
distinguishing itself through the quality of its operations. The Company intends
to selectively grow through acquisition. The Company has a successful track
record of acquiring underperforming radio stations in attractive markets and
improving their ratings, revenues and broadcast cash flow by utilizing its
programming and marketing skills. The Company believes that its strategy of
acquiring underperforming radio broadcast properties and improving their
operational and financial performance is also applicable to television broadcast
properties.
RADIO BROADCASTING STRATEGY. The key components of the Company's radio
broadcasting strategy include the following:
Pursuit of Strategic Acquisitions. The Company believes that continued
consolidation in the broadcasting industry will result in attractive
acquisition opportunities as the number of potential buyers for radio
assets declines. The Company also expects additional stations to become
available as larger consolidators either sell broadcasting assets or are
not able to bid for properties due to in-market ownership limitations. The
Company will consider acquisitions of individual radio stations or groups
of radio stations in new markets where it expects that it can ultimately
achieve a leadership position. In addition, the Company intends to pursue
acquisitions of radio stations in those of its current markets where it
believes increases in broadcast cash flow are attainable. Generally, the
Company has targeted markets that feature both large revenue pools and a
relatively small number of stations with competitive signals, a combination
which allows the Company greater operating leverage to achieve high
margins. The Company believes that historically under-serviced markets,
such as the Indianapolis radio market, provide vehicles for the Company's
sustained future growth. In analyzing potential acquisitions in new
markets, the Company generally considers (i) the amount of money generated
through radio advertising each year in the relevant market and the growth
rate for this pool of revenue, (ii) the number of competitive stations in
the market, including whether there is a niche or whether one of the
competitors has a perceived vulnerability, (iii) whether the station
proposed to be acquired has a competitive signal, (iv) whether value can be
achieved through ownership of multiple stations in that market, and (v) the
minimum level of performance which can be expected from the station under
the Company's management.
Strategic Grouping of Stations. Emmis organizes its operations within each
market to optimize operational performance and best position the properties
within that market to establish and maintain leadership positions.
Management concentrates on providing a focused programming format tailored
to its advertisers and the audiences they seek. This focus has resulted in
Emmis operating more than one radio station in certain markets so that
complementary programming formats may be offered to advertisers. In other
markets, management considers various opportunities to increase the number
of radio stations owned, and will only acquire other radio stations if they
are deemed appropriate for Emmis and its goals in that market at that time.
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<PAGE> 36
Innovative Programming. Historically, Emmis has been able to improve the
ratings, revenue and cash flow of its developing properties with increased
marketing and innovative programming. For example, in New York City Emmis
acquired WRKS-FM in 1994, the direct competitor of WQHT-FM, a station it
already owned. By changing the format of WRKS-FM to appeal to an older
demographic target and refocusing WQHT-FM to target the younger end of the
Contemporary Hit spectrum, the Company allowed the stations to complement
one another, captured a larger audience share and increased the combined
cash flow of the stations by approximately 133% over the three years ended
February 28, 1997. The Company expects its acquisition of WQCD-FM to round
out this group of stations in New York City by adding a third complementary
music format. The Company believes it can achieve similar success with its
television properties.
Focused Marketing Strategy. Emmis designs its local and national sales
efforts based on advertiser demand and the competitive formats within each
market. Since radio advertising revenues have generally grown at a more
rapid rate than total advertising sales, the Company has tailored its
programming in each market to appeal to specific demographic groups. For
example, in 1984 Emmis took over KPWR-FM in Los Angeles and changed its
format from adult contemporary to the nation's first Rhythmic Top 40's
station. This format appealed directly to the Latino population (the
fastest-growing segment of the population in Los Angeles) and made the
station an overnight success. KPWR-FM has been the number one station for
12 to 24 year old listeners for the past 10 years.
Entrepreneurial Management Approach. Each of the Company's stations is
managed by a team of experienced broadcasters who understand the musical
tastes, demographics and competitive opportunities of their particular
market. The Company uses an entrepreneurial management approach involving
decentralized station operations by local management which oversees and
controls station spending, long-range planning, company policies and
resource allocation at its individual station and is rewarded based on that
station's performance. In addition, the Company encourages its managers and
employees to own a stake in the Company, and over 79% of all full-time
employees own Emmis shares (or options to purchase shares), except for
full-time employees hired in connection with acquisitions since October
1997. The Company believes that this entrepreneurial management approach
has given Emmis a distinctive corporate culture, making it a highly
desirable employer in the broadcasting industry and significantly enhancing
the Company's ability to attract and retain experienced and highly
motivated employees and management.
TELEVISION BROADCASTING STRATEGY. The key components of the Company's
television broadcasting strategy include the following:
Pursuit of Strategic Acquisitions. The Company believes that attractive
acquisition opportunities are becoming increasingly available in the
television broadcasting industry. In many cases, such television stations
have suffered ratings and revenue declines due to management inattention,
improper programming strategies or inadequate sales and marketing efforts.
The Company intends to pursue acquisitions of underperforming television
stations which offer the potential for significant improvement in ratings
and broadcast cash flow from more focused, research-based programming and
application of the Company's sales and marketing experience.
Programming Strategy. Emmis believes that innovative programming and
knowledge of local markets are the most important determinants of
individual station success. Familiarity with the local market is
particularly important to the Fox stations to be acquired by the Company
because of the significant programming flexibility resulting from
relatively low levels of network-originated programming. While major
networks may provide as much as 70% of the total programming aired by their
affiliated stations, Fox generally provides closer to 30%. Therefore, in
order to develop the Television Stations successfully, the Company has
identified television veteran Greg Nathanson to head its television
division. Mr. Nathanson has over 30 years of television broadcasting
experience and has had extensive independent programming experience as
President of Programming and Development for Twentieth Television and
President of Fox Television Stations. In addition, the Company expects to
conduct specific market research in order to effectively target the local
audience.
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<PAGE> 37
Maximize Advertising Inventory Value. Emmis intends to develop
complementary programming and organize the programming schedule at its
television stations to maximize the value of its advertizing spot inventory
by scheduling complementary programming around its most successful
programs. For example, the Company intends to leverage the popularity of
football programming in a market such as Green Bay or New Orleans by
developing and scheduling football-related programming for which higher
advertising revenue can be obtained.
Entrepreneurial Management Approach. The Company intends to extend its
successful entrepreneurial management approach to its television stations
through decentralized station operations by experienced local managers at
each station who understand the programming tastes, demographics and
competitive opportunities of their particular market and will be rewarded
based on their station's performance. Senior management of the Company will
work closely with local station management to implement the Company's
programming and marketing strategies and help enhance each station's
ratings and broadcast cash flow. The Company will also encourage the
managers and employees of its television stations to own a stake in the
Company and will include them in its various option, share purchase and
other share ownership programs open to its employees generally.
INFORMATION REGARDING OPERATING GROUPS
For the fiscal year ended February 28, 1998, the Company derived
approximately 89.5% of its net revenue from radio operations and approximately
10.5% of its net revenue from publishing and other operations and would have
derived approximately 55.7% of its net revenue from radio operations,
approximately 29.0% of its net revenue from television operations, and
approximately 15.3% of its net revenue from publishing and other operations on a
pro forma basis assuming the Acquisition Transactions had occurred at the
beginning of such period. The following table sets forth selected information
regarding the Company's operating groups for
36
<PAGE> 38
the fiscal years ended February 28, 1997 and 1998 and pro forma information for
the fiscal year ended February 28, 1998 assuming the Acquisition Transactions
had occurred as of the beginning of the year:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
------------------------------------------
PRO FORMA(1)
1997 1998 1998
---- ---- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
RADIO
Net revenue............................................ $103,292 $125,855 $134,603
Operating expenses..................................... 52,839 67,646 72,646
Broadcast cash flow.................................... 50,453 58,209 61,957
EBITDA................................................. 50,453 58,209 61,957
Time brokerage agreement............................... -- 5,667 --
Depreciation and amortization.......................... 5,092 7,045 13,143
Operating income....................................... 45,361 45,497 48,814
TELEVISION
Net revenue............................................ 70,072
Operating expenses..................................... 45,972
Broadcast cash flow.................................... 19,465
EBITDA................................................. 19,465
Depreciation and amortization.......................... 13,575
Amortization of program rights......................... 5,901
Operating income....................................... 4,624
PUBLISHING AND OTHER
Net revenue............................................ 10,338 14,727 36,906
Operating expenses..................................... 9,504 13,523 33,130
EBITDA................................................. 834 1,204 3,776
Depreciation and amortization.......................... 200 314 3,539
Operating income....................................... 634 890 237
Total group operating income........................... 45,995 46,387 53,675
CORPORATE CHARGES
Corporate overhead expenses............................ 7,093 7,845 10,285
Depreciation and amortization.......................... 189 177 177
Noncash compensation................................... 3,465 4,882 4,882
CONSOLIDATED OPERATING INCOME.......................... 35,248 33,483 38,331
</TABLE>
- -------------------------
(1) Reflects adjustments to the condensed consolidated historical operating data
of the Company to give effect to (i) the Consummated Acquisitions and the
disposition of WALC-AM, all of which occurred during the year ended February
28, 1998, (ii) the WQCD Acquisition, (iii) the SF Acquisition and (iv) the
Wabash Valley Acquisition, as if such transactions had occurred at the
beginning of the year presented.
COMMUNITY INVOLVEMENT
The Company believes that to be successful, it must be integrally involved
in the communities it serves. To that end, each of the Company's stations and
magazines participates in many community programs, fundraisers and activities
that benefit a wide variety of organizations. Charitable organizations that have
been the beneficiaries of the Company's marathons, walkathons, dance-a-thons,
concerts, fairs and festivals include, among others, The March of Dimes,
American Cancer Society, Riley Children's Hospital and research foundations
seeking cures for cystic fibrosis, leukemia and AIDS and helping to fight drug
abuse.
In addition to its planned activities, the Company's stations take
leadership roles in community responses to natural disasters.
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<PAGE> 39
INDUSTRY INVOLVEMENT
The Company has an active leadership role in a wide range of industry
organizations. The Company's senior managers have served in various capacities
with industry associations, including as directors of the National Association
of Broadcasters, the Radio Advertising Bureau, the Radio Futures Committee and
the Arbitron Advisory Council and as founding members of the Radio Operators
Caucus. In addition, managers of the Company have been voted Radio President of
the Year and General Manager of the Year, and at various times the Company was
voted Most Respected Broadcaster in polls of radio industry chief executive
officers and managers.
ADVERTISING SALES
Virtually all of the revenue of a radio or television station is derived
from local, regional and national advertising. In the case of television
stations, additional revenue is sometimes derived from fees received from the
affiliated television networks in exchange for broadcasting network programming
and associated network advertising. Advertising rates charged by a station are a
function of the station's ability to attract audiences in the demographic groups
which advertisers wish to reach, and the number of stations competing in the
market area. A station's audience is reflected in rating service surveys of the
size of the audience tuned to the station and the time spent listening or
viewing.
The Company's stations derive their advertising revenue from local and
regional advertising in the marketplaces in which they operate, as well as from
the sale of national advertising. Local and most regional sales are made by a
station's sales staff. National sales are made by firms specializing in such
sales which are compensated on a commission-only basis. The Company believes
that the volume of national advertising revenue tends to adjust to shifts in a
station's audience share position more rapidly than does the volume of local and
regional advertising revenue.
The Company has led the industry in developing "vendor co-op" advertising
revenue (i.e., revenue from a manufacturer or distributor which is used to
promote its particular goods together with local retail outlets for those
goods). Although this source of advertising revenue is common in the newspaper
and magazine industry, the Company was among the first radio broadcasters to
recognize, and take advantage of, the potential of vendor co-op advertising. The
Company's Revenue Development Systems division has established a network of
radio stations which share information about sources of vendor co-op revenue. In
addition, each of the Company's stations has a salesperson devoted exclusively
to the development of cooperative advertising. The Company intends to expand
this approach to the Television Stations.
In the broadcasting industry, stations often utilize trade (or barter)
agreements to exchange advertising time for goods or services (such as other
media advertising, travel or lodging), in lieu of cash. In order to preserve
most of its on-air inventory for cash advertising, the Company generally enters
into trade agreements only if the goods or services bartered to the Company will
be used in the Company's business. The Company has minimized its use of trade
agreements and in fiscal 1996, 1997 and 1998 sold approximately 95% of its
advertising time for cash. In addition, it is the Company's general policy not
to preempt advertising spots paid for in cash with advertising spots paid for in
trade.
RADIO NETWORKS
In addition to its other radio broadcasting operations, the Company owns
and operates two radio networks. Network Indiana provides news and other
programming to nearly 70 affiliated radio stations in Indiana. AgriAmerica
network provides farm news, weather information and market analysis to radio
stations across Indiana.
PUBLISHING OPERATIONS
The Company publishes four magazines which were acquired beginning in 1988.
Indianapolis Monthly. The Company has published Indianapolis Monthly
magazine since September 1988. Indianapolis Monthly covers local personalities,
homes and lifestyles and currently has a paid monthly circulation of
approximately 45,000. Despite a nationwide downturn in the city and regional
magazine business, Indianapolis Monthly continues to perform well. The Company
believes this is due to a large
38
<PAGE> 40
advertising base and a popular editorial focus. Competition comes from other
local publications, although Indianapolis Monthly is now the only general
interest magazine focusing on the Indianapolis area.
Atlanta. The Company acquired and began publishing Atlanta magazine on
August 1, 1993. Atlanta covers area personalities, issues and style and
currently has a paid monthly circulation of approximately 65,000. The magazine
was unprofitable for several years before it was acquired by the Company for a
nominal investment. Certain initiatives, including downsizing staff, increasing
sales efforts and repositioning editorial focus, have contributed to improving
profitability.
Cincinnati. The Company acquired Cincinnati magazine in October 1997.
Cincinnati magazine was founded by the Greater Cincinnati Chamber of Commerce in
1967 and under its most recent owner before the Company grew to a paid monthly
circulation of approximately 22,000. The Company has repositioned the editorial
product to an up-to-date city/regional magazine covering people and
entertainment in Cincinnati, has doubled the existing sales staff and is
marketing the newly designed magazine to the Cincinnati area.
Texas Monthly. The Company acquired Texas Monthly magazine in February
1998. The critically acclaimed magazine, which has received eight National
Magazine Awards, has a paid monthly circulation of approximately 300,000 and is
believed by the Company to be read by more than 2,436,000 people. It marked its
25th anniversary with the publication of the February 1998 issue, which set a
single issue advertising record. The Company plans to increase Texas Monthly's
operating efficiencies while leaving the highly regarded editorial product
intact.
COMPETITION
Radio and television broadcasting stations compete with the other
broadcasting stations in their respective market areas, as well as with other
advertising media such as newspapers, magazines, outdoor advertising, transit
advertising, compact discs, music videos, the internet and direct mail
marketing. Competition within the broadcasting industry occurs primarily in
individual market areas, so that a station in one market does not generally
compete with stations in other market areas. In each of its markets, the
Company's stations face competition from other stations with substantial
financial resources, including stations targeting the same demographic groups.
In addition to management experience, factors which are material to competitive
position include the station's rank in its market, authorized power, assigned
frequency, audience characteristics, local program acceptance and the number and
characteristics of other stations in the market area. The Company attempts to
improve its competitive position with programming and promotional campaigns
aimed at the demographic groups targeted by its stations, and through sales
efforts designed to attract advertisers that have done little or no broadcast
advertising by emphasizing the effectiveness of radio and television advertising
in increasing the advertisers' revenues. Recent changes in the policies and
rules of the FCC permit increased joint ownership and joint operation of local
stations. Those stations taking advantage of these joint arrangements may in
certain circumstances have lower operating costs and may be able to offer
advertisers more attractive rates and services. Although the Company believes
that each of its stations can compete effectively in its market, there can be no
assurance that any of the Company's stations will be able to maintain or
increase its current audience ratings or advertising revenue market share.
Although the broadcasting industry is highly competitive, some barriers to
entry exist. The operation of a broadcasting station in the United States
requires a license from the FCC, and the number of stations that can operate in
a given market is limited by the availability of the frequencies that the FCC
will license in that market, as well as by the FCC's multiple ownership rules
regulating the number of stations that may be owned and controlled by a single
entity. The FCC's multiple ownership rules have changed significantly as a
result of the 1996 Act.
The broadcasting industry historically has grown in terms of total revenues
despite the introduction of new technology for the delivery of entertainment and
information, such as cable television, audio tapes and compact discs. The
Company believes that radio's portability in particular makes it less vulnerable
than other media to competition from new methods of distribution or other
technological advances. There can be no assurance, however, that the development
or introduction in the future of any new media technology will not have an
adverse effect on the radio or television broadcasting industry.
39
<PAGE> 41
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning the executive
officers and directors of the Company as of April 30, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jeffrey H. Smulyan....... 51 Chairman, President and Chief Executive
Officer
Doyle L. Rose............ 49 Radio Division President and Director
Richard F. Cummings...... 46 Executive Vice President -- Programming
Howard L. Schrott........ 43 Executive Vice President, Treasurer and
Chief Financial Officer
Norman H. Gurwitz........ 51 Executive Vice President, Corporate Counsel
and Secretary
Gary L. Kaseff........... 50 Counsel to the Company and Director
Lawrence B. Sorrel....... 39 Director
Susan B. Bayh............ 38 Director(1)
Richard A. Leventhal..... 51 Director(1)
</TABLE>
- -------------------------
(1) Elected by the holders of Class A Common Stock. See "Description of Capital
Stock -- Common Stock."
Jeffrey H. Smulyan founded the Company in 1981 and is the Chairman of the
Board of Directors, President and Chief Executive Officer of the Company. Mr.
Smulyan began working in radio in 1973, and has owned one or more radio stations
since then. Formerly, he was also the owner and chief executive officer of the
Seattle Mariners major league baseball team. He is a Director of the Radio
Advertising Bureau and The Finish Line, a sports apparel manufacturer, and
serves as a Trustee of Ball State University. Mr. Smulyan has been chosen Radio
Executive of the Year by a radio industry group and was voted one of the Ten
Most Influential Radio Executives in the Past 20 Years in a poll in Radio and
Records magazine. In 1994 he was named by The White House to head the United
States delegation to the Plenipotentiary Conference of the International
Telecommunications Union.
Doyle L. Rose has been Radio Division President of the Company since 1989,
and General Manager of KPWR-FM in Los Angeles from 1991 through 1995.
Previously, he was Executive Vice President-Operations. Mr. Rose has been a
general manager of one or more radio stations for approximately twenty years.
Richard F. Cummings was the Program Director of WENS from 1981 to March
1984, when he became the National Program Director and a Vice President of the
Company. He became Executive Vice President -- Programming in 1988.
Howard L. Schrott became Vice President, Chief Financial Officer and
Treasurer of the Company in 1991. He became an Executive Vice President in 1995.
Prior to joining the Company, Mr. Schrott was a Vice President in the
Communications Lending Group at First Union National Bank, Charlotte, North
Carolina. From 1984 to 1989 Mr. Schrott served as Chief Operating and Executive
Officer for a group of radio stations. Mr. Schrott also spent two years
practicing law in Washington, D.C. and Indianapolis, Indiana, where he
concentrated on matters before the FCC and general business matters relating to
broadcasting and media.
Norman H. Gurwitz became Corporate Counsel for the Company in 1987 and a
Vice President in 1988. He became Secretary of the Company in 1989 and became an
Executive Vice President in 1995. Prior to 1987, he was a partner in the
Indianapolis law firm of Scott & Gurwitz.
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<PAGE> 42
Gary L. Kaseff is employed as counsel to the Company, and also has been a
solo practitioner attorney in Southern California since 1992. Previously, he was
President of the Seattle Mariners major league baseball team and partner with
the law firm of Epport & Kaseff.
Lawrence B. Sorrel is a general partner of Welsh, Carson, Anderson and
Stowe, a private investment firm. Prior to May 4, 1998, he was a Managing
Director of Morgan Stanley & Co. Incorporated, where he had been employed since
1986. He also serves as a director of several private companies.
Susan B. Bayh is the Commissioner of the International Joint Commission of
the United States and Canada, and also serves as a Distinguished Visiting
Professor at Butler University, both of which positions she has held since 1994.
Previously, she was an attorney with Eli Lilly & Company.
Richard A. Leventhal has owned and operated a wholesale fabric and textile
company in Carmel, Indiana, for 24 years. Mr. Leventhal is the brother-in-law of
Norman H. Gurwitz, an executive officer of the Company.
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<PAGE> 43
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Common Stock as of April 29, 1998 by
(i) each person known to the Company to be the beneficial owner of more than
five percent of the issued and outstanding Common Stock of the Company, (ii)
each director and executive officer, and (iii) all officers and directors as a
group.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
------------------------ ------------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF PERCENT
FIVE PERCENT SHAREHOLDERS, BENEFICIAL PERCENT BENEFICIAL PERCENT OF TOTAL
DIRECTORS AND EXECUTIVE OFFICERS OWNERSHIP OF CLASS OWNERSHIP OF CLASS VOTING POWER
-------------------------------- ---------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Jeffrey H. Smulyan................... 224,444(1) 2.7% 2,935,894(14) 100.0% 77.6%(14)
Susan B. Bayh........................ 10,100(2) * -- -- *
Richard F. Cummings.................. 102,957(3) 1.2 -- -- *
Norman H. Gurwitz.................... 89,445(4) 1.0 -- -- *
Gary L. Kaseff....................... 24,424(5) * -- -- *
Richard A. Leventhal................. 30,600(6) * -- -- *
Doyle L. Rose........................ 107,935(7) 1.3 -- -- *
Howard L. Schrott.................... 63,602(8) * -- -- *
Lawrence B. Sorrel................... -- * -- -- *
Putnam Investments, Inc. ............ 923,000(9) 11.2 -- -- 2.7
Westport Asset Management, Inc. ..... 507,200(10) 6.1 -- -- 1.5
Denver Investment Advisors LLC....... 504,500(11) 6.1 -- -- 1.5
Capital Group Companies, et al. ..... 467,100(12) 5.6 -- -- 1.4
All Executive Officers and Directors
as a Group (9 persons)............. 638,501(13) 7.2 2,935,894 100.0 78.6
</TABLE>
- -------------------------
* Less than 1%.
(1) Includes 144,444 shares held by Mr. Smulyan as trustee for the Emmis
Broadcasting Corporation Profit Sharing Trust (the "Profit Sharing Trust"),
as to which Mr. Smulyan disclaims beneficial ownership.
(2) Consists of 100 shares owned individually and 10,000 shares represented by
stock options exercisable within 60 days of April 29, 1998.
(3) Consists of 11,916 shares owned individually, 2,468 shares held for the
benefit of Mr. Cummings' children, 1,573 shares held in the Profit Sharing
Trust and 87,000 shares represented by stock options exercisable within 60
days of April 29, 1998.
(4) Consists of 11,238 shares owned individually or jointly with his spouse,
275 owned by Mr. Gurwitz's spouse, 2,308 owned for the benefit of Mr.
Gurwitz's children, 64,545 shares represented by stock options exercisable
within 60 days of April 29, 1998, 979 shares held in the Profit Sharing
Trust, and 10,100 shares owned by a corporation of which Mr. Gurwitz's
spouse is a 50% owner.
(5) Consists of 3,059 shares owned individually by Mr. Kaseff, 1,154 shares
owned by Mr. Kaseff's spouse, 211 shares held in the Profit Sharing Trust,
and 20,000 shares represented by stock options exercisable within 60 days
of April 29, 1998.
(6) Consists of 4,000 shares owned individually, 1,500 shares owned by Mr.
Leventhal's spouse, 10,100 shares owned by a corporation of which Mr.
Leventhal is a 50% owner and 15,000 shares represented by stock options
exercisable within 60 days of April 29, 1998.
(7) Consists of 19,362 shares owned individually, 1,573 shares held in the
Profit Sharing Trust and 87,000 shares represented by stock options
exercisable within 60 days of April 29, 1998.
(8) Consists of 750 shares owned individually, 570 shares held in the Profit
Sharing Trust, and 62,282 shares represented by stock options exercisable
within 60 days of April 29, 1998.
(9) Information concerning these shares was obtained from an Amendment to
Schedule 13G filed in January 1998 by Putnam Investments, Inc. on behalf of
itself, Marsh & McLennan Companies, Inc.,
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<PAGE> 44
Putnam Investment Management, Inc., The Putnam Advisory Company, Inc., and
Putnam New Opportunities Fund (collectively the "Putnam Group"), each of
whom has an address of One Post Office Square, Boston, Massachusetts 02109
(except Marsh & McLennan Companies, Inc. which has an address of 1166
Avenue of the Americas, New York, New York 10036).
(10) Information concerning these shares was obtained from a Schedule 13G filed
in February 1998 by Westport Asset Management, Inc., which has an address
of 235 Riverside Avenue, Westport, Connecticut 06880.
(11) Information concerning these shares was obtained from a Schedule 13G filed
in February 1998 by Denver Investment Advisors LLC, which has an address of
1225 17th Street, 26th Floor, Denver, Colorado 80202. Denver Investment
Advisors LLC has indicated that it has sole dispositive power over 504,500
shares and sole voting power over 332,200 shares.
(12) Information concerning these shares was obtained from a Schedule 13G filed
in February 1998 by The Capital Group Companies, Inc., Capital Research and
Management Company and SMALLCAP World Fund, Inc., each of whom has an
address of 333 South Hope Street, 52nd Floor, Los Angeles, California
90071.
(13) Includes 345,827 shares represented by stock options exercisable within 60
days of April 29, 1998 and 144,444 shares held in the Emmis Broadcasting
Corporation Profit Sharing Trust.
(14) Consists of 2,560,894 shares owned individually and 375,000 shares
represented by stock options exercisable within 60 days of April 29, 1998.
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<PAGE> 45
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 34 million shares of
Class A Common Stock, par value $.01 per share, 6 million shares of Class B
Common Stock, par value $.01 per share, and 10 million shares of serial
preferred stock, par value $.01 per share. All shares of Class A Common Stock
offered hereby will be, upon issuance, validly issued, fully paid and
nonassessable.
COMMON STOCK
Dividends. Holders of record of shares of Common Stock on the record date
fixed by the Company's Board of Directors are entitled to receive such dividends
as may be declared by the Board of Directors out of funds legally available for
such purpose. No dividends may be declared or paid in cash or property on any
share of any class of Common Stock, however, unless simultaneously the same
dividend is declared or paid on each share of the other class of Common Stock.
In the case of any stock dividend, holders of Class A Common Stock are entitled
to receive the same percentage dividend (payment in shares of Class A Common
Stock) as the holders of Class B Common Stock receive (payable in shares of
Class B Common Stock). The payment of dividends is currently restricted by the
Existing Credit Facility and is anticipated to be restricted under the New
Credit Facility.
Voting Rights. Holders of shares of Class A Common Stock and Class B Common
Stock will vote as a single class on all matters submitted to a vote of the
shareholders, with each share of Class A Common Stock entitled to one vote and
each share of Class B Common Stock entitled to ten votes, except (i) for the
election of two directors, (ii) with respect to any proposed "going private"
transaction (as defined below) between the Company and Jeffrey H. Smulyan (the
holder of all shares of the Class B Common Stock), or an affiliate of Mr.
Smulyan, or any group of which Mr. Smulyan or an affiliate of Mr. Smulyan is a
member, and (iii) as otherwise provided by law.
In the election of directors, the holders of Class A Common Stock, voting
as a separate class, are entitled to elect two of the Company's directors, who
must be independent directors. For this purpose, an "independent director" means
a person who is not an officer or employee of the Company or its subsidiaries,
and who does not have a relationship which, in the opinion of the Board of
Directors, would interfere with the exercise of independent judgement in
carrying out the responsibilities of a director. The holders of Class A Common
Stock and Class B Common Stock, voting as a single class with each share of
Class A Common Stock entitled to one vote and each share of Class B Common Stock
entitled to ten votes, are entitled to elect the remaining directors. Holders of
Common Stock are not entitled to cumulate votes in the election of directors.
The holders of Class A Common Stock and Class B Common Stock vote as a
single class with respect to any proposed "going private" transaction, with each
share of each class of Common Stock entitled to one vote per share. A "going
private" transaction is any "Rule 13e-3 Transaction," as such term is defined in
Rule 13e-3 promulgated under the Exchange Act, between the Company and (i) Mr.
Smulyan, or (ii) any affiliate of Mr. Smulyan, or (iii) any group of which Mr.
Smulyan or an affiliate of Mr. Smulyan is a member. An "affiliate" is defined as
(i) any individual or entity who or that, directly or indirectly, controls, is
controlled by, or is under common control with Mr. Smulyan, (ii) any corporation
or organization (other than the Company or a majority-owned subsidiary of the
Company) of which Mr. Smulyan is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of voting
securities, or in which Mr. Smulyan has a substantial beneficial interest, (iii)
a voting trust or similar arrangement pursuant to which Mr. Smulyan generally
controls the vote of the shares of Common Stock held by or subject to such trust
or arrangement (a "Qualified Voting Trust"), (iv) any other trust or estate in
which Mr. Smulyan has a substantial beneficial interest or as to which Mr.
Smulyan serves as trustee or in a similar fiduciary capacity, or (v) any
relative or spouse of Mr. Smulyan, or any relative of such spouse, who has the
same residence as Mr. Smulyan.
Under Indiana law, the affirmative vote of the holders of a majority of the
outstanding shares of any class of capital stock is required to approve, among
other things, a change in the designation, rights, preferences or limitations of
the shares of such class of capital stock.
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Liquidation Rights. Upon liquidation, dissolution or winding-up of the
Company, the holders of Class A Common Stock are entitled to share ratably with
the holders of Class B Common Stock in all assets available for distributions
after payment in full of creditors and payment in full to any holders of
preferred stock of the Company then outstanding of any amount required to be
paid under the terms of such preferred stock.
Other Provisions. Each share of Class B Common Stock is convertible, at the
option of its holder, into one share of Class A Common Stock at any time. One
share of Class B Common Stock converts automatically and without the requirement
of any further action into one share of Class A Common Stock upon its sale or
other transfer to a person or entity other than Mr. Smulyan or an affiliate of
Mr. Smulyan. A pledge of shares of Class B Common Stock is not considered a
transfer for this purpose unless the pledge is enforced. All outstanding shares
of Class B Common Stock will convert automatically and without the requirement
of any further action into an equivalent number of shares of Class A Common
Stock upon the earlier of Mr. Smulyan's death or his ceasing to own at least
1,520,000 shares of Common Stock, as adjusted for any stock splits or stock
dividends. The holders of Common Stock are not entitled to preemptive rights. In
any merger, consolidation or business combination, the consideration to be
received per share by holders of Class A Common Stock must be identical to that
received by holders of Class B Common Stock, except that in any such transaction
in which shares of common stock are distributed, such shares may differ as to
voting rights to the extent that voting rights now differ among the classes of
Common Stock. No class of Common Stock may be subdivided, consolidated,
reclassified or otherwise changed unless concurrently the other classes of
Common Stock are subdivided, consolidated, reclassified or otherwise changed in
the same proportion and in the same manner.
Each new issuance of Common Stock will be of Class A Common Stock unless
the party to whom Common Stock is issued is Mr. Smulyan or a Qualified Voting
Trust, in which case the shares issued will be shares of Class B Common Stock.
PREFERRED STOCK
The 10 million authorized shares of Preferred Stock may be issued with such
designations, preferences, limitations and relative rights as the Company's
Board of Directors may authorize, including but not limited to: (i) the
distinctive designation of each series and the number of shares that will
constitute such series; (ii) the voting rights, if any, of shares of such
series; (iii) the dividend rate on the shares of such series, any restriction,
limitation or condition upon the payment of such dividends, whether dividends
shall be cumulative, and the dates on which dividends are payable; (iv) the
prices at which, and the terms and conditions on which, the shares of such
series may be redeemed, if such shares are redeemable; (v) the purchase or
sinking fund provisions, if any, for the purchase or redemption of shares of
such series; (vi) any preferential amount payable upon shares of such series in
the event of the liquidation, dissolution or winding-up of the Company or the
distribution of its assets; and (vii) the prices or rates of conversion at
which, and the terms and conditions of which, the shares of such series may be
converted into other securities, if such shares are convertible. Although the
Company has no present intention to issue shares of Preferred Stock, the
issuance of Preferred Stock, or the issuance of rights to purchase such shares,
could discourage an unsolicited acquisition proposal.
FOREIGN OWNERSHIP
The Company's Amended and Restated Articles of Incorporation restrict the
ownership, voting and transfer of the Company's capital stock, including the
Class A Common Stock, in accordance with the Communications Act and the rules of
the FCC, to prohibit ownership of more than 25% of the Company's outstanding
capital stock (or more than 25% of the voting rights it represents) by or for
the account of aliens (as defined in the Communications Act) or corporations
otherwise subject to domination or control by aliens. The Amended and Restated
Articles of Incorporation authorize the Board of Directors of the Company to
prohibit any transfer of the Company's capital stock that would cause the
Company to violate this prohibition. In addition, the Amended and Restated
Articles of Incorporation provide that shares of capital stock of the Company
determined by the Board of Directors to be beneficially owned by an alien shall
always be subject to redemption by the Company by action of the Board of
Directors to the extent necessary, in the judgment of the Board of Directors, to
comply with the alien ownership restrictions of the Communications Act and FCC
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<PAGE> 47
rules. The Amended and Restated Articles of Incorporation further authorize the
Board of Directors of the Company to adopt such provisions as it deems necessary
to enforce the foregoing alien ownership restrictions.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is First
Union National Bank (telephone number (800) 829-8432).
TRADING
The Class A Common Stock is traded on The NASDAQ National Market under the
symbol "EMMS."
CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF CLASS A COMMON STOCK
The following is a general discussion of certain United States federal
income and estate and gift tax consequences of the ownership and sale or other
disposition of Class A Common Stock by a holder that, for United States federal
income tax purposes, is not a "United States person" (a "Non-United States
Holder"). For purposes of this discussion, a "United States person" means a
citizen or individual resident (as determined for U.S. federal income tax
purposes) of the United States; a corporation, partnership or other entity
created or organized in the United States or under the laws of the United States
or of any political subdivision thereof; an estate the income of which is
includible in gross income for U.S. federal income tax purposes, regardless of
its source; or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust. Resident alien individuals will be subject to United States federal
income tax with respect to the Class A Common Stock as if they were United
States citizens.
THIS DISCUSSION IS BASED ON THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"), AND THE ADMINISTRATIVE INTERPRETATIONS THEREOF AS OF THE DATE
HEREOF, ALL OF WHICH MAY BE CHANGED EITHER RETROACTIVELY OR PROSPECTIVELY. THIS
DISCUSSION IS FOR GENERAL INFORMATION ONLY, DOES NOT CONSIDER ANY SPECIFIC FACTS
OR CIRCUMSTANCES THAT MAY APPLY TO A PARTICULAR NON-UNITED STATES HOLDER AND
DOES NOT ADDRESS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, MUNICIPALITY,
FOREIGN COUNTRY OR OTHER TAXING JURISDICTION. PROSPECTIVE INVESTORS ARE URGED TO
CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL TAX CONSEQUENCES
OF OWNING AND DISPOSING OF CLASS A COMMON STOCK (INCLUDING THE INVESTOR'S STATUS
AS A UNITED STATES PERSON OR A NON-UNITED STATES HOLDER), AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE, MUNICIPALITY, FOREIGN
COUNTRY OR OTHER TAXING JURISDICTION.
DIVIDENDS
Dividends, if any, paid to a Non-United States Holder will generally be
subject to the withholding of United States federal income tax at the rate of
30%, unless the dividend is effectively connected with the conduct of a trade or
business (or, if an income tax treaty applies, is attributable to a "permanent
establishment", as defined therein) within the United States of the Non-United
States Holder, in which case the dividend will be subject to the rules described
in the next paragraph. Non-United States Holders should consult any applicable
income tax treaties, which may provide for a reduced withholding rate or other
rules different from those described above. For purposes of determining whether
tax will be withheld at a 30% rate or a reduced rate as specified by an income
tax treaty, current law permits the Company to presume that dividends paid to an
address in a foreign country are paid to a resident of such country absent
definite knowledge that such presumption is not warranted. However, under newly
issued U.S. Treasury regulations, in the case of dividends paid after December
31, 1999, in order to obtain a reduced rate of withholding under an
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<PAGE> 48
income tax treaty, a Non-United States Holder generally will be required to
provide to the Company a valid Internal Revenue Service Form W-8 (or any
successor form) certifying that such Non-United States Holder is entitled to
benefits under an income tax treaty. The new regulations also provide special
rules for dividend payments made to foreign intermediaries, U.S. or foreign
wholly-owned entities that are disregarded for U.S. federal income tax purposes
and entities that are treated as fiscally transparent in the United States, the
applicable income tax treaty jurisdiction or both. Prospective investors should
consult their tax advisors concerning the effect, if any, of the adoption of
these new U.S. Treasury regulations on an investment in the Class A Common
Stock. A Non-United States Holder who is eligible for a reduced withholding rate
may obtain a refund of any excess amounts withheld by filing an appropriate
claim for a refund with the Internal Revenue Service (the "Service").
The Company will not withhold federal income tax upon dividends paid to a
Non-United States Holder if the Company receives the appropriate form of the
Service (currently Form 4224) from that Non-United States Holder, certifying
that such income is effectively connected with the conduct of a trade or
business (or, if an income tax treaty applies, is attributable to a "permanent
establishment," as defined therein) within the United States of the Non-United
States Holder, unless the Company has knowledge to the contrary. Dividends paid
to a Non-United States Holder of Class A Common Stock that are effectively
connected with the conduct of a trade or business (or, if an income tax treaty
applies, are attributable to a "permanent establishment," as defined therein)
within the United States of the Non-United States Holder will generally be taxed
on a net income basis (that is, after allowance for applicable deductions) at
the graduated rates that are applicable to United States persons. In the case of
a Non-United States Holder that is a corporation, such income may also be
subject to the United States federal branch profits tax (which is generally
imposed on a foreign corporation upon the deemed repatriation from the United
States of effectively connected earnings and profits) at a 30% rate, unless the
rate is reduced or eliminated by an applicable income tax treaty and the Non-
United States Holder is a qualified resident of the treaty country.
GAIN ON SALE OR OTHER DISPOSITION
Subject to special rules applicable to individuals as described below, a
Non-United States Holder will generally not be subject to regular United States
federal income or withholding tax on gain recognized on a sale or other
disposition of Class A Common Stock, unless (i) the gain is effectively
connected with the conduct of a trade or business (or, if an income tax treaty
applies, is attributable to a "permanent establishment," as defined therein)
within the United States of the Non-United States Holder or of a partnership,
trust or estate in which such Non-United States Holder is a partner or
beneficiary, or (ii) the Company has been, is or becomes a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code at any time within the shorter of the five-year period preceding such sale
or other disposition or such Non-United States Holder's holding period for the
Class A Common Stock.
A corporation is generally considered to be a United States real property
holding corporation under Section 897(c)(2) of the Code if the fair market value
of its "United States real property interests" within the meaning of Section
897(c)(1) of the Code equals or exceeds 50% of the sum of the fair market value
of its worldwide real property interests plus the fair market value of any other
of its assets used or held for use in a trade or business. The Company believes
that it has not been, is not currently and is not likely to become a United
States real property holding corporation. Further, even if the Company were to
become a United States real property holding corporation, any gain recognized by
a Non-United States Holder still would not be subject to U.S. federal income tax
if the Class A Common Stock were considered to be "regularly traded" (within the
meaning of applicable U.S. Treasury regulations) on an established securities
market (e.g., The NASDAQ National Market, on which the Company's Class A Common
Stock is traded), and the Non-United States Holder did not own, directly or
indirectly, at any time during the five-year period ending on the date of the
sale or other disposition, more than 5% of the Class A Common Stock.
Gains realized by a Non-United States Holder of Class A Common Stock that
are effectively connected with the conduct of a trade or business (or, if an
income tax treaty applies, are attributable to a "permanent establishment," as
defined therein) within the United States of the Non-United States Holder will
generally be taxed on a net income basis (that is, after allowance for
applicable deductions) at the graduated rates that
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<PAGE> 49
are applicable to United States persons. In the case of a Non-United States
Holder that is a corporation, such income may also be subject to the United
States federal branch profits tax (which is generally imposed on a foreign
corporation upon the deemed repatriation from the United States of effectively
connected earnings and profits) at a 30% rate, unless the rate is reduced or
eliminated by an applicable income tax treaty and the Non-United States Holder
is a qualified resident of the treaty country.
In addition to being subject to the rules described above, an individual
Non-United States Holder who holds Class A Common Stock as a capital asset will
generally be subject to tax at a 30% rate on any gain recognized on the sale or
other disposition of such stock if (i) such gain is not effectively connected
with the conduct of a trade or business (or, if an income tax treaty applies, is
not attributable to a "permanent establishment," as defined therein) within the
United States of the Non-United States Holder, and (ii) such individual is
present in the United States for 183 days or more in the taxable year of the
sale or other disposition and either (A) has a "tax home" in the United States
(as specially defined for purposes of the United States federal income tax), or
(B) maintains an office or other fixed place of business in the United States
and the income from the sale of the stock is attributable to such office or
other fixed place of business. Individual Non-United States Holders may also be
subject to tax pursuant to provisions of United States federal income tax law
applicable to certain United States expatriates (including certain former
long-term residents of the United States).
FEDERAL ESTATE AND GIFT TAXES
Class A Common Stock owned or treated as owned by an individual (regardless
of whether such an individual is a citizen or a resident of the United States)
at the date of death will be included in such individual's estate for United
States federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise.
A Non-United States Holder will not be subject to United States federal
gift tax on a transfer of Class A Common Stock, unless such person is an
individual domiciled in the United States or such person is an individual
subject to provisions of United States federal gift tax law applicable to
certain United States expatriates (including certain former long-term residents
of the United States).
BACKUP WITHHOLDING AND INFORMATION REPORTING
The Company must report annually to the Service and to each Non-United
States Holder the amount of dividends paid to, and the tax withheld with respect
to, such Non-United States Holder, regardless of whether tax was actually
withheld and whether withholding was reduced by an applicable income tax treaty.
Pursuant to certain income tax treaties and other agreements, that information
may also be made available to the tax authorities of the country in which the
Non-United States Holder resides.
United States federal backup withholding (which generally is withholding
tax imposed at the rate of 31% on certain payments to persons not otherwise
exempt who fail to furnish certain identifying information) will generally not
apply to (i) dividends paid to a Non-United States Holder that is subject to
withholding at the 30% rate (or that is subject to withholding at a reduced rate
under an applicable income tax treaty), or (ii) under current law, dividends
paid to a Non-United States Holder at an address outside of the United States
(unless the payor has knowledge that the payee is a United States person).
However, under newly issued U.S. Treasury regulations, in the case of dividends
paid after December 31, 1999, a Non-United States Holder will generally be
subject to United States withholding tax at a 31% rate, unless certain
certification procedures (or in the case of payments made outside of the United
States with respect to an offshore account, certain documentary evidence
procedures) are satisfied, directly or through a foreign intermediary.
The backup withholding and information reporting requirements will
generally also apply to the gross proceeds paid to a Non-United States Holder
upon the sale or other disposition of Class A Common Stock by or through a
United States office of a United States or foreign broker, unless the Non-United
States Holder certifies to the broker under penalties of perjury as to, among
other things, its name, address and status as a Non-United States Holder by
filing the Service's Form W-8 (or any successor form) with the broker, or unless
the Non-United States Holder otherwise establishes an exemption.
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Information reporting requirements (but not backup withholding) will
generally apply to a payment of the proceeds of a sale or other disposition of
Class A Common Stock effected at a foreign office of (i) a United States broker,
(ii) a foreign broker 50% or more of whose gross income for certain periods is
effectively connected with the conduct of a trade or business within the United
States, (iii) a foreign broker that is a "controlled foreign corporation" for
United States federal income tax purposes, or (iv) pursuant to newly issued U.S.
Treasury Regulations effective after December 31, 1999, a foreign broker that is
(A) a foreign partnership one or more of whose partners are U.S. persons that in
the aggregate hold more than 50% of the income or capital interest in the
partnership at any time during its tax year, or (B) a foreign partnership
engaged at any time during its tax year in the conduct of a trade or business in
the United States, unless the broker has certain documentary evidence in its
records that the Non-United States Holder is a Non-United States Holder (and the
broker has no knowledge to the contrary) and certain other conditions are met,
or unless the Non-United States Holder otherwise establishes an exemption.
Neither backup withholding nor information reporting will generally apply to a
payment of the proceeds of a sale or other disposition of Class A Common Stock
effected at a foreign office of a foreign broker not subject to the preceding
sentence. Prospective investors should consult their tax advisors concerning the
effect, if any, of the adoption of the newly issued U.S. Treasury regulations on
backup withholding and information reporting on an investment in the Class A
Common Stock.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
Non-United States Holder files an appropriate claim for a refund with the
Service.
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<PAGE> 51
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the U.S.
Underwriters named below for whom Morgan Stanley & Co. Incorporated, Credit
Suisse First Boston Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation, Lehman Brothers Inc., A.G. Edwards & Sons, Inc., Goldman, Sachs &
Co., NationsBanc Montgomery Securities LLC and Schroder & Co. Inc. are acting as
U.S. Representatives, have severally agreed to purchase, and the Company has
agreed to sell to them, and the International Underwriters named below for whom
Morgan Stanley & Co. International Limited, Credit Suisse First Boston (Europe)
Limited, Donaldson, Lufkin & Jenrette International, Lehman Brothers
International (Europe), A.G. Edwards & Sons, Inc., Goldman Sachs International,
J. Henry Schroder & Co. Limited and NationsBanc Montgomery Securities LLC are
acting as International Representatives, have severally agreed to purchase, and
the Company has agreed to sell to them, the respective number of shares of the
Company's Class A Common Stock set forth opposite the names of such Underwriters
below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated ........................ 424,000
Credit Suisse First Boston Corporation.................... 318,000
Donaldson, Lufkin & Jenrette Securities Corporation....... 318,000
Lehman Brothers Inc. ..................................... 318,000
A.G. Edwards & Sons, Inc. ................................ 185,500
Goldman, Sachs & Co. ..................................... 185,500
NationsBanc Montgomery Securities LLC..................... 185,500
Schroder & Co. Inc. ...................................... 185,500
Sanford C. Bernstein & Co., Inc. ......................... 60,000
BT Alex. Brown Incorporated............................... 120,000
Furman Selz LLC .......................................... 120,000
Janney Montgomery Scott Inc. ............................. 60,000
Legg Mason Wood Walker, Incorporated...................... 60,000
McDonald & Company Securities, Inc........................ 120,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated........ 120,000
PaineWebber Incorporated.................................. 120,000
Piper Jaffray Inc......................................... 60,000
UBS Securities LLC........................................ 120,000
Wasserstein Perella Securities, Inc....................... 120,000
---------
Subtotal............................................... 3,200,000
---------
International Underwriters:
Morgan Stanley & Co. International Limited................ 153,010
Credit Suisse First Boston (Europe) Limited............... 114,750
Donaldson, Lufkin & Jenrette International................ 114,750
Lehman Brothers International (Europe).................... 114,750
A.G. Edwards & Sons, Inc.................................. 66,935
Goldman Sachs International............................... 66,935
NationsBanc Montgomery Securities LLC..................... 66,935
J. Henry Schroder & Co. Limited........................... 66,935
Swiss Bank Corporation.................................... 35,000
---------
Subtotal............................................... 800,000
---------
Total................................................ 4,000,000
=========
</TABLE>
The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives,"
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<PAGE> 52
respectively. The Underwriting Agreement provides that the obligations of the
several Underwriters to pay for and accept delivery of the shares of Class A
Common Stock offered hereby are subject to the approval of certain legal matters
by their counsel and to certain other conditions. The Underwriters are obligated
to take and pay for all of the shares of Class A Common Stock offered hereby
(other than those covered by the U.S. Underwriters' over-allotment option
described below) if any such shares are taken.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any U.S. Shares (as defined herein) for the account of
anyone other than a United States or Canadian Person (as defined herein) and
(ii) it has not offered or sold, and will not offer or sell, directly or
indirectly, any U.S. Shares or distribute any prospectus relating to the U.S.
Shares outside the United States or Canada or to anyone other than a United
States or Canadian Person. Pursuant to the Agreement between U.S. and
International Underwriters, each International Underwriter has represented and
agreed that, with certain exceptions: (i) it is not purchasing any International
Shares (as defined herein) for the account of any United States or Canadian
Person and (ii) it has not offered or sold, and will not offer or sell, directly
or indirectly, any International Shares within the United States or Canada or to
any United States or Canadian Person. With respect to any Underwriter that is a
U.S. Underwriter and an International Underwriter, the foregoing representations
and agreements (i) made by it in its capacity as a U.S. Underwriter apply only
to it in its capacity as a U.S. Underwriter and (ii) made by it in its capacity
as an International Underwriter apply only to it in its capacity as an
International Underwriter. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions specified in the
Agreement between U.S. and International Underwriters. As used herein, "United
States or Canadian Person" means any national or resident of the United States
or Canada, or any corporation, pension, profit-sharing or other trust or other
entity organized under the laws of the United States or Canada or of any
political subdivision thereof (other than a branch located outside the United
States and Canada of any United States or Canadian Person) and includes any
United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person. All shares of Class A Common Stock to be purchased by
the U.S. Underwriters and the International Underwriters are referred to herein
as the "U.S. Shares" and the "International Shares," respectively, and,
collectively, as the "Shares."
Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of shares of Class A Common Stock to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price of any
shares of Class A Common Stock sold shall be the Price to Public set forth on
the cover page hereof, in United States dollars, less an amount not greater than
the per share amount of the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Class A Common Stock, directly or
indirectly, in any province or territory of Canada or to, or for the benefit of,
any resident of any province or territory of Canada in contravention of the
securities laws thereof and has represented that any offer or sale of shares of
Class A Common Stock in Canada will be made only pursuant to an exemption from
the requirement to file a prospectus in the province or territory of Canada in
which such offer or sale is made. Each U.S. Underwriter has further agreed to
send to any dealer who purchases from it any shares of Class A Common Stock a
notice stating in substance that, by purchasing such shares of Class A Common
Stock, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, directly or indirectly, any of such shares of Class A
Common Stock in any province or territory of Canada or to, or for the benefit
of, any resident of any province or territory of Canada in contravention of the
securities laws thereof and that any offer or sale of shares of Class A Common
Stock in Canada will be made only pursuant to an exemption from the requirement
to file a prospectus in the province or territory of Canada in which such offer
or sale is made, and that such dealer will deliver to any other dealer to whom
it sells any of such shares of Class A Common Stock a notice containing
substantially the same statement as is contained in this sentence.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and prior to the date six months after the closing date for the sale of
the International Shares will not offer or sell any shares of Class A Common
Stock to
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<PAGE> 53
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the shares of Class A Common Stock offered
hereby in, from or otherwise involving the United Kingdom; and (iii) it has only
issued or passed on and will only issue or pass on any document received by it
in connection with the issue of the shares of Class A Common Stock, to a person
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1998 or a person to whom such
document may otherwise lawfully be issued or passed on.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the shares of Class A
Common Stock acquired in connection with the distribution contemplated hereby,
except for offers or sales to Japanese International Underwriters or dealers and
except pursuant to any exemption from the registration requirements of the
Securities and Exchange Law and otherwise in compliance with applicable
provisions of Japanese law. Each International Underwriter has further agreed to
send to any dealer who purchases from it any of the shares of Class A Common
Stock a notice stating in substance that, by purchasing such shares, such dealer
represents and agrees that it has not offered or sold, and will not offer or
sell, any of such shares of Class A Common Stock, directly or indirectly, in
Japan or to or for the account of any resident thereof except for offers or
sales to Japanese International Underwriters or dealers and except pursuant to
any exemption from the registration requirements of the Securities and Exchange
Law and otherwise in compliance with applicable provisions of Japanese law, and
that such dealer will send to any other dealer to whom it sells any of such
shares of Class A Common Stock a notice containing substantially the same
statement as is contained in this sentence.
The Underwriters propose to offer part of the shares of Class A Common
Stock directly to the public at the Price to Public set forth on the cover page
hereof and part to certain dealers at a price which represents a concession not
in excess of $1.25 per share under the public offering price. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $.10 per
share to other Underwriters and to certain dealers. After the initial offering
of the shares of Class A Common Stock, the offering price and other selling
terms may from time to time be varied by the Representatives.
Pursuant to the Underwriting Agreement, the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of 600,000 additional shares of Class
A Common Stock at the Price to Public set forth on the cover page hereof, less
underwriting discounts and commissions. The U.S. Underwriters may exercise such
option to purchase solely for the purpose of covering overallotments, if any,
made in connection with the Offering of the shares of Class A Common Stock
offered hereby. To the extent such option is exercised, each U.S. Underwriter
shall become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional shares of Class A Common Stock as the
number set forth next to such U.S. Underwriter's name in the preceding table
bears to the total number of shares of Class A Common Stock offered by the U.S.
Underwriters hereby.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Class A Common Stock offered by them.
Each of the Company and the directors, executive officers and certain other
stockholders of the Company has agreed that, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of this Prospectus, (i) offer,
pledge (with certain specified exceptions), sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend or otherwise transfer or dispose
of, directly or indirectly, any shares of Class A Common Stock or any securities
convertible into or exercisable or exchangeable for Class A Common Stock or (ii)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of the Class A Common
Stock,
52
<PAGE> 54
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Class A Common Stock or such other securities, in cash or
otherwise. The restrictions described in this paragraph do not apply to (x) the
sale of shares of Class A Common Stock to the Underwriters, (y) the issuance by
the Company of shares of Common Stock upon the exercise of an option or a
warrant or the conversion of a security outstanding on the date of the
Underwriting Agreement of which the Underwriters have been advised in writing,
including pursuant to certain benefit plans or (z) transactions by any person
other than the Company relating to shares of Class A Common Stock or other
securities acquired in open market transactions after the completion of the
offering of the shares.
In order to facilitate the offering of the shares of Class A Common Stock,
the Underwriters may engage in transactions that stabilize, maintain or
otherwise affect the price of the Class A Common Stock. Specifically, the
Underwriters may overallot in connection with the offering, creating a short
position in the Class A Common Stock for their own account. In addition, to
cover overallotments or to stabilize the price of the Class A Common Stock, the
Underwriters may bid for, and purchase, shares of Class A Common Stock in the
open market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an Underwriter or a dealer for distributing shares of Class A Common
Stock in the Offering, if the syndicate repurchases previously distributed
shares of Class A Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. The Underwriters have
reserved the right to reclaim selling concessions in order to encourage
Underwriters and dealers to distribute shares of Class A Common Stock for
investment, rather than short-term profit taking. Increasing the proportion of
the Offering held for investment may reduce the supply of Class A Common Stock
available for short-term trading. Any of these activities may stabilize or
maintain the market price of the Class A Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
From time to time, Morgan Stanley & Co. Incorporated has provided, and
continues to provide, investment banking services to the Company, including in
connection with the Acquisition Transactions.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The legal validity of the shares of Class A Common Stock offered hereby
will be passed upon for the Company by Bose McKinney & Evans, Indianapolis,
Indiana. Certain legal matters will be passed upon for the Underwriters by Dow,
Lohnes & Albertson, PLLC, Washington, D.C. Ronald E. Elberger, a partner in Bose
McKinney & Evans, is an officer of the Company.
EXPERTS
The audited consolidated financial statements and schedule of Emmis
Broadcasting Corporation and Subsidiaries as of February 28, 1997 and 1998 and
for each of the three years in the period ended February 28, 1998, incorporated
by reference in this Prospectus and elsewhere in the Registration Statement,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
The audited financial statements of Tribune New York Radio, Inc. as of
December 28, 1997 and for each of the two years in the period ended December 28,
1997 incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto and is incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports.
The audited combined financial statements of SF Broadcasting of Wisconsin,
Inc. and SF Multistations, Inc. and Subsidiaries as of December 29, 1996 and
December 28, 1997 and for each of the three years in the period ended December
28, 1997, incorporated in this Prospectus, have been audited by Ernst & Young
LLP, independent auditors, as indicated in their report with respect thereto
incorporated herein.
53
<PAGE> 55
EMMIS LOGO
<PAGE> 56
PROSPECTUS
4,000,000 Shares
EMMIS LOGO
Emmis Broadcasting Corporation
CLASS A COMMON STOCK
------------------------
ALL OF THE SHARES OF CLASS A COMMON STOCK BEING OFFERED HEREBY ARE BEING SOLD BY
EMMIS BROADCASTING CORPORATION, AN INDIANA CORPORATION (THE "COMPANY" OR
"EMMIS"). OF THE SHARES BEING OFFERED, 800,000 SHARES ARE BEING OFFERED
INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS
(THE "INTERNATIONAL OFFERING") AND 3,200,000 SHARES ARE BEING OFFERED INITIALLY
IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS (THE "U.S. OFFERING"
AND, TOGETHER WITH THE INTERNATIONAL OFFERING, THE "OFFERING"). SEE
"UNDERWRITERS." THE CLASS A COMMON STOCK IS TRADED ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "EMMS." THE LAST REPORTED SALE PRICE FOR THE CLASS A COMMON
STOCK ON MAY 28, 1998 WAS $43 1/8 PER SHARE.
------------------------
THE COMPANY'S OUTSTANDING CAPITAL STOCK CONSISTS OF CLASS A COMMON STOCK, PAR
VALUE $.01 PER SHARE (THE "CLASS A COMMON STOCK"), AND CLASS B COMMON STOCK, PAR
VALUE $.01 PER SHARE (THE "CLASS B COMMON STOCK" AND TOGETHER WITH THE CLASS A
COMMON STOCK, THE "COMMON STOCK"). EACH SHARE OF CLASS A COMMON STOCK ENTITLES
ITS HOLDER TO ONE VOTE, WHEREAS EACH SHARE OF CLASS B COMMON STOCK GENERALLY
ENTITLES ITS HOLDER TO TEN VOTES. THE HOLDERS OF CLASS A COMMON STOCK, VOTING AS
A SEPARATE CLASS, ARE ENTITLED TO ELECT TWO OF THE COMPANY'S DIRECTORS.
IMMEDIATELY AFTER THIS OFFERING, JEFFREY H. SMULYAN, AS HOLDER OF ALL OF THE
CLASS B COMMON STOCK, WILL HAVE APPROXIMATELY 70.4% OF THE COMBINED VOTING POWER
IN RESPECT OF SUBSTANTIALLY ALL MATTERS SUBMITTED FOR THE VOTE OF ALL
SHAREHOLDERS. SEE "RISK FACTORS" AND "DESCRIPTION OF CAPITAL STOCK."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE $42 A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------
<S> <C> <C> <C>
Per Share............................................... $42.00 $2.10 $39.90
Total (3)............................................... $168,000,000 $8,400,000 $159,600,000
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $1.6
million.
(3) The Company has granted the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
600,000 additional shares at the Price to Public less Underwriting
Discounts and Commissions, for the purpose of covering over-allotments,
if any. If the U.S. Underwriters exercise such option in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $193,200,000, $9,660,000 and $183,540,000, respectively.
See "Underwriters."
------------------------
The shares of Class A Common Stock are offered, subject to prior sale,
when, as and if accepted by the Underwriters named herein and subject to
approval of certain legal matters by Dow, Lohnes & Albertson, PLLC, counsel for
the Underwriters. It is expected that delivery of the shares of Class A Common
Stock will be made on or about June 4, 1998, at the office of Morgan Stanley &
Co. Incorporated, New York, N.Y., against payment therefor in immediately
available funds.
------------------------
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON DONALDSON, LUFKIN & JENRETTE LEHMAN BROTHERS
International
A.G. EDWARDS & SONS, INC.
GOLDMAN SACHS INTERNATIONAL
NATIONSBANC MONTGOMERY SECURITIES LLC
SCHRODERS
May 29, 1998
<PAGE> 57
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration Fee............................................ $ 71,906
NASD Fee.................................................... 17,500
Printing and Engraving Expenses............................. 300,000
Legal Fees and Expenses..................................... 400,000
Accounting Fees and Expenses................................ 300,000
Miscellaneous............................................... 510,594
----------
Total.................................................. $1,600,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is an Indiana corporation. Chapter 37 of The Indiana Business
Corporation Law (the "IBCL") requires a corporation, unless its articles of
incorporation provide otherwise, to indemnify a director or an officer of the
corporation who is wholly successful, on the merits or otherwise, in the defense
of any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative and whether formal or informal,
against reasonable expenses, including counsel fees, incurred in connection with
the proceeding. The Company's Articles of Incorporation do not contain any
provision prohibiting such indemnification. The Company's Amended and Restated
Articles of Incorporation expressly require such indemnification.
The IBCL also permits a corporation to indemnify a director, officer,
employee or agent who is made a party to a proceeding because the person was a
director, officer, employee or agent of the corporation or its subsidiary
against liability incurred in the proceeding if (i) the individual's conduct was
in good faith and (ii) the individual reasonably believed (A) in the case of
conduct in the individual's official capacity with the corporation that the
conduct was in the corporation's best interests and (B) in all other cases that
the individual's conduct was at least not opposed to the corporation's best
interests and (iii) in the case of a criminal proceeding, the individual either
(A) had reasonable cause to believe the individual's conduct was lawful or (B)
had no reasonable cause to believe the individual's conduct was unlawful. The
IBCL also permits a corporation to pay for or reimburse reasonable expenses
incurred before the final disposition of the proceeding and permits a court of
competent jurisdiction to order a corporation to indemnify a director or officer
if the court determines that the person is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not the
person met the standards for indemnification otherwise provided in the IBCL.
The Company's Amended and Restated Articles of Incorporation generally
provide that any director or officer of the Company or any person who is serving
at the request of the Company as a director, officer, employee or agent of
another entity shall be indemnified and held harmless by the Company to the
fullest extent authorized by the IBCL. The Amended and Restated Articles of
Incorporation also provide such persons with certain rights to be paid by the
Company the expenses incurred in defending proceedings in advance of their final
disposition and authorize the Company to maintain insurance to protect itself
and any director, officer, employee or agent of the Company or any person who is
or was serving at the request of the Company as a director, officer, partner,
trustee, employee or agent of another entity against expense, liability or loss,
whether or not the Company would have the power to indemnify such person against
such expense, liability or loss under the Amended and Restated Articles of
Incorporation.
II-1
<PAGE> 58
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<S> <C>
1 Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of Emmis
Broadcasting Corporation, incorporated by reference to
Exhibit 2.3 to the Company's Registration Statement on Form
S-1, File No. 33-73218, as amended.
3.2 Amended and Restated Bylaws of Emmis Broadcasting
Corporation, incorporated by reference to Exhibit 2.4 to the
Company's Quarterly Report on Form 10-Q, for the fiscal
period ended May 31, 1995.
5 Opinion and consent of Bose McKinney & Evans regarding the
legality of the securities being registered.*
8 Tax opinion and consent of Bose McKinney & Evans.*
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ernst & Young, LLP.
24 Powers of Attorney.*
</TABLE>
- -------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 to Regulation S-X at the start
of any delayed offering or throughout a continuous offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of
II-2
<PAGE> 59
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
D. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Indianapolis, Indiana, on May 29, 1998.
EMMIS BROADCASTING CORPORATION
By: /s/ HOWARD L. SCHROTT
------------------------------------
Howard L. Schrott
Executive Vice President, Chief
Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed on May 29, 1998, by the following persons in the capacities
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JEFFREY H. SMULYAN* Director and Chairman of the Board (Principal
- --------------------------------------------- Executive Officer)
Jeffrey H. Smulyan
/s/ DOYLE L. ROSE* Director and Radio Division President
- ---------------------------------------------
Doyle L. Rose
/s/ RICHARD A. LEVENTHAL* Director
- ---------------------------------------------
Richard A. Leventhal
/s/ LAWRENCE B. SORREL* Director
- ---------------------------------------------
Lawrence B. Sorrel
/s/ SUSAN B. BAYH* Director
- ---------------------------------------------
Susan B. Bayh
/s/ GARY L. KASEFF* Director
- ---------------------------------------------
Gary L. Kaseff
/s/ HOWARD L. SCHROTT Executive Vice President, Chief Financial Officer
- --------------------------------------------- and Treasurer (Principal Financial Officer and
Howard L. Schrott Principal Accounting Officer)
*By: /s/ HOWARD L. SCHROTT
---------------------------------------
Howard L. Schrott
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 1
DL&A Draft
5/28/98
4,000,000 SHARES
EMMIS BROADCASTING CORPORATION
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
UNDERWRITING AGREEMENT
May 28, 1998
<PAGE> 2
May 28, 1998
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
Lehman Brothers Inc.
A. G. Edwards & Sons, Inc.
Goldman, Sachs & Co.
NationsBanc Montgomery Securities LLC
Schroder & Co. Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Credit Suisse First Boston (Europe) Limited
Donaldson, Lufkin & Jenrette International
Lehman Brothers International (Europe)
A.G. Edwards & Sons, Inc.
Goldman Sachs International
J. Henry Schroder & Co. Limited
NationsBanc Montgomery Securities LLC
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
EMMIS BROADCASTING CORPORATION, an Indiana corporation (the "COMPANY"),
proposes to issue and sell to the several Underwriters (as defined below) an
aggregate of 4,000,000 shares of Class A Common stock, par value $.01 per share
(the "FIRM SHARES").
It is understood that, subject to the conditions hereinafter stated,
3,200,000 Firm Shares (the "U.S. FIRM SHARES") will be sold to the several U.S.
Underwriters named in Schedule I hereto (the "U.S. UNDERWRITERS") in connection
with the offering and sale of
2
<PAGE> 3
such U.S. Firm Shares in the United States and Canada to United States and
Canadian Persons (as such terms are defined in the Agreement Between U.S. and
International Underwriters of even date herewith), and 800,000 Firm Shares (the
"INTERNATIONAL SHARES") will be sold to the several International Underwriters
named in Schedule II hereto (the "INTERNATIONAL UNDERWRITERS") in connection
with the offering and sale of such International Shares outside the United
States and Canada to persons other than United States and Canadian Persons.
Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers Inc., A. G.
Edwards & Sons, Inc., Goldman, Sachs & Co., NationsBanc Montgomery Securities
LLC and Schroder & Co. Inc. shall act as representatives (the "U.S.
REPRESENTATIVES") of the several U.S. Underwriters, and Morgan Stanley & Co.
International Limited, Credit Suisse First Boston (Europe) Limited, Donaldson,
Lufkin & Jenrette International, Lehman Brothers International (Europe), A.G.
Edwards & Sons, Inc., Goldman Sachs International, J. Henry Schroder & Co.
Limited and NationsBanc Montgomery Securities LLC shall act as representatives
(the "INTERNATIONAL REPRESENTATIVES" and, together with the U.S.
Representatives, the "REPRESENTATIVES") of the several International
Underwriters. The U.S. Underwriters and the International Underwriters are
hereinafter collectively referred to as the "UNDERWRITERS."
The Company also proposes to issue and sell to the several U.S.
Underwriters not more than an additional 600,000 shares of its Class A Common
Stock, par value $.01 per share (the "ADDITIONAL SHARES"), if and to the extent
that the U.S. Representative shall have determined to exercise, on behalf of the
U.S. Underwriters, the right to purchase such shares of common stock granted to
the U.S. Underwriters in Section 2 hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "SHARES". The shares of
Class A Common Stock, par value $.01 per share, of the Company to be outstanding
after giving effect to the sales contemplated hereby are hereinafter referred to
as the "COMMON STOCK".
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement relating to the Shares. Two prospectuses
will be used in connection with the offering and sale of the Shares: the U.S.
prospectus (which is contained in the Registration Statement), to be used in
connection with the offering and sale of Shares in the United States and Canada
to United States and Canadian Persons, and the international prospectus, to be
used in connection with the offering and sale of Shares outside the United
States and Canada to persons other than United States and Canadian Persons. The
international prospectus is identical to the U.S. prospectus except for the
outside front cover page. The registration statement as amended at the time it
becomes effective and as amended pursuant to any post-effective amendment,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the U.S. prospectus and the
international prospectus in the respective forms first used to confirm sales of
Shares are hereinafter collectively referred to as the "Prospectus". If the
Company has filed an abbreviated registration statement to
3
<PAGE> 4
register additional shares of Common Stock pursuant to Rule 462(b) under the
Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference
herein to the term "REGISTRATION STATEMENT" shall be deemed to include such Rule
462 Registration Statement (including, in the case of all references to the
Registration Statement and the Prospectus, documents incorporated therein by
reference).
1. Representations and Warranties. The Company represents and warrants
to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and
no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and
incorporated by reference in the Prospectus complied or will comply when so
filed in all material respects with the Exchange Act and the applicable
rules and regulations of the Commission thereunder, (ii) the Registration
Statement, when it became effective, did not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, (iii) the
Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder and (iv) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set
forth in this paragraph do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property and
to conduct its business as described in the Prospectus and is duly qualified
to transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property requires
such qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
4
<PAGE> 5
(d) Each subsidiary of the Company has been duly formed, is validly
existing as a corporation, partnership or limited liability company in good
standing under the laws of the jurisdiction of its organization, has the
corporate, partnership or limited liability company power and authority to
own its property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole; all of the issued equity interests of each subsidiary of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and, except as set forth in Schedule III hereto, are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and delivered
by the Company.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid and
non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will not
contravene any provision of applicable law or the articles of incorporation
or by-laws of the Company or any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the Company and
its subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.
5
<PAGE> 6
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement).
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(n) Except for real property owned by 1050 Limited Partnership
(which the Company and its subsidiaries do not control) and except for
activities, conditions, circumstances or matters that would not, singly or
in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole:
(A) excluding such customary amounts as may be lawfully generated,
stored, used, treated, disposed of, or otherwise handled or
located at a property, neither the Company nor its subsidiaries
has caused or suffered to occur any release of any substance,
pollutant or waste listed in the United States Department of
Transportation Optional Hazardous Material Table, 49 C.F.R.
Section 172.101, as the same may now or hereafter be amended, or
in the United States Environmental Protection Agency (the "EPA")
List of Hazardous Substances and Reportable Quantities, 40
C.F.R. Part 3202, as the same may now or hereafter be amended (a
"Hazardous Substance")
6
<PAGE> 7
on, in, under or from any real property owned or leased by the
Company or its subsidiaries (each, a "Property"), and no
condition exists on, in, under or from any Property, to the
knowledge of the Company, that could result in the incurrence of
liabilities or any violations of any Environmental Law (as
defined below) or cause or constitute a health, safety or
environmental hazard to any property, person or entity;
(B) neither the Company nor its subsidiaries has received any notice
of a claim under or pursuant to any Environmental Law or under
common law pertaining to Hazardous Substances on or originating
from any Property;
(C) neither the Company nor its subsidiaries has received any notice
from any governmental authority having the duty or authority to
promulgate, implement or enforce any Environmental Law claiming
any violation of any Environmental Law; and
(D) no Property is included or, to the knowledge of the Company,
proposed for inclusion on the National Priorities List issued
pursuant to CERCLA (as defined below) by the EPA or on the
Comprehensive Environmental Response, Compensation, and
Liability Information System database maintained by the EPA, and
has not otherwise been identified by the EPA as a potential
CERCLA removal, remedial or response site or included or, to the
knowledge of the Company, proposed for inclusion on, any similar
list of potentially contaminated sites pursuant to any other
Environmental Law.
The representations set forth in paragraphs (A) through (D) above
are true and correct to the knowledge of the Company after due inquiry with
respect to real property owned by 1050 Limited Partnership.
As used in this paragraph, "Environmental Law" means the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (42 U.S.C. Section 9601 et seq.) ("CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section 6901,
et seq.), the Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.),
the Clean Water Act, as amended (33 U.S.C. Section 1251, et seq.), the Toxic
Substances Control Act, as amended (15 U.S.C. Section 2601, et seq.), the
Occupational Safety and Health Act of 1970, as amended (29 U.S.C. Section
651, et seq.), the Hazardous Materials Transportation Act, as amended (49
U.S.C. Section 1801, et seq.), and all other federal, state and local laws,
ordinances, regulations, rules, orders, decisions and permits
7
<PAGE> 8
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants.
(o) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(p) Except as set forth in Exhibit C, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company or to require the Company to include such securities with the Shares
registered pursuant to the Registration Statement.
(q) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or
with any person or affiliate located in Cuba.
(r) Neither the Company nor any subsidiary (other than Emmis
Meadowlands Corporation and Emmis 1380 AM Radio Corporation of St. Louis) is
or has been a "United States real property holding corporation" within the
meaning of Section 897 (c)(2) of the Internal Revenue Code of 1986, as
amended, during the applicable period specified in Section 897 (c)(1)(A).
(s) Except for such FCC consents and approvals that have already
been obtained and are currently in effect, no consent or approval of the FCC
is required under the Communications Act of 1934, as amended, and the
regulations promulgated thereunder (the "COMMUNICATIONS LAWS") for the
issuance and sale under this Agreement by the Company of the Shares. The
execution, delivery and performance of this Agreement in accordance with the
terms hereof by the Company does not violate the Communications Laws.
(t) Except as described in the Company's Annual Report on Form 10-K
for the fiscal year ended February 28, 1998, the Company and the following
subsidiaries of the Company (the "SUBSIDIARIES") hold all necessary
authorizations, approvals, consents, orders, licenses, certificates and
permits issued by the FCC to own and to operate their respective radio
broadcast stations (the "STATIONS") as identified below (all such held FCC
authorizations, approvals,
8
<PAGE> 9
consents, orders, licenses, certificates and permits of the Subsidiaries
collectively, "FCC LICENSES"):
<TABLE>
<CAPTION>
Corporation Station
- ----------- -------
<S> <C>
Emmis FM License Corporation of St. Louis KSHE-FM
Emmis 104.1 FM Radio License Corporation of St. Louis WALC-FM
Emmis 106.5 FM License Corporation of St. Louis WKKX-FM
Emmis FM License Corporation of Indianapolis WENS-FM
Emmis AM Radio License Corporation of Indianapolis WIBC-AM
Emmis FM Radio License Corporation of Indianapolis WNAP-FM
Emmis 105.7 FM Radio License Corporation of Indianapolis WTLC-FM
Emmis 1310 AM Radio License Corporation of Indianapolis WTLC-AM
Emmis FM License Corporation of Chicago WKQX-FM
Emmis License Corporation of New York WQHT-FM
Emmis Radio License Corporation of New York WRKS-FM
KPWR License, Inc. KPWR-FM
</TABLE>
(u) Except as set forth in the Prospectus, there are no proceedings
pending or threatened in writing under the Communications Laws against the
Company, the Subsidiaries or the Stations before or by the FCC or any court
having jurisdiction over matters arising under the Communications Laws,
relating to any invalidity, revocation or modification of any FCC Licenses,
or the violation of the Communications Laws, that would reasonably be
expected to have a material adverse effect upon the condition (financial or
other), business or properties of the Company and the Subsidiaries taken as
a whole.
(v) The consolidated financial statements of the Company and its
subsidiaries incorporated by reference in the Registration Statement and any
amendment or supplement thereto, present fairly in all material respects the
financial position, results of operations and changes in cash flows of the
Company and its subsidiaries consolidated, at the indicated dates and for
the indicated periods. Such financial statements have been prepared in
accordance with generally accepted principles of accounting, consistently
applied throughout the periods involved, and all adjustments necessary for a
fair presentation of results for such periods have been made. The pro forma
financial information filed as part of the Registration Statement and the
Prospectus or incorporated therein by
9
<PAGE> 10
reference and any amendment or supplement thereto has been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and the assumptions used in the preparation
thereof are, in the Company's opinion, reasonable. The summary financial and
statistical data included in the Registration Statement and any amendment or
supplement thereto presents fairly the information shown therein and have
been compiled on a basis consistent with such financial statements and the
books and records of the Company.
(w) Except as set forth on Exhibit C, no holder of any security of
the Company has any right, not effectively satisfied or waived, to require
inclusion of shares of common stock or any other security of the Company in
the Registration Statement.
2. Agreements to Sell and Purchase. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares (subject to such adjustments to
eliminate fractional shares as you may determine) that bears the same proportion
to the number of Firm Shares as the number of Firm Shares set forth in Schedules
I and II hereto opposite the name of such Underwriter bears to the total number
of Firm shares at U.S.$39.90 a share ("PURCHASE PRICE").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the U.S. Underwriters the Additional Shares, and the U.S. Underwriters shall
have a one-time right to purchase, severally and not jointly, up to 600,000
Additional Shares at the Purchase Price. If the U.S. Representatives, on behalf
of the U.S. Underwriters, elect to exercise such option, the U.S.
Representatives shall so notify the Company in writing not later than 30 days
after the date of this Agreement, which notice shall specify the number of
Additional Shares to be purchased by the U.S. Underwriters and the date on which
such shares are to be purchased. Such date may be the same as the Closing Date
(as defined below) but not earlier than the Closing Date nor later than ten
business days after the date of such notice. Additional Shares may be purchased
as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each U.S. Underwriter agrees, severally
and not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the U.S. Representatives may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of U.S. Firm Shares set forth in Schedule I
hereto opposite the name of such U.S. Underwriter bears to the total number of
U.S. Firm Shares.
10
<PAGE> 11
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder or (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing, including, without limitation, the
grant by the Company of options or the issuance by the Company of shares of
Common Stock pursuant to the Company's 1986 Stock Incentive Plan, 1992
Nonqualified Stock Option Plan, 1994 Equity Incentive Plan, 1995 Equity
Incentive Plan, 1997 Equity Incentive Plan or Non-Employee Director Stock Option
Plan.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
U.S.$42.00 a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected
by you at a price that represents a concession not in excess of U.S.$1.25 a
share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may reallow, a concession, not in excess of U.S.$.10 a share, to
any Underwriter or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares to be sold by
the Company shall be made to such Seller in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on June 4, 1998, or at such other time on the same or such other date, not
later than July 11, 1998, as shall be designated in writing by you. The time and
date of such payment are hereinafter referred to as the "CLOSING DATE".
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such other
date, in any event not
11
<PAGE> 12
later than July 6, 1998, as shall be designated in writing by the U.S.
Representatives. The time and date of such payment are hereinafter referred to
as the "OPTION CLOSING DATE".
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of
the Company to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement, including
Post-Effective Amendment No. 1 thereto, shall have become effective not later
than 11:30 a.m. (New York City time) on May 29, 1998.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Company's securities by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
12
<PAGE> 13
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in Section 5(a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
The officer signing and delivering such certificate may rely upon
the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Bose McKinney & Evans, outside counsel for the Company, dated the
Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly formed, is
validly existing as a corporation, partnership or limited liability
company in good standing under the laws of the jurisdiction of its
organization, has the corporate, partnership or limited liability
company power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken
as a whole; provided, however, that with respect to Radio Hungaria
Co., Ltd. d/b/a Slager Radio ("Radio Hungaria"), such counsel may
state that it is not qualified to practice law in Hungary and that
such conclusions are based solely upon its review of specified
corporate records of the Company and Radio Hungaria certified by
the Company as true and correct translations or English language
summaries thereof.
13
<PAGE> 14
(iii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the
Prospectus;
(iv) the shares of Common Stock (including the shares to be sold
by the Selling Shareholder) outstanding prior to the issuance of the
Shares have been duly authorized and are validly issued, fully paid
and non-assessable;
(v) all of the issued equity interests of each subsidiary of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and, except as set forth in Schedule III
hereto, are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(vi) the Shares to be sold by the Company have been duly
authorized and, when issued and delivered in accordance with the
terms of this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject
to any preemptive or similar rights;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the articles
of incorporation or by-laws of the Company or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the
Company and its subsidiaries, taken as a whole, or, to the best of
such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the
Company or any subsidiary, and no consent, approval, authorization
or order of, or qualification with, any governmental body or agency
is required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states in connection with
the offer and sale of the Shares by the U.S. Underwriters;
(ix) the statements (A) in the Prospectus under the captions
"Summary -- Recent Developments," "-- SF Acquisition," "-- Wabash
Valley Acquisition," "-- WQCD Acquisition," "Business -- Television
Stations," "-- Competition," "Principal Shareholders," "Description
of Capital Stock," "Certain U.S. Federal Tax Consideration for
Non-U.S.
14
<PAGE> 15
Holders of Class A Common Stock," and "Underwriters", (B)
in the Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1998 under the captions "Business -- Pending
Transactions," "-- Competition," "Properties," "Legal Proceedings",
(C) in the description of the Class A Common Stock contained in the
Company's registration statement on Form 8-A (file no. 0-23264), as
amended, (D) in the Company's Proxy Statement pursuant to Section
14(A) of the Exchange Act on Schedule 14A dated May 21, 1998 under
the caption "Executive Compensation -- Employment Agreements," and
(E) in the Registration Statement in Item 15, in each case insofar
as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents
and proceedings and fairly summarize the matters referred to
therein;
(x) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company
or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described or of any statutes, regulations,
contracts or other documents that are required to be described in
the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or
filed as required;
(xi) the Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company"
as such term is defined in the Investment Company Act of 1940, as
amended;
(xii) (A) each document, if any, filed pursuant to the Exchange
Act and incorporated by reference in the Registration Statement and
the Prospectus (except for financial statements and schedules as to
which such counsel need not express any opinion) complied when so
filed as to form in all material respects with the Exchange Act, and
the applicable rules and regulations of the Commission thereunder,
(B) the Registration Statement and Prospectus (except for financial
statements and schedules and other financial and statistical data
included therein as to which such counsel need not express any
opinion) comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the
Commission thereunder, (C) such counsel has no reason to believe
that (except for financial statements and schedules and other
financial and statistical data as to which such counsel need not
15
<PAGE> 16
express any belief) the Registration Statement and the prospectus
included therein at the time the Registration Statement became
effective contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (D) such
counsel has no reason to believe that (except for financial
statements and schedules and other financial and statistical data as
to which such counsel need not express any belief) the Prospectus
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading;
(xiii) neither the Company nor any subsidiary (other than Emmis
Meadowlands Corporation and Emmis 1380 AM Radio Corporation of St.
Louis) is or has been a "United States real property holding
corporation" within the meaning of Section 897 (c)(2) of the
Internal Revenue Code of 1986, as amended, during the applicable
period specified in Section 897 (c)(1)(A); and
(xiv) except as set forth on Exhibit C, no holder of any security
of the Company has any right, not effectively satisfied or waived,
to require inclusion of shares of common stock or any other security
of the Company in the Registration Statement.
The opinion of Bose McKinney & Evans described in this Section 5(c)
above shall be rendered to the Underwriters at the request of the Company
and shall so state therein.
(d) The Underwriters shall have received an opinion, dated such
Closing Date, of Gardner, Carton & Douglas, FCC counsel for the Company, to
the effect that:
(i) Except for such FCC consents and approvals that have already
been obtained and are currently in effect, no consent or approval of
the FCC is required under the Communications Act of 1934, as
amended, and the regulations promulgated thereunder (the
"COMMUNICATIONS LAWS") for the issuance and sale under this
Agreement by the Company of the Shares. The execution, delivery and
performance of this Agreement in accordance with the terms hereof by
the Company does not violate the Communications Laws;
(ii)Except as described in the Company's Annual Report on Form 10-K
for the fiscal year ended February 28, 1998, the Company and the
following subsidiaries of the Company (the "SUBSIDIARIES") hold all
16
<PAGE> 17
necessary authorizations, approvals, consents, orders, licenses,
certificates and permits issued by the FCC to own and to operate
their respective radio broadcast stations (the "STATIONS") as
identified below (all such held FCC authorizations, approvals,
consents, orders, licenses, certificates and permits of the
Subsidiaries collectively, "FCC Licenses"):
<TABLE>
<CAPTION>
Corporation Station
----------- -------
<S> <C>
Emmis FM License Corporation of St. Louis KSHE-FM
Emmis 104.1 FM Radio License Corporation of St. Louis WALC-FM
Emmis 106.5 FM License Corporation of St. Louis WKKX-FM
Emmis FM License Corporation of Indianapolis WENS-FM
Emmis AM Radio License Corporation of Indianapolis WIBC-AM
Emmis FM Radio License Corporation of Indianapolis WNAP-FM
Emmis 105.7 FM Radio License Corporation of Indianapolis WTLC-FM
Emmis 1310 AM Radio License Corporation of Indianapolis WTLC-AM
Emmis FM License Corporation of Chicago WKQX-FM
Emmis License Corporation of New York WQHT-FM
Emmis Radio License Corporation of New York WRKS-FM
KPWR License, Inc. KPWR-FM
</TABLE>
(iii) Except as set forth, or incorporated by reference, in the
Prospectus, such counsel knows of no proceedings pending or
threatened in writing under the Communications Laws against the
Company, the Subsidiaries or the Stations before or by the FCC or
any court having jurisdiction over matters arising under the
Communications Laws, relating to any invalidity, revocation or
modification of any FCC Licenses, or the violation of the
Communications Laws, that would reasonably be expected to have a
material adverse effect upon the condition (financial or other),
business or properties of the Company and the Subsidiaries taken as
a whole;
17
<PAGE> 18
(iv)The statements set forth in the Registration Statement under the
captions "Risk Factors -- New Technologies" and " -- Broadcast
Industry Subject to Federal Regulation"; "Recent Developments -- SF
Acquisition," and "-- Wabash Valley Acquisition" ; and Business
Strategy -- Competition"; and in the Company's Annual Report on Form
10-K (file no. 0-23264) for the fiscal year ended February 28, 1998,
incorporated by reference in the Registration Statement, under the
captions "Item 1. Business. -- Competition," and "-- Federal
Regulation," insofar as such statements constitute a summary of
Communications Laws and material proceedings thereunder, fairly
present such information contained under such captions in light of
the circumstances under which such statements are made. The
statements set forth in the Registration Statement under the
captions "Risk Factors -- New Technologies" and " -- Broadcast
Industry Subject to Federal Regulation"; "Recent Developments -- SF
Acquisition," and " -- Wabash Valley Acquisition" ; and Business
Strategy -- Competition"; and in the Company's Annual Report on Form
10-K (file no. 0-23264), incorporated by reference in the
Registration Statement, under the captions "Item 1. Business. --
Competition," and "-- Federal Regulation," insofar as such
statements constitute a summary with respect to FCC matters and
legal conclusions with respect to FCC matters, fairly and in all
material respects accurately present such information contained
under such captions in light of the circumstances under which such
statements are made;
(v) Such counsel has no reason to believe that any part of the
Registration Statement or any amendment thereto, as of its effective
date or as of such Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus or any amendment or supplement
thereto, as of its issue date or as of such Closing Date, contained
any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided that, in rendering the opinion in this
subparagraph (v), counsel may qualify its opinion based on the scope
of its engagement as FCC counsel for the Company.
(e) The Underwriters shall have received on the Closing Date an
opinion of Dow, Lohnes & Albertson, PLLC, counsel for the Underwriters,
dated the Closing Date, covering the matters referred to in Section 5(c)(ix)
(but only as to the statements in the Prospectus under "Underwriters") and
clauses (B), (C) and (D) of 5(c)(xiii) above.
18
<PAGE> 19
With respect to Section 5(c)(xiii) and 5(d)(vi) above, Bose McKinney
& Evans may state that its opinion and belief are based upon its
participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and documents
incorporated by reference and review and discussion of the contents thereof,
but are without independent check or verification, except as specified. With
respect to clauses (B), (C) and (D) of paragraph 5(c)(xiii) above, Dow,
Lohnes & Albertson, PLLC may state that its opinion and belief are based
upon its participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto (other than the
documents incorporated by reference) and upon review and discussion of the
contents thereof (including documents incorporated by reference), but are
without independent check or verification except as specified.
(f) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date, as
the case may be, in form and substance satisfactory to the Underwriters,
from Arthur Andersen LLP, independent public accountants, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus or incorporated by reference therein; provided that the
letter delivered on the Closing Date shall use a "cut-off date" not earlier
than the date hereof.
(g) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other dispositions of
shares of Common Stock or certain other securities, delivered to you on or
before the date hereof, shall be in full force and effect on the Closing
Date.
(h) The Underwriters shall have received on the Closing Date a
wavier, substantially in the form of Exhibit B hereto, from each executive
officer, director and beneficial owner of more than five percent of the
issued and outstanding Common Stock of the Company and each person, which,
to the knowledge of the Company, is an "affiliate" (as defined for purposes
of Rule 144 under the Securities Act) of the Company, in each case which
possesses registration rights, claims, causes of action or objections under
any registration rights agreement entered into by the Company and currently
in effect.
The several obligations of the U.S. Underwriters to purchase
Additional Shares hereunder are subject to the delivery to the U.S.
Representatives on the Option Closing Date of such documents as they may
reasonably request with respect to the
19
<PAGE> 20
good standing of the Company, the due authorization and issuance of the
Additional Shares and other matters related to the issuance of the Additional
Shares.
6. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, 15 signed copies of the
Registration Statement (including exhibits thereto and documents
incorporated by reference) and for delivery to each other Underwriter a
conformed copy of the Registration Statement (without exhibits thereto, but
including documents incorporated by reference) and to furnish to you in New
York City, without charge, prior to 10:00 a.m. New York City time on the
business day next succeeding the date of this Agreement and during the
period mentioned in Section 6(c) below, as many copies of the Prospectus,
any documents incorporated by reference and any supplements and amendments
thereto or to the Registration Statement as you may reasonably request. The
terms "supplement" and "amendment" or "amend" as used in this Agreement
shall include all documents subsequently filed by the Company with the
Commission pursuant to the Exchange Act that are deemed to be incorporated
by reference in the Prospectus.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters the
Prospectus is required by law to be delivered in connection with sales by an
Underwriter or dealer, any event shall occur or condition exist as a result
of which it is necessary to amend or supplement the Prospectus in order to
make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will furnish
to the Company) to which Shares may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be
20
<PAGE> 21
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders
and to you as soon as practicable an earning statement covering the
twelve-month period ending May 31, 1999 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
7. Expenses. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company agrees to
pay or cause to be paid all expenses incident to the performance of their
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel, the Company's accountants and counsel for the
Selling Shareholder in connection with the registration and delivery of the
Shares under the Securities Act and all other fees or expenses in connection
with the preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the mailing
and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) the cost of printing or producing any Blue
Sky or Legal Investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with the
qualification of the Shares for offer and sale under state securities laws as
provided in Section 6(d) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky or Legal Investment
memorandum, (iv) all filing fees and the reasonable fees and disbursements of
counsel to the Underwriters incurred in connection with the review and
qualification of the offering of the Shares by the National Association of
Securities Dealers, Inc., (v) the cost of printing certificates representing
the Shares, (vi) the costs and charges of any transfer agent, registrar or
depositary, (vii) the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the marketing of
the offering of the Shares, including, without limitation, expenses associated
with the production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with the
prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants, and the
cost of any aircraft chartered in connection with the road show, (viii) all
expenses in connection with any offer and sale of the Shares outside of the
United States, including filing fees and the
21
<PAGE> 22
reasonable fees and disbursements of counsel for the Underwriters in
connection with offers and sales outside of the United States, and (ix) all
other costs and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this Section. It
is understood, however, that except as provided in this Section, Section 8
entitled "Indemnity and Contribution", and the last paragraph of Section 10
below, the Underwriters will pay all of their costs and expenses, including
fees and disbursements of their counsel, stock transfer taxes payable on resale
of any of the Shares by them and any advertising expenses connected with any
offers they may make.
8. Indemnity and Contribution. (a) The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Selling Shareholder, the Company, its directors, its
officers who sign the Registration Statement and each person, if any, who
controls the Company or the Selling Shareholder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to such Underwriter, but only
with reference to information relating to such Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b), such person (the "INDEMNIFIED PARTY")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may
22
<PAGE> 23
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i)
the indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
It is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (i) the fees and expenses
of more than one separate firm (in addition to any local counsel) for all
Underwriters and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, and (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, its directors, its officers who
sign the Registration Statement and each person, if any, who controls the
Company within the meaning of either such Section. In the case of any such
separate firm for the Underwriters and such control persons of any
Underwriters, such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated. In the case of any such separate firm for the Selling
Shareholder, such firm shall be designated in writing by the Selling
Shareholder. The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in Section 8(a)
or 8(b) is unavailable to an indemnified party or insufficient in respect of any
losses,
23
<PAGE> 24
claims, damages or liabilities referred to therein, then each indemnifying party
under such paragraph, in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other hand in connection with the offering of the
Shares shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Shares (before deducting expenses) received by
the Company and the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate Public Offering Price of the Shares. The
relative fault of the Company on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Underwriters' respective obligations to contribute pursuant to this Section
8 are several in proportion to the respective number of Shares they have
purchased hereunder, and not joint.
(f) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 8(e). The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies
24
<PAGE> 25
provided for in this Section 8 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified party at law or
in equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, the Company's officers and
directors or any person controlling the Company and (iii) acceptance of and
payment for any of the Shares.
9. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
10. Effectiveness; Defaulting Underwriters. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I or Schedule
II bears to the aggregate number of Firm Shares set forth opposite the names of
all such non-defaulting Underwriters, or in such other proportions as you may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter
25
<PAGE> 26
has agreed to purchase pursuant to this Agreement be increased pursuant to this
Section 9 by an amount in excess of one-ninth of such number of Shares without
the written consent of such Underwriter. If, on the Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the
aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you and the Company for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. If, on the
Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
Additional Shares or (ii) purchase not less than the number of Additional Shares
that such non-defaulting Underwriters would have been obligated to purchase in
the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
11. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
26
<PAGE> 27
Very truly yours,
EMMIS BROADCASTING
CORPORATION
By:
-----------------------
Name:
Title:
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
LEHMAN BROTHERS INC.
A. G. EDWARDS & SONS, INC.
GOLDMAN, SACHS & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
SCHRODER & CO. INC.
Acting severally on behalf of themselves
and the several U.S. Underwriters
named in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By:
---------------------------
Name:
Title:
27
<PAGE> 28
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
DONALDSON, LUFKIN & JENRETTE SECURITIES INTERNATIONAL
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
A. G. EDWARDS & SONS, INC.
GOLDMAN SACHS INTERNATIONAL
J. HENRY SCHRODER & CO. LIMITED
NATIONSBANC MONTGOMERY SECURITIES LLC
Acting severally on behalf of themselves
and the several International Underwriters
named in Schedule II hereto.
By: Morgan Stanley & Co. International Limited
By:
----------------------------
Name:
Title:
28
<PAGE> 29
SCHEDULE I
U.S. UNDERWRITERS
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
Morgan Stanley & Co. Incorporated 424,000
Credit Suisse First Boston Corporation 318,000
Donaldson, Lufkin & Jenrette Securities Corporation 318,000
Lehman Brothers Inc. 318,000
A. G. Edwards & Sons, Inc. 185,500
Goldman, Sachs & Co. 185,500
NationsBanc Montgomery Securities LLC 185,500
Schroder & Co. Inc. 185,500
Sanford C. Bernstein & Co., Inc. 60,000
BT Alex. Brown Incorporated 120,000
Furman Selz LLC 120,000
Janney Montgomery Scott Inc. 60,000
Legg Mason Wood Walker, Incorporated 60,000
McDonald & Company Securities, Inc. 120,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 120,000
Paine Webber Incorporated 120,000
Piper Jaffrey Inc. 60,000
UBS Securities LLC 120,000
Wasserstein Perella Securities, Inc. 120,000
---------------
3,200,000
Total U.S. Firm Shares .............. ===============
<PAGE> 30
SCHEDULE II
INTERNATIONAL UNDERWRITERS
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
Morgan Stanley & Co. International Limited 153,010
Credit Suisse First Boston (Europe) Limited 114,750
Donaldson, Lufkin & Jenrette International 114,750
Lehman Brothers International (Europe) 114,750
A.G. Edwards & Sons, Inc. 66,935
Goldman Sachs International 66,935
NationsBanc Montgomery Securities LLC 66,935
J. Henry Schroder & Co. Limited 66,935
Swiss Bank Corporation 35,000
-------
800,000
Total International Firm Shares ...... =======
<PAGE> 31
SCHEDULE III
SUBSIDIARY
Duncan America Radio, LLC
Radio Hungaria Co. Ltd.
1050 Limited Partnership
Equity interests in substantially all subsidiaries are subject to
liens which secure the Company's Credit Family.
31
<PAGE> 32
EXHIBIT A
[FORM OF LOCK-UP LETTER]
May __, 1998
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
Lehman Brothers Inc.
A. G. Edwards & Sons, Inc.
Goldman, Sachs & Co.
NationsBanc Montgomery Securities LLC
Schroder & Co. Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Morgan Stanley & Co. International Limited
Credit Suisse First Boston (Europe) Limited
Donaldson, Lufkin & Jenrette International
Lehman Brothers International (Europe)
A.G. Edwards & Sons, Inc.
Goldman Sachs International
J. Henry Schroder & Co. Limited
NationsBanc Montgomery Securities LLC
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") and Morgan Stanley & Co. International Limited ("MSIL")
propose to enter into an Underwriting Agreement (the "UNDERWRITING AGREEMENT")
with Emmis Broadcasting Corporation, an Indiana corporation (the "COMPANY")
providing for the public offering (the "PUBLIC OFFERING") by the several
Underwriters, including Morgan Stanley and MSIL (the "UNDERWRITERS") of
4,000,000 shares (the
<PAGE> 33
"SHARES") of the Class A Common Stock, par value $.01 per share, of the Company
(the "COMMON STOCK").
To induce the Underwriters that may participate in the Public
Offering to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 90 days after the date of the final prospectus
relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge1, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (a) the sale of any
Shares to the Underwriters pursuant to the Underwriting Agreement or (b)
transactions relating to shares of Common Stock or other securities acquired in
open market transactions after the completion of the Public Offering. In
addition, the undersigned agrees that, without the prior written consent of
Morgan Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 90 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.2
- -------------------------
1 In the Lock-Up Letter to be executed by Mr. Jeffrey H. Smulyan,
the following phrase shall be inserted after the word "pledge": "(other than any
pledge existing on the date hereof or any pledge required to renew any
obligation existing on the date hereof secured by a pledge existing on the date
hereof; provided, however, that in the aggregate all shares pledged pursuant
thereto shall have a fair market value not in excess of $30 million)".
2 In the Lock-Up Letter to be executed by Mr. Jeffrey H. Smulyan,
the following paragraph shall also be included:
"The undersigned also agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, he
will not, during the period ending 90 days after the date of the
Prospectus, make any demand for, or exercise any right with respect to,
the registration of any shares of Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock."
<PAGE> 34
Whether or not the Public Offering actually occurs depends on a
number of factors, including market conditions. Any Public Offering will only be
made pursuant to an Underwriting Agreement, the terms of which are subject to
negotiations between the Company and the Underwriters.
Very truly yours,
-------------------------
(Name)
-------------------------
(Address)
34
<PAGE> 35
EXHIBIT B
WAIVER AND RELEASE
_________________________________________, hereby waives and releases any and
all rights, claims, causes of action or objections it may now or hereafter have
pursuant to the Registration Rights Agreements or to require inclusion of
shares of Common Stock or any other security of the Company in the Registration
Statement (as herein defined), under applicable law or otherwise, in connection
with the public offering and sale of 4,000,000 shares of Class A Common Stock
by Emmis Broadcasting Corporation, an Indiana corporation ("Emmis") which have
been registered pursuant to the Securities Act of 1933, as amended, on the
Registration Statement or Form S-3 (file no. 333-52029) (the "Registration
Statement"). For purposes hereof, "Registration Rights Agreements" means the
Registration Rights Agreement dated as of March 1, 1994 between Emmis and
Morgan Stanley Group Inc., the Registration Rights Agreement dated as of
January 2, 1986 between Emmis and Morgan Stanley Leveraged Mezzanine Fund,
L.P., Connecticut General Life Insurance Company and Aetna Insurance Company,
as amended, and the Registration Rights Agreement dated as of January 2, 1986
between Emmis and Morgan Stanley Leveraged Equity Fund, L.P., et al, as
amended.
By:______________________________
Name:____________________________
Title:_____________________________
<PAGE> 36
EXHIBIT C
1. Registration Rights Agreement dated as of March 1, 1994 between
the Company and Morgan Stanley Group, Inc.
2. Registration Rights Agreement dated as of January 2, 1986 between
the Company and Morgan Stanley Leveraged Mezzanine Fund, L.P.,
Connecticut General Life Insurance Company and Aetna Insurance
Company, as amended.
3. Registration Rights Agreement dated as of January 2, 1986 between
the Company and Morgan Stanley Leveraged Equity Fund, L.P., et al,
as amended.
36
<PAGE> 1
EXHIBIT 23.1
CONSENTS OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated March 31, 1998
on the consolidated financial statements of Emmis Broadcasting Corporation
included in Emmis Broadcasting Corporation's Form 10-K for the year ended
February 28, 1998 and our reports dated May 1, 1998 on the financial statements
of Tribune New York Radio, Inc. included in Emmis Broadcasting Corporation's
Form 8-K filed on May 7, 1998 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
May 28, 1998.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement and related Prospectus of Emmis Broadcasting Corporation
(File No. 333-52029) and to the incorporation by reference therein of our report
dated February 20, 1998 (except for Note 10, as to which the date is March 18,
1998) with respect to the combined financial statements of SF Broadcasting of
Wisconsin, Inc. and SF Multistations, Inc. and Subsidiaries included in Emmis
Broadcasting Corporation's Current Report on Form 8-K filed with the Securities
and Exchange Commission.
Ernst & Young LLP
New York, New York
May 27, 1998
