<PAGE> 1
Registration No. 333-74377
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
EMMIS COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
INDIANA 4832 35-1542018
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer Identification
incorporation or organization) classification code number) No.)
</TABLE>
40 MONUMENT CIRCLE, 7TH FLOOR, INDIANAPOLIS, INDIANA 46204, (317) 266-0100
(Address, including zip code and telephone number, including area code, of
principal executive offices)
SEE "TABLE OF ADDITIONAL REGISTRANTS" ON THE FOLLOWING PAGE FOR INFORMATION
RELATING TO ADDITIONAL GUARANTORS
OF CERTAIN SECURITIES REGISTERED HEREBY WHO ARE ADDITIONAL REGISTRANTS
J. SCOTT ENRIGHT, ESQ.
VICE PRESIDENT AND ASSOCIATE GENERAL COUNSEL
EMMIS COMMUNICATIONS CORPORATION
40 MONUMENT CIRCLE, 7TH FLOOR
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 this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
TO FORM S-4 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
<TABLE>
<S> <C> <C> <C>
Emmis FM Broadcasting Indiana 4832 35-1704900
Corporation of Indianapolis
Emmis FM Broadcasting Indiana 4832 35-1705341
Corporation of St. Louis
KPWR, Inc. Indiana 4832 35-1705334
Emmis Broadcasting Corporation Indiana 4832 35-1705332
of New York
Emmis FM Broadcasting Indiana 4832 31-1397437
Corporation of Chicago
Emmis Meadowlands Corporation Indiana 4832 35-1756647
Emmis Publishing Corporation Indiana 2721 35-1748335
Emmis AM Radio Corporation of Indiana 4832 35-1922651
Indianapolis
Emmis FM Radio Corporation of Indiana 4832 35-1922632
Indianapolis
Emmis 104.1 FM Radio Indiana 4832 35-2005992
Corporation of St. Louis
Emmis 106.5 FM Broadcasting Indiana 4832 35-2005991
Corporation of St. Louis
Emmis 1310 AM Radio Corporation Indiana 4832 35-2030857
of Indianapolis
Emmis 105.7 FM Radio Indiana 4832 35-2030858
Corporation of Indianapolis
Mediatex Communications Texas 2721 74-1723301
Corporation
Mediatex Development Texas 2721 74-2120662
Corporation
Texas Monthly, Inc. Texas 2721 74-2236977
Emmis DAR, Inc. Indiana 4800 35-1740703
Emmis International Corporation Indiana 4832 35-2027309
Emmis 1380 AM Radio Corporation Indiana 4832 35-2005995
of St. Louis
Emmis FM Holding Corporation of Delaware 4832 39-1623479
New York
Emmis 101.9 FM Radio Michigan 4832 38-2270683
Corporation of New York
Emmis Radio Corporation of New Delaware 4832 58-1825801
York
Emmis Indiana Broadcasting, Indiana 4832 35-2039701
L.P.
Emmis Television Broadcasting, Indiana 4833 35-2051031
L.P.
Emmis Publishing, L.P. Indiana 2721 35-2039702
(Exact name of Registrant as (State or other (Primary standard (I.R.S. Employer
specified in its charter) jurisdiction of industrial Identification No.)
incorporation or classification code
organization) number)
</TABLE>
<PAGE> 3
40 MONUMENT CIRCLE
7TH FLOOR
INDIANAPOLIS, INDIANA 46204
(317) 266-0100
(Address, including zip code and telephone number,
including area code, of principal executive offices)
J. SCOTT ENRIGHT, ESQ.
VICE PRESIDENT AND ASSOCIATE GENERAL COUNSEL
EMMIS COMMUNICATIONS CORPORATION
40 MONUMENT CIRCLE, 7TH FLOOR
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
------------------------------
<TABLE>
<S> <C> <C> <C>
Emmis FM License Corporation of California 4832 95-4662828
Indianapolis
Emmis FM License Corporation of St. California 4832 95-4662829
Louis
KPWR License, Inc. California 4832 95-4663002
Emmis License Corporation of New York California 4832 95-4662857
Emmis FM License Corporation of Chicago California 4832 95-4662827
Emmis AM Radio License Corporation of California 4832 95-4662831
Indianapolis
Emmis FM Radio License Corporation of California 4832 95-4662856
Indianapolis
Emmis Radio License Corporation of New California 4832 95-4662859
York
Emmis 104.1 FM Radio License California 4832 95-4662863
Corporation of St. Louis
Emmis 106.5 FM License Corporation of California 4832 95-4663001
St. Louis
Emmis 1310 AM Radio License Corporation California 4832 95-4663000
of Indianapolis
Emmis License Corporation California 4832 95-4662830
Emmis International Broadcasting California 4832 31-1573818
Corporation
Emmis Television License Corporation of California 4833 35-2051237
Honolulu
Emmis Television License Corporation of California 4833 35-2051244
Mobile
Emmis Television License Corporation of California 4833 35-2051644
Cape Coral
Emmis Television License Corporation of California 4833 35-2051241
Green Bay
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
Emmis 1480 AM Radio License Corporation of Terre California 4832 35-2051646
Haute
Emmis Television License Corporation of Terre Haute California 4832 35-2051642
Emmis 99.9 FM Radio License Corporation of Terre California 4832 35-2051618
Haute
Emmis 105.7 FM Radio License Corporation of California 4832 95-4663004
Indianapolis
Emmis Television License Corporation of New Orleans California 4833 35-2051239
Emmis 105.5 FM Radio License Corporation of Terre California 4832 35-2051649
Haute
(Exact name of Registrant as specified in its (State or other (Primary standard (I.R.S.
charter) jurisdiction of industrial Employer
incorporation or classification code Identification
organization) number) No.)
</TABLE>
15821 VENTURA BLVD.
SUITE 685
ENCINO, CALIFORNIA 91436
(818) 817-8522
(Address, including zip code and telephone number,
including area code, of principal executive offices)
J. SCOTT ENRIGHT, ESQ.
VICE PRESIDENT AND ASSOCIATE GENERAL COUNSEL
EMMIS COMMUNICATIONS CORPORATION
40 MONUMENT CIRCLE, 7TH FLOOR
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
------------------------------
<PAGE> 5
This information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell nor is it seeking an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 5, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
EMMIS COMMUNICATIONS CORPORATION LOGO
EMMIS COMMUNICATIONS CORPORATION
$300,000,000
OFFER TO EXCHANGE SERIES B 8 1/8% SENIOR SUBORDINATED NOTES DUE 2009
FOR ANY AND ALL OUTSTANDING 8 1/8% SENIOR SUBORDINATED NOTES DUE 2009
- --------------------------------------------------------------------------------
TERMS OF EXCHANGE OFFER
- - Expires 5:00 p.m., New York City time, , 1999, unless extended
- - All outstanding notes that are validly tendered and not withdrawn will be
exchanged
- - Tenders of outstanding notes may be withdrawn any time prior to the expiration
of the exchange offer
The notes are eligible for trading in The Portal(SM) Market, a subsidiary
of The Nasdaq Market, Inc.
WE ARE NOT MAKING AN OFFER TO EXCHANGE NOTES IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED.
FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER BEFORE
PARTICIPATING IN THIS EXCHANGE OFFER, SEE "RISK FACTORS" COMMENCING ON PAGE 14.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE NOTES TO BE DISTRIBUTED IN THE EXCHANGE OFFER, NOR
HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
, 1999
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary................. 1
Risk Factors....................... 10
Use of Proceeds.................... 19
Capitalization..................... 20
Selected Consolidated Financial and
Other Data....................... 21
Unaudited Pro Forma Condensed
Consolidated Financial Data...... 24
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 32
Business........................... 40
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Management......................... 48
Principal Shareholders............. 50
Description of Notes............... 52
Description of Certain
Indebtedness..................... 95
Certain Federal Income Tax
Considerations................... 98
The Exchange Offer................. 106
Plan of Distribution............... 118
Legal Matters...................... 119
Experts............................ 119
Where You Can Find More
Information...................... 120
</TABLE>
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including the financial statements and related notes, appearing
elsewhere in this prospectus or incorporated into this prospectus by reference.
All references to Emmis in this prospectus mean Emmis Communications Corporation
and its subsidiaries collectively, except where it is clear we mean only the
parent company.
THE COMPANY
We are a diversified media company with radio broadcasting, television
broadcasting and magazine publishing operations. We are the eighth largest radio
broadcaster in the United States based on total revenues. The thirteen FM radio
stations and three AM radio stations we own 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, Indianapolis and Terre Haute, Indiana. Our six television
stations, which we acquired in 1998, are located in New Orleans, Louisiana,
Mobile, Alabama, Green Bay, Wisconsin, Honolulu, Hawaii, Fort Myers, Florida and
Terre Haute, Indiana.
Our strategy is to selectively acquire underdeveloped media properties in
desirable markets and then to create value by developing those properties to
increase their cash flow. We find such underdeveloped properties attractive
because they offer greater potential for revenue and cash flow growth than
mature properties.
In addition to our domestic broadcasting properties, we operate news and
agricultural information radio networks in Indiana, publish the Indianapolis
Monthly, Atlanta, Cincinnati, Texas Monthly and Country Sampler magazines, and
have a 54% interest in a national radio station in Hungary. We also engage in
various businesses ancillary to our broadcasting business, such as consulting
and broadcast tower leasing.
1
<PAGE> 8
SUMMARY OF THE EXCHANGE OFFER
Registration Rights
Agreement................ You have the right to exchange your notes for
registered notes with substantially identical
terms. This exchange offer is intended to satisfy
these rights. After the exchange offer is complete,
you will no longer be entitled to any exchange or
registration rights with respect to your notes.
The Exchange Offer......... We are offering to exchange $1,000 principal amount
of Emmis' 8 1/8% Senior Subordinated Notes due 2009
which have been registered under the Securities Act
for each $1,000 principal amount at maturity of
Emmis' outstanding 8 1/8% Senior Subordinated Notes
due 2009 which were issued in February 1999 in a
private offering. In order to be exchanged, an
outstanding note must be properly tendered and
accepted. We will exchange all notes validly
tendered and not validly withdrawn. As of this date
there is $300,000,000 aggregate principal amount of
notes outstanding. We will issue registered notes
on or promptly after the expiration of the exchange
offer.
Resales.................... We believe that the registered notes may be offered
for resale, resold and otherwise transferred by you
without compliance with the registration and
prospectus delivery provisions of the Securities
Act provided that:
- you acquire the registered notes issued in the
exchange offer in the ordinary course of your
business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the registered notes issued
to you in the exchange offer; and
- you are not an "affiliate," as defined under Rule
405 of the Securities Act, of Emmis.
If our belief is inaccurate and you transfer any
registered note issued to you in the exchange offer
without delivering a prospectus meeting the
requirements of the Securities Act or without an
exemption of your registered notes from such
requirements, you may incur liability under the
Securities Act. We do not assume or indemnify you
against such liability. Each broker-dealer that
issued registered notes for its own account in
exchange for outstanding notes which were acquired
by such broker-dealer as a result of market-making
or other trading activities must acknowledge that
it will deliver a prospectus meeting the
requirements of the Securities Act in connection
with any resale of the registered notes. A
broker-dealer may use
2
<PAGE> 9
this prospectus for an offer to resell, resale or
other retransfer of the registered notes issued to
it in the exchange offer.
Record Date................ We mailed this prospectus and the related exchange
offer documents to registered holders of
outstanding notes on , 1999.
Expiration Date............ The exchange offer will expire at 5:00 p.m., New
York City time, , 1999, unless we decide
to extend the expiration date.
Conditions to the Exchange
Offer.................... We may terminate or amend the exchange offer if:
- any legal proceeding, government action or other
adverse development materially impairs our
ability to complete the exchange offer;
- any SEC rule, regulation or interpretation
materially impairs the exchange offer; or
- we have not obtained any necessary governmental
approvals with respect to the exchange offer.
We may waive any or all of these conditions. At
this time, there are no adverse proceedings,
actions or developments pending or, to our
knowledge, threatened and no governmental approvals
are necessary to complete the exchange offer.
Procedures for Tendering
Outstanding Notes........ Each holder of outstanding notes wishing to accept
the exchange offer must:
- complete, sign and date the accompanying letter
of transmittal, or a facsimile thereof; or
- arrange for DTC to transmit certain required
information to the exchange agent in connection
with a book-entry transfer.
You must mail or otherwise deliver such
documentation and your outstanding notes to IBJ
Whitehall Bank and Trust Company, as exchange
agent, at the address set forth under "The Exchange
Offer -- Exchange Agent." By tendering your
outstanding notes in this manner, you will be
representing, among other things, that:
- you are acquiring the registered notes pursuant
to the exchange offer in the ordinary course of
your business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to
3
<PAGE> 10
participate, in the distribution of the
registered notes issued to you in the exchange
offer; and
- you are not an affiliate of Emmis.
Untendered Outstanding
Notes.................... If you are eligible to participate in the exchange
offer and you do not tender your outstanding notes,
you will not have any further registration or
exchange rights and your outstanding notes will
continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market
for such outstanding notes could be adversely
affected.
Special Procedures for
Beneficial Owners........ If you beneficially own outstanding notes
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
you wish to tender your outstanding notes in the
exchange offer, you should contact such registered
holder promptly and instruct it to tender on your
behalf. If you wish to tender on your own behalf,
you must, prior to completing and executing the
letter of transmittal for the exchange offer and
delivering your outstanding notes, either arrange
to have your outstanding notes registered in your
name or obtain a properly completed bond power from
the registered holder. The transfer of registered
ownership may take considerable time.
Guaranteed Delivery
Procedures............... If you wish to tender your outstanding notes and
time will not permit your required documents to
reach the exchange agent by the expiration date of
the exchange offer, or you cannot complete the
procedure for book-entry transfer on time or you
cannot deliver certificates for your outstanding
notes on time, you may tender your outstanding
notes pursuant to the procedures described in this
prospectus under the heading "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... You may withdraw the tender of your outstanding
notes at any time prior to 5:00 p.m., New York City
time, on , 1999.
Certain U.S. Federal Tax
Considerations........... The exchange of notes will not be a taxable event
for United States federal income tax purposes.
Use of Proceeds............ We will not receive any proceeds from the issuance
of registered notes pursuant to the exchange offer.
We will pay all our expenses incident to the
exchange offer.
Exchange Agent............. IBJ Whitehall Bank and Trust Company is serving as
the exchange agent in connection with the exchange
offer.
4
<PAGE> 11
SUMMARY OF TERMS OF THE REGISTERED NOTES
The form and terms of the registered notes are the same as the form and
terms of the outstanding notes except that the registered notes will be
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer and will not be entitled to registration under the
Securities Act. In this regard, we use the term "notes" when describing
provisions that govern or otherwise pertain to both the outstanding notes and
the registered notes. The registered notes will evidence the same debt as the
outstanding notes, and the same indenture will govern both the registered notes
and the outstanding notes.
Issuer..................... Emmis Communications Corporation
Securities Offered......... $300 million aggregate principal amount of 8 1/8%
Senior Subordinated Notes due 2009.
Maturity Date.............. March 15, 2009.
Interest Payment Dates..... Interest on the notes will accrue at the rate of
8 1/8% per year, payable semi-annually in cash in
arrears on March 15 and September 15 of each year,
commencing September 15, 1999.
Optional Redemption........ Emmis can redeem the notes, in whole or in part, on
or after March 15, 2004, at the redemption prices
set forth in this prospectus, plus accrued and
unpaid interest. In addition, before March 15,
2002, Emmis can redeem up to 35% of the notes at
108.125% of the principal amount thereof, plus
accrued and unpaid interest, with the net cash
proceeds from certain common stock offerings.
Guarantees................. The notes will be fully and unconditionally
guaranteed by our existing wholly-owned
subsidiaries and certain future subsidiaries. These
guarantees will be subordinate in right of payment
to all existing and future senior indebtedness of
our subsidiary guarantors. These subsidiary
guarantees will rank equal to other existing and
future senior subordinated indebtedness of the
subsidiary guarantors and senior in right of
payment to all of the existing and future
obligations of the subsidiary guarantors that are
expressly subordinated in right of payment to the
subsidiary guarantees.
Change of Control.......... Upon the occurrence of certain change of control
events, you may require Emmis to repurchase all or
a portion of your notes at 101% of the principal
amount thereof, plus accrued and unpaid interest.
Ranking.................... The notes:
- are general unsecured obligations of Emmis;
- rank equally with all of our other existing and
future senior subordinated indebtedness;
5
<PAGE> 12
- are senior in right of payment to existing and
future obligations expressly subordinated in
right of payment to the notes; and
- rank junior to all existing and future senior
debt, as defined in the indenture governing the
notes.
Anti-Layering.............. Emmis will not incur any indebtedness that is
subordinate in right of payment to any of our
senior debt and senior in any respect in right of
payment to the notes. No subsidiary guarantor will
incur any indebtedness that is subordinate in right
of payment to any senior debt of such subsidiary
guarantor and senior in any respect in right of
payment to its subsidiary guarantee.
Certain Covenants.......... The indenture governing the notes contains
covenants that, among other things, limit our
ability and the ability of our subsidiaries to:
- pay or permit payment of certain dividends on,
redeem or repurchase its capital stock;
- make certain investments;
- incur additional indebtedness;
- allow the imposition of dividend restrictions on
certain subsidiaries;
- sell assets;
- guarantee indebtedness;
- issue capital stock;
- create certain liens;
- engage in certain transactions with affiliates;
and
- consolidate or merge or sell all or
substantially all our assets and the assets of
our subsidiaries.
All of these limitations are subject to important
exceptions and qualifications.
6
<PAGE> 13
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following sets forth summary unaudited pro forma financial data derived
from the unaudited pro forma condensed consolidated financial data included
elsewhere in this prospectus. The unaudited pro forma condensed consolidated
statement of operations data for the year ended February 28, 1998 reflect
adjustments to our condensed consolidated historical operating data to give
effect to:
- the acquisitions of three radio stations in St. Louis, two radio
stations in Indianapolis and Texas Monthly and the disposition of the
St. Louis AM radio station, all of which occurred during the year ended
February 28, 1998,
- the acquisition of WQCD-FM in New York City,
- our equity offering in June 1998 and the amendment and restatement of
our Credit Facility in July 1998,
- the acquisition of four television stations in New Orleans, Louisiana,
Mobile, Alabama, Green Bay, Wisconsin and Honolulu, Hawaii from various
SF Broadcasting entities,
- the acquisition of two television stations in Fort Myers, Florida and
Terre Haute, Indiana and three radio stations in Terre Haute from Wabash
Valley Broadcasting and
- the offering of the outstanding notes and a concurrent amendment to the
Credit Facility
as if such transactions had occurred at the beginning of the year presented.
The unaudited pro forma condensed consolidated statement of operations data
for the nine months ended November 30, 1998 reflect adjustments to our condensed
consolidated historical operating data to give effect to:
- the WQCD acquisition,
- the 1998 equity offering and the Credit Facility restatement,
- the SF acquisition,
- the Wabash Valley acquisition and
- the offering of the outstanding notes and the Credit Facility amendment,
as if such transactions had occurred at the beginning of the period presented.
The unaudited pro forma condensed consolidated statement of operations data
for the twelve months ended November 30, 1998 reflect adjustments to our
condensed consolidated historical operating data to give effect to:
- the acquisition of Texas Monthly,
- the WQCD acquisition,
- the 1998 equity offering and the Credit Facility restatement,
- the SF acquisition,
- the Wabash Valley acquisition and
- the offering of the outstanding notes and the Credit Facility amendment,
as if such transactions had occurred at the beginning of the period presented.
7
<PAGE> 14
The summary unaudited pro forma financial data does not purport to present
the actual results of operations of Emmis had the transactions and events
assumed therein in fact occurred on the dates specified, nor are they
necessarily indicative of the results of operations that may be achieved in the
future. The summary unaudited pro forma financial data are based on certain
assumptions and adjustments described in the notes to the unaudited pro forma
condensed consolidated financial data and should be read in conjunction with
those notes. The pro forma data presented below should also be read in
conjunction with, and are qualified in their entirety by reference to, our
consolidated financial statements for the year ended February 28, 1998 and our
unaudited condensed consolidated financial statements for the nine months ended
November 30, 1998 and related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" which are incorporated in this
prospectus by reference.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
-------------------------------------------------------------
FISCAL YEAR ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
FEBRUARY 28, 1998 NOVEMBER 30, 1998 NOVEMBER 30, 1998
----------------- ----------------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues....................... $ 242,968 $ 205,419 $ 258,122
Operating expenses................. 158,889 125,612 164,087
International business development
expenses........................... 999 974 1,041
Corporate expenses................. 9,286 7,488 9,763
Depreciation and amortization...... 31,656 26,361 34,220
Noncash compensation............... 1,482 2,378 328
----------- ----------- -----------
Operating income................... 40,656 42,606 48,683
Interest expense................... 48,919 37,337 49,450
Other income (expense) net......... (173) 4,013 (1,195)
----------- ----------- -----------
Income (loss) before income
taxes.............................. (8,436) 9,282 (1,962)
Provision (benefit) for income
taxes.............................. (1,600) 5,800 900
----------- ----------- -----------
Net income (loss).................. $ (6,836) $ 3,482 $ (2,862)
=========== =========== ===========
Basic net income (loss) per
share.............................. $ (.44) $ .22 $ (.18)
=========== =========== ===========
Diluted net income
(loss) per Share................... $ (.44) $ .22 $ (.18)
=========== =========== ===========
Weighted average
common shares outstanding:
Basic............................ 15,503,333 15,635,719 15,635,719
Diluted.......................... 15,503,333(10) 16,036,855 15,635,719(10)
OTHER FINANCIAL DATA:
Broadcast/publishing cash
flow(1)............................ $ 84,079 $ 79,807 $ 94,035
Broadcast/publishing cash flow
margin(2).......................... 34.6% 38.9% 36.4%
Adjusted EBITDA(3)................. $ 73,794 $ 71,345 $ 83,231
Capital expenditures(4)...................................................... 40,179
EMMIS AND ITS RESTRICTED
SUBSIDIARIES(5):
Consolidated EBITDA(6)....................................................... $ 84,503
Cash interest expense........................................................ 46,318
Total indebtedness........................................................... 575,152
Interest coverage ratio(7)................................................... 1.8x
Leverage ratio(8)............................................................ 6.8
</TABLE>
8
<PAGE> 15
\
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
AS OF NOVEMBER 30, 1998
------------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA(9):
Working capital........................................... $ 5,746
Intangible assets......................................... 801,351
Total assets.............................................. 1,019,701
Total debt................................................ 591,958
Total shareholders' equity................................ 238,655
</TABLE>
- ---------------
(1) The Company evaluates performance of its operating entities based on
broadcast cash flow (BCF) and publishing cash flow (PCF). Management
believes that BCF and PCF are useful because they provide a meaningful
comparison of operating performance between companies in the industry and
serve as an indicator of the market value of a group of stations or
publishing entities. BCF and PCF are generally recognized by the broadcast
and publishing industries as a measure of performance and are used by
analysts who report on the performance of broadcasting and publishing
groups. BCF and PCF do not take into account Emmis' debt service
requirements and other commitments and, accordingly, BCF and PCF are not
necessarily indicative of amounts that may be available for dividends,
reinvestment in Emmis' business or other discretionary uses. BCF and PCF are
not measures of liquidity or of performance in accordance with generally
accepted accounting principles, and should be viewed as a supplement to and
not a substitute for our results of operations presented on the basis of
generally accepted accounting principles. Moreover, BCF and PCF are not
standardized measures and may be calculated in a number of ways. Emmis
defines BCF and PCF as revenues net of agency commissions and operating
expenses. The primary source of broadcast advertising revenues is the sale
of advertising time to local and national advertisers. Publishing entities
derive revenue from subscriptions and sale of print advertising inventory.
The most significant broadcast operating expenses are employee salaries and
commissions, costs associated with programming, advertising and promotion,
and station general and administrative costs. Significant publishing
operating expenses are employee salaries and commissions, costs associated
with producing the magazine, and general and administrative costs.
(2) Broadcast/publishing cash flow margin is defined as broadcast cash flow
divided by net broadcasting revenues.
(3) Adjusted EBITDA is defined as operating income plus depreciation and
amortization and noncash compensation expenses.
(4) Capital expenditures for the twelve months ended November 30, 1998 include
progress payments totaling $26,818 in connection with the construction of
our new Indianapolis office and studio facility.
(5) This information represents Emmis and its restricted subsidiaries (as
defined under the indenture) and, therefore, excludes the results of its
Unrestricted Subsidiary, Radio Hungaria Co. Ltd.
(6) Consolidated EBITDA as defined under the indenture for the notes. See
"Description of Notes -- Certain Definitions."
(7) Represents the ratio of Consolidated EBITDA to cash interest expense.
(8) Represents the ratio of consolidated indebtedness to Consolidated EBITDA.
(9) Unaudited pro forma balance sheet data are calculated based on the unaudited
historical balance sheet at November 30, 1998 plus the effects of the
offering of the outstanding notes and the Credit Facility amendment.
(10) 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.
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<PAGE> 16
RISK FACTORS
In connection with this exchange offer, you should consider carefully all
of the information in this prospectus and, in particular, the following factors.
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR
FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We have now and, after the offering, will continue to have a significant
amount of indebtedness. At November 30, 1998, on a pro forma basis assuming we
had completed the offering of the outstanding notes as of that date and applied
the proceeds as intended, our total indebtedness would have been approximately
$592.0 million and our stockholders' equity would have been approximately $238.7
million. Our substantial indebtedness could have important consequences to you.
For example, it could:
- make it more difficult for us to satisfy our obligations with respect to
these notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to finance future acquisitions and to fund working
capital, capital expenditures and other general corporate requirements;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other general corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors that
have less debt; and
- limit, along with the financial and other restrictive covenants in our
credit facility and the indenture governing the notes, among other
things, our ability to borrow additional funds. Failing to comply with
those covenants could result in an event of default which, if not cured
or waived, could have a material adverse effect on us.
ADDITIONAL BORROWINGS AVAILABLE -- DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND
OUR SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD
FURTHER EXACERBATE THE RISKS DESCRIBED ABOVE.
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture governing the notes, do
not fully prohibit us or our subsidiaries from doing so. Our credit facility
would permit additional borrowings of up to $475.1 million, and all of those
borrowings would be senior to the notes and the subsidiary guarantees. If new
debt is added to our and our subsidiaries' current debt levels, the related
risks that we and they now face could intensify.
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<PAGE> 17
ABILITY TO SERVICE DEBT -- TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness,
including the notes, and to fund planned capital expenditures will depend on our
ability to generate cash in the future. This, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control.
Based on our current level of operations and operating improvements, we
believe our cash flow from operations, available cash and available borrowings
under our credit facility will be adequate to meet our future liquidity needs
for at least the next few years.
We cannot assure you, however, that our business will generate sufficient
cash flow from operations, that currently anticipated operating improvements
will be realized on schedule or that future borrowings will be available to us
under our credit facility in an amount sufficient to enable us to pay our
indebtedness, including the notes, or to fund our other liquidity needs. We may
need to refinance all or a portion of our indebtedness, including the notes, on
or before maturity. We cannot assure you that we will be able to refinance any
of our indebtedness, including our credit facility and the notes, on
commercially reasonable terms or at all.
SUBORDINATION -- UPON ANY DISTRIBUTION TO OUR CREDITORS OR THE CREDITORS OF OUR
SUBSIDIARY GUARANTORS IN A BANKRUPTCY, LIQUIDATION, REORGANIZATION OR SIMILAR
PROCEEDING, OUR SENIOR CREDITORS AND THE SENIOR CREDITORS OF OUR SUBSIDIARY
GUARANTORS ARE ENTITLED TO BE PAID IN FULL BEFORE PAYMENT, IF ANY, CAN BE MADE
ON THE NOTES OR THE SUBSIDIARY GUARANTEES.
The notes and the subsidiary guarantees rank behind all of our and the
subsidiary guarantors' existing indebtedness and all of our and their future
borrowings, except any future indebtedness that expressly provides that it ranks
equal with, or is subordinated in right of payment to, the notes and the
subsidiary guarantees. As a result, upon any distribution to our creditors or
the creditors of the subsidiary guarantors in a bankruptcy, liquidation or
reorganization or similar proceeding relating to us or the subsidiary guarantors
or our or their property, the holders of senior debt of Emmis and the subsidiary
guarantors will be entitled to be paid in full in cash before any payment may be
made with respect to the notes or the subsidiary guarantees.
In addition, all payments on the notes and the subsidiary guarantees will
be blocked in the event of a payment default on senior debt and may be blocked
for up to 179 of 360 consecutive days in the event of certain non-payment
defaults on senior debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to Emmis or the subsidiary guarantors, holders of the notes
will participate with trade creditors and all other holders of subordinated
indebtedness of Emmis and the subsidiary guarantors in the assets remaining
after Emmis and the subsidiary guarantors have paid all of the senior debt.
However, because the indenture governing the notes requires that amounts
otherwise payable to holders of the notes in a bankruptcy or similar proceeding
be paid to holders of senior debt instead, holders of the notes may receive
less, ratably, than holders of trade payables in any such proceeding. In any of
these cases, Emmis and the subsidiary guarantors may not have sufficient funds
to pay all of our creditors and holders of notes may receive less, ratably, than
the holders of senior debt.
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<PAGE> 18
Assuming we had completed the offering of the outstanding notes on November
30, 1998, the notes and the subsidiary guarantees would have been subordinated
to $274.9 million of senior debt, and approximately $475.1 million would have
been available for borrowing as additional senior debt under our credit
facility. We will be permitted to borrow substantial additional indebtedness,
including senior debt, in the future under the terms of the indenture governing
the notes.
NOT ALL SUBSIDIARIES ARE GUARANTORS -- YOUR RIGHT TO RECEIVE PAYMENTS ON THE
NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR SUBSIDIARIES
DECLARES BANKRUPTCY, LIQUIDATES OR REORGANIZES.
Most but not all of our subsidiaries will guarantee the notes. In the event
of a bankruptcy, liquidation or reorganization of any of the non-guarantor
subsidiaries, holders of their indebtedness and their trade creditors will
generally be entitled to payment of their claims from the assets of those
subsidiaries before any assets are made available for distribution to us.
Assuming we had completed the offering of the outstanding notes on November 30,
1998, the notes would have been effectively junior to $27.8 million of
indebtedness and other liabilities (including trade payables) of these
non-guarantor subsidiaries. The non-guarantor subsidiaries generated 1.1% of our
consolidated revenues in the nine-month period ended November 30, 1998 and held
2.1% of our consolidated assets as of November 30, 1998.
FRAUDULENT CONVEYANCE MATTERS -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER
SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN
PAYMENTS RECEIVED FROM GUARANTORS.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that guarantor if, among
other things, the guarantor, at the time it incurred the indebtedness evidenced
by its guarantee:
- received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee; and
- was insolvent or rendered insolvent by reason of such incurrence; or
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could be
voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, were greater
than the fair saleable value of all of its assets, or
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<PAGE> 19
- if the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become
absolute and mature, or
- it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each subsidiary guarantor, after giving
effect to its guarantee of the notes, will not be insolvent, will not have
unreasonably small capital for the business in which it is engaged and will not
have incurred debts beyond its ability to pay such debts as they mature. There
can be no assurance, however, as to what standard a court would apply in making
such determinations or that a court would agree with our conclusions in this
regard.
NEW LINE OF BUSINESS -- IF WE CANNOT SUCCESSFULLY INTEGRATE AND OPERATE OUR
TELEVISION STATIONS, IT COULD ADVERSELY AFFECT OUR CASH FLOW AND, CONSEQUENTLY,
OUR ABILITY TO PAY PRINCIPAL AND INTEREST ON THE NOTES.
Until recently, we had concentrated our business operations in radio
broadcasting and magazine publishing and had not operated television stations.
In 1998, we acquired six television stations. Although we have hired a manager
with substantial television experience to manage our television stations, we
have no established operating history in the television industry, and we must
make the operations of these television stations a part of our operations. We
cannot be sure that our management can successfully integrate our newly-acquired
television stations into our business. If we experience any delays or unexpected
costs in that process, it could have an adverse effect on our business,
operating results or financial condition.
DEPENDENCE UPON ADVERTISING -- OUR REVENUES ARE SUBSTANTIALLY DEPENDENT UPON THE
DEMAND FOR ADVERTISING WHICH FLUCTUATES WITH GENERAL ECONOMIC CONDITIONS THAT WE
CANNOT CONTROL.
We derive substantially all of our revenues from the sale of advertising on
our radio and television stations. Because advertisers generally reduce their
spending during economic downturns, we could be adversely affected by a future
national recession. In addition, because a substantial portion of our revenues
are derived from local advertisers, our ability to generate advertising revenues
in specific markets could be adversely affected by local or regional economic
downturns. This is particularly true in New York, where our three radio stations
accounted for approximately 46.9% of our total pro forma broadcast cash flow for
the twelve months ended November 30, 1998.
RELIANCE ON PROGRAMMING -- IF WE CANNOT SECURE POPULAR PROGRAMMING FOR OUR
TELEVISION STATIONS AT A REASONABLE COST, IT COULD ADVERSELY AFFECT OUR CASH
FLOW AND, CONSEQUENTLY, OUR ABILITY TO PAY PRINCIPAL AND INTEREST ON THE NOTES.
A significant operating expense for our television stations is syndicated
programming. If the cost of syndicated programming increases in the future, it
may cause us to have lower net income. It is difficult to predict accurately how
a program will perform because television stations often must purchase program
rights two or three years in advance. In some instances, we may need to replace
programs early and write off a portion of their costs, which will increase our
operating expenses. In addition, because television stations need to purchase
syndicated
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<PAGE> 20
programming and develop original programming substantially in advance of the
date it is first broadcast, the audience ratings and broadcast cash flow of our
television stations will probably not improve for some time. If we cannot obtain
or develop certain types of programming at an acceptable cost, or at all, any
improvements in audience ratings or broadcast cash flow could take even longer
or not be as large.
LIMITATIONS ON ACQUISITION STRATEGY -- IF OUR STRATEGY TO GROW THROUGH
ACQUISITIONS IS LIMITED BY COMPETITION FOR SUITABLE PROPERTIES OR OTHER FACTORS
WE CANNOT CONTROL, IT COULD ADVERSELY AFFECT OUR CASH FLOW AND, CONSEQUENTLY,
OUR ABILITY TO PAY PRINCIPAL AND INTEREST ON THE NOTES.
We intend to selectively pursue acquisitions of television stations, radio
stations and publishing properties as our management believes appropriate. In
order for us to be successful with this strategy, we must be effective at
quickly evaluating markets, obtaining loans to buy stations and publishing
properties on satisfactory terms and obtaining the necessary governmental
authorizations. We must also do these tasks at reasonable costs. We compete with
many other buyers for television and radio stations. Many of those competitors
have much more money and other resources than we do. We cannot predict whether
we will be successful in buying stations or whether we will be successful with
any station we buy. Also, our strategy is to buy underperforming broadcast
properties and use our experience to improve their performance. Thus, we will
likely benefit over time from any station we buy, rather than immediately, and
we may need to pay large initial costs for these improvements.
COMPETITIVE NATURE OF BROADCASTING -- IF OUR STATIONS CANNOT KEEP OR INCREASE
THEIR CURRENT AUDIENCE RATINGS OR MARKET SHARE, IT COULD ADVERSELY AFFECT OUR
CASH FLOW AND, CONSEQUENTLY, OUR ABILITY TO PAY PRINCIPAL AND INTEREST ON THE
NOTES.
The broadcasting industry is very competitive. The success of each of our
stations is dependent upon its audience ratings and share of the overall
advertising revenues within its market. Our stations compete for audiences and
advertising revenues directly with other radio and television stations, and some
of the owners of those competing stations have much more money than we do. Our
stations also compete with other media such as cable television, newspapers,
magazines, direct mail, compact discs, music videos, the Internet and outdoor
advertising. Although we believe that each of our stations can compete
effectively in its broadcast area, we cannot be sure that any of our stations
can keep or increase its current audience ratings or market share. In addition,
other stations may change their format or programming to compete directly with
our stations for audience and advertisers, or engage in aggressive promotional
campaigns. If this happens, the ratings and advertising revenues of our stations
could decrease, the promotion and other expenses of our stations could increase,
and our stations would have lower broadcast cash flow.
New media technologies are also being introduced to compete with the
broadcasting industry. Some of these new technologies are as follows:
- Direct broadcast satellite systems, which provide video and audio
programming on a subscription basis to people with a satellite signal
receiving dish and decoder equipment. These systems claim to provide
high picture and sound quality. They do not usually
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<PAGE> 21
provide the signals of traditional over-the-air broadcast stations, and
thus are generally restricted to providing cable-oriented and premium
services.
- Digital audio broadcasting and satellite digital audio radio service,
which provide for the delivery of multiple new, high quality audio
programming formats to local and national audiences.
We cannot predict at this time the effect, if any, that any of these new
technologies may have on the radio or television broadcasting industry in
general or our stations in particular.
KEY EMPLOYEES -- THE LOSS OF ONE OR MORE KEY EXECUTIVES OR ON-AIR TALENT COULD
SERIOUSLY IMPAIR OUR ABILITY TO IMPLEMENT OUR STRATEGY.
Our business depends upon certain key employees, including Jeffrey H.
Smulyan, our Chief Executive Officer and President. We had an employment
agreement with Mr. Smulyan which expired in February 1999. We currently are
negotiating a new agreement for Mr. Smulyan. We are also in the process of
finalizing new employment agreements with certain other key employees. In each
of these cases, although we expect to enter into long-term agreements, we cannot
predict when or if such agreements will be completed and signed. In addition, we
employ several on-air personalities with significant loyal audiences. We
generally enter into long-term employment agreements with our key on-air talent,
but we cannot be sure that any of these on-air personalities will remain with
our company.
CONTROL OF OUR COMPANY -- ONE SHAREHOLDER CONTROLS A SUBSTANTIAL MAJORITY OF THE
COMMON STOCK VOTING POWER, AND HIS INTERESTS MAY CONFLICT WITH YOURS.
Jeffrey H. Smulyan holds shares representing approximately 68% of the
outstanding combined voting power of all classes of our common stock. As a
result of his voting power, Mr. Smulyan can control the outcome of most matters
submitted to a vote of our shareholders, including the election of a majority of
the directors. We cannot assure you that Mr. Smulyan's interest will align with
those of the holders of notes.
FUTURE CAPITAL COST OF DIGITAL CONVERSION -- IF THE COST OF EQUIPPING OUR
TELEVISION STATIONS WITH DIGITAL TELEVISION CAPABILITIES IS TOO GREAT, IT COULD
ADVERSELY AFFECT OUR CASH FLOW AND, CONSEQUENTLY, OUR ABILITY TO PAY PRINCIPAL
AND INTEREST ON THE NOTES.
Under current rules of the Federal Communications Commission, our
television stations will be required to broadcast a digital signal by May 2002
and then cease analog operations at the end of a digital television transition
period. Digital television will provide additional channels to television
broadcasters which can be used for multiple standard definition program
channels, data transfer and other services as well as digital video programming.
However, our costs to convert our television stations to digital television will
be significant, and we cannot predict whether or when there will be any consumer
demand for digital television services.
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UNITED STATES BROADCASTING INDUSTRY SUBJECT TO FEDERAL REGULATION -- OUR NEED TO
COMPLY WITH COMPREHENSIVE, COMPLEX AND SOMETIMES UNPREDICTABLE FEDERAL
REGULATIONS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS AND OUR ABILITY TO PAY
PRINCIPAL AND INTEREST ON THE NOTES.
The broadcasting industry in the United States is subject to extensive and
changing regulation by the Federal Communications Commission. Among other
things, the FCC is responsible for the following:
- Assigning frequency bands for broadcasting
- Determining the particular frequencies, locations and operating power of
stations
- Issuing, renewing, revoking and modifying station licenses
- Determining whether to approve changes in ownership or control of
station licenses
- Regulating equipment used by stations
- Adopting and implementing 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
applicable statutes. In particular, our 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 these licenses are
renewed by the FCC, we cannot be sure that any of our United States stations'
licenses will be renewed at their expiration date. If our licenses are renewed,
we cannot be sure that the FCC will not impose conditions or qualifications that
could cause problems in our business.
Although a recent amendment to the law loosened or eliminated many
restrictions on ownership of radio and television stations in the United States,
we are still restricted from owning more than a certain number of stations in
any United States market. This restriction, as well as rules which could
"attribute" ownership of broadcast properties by other persons to us because
those persons are associated with us, may limit our ability to purchase stations
we would otherwise wish to buy.
The law also limits the ability of non-U.S. persons to own our voting
capital stock and to participate in our affairs. Our articles of incorporation
contain provisions which place restrictions on the ownership, voting and
transfer of our capital stock in accordance with the law.
INTANGIBLE ASSETS -- WE HAVE A SUBSTANTIAL AMOUNT OF INTANGIBLE ASSETS WHOSE
LIQUIDATION VALUE MIGHT NOT BE SUFFICIENT FOR US TO REPAY ALL OUR SENIOR DEBT
AND THE NOTES.
At November 30, 1998, approximately 79% of our total assets consisted of
intangible assets, such as broadcast licenses, excess of cost over fair value of
net assets of purchased businesses, subscription lists and similar assets, the
value of which depends significantly upon the continued operation of our
business. As a consequence, in the event of a default or any other event which
would result in a liquidation of our assets to pay our indebtedness, we cannot
assure you that the proceeds would be sufficient to repay our outstanding
indebtedness, including the notes.
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INTERNATIONAL BUSINESS RISKS -- OUR CURRENT AND ANY FUTURE INTERNATIONAL
OPERATIONS ARE SUBJECT TO CERTAIN RISKS THAT ARE UNIQUE TO OPERATING IN A
FOREIGN COUNTRY.
We currently own a 54% interest in a national radio station in Hungary, and
we intend to pursue opportunities to buy broadcasting properties in other
foreign countries. The risks of doing business in foreign countries include the
following:
- Changing regulatory or taxation policies
- Currency exchange risks
- Changes in diplomatic relations or hostility from local populations
- The risk that our property could be taken by the government, or that our
ability to transfer our property or earnings out of the foreign country
will be restricted
- Potential instability of foreign governments, which might result in
losses against which we are not insured.
Although we will try to evaluate the risks before we purchase a station in a
foreign country, we cannot be sure whether any of these risks will have an
effect on our business in the future.
FINANCING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FINANCE A CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE
GOVERNING THE NOTES.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all notes then outstanding. However,
it is possible that we will not have sufficient funds at the time of the change
of control to make the required repurchase of notes or that restrictions in our
credit facility will not allow such repurchases. In addition, certain important
corporate events, such as leveraged recapitalizations that would increase the
level of our indebtedness, would not constitute a "change of control" under the
indenture governing the notes.
NO PRIOR MARKET FOR THE NOTES -- YOU CANNOT BE SURE THAT AN ACTIVE TRADING
MARKET WILL DEVELOP FOR THE NOTES.
The outstanding notes were not registered under the Securities Act or under
the securities laws of any state and may not be resold unless they are
subsequently registered or an exemption from the registration requirements of
the Securities Act and applicable state securities laws is available. The
registered notes will be registered under the Securities Act, but will
constitute a new issue of securities with no established trading market, and
there can be no assurance as to:
- the liquidity of any such market that may develop;
- the ability of registered note holders to sell their notes; or
- the price at which the registered note holders would be able to sell
their notes. If such a market were to exist, the registered notes may
trade at higher or lower prices than their principal amount or purchase
price, depending on many factors, including prevailing interest rates,
the market for similar debentures and the financial performance of
Emmis.
The notes are designated for trading among qualified institutional buyers
in The Portal(SM) Market. We understand that Credit Suisse First Boston
Corporation, Lehman Brothers Inc. and
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<PAGE> 24
CIBC Oppenheimer Corp. presently intend to make a market in the notes. However,
they are not obligated to do so, and any market-making activity with respect to
the notes may be discontinued at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act and the Securities Exchange Act of 1934, and may be limited during the
exchange offer or the pendency of an applicable shelf registration statement.
There can be no assurance that an active trading market will exist for the notes
or that such trading market will be liquid.
Notes that are not tendered or are tendered but not accepted will,
following the consummation of the exchange offer, continue to be subject to the
existing restrictions upon transfer, and, upon consummation of the exchange
offer, certain registration rights with respect to the outstanding notes will
terminate. In addition, any outstanding note holder who tenders in the exchange
offer for the purpose of participating in a distribution of the registered notes
may be deemed to have received restricted securities, and if so, will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. To the extent that
outstanding notes are tendered and accepted in the exchange offer, the trading
market for untendered and tendered but unaccepted outstanding notes could be
adversely affected.
WE ARE NOT OBLIGATED TO NOTIFY YOU OF UNTIMELY OR DEFECTIVE TENDERS OF
OUTSTANDING NOTES.
We will issue registered notes pursuant to this exchange offer only after a
timely receipt of your outstanding notes, a properly completed and duly executed
letter of transmittal and all other required documents. Therefore, if you want
to tender your outstanding notes, please allow sufficient time to ensure timely
delivery. We are under no duty to give notification of defects or irregularities
with respect to the tenders of outstanding notes for exchange.
SOME OF OUR FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS MAY NOT TURN OUT TO BE
CORRECT.
Some of the statements contained in this prospectus are forward-looking.
All statements regarding our expected financial position, business and financing
plans are forward-looking statements. These statements can sometimes be
identified by our use of forward-looking words such as "may," "will," "should,"
"expect," "anticipate," "estimate" or "continue." Although we believe that our
expectations in such forward-looking statements are reasonable, we cannot
promise that our expectations will turn out to be correct. Actual results could
be materially different from and worse than our expectations for various
reasons, including those discussed in this section.
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USE OF PROCEEDS
Emmis will not receive any cash proceeds from the issuance of the
registered notes in exchange for the outstanding notes. In consideration for
issuing the registered notes, Emmis will receive outstanding notes in like
original principal amount at maturity. Outstanding notes received in the
exchange offer will be cancelled.
The net proceeds to Emmis from the original issuance of the outstanding
notes, after deducting discount and estimated expenses, were approximately
$291.3 million. We used approximately $26.1 million of the net proceeds to
retire our $25 million promissory note, including accrued interest, representing
a portion of the purchase price of the four television stations we acquired in
the SF acquisition, and used the remainder of the net proceeds to reduce the
outstanding balance on our credit facility. For more information regarding the
SF note and our credit facility, see "Description of Certain Indebtedness."
As of February 12, 1999, we had aggregate amounts outstanding under our
credit facility of $552.0 million prior to application of net proceeds from the
sale of the outstanding notes. All amounts outstanding under our credit facility
bear interest at a rate that fluctuates with an applicable margin based on our
leverage ratio plus a bank base rate or a Eurodollar base rate as applicable. At
February 12, 1999, the weighted average interest rate on our credit facility was
approximately 7.3%. Outstanding indebtedness under our credit facility has been
incurred primarily to pay for acquisitions. The SF note accrued interest at 8.0%
per annum and was scheduled to mature in July 1999.
Our credit facility, as amended and restated as of July 16, 1998, provided
availability of $750 million in loans, which could be increased to $1.0 billion
with the consent of the lenders. Concurrently with the offering of the
outstanding notes, our lenders amended the credit facility to permit Emmis to
complete the offering and use the proceeds of the offering as described above.
As so amended, the credit facility provides for the following:
- A $400 million senior secured revolving credit facility with a final
maturity date of August 31, 2006;
- A $250 million senior secured amortizing term loan with a final maturity
date of February 28, 2007; and
- A $100 million senior secured acquisition revolving credit/term loan
facility with a final maturity date of August 31, 2006, which will
terminate if not utilized prior to July 1999.
See "Description of Certain Indebtedness -- Amendment to Credit Facility."
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CAPITALIZATION
The following table sets forth the capitalization of Emmis as of November
30, 1998 and as adjusted to reflect the application of the net proceeds from the
offering of the outstanding notes in the manner described in "Use of Proceeds"
and the amendment of our credit facility, as described in "Description of
Certain Indebtedness -- Amendment to Credit Facility." Read the following
information in conjunction with our consolidated financial statements and
related notes, which are incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1998
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current maturities:
Credit facility......................................... $539,000 $274,946
SF note................................................. 25,000 --
Capital leases.......................................... 206 206
Hungarian radio debt(1)................................. 16,806 16,806
8 1/8% Senior Subordinated Notes due 2009............... -- 300,000
-------- --------
Total long-term debt................................. 581,012 591,958
Total shareholders' equity................................ 238,655 238,655
-------- --------
Total capitalization.............................. $819,667 $830,613
======== ========
</TABLE>
- ------------------------------
(1) Hungarian radio debt represents obligations of our 54% owned Hungarian
subsidiary which are consolidated in our financial statements due to our
majority ownership interest. However, Emmis is not a guarantor of or
required to fund these obligations. See "Description of Certain
Indebtedness -- Hungarian Radio Debt."
20
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The selected consolidated financial and other data have been derived,
except as otherwise noted, from the consolidated financial statements of Emmis
for the years ended February (29) 28, 1994, 1995, 1996, 1997 and 1998 which have
been audited by Arthur Andersen LLP and from the unaudited condensed
consolidated financial statements of Emmis for the nine months ended November
30, 1997 and 1998. The selected consolidated financial and other data presented
below should be read in conjunction with, and are qualified in their entirety by
reference to, our consolidated financial statements for the years ended February
(29) 28, 1996, 1997, and 1998 and to our unaudited condensed consolidated
financial statements for the nine months ended November 30, 1997 and 1998 and
related notes, both of which are incorporated by reference in this prospectus,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED FEBRUARY (29) 28, NOVEMBER 30,
----------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1997 1998
------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues.................. $55,664 $ 74,604 $ 109,244 $ 113,720 $ 140,583 $ 108,147 $ 174,132
Operating expenses............ 34,064 45,990 62,466 62,433 81,170 59,143 102,521
International business
development expenses........ -- 313 1,264 1,164 999 932 974
Corporate expenses............ 2,766 3,700 4,419 5,929 6,846 5,338 6,379
Depreciation and
amortization................ 2,812 3,827 5,677 5,481 7,536 5,407 18,595
Noncash compensation.......... 1,724 600 3,667 3,465 1,482 3,532 2,378
Time brokerage fee............ -- -- -- -- 5,667 3,542 2,220
------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income.............. 14,298 20,174 31,751 35,248 36,883 30,253 41,065
Interest expense(1)........... (13,588) (7,849) (13,540) (9,633) (13,772) (10,356) (24,942)
Minority interest............. -- -- -- -- -- -- 1,875
Loss on donation of radio
station..................... -- -- -- -- (4,833) -- --
Other income (expense), net... (367) (170) (303) 325 6 322 2,313
------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes and
extraordinary item.......... 343 12,155 17,908 25,940 18,284 20,219 20,311
Provision for income taxes.... 1,300 4,528 7,600 10,500 7,200 8,100 11,350
------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary item.......... (957) 7,627 10,308 15,440 11,084 12,119 8,961
------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)............. $(4,365) $ 7,627 $ 10,308 $ 15,440 $ 11,084 $ 12,119 $ 7,364
Net income (loss) available to
common shareholders......... (5,853) 7,627 10,308 15,440 11,084 12,119 7,364
Basic net income (loss) per
share....................... (.83) $ .72 $ .96 $ 1.41 $ 1.02 $ 1.10 $ .52
Diluted net income (loss) per
share....................... $ (.83) $ .70 $ .93 $ 1.37 $ .98 $ 1.06 $ .51
Weighted average common shares
outstanding:
Basic....................... 7,080,172 10,557,328 10,690,677 10,942,996 10,903,333 11,034,856 14,046,628
Diluted..................... 7,080,172 10,831,695 11,083,504 11,291,225 11,361,881 11,450,283 14,447,764
</TABLE>
(footnotes on following page)
21
<PAGE> 28
<TABLE>
<CAPTION>
AS OF FEBRUARY (29) 28, AS OF
---------------------------------------------------- NOVEMBER 30,
1994 1995 1996 1997 1998 1998
-------- -------- -------- -------- -------- ------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents......... $ 1,607 $ 3,205 $ 1,218 $ 1,191 $ 5,785 $ 5,320
Working capital....... 6,210 10,088 14,761 15,463 23,083 (20,337)
Net intangible
assets(2)........... 30,751 139,729 135,830 131,743 234,558 801,351
Total assets.......... 57,849 183,441 176,566 189,716 333,388 1,009,838
Total debt............ 92,345 152,322 124,257 115,172 231,422 580,962
Redeemable preferred
stock............... 11,250 -- -- -- -- --
Shareholders' equity
(deficit)........... (54,229) (2,661) 13,884 34,422 43,910 238,655
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED FEBRUARY (29) 28, NOVEMBER 30,
----------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1997 1998
------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Broadcast/publishing cash
flow(3)...................... $21,600 $ 28,614 $ 46,778 $ 51,287 $ 59,413 $ 49,004 $ 71,611
Broadcast/publishing cash flow
margin(4).................... 38.8% 38.4% 42.8% 45.1% 42.3% 45.3% 41.1%
Adjusted EBITDA(5)............. $18,834 $ 24,601 $ 41,095 $ 44,194 $ 51,568 $ 42,734 $ 64,258
Cash flows from:
Operating activities.......... (4,177) 15,480 23,221 21,362 22,487 13,534 30,365
Investing activities.......... 10,368 (102,682) 222 (13,919) (116,693) (61,480) (530,264)
Financing activities.......... (7,726) 88,800 (25,430) (7,470) 98,800 59,048 500,087
Capital expenditures(6)........ 659 1,081 1,396 7,559 16,991 6,492 26,224
Ratio of earnings to fixed
charges(7)................... 1.0x 2.4x 2.4x 3.4x 2.2 2.8x 1.7
</TABLE>
- ------------------------------
(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 $1,920 and $910 for the periods ended
November 30, 1997 and 1998, respectively.
(2) 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.
(3) The Company evaluates performance of its operating entities based on
broadcast cash flow (BCF) and publishing cash flow (PCF). Management
believes that BCF and PCF are useful because they provide a meaningful
comparison of operating performance between companies in the industry and
serve as an indicator of the market value of a group of stations or
publishing entities. BCF and PCF are generally recognized by the broadcast
and publishing industries as a measure of performance and are used by
analysts who report on the performance of broadcasting and publishing
groups. BCF and PCF do not take into account Emmis' debt service
requirements and other commitments and, accordingly, BCF and PCF are not
necessarily indicative of amounts that may be available for dividends,
reinvestment in Emmis' business or other discretionary uses. BCF and PCF are
not measures of liquidity or of performance in accordance with generally
accepted accounting principles, and should
22
<PAGE> 29
be viewed as a supplement to and not a substitute for our results of
operations presented on the basis of generally accepted accounting
principles. Moreover, BCF and PCF are not standardized measures and may be
calculated in a number of ways. Emmis defines BCF and PCF as revenues net of
agency commissions and operating expenses. The primary source of broadcast
advertising revenues is the sale of advertising time to local and national
advertisers. Publishing entities derive revenue from subscriptions and sale
of print advertising inventory. The most significant broadcast operating
expenses are employee salaries and commissions, costs associated with
programming, advertising and promotion, and station general and
administrative costs. Significant publishing operating expenses are employee
salaries and commissions, costs associated with producing the magazine, and
general and administrative costs.
(4) Broadcast cash flow margin is defined as broadcast/publishing cash flow
divided by net revenues.
(5) Adjusted EBITDA is defined as broadcast/publishing cash flow less corporate
and international business development expenses.
(6) Capital expenditures for the year ended February 28, 1998 and nine months
ended November 30, 1997 and 1998 include progress payments totaling $11,775,
$4,342 and $19,385, respectively, in connection with the construction of our
new Indianapolis office and studio facility.
(7) Earnings are calculated by adding fixed charges, excluding capitalized
interest, to pre-tax income excluding minority interest in loss of
consolidated subsidiary. Fixed charges include interest, whether expensed or
capitalized, the interest component of rental expenses and amortization of
debt issuance costs.
23
<PAGE> 30
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial data
reflect the unaudited pro forma condensed consolidated results of operations
data of Emmis for the year ended February 28, 1998, the nine months ended
November 30, 1998 and the twelve months ended November 30, 1998. The unaudited
pro forma condensed consolidated statement of operations data for the year ended
February 28, 1998 reflect adjustments to our condensed consolidated historical
operating data to give effect to:
- the acquisition of five radio stations and Texas Monthly and disposition
of a radio station, all of which occurred during the year ended February
28, 1998,
- the WQCD acquisition,
- the 1998 equity offering and the Credit Facility restatement,
- the SF acquisition,
- the Wabash Valley acquisition, and
- the offering of the outstanding notes and the Credit Facility amendment,
as if such transactions had occurred at the beginning of the year presented.
The unaudited pro forma condensed consolidated statement of operations data
for the nine months ended November 30, 1998 reflect adjustments to our condensed
consolidated historical operating data to give effect to:
- the WQCD acquisition,
- the 1998 equity offering and the Credit Facility restatement,
- the SF acquisition,
- the Wabash Valley acquisition, and
- the offering of the outstanding notes and the Credit Facility amendment,
as if such transactions had occurred at the beginning of the period presented.
The unaudited pro forma condensed consolidated statement of operations data
for the twelve months ended November 30, 1998 reflect adjustments to our
condensed consolidated historical operating data to give effect to:
- the acquisition of Texas Monthly,
- the WQCD acquisition,
- the 1998 equity offering and the Credit Facility restatement,
- the SF acquisition,
- the Wabash Valley acquisition, and
- the offering of the outstanding notes and the Credit Facility amendment,
as if such transactions had occurred at the beginning of the period presented.
24
<PAGE> 31
Except as otherwise noted, the unaudited pro forma condensed consolidated
financial data are based on historical consolidated financial statements of
Emmis and the entities from which assets were acquired in connection with
certain of the transactions referred to above, and should be read in conjunction
with our consolidated financial statements for the year ended February 28, 1998,
our unaudited condensed consolidated financial statements for the nine months
ended November 30, 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 of Wisconsin, Inc. and SF Multistations, Inc. and
subsidiaries for the year ended December 28, 1997, incorporated in this
prospectus by reference. In the opinion of management, all adjustments necessary
to fairly present pro forma data have been made.
The unaudited pro forma data are presented for illustrative purposes only
and are 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.
25
<PAGE> 32
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1998
<TABLE>
<CAPTION>
EQUITY
OFFERING WABASH
FISCAL 1998 WQCD AND CREDIT SF VALLEY
HISTORICAL TRANSACTIONS ACQUISITION FACILITY ACQUISITION ACQUISITION
---------- ------------ ----------- ---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues............................ $ 140,583 $25,540(3) $ 6,773(5) -- $ 52,934(8) $17,138(8)
Operating expenses...................... 81,170 22,423(3) 3,570(5) -- 38,775(8) 12,951(8)
International business development
expenses............................... 999 -- -- -- -- --
Corporate expenses...................... 6,846 -- -- -- 1,940(8) 500(8)
Depreciation and amortization........... 7,536 3,540(4) 5,240(4) -- 11,968(4) 3,372(4)
Noncash compensation.................... 1,482 -- -- -- -- --
Time brokerage fee...................... 5,667 -- (5,667)(5) -- -- --
---------- ------- -------- --------- -------- -------
Operating income (loss)................. 36,883 (423) 3,630 -- 251 315
---------- ------- -------- --------- -------- -------
Other income (expense):
Interest expense(1).................... (13,772) (3,840)(3) (10,215)(6) 12,871(7) (24,506)(9) (7,095)(11)
Other income (expense), net............ (234)(10)
(4,827) 4,833(3) -- -- 55(8) --
---------- ------- -------- --------- -------- -------
Total other income (expense)......... (18,599) 993 (10,215) 12,871 (24,685) (7,095)
---------- ------- -------- --------- -------- -------
Income (loss) before income taxes....... 18,284 570 (6,585) 12,871 (24,434) (6,780)
Provision (benefit) for income
taxes(2)............................... 7,200 188 (2,169) 4,239 (8,047) (2,233)
---------- ------- -------- --------- -------- -------
Net income (loss)....................... $ 11,084 $ 382 $ (4,416) $ 8,632 $(16,387) $(4,547)
========== ======= ======== ========= ======== =======
Basic net income (loss) per share....... $ 1.02
==========
Diluted net income (loss) per share..... $ .98
==========
Weighted average common shares
outstanding:
Basic.................................. 10,903,333 -- -- 4,600,000(13) -- --
Diluted................................ 11,361,881 -- -- 4,600,000(13) -- --
<CAPTION>
NOTES
OFFERING AND
CREDIT FACILITY
SUBTOTAL AMENDMENT PRO FORMA
-------- --------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues............................ $242,968 -- $ 242,968
Operating expenses...................... 158,889 -- 158,889
International business development
expenses............................... 999 -- 999
Corporate expenses...................... 9,286 -- 9,286
Depreciation and amortization........... 31,656 -- 31,656
Noncash compensation.................... 1,482 -- 1,482
Time brokerage fee...................... -- -- --
-------- ------- ----------
Operating income (loss)................. 40,656 -- 40,656
-------- ------- ----------
Other income (expense):
Interest expense(1).................... (46,557) (2,362)(12) (48,919)
Other income (expense), net............ (234) -- (234)
61 -- 61
-------- ------- ----------
Total other income (expense)......... (46,730) (2,362) (49,092)
-------- ------- ----------
Income (loss) before income taxes....... (6,074) (2,362) (8,436)
Provision (benefit) for income
taxes(2)............................... (822) (778) (1,600)
-------- ------- ----------
Net income (loss)....................... $ (5,252) $(1,584) $ (6,836)
======== ======= ==========
Basic net income (loss) per share....... $ (.44)
==========
Diluted net income (loss) per share..... $ (.44)
==========
Weighted average common shares
outstanding:
Basic.................................. -- -- 15,503,333
Diluted................................ -- -- 15,503,333(14)
</TABLE>
- ------------------------------
(1) Reflects pro forma interest expense for the twelve months ended February
28, 1998 resulting from borrowings under our credit facility, assuming the
fiscal 1998 transactions, WQCD acquisition, the 1998 equity offering and
the Credit Facility restatement, the SF acquisition and the Wabash Valley
acquisition had occurred as of March 1, 1997 and assuming a weighted
average interest rate of 7.981%.
(2) Calculated using a statutory tax rate of 38% of taxable income.
(3) Includes the fiscal 1998 transactions, assuming the transactions had
occurred as of March 1, 1997.
(4) Reflects pro forma depreciation of property and equipment and amortization
of intangibles and television program rights resulting from the allocation
of the purchase price of the acquisitions from March 1, 1997 through the
respective date of each acquisition.
(5) 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 Emmis began operating the station on July 1, 1997 under
a time brokerage agreement. The time brokerage fees have been eliminated
for pro forma purposes.
26
<PAGE> 33
(6) Reflects pro forma interest expense on the cash purchase price of the radio
station of $141,000 less $13,000 for adjustments relating to taxes. The net
purchase price was funded by borrowings under our credit facility.
(7) Reflects the net effect of (i) the elimination of interest expense and
amortization of debt issuance costs and interest rate caps resulting from
repayment of the outstanding balance under the prior credit facility by
application of $173,900 of the net proceeds of the 1998 equity offering and
the Credit Facility restatement, and (ii) interest expense under our credit
facility and the amortization of debt issuance costs and interest rate caps
related to the Credit Facility restatement.
(8) Represents the historical operating results of the acquired stations for
the year ended December 28, 1997, exclusive of depreciation and
amortization, and amortization of television program rights.
(9) Reflects pro forma interest expense on the borrowings, totaling $307,000,
associated with the purchase of the stations. The borrowings consist of the
SF note accruing interest at 8.0% and $282,000 in borrowings under our
credit facility.
(10) Reflects reduced interest income due to cash paid for acquisition related
costs.
(11) Reflects pro forma interest expense on the adjusted cash purchase price of
the stations of $88,905. The purchase price was funded by $9,000 held in
escrow and $79,905 in borrowings under our credit facility.
(12) Represents an adjustment to interest expense to reflect (i) the repayment
of the SF note and accrued interest of $26,083, (ii) the repayment of
borrowings under our credit facility of $264,054, (iii) the interest on the
notes at a rate of 8.125% and (iv) the amortization of debt issuance costs
relating to the offering of the outstanding notes and the Credit Facility
amendment.
(13) Reflects issuance of 4.6 million shares of Class A Common Stock at $42.00
per share resulting from the 1998 equity offering.
(14) 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.
27
<PAGE> 34
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1998
<TABLE>
<CAPTION>
EQUITY NOTES
OFFERING WABASH OFFERING AND
WQCD AND CREDIT SF VALLEY CREDIT FACILITY
HISTORICAL ACQUISITION FACILITY ACQUISITION ACQUISITION SUBTOTAL AMENDMENT
---------- ----------- ---------- ----------- ----------- -------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues............. $ 174,132 $ -- $ -- $19,896(8) $11,391(11) $205,419 --
Operating expenses....... 102,521 -- -- 14,945(8) 8,146(11) 125,612 --
International business
development expenses... 974 -- -- -- -- 974 --
Corporate expenses....... 6,379 -- -- 817(8) 292(11) 7,488 --
Depreciation and
amortization........... 18,595 1,310(3) -- 4,489(3) 1,967(3) 26,361 --
Noncash compensation..... 2,378 -- -- -- -- 2,378 --
Time brokerage fee....... 2,220 (2,220)(4) -- -- -- -- --
---------- ------- --------- ------- ------- -------- -------
Operating income
(loss)................. 41,065 910 -- (355) 986 42,606 --
---------- ------- --------- ------- ------- -------- -------
Other income (expense):
Interest expense(1).... (24,942) (2,554)(5) 5,256(6) (9,189)(9) (4,137)(12) (35,566) (1,771)(13)
Other income (expense),
net.................. 4,188 -- -- (175)(10) -- 4,013 --
---------- ------- --------- ------- ------- -------- -------
Total other income
(expense).......... (20,754) (2,554) 5,256 (9,364) (4,137) (31,553) (1,771)
---------- ------- --------- ------- ------- -------- -------
Income (loss) before
income taxes........... 20,311 (1,644) 5,256 (9,719) (3,151) 11,053 (1,771)
Provision (benefit) for
income taxes(2)........ 11,350 (827) 2,645 (4,891) (1,586) 6,691 (891)
---------- ------- --------- ------- ------- -------- -------
Net income (loss) before
extraordinary item..... 8,961 (817) 2,611 (4,828) (1,565) 4,362 (880)
Extraordinary item, net
of tax................. 1,597 -- (1,597)(7) -- -- -- --
---------- ------- --------- ------- ------- -------- -------
Net income (loss)........ 7,364 $ (817) $ 4,208 $(4,828) $(1,565) $ 4,362 $ (880)
========== ======= ========= ======= ======= ======== =======
Basic net income (loss)
per share.............. $ .52
==========
Diluted net income (loss)
per share.............. $ .51
==========
Weighted average common
shares outstanding:
Basic.................. 14,046,628 -- 1,589,091(14) -- -- -- --
Diluted................ 14,447,764 -- 1,589,091(14) -- -- -- --
<CAPTION>
PRO FORMA
----------
<S> <C>
Net revenues............. $ 205,419
Operating expenses....... 125,612
International business
development expenses... 974
Corporate expenses....... 7,488
Depreciation and
amortization........... 26,361
Noncash compensation..... 2,378
Time brokerage fee....... --
----------
Operating income
(loss)................. 42,606
----------
Other income (expense):
Interest expense(1).... (37,337)
Other income (expense),
net.................. 4,013
----------
Total other income
(expense).......... (33,324)
----------
Income (loss) before
income taxes........... 9,282
Provision (benefit) for
income taxes(2)........ 5,800
----------
Net income (loss) before
extraordinary item..... 3,482
Extraordinary item, net
of tax................. --
----------
Net income (loss)........ 3,482
==========
Basic net income (loss)
per share.............. $ .22
==========
Diluted net income (loss)
per share.............. $ .22
==========
Weighted average common
shares outstanding:
Basic.................. 15,635,719
Diluted................ 16,036,855
</TABLE>
- ------------------------------
(1) Reflects pro forma interest expense for the nine months ended November 30,
1998 resulting from borrowings under our credit facility, assuming the WQCD
acquisition, the 1998 equity offering and the Credit Facility restatement,
the SF acquisition and the Wabash Valley acquisition had occurred as of
March 1, 1998 and assuming a weighted average interest rate of 7.981%.
(2) Calculated using a statutory tax rate of 37% of taxable income.
(3) Reflects pro forma depreciation of property and equipment and amortization
of intangibles and television program rights resulting from the allocation
of the purchase price of the acquisitions from March 1, 1998 through the
respective date of each acquisition.
(4) Actual operating results for the period from March 1, 1998 to November 30,
1998 for WQCD-FM in New York City are reflected in historical operations
because Emmis began operating the station on July 1, 1997 under a time
brokerage agreement. The time brokerage fees have been eliminated for pro
forma purposes.
28
<PAGE> 35
(5) Reflects pro forma interest expense on the cash purchase price of the radio
station of $141,000 less $13,000 for adjustments relating to taxes. The net
purchase price was funded by borrowings under our credit facility.
(6) Reflects the net effect of (i) the elimination of interest expense and
amortization of debt issuance costs and interest rate caps resulting from
repayment of the outstanding balance under the prior credit facility by
application of $173,900 of the net proceeds of the equity offering and by
borrowings under our credit facility, and (ii) interest expense under our
credit facility and the amortization of debt issuance costs and interest
rate caps related to the Credit Facility restatement.
(7) Represents the elimination of the write-off of deferred debt issuance
costs, net of tax resulting from the Credit Facility restatement, which
were recorded as an extraordinary item in the historical statement of
operations for the nine months ended November 30, 1998.
(8) Represents the historical operating results of the acquired stations for
the period from March 1, 1998 to July 14, 1998, exclusive of depreciation
and amortization and amortization of program rights.
(9) Reflects pro forma interest expense on the borrowings, totaling $307,000,
associated with the purchase of the stations. The borrowings consist of the
SF note accruing interest at 8.0% and $282,000 in borrowings under our
credit facility.
(10) Reflects reduced interest income due to cash paid for acquisition related
costs.
(11) Represents the historical operating results of the stations acquired in the
Wabash Valley acquisition for the period from March 1, 1998 to September
30, 1998, exclusive of depreciation and amortization and amortization of
program rights.
(12) Reflects pro forma interest expense on the adjusted cash purchase price of
the stations of $88,905. The purchase price was funded by $9,000 held in
escrow and $79,905 in borrowings under our credit facility.
(13) Represents an adjustment to interest expense to reflect (i) the repayment
of the SF note and accrued interest of $26,083, (ii) the repayment of
borrowings under our credit facility of $264,054, (iii) the interest on the
notes at a rate of 8.125% and (iv) the amortization of debt issuance costs
relating to the offering of the outstanding notes and the Credit Facility
amendment.
(14) Represents shares not included in historical related to the issuance of 4.6
million shares of Class A Common Stock at $42.00 per share resulting from
the 1998 equity offering.
29
<PAGE> 36
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED NOVEMBER 30, 1998
<TABLE>
<CAPTION>
EQUITY
TEXAS OFFERING WABASH
MONTHLY WQCD AND CREDIT SF VALLEY
HISTORICAL ACQUISITION ACQUISITION FACILITY ACQUISITION ACQUISITION SUBTOTAL
---------- ----------- ----------- ---------- ----------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues......... $ 206,567 $4,454(3) $ -- -- $31,742(9) $15,359(12) $258,122
Operating expenses... 124,548 3,969(3) -- -- 24,238(9) 11,332(12) 164,087
International
business development
expenses............ 1,041 -- -- -- -- -- 1,041
Corporate expenses... 7,887 -- -- -- 1,459(9) 417(12) 9,763
Depreciation and
amortization........ 20,724 586(4) 2,620(4) -- 7,480(4) 2,810(4) 34,220
Noncash
compensation........ 328 -- -- -- -- -- 328
Time brokerage fee... 4,345 -- (4,345)(5) -- -- -- --
---------- ------ ------- --------- ------- ------- --------
Operating income
(loss).............. 47,694 (101) 1,725 -- (1,435) 800 48,683
---------- ------ ------- --------- ------- ------- --------
Other income
(expense):
Interest
expense(1)........ (28,358) (498) (5,106)(6) 8,099(7) (15,315)(10) (5,910)(13) (47,088)
Other income
(expense), net...... (961) -- -- -- (234)(11) -- (1,195)
---------- ------ ------- --------- ------- ------- --------
Total other income
(expense)....... (29,319) (498) (5,106) 8,099 (15,549) (5,910) (48,283)
---------- ------ ------- --------- ------- ------- --------
Income (loss) before
income taxes........ 18,375 (599) (3,381) 8,099 (16,984) (5,110) 400
Provision (benefit)
for income
taxes(2)............ 10,450 (281) (1,588) 3,803 (7,975) (2,400) 2,009
---------- ------ ------- --------- ------- ------- --------
Net income (loss)
before extraordinary
items............... 7,925 (318) (1,793) 4,296 (9,009) (2,710) (1,609)
Extraordinary
items............... 1,597 -- -- (1,597)(8) -- -- --
---------- ------ ------- --------- ------- ------- --------
Net income (loss).... $ 6,328 $ (318) $(1,793) $ 5,893 $(9,009) $(2,710) $ (1,609)
========== ====== ======= ========= ======= ======= ========
Basic net income
(loss) per share.... $ .45
==========
Diluted net income
(loss) per share.... $ .44
==========
Weighted average
common shares
outstanding:
Basic............... 14,046,628 -- -- 1,589,091(15) -- -- --
Diluted............. 14,447,764 -- -- 1,589,091(15) -- -- --
<CAPTION>
NOTES
OFFERING AND
CREDIT FACILITY
AMENDMENT PRO FORMA
--------------- ----------
<S> <C> <C>
Net revenues......... -- $ 258,122
Operating expenses... -- 164,087
International
business development
expenses............ -- 1,041
Corporate expenses... -- 9,763
Depreciation and
amortization........ -- 34,220
Noncash
compensation........ -- 328
Time brokerage fee... -- --
------- ----------
Operating income
(loss).............. -- 48,683
------- ----------
Other income
(expense):
Interest
expense(1)........ (2,362)(14) (49,450)
Other income
(expense), net...... -- (1,195)
------- ----------
Total other income
(expense)....... (2,362) (50,645)
------- ----------
Income (loss) before
income taxes........ (2,362) (1,962)
Provision (benefit)
for income
taxes(2)............ (1,109) 900
------- ----------
Net income (loss)
before extraordinary
items............... (1,253) (2,862)
Extraordinary
items............... -- --
------- ----------
Net income (loss).... $(1,253) $ (2,862)
======= ==========
Basic net income
(loss) per share.... $ (.18)
==========
Diluted net income
(loss) per share.... $ (.18)
==========
Weighted average
common shares
outstanding:
Basic............... -- 15,635,719
Diluted............. -- 15,635,719(16)
</TABLE>
- ------------------------------
(1) Reflects pro forma interest expense for the twelve months ended November
30, 1998 resulting from borrowings under our credit facility, assuming the
Texas Monthly acquisition, the WQCD acquisition, the 1998 equity offering
and the Credit Facility restatement, the SF acquisition and the Wabash
Valley acquisition had occurred as of December 1, 1997 and assuming a
weighted average interest rate of 7.981%.
(2) Calculated using a statutory tax rate of 37% of taxable income.
(3) Represents the historical operating results of Texas Monthly for the period
from December 1, 1997 to January 31, 1998, exclusive of depreciation and
amortization.
(4) Reflects pro forma depreciation of property and equipment and amortization
of intangibles and television program rights resulting from the allocation
of the purchase price of the acquisitions from December 1, 1997 through the
respective date of each acquisition.
30
<PAGE> 37
(5) Actual operating results for the period from December 1, 1997 to November
30, 1998 for WQCD-FM in New York City are reflected in historical
operations because Emmis began operating the station on July 1, 1997 under
a time brokerage agreement. The time brokerage fees have been eliminated
for pro forma purposes.
(6) Reflects pro forma interest expense on the cash purchase price of the radio
station of $141,000 less $13,000 for adjustments relating to taxes. The net
purchase price was funded by borrowings under our credit facility.
(7) Reflects the net effect of (i) the elimination of interest expense and
amortization of debt issuance costs and interest rate caps resulting from
repayment of the outstanding balance under the prior credit facility by
application of $173,900 of the net proceeds of the 1998 equity offering and
by the Credit Facility restatement, and (ii) interest expense under our
credit facility and the amortization of debt issuance costs and interest
rate caps related to the Credit Facility restatement.
(8) Represents the elimination of the write-off of deferred debt issuance
costs, net of tax resulting from the Credit Facility restatement, which
were recorded as an extraordinary item in the historical statement of
operations for the twelve months ended November 30, 1998.
(9) Represents the historical operating results of the acquired stations for
the period from December 1, 1997 to July 14, 1998, exclusive of
depreciation and amortization and amortization of program rights.
(10) Reflects pro forma interest expense on the borrowings, totaling $307,000,
associated with the purchase of the stations. The borrowings consist of the
SF note accruing interest at 8.0% and $282,000 in borrowings under our
credit facility.
(11) Reflects reduced interest income due to cash paid for acquisition related
costs.
(12) Represents the historical operating results of the stations acquired in the
Wabash Valley acquisition for the period from December 1, 1997 to September
30, 1998, exclusive of depreciation and amortization and amortization of
program rights.
(13) Reflects pro forma interest expense on the adjusted cash purchase price of
the stations of $88,905. The purchase price was funded by $9,000 held in
escrow and $79,905 in borrowings under our credit facility.
(14) Represents an adjustment to interest expense to reflect (i) the repayment
of the SF note and accrued interest of $26,083, (ii) the repayment of
borrowings under our credit facility of $264,054, (iii) the interest on the
notes at a rate of 8.125% and (iv) the amortization of debt issuance costs
relating to the offering of the outstanding notes and the Credit Facility
amendment.
(15) Represents shares not included in historical related to the issuance of 4.6
million shares of Class A Common Stock at $42.00 per share resulting from
the 1998 equity offering.
(16) 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.
31
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our selected
historical and pro forma financial statements and the related notes presented
elsewhere in this offering memorandum, as well as our historical financial
statements and the financial statements of acquired businesses which are
incorporated by reference in this offering memorandum.
GENERAL
We own and operate sixteen radio stations, six television stations and four
magazine publishing operations. Our radio stations consist of thirteen FM and
three AM stations serving New York City, Los Angeles, Chicago, St. Louis,
Indianapolis and Terre Haute, Indiana. Our television stations consist of five
Fox affiliated stations serving New Orleans, Louisiana, Mobile, Alabama, Green
Bay, Wisconsin, Honolulu, Hawaii and Fort Myers, Florida and one CBS affiliated
station serving Terre Haute, Indiana. Our publishing operations consist
primarily of four city or regional monthly magazines including Indianapolis
Monthly, Atlanta, Cincinnati and Texas Monthly.
The principal source of our broadcasting revenues is the sale of
broadcasting time on our radio and television stations for advertising. The sale
of advertising time is primarily affected by the demand for advertising time by
local and national advertisers and the advertising rates charged by our radio
and television stations. We derive a small portion of our broadcasting revenues
from fees paid by the networks and program syndicators for the broadcast of
programming. Our broadcast revenues are generally highest in our second and
third fiscal quarters.
Radio station advertising rates are based in part on a 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, as well as local, regional
and national economic conditions. 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.
Television station advertising is sold for placement in proximity to
specific local or network programming and is priced primarily on the basis of a
program's popularity with the audience advertisers wish to reach, as measured
principally by quarterly audience surveys. In addition, advertising rates are
affected by the number of advertisers competing for the available time, the size
and demographic makeup of the market areas served, and local, regional and
national economic conditions.
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 our on-air inventory for cash advertising, we generally enter into trade
agreements only if the goods or services bartered to us will be used in our
business. We have minimized our use of trade agreements and in fiscal 1996, 1997
and 1998 sold approximately 95% of our advertising time for cash.
The principal source of our publishing revenues is the sale of local,
regional and national advertising pages in our magazines. Advertising sales and
the rates that we charge are
32
<PAGE> 39
determined in part by a publication's ability to attract audiences in the
geographic and demographic groups which advertisers wish to reach and the number
of magazines competing in the market area, as well as local, regional and
national economic conditions. Our publications also derive revenues from the
sale of subscriptions to our magazines and the sales of our magazines at retail
locations such as newsstands, bookstores and shops.
The primary operating expenses involved in owning and operating radio
stations are employee salaries and commissions, programming, advertising and
promotion. The primary operating expenses involved in owning and operating
television stations are syndicated program rights fees, employee salaries and
commissions, news gathering, programming, advertising and promotion. The
principal operating expenses involved in owning and operating magazines are
printing, employee salaries and commissions, advertising and promotion. Our net
earnings are also impacted by depreciation, amortization and interest expenses
associated with our acquisition of broadcasting and publishing operations.
The Company evaluates performance of its operating entities based on
broadcast cash flow (BCF) and publishing cash flow (PCF). Management believes
that BCF and PCF are useful because they provide a meaningful comparison of
operating performance between companies in the industry and serve as an
indicator of the market value of a group of stations or publishing entities. BCF
and PCF are generally recognized by the broadcast and publishing industries as a
measure of performance and are used by analysts who report on the performance of
broadcasting and publishing groups. BCF and PCF do not take into account Emmis'
debt service requirements and other commitments and, accordingly, BCF and PCF
are not necessarily indicative of amounts that may be available for dividends,
reinvestment in Emmis' business or other discretionary uses. BCF and PCF are not
measures of liquidity or of performance in accordance with generally accepted
accounting principles, and should be viewed as a supplement to and not a
substitute for our results of operations presented on the basis of generally
accepted accounting principles. Moreover, BCF and PCF are not standardized
measures and may be calculated in a number of ways. Emmis defines BCF and PCF as
revenues net of agency commissions and operating expenses. The primary source of
broadcast advertising revenues is the sale of advertising time to local and
national advertisers. Publishing entities derive revenue from subscriptions and
sale of print advertising inventory. The most significant broadcast operating
expenses are employee salaries and commissions, costs associated with
programming, advertising and promotion, and station general and administrative
costs. Significant publishing operating expenses are employee salaries and
commissions, costs associated with producing the magazine, and general and
administrative costs.
RESULTS OF OPERATIONS
The pro forma comparisons discussed in this section are based on the pro
forma data in Note 3 to our consolidated financial statements for the nine
months ended November 30, 1998 and in Note 6 to our consolidated financial
statements for the fiscal year ended February 28, 1998.
33
<PAGE> 40
NINE MONTHS ENDED NOVEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED NOVEMBER
30, 1997
Net revenues for the nine months ended November 30, 1998 were $174.1
million compared to $108.1 million for the same period of the prior year, an
increase of $66.0 million or 61.0%. This increase is principally due to the
operation of WQCD under a time brokerage agreement and the subsequent
acquisition thereof, the acquisition of WTLC FM and AM, the acquisition of Texas
Monthly, the commencement of operations of our Hungarian national radio
subsidiary (known as Slager Radio), the SF acquisition and the Wabash Valley
acquisition, as well as improved performance at our properties in New York and
Chicago. On a pro forma basis, net revenues increased $17.3 million or 9.2% for
the nine-month period. This pro forma increase is principally due to improved
performance at our radio stations in New York and Chicago.
Operating expenses (including amortization of TV program rights) for the
nine months ended November 30, 1998 were $102.5 million compared to $59.1
million for the same period of the prior year, an increase of $43.4 million or
73.4%. This increase is primarily attributable to the operation of WQCD under a
time brokerage agreement and the subsequent acquisition thereof, the acquisition
of WTLC FM and AM, the acquisition of Texas Monthly, the commencement of
operations of Slager Radio, the SF acquisition and the Wabash Valley
acquisition. On a pro forma basis operating expenses (including amortization of
TV program rights) increased $7.8 million or 6.6% for the nine-month period.
This pro forma increase is principally due to expenses associated with higher
revenues.
BCF and PCF for the nine-months ended November 30, 1998 was $71.6 million
compared to $49.0 million for the same period of the prior year, an increase of
$22.6 million or 46.1%. This increase is principally due to increased net
revenues offset by increased operating expenses as discussed above. On a pro
forma basis, BCF and PCF increased $9.5 million or 13.5% for the nine-month
period. This pro forma increase is principally due to improved operations at our
properties in New York and Chicago.
Corporate expenses for the nine-month period ended November 30, 1998 were
$6.4 million compared to $5.3 million for same period of the prior year, an
increase of $1.1 million or 19.5%. This increase is primarily due to the
establishment of corporate divisions for publishing and television.
International business development expenses for the nine-month period ended
November 30, 1998 were $1.0 million compared to $0.9 million for the same period
of the prior year. These expenses reflect costs associated with Emmis
International Corporation. The purpose of this wholly owned subsidiary is to
identify, investigate and develop international broadcast investments or other
international business opportunities. Expenses consist primarily of salaries,
travel and various administrative costs.
Adjusted EBITDA is defined as broadcast/publishing cash flow less corporate
and international business development expense. Adjusted EBITDA for the nine
months ended November 30, 1998 was $64.3 million compared to $42.7 million for
the same period of the prior year, an increase of $21.6 million or 50.4%. This
increase is principally due to increased net revenues offset by increased
operating expenses, as discussed above.
34
<PAGE> 41
On a pro forma basis, Adjusted EBITDA increased $8.8 million or 13.8% for the
nine-month period.
Interest expense was $24.9 million for the nine months ended November 30,
1998 compared to $10.4 million for the same period of the prior year, an
increase of $14.5 million or 140.9%. This increase reflects higher outstanding
debt due to the WTLC FM and AM acquisitions, the acquisition of Texas Monthly,
the acquisition of Slager Radio, the WQCD acquisition, the SF acquisition and
the Wabash Valley acquisition. On a pro forma basis, interest expense increased
$0.3 million or 0.9% for the nine-month period.
YEAR ENDED FEBRUARY 28, 1998 COMPARED TO YEAR ENDED FEBRUARY 28, 1997
Net revenues for the year ended February 28, 1998 were $140.6 million
compared to $113.7 million for the same period of the prior year, an increase of
$26.9 million or 23.6%. This increase was principally due to the acquisition of
radio stations in St. Louis, the operation of WQCD-FM under a time brokerage
agreement, and the ability to realize higher advertising rates at our
broadcasting properties, resulting from higher ratings at certain broadcasting
properties, as well as increases in general radio spending in the markets in
which Emmis operates. On a pro forma basis, net revenues would have increased
$19.7 million or 12.9% for the year. For these purposes, pro forma information
assumes the acquisition of Texas Monthly, the acquisition of radio stations in
Indianapolis and St. Louis and the operation of WQCD-FM under a time brokerage
agreement were effective on the first day of the year ended February 28, 1997.
Operating expenses for the year ended February 28, 1998 were $81.2 million
compared to $62.4 million for the same period of the prior year, an increase of
$18.8 million or 30.0%. This increase was principally attributable to the
acquisition of radio stations in St. Louis and the operation of WQCD-FM under a
time brokerage agreement and increased promotional spending at our broadcasting
properties. On a pro forma basis, operating expenses would have increased $15.0
million or 16.2% for the year.
Broadcast/publishing cash flow for the year ended February 28, 1998 was
$59.4 million compared to $51.3 million for the same period of the prior year,
an increase of $8.1 million or 15.8%. This increase was due to increased net
revenues partially offset by increased operating expenses as discussed above. On
a pro forma basis, broadcast/publishing cash flow would have increased $4.7
million or 7.8% for the year.
Corporate expenses for the year ended February 28, 1998 were $6.8 million
compared to $5.9 million for the same period of the prior year, an increase of
$0.9 million or 15.5%. This increase was primarily due to increased travel
expenses and other expenses related to potential acquisitions that were not
finalized and increased professional fees.
Adjusted EBITDA is defined as broadcast/publishing cash flow less corporate
and international business development expense. Adjusted EBITDA for the year
ended February 28, 1998 was $51.6 million compared to $44.2 million for the same
period of the prior year, an increase of $7.4 million or 16.7%. This increase
was principally due to the increase in broadcast/publishing cash flow partially
offset by an increase in corporate expenses. On a pro forma basis, adjusted
EBITDA would have increased $4.0 million or 7.5% for the year.
35
<PAGE> 42
Interest expense was $13.8 million for the year ended February 28, 1998
compared to $9.6 million for the same period of the prior year, an increase of
$4.2 million or 43.0%. This increase reflected higher outstanding debt due to
the acquisition of radio stations in St. Louis and the write-off of deferred
financing costs associated with refinancing of our bank debt, offset by
voluntary repayments made under the bank debt and a rate decrease associated
with the refinancing. On a pro forma basis, interest expense would have
increased $0.8 million or 4.6% for the year.
Depreciation and amortization expense for the year ended February 28, 1998
was $7.5 million compared to $5.5 million for the same period of the prior year,
an increase of $2.0 million or 37.5%. This increase was primarily due to the
acquisition of Texas Monthly and radio stations in Indianapolis and St. Louis.
On a pro forma basis, depreciation and amortization expense would have increased
$0.1 million or 0.9%.
Noncash compensation expense for year ended February 28, 1998 was $1.5
million compared to $3.5 million for the same period of the prior year, a
decrease of $2.0 million or 57.2%. Noncash compensation includes compensation
expense associated with stock options granted, restricted common stock issued
under employment agreements and common stock contributed to The Company's Profit
Sharing Plan. This decrease was due primarily to options under an employment
contract awarded to the CEO in fiscal 1997 under which similar options were not
awarded in 1998.
Accounts receivable at February 28, 1998 were $32.1 million compared to
$20.8 million at February 28, 1997, an increase of $11.3 million or 54.2%. This
increase in accounts receivable was due primarily to the acquisition of Texas
Monthly and Cincinnati magazines, radio stations in Indianapolis and St. Louis
and two radio networks and the operation of WQCD-FM under a time brokerage
agreement.
YEAR ENDED FEBRUARY 28, 1997 COMPARED TO YEAR ENDED FEBRUARY 29, 1996.
Net revenues for the year ended February 28, 1997 were $113.7 million
compared to $109.2 million for the same period of the prior year, an increase of
$4.5 million or 4.1%. This increase was due to higher advertising rates at the
Company's broadcasting properties.
Total operating expenses for the year ended February 28, 1997 were $62.4
million compared to $62.5 million for the same period of the prior year, a
decrease of $0.1 million or 0.1%. This decrease was principally due to decreased
promotional spending at the Company's broadcasting properties.
Corporate expenses for the year ended February 28, 1997 were $5.9 million
compared to $4.4 million for the same period of the prior year, an increase of
$1.5 million or 34.2%. This increase was primarily due to increased
compensation.
Depreciation and amortization expense for the year ended February 28, 1997
was $5.5 million compared to $5.7 million for the same period of the prior year,
a decrease of $0.2 million or 3.5%. This decrease was due to fully depreciated
assets at the Company's broadcasting properties.
Noncash compensation expense for the year ended February 28, 1997 was $3.5
million compared to $3.7 million for the same period of the prior year, a
decrease of $0.2 million or
36
<PAGE> 43
5.5%. Noncash compensation includes compensation expense associated with stock
options granted, restricted common stock issued under employment agreements and
common stock contributed to the Company's Profit Sharing Plan. This decrease was
due primarily to the decrease in stock price from a year ago.
Interest expense for the fiscal year ended February 28, 1997 was $9.6
million compared to $13.5 million for the same period of the prior year, a
decrease of $3.9 million or 28.9%. This decrease reflected lower outstanding
debt due to voluntary repayments made under the Company's credit facility.
Accounts receivable at February 28, 1997, were $20.8 million compared to
$19.2 million at February 29, 1996, an increase of $1.6 million or 8.7%. This
increase in accounts receivable was due primarily to increases in net revenues
at the Company's properties.
LIQUIDITY AND CAPITAL RESOURCES
The increase in accounts receivable from February 28, 1998 to November 30,
1998 is due to the increase of net revenues in the quarter ended November 30,
1998 compared to the quarter ended February 28, 1998.
In August 1996, Emmis announced its plan to build an office building in
downtown Indianapolis for its corporate office and its Indianapolis operations.
The project is substantially complete. In the nine-month period ended November
30, 1998, Emmis had capital expenditures of $26.2 million, of which $19.4
million relate to payments in connection with the Indianapolis building project.
In June 1998, Emmis completed the sale of 4.6 million shares of its Class A
Common Stock at $42.00 per share, resulting in net proceeds of $182.6 million.
Net proceeds from the offering were used to repay outstanding obligations under
our prior credit facility.
In July 1998, Emmis entered into an amended and restated credit facility.
See Note 6 to our financial statements for the nine months ended November 30,
1998, incorporated by reference in this prospectus. Concurrently with the
offering of the outstanding notes, our lenders amended the credit facility. See
"Description of Certain Indebtedness -- Amendment to Credit Facility."
On April 1, 1999 Emmis acquired substantially all the assets of Country
Sampler, Inc. for $19.0 million in cash, $2.0 million payable under contract
with the principal shareholder through April 2003, and assumed liabilities of
approximately $3.4 million.
We expect that cash flow from operating activities will be sufficient to
fund all debt service obligations, working capital and capital expenditure
requirements for the next fiscal year. As part of its business strategy, Emmis
frequently evaluates potential acquisitions of radio and television stations. In
connection with future acquisition opportunities, we may incur additional debt
or issue additional equity or debt securities depending on market conditions and
other factors.
INFORMATION REGARDING OPERATING GROUPS
On a pro forma basis, for the nine-month period ended November 30, 1998,
Emmis would have derived approximately 59.1% of its net revenue from radio
operations and approximately
37
<PAGE> 44
26.9% of its net revenue from television operations, and approximately 14.0% of
its net revenue from publishing and other operations. On a pro forma basis, for
the twelve-month period ended November 30, 1998, Emmis would have derived
approximately 57.7% of its net revenue from radio operations and approximately
27.4% of its net revenue from television operations, and approximately 14.9% of
its net revenue from publishing and other operations. The following table sets
forth selected pro forma information regarding our operating groups for the
fiscal year ended February 28, 1998 and for the nine-month and twelve-month
periods ended November 30, 1998 assuming the acquisition of WQCD-FM and our
television stations had occurred as of the beginning of the periods:
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
-----------------------------------------------------------
NINE MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
FEBRUARY 28, NOVEMBER 30, NOVEMBER 30,
1998 1998 1998
(IN THOUSANDS)
<S> <C> <C> <C>
RADIO:
Net revenue....................... $136,279 $121,386 $148,916
Broadcast cash flow............... 61,593 58,009 68,098
TELEVISION:
Net revenue....................... 68,396 55,178 70,620
Broadcast cash flow............... 18,710 17,271 20,768
PUBLISHING AND OTHER:
Net revenue....................... 38,293 28,855 38,586
Publishing and other cash
flow(1)........................ 3,776 4,527 5,169
Total group net revenue............. 242,968 205,419 258,122
Total group broadcast/publishing
cash flow......................... 84,079 79,807 94,035
Corporate and international business
development expenses.............. 10,285 8,462 10,804
-------- -------- --------
Adjusted EBITDA..................... $ 73,794 $ 71,345 $ 83,231
======== ======== ========
</TABLE>
- ------------------------------
(1) Publishing and other cash flow for our Publishing and Other operating group
represents publishing, tower leasing and consulting revenues, net of
operating expenses.
IMPACT OF THE YEAR 2000
Emmis has completed its assessment phase of year 2000 compliance for
information technology for all of its radio broadcasting properties except those
included in the Wabash Valley Acquisition. The Company has also completed its
assessment of other equipment, including broadcast equipment and embedded
technology, at certain radio properties. Assessment of year 2000 compliance at
newly acquired television stations, corporate and publishing entities is
partially complete. Certain information technology and other equipment is
represented by its vendors to be year 2000 compliant. Technology and equipment
that is currently not represented as year 2000 compliant is scheduled to be
upgraded or replaced, and tested prior to August 31,
38
<PAGE> 45
1999. In connection with the move of our corporate and Indianapolis operations
to an office building in downtown Indianapolis, substantially all information
technology and other equipment in the building has been replaced and is believed
to be year 2000 compliant. Emmis estimates that the cost of the remaining year
2000 remediation effort will be approximately $2.0 million, which will be funded
from current operations. Emmis has not separately tracked costs incurred to date
relating to year 2000 compliance; however, management believes that these costs
have been insignificant. Emmis has trained its employees regarding year 2000
issues and compliance. Certain employees at each entity are responsible for year
2000 compliance. Emmis' information systems department is currently auditing the
year 2000 compliance of each entity. This audit includes (1) verifying that
critical applications have been identified, (2) testing of critical
applications, (3) ensuring that year 2000 compliance documentation exists, (4)
verifying that remediation is occurring as planned and (5) developing written
contingency plans. The audit should be complete by August 31, 1999. If certain
broadcast equipment and information technology is not year 2000 compliant prior
to January 1, 2000, an entity using that equipment and information technology
might not be able to broadcast and process transactions. If this were to occur,
temporary solutions or processes not involving the malfunctioning equipment
could be implemented. The contingency plans documented during the audit process
would be used to implement such temporary solutions.
39
<PAGE> 46
BUSINESS
We are a diversified media company with radio broadcasting, television
broadcasting and magazine publishing operations. We are the eighth largest radio
broadcaster in the United States based on total revenues. The thirteen FM radio
stations and three AM radio stations we own 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, Indianapolis and Terre Haute, Indiana. Our six television
stations, which we acquired in 1998, are located in New Orleans, Louisiana,
Mobile, Alabama, Green Bay, Wisconsin, Honolulu, Hawaii, Fort Myers, Florida and
Terre Haute, Indiana. On a pro forma basis after considering recent
acquisitions, we had revenues and Adjusted EBITDA of $219.5 million and $83.2
million, respectively, for the twelve months ended November 30, 1998.
Our strategy is to selectively acquire underdeveloped media properties in
desirable markets and then to create value by developing those properties to
increase their cash flow. We find such underdeveloped properties attractive
because they offer greater potential for revenue and cash flow growth than
mature properties. We have been successful in acquiring these types of radio
stations and improving their ratings, revenues and cash flow with our marketing
focus and innovative programming expertise. We have created top-performing radio
stations which rank, in terms of primary demographic target audience share,
among the top ten stations in the New York City, Los Angeles and Chicago radio
markets according to the Fall 1998 Arbitron survey. We believe that our strong
large-market radio presence and diversity of station formats makes us attractive
to a diverse base of radio advertisers and reduces our dependence on any one
economic sector or specific advertiser.
More recently, we have begun to apply our advertising sales and programming
expertise to our television stations. We view our entry into television as a
logical outgrowth of our radio business and as a platform for diversification.
Like the radio stations we previously acquired, our television stations are
underdeveloped properties located in desirable markets, which can benefit from
innovative, research-based programming and our experienced management team. We
believe we can improve the ratings, revenues and broadcast cash flow of our
television stations with a more market-focused, research-based programming
approach and other related strategies, which have proven successful with our
radio properties.
In addition to our domestic broadcasting properties, we operate news and
agricultural information radio networks in Indiana, publish the Indianapolis
Monthly, Atlanta, Cincinnati, Texas Monthly and Country Sampler magazines, and
have a 54% interest in a national radio station in Hungary. We also engage in
various businesses ancillary to our broadcasting business, such as consulting
and broadcast tower leasing.
BUSINESS STRATEGY
We are committed to maintaining our leadership positions in broadcasting,
enhancing the performance of our broadcast properties, and distinguishing
ourselves through the quality of our operations. Our strategy has the following
principal components:
CREATE CASH FLOW GROWTH BY ENHANCING STATION PERFORMANCE. Our strategy is
to selectively acquire underdeveloped media properties in desirable markets
and then to create value by developing those properties to increase their
cash flow. We believe that our station portfolio
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<PAGE> 47
provides significant potential for revenue and cash flow growth through
enhanced operating performance. We believe that our growth is less
dependent on overall advertising market growth than it would be if we owned
only mature properties. We expect to continue to create value, particularly
in our recently-acquired television stations, through maximizing operating
efficiencies, development of innovative programming and focused sales and
marketing efforts.
DEVELOP INNOVATIVE PROGRAMMING. We believe that knowledge of local markets
and innovative programming developed to target specific demographic groups
are the most important determinants of individual radio and television
station success. We conduct extensive market research to identify
underserved segments of our markets or to insure that we are meeting the
needs and tastes of our target audiences. Utilizing the research results,
we concentrate on providing focused programming formats carefully tailored
to the demographics of our markets and our advertisers' preferences. Such
programming strategies might include, for example, the development or
acquisition of on-air talent or development of a sports coverage or news
franchise. Local market knowledge is particularly important in developing
programming for our Fox television stations, as the higher degree of
programming flexibility afforded by our Fox affiliation provides us greater
opportunity to tailor our programming to meet the specific demands of our
local markets. Greg Nathanson, who heads our television division and
directs programming, 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.
EMPHASIZE FOCUSED SALES AND MARKETING STRATEGY. Emmis designs its local
and national sales efforts based on advertiser demand and competition
within each market. We provide our sales force with extensive training and
technology for sophisticated inventory management techniques, which allows
us to make frequent price adjustments based on regional and local market
conditions. We seek to maximize sources of non-traditional, non-spot
revenue and have led the industry in developing "vendor co-op" advertising
revenue. Although this source of advertising revenue is common in the
newspaper and magazine industry, we were among the first broadcasters to
recognize and take advantage of the potential of vendor co-op advertising.
ENCOURAGE ENTREPRENEURIAL MANAGEMENT APPROACH. We believe that
broadcasting is primarily a local business and that much of our success is
the result of the efforts of regional and local management and staff. We
have attracted and retained an experienced team of broadcast professionals
who understand the musical tastes, demographics and competitive
opportunities of their particular market. Our decentralized approach to
station management gives local management oversight of station spending,
long-range planning and resource allocation at their individual stations
and rewards local management based on those stations' performance. In
addition, we encourage our managers and employees to own a stake in Emmis,
and over 90% of all full-time employees have an equity ownership position
in the company. We believe that this entrepreneurial management approach
has given us a distinctive corporate culture, making Emmis a highly
desirable employer in the broadcasting industry and significantly enhancing
our ability to attract and retain experienced and highly motivated
employees and management.
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<PAGE> 48
SELECTIVELY PURSUE STRATEGIC ACQUISITIONS. Our acquisition strategy is to
selectively acquire underdeveloped media properties at reasonable purchase
prices where our experienced management team can enhance value. We believe
that continued consolidation in the radio broadcasting industry will create
attractive acquisition opportunities as the number of potential buyers for
radio assets declines as a result of in-market ownership limitations, and
we will continue to evaluate acquisitions of individual radio stations or
groups of radio stations in both our current and new markets. We also
believe that attractive acquisition opportunities are becoming increasingly
available in the television broadcasting industry. In many cases,
television stations have suffered ratings and revenue declines due to
management inattention, improper programming strategies or inadequate sales
and marketing efforts. We also expect to evaluate acquisitions of
international broadcasting stations and magazine publishing properties
which present attractive purchase prices and significant opportunities to
capitalize on our management expertise to enhance cash flow. We intend to
seek strong local minority-interest partners in evaluating and completing
any international broadcasting acquisition opportunities.
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<PAGE> 49
RADIO AND TELEVISION STATIONS
The following tables set forth certain information regarding our radio and
television stations and their broadcast markets.
RADIO STATIONS
In the following table, "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 ranking figures are from
Duncan's Radio Market Guide (1998 ed.). We own a 40% equity interest in the
publisher of Duncan's Radio Market Guide. "Ranking in Primary Demographic
Target" is the ranking of the station among all radio stations in its market
based on the Fall 1998 Arbitron survey. A "t" indicates the station tied with
another station for the stated ranking. "Station Audience Share" represents a
percentage generally computed by dividing the average number of persons over age
12 listening to a particular station during specified time periods by the
average number of such persons for all stations in the market area as determined
by Arbitron.
<TABLE>
<CAPTION>
RANKING IN
MARKET MARKET PRIMARY PRIMARY STATION
AND RANK BY DEMOGRAPHIC DEMOGRAPHIC AUDIENCE
STATION REVENUE FORMAT TARGET AGES TARGET SHARE
------- ------- ------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Los Angeles 1
KPWR-FM Dance/Contemporary Hit 12-24 1 4.1
New York 2
WQHT-FM Dance/Contemporary Hit 12-24 1 5.3
WRKS-FM Classic Soul/Smooth R&B 25-54 4 3.8
WQCD-FM Contemporary Jazz 25-54 7 3.1
Chicago 3
WKQX-FM New Rock 18-34 2 3.9
St. Louis 18
KSHE-FM Album Oriented Rock 18-34 12 3.6
WKKX-FM Country 18-34 6t 3.8
WXTM-FM Extreme Rock 18-34 4 2.9
Indianapolis 30
WENS-FM Adult Contemporary 25-54 4 4.9
WIBC-AM News/Talk 35-64 4 7.8
WNAP-FM Classic Rock 18-34 8 3.3
WTLC-FM Urban Contemporary 25-54 6 6.0
WTLC-AM Solid Gold Soul, Gospel and Talk 35-64 19 0.7
Terre Haute 172
WTHI-FM Country 25-54 1t 19.2
WTHI-AM News/Talk 35-54 9t 1.7
WWVR-FM Classic Rock 25-49 1 12.1
</TABLE>
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<PAGE> 50
TELEVISION STATIONS
In the following table, "DMA Rank" is estimated by the A.C. Nielsen Company
as of January 1998. Rankings are based on the relative size of a station's
market among the 212 generally recognized Designated Market Areas, or "DMAs", as
defined by Nielsen. "Number of Stations in Market" 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 9:00 a.m. to midnight, Sunday through Saturday time period.
"Station Rank" reflects the station's rank relative to other local television
stations based upon the DMA rating as reported by Nielsen from 9:00 a.m. to
midnight, Sunday through Saturday during November 1998. "Station Audience Share"
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.
<TABLE>
<CAPTION>
NUMBER OF STATION
TELEVISION METROPOLITAN DMA AFFILIATION/ STATIONS STATION AUDIENCE
STATION AREA SERVED RANK CHANNEL IN MARKET RANK SHARE
---------- ------------ ---- ------------ --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
WVUE-TV New Orleans, LA 41 Fox/8 6 3t 9
WALA-TV Mobile, AL-Pensacola, FL 62 Fox/10 6 3 11
WLUK-TV Green Bay, WI 70 Fox/11 5 3 14
KHON-TV Honolulu, HI 71 Fox/2 6 1 17
WFTX-TV Fort Myers, FL 83 Fox/36 5 4 8
WTHI-TV Terre Haute, IN 140 CBS/10 3 1 24
</TABLE>
Emmis also owns 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.
RADIO NETWORKS
In addition to our other radio broadcasting operations, we own and operate
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
We publish five magazines through our publishing division, as follows.
Indianapolis Monthly. We have 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.
With a large advertising base and a popular editorial focus, Indianapolis
Monthly is the market's leading general interest magazine focusing on the
Indianapolis area.
Atlanta. We acquired and began publishing Atlanta magazine in August 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 we acquired it for
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<PAGE> 51
a nominal investment. Certain initiatives, including downsizing staff,
increasing sales efforts and repositioning the editorial focus, have contributed
to improving profitability.
Cincinnati. We acquired Cincinnati magazine in October 1997. Cincinnati
magazine was founded by the Greater Cincinnati Chamber of Commerce in 1967 and,
under its prior owners, the magazine grew to a paid monthly circulation of
approximately 22,000. We repositioned the editorial product to an up-to-date
city/regional magazine covering people and entertainment in Cincinnati, doubled
the existing sales staff and marketed the newly designed magazine to the
Cincinnati area. The magazine currently has a paid monthly circulation of
approximately 31,000.
Texas Monthly. We 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 we believe
it is read by more than two million people. It marked its 25th anniversary with
the publication of the February 1998 issue, which set a single issue advertising
record. Since acquiring the magazine, we have worked to increase Texas Monthly's
operating efficiencies while leaving the highly regarded editorial product
intact.
Country Sampler. We acquired Country Sampler magazine and certain related
publications in April 1999. Country Sampler focuses on country craft and home
decorating ideas and products, and we believe it is read by more than two
million people.
COMMUNITY INVOLVEMENT
We believe that to be successful, we must be integrally involved in the
communities we serve. To that end, each of our stations participates in many
community programs, fundraisers and activities that benefit a wide variety of
organizations. Charitable organizations that have been the beneficiaries of our
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 our planned activities,
our stations take leadership roles in community responses to natural disasters.
INDUSTRY INVOLVEMENT
We have an active leadership role in a wide range of industry
organizations. Our 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, our managers have been voted Radio President of the Year and
General Manager of the Year, and at various times we have been voted Most
Respected Broadcaster in polls of radio industry chief executive officers and
managers.
CERTAIN REGULATORY DEVELOPMENTS
In August 1998, the FCC adopted new rules and procedures that establish the
use of competitive bidding (auctions) to resolve competing applications for all
new broadcast stations and mutually exclusive applications for major changes to
existing broadcast stations. The rules apply to full power commercial radio and
analog television stations as well as all secondary
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<PAGE> 52
commercial broadcast services (e.g., low power television, FM translator and
television translator services).
With respect to equal employment opportunity regulation, the FCC recently
initiated a rulemaking proceeding that may lead to reinstatement (in revised
form) of the equal employment opportunity rules and reporting requirements which
were overturned last year by the U.S. Court of Appeals for the D.C. Circuit. The
FCC suspended its EEO rules and reporting requirements following the court's
denial of the FCC's request for rehearing en banc.
In July 1998, the FCC initiated a rulemaking proceeding to determine the
nature and extent of the mandatory carriage obligations of cable operators
during the digital television transition. The rulemaking proceeding also seeks
comment on related issues, including how to resolve technical compatibility
problems, whether the FCC should modify its signal quality requirement during
the transition, how to regulate channel placement of digital television signals
and whether such signals must be carried on the basic cable tier. The FCC also
adopted new rules in November 1998 requiring the payment of fees by commercial
broadcasters in connection with any revenues they receive from their use of
digital television spectrum for services other than free, over-the-air
advertiser supported television. The fee is set at 5% of gross revenues from
covered services.
The FCC has also initiated a rulemaking proceeding to determine whether to
give greater flexibility to direct broadcast satellite operators seeking to
provide distant broadcast network signals to their subscribers. Additionally, as
part of the ongoing examination of its broadcast ownership rules, the FCC is
considering whether to permit a single entity to own television stations
covering more than 35% of the national television homes. The FCC is also
considering whether to eliminate or modify the 50% discount credited to UHF
television stations in calculating compliance with the national ownership cap.
We cannot predict the outcome of any of these rulemaking proceedings or the
effect of a particular outcome on the ownership and operation of our station
properties.
ADVERTISING SALES
Our 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. We believe 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.
We have 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, we were among the first radio broadcasters to recognize, and take
advantage of, the potential of vendor co-op advertising. Our 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 our
stations has a salesperson devoted exclusively to the development of cooperative
advertising. We also use this approach at our television stations.
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<PAGE> 53
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, 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 our markets, our 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. We attempt to improve our competitive position with programming and
promotional campaigns aimed at the demographic groups targeted by our 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 we
believe that each of our stations can compete effectively in its market, there
can be no assurance that any of our 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 Telecommunications Act of 1996.
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. We believe
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.
EMPLOYEES
As of November 30, 1998, Emmis had approximately 1,242 full-time employees
and approximately 332 part-time employees. We have approximately 246 employees
at various radio and television stations represented by unions. We consider
relations with our employees to be excellent.
LITIGATION
Emmis currently and from time to time is involved in litigation incidental
to the conduct of its business. However, we are not a party to any lawsuit or
proceeding which, in the opinion of management, is likely to have a material
adverse effect on us.
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<PAGE> 54
MANAGEMENT
The following table sets forth information about our executive officers and
directors as of March 1, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Jeffrey H. Smulyan................... 51 Chairman, President and Chief Executive Officer
Doyle L. Rose........................ 50 Radio Division President and Director
Greg Nathanson....................... 51 Television Division President and Director
Richard F. Cummings.................. 47 Executive Vice President --Programming
Walter Z. Berger..................... 43 Executive Vice President, Treasurer and Chief
Financial Officer
Norman H. Gurwitz.................... 51 Executive Vice President -- Human Resources and
Secretary
Gary L. Kaseff....................... 50 Executive Vice President, General Counsel and
Director
Susan B. Bayh........................ 39 Director
Richard A. Leventhal................. 51 Director
Frank V. Sica........................ 47 Director
Lawrence B. Sorrel................... 40 Director
</TABLE>
Jeffrey H. Smulyan founded Emmis in 1981 and is our Chairman of the Board
of Directors, President and Chief Executive Officer. He has held the positions
of Chairman of the Board of Directors and Chief Executive Officer since 1981 and
the position of President since 1994. 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.
Doyle L. Rose has been Radio Division President of Emmis since 1989, and
General Manager of KPWR-FM in Los Angeles from 1991 through 1995. Previously, he
was our Executive Vice President-Operations. Mr. Rose has been a general manager
of one or more radio stations for approximately twenty years and has been a
Director since 1984.
Greg Nathanson joined Emmis in 1998 as Television Division President and a
Director. Mr. Nathanson has over 30 years of television broadcasting experience,
most recently as President of Programming and Development for Twentieth
Television from 1996 to 1998, as General Manager of KTLA-TV in Los Angeles,
California from 1992 to 1996 and as President of Fox Television Stations from
1990 to 1992.
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<PAGE> 55
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
Emmis. He became our Executive Vice President -- Programming in 1988.
Walter Z. Berger became Executive Vice President and Chief Financial
Officer of Emmis on March 1, 1999. Most recently, Mr. Berger served as Group
President of the Energy Marketing Division of LG&E Energy Corporation. Prior to
that appointment, he served as Executive Vice President and Chief Financial
Officer of LG&E Energy Corporation. From 1992 to 1996, he held several senior
financial and operating management positions at Enron Corporation and its
affiliates. Mr. Berger also spent seven years in various financial management
roles at Baker Hughes Incorporated.
Norman H. Gurwitz currently serves as Executive Vice President -- Human
Resources, a position he assumed in 1998. Previously he served as Corporate
Counsel for Emmis from 1987 to 1998 and as a Vice President from 1988 to 1995.
He became Secretary of Emmis 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.
Gary L. Kaseff is employed as Executive Vice President and General Counsel
to Emmis, a post he has held since 1998. Mr. Kaseff 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. Mr. Kaseff has been a Director since 1994.
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, positions she has held since 1994. Previously,
she was an attorney with Eli Lilly & Company. She is a director of Anthem, Inc.,
an insurance company. Mrs. Bayh has been a Director since 1994.
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. Mr. Leventhal has been a Director since 1992.
Frank V. Sica is a Managing Director of Soros Fund Management LLC and head
of Soros Fund Management's Private Equity Operations. He is director of CSG
Systems International, Inc., a computer software company, Global TeleSystems
Group, Inc., a telecommunications company, Kohl's Corporation, a retail company,
and Outboard Marine Corporation, a manufacturer of marine engines and boats.
Prior to joining Soros in 1998, Mr. Sica had been a Managing Director at Morgan
Stanley Dean Witter & Co. Mr. Sica has been a Director since 1998.
Lawrence B. Sorrel is a general partner of Welsh, Carson, Anderson & Stowe,
a private investment firm. Prior to May 1998, he was a Managing Director of
Morgan Stanley & Co. Incorporated, where he had been employed since 1986. Mr.
Sorrell has been a Director since 1993.
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<PAGE> 56
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to Emmis with
respect to beneficial ownership of our common stock as of March 1, 1999 by (i)
each person known to us to be the beneficial owner of more than five percent of
each class of our issued and outstanding common stock, (ii) each director and
executive officer and (iii) all officers and directors as a group. The Class A
Common Stock generally entitles holders to one vote per share, and the Class B
Common Stock generally entitles the holder to ten votes per share.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
--------------------- --------------------
AMOUNT AND AMOUNT AND PERCENT
FIVE PERCENT SHAREHOLDERS, NATURE OF PERCENT NATURE OF PERCENT OF TOTAL
DIRECTORS AND BENEFICIAL OF BENEFICIAL OF VOTING
EXECUTIVE OFFICERS OWNERSHIP CLASS OWNERSHIP CLASS POWER
<S> <C> <C> <C> <C> <C>
Jeffrey H. Smulyan.............................. 239,595(1) 1.7% 2,935,610(14) 100.0% 67.9%
Susan B. Bayh................................... 10,100(2) * -- -- *
Richard F. Cummings............................. 37,957(3) * -- -- *
Norman H. Gurwitz............................... 83,906(4) * -- -- *
Gary L. Kaseff.................................. 24,424(5) * -- -- *
Richard A. Leventhal............................ 30,600(6) * -- -- *
Doyle L. Rose................................... 32,935(7) * -- -- *
Walter Z. Berger................................ -- * -- -- *
Greg Nathanson.................................. 122,000(8) * -- -- *
Lawrence B. Sorrel.............................. 4,000 * -- -- *
Frank V. Sica................................... -- -- -- -- --
Mellon Bank Corporation......................... 1,301,411(9) 9.2 -- -- 3.0
Westport Asset Management, Inc.................. 1,001,200(10) 7.1 -- -- 2.3
T. Rowe Price Associates, Inc. ................. 961,500(11) 6.8 -- -- 2.2
Safeco Corp..................................... 1,851,000(12) 13.1 -- -- 4.3
All executive officers and directors as a group
(11 persons).................................. 629,637(13) 4.4 2,935,610 100.0 68.8
</TABLE>
- ------------------------------
* Less than 1%
(1) Includes 159,595 shares held by Mr. Smulyan as trustee for the Emmis
Communications 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 March 1, 1999.
(3) Consists of 24,316 shares owned individually, 2,468 shares held for the
benefit of Mr. Cummings' children, 1,573 shares held in the Profit Sharing
Trust and 9,600 shares represented by stock options exercisable within 60
days of March 1, 1999.
(4) Consists of 11,865 shares owned individually or jointly with his spouse,
275 owned by Mr. Gurwitz's spouse, 979 shares held in the Profit Sharing
Trust, 10,100 shares owned by a corporation of which Mr. Gurwitz's spouse
is a 50% owner 2,308 shares owned for the benefit of Mr. Gurwitz's children
and 58,379 shares represented by stock options exercisable within 60 days
of March 1, 1999.
(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 March 1, 1999.
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<PAGE> 57
(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 March 1, 1999.
(7) Consists of 21,762 shares owned individually, 1,573 shares held in the
Profit Sharing Trust and 9,600 shares represented by stock options
exercisable within 60 days of March 1, 1999.
(8) Consists of 100,000 shares owned individually or jointly with his spouse
and 22,000 shares owned by a trust for the benefit of Mr. Nathanson's
children.
(9) Information concerning these shares was obtained from an Amendment to
Schedule 13G filed in February 1999 by Mellon Bank Corporation on behalf of
itself, Boston Group Holdings, Inc. and The Boston Company, Inc., each of
which has a mailing address c/o Mellon Bank Corporation, One Mellon Bank
Center, Pittsburgh, Pennsylvania 15258.
(10) Information concerning these shares was obtained from an Amendment to
Schedule 13G filed in February 1999 by Westport Asset Management, Inc.,
which has an address of 253 Riverside Avenue, Westport, Connecticut 06880.
(11) Information concerning these shares was obtained from a Schedule 13G filed
in February 1999 by T. Rowe Price Associates, Inc., which has an address of
100 E. Pratt Street, Baltimore, Maryland 21202.
(12) Information concerning these shares was obtained from an Amendment to
Schedule 13G filed in February 1999 by Safeco Corporation on behalf of
itself, Safeco Common Stock Trust and Safeco Asset Management Company. Each
such entity has an address of Safeco Plaza, Seattle, Washington 98101.
(13) Includes 183,412 shares represented by stock options exercisable within 60
days of March 1, 1999 and 159,595 shares held in the Profit Sharing Trust.
(14) Consists of 2,589,610 shares owned individually and 346,000 shares
represented by stock options exercisable within 60 days of March 1, 1999.
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DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." Certain other capitalized terms are
defined in the indenture governing the notes. In this description, the word
"Emmis" refers only to Emmis Communications Corporation and not to any of its
subsidiaries.
The registered notes have the same form and terms as the outstanding notes,
which they replace, with two exceptions. First, because the issuance of the
registered notes has been registered under the Securities Act, the registered
notes will not bear legends restricting their transfer. Second, the holders of
registered notes will not be entitled to rights under the registration rights
agreement, since the primary provision of that agreement will terminate when the
exchange offer is consummated. A copy of the indenture, dated February 12, 1999,
among Emmis, the subsidiary guarantors and IBJ Whitehall Bank and Trust Company,
as trustee, has been filed as an exhibit to the exchange offer registration
statement of which this prospectus forms a part. The terms of the notes include
those stated in the indenture and those made part of the indenture by reference
to the Trust Indenture Act of 1939.
The following description is a summary of the material provisions of the
indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
holders of these notes.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
THE NOTES
These notes:
- are general unsecured obligations of Emmis;
- are subordinated in right of payment to all existing and future Senior
Debt of Emmis, including borrowings under the Credit Agreement;
- are pari passu in right of payment to any additional senior subordinated
debt incurred by Emmis in the future;
- are senior in right of payment to any future subordinated Indebtedness of
Emmis that expressly provides by its terms that it is subordinated to the
notes;
- are effectively junior to:
(1) all liabilities of Emmis' Subsidiaries that are Unrestricted
Subsidiaries (and thus not subsidiary guarantors),
(2) all liabilities of any subsidiary guarantor if such subsidiary
guarantor's guarantee is subordinated or avoided by a court of
competent jurisdiction (see "Risk Factors -- Fraudulent Conveyance
Matters") and
(3) all secured obligations, to the extent of the collateral securing
such obligations, including any borrowings under any future secured
credit facilities of Emmis; and
- are unconditionally guaranteed by the guarantors.
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THE GUARANTEES
These notes are unconditionally guaranteed, jointly and severally, by the
following subsidiaries of Emmis, which include all of Emmis' direct and indirect
domestic restricted subsidiaries:
Emmis FM Broadcasting Corporation of Indianapolis
Emmis FM Broadcasting Corporation of St. Louis
KPWR, Inc.
Emmis Broadcasting Corporation of New York
Emmis FM Broadcasting Corporation of Chicago
Emmis FM License Corporation of Indianapolis
Emmis FM License Corporation of St. Louis
KPWR License, Inc.
Emmis License Corporation of New York
Emmis FM License Corporation of Chicago
Emmis Meadowlands Corporation
Emmis Publishing Corporation
Emmis AM Radio Corporation of Indianapolis
Emmis FM Radio Corporation of Indianapolis
Emmis AM Radio License Corporation of Indianapolis
Emmis FM Radio License Corporation of Indianapolis
Emmis Radio License Corporation of New York
Emmis 104.1 FM Radio Corporation of St. Louis
Emmis 104.1 FM Radio License Corporation of St. Louis
Emmis 106.5 FM Broadcasting Corporation of St. Louis
Emmis 106.5 FM License Corporation of St. Louis
Emmis 1310 AM Radio Corporation of Indianapolis
Emmis 1310 AM Radio License Corporation of Indianapolis
Emmis 105.7 FM Radio Corporation of Indianapolis
Mediatex Communications Corporation
Mediatex Development Corporation
Texas Monthly, Inc.
Emmis License Corporation
Emmis International Broadcasting Corporation
Emmis DAR, Inc.
Emmis Publishing, L.P.
Emmis International Corporation
Emmis 1380 AM Radio Corporation of St. Louis
Emmis Television License Corporation of Honolulu
Emmis Television License Corporation of Mobile
Emmis Television License Corporation of Cape Coral
Emmis Television License Corporation of Green Bay
Emmis FM Holding Corporation of New York
Emmis 101.9 FM Radio Corporation of New York
Emmis Radio Corporation of New York
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Emmis 1480 AM Radio License Corporation of Terre Haute
Emmis Television License Corporation of Terre Haute
Emmis 99.9 FM Radio License Corporation of Terre Haute
Emmis 105.7 FM Radio License Corporation of Indianapolis
Emmis Television License Corporation of New Orleans
Emmis 105.5 FM Radio License Corporation of Terre Haute
Emmis Indiana Broadcasting, L.P.
Emmis Television Broadcasting, L.P.
The guarantees of these notes:
- are general unsecured obligations of each guarantor;
- are subordinated in right of payment to all existing and future Senior
Debt of each guarantor, including guarantees of each guarantor of Senior
Debt of Emmis;
- are pari passu in right of payment to all existing and any future senior
subordinated debt of each guarantor, including guarantees of any future
senior subordinated debt of Emmis; and
- are senior in right of payment to any future subordinated Indebtedness of
each guarantor that expressly provides by its terms that it is
subordinated to the guarantee of such guarantor.
Assuming we had completed the offering of these notes and applied the net
proceeds as intended, as of November 30, 1998, Emmis and the subsidiary
guarantors would have had total Senior Debt of approximately $274.9 million,
with an additional $475.1 million available under the Credit Agreement. As
indicated above and as discussed in detail below under the subheading
"Subordination," payments on the notes and under the guarantees will be
subordinated to the payment of Senior Debt. The indenture will permit Emmis and
the guarantors to incur additional Senior Debt.
As of the date of the indenture, all of Emmis' subsidiaries, except for
Radio Hungaria Co. Ltd., will be "restricted subsidiaries." However, under the
circumstances described below under the subheading "Certain
Covenants -- Designation of Restricted and Unrestricted Subsidiaries," we will
be permitted to designate certain of our subsidiaries as "Unrestricted
Subsidiaries." Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants in the indenture. Unrestricted Subsidiaries will not
guarantee these notes. In addition, if Emmis acquires or creates a new
restricted subsidiary that is not a domestic restricted subsidiary, Emmis will
not be required to make such newly acquired or created restricted subsidiary a
guarantor. See "Certain Covenants -- Additional Subsidiary Guarantees."
In the event of a bankruptcy, liquidation or reorganization of any of these
non-guarantor subsidiaries, these non-guarantor subsidiaries will pay the
holders of their debt and their trade creditors before they will be able to
distribute any of their assets to us. The non-guarantor subsidiaries generated
1.1% of our consolidated revenues in the nine-month period ended November 30,
1998 and held 2.1% of our consolidated assets as of November 30, 1998.
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PRINCIPAL, MATURITY AND INTEREST
The indenture will be limited to a maximum aggregate principal amount of
notes equal to $400 million, of which $300 million was issued in the offering of
the outstanding notes. The notes are in denominations of $1,000 and integral
multiples of $1,000. The notes will mature on March 15, 2009.
Interest on these notes will accrue at the rate of 8 1/8% per annum and
will be payable semiannually in arrears on March 15 and September 15, commencing
on September 15, 1999. Emmis will make each interest payment to the holders of
record of these notes on the immediately preceding March 1 and September 1.
Interest on these notes will accrue from the date of original issuance or,
if interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
SUBSIDIARY GUARANTEES
The guarantors will jointly and severally guarantee Emmis' obligations
under these notes. Each subsidiary guarantee will be subordinated to the prior
payment in full in cash of all Senior Debt of that guarantor and Emmis on the
same basis and to the same extent as the notes are junior subordinated to the
prior payment in full in cash of the Senior Debt of Emmis. The obligations of
each guarantor under its subsidiary guarantee will be limited as necessary to
prevent that subsidiary guarantee from constituting a fraudulent conveyance
under applicable law. See "Risk Factors -- Fraudulent Conveyance Matters."
A guarantor may not sell or otherwise dispose of all or substantially all
of its assets, or consolidate with or merge with or into (whether or not such
guarantor is the surviving entity), another entity unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists and either:
(a) such guarantor is the surviving corporation; or
(b) the entity formed by or surviving any such consolidation or merger,
if other than such guarantor, or to which such sale, assignment,
transfer, conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia or the
jurisdiction in which such guarantor is organized and under the laws
of which it is existing;
(2) the entity formed by or surviving any such consolidation or merger, if
other than such guarantor, or the entity to which such sale,
assignment, transfer, conveyance or other disposition shall have been
made assumes all the obligations of such guarantor under the guarantees
and the indenture, as applicable, pursuant to agreements reasonably
satisfactory to the trustee;
(3) immediately after such transaction no Event of Default, or any event
that with the passage of time or the giving of notice or both would be
an Event of Default, exists;
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(4) such guarantor or the entity formed by or surviving any such
consolidation or merger, if other than such guarantor, will have
Consolidated Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of such guarantor immediately
preceding the transaction; and
(5) the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the indenture.
The subsidiary guarantee of a guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that guarantor, including by way of
merger or consolidation, if Emmis applies the Net Proceeds of that sale
or other disposition in accordance with the applicable provisions of
the indenture; or
(2) in connection with any sale of all of the capital stock of a guarantor,
if Emmis applies the Net Proceeds of that sale in accordance with the
applicable provisions of the indenture; or
(3) if Emmis designates any restricted subsidiary that is a guarantor as an
Unrestricted Subsidiary.
See "Repurchase at the Option of Holders -- Asset Sales."
SUBORDINATION
The payment of principal, premium and liquidated damages, if any, and
interest on these notes will be subordinated to the prior payment in full in
cash of all Senior Debt of Emmis.
The holders of Senior Debt will be entitled to receive payment in full in
cash of all Obligations due in respect of Senior Debt, including interest after
the commencement of any such proceeding described below at the rate specified in
the applicable Senior Debt, before the holders of notes will be entitled to
receive any payment with respect to the notes in the event of any distribution
to creditors of Emmis:
(1) in a liquidation or dissolution of Emmis or any of its subsidiaries;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Emmis, any of its subsidiaries or any of their
respective property;
(3) in an assignment for the benefit of creditors of Emmis or any of its
subsidiaries; or
(4) in any marshalling of Emmis' or any of its subsidiaries' assets and
liabilities.
However, holders of notes may receive and retain Permitted Junior
Securities and payments made from the trust as described under "-- Legal
Defeasance and Covenant Defeasance."
Emmis also may not make any payment in respect of the notes except in
Permitted Junior Securities or from the trust as described under " -- Legal
Defeasance and Covenant Defeasance" if:
(1) a payment default with respect to any principal, interest, premium or
fees due on Designated Senior Debt occurs and is continuing; or
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(2) any other default occurs and is continuing on Designated Senior Debt
that currently, or with the passage of time or the giving of notice,
permits holders of the Designated Senior Debt to accelerate its
maturity and the trustee receives a payment blockage notice relating to
such default from Emmis or the holders of any Designated Senior Debt.
Payments on the notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default
is cured or waived in writing by the representatives of the holders of
Designated Senior Debt; and
(2) in case of a nonpayment default, upon the earlier of the date on which
such nonpayment default is cured or waived in writing by the
representatives of the holders of Designated Senior Debt or 179 days
after the date on which the applicable payment blockage notice is
received by the trustee, unless the maturity of any Designated Senior
Debt has been accelerated.
No new payment blockage notice may be delivered unless and until 360 days
have elapsed since the commencement of the immediately prior payment blockage
notice.
No nonpayment default that existed or was continuing on the date of
delivery of any payment blockage notice to the trustee shall be, or be made, the
basis for a subsequent payment blockage notice unless such default shall have
been cured or waived for a period of not less than 120 days.
Emmis must promptly notify holders of Senior Debt if payment of the notes
is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of Emmis, holders of these notes
may recover less ratably than creditors of Emmis who are holders of Senior Debt.
See "Risk Factors -- Subordination."
OPTIONAL REDEMPTION
At any time prior to March 15, 2002, Emmis may on any one or more occasions
redeem up to 35% of the aggregate principal amount of notes originally issued
under the indenture at a redemption price of 108.125% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages thereon, if
any, to the redemption date, with the net cash proceeds of one or more
underwritten public offerings of Emmis common stock in which the net proceeds to
Emmis are at least $25.0 million; provided that
(1) at least 65% of the aggregate principal amount of notes originally
issued under the indenture remains outstanding immediately after the
occurrence of such redemption, excluding notes held by Emmis and its
subsidiaries; and
(2) the redemption must occur within 45 days of the date of the closing of
such underwritten public equity offering.
Except pursuant to the preceding paragraph, the notes will not be
redeemable at Emmis' option prior to March 15, 2004.
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After March 15, 2004, Emmis may redeem all or a part of these notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices set
forth below plus accrued and unpaid interest and liquidated damages thereon, if
any, to the applicable redemption date. The redemption prices in the following
table are expressed as percentages of principal amount and apply to redemptions
during the twelve-month period beginning on March 15 of the indicated year.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004............................................ 104.063%
2005............................................ 102.708%
2006............................................ 101.354%
2007 and thereafter............................. 100.000%
</TABLE>
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each holder of notes will have the right to
require Emmis to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of that holder's notes pursuant to the Change of Control
offer. In the Change of Control offer, Emmis will offer a Change of Control
payment in cash equal to 101% of the aggregate principal amount of notes
repurchased plus accrued and unpaid interest and liquidated damages thereon, if
any, to the date of purchase. Within ten days following any Change of Control,
Emmis will mail a notice to each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
notes on the Change of Control payment date specified in such notice, pursuant
to the procedures required by the indenture and described in such notice. Emmis
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the notes as a
result of a Change of Control.
On the Change of Control payment date, Emmis will, to the extent lawful:
(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control offer;
(2) deposit with Emmis' paying agent an amount equal to the Change of
Control payment in respect of all notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the trustee the notes so accepted
together with an officers' certificate stating the aggregate principal
amount of notes or portions thereof being purchased by Emmis.
The paying agent will promptly mail to each holder of notes so tendered the
Change of Control payment for such notes, and the trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each such new note will be in a principal
amount of $1,000 or an integral multiple thereof.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, Emmis
will either repay all outstanding
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Senior Debt or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Debt to permit the repurchase of notes required by
this covenant. Emmis will publicly announce the results of the Change of Control
offer on or as soon as practicable after the Change of Control payment date.
The provisions described above that require Emmis to make a Change of
Control offer following a Change of Control will be applicable regardless of
whether or not any other provisions of the indenture are applicable. Except as
described above with respect to a Change of Control, the indenture does not
contain provisions that permit the holders of the notes to require that Emmis
repurchase or redeem the notes in the event of a takeover, recapitalization or
similar transaction.
Emmis' outstanding Senior Debt currently prohibits Emmis from purchasing
any notes, and also provides that certain change of control events with respect
to Emmis would constitute a default under the agreements governing the Senior
Debt. Any future credit agreements or other agreements relating to Senior Debt
to which Emmis becomes a party may contain similar restrictions and provisions.
In the event a Change of Control occurs at a time when Emmis is prohibited from
purchasing notes, Emmis could seek the consent of its senior lenders to the
purchase of notes or could attempt to refinance the borrowings that contain such
prohibition. If Emmis does not obtain such a consent or repay such borrowings,
Emmis will remain prohibited from purchasing notes. In such case, Emmis' failure
to purchase tendered notes would constitute an Event of Default under the
indenture which would, in turn, constitute a default under such Senior Debt. In
such circumstances, the subordination provisions in the indenture would likely
restrict payments to the holders of notes.
Emmis will not be required to make a Change of Control offer upon a Change
of Control if a third party makes the Change of Control offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control offer made by Emmis and purchases
all notes validly tendered and not withdrawn under such Change of Control offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Emmis and its subsidiaries taken as a whole. Although there is
a limited body of case law interpreting the phrase "substantially all," there is
no precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of notes to require Emmis to repurchase
such notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of Emmis and its subsidiaries taken
as a whole to another person or group may be uncertain.
ASSET SALES
Emmis will not, and will not permit any of its restricted subsidiaries to,
consummate an Asset Sale unless:
(1) Emmis (or the restricted subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or equity interests issued or sold or
otherwise disposed of;
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(2) such fair market value is determined by Emmis' board of directors and
evidenced by a resolution of the board of directors set forth in an
officers' certificate delivered to the trustee; and
(3) at least 80% of the consideration therefor received by Emmis or such
restricted subsidiary is in the form of cash. For purposes of this
provision, each of the following shall be deemed to be cash:
(a) any liabilities of Emmis or any restricted subsidiary as shown on
Emmis' or such restricted subsidiary's most recent balance sheet,
other than contingent liabilities and liabilities that are by their
terms subordinated to the notes or any subsidiary guarantee, that
are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases Emmis or such restricted
subsidiary from further liability; and
(b) any securities, notes or other obligations received by Emmis or any
such restricted subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted
by Emmis or such restricted subsidiary into cash (to the extent of
the cash received in that conversion).
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
Emmis may apply such Net Proceeds at its option:
(1) to repay Senior Debt;
(2) to acquire all or substantially all of the assets of, or a majority of
the voting stock of, another Permitted Business that is owned by Emmis
or a guarantor;
(3) to make a capital expenditure; or
(4) to acquire other long-term assets that are used or useful in a
Permitted Business that is owned by Emmis or a guarantor.
Pending the final application of any such Net Proceeds, Emmis may temporarily
reduce revolving credit borrowings or otherwise invest such Net Proceeds in any
manner that is not prohibited by the indenture.
Notwithstanding the two immediately preceding paragraphs, Emmis and its
restricted subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraphs to the extent:
(1) at least 80% of the consideration for such Asset Sale constitutes
Productive Assets, cash, Cash Equivalents and/or Marketable Securities
and
(2) such Asset Sale is for fair market value as determined in good faith by
the board of directors and certified to in an officer's certificate;
provided that any consideration not constituting Productive Assets received by
Emmis or any of its restricted subsidiaries in connection with any Asset Sale
permitted to be consummated under this paragraph shall be subject to the
provisions of the preceding paragraph.
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Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "excess proceeds." When the
aggregate amount of excess proceeds exceeds $5.0 million, Emmis will make an
Asset Sale offer to all holders of notes and all holders of other Indebtedness
that is pari passu with the notes containing provisions similar to those set
forth in the indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets to purchase the maximum principal amount of notes
and such other pari passu Indebtedness that may be purchased out of the excess
proceeds. The offer price in any Asset Sale offer will be equal to 100% of
principal amount plus accrued and unpaid interest and liquidated damages
thereon, if any, to the date of purchase, and will be payable in cash. If any
excess proceeds remain after consummation of an Asset Sale offer, Emmis may use
such excess proceeds for any purpose not otherwise prohibited by the indenture.
If the aggregate principal amount of notes and such other pari passu
Indebtedness tendered into such Asset Sale offer exceeds the amount of excess
proceeds, the trustee shall select the notes and such other pari passu
Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset
Sale offer, the amount of excess proceeds shall be reset at zero.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed, in compliance with the requirements of the
principal national securities exchange on which the notes are listed;
or
(2) if the notes are not so listed, on a pro rata basis, by lot or by such
method as the trustee shall deem fair and appropriate.
No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note shall state the portion of the principal amount thereof to
be redeemed. A new note in principal amount equal to the unredeemed portion of
the original note will be issued in the name of the holder thereof upon
cancellation of the original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on notes or portions of them called for redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
Emmis will not, and will not permit any of its restricted subsidiaries to,
directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of Emmis' or any of its restricted subsidiaries' equity
interests, including, without limitation, any payment in connection
with any merger or consolidation involving Emmis or any of its
restricted subsidiaries, or to the direct or indirect holders of
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Emmis' or any of its restricted subsidiaries' equity interests in their
capacity as such other than dividends or distributions payable in
equity interests (other than Disqualified Stock) of Emmis or to Emmis
or a restricted subsidiary of Emmis;
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving Emmis) any equity interests of Emmis or any direct or
indirect parent of Emmis or any restricted subsidiary of Emmis (other
than any such equity interests owned by Emmis or any restricted
subsidiary of Emmis);
(3) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is
subordinated to the notes or the subsidiary guarantees (other than the
notes or the subsidiary guarantees), except a payment of interest or
principal at the stated maturity thereof; or
(4) make any investment other than a Permitted Investment,
unless, at the time of and after giving effect to any such restricted payment:
(1) no default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(2) Emmis would, at the time of such restricted payment and after giving
pro forma effect thereto as if such restricted payment had been made at
the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the
Leverage Ratio test set forth in the first paragraph of the covenant
described below under the caption " -- Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(3) such restricted payment, together with the aggregate amount of all
other restricted payments made by Emmis and its restricted subsidiaries
after the date of the indenture (excluding restricted payments permitted
by clauses (2) and (3) of the next succeeding paragraph), is less than
the sum, without duplication, of:
(a) (1) the aggregate Consolidated EBITDA of Emmis for the period
(taken as one accounting period) from the beginning of the
first fiscal quarter commencing after the date of the
indenture to the end of Emmis' most recently ended fiscal
quarter for which internal financial statements are available
at the time of such restricted payment (or, in the event
aggregate Consolidated EBITDA for such period is a deficit,
then minus such deficit) less
(2) 1.4 times the aggregate Fixed Charges of Emmis for the same
period; plus
(b) the aggregate net cash proceeds received by Emmis since the date of
the indenture as a contribution to its common equity capital or
from the issue or sale of equity interests of Emmis other than
Disqualified Stock or from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt
securities of Emmis that have been converted into or
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exchanged for such equity interests, other than equity interests or
Disqualified Stock or debt securities sold to a subsidiary of
Emmis; plus
(c) to the extent that any investment other than a Permitted Investment
is sold for cash or otherwise liquidated or repaid for cash, the
lesser of:
(1) the cash return of capital with respect to such Restricted
Investment less the cost of disposition, if any, and
(2) the initial amount of such investment; plus
(d) if any Unrestricted Subsidiary:
(1) is redesignated as a restricted subsidiary, the fair market
value of such redesignated subsidiary (as determined in good
faith by the board of directors) as of the date of its
redesignation or
(2) pays any cash dividends or cash distributions to Emmis or any
of its restricted subsidiaries,
100% of any such cash dividends or cash distributions made after
the date of the indenture; plus
(e) $10.0 million.
So long as no default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other acquisition
of any subordinated Indebtedness of Emmis or any guarantor or of any
equity interests of Emmis or any restricted subsidiary in exchange for,
or out of the net cash proceeds of the substantially concurrent sale
(other than to a subsidiary of Emmis) of, equity interests of Emmis
other than Disqualified Stock; provided that the amount of any such net
cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from
clause (3)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of Emmis or any guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a restricted subsidiary of Emmis to the
holders of its common equity interests on a pro rata basis;
(5) the repurchase, redemption or other acquisition or retirement for value
of any equity interests of Emmis or any restricted subsidiary of Emmis
held by any former member of Emmis' or any of its subsidiaries'
management pursuant to any management equity subscription agreement or
stock option agreement in effect as of the date of the
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indenture; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired equity interests shall not
exceed $1.0 million in any twelve-month period; and
(6) the repurchase, redemption or other acquisition or retirement for value
of any equity interests of Emmis other than those described in clause
(5) above in an amount not to exceed $25 million in the aggregate.
The amount of all restricted payments other than cash shall be the fair
market value on the date of the restricted payment of the asset(s) or securities
proposed to be transferred or issued by Emmis or such restricted subsidiary, as
the case may be, pursuant to the restricted payment. The fair market value of
any assets or securities that are required to be valued by this covenant shall
be determined by the board of directors whose resolution with respect thereto
shall be delivered to the trustee. The board of directors' determination must be
based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if the fair market value exceeds
$5.0 million. Not later than the date of making any restricted payment, Emmis
shall deliver to the trustee an officers' certificate stating that such
restricted payment is permitted and setting forth the basis upon which the
calculations required by this "restricted payments" covenant were computed,
together with a copy of any fairness opinion or appraisal required by the
indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
Emmis will not, and will not permit any of its subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness, including Acquired Debt, and Emmis will not issue any
Disqualified Stock and will not permit any of its restricted subsidiaries to
issue any shares of preferred stock; provided, however, that Emmis and any
restricted subsidiary may incur Indebtedness (including Acquired Debt), and may
issue Disqualified Stock, if the Leverage Ratio of Emmis for the four full
fiscal quarters ended immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would not have
been greater than 7.0 to 1, determined on a pro forma basis after giving pro
forma effect to such incurrence or issuance and to the application of the net
proceeds therefrom, and in accordance with the definition of Leverage Ratio.
So long as no default shall have occurred and be continuing or would be
caused thereby, the first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness:
(1) the incurrence by Emmis and any restricted subsidiary of Indebtedness
under the Credit Agreement; provided that the aggregate principal amount
of all Indebtedness of Emmis and the restricted subsidiaries outstanding
under the Credit Agreement after giving effect to such incurrence does
not exceed an amount equal to $750.0 million less the aggregate amount
of all Net Proceeds of Asset Sales required to be applied by Emmis or
any of its restricted subsidiaries since the date of the indenture to
repay Indebtedness under the Credit Facilities pursuant to the covenant
described above under the caption "-- Asset Sales;"
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(2) the incurrence by Emmis and its restricted subsidiaries of Existing
Indebtedness;
(3) the incurrence by Emmis and the guarantors of Indebtedness represented
by the outstanding notes or the registered notes and the subsidiary
guarantees;
(4) the incurrence by Emmis or any of its restricted subsidiaries of
Indebtedness represented by capital lease obligations, mortgage
financings or purchase money obligations, in each case, incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of Emmis or such restricted subsidiary, in an aggregate
principal amount not to exceed $5.0 million at any time outstanding;
(5) the incurrence by Emmis or any of its restricted subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace, Indebtedness (other
than intercompany Indebtedness) that was permitted by the indenture to
be incurred under the first paragraph of this covenant or clauses (2),
(3), (4), (8) or (9) of this paragraph;
(6) the incurrence by Emmis or any of its restricted subsidiaries of
intercompany Indebtedness between or among Emmis and any guarantor;
provided, however, that:
(a) if Emmis or any guarantor is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the notes, in the
case of Emmis, or the subsidiary guarantee of such guarantor, in
the case of a guarantor; and
(b) (1) any subsequent issuance or transfer of equity interests that
results in any such Indebtedness being held by a person other
than Emmis or a guarantor and
(2) any sale or other transfer of any such Indebtedness to a
person that is not either Emmis or a guarantor shall be
deemed, in each case, to constitute an incurrence of such
Indebtedness by Emmis or such restricted subsidiary, as the
case may be, that was not permitted by this clause (6);
(7) the incurrence by Emmis or any of its restricted subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of the indenture to be
outstanding;
(8) the guarantee by Emmis or any of the restricted subsidiaries of
Indebtedness of Emmis or a restricted subsidiary of Emmis that is also
a guarantor that was permitted to be incurred by another provision of
this covenant;
(9) the incurrence by Emmis or any of its restricted subsidiaries of
additional Indebtedness in an aggregate principal amount, or accreted
value, as applicable, at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (9), not to exceed $25
million;
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(10) the incurrence by Emmis' Unrestricted Subsidiaries of non-recourse
debt; provided, however, that if any such Indebtedness ceases to be
non-recourse debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a restricted
subsidiary of Emmis that was not permitted by this clause (10);
(11) the accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, provided, in each such
case, that the amount thereof is included in Fixed Charges of Emmis as
accrued, and the payment of dividends on Disqualified Stock in the
form of additional shares of the same class of Disqualified Stock; and
(12) the incurrence by Emmis and any restricted subsidiary of up to an
aggregate principal amount of $250.0 million of Indebtedness under the
Credit Facilities for the purpose of acquiring Permitted Businesses.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Indebtedness described in clauses (1) through (12) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant, Emmis
will be permitted to classify such item of Indebtedness on the date of its
incurrence in any manner that complies with this covenant.
NO SENIOR SUBORDINATED DEBT
Emmis will not incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
any Senior Debt of Emmis and senior in any respect in right of payment to the
notes. No guarantor will incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of such guarantor and senior in any respect in right
of payment to such guarantor's subsidiary guarantee.
LIENS
Emmis will not, and will not permit any of its restricted subsidiaries to,
directly or indirectly create, incur, assume or suffer to exist any lien of any
kind securing Indebtedness, Attributable Debt or trade payables on any asset now
owned or hereafter acquired, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
Emmis will not, and will not permit any of its restricted subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
encumbrance or restriction on the ability of any restricted subsidiary to:
(1) pay dividends or make any other distributions on its capital stock to
Emmis or any of Emmis' restricted subsidiaries, or with respect to any
other interest or participation in, or measured by, its profits, or pay
any indebtedness owed to Emmis or any of Emmis' restricted
subsidiaries;
(2) make loans or advances to Emmis or any of Emmis' restricted
subsidiaries; or
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(3) transfer any of its properties or assets to Emmis or any of Emmis'
restricted subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the indenture and any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in such Existing
Indebtedness, as in effect on the date of the indenture;
(2) the indenture and the notes;
(3) applicable law;
(4) any instrument governing Indebtedness or capital stock of a person
acquired by Emmis or any of its restricted subsidiaries as in effect at
the time of such acquisition, except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition,
which encumbrance or restriction is not applicable to any person, or the
properties or assets of any person, other than the person, or the
property or assets of the person, so acquired, provided that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of
the indenture to be incurred;
(5) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary course
of business that impose restrictions on the property so acquired of the
nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a restricted
subsidiary that restricts distributions by such restricted subsidiary
pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred pursuant
to the provisions of the covenant described above under the caption
"-- Liens" that limit the right of Emmis or any of its restricted
subsidiaries to dispose of the assets subject to such lien;
(10) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business; and
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business.
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MERGER, CONSOLIDATION OR SALE OF ASSETS
Emmis may not, directly or indirectly consolidate or merge with or into
another person, whether or not Emmis is the surviving corporation, or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to another person,
unless:
(1) either:
(a) Emmis is the surviving corporation; or
(b) if Emmis is not the surviving corporation, the person formed by or
surviving any such consolidation or merger or to which such sale,
assignment, transfer, conveyance or other disposition shall have
been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia;
(2) the person formed by or surviving any such consolidation or merger, if
other than Emmis, or the person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes
all the obligations of Emmis under the notes and the indenture pursuant
to agreements reasonably satisfactory to the trustee;
(3) immediately after such transaction no default or Event of Default
exists; and
(4) Emmis or the person formed by or surviving any such consolidation or
merger, if other than Emmis:
(a) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of Emmis
immediately preceding the transaction; and
(b) will, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the
same had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Leverage Ratio test set forth in the
first paragraph of the covenant described above under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock."
In addition, Emmis may not, directly or indirectly, lease all or substantially
all of its properties or assets, in one or more related transactions, to any
other person. This "Merger, Consolidation, or Sale of Assets" covenant will not
apply to a sale, assignment, transfer, conveyance or other disposition of assets
between or among Emmis and any of its wholly owned subsidiaries.
TRANSACTIONS WITH AFFILIATES
Emmis will not, and will not permit any of its restricted subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract,
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agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any affiliate, unless:
(1) such affiliate transaction is on terms that are no less favorable to
Emmis or the relevant restricted subsidiary than those that would have
been obtained in a comparable transaction by Emmis or such restricted
subsidiary with an unrelated person; and
(2) Emmis delivers to the trustee:
(a) with respect to any affiliate transaction or series of related
affiliate transactions involving aggregate consideration in excess
of $1.0 million, a resolution of the board of directors set forth in
an officers' certificate certifying that such affiliate transaction
complies with this covenant and that such affiliate transaction has
been approved by a majority of the disinterested members of the
board of directors; and
(b) with respect to any affiliate transaction or series of related
affiliate transactions involving aggregate consideration in excess
of $5.0 million, an opinion as to the fairness to the holders of the
notes of such affiliate transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of
national standing.
The following items shall not be deemed to be affiliate transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by Emmis or any of its restricted
subsidiaries in the ordinary course of business and consistent with the
past practice of Emmis or such restricted subsidiary;
(2) transactions between or among Emmis and/or its restricted subsidiaries;
(3) payment of reasonable directors fees to persons who are not otherwise
affiliates of Emmis; and
(4) Restricted payments that are permitted by the provisions of the
indenture described above under the caption "-- Restricted Payments."
ADDITIONAL SUBSIDIARY GUARANTEES
If Emmis or any of its restricted subsidiaries acquires or creates another
subsidiary after the date of the indenture, then that newly acquired or created
Restricted Subsidiary must become a guarantor and execute a supplemental
indenture satisfactory to the trustee and deliver an opinion of counsel to the
trustee within 10 business days of the date on which it was acquired or created
unless such subsidiary either:
(1) is designated as an "Unrestricted Subsidiary" in accordance with the
covenant described below under the caption "-- Designation of
Restricted and Unrestricted Subsidiaries" or
(2) is not a domestic restricted subsidiary.
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DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The board of directors may designate any restricted subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a default. If a
restricted subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by Emmis and its restricted subsidiaries in the
subsidiary so designated will be deemed to be an Investment made as of the time
of such designation and will reduce the amount available for restricted payments
under the first paragraph of the covenant described above under the caption
"-- Restricted Payments" or Permitted Investments, as applicable. All such
outstanding Investments will be valued at their fair market value at the time of
such designation. In addition, such designation will only be permitted if such
restricted payment would be permitted at that time and if such restricted
subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The
board of directors may redesignate any Unrestricted Subsidiary to be a
restricted subsidiary if the redesignation would not cause a default.
SALE AND LEASEBACK TRANSACTIONS
Emmis will not, and will not permit any of its restricted subsidiaries to,
enter into any sale and leaseback transaction; provided that Emmis or any
guarantor may enter into a sale and leaseback transaction if:
(1) Emmis or that guarantor, as applicable, could have:
(a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction under the Leverage
Ratio test in the first paragraph of the covenant described above
under the caption "-- Incurrence of Additional Indebtedness and
Issuance of Preferred Stock" and
(b) incurred a lien to secure such Indebtedness pursuant to the
covenant described above under the caption "-- Liens;"
(2) the gross cash proceeds of that sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by
the board of directors and set forth in an officers' certificate
delivered to the trustee, of the property that is the subject of such
sale and leaseback transaction; and
(3) the transfer of assets in that sale and leaseback transaction is
permitted by, and Emmis applies the proceeds of such transaction in
compliance with, the covenant described above under the caption
"-- Asset Sales."
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN WHOLLY OWNED
SUBSIDIARIES
Emmis will not, and will not permit any of its restricted subsidiaries to,
transfer, convey, sell, lease or otherwise dispose of any equity interests in
any wholly owned restricted subsidiary of Emmis to any person (other than Emmis
or a wholly owned restricted subsidiary of Emmis), unless:
(1) such transfer, conveyance, sale, lease or other disposition is of all
the equity interests in such wholly owned restricted subsidiary; and
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(2) the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant described
above under the caption "-- Asset Sales."
In addition, Emmis will not permit any wholly owned restricted subsidiary of
Emmis to issue any of its equity interests (other than, if necessary, shares of
its capital stock constituting directors' qualifying shares) to any person other
than to Emmis or a wholly owned restricted subsidiary of Emmis.
LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
Emmis will not permit any of its restricted subsidiaries, directly or
indirectly, to guarantee or pledge any assets to secure the payment of any other
Indebtedness of Emmis unless such restricted subsidiary simultaneously executes
and delivers a supplemental indenture providing for the guarantee of the payment
of the notes by such restricted subsidiary, which guarantee shall be senior to
or pari passu with such restricted subsidiary's guarantee of or pledge to secure
such other Indebtedness, unless such other Indebtedness is Senior Debt, in which
case the guarantee of the notes may be subordinated to the guarantee of such
Senior Debt to the same extent as the notes are subordinated to such Senior
Debt.
Notwithstanding the preceding paragraph, any subsidiary guarantee of the
notes will provide by its terms that it will be automatically and
unconditionally released and discharged under the circumstances described above
under the caption "-- Subsidiary Guarantees." The form of the subsidiary
guarantee will be attached as an exhibit to the indenture.
PAYMENTS FOR CONSENT
Emmis will not, and will not permit any of its subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration to or for the benefit of
any holder of notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of the Indenture or the notes unless such
consideration is offered to be paid and is paid to all holders of the notes that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
REPORTS
Whether or not required by the SEC, so long as any notes are outstanding,
Emmis will furnish to the holders of notes, within the time periods specified in
the SEC's rules and regulations:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if
Emmis were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report
on the annual financial statements by Emmis' certified independent
accountants; and
(2) all current reports that would be required to be filed with the SEC on
Form 8-K if Emmis were required to file such reports.
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If Emmis has designated any of its subsidiaries as Unrestricted
Subsidiaries or if any restricted subsidiaries of Emmis are not guarantors, then
the quarterly and annual financial information required by the preceding
paragraph shall include a reasonably detailed presentation, either on the face
of the financial statements or in the footnotes thereto, and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, of the
financial condition and results of operations of Emmis and its restricted
subsidiaries separate from the financial condition and results of operations of
the non-guarantor subsidiaries of Emmis.
In addition, whether or not required by the SEC, Emmis will file a copy of
all of the information and reports referred to in clauses (1) and (2) above with
the SEC for public availability within the time periods specified in the SEC's
rules and regulations (unless the SEC will not accept such a filing) and make
such information available to securities analysts and prospective investors upon
request.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
liquidated damages with respect to, the notes, whether or not
prohibited by the subordination provisions of the indenture;
(2) default in payment when due of the principal of or premium, if any, on
the notes, whether or not prohibited by the subordination provisions of
the indenture;
(3) failure by Emmis or any of its subsidiaries to comply with the
provisions described under the captions "-- Change of Control,"
"-- Asset Sales," "-- Restricted Payments" or "-- Incurrence of
Indebtedness and Issuance of Preferred Stock" or "-- Merger,
Consolidation or Sale of Assets;"
(4) failure by Emmis or any of its restricted subsidiaries to comply with
any of the other agreements in the indenture for 60 days after notice
to Emmis by the trustee or the holders of at least 25% in aggregate
principal amount of the notes then outstanding;
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Emmis or any of its restricted
subsidiaries, or the payment of which is guaranteed by Emmis or any of
its restricted subsidiaries, whether such Indebtedness or guarantee now
exists, or is created after the date of the indenture, if that default:
(a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default;
and
(b) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a payment default as
described in clause (a) or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
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(6) failure by Emmis or any of its restricted subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the indenture, any subsidiary guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any guarantor,
or any person acting on behalf of any guarantor, shall deny or
disaffirm its obligations under its subsidiary guarantee; and
(8) certain events of bankruptcy or insolvency with respect to Emmis or its
restricted subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Emmis, any restricted subsidiary that
is a Significant Subsidiary or any group of restricted subsidiaries that, taken
together, would constitute a Significant Subsidiary, all notes then outstanding
will become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the trustee or the holders of
at least 25% in principal amount of the notes then outstanding may declare all
the notes to be due and payable immediately.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a majority
in principal amount of the notes then outstanding may direct the trustee in its
exercise of any trust or power. The trustee may withhold from holders of the
notes notice of any continuing default or Event of Default (except a default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing default or Event of Default and its consequences under
the indenture except a continuing default or Event of Default in the payment of
interest on, or the principal of, the notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of Emmis with the
intention of avoiding payment of the premium that Emmis would have had to pay if
Emmis then had elected to redeem the notes pursuant to the optional redemption
provisions of the indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the acceleration
of the notes. If an Event of Default occurs prior to March 15, 2004, by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of
Emmis with the intention of avoiding the prohibition on redemption of the notes
prior to March 15, 2004, then the premium specified in the indenture shall also
become immediately due and payable to the extent permitted by law upon the
acceleration of the notes.
Emmis is required to deliver to the trustee annually a statement regarding
compliance with the indenture. Upon becoming aware of any default or Event of
Default, Emmis is required to deliver to the trustee a statement specifying such
default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Emmis or any
guarantor, as such, shall have any liability for any obligations of Emmis or the
guarantors under the notes, the indenture or the subsidiary guarantees or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of notes by accepting a note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the notes. The waiver may not be effective to waive liabilities under the
federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Emmis may, at its option and at any time, elect to have all of its
obligations discharged with respect to notes then outstanding and all
obligations of the guarantors discharged with respect to their subsidiary
guarantees ("Legal Defeasance") except for:
(1) the rights of holders of notes then outstanding to receive payments in
respect of the principal of, premium and liquidated damages, if any,
and interest on such notes when such payments are due from the trust
referred to below;
(2) Emmis' obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee, and
Emmis' obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, Emmis may, at its option and at any time, elect to have the
obligations of Emmis and the guarantors released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance") and
thereafter any omission to comply with those covenants shall not constitute a
default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events described under "Events of Default" other than
non-payment, bankruptcy, receivership, rehabilitation and insolvency events will
no longer constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Emmis must irrevocably deposit with the trustee, in trust, for the
benefit of the holders of the notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if
any, and interest on the notes then outstanding on the stated maturity
or on the applicable redemption date, as the case may be, and Emmis
must specify whether the notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, Emmis shall have delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that:
(a) Emmis has received from, or there has been published by, the
Internal Revenue Service a ruling or
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(b) since the date of the indenture, there has been a change in the
applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the holders of the notes then outstanding
will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Emmis shall have delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the holders of the notes then outstanding will not
recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(4) no default or Event of Default shall have occurred and be continuing
either:
(a) on the date of such deposit, other than a default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit; or
(b) or insofar as Events of Default from bankruptcy or insolvency
events are concerned at any time in the period ending on the 91st
day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument other than the indenture to which Emmis or any
of its restricted subsidiaries is a party or by which Emmis or any of
its restricted subsidiaries is bound, including without limitation the
Credit Facilities;
(6) Emmis must have delivered to the trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) Emmis must deliver to the trustee an officers' certificate stating that
the deposit was not made by Emmis with the intent of preferring the
holders of notes over the other creditors of Emmis with the intent of
defeating, hindering, delaying or defrauding creditors of Emmis or
others; and
(8) Emmis must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent relating
to the Legal Defeasance or the Covenant Defeasance have been complied
with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and Emmis may require a
holder to pay any taxes and fees required by law or permitted by the Indenture.
Emmis is not required to transfer or exchange any note
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selected for redemption. Also, Emmis is not required to transfer or exchange any
note for a period of 15 days before a selection of notes to be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next and the third succeeding paragraphs, the
indenture or the notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the notes then outstanding
including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, notes, and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the holders of a majority in principal amount of the notes then
outstanding including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, notes.
Without the consent of each holder affected, an amendment or waiver may not
with respect to any notes held by a non-consenting holder:
(1) reduce the principal amount of notes whose holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes, other
than provisions relating to the covenants described above under the
caption "-- Repurchase at the Option of Holders";
(3) reduce the rate of or change the time for payment of interest on any
note;
(4) waive a default or Event of Default in the payment of principal of or
premium, if any, or interest on the notes, except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment
default that resulted from such acceleration;
(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to waivers
of past defaults or the rights of holders of notes to receive payments
of principal of or premium, if any, or interest on the notes;
(7) waive a redemption payment with respect to any note other than a
payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders"; or
(8) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
indenture relating to subordination that adversely affects the rights of the
holders of the notes will require the consent of the holders of at least 75% in
aggregate principal amount of notes then outstanding. Also, any amendment to
such provisions will require the consent of the representatives of the holders
of Designated Senior Debt.
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Notwithstanding the preceding, without the consent of any holder of notes,
Emmis and the trustee may amend or supplement the indenture or the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of Emmis' obligations to holders of notes
in the case of a merger or consolidation or sale of all or
substantially all of Emmis' assets;
(4) to make any change that would provide any additional rights or benefits
to the holders of notes or that does not adversely affect the legal
rights under the Indenture of any such holder; or
(5) to comply with requirements of the SEC in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of Emmis or any guarantor, the indenture
limits its right to obtain payment of claims in certain cases, or to realize
property received in respect of any such claim as security or otherwise. The
trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue or resign.
The holders of a majority in principal amount of the notes then outstanding
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur and be continuing, the trustee will be required, in the exercise of
its power, to use the degree of care of a prudent person in the conduct of his
or her own affairs. Subject to such provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request of any holder of notes, unless such holder shall have offered to the
trustee security and indemnity satisfactory to it against any loss, liability or
expense.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a holder has given wire transfer instructions to Emmis, Emmis will make
all principal, premium, liquidated damages and interest payments on those notes
in accordance with those instructions. All other payments on these notes will be
made at the office or agency of the paying agent and registrar within the City
and State of New York unless Emmis elects to make interest payments by check
mailed to the holders at their address set forth in the register of holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar. Emmis may
change the paying agent or registrar without prior notice to the holders of the
notes, and Emmis or any of its subsidiaries may act as paying agent or
registrar.
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BOOK-ENTRY; DELIVERY; FORM AND TRANSFER
The notes initially will be in the form of one or more registered global
notes without interest coupons (collectively, the "Global Notes"). Upon
issuance, the Global Notes will be deposited with the trustee, as custodian for
the Depository Trust Company ("DTC" or the "Depositary"), in New York and
registered in the name of DTC or its nominee for credit to the accounts of DTC's
Direct Participants and Indirect Participants (each as defined).
Transfer of beneficial interests in Global Notes will be subject to the
applicable rules and procedures of DTC and its Direct Participants or Indirect
Participants, including, if applicable, those of Euroclear and CEDEL, which may
change from time to time.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor DTC or its nominee in certain limited
circumstances. Beneficial interests in the Global Notes may be exchanged for
notes in certificated form in certain limited circumstances. See "-- Transfer of
Interests in Global Notes for Certificated Notes."
The notes may be presented for registration of transfer and exchanged at
the offices of the registrar.
DEPOSITARY PROCEDURES
DTC has advised Emmis that DTC is a limited-purpose trust company created
to hold securities for its participating organizations (collectively, the
"Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in their accounts. The Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations, including Euroclear and CEDEL. Access to DTC's system is
also available to other entities that clear through or maintain a direct or
indirect, custodial relationship with a Direct Participant (collectively, the
"Indirect Participants"). DTC may hold securities beneficially owned by other
persons only through the Direct Participants or Indirect Participants and such
other person's ownership interest and transfer of ownership interest will be
recorded only on the records of the Direct Participant and/or Indirect
Participant and not on the records maintained by DTC.
DTC has also advised Emmis that, pursuant to DTC's procedures, (i) upon
deposit of the Global Notes, DTC will credit the accounts of Direct Participants
with portions of the principal amount of the Global Notes, and (ii) DTC will
maintain records of the ownership interests of such Direct Participants in the
Global Notes and the transfer of ownership interests by and between Direct
Participants. DTC will not maintain records of the ownership interests of, or
the transfer of ownership interests by and between, Indirect Participants or
other owners of beneficial interests in the Global Notes. Direct Participants
and Indirect Participants must maintain their own records of the ownership
interests of, and the transfer of ownership interests by and between, Indirect
Participants and other owners of beneficial interests in the Global Notes.
Investors in the Global Notes may hold their interests therein directly
through DTC if they are Direct Participants in DTC or indirectly through
organizations that are Direct Participants in DTC. The laws of some states in
the United States require that certain persons take physical delivery in
definitive, certificated form, of securities that they own. This may limit or
curtail the
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ability to transfer beneficial interests in a Global Note to such persons.
Because DTC can act only on behalf of Direct Participants, which in turn act on
behalf of Indirect Participants and others, the ability of a person having a
beneficial interest in a Global Note to pledge such interest to persons or
entities that are not Direct Participants in DTC, or to otherwise take actions
in respect of such interests, may be affected by the lack of physical
certificates evidencing such interests. For certain other restrictions on the
transferability of the notes see "-- Transfers of Interests in Global Notes for
Certificated Notes."
EXCEPT AS DESCRIBED IN "-- TRANSFERS OF INTEREST IN GLOBAL NOTES FOR
CERTIFICATED NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Under the terms of the indenture, Emmis, the guarantors and the trustee
will treat the persons in whose names the notes are registered (including notes
represented by Global Notes) as the owners thereof for the purpose of receiving
payments and for any and all other purposes whatsoever. Payments in respect of
the principal, premium, liquidated damages, if any, and interest on Global Notes
registered in the name of DTC or its nominee will be payable by the trustee to
DTC or its nominee as the registered holder under the indenture. Consequently,
none of Emmis, the guarantors, the trustee or any agent of Emmis, the guarantors
or the trustee has or will have any responsibility or liability for:
(1) any aspect of DTC's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any of DTC's records or any Direct
Participant's or Indirect Participant's records relating to the
beneficial ownership interests in any Global Note or
(2) any other matter relating to the actions and practices of DTC or any of
its Direct Participants or Indirect Participants.
DTC has advised Emmis that its current payment practice for payments of
principal, interest and the like with respect to securities such as the notes is
to credit the accounts of the relevant Direct Participants with such payment on
the payment date in amounts proportionate to such Direct Participant's
respective ownership interests in the Global Notes as shown on DTC's records.
Payments by Direct Participants and Indirect Participants to the beneficial
owners of the notes will be governed by standing instructions and customary
practices between them and will not be the responsibility of DTC, the trustee,
Emmis or the guarantors. None of Emmis, the guarantors or the trustee will be
liable for any delay by DTC or its Direct Participants or Indirect Participants
in identifying the beneficial owners of the notes, and Emmis and the trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee as the registered owner of the notes for all purposes.
The Global Notes will trade in DTC's Same-Day Funds Settlement System and,
therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between Indirect Participants, other than Indirect Participants
who hold an interest in the notes through Euroclear or CEDEL, who hold an
interest through a Direct Participant will be effected in accordance with
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the procedures of such Direct Participant but generally will settle in
immediately available funds. Transfers between and among Indirect Participants
who hold interests in the notes through Euroclear and CEDEL will be effected in
the ordinary way in accordance with their respective rules and operating
procedures.
Subject to compliance with the transfer restrictions applicable to the
notes described herein, cross-market transfers between Direct Participants in
DTC, on the one hand, and Indirect Participants who hold interests in the notes
through Euroclear or CEDEL, on the other hand, will be effected by Euroclear's
or CEDEL's respective nominee through DTC in accordance with DTC's rules on
behalf of Euroclear or CEDEL; however, delivery of instructions relating to
crossmarket transactions must be made directly to Euroclear or CEDEL, as the
case may be, by the counterparty in accordance with the rules and procedures of
Euroclear or CEDEL and within their established deadlines (Brussels time for
Euroclear and U.K. time for CEDEL). Indirect Participants who hold interest in
the notes through Euroclear and CEDEL may not deliver instructions directly to
Euroclear's or CEDEL's nominee. Euroclear or CEDEL will, if the transaction
meets its settlement requirements, deliver instructions to its respective
nominee to deliver or receive interests on Euroclear's or CEDEL's behalf in the
relevant Global Note in DTC, and make or receive payment in accordance with
normal procedures for same-day funds settlement applicable to DTC.
Because of time zone differences, the securities of accounts of an Indirect
Participant who holds an interest in the notes through Euroclear or CEDEL
purchasing an interest in a Global Note from a Direct Participant in DTC will be
credited, and any such crediting will be reported, to Euroclear or CEDEL during
the European business day immediately following the settlement date of DTC in
New York.
DTC has advised Emmis that it will take any action permitted to be taken by
a holder of notes only at the direction of one or more Direct Participants to
whose account interest in the Global Notes is credited and only in respect of
such portion of the aggregate principal amount of the notes to which such Direct
Participant or Direct Participants has or have given direction. However, if
there is an Event of Default under the notes, DTC reserves the right to exchange
Global Notes without the direction of one or more of its Direct Participants for
notes in certificated form, and to distribute such certificated forms of notes
to its Direct Participants. See "-- Transfers of Interest in Global Notes for
Certificated Notes."
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interest in the Global Notes among Direct
Participants, including Euroclear and CEDEL, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. None of Emmis, the guarantors or the trustee shall
have any responsibility for the performance by DTC, Euroclear or CEDEL or their
respective Direct Participants and Indirect Participants of their respective
obligations under the rules and procedures governing any of their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that Emmis believes to
be reliable, but Emmis takes no responsibility for the accuracy thereof.
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TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive notes in registered,
certificated form with interest coupons if:
(1) DTC:
(a) notifies Emmis that it is unwilling or unable to continue as
depositary for the Global Notes and Emmis thereupon fails to
appoint a successor depositary within 90 days or
(b) has ceased to be a clearing agency registered under the Exchange
Act,
(2) Emmis, at its option, notifies that trustee in writing that it elects
to cause the issuance of certificated notes or,
(3) there shall have occurred and be continuing a default or an Event of
Default with respect to the notes. In any such case, Emmis will notify
the trustee in writing that, upon surrender by the Direct Participants
and Indirect Participants of their interest in such Global Note,
certificated notes will be issued to each person that such Direct
Participants and Indirect Participants and DTC identify as being the
beneficial owner of the related notes.
Beneficial interests in Global Notes held by any Direct Participant or
Indirect Participant may be exchanged for certificated notes upon request to
DTC, by such Direct Participant (for itself or on behalf of an Indirect
Participant) or to the trustee in accordance with customary DTC procedures.
Certificated notes delivered in exchange for any beneficial interests in any
Global Note will be registered in the names, and issued in any approved
denominations, requested by DTC on behalf of such Direct Participants or
Indirect Participants in accordance with DTC's customary procedures.
None of Emmis, the guarantors or the trustee will be liable for any delay
by the holder of any Global Note or DTC in identifying the beneficial owners of
notes, and Emmis and the trustee may conclusively rely on, and will be protected
in relying on, instructions from the holder of the Global Note or DTC for all
purposes.
SAME DAY SETTLEMENT AND PAYMENT
The indenture requires that payments in respect of the notes represented by
the Global Notes, including principal, premium, if any, interest and liquidated
damages, if any, be made by wire transfer of immediately available same day
funds to the accounts specified by the holder of interests in such Global Note.
With respect to certificated notes, Emmis will make all payments of principal,
premium, if any, interest and liquidated damages, if any by wire transfer of
immediately available same day funds to the accounts specified by the holders
thereof or, if no such account is specified, by mailing a check to each such
holder's registered address. Emmis expects the secondary trading in the
certificated notes will also be settled in immediately available funds.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified person:
(1) Indebtedness of any other person existing at the time such other person
is merged with or into or became a subsidiary of such specified person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other person merging with or into, or becoming a
subsidiary of, such specified person; and
(2) Indebtedness secured by a lien encumbering any asset acquired by such
specified person.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory in the ordinary course of
business consistent with past practices; provided that the sale,
conveyance or other disposition of all or substantially all of the
assets of Emmis and its restricted subsidiaries taken as a whole will
be governed by the provisions of the indenture described above under
the caption "-- Change of Control" and/or the provisions described
above under the caption "-- Merger, Consolidation or Sale of Assets"
and not by the provisions of the Asset Sale covenant; and
(2) the issuance of equity interests by any of Emmis' restricted
subsidiaries or the sale of equity interests in any of its
subsidiaries,
Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:
(1) any single transaction or series of related transactions that:
(a) involves assets having a fair market value of less than $1.0
million; or
(b) results in net proceeds to Emmis and its restricted subsidiaries
of less than $1.0 million;
(2) a transfer of assets between or among Emmis and any of its guarantors;
(3) an issuance of equity interests by a guarantor to Emmis or to a
guarantor;
(4) a transfer by Emmis of assets in a transaction that qualifies as a
charitable contribution or donation and which does not exceed $2.0
million in the aggregate; and
(5) a restricted payment that is permitted by the covenant described above
under the caption "-- Restricted Payments."
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with generally accepted
accounting principles.
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"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof,
provided that the full faith and credit of the United States is pledged
in support thereof, having maturities of not more than six months from
the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding six months and overnight bank deposits,
in each case, with any domestic commercial bank having capital and
surplus in excess of $500 million and a Thompson Bank Watch Rating of
"B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition other than by way
of merger or consolidation, in one or a series of related transactions,
of all or substantially all of the assets of Emmis and its subsidiaries
taken as a whole to any "person", as such term is used in Section
13(d)(3) of the Exchange Act, other than Jeffrey H. Smulyan or a
Related Party of Jeffrey H. Smulyan;
(2) the adoption of a plan relating to the liquidation or dissolution of
Emmis;
(3) the consummation of any transaction, including, without limitation, any
merger or consolidation, the result of which is that any "person" (as
defined above), other than Jeffrey H. Smulyan and his Related Parties,
becomes the beneficial owner, directly or indirectly, of more than 35%
of the voting stock of Emmis, measured by voting power rather than
number of shares;
(4) the first day on which a majority of the members of the board of
directors of Emmis are not Continuing Directors; or
(5) Emmis consolidates with, or merges with or into, any person, or any
person consolidates with, or merges with or into, Emmis, in any such
event pursuant to a transaction in which any of the outstanding voting
stock of Emmis is converted into or exchanged for cash, securities or
other property, other than any such transaction where the voting stock
of Emmis outstanding immediately prior to such transaction is converted
into or exchanged for voting stock other than Disqualified Stock of the
surviving or transferee
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person constituting a majority of the outstanding shares of such voting
stock of such surviving or transferee person immediately after giving
effect to such issuance.
"Consolidated EBITDA" means, with respect to any person for any period, the
Consolidated Net Income of such person for such period plus:
(1) an amount equal to any extraordinary loss on an after tax basis plus
any loss realized in connection with an Asset Sale or any refinancing
of a Credit Facility on an after tax basis, to the extent such losses
were deducted in computing such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such person and its
restricted subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net
Income; plus
(3) consolidated interest expense of such person and its restricted
subsidiaries for such period, whether paid or accrued and whether or
not capitalized, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the
interest component of all payments associated with capital lease
obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect
of letter of credit or bankers' acceptance financings, and net
payments, if any, pursuant to Hedging Obligations, to the extent that
any such expense was deducted in computing such Consolidated Net
Income; plus
(4) depreciation, amortization, including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period, and other non-cash expenses,
excluding any such non-cash expense to the extent that it represents an
accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period,
of such person and its restricted subsidiaries for such period to the
extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income; plus
(5) all one-time cash compensation payments in connection with employment
agreements as in effect on the date of the indenture; minus
(6) non-cash items increasing such Consolidated Net Income for such period,
other than items that were accrued in the ordinary course of business,
in each case, on a consolidated basis and determined in accordance with
generally accepted accounting principles.
Notwithstanding the preceding, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges of,
a restricted subsidiary of Emmis shall be added to Consolidated Net Income to
compute Consolidated EBITDA of Emmis only to the extent that a corresponding
amount would be permitted at the date of determination to be dividended to Emmis
by such restricted subsidiary without prior approval that has not been obtained,
pursuant to the terms of its charter and all agreements, instruments, judgments,
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decrees, orders, statutes, rules and governmental regulations applicable to that
subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified person for
any period, the aggregate of the Net Income of such person and its restricted
subsidiaries for such period, on a consolidated basis, determined in accordance
with generally accepted accounting principles; provided that:
(1) the Net Income or loss of any person that is not a restricted
subsidiary or Unrestricted Subsidiary or that is accounted for by the
equity method of accounting shall be excluded; provided, however, that
such Net Income shall be included to the extent of the amount of
dividends or distributions paid in cash to the specified person or a
restricted subsidiary thereof;
(2) the Net Income of any restricted subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that restricted subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental
approval that has not been obtained or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that restricted subsidiary or its stockholders;
(3) the Net Income of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(4) the Net Income or loss of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the specified person or one of
its subsidiaries; and
(5) the cumulative effect of a change in accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to any person as of any date,
the sum of:
(1) the consolidated equity of the common stockholders of such person and
its consolidated subsidiaries as of such date; plus
(2) the respective amounts reported on such person's balance sheet as of
such date with respect to any series of preferred stock other than
Disqualified Stock that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of
net earnings in respect of the year of such declaration and payment,
but only to the extent of any cash received by such person upon
issuance of such preferred stock.
"Continuing Directors" means, as of any date of determination, any member
of the board of directors of Emmis who:
(1) was a member of such board of directors on the date of the indenture;
or
(2) was nominated for election or elected to such board of directors with
the approval of a majority of the Continuing Directors who were members
of such board at the time of such nomination or election.
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"Credit Agreement" means the Second Amended and Restated Revolving Credit
and Term Loan Agreement, dated as of July 16, 1998, as amended, among Emmis, the
lenders named therein, Toronto Dominion (Texas), Inc., as Administrative Agent,
BankBoston, N.A., as Documentation Agent and First Union National Bank, as
Syndication Agent, as further amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Credit Facilities" means one or more debt facilities, including, without
limitation, the Credit Agreement, or commercial paper facilities with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing, including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables, and/or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time.
"Designated Senior Debt" means:
(1) any and all Indebtedness (including all principal, premium, interest,
fees, expenses and other obligations and liabilities) outstanding under
the Credit Agreement and all Hedging Obligations with respect thereto
and
(2) any Senior Debt permitted under the indenture the principal amount of
which is $25.0 million or more and that has been designated by Emmis as
"Designated Senior Debt"; provided, however, that so long as the Credit
Agreement remains in effect, lenders holding a majority of the loan
commitments or outstanding loans thereunder shall have consented in
writing to such designation by Emmis of additional Indebtedness as
Designated Senior Debt.
"Disqualified Stock" means any capital stock that, by its terms or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof, or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the notes mature. Notwithstanding the preceding sentence, any
capital stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require Emmis to repurchase such capital stock
upon the occurrence of a change of control or an asset sale shall not constitute
Disqualified Stock if the terms of such capital stock provide that Emmis may not
repurchase or redeem any such capital stock pursuant to such provisions unless
such repurchase or redemption complies with the covenant described above under
the caption "-- Certain Covenants -- Restricted Payments."
"Existing Indebtedness" means up to $0.5 million in aggregate principal
amount of Indebtedness of Emmis and its restricted subsidiaries in existence on
the date of the indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any person for any period, the sum,
without duplication, of:
(1) the consolidated interest expense of such person and its restricted
subsidiaries for such period, whether paid or accrued, including,
without limitation, amortization of debt
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issuance costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with capital lease obligations,
imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net payments, if any,
pursuant to Hedging Obligations; plus
(2) the consolidated interest of such person and its restricted
subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another person that is
Guaranteed by such person or one of its restricted subsidiaries or
secured by a lien on assets of such person or one of its restricted
subsidiaries, whether or not such guarantee or lien is called upon and
limited to the amount of such guarantee or the fair market value of the
property secured by such lien, as the case may be.
"Hedging Obligations" means, with respect to any person, the obligations of
such person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such person
against fluctuations in interest rates.
"Indebtedness" means, without duplication, with respect to any specified
person, any indebtedness of such person, whether or not contingent, in respect
of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters
of credit or reimbursement agreements in respect thereof;
(3) banker's acceptances;
(4) representing capital lease obligations;
(5) the balance deferred and unpaid of the purchase price of any property,
except any such balance that constitutes an accrued expense or trade
payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified person prepared in accordance with generally accepted accounting
principles. In addition, the term "Indebtedness" includes all Indebtedness of
others secured by a lien on any asset of the specified person, whether or not
such Indebtedness is assumed by the specified person, limited to the fair market
value of the property securing such lien, and, to the extent not otherwise
included, the guarantee by such person of any indebtedness of any other person.
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The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Investments" means, with respect to any person, all investments by such
person in other persons, including affiliates, in the forms of direct or
indirect loans, including guarantees of Indebtedness or other obligations,
advances or capital contributions, excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business,
purchases or other acquisitions for consideration of Indebtedness, equity
interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with
generally accepted accounting principles. If Emmis or any restricted subsidiary
of Emmis sells or otherwise disposes of any equity interests of any direct or
indirect restricted subsidiary of Emmis such that, after giving effect to any
such sale or disposition, such person is no longer a restricted subsidiary of
Emmis, Emmis shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the equity interests of
such restricted subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "Certain Covenants -- Restricted Payments."
"Leverage Ratio" means, with respect to any specified person on any date of
determination (the "Calculation Date"), the ratio, on a pro forma basis, of:
(1) the sum of the aggregate outstanding amount of Indebtedness and
Disqualified Stock of such person and its restricted subsidiaries as of
the calculation date determined on a consolidated basis in accordance
with generally accepted accounting principles to
(2) the Consolidated EBITDA of such person and its restricted subsidiaries
attributable to continuing operations and businesses, exclusive of
amounts attributable to operations and businesses permanently
discontinued or disposed of, for the four fiscal quarters ended
immediately prior to such date.
For purposes of calculating the Leverage Ratio:
(1) acquisitions that have been made by the specified person or any of its
restricted subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four
fiscal quarters ended immediately prior to such date or subsequent to
such reference period and on or prior to the calculation date shall be
deemed to have occurred on the first day of such period and
Consolidated EBITDA for such period shall be calculated without giving
effect to clause (3) of the proviso set forth in the definition of
Consolidated Net Income; and
(2) transactions giving rise to the need to calculate the Leverage Ratio
shall be assumed to have occurred on the first day of such period.
"Marketable Securities" means publicly traded debt or equity securities
that are listed for trading on a national securities exchange and that were
issued by a corporation with debt
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securities rated at least "AAA-" from Standard & Poor's Corporation or "Aaa3"
from Moody's Investors Service, Inc.
"Net Income" means, with respect to any person, the net income (loss) of
such person and its restricted subsidiaries, determined in accordance with
generally accepted accounting principles and before any reduction in respect of
preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for taxes
on such gain (but not loss), realized in connection with:
(a) any Asset Sale; or
(b) the disposition of any securities by such person or any of its
restricted subsidiaries or the extinguishment of any Indebtedness of
such person or any of its restricted subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by Emmis or any
of its restricted subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale, including, without limitation, legal, accounting and investment
banking fees, and sales commissions, and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof, in each case after
taking into account any available tax credits or deductions and any tax sharing
arrangements and amounts required to be applied to the repayment of
Indebtedness, other than Senior Debt, secured by a lien on the asset or assets
that were the subject of such Asset Sale.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness, including, without limitation,
post-petition interest whether or not allowed as a claim in any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Indebtedness.
"Permitted Business" means any business in which Emmis and its restricted
subsidiaries are engaged on the date of the indenture or any business reasonably
related, incidental, complementary or ancillary thereto.
"Permitted Investments" means:
(1) any Investment in Emmis or in a restricted subsidiary of Emmis;
(2) any Investment in Cash Equivalents;
(3) any Investment by Emmis or any restricted subsidiary of Emmis in a
person, if as a result of such Investment:
(a) such person becomes a restricted subsidiary of Emmis or
(b) such person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, Emmis or a restricted subsidiary of Emmis;
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(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of equity
interests of Emmis other than Disqualified Stock;
(6) other Investments in any person having an aggregate fair market value
measured on the date each such Investment was made and without giving
effect to subsequent changes in value, when taken together with all
other Investments made pursuant to this clause (6) since the date of
the indenture, not to exceed $15 million in the aggregate;
(7) Investments in Permitted Joint Ventures, provided that, at the time of
and immediately after giving pro forma effect to such Investment and
any related transaction or series of transactions, the Leverage Ratio
would be less than or equal to the Leverage Ratio immediately prior to
such Investment; and
(8) any Investment in the form of loans or advances to employees of Emmis
not to exceed $3.0 million in aggregate principal amount at any one
time outstanding.
"Permitted Joint Ventures" means a corporation, partnership or other
entity, other than a subsidiary, engaged in one or more Permitted Businesses in
respect of which Emmis or a restricted subsidiary:
(1) beneficially owns at least 20% of the capital stock of such entity and
(2) either is a party to an agreement empowering one or more parties to
such agreement, which may or may not be Emmis or a subsidiary, or is a
member of a group that, pursuant to the constituent documents of the
applicable corporation, partnership or other entity, has the power, to
direct the policies, management and affairs of such entity.
"Permitted Junior Securities" means:
(1) equity interests in Emmis or any guarantor; or
(2) debt securities of Emmis or any guarantor that are unsecured and
subordinated to all Senior Debt and any debt securities issued in
exchange for Senior Debt, to substantially the same extent as, or to a
greater extent than, the notes and the subsidiary guarantees are
subordinated to Senior Debt pursuant to the indenture.
Without limiting the foregoing, such Permitted Junior Securities shall have no
required principal payments or equity redemption requirements until after the
final maturity of the Senior Debt.
"Permitted Liens" means:
(1) liens on the assets of Emmis and any guarantor securing Senior Debt and
Indebtedness and other Obligations under Credit Facilities to the
extent such Indebtedness was permitted by the terms of the indenture to
be incurred;
(2) liens in favor of Emmis or the guarantors;
(3) liens on property of a person existing at the time such person is
merged with or into or consolidated with Emmis or any restricted
subsidiary of Emmis; provided that such
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liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the
person merged into or consolidated with Emmis or the restricted
subsidiary;
(4) liens on property existing at the time of acquisition thereof by Emmis
or any restricted subsidiary of Emmis, provided that such liens were in
existence prior to the contemplation of such acquisition;
(5) liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) liens to secure Indebtedness, including capital lease obligations,
permitted by clause (4) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock"
covering only the assets acquired with such Indebtedness;
(7) liens existing on the date of the indenture;
(8) liens on assets of guarantors to secure Senior Debt of such guarantor
to the extent that such lien was permitted by the indenture to be
incurred;
(9) liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with generally accepted accounting principles
shall have been made therefor; and
(10) liens incurred in the ordinary course of business of Emmis or any
restricted subsidiary of Emmis with respect to obligations that do not
exceed $5.0 million at any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of Emmis or any
of its restricted subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of Emmis or any of its restricted subsidiaries other than
intercompany Indebtedness; provided that:
(1) the principal amount or accreted value, if applicable, of such
Permitted Refinancing Indebtedness does not exceed the principal amount
of or accreted value, if applicable, plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded plus the amount of reasonable expenses incurred in connection
therewith;
(2) such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes,
such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of
payment to, the notes on terms at least as favorable to the
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holders of notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and
(4) such Indebtedness is incurred either by Emmis or by the restricted
subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Productive Assets" means assets (including capital stock) that are used or
usable by Emmis and its restricted subsidiaries in Permitted Businesses;
provided that for any capital stock to qualify as Productive Assets, it must,
after giving pro forma effect to the transaction in which it was acquired, be
capital stock of a restricted subsidiary.
"Related Party" with respect to Jeffrey H. Smulyan means:
(1) any 80% or more owned subsidiary, or spouse or immediate family member
of Jeffrey H. Smulyan; or
(2) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or persons beneficially holding an 80%
or more controlling interest of which consist of Jeffrey H. Smulyan
and/or such other persons referred to in the immediately preceding
clause (1).
"Senior Debt" means:
(1) all principal, premium, interest, fees, expenses and other obligations
and liabilities of any kind outstanding under the Credit Facilities and
any guarantees thereof, together with available undrawn amounts under
letters of credit issued thereunder and any other Indebtedness
outstanding under the Credit Facilities, including, without limitation,
post-petition interest whether or not allowed as a claim in any
bankruptcy, reorganization, insolvency, receivership or similar
proceeding with respect to Indebtedness outstanding under the Credit
Facilities and all Hedging Obligations with respect thereto;
(2) any other Indebtedness permitted to be incurred by Emmis under the
terms of the indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with
or subordinated in right of payment to the notes; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt will not
include:
(1) any liability for federal, state, local or other taxes owed or owing by
Emmis;
(2) any Indebtedness of Emmis to any of its subsidiaries or other
affiliates;
(3) any trade payables; or
(4) any Indebtedness that is incurred in violation of the indenture.
"Significant Subsidiary" means any subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, as such
regulation is in effect on the date of the indenture.
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"Unrestricted Subsidiary" means Radio Hungaria Co. Ltd. and any other
subsidiary of Emmis that is designated by the board of directors of Emmis as an
Unrestricted Subsidiary pursuant to a board resolution, but only to the extent
that such subsidiary:
(1) has no Indebtedness other than non-recourse debt;
(2) is not party to any agreement, contract, arrangement or understanding
with Emmis or any restricted subsidiary of Emmis unless the terms of
any such agreement, contract, arrangement or understanding are no less
favorable to Emmis or such restricted subsidiary than those that might
be obtained at the time from persons who are not affiliates of Emmis;
(3) is a person with respect to which neither Emmis nor any of its
restricted subsidiaries has any direct or indirect obligation:
(a) to subscribe for additional equity interests or
(b) to maintain or preserve such person's financial condition or to
cause such person to achieve any specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of Emmis or any of its restricted
subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of Emmis or any of its restricted
subsidiaries and has at least one executive officer that is not a
director or executive officer of Emmis or any of its restricted
subsidiaries.
Any designation of a subsidiary of Emmis as an Unrestricted Subsidiary
shall be evidenced to the trustee by filing with the trustee a certified copy of
the board resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such subsidiary shall be
deemed to be incurred by a restricted subsidiary of Emmis as of such date and,
if such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "Incurrence of Indebtedness and Issuance of
Preferred Stock," Emmis shall be in default of such covenant. The board of
directors of Emmis may at any time designate any Unrestricted Subsidiary to be a
restricted subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a restricted subsidiary of Emmis of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if:
(1) such Indebtedness is permitted under the covenant described under the
caption "Certain Covenants -- Incurrence of Indebtedness and Issuance
of Preferred Stock," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter
reference period; and
(2) no default or Event of Default would be in existence following such
designation.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying:
(a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by
(b) the number of years calculated to the nearest one-twelfth that
will elapse between such date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary description of material indebtedness of Emmis is
qualified in its entirety by reference to the provisions of the various related
agreements, certain of which are on file with the Securities and Exchange
Commission and to which reference is hereby made.
CREDIT FACILITY
Emmis amended and restated its senior credit facility with a syndicate of
banks and other financial institutions on July 16, 1998. Prior to the offering
of the outstanding notes, the Credit Facility provided availability of $750
million in loans, which could be increased to $1.0 billion with the consent of
the lenders. The Credit Facility provided for four lending facilities, as
follows:
- A $150 million senior secured revolving credit facility with a final
maturity date of August 31, 2006;
- A $250 million senior secured amortizing term loan with a final maturity
date of August 31, 2006;
- A $250 million senior secured amortizing term loan with a final maturity
date of February 28, 2007; and
- A $100 million senior secured acquisition revolving credit/term loan
facility with a final maturity date of August 31, 2006 which will
terminate if not utilized prior to July 1999.
The Credit Facility provides for letters of credit to be made available to
Emmis not to exceed $50 million. The aggregate amount of outstanding letters of
credit and amounts borrowed under the revolving credit facility cannot exceed
the revolving credit facility commitment.
All outstanding amounts under the Credit Facility bear interest, at the
option of Emmis, at a rate equal to the Eurodollar Rate or an alternative base
rate (as such terms are defined in the Credit Facility) plus a margin. The
margin over the Eurodollar Rate or the alternative base rate varies from time to
time, depending on our ratio of debt to earnings before interest, taxes,
depreciation and amortization (EBITDA), as defined in the Credit Facility.
Interest is due on a calendar quarter basis under the alternative base rate and
at least every three months under the Eurodollar Rate.
The Credit Facility requires Emmis to maintain interest rate protection
agreements through July 2001. The notional amount required varies based upon our
ratio of adjusted debt to EBITDA, as defined in the Credit Facility. The
notional amount of the agreements outstanding as of January 18, 1999 was $274
million. The agreements, which expire at various dates ranging from April 2000
to February 2001, establish ceilings of 6.5% to 8.0% on the London Interbank
Offered Rate ("LIBOR") interest rate.
The aggregate amount of the revolving credit facility under the Credit
Facility reduces quarterly beginning August 31, 2001. Amortization of the
outstanding principal amount under the term notes and revolving credit
facility/term loan facility is payable in quarterly installments beginning
August 31, 2001.
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Commencing with the fiscal year ending February 28, 2002, in addition to
the scheduled amortization/reduction under the Credit Facility, within 60 days
after the end of each fiscal year, the amount available for borrowing under the
Credit Facility is permanently reduced by 50% of our excess cash flow if the
ratio of adjusted debt (as defined in the Credit Facility) to EBITDA exceeds 4.5
to 1. Excess cash flow is generally defined as EBITDA reduced by the sum of net
cash tax payments, capital expenditures, required debt service, increases in
working capital (net of cash or cash equivalents) and $5 million. The net
proceeds of any sale of certain assets must also be used to permanently reduce
borrowings under the Credit Facility. If the ratio of adjusted debt to EBITDA is
less than 5.5 to 1 and certain other conditions are met, Emmis will be permitted
in certain circumstances to reborrow the amount of the net proceeds within nine
months solely for the purpose of funding an acquisition.
The Credit Facility contains various financial and operating covenants and
other restrictions with which Emmis must comply, including, among others,
restrictions on additional indebtedness, engaging in businesses other than
broadcasting and publishing, paying cash dividends, redeeming or repurchasing
our capital stock and use of borrowings, as well as requirements to maintain
certain financial ratios. The Credit Facility also prohibits Emmis, under
certain circumstances, from making acquisitions and disposing of certain assets
without the prior consent of the lenders, and provides that an event of default
will occur if Jeffrey H. Smulyan ceases to maintain (i) a significant equity
investment in Emmis (as specified in the Credit Facility), (ii) the ability to
elect a majority of our directors or (iii) control of a majority of shareholder
voting power. Substantially all of our assets, including the stock of our
subsidiaries, are pledged to secure the Credit Facility.
AMENDMENT TO CREDIT FACILITY
Concurrently with the offering of the outstanding notes, our lenders
amended the Credit Facility as follows:
- The $250 million senior secured amortizing term loan with a final
maturity date of August 31, 2006 was changed into a revolving credit
facility and the prepayment provisions were modified to permit Emmis to
reduce the outstanding balance on that facility with a portion of the
proceeds of the offering of the outstanding notes and then reborrow
these amounts as needed for acquisitions or other business needs;
- The limitation on subordinated indebtedness was increased to permit the
offering of the outstanding notes;
- The restrictions on payment of the SF note were modified to permit Emmis
to retire the SF note with a portion of the proceeds from the offering
of the outstanding notes; and
- Various financial covenants and acquisition restrictions were modified.
SF NOTE
In connection with our acquisition in 1998 of four television stations
representing substantially all of the assets of SF Broadcasting of Wisconsin,
Inc. and SF Multistations, Inc. and its subsidiaries, Emmis issued the $25
million SF note for a portion of the purchase price. The SF note was due July
15, 1999 and accrued interest at 8% per annum. The SF note was
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secured by a pledge of approximately $27 million of our Class A Common Stock. At
the option of Emmis, the SF note could be paid in cash or an equivalent amount
of our Class A Common Stock. We paid this obligation in cash with a portion of
the net proceeds from the offering of the outstanding notes.
HUNGARIAN RADIO DEBT
Our 54% owned Hungarian subsidiary, Radio Hungaria Co. Ltd. (doing business
as Slager Radio), has certain obligations which are consolidated in our
financial statements due to our majority ownership interest. However, Emmis is
not a guarantor of or required to fund these obligations. In particular, Slager
Radio must pay, in Hungarian forints, an obligation for a radio broadcast
license to the Hungarian government in four equal annual installments commencing
November 2000. At November 30, 1998, this obligation (in U.S. dollars) was
approximately $13.1 million, which was net of an unamortized discount of
approximately $1.4 million. The obligation is subject to a monthly Hungarian
cost of living adjustment (which was 14.3% for the year ended December 31, 1998)
payable in Hungarian forints concurrently with the principal payments. At the
commencement of the obligation, Slager Radio recorded the obligation at its
present value giving consideration for the difference between the estimated
current annual cost of living adjustment and the estimated average cost of
borrowing. The amortization of this discount is reflected in interest expense
and will be paid in Hungarian forints concurrently with the principal payments.
In addition, Slager Radio is obligated to pay certain notes and bonds to
its shareholders. At November 30, 1998, bonds payable to the minority
shareholders were (in U.S. dollars) approximately $2.9 million. The bonds are
due at maturity in November 2004 and bear interest at the Hungarian State Bill
rate plus 3% (20.2% at November 30, 1998). Interest payments on the bonds are
semiannual. At November 30, 1998, notes payable to the minority shareholders
were (in U.S. dollars) approximately $0.8 million. The notes bear interest at
the Citibank prime rate plus 2% (9.75% at November 30, 1998). The notes and
accrued interest are due at maturity in September 1999.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain material United States federal
income tax consequences of the purchase, disposition and ownership of the notes
as of the date hereof, but is not purported to be a complete analysis of all
potential tax effects. Except where noted, it deals only with notes held as
capital assets and does not deal with special situations, such as those of
dealers in securities or currencies, tax exempt organizations, individual
retirement accounts and other tax deferred accounts, financial institutions,
life insurance companies, persons holding notes as a part of a hedging or
conversion transaction or a straddle, persons subject to the alternative minimum
tax or holders of notes whose "functional currency" is not the U.S. dollar.
Furthermore, the discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified, either retroactively or prospectively, so as to
result in federal income tax consequences different from those discussed below.
In addition, except as otherwise indicated, the following does not consider the
effect of any applicable foreign, state, local or other tax laws or estate or
gift tax considerations. Persons considering the purchase, ownership or
disposition of notes should consult their own tax advisors concerning the
federal income tax consequences in light of their particular situations, as well
as any consequences arising under the laws of any other taxing jurisdiction.
EFFECT OF EXCHANGE OF OUTSTANDING NOTES FOR REGISTERED NOTES
Emmis believes that the exchange of outstanding notes for registered notes
pursuant to the registered exchange offer will not be treated as an "exchange"
for federal income tax purposes because the registered notes will not be
considered to differ materially in kind or extent from the outstanding notes.
Rather, the registered notes received by a holder will be treated as a
continuation of the outstanding notes in the hands of such holder. As a result,
holders will not recognize any taxable gain or loss or any interest income as a
result of exchanging outstanding notes for registered notes pursuant to the
exchange offer, the holding period of the registered notes will include the
holding period of the outstanding notes, and the basis of the registered notes
will equal the basis of the outstanding notes immediately before the exchange.
STATED INTEREST ON NOTES
Except as set forth below, interest on a note will generally be taxable to
a United States Holder as ordinary interest income from domestic sources at the
time it is accrued or received (in accordance with the United States Holder's
method of accounting for tax purposes). As used herein, a "United States Holder"
of a note means a holder that is a citizen or individual resident (as defined in
Section 7701(b) of the Code) of the United States; a corporation or partnership
(including any entity treated as a corporation or partnership for United States
federal income tax purposes) created or organized under the laws of the United
States, any state thereof or the District of Columbia unless, in the case of a
partnership, otherwise provided by regulation; an estate the income of which is
subject to United States federal income taxation regardless of its source; or a
trust if:
(1) a U.S. court is able to exercise primary supervision over the
administration of the trust, and
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(2) one or more U.S. trustees or fiduciaries have the authority to control
all substantial decisions of the trust.
A "Non-United States Holder" is a holder that is not a United States Holder.
Failure of Emmis to consummate this exchange offer or to file or cause to
be declared effective the shelf registration statement as described under "The
Exchange Offer -- Purpose and Effect of the Exchange Offer" will cause
liquidated damages to accrue on the outstanding notes in the manner described
therein and in the same manner as additional interest. According to Treasury
regulations, the possibility of a change in the interest rate will not affect
the amount of interest income recognized by a United States Holder (or the
timing of such recognition) if the likelihood of the change, as of the date the
notes are issued, is remote. Emmis believes that the likelihood of a change in
the interest rate on the notes is remote and does not intend to treat the
possibility of a change in the interest rate as affecting the yield to maturity
of any note. In the unlikely event that the interest rate on the notes is
increased, then such increased interest may be treated as original issue
discount, includible by a United States Holder in income as such interest
accrues, in advance of receipt of any cash payment thereof. Because the issue
price of the notes was equal to their stated principal amount, and because the
likelihood of a change in the interest rate is remote, the notes were not issued
with original issue discount.
MARKET DISCOUNT
If a United States Holder purchases a note subsequent to its original
issuance for an amount that is less than its stated redemption price at
maturity, the amount of the difference will be treated as "market discount" for
U.S. federal income tax purposes, unless such difference is less than a
specified de minimis amount. Under the market discount rules, a United States
Holder will be required to treat any partial principal payment on, or any gain
on the sale, exchange, redemption, retirement or other disposition of a note as
ordinary income to the extent of the market discount which has not previously
been included in income, and such income is treated as having accrued on such
note at the time of such payment or disposition. In addition, the United States
Holder may be required to defer, until the maturity of the note or its earlier
disposition in a taxable transaction, the deduction of all or a portion of the
interest expense on any indebtedness incurred or continued to purchase or carry
such note.
Any market discount will be considered to accrue on a straight-line basis
during the period from the date of acquisition to the maturity date of the note,
unless the United States Holder elects to accrue on a constant interest method.
A United States Holder of a Note may elect to include market discount in income
currently as it accrues (on either a straight-line or constant interest method).
If the United States Holder of a note makes such an election, the foregoing
rules with respect to the recognition of ordinary income on sales and other
dispositions of such instruments, and with respect to the deferral of interest
deductions on debt incurred or maintained to purchase or carry such debt
instruments, would not apply. This election to include market discount in income
currently once made applies to all market discount obligations acquired on or
after the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service.
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AMORTIZABLE BOND PREMIUM
A United States Holder that purchases a note for an amount in excess of the
principal amount will be considered to have purchased the note at a "premium." A
United States Holder generally may elect to amortize the premium over the
remaining term of the note on a constant yield method (or, if a smaller
amortization allowance would result, by computing such allowance with reference
to the amount payable on an earlier call date and amortizing such allowance over
the shorter period to such call date). The amount amortized in any year will be
treated as a reduction of the United States Holder's interest income from the
note. Bond premium on a note held by a United States Holder that does not make
such an election will decrease the gain or increase the loss otherwise
recognized on disposition of the note. The election to amortize premium on a
constant yield method, once made, applies to all debt obligations held or
subsequently acquired by the electing United States Holder on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service.
SALE, EXCHANGE AND REDEMPTION OF NOTES
Upon the sale, exchange, redemption, retirement or other disposition of a
note, a United States Holder generally will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange, redemption,
retirement or other disposition and such holder's adjusted tax basis in the
note. A United States Holder's adjusted tax basis in a note will, in general, be
the United States Holder's cost therefor, increased by market discount
previously included in income by the United States Holder and reduced by any
amortized premium previously deducted from income by the United States Holder.
Except as described above with respect to market discount or except to the
extent the gain or loss is attributable to accrued but unpaid stated interest,
such gain or loss will be capital gain or loss and will be long-term capital
gain or loss if, at the time of sale, exchange, redemption, retirement or other
disposition, the note has been held for more than one year.
United States Holders that are corporations will generally be taxed on net
capital gains at a maximum rate of 35%. In contrast, United States Holders that
are individuals will generally be taxed on net capital gains at a maximum rate
of:
(1) 39.6% for property held for 12 months or less, and
(2) 20% for property held for more than 12 months.
Special rules (and generally lower maximum rates) apply for individuals in lower
tax brackets. Any capital losses realized by a United States Holder that is a
corporation generally may be used only to offset capital gains. Any capital
losses realized by a United States Holder that is an individual generally may be
used only to offset capital gains plus $3,000 of other income per year.
NON-UNITED STATES HOLDERS
Under present United States federal income tax law, and, subject to the
discussion below concerning backup withholding, no United States federal
withholding tax will be imposed with
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respect to the payment by Emmis or a paying agent of principal or interest on a
note owned by a Non-United States Holder (the "Portfolio Interest Exception"),
provided:
(1) that such Non-United States Holder does not actually or constructively
own 10% or more of the total combined voting power of all classes of
stock of Emmis entitled to vote within the meaning of Section 871(h)(3)
of the Code and the regulations thereunder,
(2) such Non-United States Holder is not a controlled foreign corporation
that is related, directly or indirectly, to Emmis through stock
ownership,
(3) such Non-United States Holder is not a bank whose receipt of interest
on a note is described in Section 881(c)(3)(A) of the Code, and
(4) such Non-United States Holder satisfies the statement requirement
described generally below and set forth in Section 871(h) and Section
881(c) of the Code and the regulations thereunder.
To satisfy the requirement referred to in clause (4) above, the beneficial
owner of such note, or a financial institution holding the note on behalf of
such owner, must provide, in accordance with specified procedures, Emmis or its
paying agent with a statement to the effect that the beneficial owner is not a
United States Holder. Pursuant to current temporary Treasury regulations, these
requirements will be met if:
(1) the beneficial owner provides his name and address, and certifies,
under penalties of perjury, that he is not a United States Holder,
which certification may be made on an Internal Revenue Service Form W-8
or successor form, or
(2) a financial institution, holding the note in the ordinary course of its
trade or business on behalf of the beneficial owner, certifies under
penalties of perjury that such statement has been received by it or by
a financial institution between it and the beneficial owner and
furnishes Emmis or its agent with a copy thereof.
Such certification is effective with respect to payments of interest made after
the issuance of the certificate in the calendar year of its issuance and the two
immediately succeeding calendar years.
On October 6, 1997, final regulations were adopted by the issuance of T.D.
8734 (the "1997 Final Regulations") that affect the United States federal income
taxation of Non-United States Holders. The 1997 Final Regulations are effective
for payments after December 31, 1999, regardless of the issue date of the
instrument with respect to which such payments are made, subject to certain
transition rules discussed below. The discussion under this heading and under
"Information Reporting and Backup Withholding" below is not intended to be a
complete discussion of the provisions of the 1997 Final Regulations. Holders of
the notes are urged to consult their tax advisors concerning the tax
consequences of their investment in light of the 1997 Final Regulations.
The 1997 Final Regulations provide documentation procedures designed to
simplify compliance by withholding agents. The 1997 Final Regulations generally
do not affect the documentation rules described above, but add other
certification options. Under one such option,
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a withholding agent will be allowed to rely on an intermediary withholding
certificate furnished by a "qualified intermediary" (as defined below) on behalf
of one or more beneficial owners or other intermediaries without having to
obtain the beneficial owner certificate described above. Qualified
intermediaries include persons that are parties to a withholding agreement with
the Internal Revenue Service where such persons are:
(1) foreign financial institutions or foreign clearing organizations other
than a United States branch or United States office of such institution
or organization,
(2) foreign branches or offices of United States financial institutions or
foreign branches or offices of United States clearing organizations,
(3) foreign corporations for purposes of presenting claims of benefits
under income tax treaties on behalf of their shareholders or
(4) any other persons acceptable to the Internal Revenue Service.
In addition to certain other requirements, qualified intermediaries must obtain
withholding certificates, such as revised Internal Revenue Service Form W-8
(discussed below), from each beneficial owner. Under another option, an
authorized foreign agent of a United States withholding agent will be permitted
to act on behalf of the United States withholding agent (including the receipt
of withholding certificates, the payment of amounts of income subject to
withholding and the deposit of tax withheld), provided that certain conditions
are met.
For purposes of the certification requirements, the 1997 Final Regulations
generally treat as the beneficial owners of payments on a note those persons
that, under United States federal income tax principles, are the taxpayers with
respect to such payments, rather than persons such as nominees or agents legally
entitled to such payments. In the case of payments to an entity classified as a
foreign partnership under United States tax principles, the partners, rather
than the partnership, generally must provide the required certifications to
qualify for the withholding tax exemption described above (unless the
partnership has entered into a special agreement with the Internal Revenue
Service). A payment to a United States partnership, however, is treated for
these purposes as payment to a United States payee, even if the partnership has
one or more foreign partners. The 1997 Final Regulations provide certain
presumptions with respect to withholding for holders not furnishing the required
certifications to qualify for the withholding tax exemption described above. In
addition, the 1997 Final Regulations will replace a number of current tax
certification forms (including Internal Revenue Service Form W-8) with a series
of revised Internal Revenue Service Forms W-8 which, in certain circumstances,
require information in addition to that previously required. Under the 1997
Final Regulations, these revised Forms W-8 will remain valid until the last day
of the third calendar year following the year in which the certificate is
signed.
The 1997 Final Regulations provide transition rules concerning existing
certificates, such as Internal Revenue Service Form W-8. Valid withholding
certificates that are held on December 31, 1999 will generally remain valid
until the earlier of December 31, 2000 or the date of their expiration. Existing
certificates that expire in 1999 will not be effective after their expiration.
Certificates dated prior to January 1, 1998 will generally remain valid until
the end of 1998, irrespective of the fact that their validity expires during
1998.
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If a Non-United States Holder cannot satisfy the requirements of the
Portfolio Interest Exception described above in "-- Non-United States
Holders -- Interest," payments on a note made to such Non-United States Holder
will be subject to a 30% withholding tax unless the beneficial owner of the note
provides Emmis or its paying agent with a properly executed:
(1) Internal Revenue Service Form 1001 or successor form claiming an
exemption from withholding under the benefit of a tax treaty, or
(2) Internal Revenue Service Form 4224 or successor form stating that
interest paid on the note is not subject to withholding tax because it
is effectively connected with the beneficial owner's conduct of a trade
or business in the United States.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest paid on a note is effectively connected with the
conduct of such trade or business, the Non-United States Holder, although exempt
from United States federal withholding tax as discussed above, will be subject
to United States federal income tax on such payment on a net income basis (that
is, after allowance for applicable deductions) at the graduated rates that are
applicable to United States Holders in essentially the same manner as if the
notes were held by a United States Holder, as discussed above. In addition, if
such Non-United States Holder is a corporation, it may be subject to a 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. For this purpose, such payment on
a note will be included in such foreign corporation's earnings and profits.
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 the notes, unless the gain is effectively connected with the
conduct of a trade or business 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.
Gains realized by a Non-United States Holder that are effectively connected
with the conduct of a trade or business 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 Holders, as described above, unless exempt by an
applicable income tax treaty. 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.
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In addition to being subject to the rules described above, an individual
Non-United States Holder who holds the notes 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 notes if:
(1) such gain is not effectively connected with the conduct of a trade or
business within the United States of the Non-United States Holder, and
(2) 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 gain from the sale or other disposition of the notes
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.
Under the 1997 Final Regulations, withholding of United States federal
income tax may apply to payments on a taxable sale or other disposition of the
notes by a Non-United States Holder who does not provide appropriate
certification to the withholding agent with respect to such transaction.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments on a
note and to the proceeds of the sale or other disposition of a note before
maturity if the sale is to United States Holders other than certain exempt
recipients such as corporations. In addition, a 31% backup withholding tax
applies if a non-corporate person:
(1) fails to furnish such person's Taxpayer Identification Number (which,
for an individual, is his or her Social Security Number) to the payor
in the manner required,
(2) furnishes an incorrect Taxpayer Identification Number and the payor is
so notified by the Internal Revenue Service,
(3) is notified by the Internal Revenue Service that such person has failed
properly to report payments of interest and dividends, or
(4) in certain circumstances, fails to certify, under penalties of perjury,
that such person has not been notified by the Internal Revenue Service
that such person is subject to backup withholding for failure properly
to report interest and dividend payments.
Backup withholding does not apply to payments made to certain exempt recipients,
such as corporations and tax-exempt organizations.
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No information reporting or backup withholding will be required with
respect to payments made by Emmis or its paying agent to Non-United States
Holders if either:
(1) a statement described in clause (4) under "--Non-United States
Holders -- Interest" has been received and the payor does not have
actual knowledge that the beneficial owner is a United States person,
or
(2) an exemption has otherwise been established.
In addition, backup withholding and information reporting will not apply if
interest payments on a note are collected by a foreign office of a custodian,
nominee or other foreign agent on behalf of the beneficial owner of such note,
or if a foreign office of a broker (as defined in applicable Treasury
regulations) pays the proceeds of the sale or other disposition of a note to the
owner thereof. If, however, such nominee, custodian, agent or broker is, for
United States federal income tax purposes, a United States person, a controlled
foreign corporation or a foreign person 50% or more of whose gross income is
effectively connected with the conduct of a trade or business in the United
States for a specified three year period, such payments will be subject to
information reporting (but not backup withholding), unless:
(1) such custodian, nominee, agent or broker has documentary evidence in
its records that the beneficial owner is not a United States person and
certain other conditions are met, or
(2) the beneficial owner otherwise establishes an exemption.
The 1997 Final Regulations modify certain of the certification requirements for
backup withholding and expand the group of U.S. Related Persons. It is possible
that Emmis or its paying agent may request new withholding exemption forms from
holders of notes in order to qualify for continued exemption from backup
withholding when the 1997 Final Regulations become effective.
Payments on a note paid to the beneficial owner of a note by a United
States office of a custodian, nominee or agent, or the payment by the United
States office of a broker of the proceeds of sale of a note, will be subject to
both backup withholding and information reporting unless:
(1) the beneficial owner provides the statement described in clause (4)
under "--Non-United States Holders -- Interest" and the payor does not
have actual knowledge that the beneficial owner is a United States
person, or
(2) the beneficial owner otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amount withheld under the
backup withholding rules will be allowed as a refund or a credit against such
holder's United States federal income tax liability provided the required
information is furnished to the Internal Revenue Service.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Emmis originally sold the outstanding notes to Donaldson, Lufkin & Jenrette
Securities Corporation, BancBoston Robertson Stephens Inc., First Union Capital
Markets Corp., Goldman. Sachs & Co. and TD Securities (USA) Inc. These initial
purchasers subsequently placed the outstanding notes with:
- qualified institutional buyers in reliance on Rule 144A under the
Securities Act; and
- qualified buyers outside the United States in reliance on Regulation S
under the Securities Act.
Emmis entered into a registration rights agreement with the initial
purchasers, as a condition to their purchase of the outstanding notes, pursuant
to which Emmis has agreed, for the benefit of the outstanding note holders, at
its own expense, to file a registration statement for this exchange offer, of
which this prospectus is a part, with the SEC on or before a date 30 days after
the date of the registration rights agreement. When the exchange offer
registration statement is declared effective, Emmis will offer the registered
notes in exchange for tender of the outstanding notes. For each outstanding note
tendered to Emmis pursuant to the exchange offer, the holder of such outstanding
note will receive a registered note having an original principal amount at
maturity equal to that of the tendered outstanding note.
Based upon interpretations by the SEC staff set forth in certain no-action
letters to third parties (including Exxon Capital Holdings Corp., SEC No-Action
Letter (April 13, 1989); Morgan Stanley & Co. Inc., SEC No-Action Letter (June
5, 1991); and Shearman & Sterling, SEC No-Action Letter (July 2, 1993)), Emmis
believes that the registered notes issued pursuant to this exchange offer in
exchange for the outstanding notes, in general, will be freely tradeable after
the exchange offer, without compliance with the registration and prospectus
delivery requirements of the Securities Act. However, any purchaser of
outstanding notes who is a Emmis "affiliate," within the meaning of Rule 405
under the Securities Act, who does not acquire the registered notes in the
ordinary course of business, or who tenders in the exchange offer for the
purpose of participating in a distribution of the registered notes, could not
rely on the SEC staff position enunciated in such no-action letters and, in the
absence of an applicable exemption, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. A holder's failure to comply with those requirements in such
an instance may result in that holder incurring liability under the Securities
Act which we will not indemnify.
As the above-mentioned no-action letters and the registration rights
agreement contemplate, each holder accepting the exchange offer is required to
represent to us, in a letter of transmittal, that:
- the holder or the person receiving the registered notes, whether or not
such person is the holder, will acquire those registered notes in the
ordinary course of business;
- the holder or any other acquiror is not engaging in a distribution of
the registered notes;
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- the holder or any other acquiror has no arrangement or understanding
with any person to participate in a distribution of the registered
notes;
- neither the holder nor any other acquiror is an Emmis affiliate within
the meaning of Rule 405 under the Securities Act; and
- the holder or any other acquiror acknowledges that if that holder or
other acquiror participates in the exchange offer for the purpose of
distributing the registered notes, it must comply with the registration
and prospectus delivery requirements of the Securities Act in connection
with any such resale and cannot rely on the above-mentioned no-action
letters.
As indicated above, each broker-dealer that receives for its own account a
registered note in exchange for outstanding notes must acknowledge that it:
- acquired the outstanding notes for its own account as a result of
market-making activities or other trading activities;
- has not entered into any arrangement or understanding with Emmis or any
Emmis "affiliate" to distribute the registered notes; and
- will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of the registered notes.
For a description of the procedures for resales by participating
broker-dealers, see "Plan of Distribution."
In the event that changes in the law or the applicable interpretations of
the SEC staff do not permit Emmis to effect this exchange offer, or if for any
other reason the exchange offer is commenced and not consummated within 30 days
after the exchange offer registration statement is declared effective, or in
certain other events involving holders of the notes who are not permitted to
participate in the exchange offer, Emmis will:
- file a shelf registration statement covering resales of the outstanding
notes;
- use reasonable best efforts to cause the shelf registration statement to
be declared effective under the Securities Act; and
- use reasonable best efforts to keep effective the shelf registration
statement until the earlier of two years after the outstanding notes'
original issuance date, subject to extension under certain
circumstances, or such time as all of the applicable outstanding notes
have been sold.
Emmis will, if and when it files the shelf registration statement, provide
to each applicable holder of the outstanding notes copies of the prospectus
which is a part of the shelf registration statement. A holder that sells the
outstanding notes pursuant to the shelf registration statement generally:
- must be named as a selling security holder in the related prospectus;
- must deliver a prospectus to purchasers;
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- will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales; and
- will be bound by the provisions of the registration rights agreement
which are applicable to that holder, including certain indemnification
obligations.
In addition, each of the outstanding note holders must deliver information
to Emmis, to be used in connection with the shelf registration statement, in
order to have his or her outstanding notes included in the shelf registration
statement and to benefit from the provisions set forth in the foregoing
paragraph.
The registration rights agreement covering the outstanding notes provides
that Emmis will file an exchange offer registration statement with the SEC on or
before a date 30 days after the date of the registration rights agreement. In
the event that:
- by the 90(th) day after February 12, 1999 the exchange offer
registration statement is not declared effective; or
- by the 30th day after the exchange offer registration statement is
declared effective the exchange offer is not consummated; or
- if Emmis is obligated to file a shelf registration statement either
Emmis does not file the shelf registration within 30 days after notice
or the shelf registration statement is not declared effective within 60
days after filing; or
- after either the exchange offer registration statement or shelf
registration statement is declared effective, such registration
statement thereafter ceases to be effective or usable, subject to
certain exceptions, in connection with resales of the outstanding notes
or registered notes in accordance with and during the periods specified
in the registration rights agreement,
then Emmis will be required to pay to the holders of the notes liquidated
damages in amounts equal to $0.05 per week per $1,000 in principal amount of
notes held by such holders for each week or part of a week that the registration
default continues during the first 90-day period after the registration default
occurs. The amount of liquidated damages will increase by an additional $0.05
per week per $1,000 in principal amount of notes at the beginning of and for
each subsequent 90-day period until the registration defaults are cured, up to a
maximum amount of liquidated damages of $0.50 per week per $1,000 in principal
amount of the notes. Emmis will not be required to pay liquidated damages for
more than one registration default at any given time. Liquidated damages will
cease to accrue following the cure of all registration defaults. The sole remedy
available to the outstanding note holders will be the collection of these
liquidated damages. All liquidated damages payable because a registration
default occurred will be payable to the outstanding notes holders in cash on
each March 15 and September 15, commencing with the first such date occurring
after any such liquidated damages begin to accrue, until the registration
default is cured.
Outstanding note holders must:
- make certain representations to us in order to participate in the
exchange offer;
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- deliver information to be used in connection with the shelf registration
statement, if required; and
- provide comments on the shelf registration statement within the time
periods set forth in the registration rights agreement,
in order to have their outstanding notes included in the shelf registration
statement and to benefit from the provisions regarding liquidated damages
payable because a registration default occurred, as set forth above.
The preceding summary of the material provisions of the registration rights
agreement is subject to, and is qualified in its entirety by, all the provisions
of the registration rights agreement, a copy of which is filed as an exhibit to
the exchange offer registration statement of which this prospectus is a part.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal for the exchange offer, we will accept any and
all outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the expiration date. See "-- Expiration Date; Extensions;
Amendments." Emmis will issue $1,000 original principal amount at maturity of
registered notes in exchange for each $1,000 original principal amount at
maturity of outstanding notes accepted in the exchange offer. Holders may tender
some or all of their outstanding notes pursuant to the exchange offer. However,
outstanding notes may be tendered only in integral multiples of $1,000.
The form and terms of the registered notes are the same as the form and
terms of the outstanding notes except that:
- the registered notes have been registered under the Securities Act and
hence will not bear legends restricting their transfer; and
- the registered note holders will not be entitled to certain rights under
the registration rights agreement covering the outstanding notes,
including the provisions providing for an increase in the interest rate
on the outstanding notes in certain circumstances relating to the timing
of the exchange offer, all of which rights will terminate when the
exchange offer is terminated.
The registered notes will evidence the same debt as the outstanding notes
and will be entitled to the benefits of the indenture governing the outstanding
notes. As of the date of this prospectus, $300,000,000 aggregate principal
amount of notes were outstanding. We have fixed the close of business on
, 1999 as the record date for the exchange offer for purposes of
determining the persons to whom this prospectus and the letter of transmittal
will be mailed initially.
Outstanding note holders do not have any appraisal or dissenters' rights
under the Indiana Business Corporation Law or the indenture in connection with
the exchange offer. We intend to conduct the exchange offer in accordance with
the applicable requirements of the Exchange Act and the rules and regulations of
the SEC related to such offers.
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Emmis shall be deemed to have accepted validly tendered outstanding notes
when, as and if we give oral or written notice to IBJ Whitehall Bank and Trust
Company, which is the exchange agent. The exchange agent will act as agent for
the tendering holders for the purpose of receiving the registered notes from
Emmis.
If any tendered outstanding notes are not accepted for exchange either
because of an invalid tender, the occurrence of certain other events set forth
herein, or otherwise, the certificates for the unaccepted outstanding notes will
be returned, without expense, to the tendering holder as promptly as practicable
after the exchange offer's expiration date.
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes pursuant to the exchange offer. We will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the exchange offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
We shall keep the exchange offer open for at least 30 days, or longer if
required by applicable law, including in connection with any material
modification or waiver of the terms or conditions of the exchange offer that
requires such extension, after the date that notice of the exchange offer is
mailed to outstanding note holders. The expiration date shall be 5:00 p.m., New
York City time, on , 1999, unless we, in our sole discretion, extend
the exchange offer, in which case the expiration date shall be the latest date
and time to which we extend the exchange offer.
If we decide to extend the exchange offer, we will notify IBJ Whitehall
Bank and Trust Company, which is the exchange agent, of the extension by oral or
written notice, and will mail an announcement of the extension to the registered
holders prior to 10:00 a.m., New York City time, on the next business day after
the previously scheduled expiration date.
Emmis reserves the right, in its sole discretion:
- to delay accepting any outstanding notes, to extend the exchange offer
or to terminate the exchange offer if any of the conditions set forth
below under "-- Conditions" shall not have been satisfied, by giving
oral or written notice of such delay, extension or termination to the
exchange agent; or
- to amend the terms of the exchange offer in any manner.
We will give oral or written notice of any delay in acceptance, extension,
termination or amendment to the registered holders as promptly as practicable.
PROCEDURES FOR TENDERING
Only an outstanding note holder may tender such outstanding notes in the
exchange offer. To tender in the exchange offer, a holder must complete, sign
and date the letter of transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if the letter of transmittal so requires, or transmit an
agent's message in connection with a book-entry transfer, and mail or otherwise
deliver the letter of transmittal or facsimile, or agent's message, together
with the
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outstanding notes and any other required documents, to IBJ Whitehall Bank and
Trust Company, which is the exchange agent, prior to 5:00 p.m., New York City
time, on the expiration date. In addition, either:
- the exchange agent must receive the letter of transmittal and
certificates for the outstanding notes prior to the expiration date;
- the exchange agent must receive a timely confirmation of a book-entry
transfer of the outstanding notes into the exchange agent's account at
The Depository Trust Company ("DTC") pursuant to the procedure for
book-entry transfer described below, prior to the expiration date; or
- the holder must comply with the guaranteed delivery procedures described
below.
For effective tender, the exchange agent must receive the outstanding notes
or book-entry confirmation, as the case may be, the letter of transmittal, and
other required documents, at the address set forth below under "-- Exchange
Agent" prior to 5:00 p.m., New York City time, on the expiration date. Delivery
of documents to the book entry transfer facility in accordance with its
procedure does not constitute delivery to the exchange agent.
DTC has authorized DTC participants that hold outstanding notes on behalf
of the outstanding notes' beneficial owners to tender their outstanding notes as
if they were holders. To effect a tender of outstanding notes, DTC participants
should either:
- complete and sign the letter of transmittal, or a manually signed
facsimile thereof, have the signature guaranteed if required by the
instructions, and mail or deliver the letter of transmittal, or the
manually signed facsimile, to the exchange agent pursuant to the
procedure set forth in "Procedures for Tendering;" or
- transmit their acceptance to DTC through the DTC automated tender offer
program for which the transaction will be eligible and follow the
procedure for book-entry transfer set forth in "-- Book-Entry Transfer."
By executing the letter of transmittal or an agent's message, each holder
will make to Emmis the representations set forth above in the third paragraph
under the heading "-- Purpose and Effect of the Exchange Offer."
Each holder's tender, and Emmis' acceptance, will constitute agreement
between such holder and Emmis in accordance with the terms, and subject to the
conditions, set forth herein and in the letter of transmittal or agent's
message.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL OR
AGENT'S MESSAGE, AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT
THE HOLDER'S ELECTION AND SOLE RISK. AS AN ALTERNATIVE TO MAIL DELIVERY, HOLDERS
MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, HOLDERS
SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO
EMMIS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR THEM.
Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the
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registered holder promptly and instruct the registered holder to tender on the
beneficial owner's behalf. See "Instructions to Registered Holder and/or
Book-Entry Transfer Facility Participant from Beneficial Owner" included with
the letter of transmittal.
A member of the Medallion System must guarantee signatures on a letter of
transmittal or a notice of withdrawal, as the case may be, unless the
outstanding notes tendered pursuant thereto are tendered:
- by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the
letter of transmittal; or
- for the account of a Medallion System member.
In the event that signatures on a letter of transmittal or a notice of
withdrawal, as the case may be, must be guaranteed, such guarantee must be by a
Medallion System member.
If a person other than the registered holder of any outstanding notes
listed therein signs the accompanying letter of transmittal, the outstanding
notes must be endorsed or accompanied by a properly completed bond power, signed
by the registered holder as his or name appears on the outstanding notes, with
the signature guaranteed by a Medallion System member.
If trustees, executors, administrators, guardians, attorneys-in-fact,
offices of corporations, or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any outstanding notes or bond powers,
such persons should so indicate when signing, and they must submit evidence
satisfactory to Emmis of their authority to so act, with the letter of
transmittal.
Emmis will determine, in its sole discretion, all questions as to the
validity, form, eligibility, including time of receipt, and acceptance and
withdrawal of tendered outstanding notes. This determination will be final and
binding. We reserve the absolute right to reject any and all outstanding notes
not properly tendered, or any outstanding notes, Emmis' acceptance of which
would, in the opinion of Emmis' counsel, be unlawful. We also reserve the right,
in our sole discretion, to waive any defects, irregularities or conditions of
tender as to particular outstanding notes. Our interpretation of the terms and
conditions of the exchange offer, including the instructions in the letter of
transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of outstanding notes must
be cured within such time as we shall determine. Although we intend to notify
holders of defects or irregularities with respect to tenders of outstanding
notes, neither Emmis, the exchange agent nor any other person shall incur any
liability for failure to give such notification. Tenders of outstanding notes
will not be deemed to have been made until such defects or irregularities have
been cured or waived. If the exchange agent receives any outstanding notes that
are not properly tendered, and as to which the defects or irregularities have
not been cured or waived, the exchange agent will return them to the tendering
holders, unless otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date.
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF REGISTERED NOTES
For each outstanding note Emmis accepts for exchange, the holder will
receive a registered note having a principal amount at maturity equal to that of
the surrendered outstanding note. For purposes of the exchange offer, Emmis
shall be deemed to have accepted properly tendered
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outstanding notes for exchange when, as and if Emmis has given oral or written
notice thereof to IBJ Whitehall Bank and Trust Company, as exchange agent.
In all cases, Emmis will issue registered notes for outstanding notes that
are accepted for exchange pursuant to the exchange offer only after the exchange
agent's timely receipt of certificates for such outstanding notes, or a timely
book-entry confirmation of the outstanding notes into the exchange agent's
account at the book-entry transfer facility, plus a properly completed and duly
executed letter of transmittal or agent's message and all other required
documents. If Emmis does not accept any tendered outstanding notes for any
reason set forth in the terms and conditions of the exchange offer, we will
return the unaccepted or non-exchanged outstanding notes without expense to the
tendering holder, or, in the case of outstanding notes tendered by book-entry
transfer into the exchange agent's account, the non-exchanged outstanding notes
will be credited to an account maintained with the book-entry transfer facility,
as promptly as practicable after the expiration date.
BOOK-ENTRY TRANSFER
IBJ Whitehall Bank and Trust Company, as exchange agent, will establish a
new account or utilize an existing account at DTC for the outstanding notes
promptly after the date of this prospectus, and any financial institution that
is a participant in DTC and whose name appears on a security position listing as
the owner of outstanding notes may make a book-entry tender of outstanding notes
by causing DTC to transfer such outstanding notes into the exchange agent's
account in accordance with DTC's procedures for such transfer. However, the
exchange agent must receive, at its address set forth below under the caption
"Exchange Agent," on or prior to the expiration date, or the holders must comply
with the guaranteed delivery procedures described below to submit, the letter of
transmittal, or a manually signed facsimile thereof, properly completed and
validly executed, with any required signature guarantees, or an agent's message,
and any other required documents. Document delivery to DTC in accordance with
DTC's procedures does not constitute delivery to the exchange agent.
The term "agent's message" means a message transmitted by DTC to, and
received by, the exchange agent, forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the DTC
participant tendering the outstanding notes, stating:
- the aggregate principal amount of outstanding notes which have been
tendered by such participant;
- that such participant has received and agrees to be bound by the terms
of the letter of transmittal; and
- that Emmis may enforce that agreement against the participant.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their outstanding notes and:
- whose outstanding notes are not immediately available;
- who cannot deliver their outstanding notes, the letter of transmittal or
any other required documents, to IBJ Whitehall Bank and Trust Company,
which is the exchange agent; or
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- who cannot complete the procedures for book-entry transfer, prior to the
expiration date,
may effect a tender if:
(a) the tender is made through a firm which is a member of a registered
national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having
an office or correspondent in the United States;
(b) prior to the expiration date, the exchange agent receives from an
institution listed in clause (a) above a properly completed and duly
executed Notice of Guaranteed Delivery, by facsimile transmission, mail
or hand delivery, setting forth the name and address of the holder, the
certificate number(s) of the outstanding notes and the principal amount
of outstanding notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five New York Stock Exchange
trading days after the expiration date, the letter of transmittal, or
facsimile thereof, or an agent's message, together with the
certificate(s) representing the outstanding notes, or a confirmation of
book-entry transfer of the notes into the exchange agent's account at
the book-entry transfer facility, and any other documents required by
the letter of transmittal, will be deposited by the institution with
the exchange agent; and
(c) the exchange agent receives, no later than five New York Stock Exchange
trading days after the expiration date, the certificate(s) representing
all tendered outstanding notes in proper form for transfer, or a
confirmation of book-entry transfer of such outstanding notes into the
exchange agent's account at the book-entry transfer facility, together
with a letter of transmittal, or facsimile thereof, properly completed
and duly executed, with any required signature guarantees, or an
agent's message, and all other documents required by the letter of
transmittal.
Holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above may request that the exchange
agent send them a Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of outstanding notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on ,
1999; otherwise such tenders are irrevocable.
To withdraw a tender of outstanding notes in the exchange offer IBJ
Whitehall Bank and Trust Company, which is the exchange agent, must receive a
telegram, telex, letter or facsimile transmission notice of withdrawal at its
address set forth herein prior to 5:00 p.m., New York City time, on the
expiration date. Any such notice of withdrawal must:
- specify the name of the person having deposited the outstanding notes to
be withdrawn;
- identify the outstanding notes to be withdrawn, including the
certificate number(s) and principal amount of such outstanding notes,
or, in the case of outstanding notes transferred by book-entry transfer,
the name and number of the account at the book-entry transfer facility
to be credited;
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- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the outstanding notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee with respect to the
outstanding notes register the transfer of such outstanding notes into
the name of the person withdrawing the tender; and
- specify the name in which to register the outstanding notes, if
different from that of the depositor.
Emmis will determine all questions as to the validity, form and
eligibility, including time of receipt, of the notices. This determination shall
be final and binding on all parties. Any outstanding notes so withdrawn will be
deemed not to have been validly tendered for purposes of the exchange offer and
no registered notes will be issued with respect thereto unless the outstanding
notes so withdrawn are validly retendered. Emmis will return to the holder any
outstanding notes which have been tendered but which are not accepted for
exchange without expense to the holder, as soon as practicable after withdrawal,
rejection of tender, or termination of the exchange offer. Holders may retender
properly withdrawn outstanding notes by following one of the procedures
described above under "-- Procedures for Tendering" at any time prior to the
expiration date.
CONDITIONS
Notwithstanding any other term of the exchange offer, we shall not be
required to accept for exchange, or offer registered notes for, any outstanding
notes, and may terminate or amend the exchange offer as provided herein before
the acceptance of the outstanding notes, if:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in our judgment, might impair materially our ability to proceed
with the exchange offer, or any material adverse development has
occurred in any existing action or proceeding with respect to Emmis or
any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the SEC staff
is proposed, adopted or enacted, which, in our judgment, might impair
materially our ability to proceed with the exchange offer, or impair
materially our contemplated benefits from the exchange offer; or
(c) any governmental approval has not been obtained, which approval we
shall, in our discretion, deem necessary for the consummation of the
exchange offer as contemplated hereby.
If we determine in our discretion that any of the conditions are not
satisfied, we may:
- refuse to accept any outstanding notes and return all tendered
outstanding notes to the tendering holders;
- extend the exchange offer and retain all outstanding notes tendered
prior to the expiration of the exchange offer, subject, however, to the
holders' rights to withdraw the outstanding notes; or
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- waive the unsatisfied conditions and accept all properly tendered
outstanding notes which have not been withdrawn.
We shall keep the exchange offer open for at least 30 days, or longer if
applicable law so requires, including, in connection with any material
modification or waiver of the terms or conditions of the exchange offer that
requires such extension under applicable law, after the date we mail notice of
the exchange offer to outstanding note holders.
EXCHANGE AGENT
IBJ Whitehall Bank and Trust Company has been appointed as the exchange
agent for this exchange offer. Questions and requests for assistance, requests
for additional copies of this prospectus or of the letter of transmittal, and
requests for notice of guaranteed delivery should be directed to the exchange
agent, addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier or by Hand:
IBJ Whitehall Bank and Trust Company IBJ Whitehall Bank and Trust Company
1 State Street, 10th Floor 1 State Street, 10th Floor
New York, New York 10004 New York, New York 10004
Attn: Corporate Trust Administration Attn: Corporate Trust Administration
By Facsimile:
(212) 858-2952
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN THOSE SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
Emmis will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telecopy, telephone or in person by officers and regular employees
of Emmis and its affiliates or its agents.
Emmis has not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers, or others soliciting
acceptances of the exchange offer. Emmis, however, will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of pocket expenses in connection with the exchange offer.
Emmis will pay the cash expenses incurred in connection with the exchange
offer. Such expenses include the exchange agent's and the trustee's fees and
expenses, accounting and legal fees, and printing costs, among others.
ACCOUNTING TREATMENT
The registered notes will be recorded at the same carrying value as the
outstanding notes, which is face value, as reflected in Emmis's accounting
records on the date of exchange.
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Accordingly, Emmis will not recognize any gain or loss for accounting purposes.
The exchange offer expenses will be expensed over the term of the registered
notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The outstanding notes that are not exchanged for registered notes pursuant
to the exchange offer will remain restricted securities. Accordingly, such
outstanding notes may be resold only:
- to Emmis, upon redemption thereof or otherwise;
- so long as the outstanding notes are eligible for resale pursuant to
Rule 144A, to a person inside the United States whom the seller
reasonably believes is a qualified institutional buyer within the
meaning of Rule 144A under the Securities Act in a transaction meeting
the requirements of Rule 144A, in accordance with Rule 144 under the
Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act, and based upon an opinion of counsel
reasonably acceptable to us;
- outside the United States to a foreign person in a transaction meeting
the requirements of Regulation S under the Securities Act; or
- pursuant to an effective registration statement under the Securities
Act.
Any resale of outstanding notes must comply with any applicable securities
laws of any state of the United States.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives registered notes for its own account
pursuant to the exchange offer, where its outstanding notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such registered notes. This prospectus, as it may be amended
or supplemented from time to time, may be used by a broker-dealer in connection
with resales of registered notes received in exchange for outstanding notes
where such outstanding notes were acquired as a result of market making or other
trading activities. Until , 1999 (90 days after the commencement of
the exchange offer), all dealers effecting transactions in the registered notes
may be required to deliver a prospectus.
Emmis will not receive any proceeds from any sales of the registered notes
by participating broker-dealers. Registered notes received by participating
broker-dealers for their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the registered notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such participating broker-dealer that resells the
registered notes, and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The letter of transmittal for the exchange offer states that, by acknowledging
that it will deliver, and by delivering, a prospectus, a participating
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the expiration date, or until all
broker-dealers who exchange outstanding notes which were acquired as a result of
market-making activities for registered notes have sold all registered notes
held by them, we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal. Emmis has agreed to pay all
expenses incident to the exchange offer. Emmis will indemnify the holders of the
registered notes, including any broker-dealers, against certain liabilities,
including liabilities under the Securities Act.
The registered notes will not be listed on any stock exchange. The notes
are designated for trading in The Portal Market.
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LEGAL MATTERS
Certain legal matters in connection with the registered notes will be
passed upon for Emmis by Bose McKinney & Evans, Indianapolis, Indiana. Ronald E.
Elberger, a partner in Bose McKinney & Evans, is an officer of Emmis
Communications Corporation.
EXPERTS
The audited consolidated financial statements and schedule of Emmis
Communications 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 included 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 reports with
respect thereto and included 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 by reference in this prospectus, have been audited by
Ernst & Young LLP, independent auditors, as indicated in their report with
respect thereto incorporated by reference herein.
With respect to the unaudited interim financial information of Emmis
Communications Corporation and Subsidiaries for the quarters ended May 31, 1998
and 1997, August 31, 1998 and 1997, and November 30, 1998 and 1997, incorporated
by reference or included elsewhere in this prospectus, Arthur Andersen LLP, has
applied limited procedures in accordance with professional standards for a
review of that information. However, their separate reports thereon state that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on that
information should be restricted in light of the limited nature of the review
procedures applied. In addition, the accountants are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
report on the unaudited interim financial information because that report is not
a "report" or a "part" of the registration statement prepared or certified by
the accountants within the meaning of Section 7 or 11 of the Act.
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WHERE YOU CAN FIND MORE INFORMATION
Emmis filed a registration statement on Form S-4 with the SEC covering the
registered notes, and this prospectus is part of our registration statement. For
further information on Emmis and the notes, you should refer to our registration
statement and its exhibits. This prospectus summarizes material provisions of
contracts and other documents that we refer you to. Since the prospectus may not
contain all the information that you may find important, you should review the
full text of these documents. We have included copies of these documents as
exhibits to our registration statement.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York and Chicago. Please
call the SEC at 1-800-SEC-0330 for more information on the public reference
rooms and their copy charges. Our SEC filings are also available to the public
from the SEC's Web Site at http://www.sec.gov.
This prospectus is part of a registration statement we filed with the SEC.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and later information that we file with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until all the
outstanding notes have been exchanged for registered notes or the exchange offer
is otherwise terminated.
- Our Annual Report on Form 10-K (file no. 0-23264) for the fiscal year
ended February 28, 1998, as amended on Form 10-K/A.
- Our Quarterly Reports on Form 10-Q (file no. 0-23264) for the fiscal
quarters ended May 31, 1998, August 31, 1998, and November 30, 1998, as
amended on Form 10-Q/A.
- Our Current Reports on Form 8-K (file no. 0-23264) filed May 7, 1998,
June 22, 1998, and July 31, 1998, December 2, 1998, March 15, 1999, and
May 5, 1999, and amendments on Form 8-K/A (file no. 0-23264) filed
September 29, 1998, and May 6, 1999.
- Our proxy statement dated May 28, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations
Emmis Communications Corporation
One Emmis Plaza, 7th Floor
40 Monument Circle
Indianapolis, Indiana 46204
Telephone: (317) 266-0100
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOGO
EMMIS COMMUNICATIONS CORPORATION
$300,000,000
OFFER TO EXCHANGE
8 1/8% SENIOR SUBORDINATED NOTES DUE 2009
-------------------------------
PROSPECTUS
-------------------------------
- --------------------------------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU
WRITTEN INFORMATION OTHER THAN THIS PROSPECTUS OR TO MAKE REPRESENTATIONS AS TO
MATTERS NOT STATED IN THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE THAT
WOULD NOT BE PERMITTED OR LEGAL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALES MADE HEREUNDER AFTER THE DATE OF THIS PROSPECTUS SHALL CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THE AFFAIRS OF THE COMPANY
HAVE NOT CHANGED SINCE THE DATE HEREOF.
UNTIL , 1999 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
BROKER-DEALERS THAT EFFECT TRANSACTIONS IN THE REGISTERED NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE BROKER-DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO ANY UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
---------------, 1999
<PAGE> 128
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Emmis Communications Corporation 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. Emmis' Articles of Incorporation do
not contain any provision prohibiting such indemnification. Emmis' 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.
Emmis' Amended and Restated Articles of Incorporation generally provide
that any director or officer of Emmis or any person who is serving at the
request of Emmis as a director, officer, employee or agent of another entity
shall be indemnified and held harmless by Emmis 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 Emmis the expenses incurred in
defending proceedings in advance of their final disposition and authorize Emmis
to maintain insurance to protect itself and any director, officer, employee or
agent of Emmis or any person who is or was serving at the request of Emmis as a
director, officer, partner, trustee, employee or agent of another entity against
expense, liability or loss, whether or not Emmis would have the power to
indemnify such person against such expense, liability or loss under the Amended
and Restated Articles of Incorporation.
II-1
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ITEM 21. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<C> <S>
3.1 Amended and Restated Articles of Incorporation of Emmis
Communications Corporation, as amended, incorporated by
reference to Exhibit 2.3 to Emmis' Registration Statement on
Form S-1, File No. 33-73218, as amended, and to Exhibit 3.1
to Emmis' Quarterly Report on Form 10-Q for the quarter
ended August 31, 1998.
3.2 Amended and Restated Bylaws of Emmis Communications
Corporation, as amended, incorporated by reference to
Exhibit 2.4 to Emmis' Quarterly Report on Form 10-Q for the
quarter ended May 31, 1995, and to Exhibit 3.2 to Emmis'
Quarterly Report on Form 10-Q for the quarter ended August
31, 1998.
4.1 Indenture, including as an exhibit thereto the form of
note.*
4.2 Registration Rights Agreement dated as of February 12, 1999,
by and among Emmis Communications Corporation and its
Subsidiary Guarantors and Donaldson, Lufkin & Jenrette
Securities Corporation, BancBoston Robertson Stephens Inc.,
First Union Capital Markets Corp., Goldman, Sachs & Co. and
TD Securities (USA) Inc.*
5 Opinion and consent of Bose McKinney & Evans regarding the
legality of the securities being registered.*
12 Statements re computation of ratios.*
15 Letter re unaudited interim financial information.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ernst & Young LLP.
24 Powers of Attorney.*
25 Statement re eligibility of trustee.*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
</TABLE>
- ---------------
* Previously filed.
ITEM 22. 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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the
II-2
<PAGE> 130
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective 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, Form S-8 or Form F-3, 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. Financial
statements and information otherwise required by Section 10(a)(3) of the
Act need not be furnished, provided that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (A)(4) and other information necessary
to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form F-3, a
post-effective amendment need not be filed to include financial statements
and information required by Section 10(a)(3) of the Act or Rule 3-19 of
Regulation S-X if such financial statements and information are contained
in periodic reports filed with or furnished to the Commission 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 Form F-3.
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 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
II-3
<PAGE> 131
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 to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
E. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in Indianapolis, Indiana, on May 5, 1999.
EMMIS COMMUNICATIONS CORPORATION
/s/ J. SCOTT ENRIGHT
By:
--------------------------------------
J. Scott Enright
Vice President and Associate General
Counsel
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed on May 5, 1999, by the following persons in the capacities
indicated.
II-4
<PAGE> 132
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
JEFFREY H. SMULYAN* Director and Chairman of the Board
- --------------------------------------------- (Principal Executive Officer)
Jeffrey H. Smulyan
DOYLE L. ROSE* Director and Radio Division President
- ---------------------------------------------
Doyle L. Rose
Director
- ---------------------------------------------
Susan B. Bayh
GARY L. KASEFF* Director
- ---------------------------------------------
Gary L. Kaseff
RICHARD A. LEVENTHAL* Director
- ---------------------------------------------
Richard A. Leventhal
GREG NATHANSON* Director
- ---------------------------------------------
Greg Nathanson
FRANK V. SICA* Director
- ---------------------------------------------
Frank V. Sica
Director
- ---------------------------------------------
Lawrence B. Sorrel
WALTER Z. BERGER* Vice President, Chief Financial Officer
- --------------------------------------------- and Treasurer
Walter Z. Berger (Principal Financial Officer and Principal
Accounting Officer)
*By /s/ J. SCOTT ENRIGHT
- ---------------------------------------------
J. Scott Enright
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 133
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in Indianapolis, Indiana, on May 5, 1999.
EMMIS FM BROADCASTING CORPORATION OF INDIANAPOLIS
EMMIS FM RADIO CORPORATION OF INDIANAPOLIS
EMMIS FM BROADCASTING CORPORATION OF ST. LOUIS
KPWR, INC.
EMMIS BROADCASTING CORPORATION OF NEW YORK
EMMIS FM BROADCASTING CORPORATION OF CHICAGO
EMMIS MEADOWLANDS CORPORATION
EMMIS PUBLISHING CORPORATION
EMMIS AM RADIO CORPORATION OF INDIANAPOLIS
EMMIS 104.1 FM RADIO CORPORATION OF ST. LOUIS
EMMIS 106.5 FM BROADCASTING CORPORATION OF ST. LOUIS
EMMIS 1310 AM RADIO CORPORATION OF INDIANAPOLIS
EMMIS 105.7 FM RADIO CORPORATION OF INDIANAPOLIS
EMMIS DAR, INC.
EMMIS 1380 AM RADIO CORPORATION OF ST. LOUIS
MEDIATEX COMMUNICATIONS CORPORATION
MEDIATEX DEVELOPMENT CORPORATION
TEXAS MONTHLY, INC.
EMMIS FM HOLDING CORPORATION OF NEW YORK
EMMIS RADIO CORPORATION OF NEW YORK
EMMIS 101.9 FM RADIO CORPORATION OF NEW YORK
EMMIS INTERNATIONAL CORPORATION
EMMIS INTERNATIONAL BROADCASTING CORPORATION
/s/ J. SCOTT ENRIGHT
By:
--------------------------------------
J. Scott Enright
Vice President and Associate General
Counsel
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed on May 6, 1999, by the following persons in the capacities
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
JEFFREY H. SMULYAN* Director and Chairman of the Board
- --------------------------------------------- (Principal Executive Officer)
Jeffrey H. Smulyan
WALTER Z. BERGER* Vice President, Chief Financial Officer and Treasurer
- --------------------------------------------- (Principal Financial Officer and Principal Accounting
Walter Z. Berger Officer)
/s/ J. SCOTT ENRIGHT
*By: ---------------------------------------
J. Scott Enright
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 134
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in Indianapolis, Indiana, on May 5, 1999.
EMMIS FM LICENSE CORPORATION OF INDIANAPOLIS
EMMIS FM LICENSE CORPORATION OF ST. LOUIS
KPWR LICENSE, INC.
EMMIS LICENSE CORPORATION OF NEW YORK
EMMIS FM LICENSE CORPORATION OF CHICAGO
EMMIS FM RADIO LICENSE CORPORATION OF INDIANAPOLIS
EMMIS AM RADIO LICENSE CORPORATION OF INDIANAPOLIS
EMMIS RADIO LICENSE CORPORATION OF NEW YORK
EMMIS 104.1 FM RADIO LICENSE CORPORATION OF ST. LOUIS
EMMIS 106.5 FM LICENSE CORPORATION OF ST. LOUIS
EMMIS 1310 AM RADIO LICENSE CORPORATION OF INDIANAPOLIS
EMMIS 105.7 FM RADIO LICENSE CORPORATION OF INDIANAPOLIS
EMMIS LICENSE CORPORATION
EMMIS 1480 AM RADIO LICENSE CORPORATION OF TERRE HAUTE
EMMIS 99.9 FM RADIO LICENSE CORPORATION OF TERRE HAUTE
EMMIS 105.5 FM RADIO LICENSE CORPORATION OF TERRE HAUTE
EMMIS TELEVISION LICENSE CORPORATION OF HONOLULU
EMMIS TELEVISION LICENSE CORPORATION OF MOBILE
EMMIS TELEVISION LICENSE CORPORATION OF CAPE CORAL
EMMIS TELEVISION LICENSE CORPORATION OF GREEN BAY
EMMIS TELEVISION LICENSE CORPORATION OF TERRE HAUTE
EMMIS TELEVISION LICENSE CORPORATION OF NEW ORLEANS
/s/ J. SCOTT ENRIGHT
By:
--------------------------------------
J. Scott Enright
Vice President and Associate General
Counsel
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed on May 5, 1999, by the following persons in the capacities
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
JEFFREY H. SMULYAN* Director and Chairman of the Board
- --------------------------------------------- (Principal Executive Officer)
Jeffrey H. Smulyan
DOYLE L. ROSE* Director and Radio Division President
- ---------------------------------------------
Doyle L. Rose
Director
- ---------------------------------------------
Richard F. Cummings
</TABLE>
II-7
<PAGE> 135
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
GARY L. KASEFF* Director
- ---------------------------------------------
Gary L. Kaseff
WALTER Z. BERGER* Vice President, Chief Financial Officer and Treasurer
- --------------------------------------------- (Principal Financial Officer and Principal Accounting
Walter Z. Berger Officer)
/s/ J. SCOTT ENRIGHT
*By: ---------------------------------------
J. Scott Enright
Attorney-in-Fact
</TABLE>
II-8
<PAGE> 136
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in Indianapolis, Indiana, on May 5, 1999.
EMMIS INDIANA BROADCASTING, L.P.
EMMIS TELEVISION BROADCASTING, L.P.
EMMIS PUBLISHING, L.P.
By: EMMIS COMMUNICATIONS CORPORATION
General Partner
/s/ J. SCOTT ENRIGHT
By:
--------------------------------------
J. Scott Enright
Vice President and Associate General
Counsel
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed on May 5, 1999, by the following persons in the capacities
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
JEFFREY H. SMULYAN* Director and Chairman of the Board
- --------------------------------------------- (Principal Executive Officer)
Jeffrey H. Smulyan
DOYLE L. ROSE* Director and Radio Division President
- ---------------------------------------------
Doyle L. Rose
Director
- ---------------------------------------------
Susan B. Bayh
GARY L. KASEFF* Director
- ---------------------------------------------
Gary L. Kaseff
RICHARD A. LEVENTHAL* Director
- ---------------------------------------------
Richard A. Leventhal
GREG NATHANSON* Director
- ---------------------------------------------
Greg Nathanson
FRANK V. SICA* Director
- ---------------------------------------------
Frank V. Sica
Director
- ---------------------------------------------
Lawrence B. Sorrel
WALTER Z. BERGER* Vice President, Chief Financial Officer and Treasurer
- --------------------------------------------- (Principal Financial Officer and Principal Accounting
Walter Z. Berger Officer)
/s/ J. SCOTT ENRIGHT
*By: ---------------------------------------
J. Scott Enright
Attorney-in-Fact
</TABLE>
II-9
<PAGE> 1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
EMMIS COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
PRO FORMA
FEBRUARY (29) 28, NOVEMBER 30, FEBRUARY 28, NOVEMBER 30,
-------------------------------------- --------------- -------------------------
1994 1995 1996 1997 1998 1997 1998 1998 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Pre tax income.................................. $343 $12,155 $17,908 $25,940 $18,284 $20,219 $20,311 $18,284 $20,311
Add:
Fixed charges.................................. 14,373 8,786 15,004 10,631 15,261 11,473 26,892 17,623 28,663
Loss from equity investments................... - 348 3,111 - - - - - -
Less:
Capitalized interest........................... - - - - - - 666 - 666
Minority loss in consolidated subsidiaries..... - - - - - - 1,875 - 1,875
------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings........................................$14,716 $21,289 $36,023 $36,571 $33,545 $31,692 $44,662 $35,907 $46,433
------- ------- ------- ------- ------- ------- ------- ------- -------
FIXED CHARGES:
Interest expense (including amortization of
debt expenses).................................$13,588 $ 7,849 $13,540 $9,633 $13,772 $10,356 $24,942 $16,134 $26,713
Capitalized interest............................ - - - - - - 666 - 666
Portion of rents representative of the
interest factor................................ 785 937 1,464 998 1,489 1,117 1,284 1,489 1,284
------- ------- ------- ------- ------- ------- ------- ------- -------
Fixed Charges...................................$14,373 $ 8,786 $15,004 $10,631 $15,261 $11,473 $26,892 $17,623 $28,663
------- ------- ------- ------- ------- ------- ------- ------- -------
Ratio of Earnings to Fixed Charges.............. 1.02 2.42 2.40 3.44 2.20 2.76 1.66 2.04 1.62
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 15
May 5, 1999
Mr. Walter Z. Berger
Chief Financial Officer
Emmis Communications Corporation
One Emmis Plaza
40 Monument Circle
Suite 700
Indianapolis, IN 46204
Dear Mr. Berger:
We are aware that Emmis Communications Corporation has incorporated by reference
in this registration statement its Form 10-Q/A for the quarter ended May 31,
1998, which includes our report dated June 19, 1998, (except with respect to the
matter discussed in Note 2 to the condensed consolidated financial statements
included in the May 31, 1998 10-Q/A as to which the date is April 30, 1999),
covering the unaudited interim financial information contained therein, its Form
10-Q/A for the quarter ended August 31, 1998, which includes our report dated
October 7, 1998, (except with respect to the matter discussed in Note 2 to the
condensed consolidated financial statements included in the August 31, 1998
10-Q/A as to which the date is April 30, 1999), covering the unaudited interim
financial information contained therein, its Form 10-Q/A for the quarter ended
November 30, 1998, which includes our report dated December 17, 1998, (except
with respect to the matter discussed in Note 2 to the condensed consolidated
financial statements included in the November 30, 1998 10-Q/A as to which the
date is April 30, 1999), covering the unaudited interim financial information
contained therein. Pursuant to Regulation C of the Securities Act of 1933, those
reports are not considered a part of the registration statement prepared or
certified by our firm or reports prepared or certified by our Firm within the
meaning of Sections 7 and 11 of the Act.
Very truly yours,
Arthur Andersen LLP
<PAGE> 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
(except with respect to the matter discussed in Note 1b to the consolidated
February 28, 1998 financial statements as to which the date is April 30, 1999),
on the consolidated financial statements of Emmis Communications Corporation for
the three years ended February 28, 1998, included in Emmis Communications
Corporation's Form 8-K to be filed on or about May 6, 1999 and to the
incorporation by reference of our reports dated May 1, 1998, on the financial
statements of Tribune New York Radio, Inc. included in Emmis Communication
Corporation's Form 8-K filed on May 7, 1998 and to all references to our Firm
included in this registration statement.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
May 5, 1999.
<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 (Form S-4) and related Prospectus of Emmis Communications
Corporation for the registration of $300,000,000 of 8-1/8% Senior Subordinated
Notes due 2009 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 filed with the
Securities and Exchange Commission.
Ernst & Young LLP
New York, New York
May 5, 1999
