<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended November 30, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to ________
Commission file number: 0-23264
EMMIS COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1542018
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE EMMIS PLAZA
40 MONUMENT CIRCLE
SUITE 700
INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices) (Zip Code)
(317) 266-0100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------------ ------------
The number of shares outstanding of each of the Registrant's classes of
common stock, as of January 10, 2000, was:
20,487,853 Shares of Class A Common Stock, $.01 Par Value
2,369,291 Shares of Class B Common Stock, $.01 Par Value
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<PAGE> 2
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements..........................................4
Condensed Consolidated Statements of
Operations for the three and nine months
ended November 30, 1998 and 1999............................4
Condensed Consolidated Balance Sheets
at February 28, 1999 and November 30, 1999..................6
Condensed Consolidated Statements of Cash
Flows for the nine months ended
November 30, 1998 and 1999..................................8
Notes to Condensed Consolidated
Financial Statements.......................................11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations........................................28
Item 3. Quantitative and Qualitative Disclosures
about Market Risk....................................33
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................33
Item 2. Changes in Securities and Use of Proceeds....................33
Item 6. Exhibits and Reports on Form 8-K.............................34
Signatures............................................................35
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Emmis Communications Corporation and Subsidiaries:
We have reviewed the accompanying condensed consolidated balance sheet
of Emmis Communications Corporation (an Indiana corporation) and Subsidiaries as
of November 30, 1999, and the related condensed consolidated statements of
operations for the three-month and nine-month periods ended November 30, 1999
and 1998 and the condensed consolidated statements of cash flows for the
nine-month periods ended November 30, 1999 and 1998. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Emmis Communications
Corporation and Subsidiaries as of February 28, 1999 (not presented separately
herein), and, in our report dated April 30, 1999, we expressed an unqualified
opinion on that statement. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of February 28, 1999 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
December 20, 1999.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended November 30, Ended November 30,
1998 1999 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
GROSS REVENUES $ 84,338 $ 106,502 $ 205,059 $ 286,656
LESS: AGENCY COMMISSIONS 12,699 15,245 30,927 41,518
--------- --------- --------- ---------
NET REVENUES 71,639 91,257 174,132 245,138
Operating expenses 41,663 52,171 102,521 145,293
International business
development expenses 413 301 974 1,048
Corporate expenses 2,453 3,533 6,379 10,217
Time brokerage fees - - 2,220 -
Depreciation and amortization 8,683 12,017 18,595 32,062
Non-cash compensation 342 2,306 2,378 4,599
--------- --------- --------- ---------
OPERATING INCOME 18,085 20,929 41,065 51,919
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (12,313) (14,040) (24,942) (41,205)
Minority interest - 207 1,875 1,732
Other income (expense), net 1,190 830 2,313 537
--------- --------- --------- ---------
Total other income (expense) (11,123) (13,003) (20,754) (38,936)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 6,962 7,926 20,311 12,983
PROVISION FOR INCOME TAXES 3,950 5,470 11,350 9,070
--------- --------- --------- ---------
NET INCOME BEFORE EXTRAORDINARY
ITEM 3,012 2,456 8,961 3,913
--------- --------- --------- ---------
EXTRAORDINARY LOSS, NET OF TAX
BENEFIT - - 1,597 -
--------- --------- --------- ---------
NET INCOME 3,012 2,456 7,364 3,913
--------- --------- --------- ---------
PREFERRED STOCK DIVIDENDS - 799 - 799
--------- --------- --------- ---------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $ 3,012 $ 1,657 $ 7,364 $ 3,114
========= ========= ========= =========
</TABLE>
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<TABLE>
<CAPTION>
Three Months Nine Months
Ended November 30, Ended November 30,
1998 1999 1998 1999
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic net income per common share:
Before extraordinary item $ .19 $ .09 $ .63 $ .19
Extraordinary item $ - $ - $ (.11) $ -
-------- --------- --------- ---------
Net income $ .19 $ .09 $ .52 $ .19
======== ========= ========= =========
Diluted net income per common share:
Before extraordinary item $ .19 $ .09 $ .62 $ .18
Extraordinary item $ - $ - $ (.11) $ -
-------- --------- --------- ---------
Net income $ .19 $ .09 $ .51 $ .18
======== ========= ========= =========
Weighted average common shares outstanding:
Basic 15,654,123 17,817,640 14,046,628 16,498,055
Diluted 15,965,611 18,537,292 14,447,764 17,059,463
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
February 28, November 30,
1999 1999
----------- ------------
(Note 1) (Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,117 $ 244,974
Accounts receivable, net 51,479 76,418
Prepaid expenses and other 13,486 26,735
---------- ----------
Total current assets 71,082 348,127
Property and equipment, net 106,060 127,932
Intangible assets, net 802,307 1,051,950
Other assets, net 35,382 58,362
---------- ----------
Total assets $1,014,831 $1,586,371
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of other
long-term debt $ 835 $ 835
Accounts payable 15,635 20,939
Accrued salaries and commissions 4,545 6,684
Accrued interest 6,223 6,276
Deferred revenue 7,238 14,855
Current portion of TV program
rights payable 9,471 10,259
Income tax payable 12,057 6,243
Other 13,829 4,222
---------- ----------
Total current liabilities 69,833 70,313
CREDIT FACILITY AND SENIOR
SUBORDINATED NOTES 577,000 550,000
TV PROGRAM RIGHTS PAYABLE, NET OF
CURRENT PORTION 25,161 68,349
OTHER LONG-TERM DEBT, NET OF
CURRENT PORTION 18,805 19,646
OTHER NONCURRENT LIABILITIES 3,466 5,390
DEFERRED INCOME TAXES 85,017 96,374
---------- ----------
Total liabilities 779,282 810,072
---------- ----------
</TABLE>
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<TABLE>
<CAPTION>
February 28, November 30,
1999 1999
----------- ------------
(Note 1) (Unaudited)
<S> <C> <C>
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Series A cumulative convertible
preferred stock, $.01 par value;
authorized 10,000,000 shares;
issued and outstanding 0 shares at
February 28, 1999 and 2,875,000
shares at November 30, 1999 - 29
Class A common stock, $.01
par value; authorized 34,000,000
shares; issued and outstanding
13,190,207 shares at
February 28, 1999 and 20,454,696
shares at November 30, 1999 132 205
Class B common stock, $.01
par value; authorized 6,000,000
shares; issued and outstanding
2,582,265 shares at
February 28, 1999 and 2,374,291
shares at November 30, 1999 26 24
Additional paid-in capital 260,344 798,723
Accumulated deficit (24,305) (21,191)
Accumulated other comprehensive loss (648) (1,491)
---------- ----------
Total shareholders' equity 235,549 776,299
---------- ----------
Total liabilities and
shareholders' equity $1,014,831 $1,586,371
========== ==========
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-7-
<PAGE> 8
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands)
Nine Months
Ended November 30,
1998 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,364 $ 3,913
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities -
Extraordinary item 1,597 -
Depreciation and amortization 21,516 38,372
Provision for bad debts 1,013 1,592
Provision for deferred income taxes 4,247 5,529
Non-cash compensation 2,378 4,599
Other (3,030) (862)
Changes in assets and liabilities -
Accounts receivable (25,450) (24,350)
Prepaid expenses and other current assets (4,131) (12,866)
Other assets 3,836 (2,115)
Accounts payable and accrued liabilities 7,222 6,407
Deferred revenue (991) 3,748
Other liabilities 14,141 (24,736)
--------- ---------
Net cash provided by (used in)
operating activities 29,712 (769)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (26,224) (25,077)
Proceeds from sale of
property and equipment 607 -
Acquisition of WQCD-FM (128,449) -
Acquisition of SF Broadcasting (287,293) -
Acquisition of Wabash Valley Broadcasting (88,905) -
Acquisition of Country Sampler - (18,954)
Acquisition of WKCF-TV - (197,105)
Acquisition of Votionis, S.A - (12,800)
Deposits on acquisitions and other - (11,500)
--------- ---------
Net cash used in investing activities (530,264) (265,436)
--------- ---------
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Nine Months
Ended November 30,
1998 1999
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (410,157) (156,668)
Proceeds from long-term debt 733,500 129,668
Proceeds from issuance of Class A
common stock, net of transaction costs 182,640 238,328
Proceeds from issuance of Series A
cumulative convertible preferred stock,
net of transaction costs - 138,454
Proceeds from sale of Class A common stock
to Liberty Media Group, net of
transaction costs - 145,287
Purchase of interest rate cap agreements
and other debt related costs (8,912) -
Proceeds from exercise of stock options 3,016 9,993
--------- ---------
Net cash provided by financing activities 500,087 505,062
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (465) 238,857
CASH AND CASH EQUIVALENTS:
Beginning of period 5,785 6,117
--------- ---------
End of period $ 5,320 $ 244,974
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for-
Interest $ 15,301 $ 37,227
Income taxes 1,460 9,270
Non cash transactions-
Preferred stock dividends $ 799
ACQUISITION OF WQCD-FM:
Fair value of assets acquired $ 203,813
Cash paid 128,449
---------
Liabilities recorded $ 75,364
=========
ACQUISITION OF SF BROADCASTING:
Fair value of asset acquired $ 338,790
Cash paid 287,293
Note payable 25,000
---------
Liabilities recorded $ 26,497
=========
ACQUISITION OF WABASH VALLEY BROADCASTING:
Fair value of assets acquired $ 101,055
Cash paid 88,905
---------
Liabilities recorded $ 12,150
=========
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Nine Months
Ended November 30,
1998 1999
--------- ---------
ACQUISITION OF COUNTRY SAMPLER:
Fair value of assets acquired $ 25,608
Cash paid 18,954
---------
Liabilities recorded $ 6,654
=========
ACQUISITION OF WKCF-TV:
Fair value of assets acquired $ 246,445
Cash paid 197,105
---------
Liabilities recorded $ 49,340
=========
ACQUISITION OF Votionis, S.A:
Fair value of assets acquired $ 14,600
Cash paid 12,800
---------
Liabilities recorded $ 1,800
=========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999
(Unaudited)
Note 1. General
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the condensed consolidated interim financial statements included
herein have been prepared, without audit, by Emmis Communications Corporation
and its subsidiaries (collectively, "Emmis" or the "Company"). As permitted
under the applicable rules and regulations of the Securities and Exchange
Commission, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations; however, Emmis believes that the disclosures are adequate to make
the information presented not misleading. The condensed consolidated financial
statements included herein should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report filed on Form 10-K for the year ended February 28, 1999. On an interim
basis, the Company defers major advertising campaigns for which future benefits
can be demonstrated. These costs are amortized over the shorter of the estimated
period benefited or the remainder of the fiscal year.
In the opinion of the registrant, the accompanying condensed
consolidated interim financial statements contain all material adjustments
(consisting only of normal recurring adjustments), necessary to present fairly
the consolidated financial position of Emmis at November 30, 1999 and the
results of its operations for the three and nine months ended November 30, 1998
and 1999 and its cash flows for the nine months ended November 30, 1998 and
1999.
The Company's results are subject to seasonal fluctuations. Therefore,
results shown on an interim basis are not necessarily indicative of results for
a full year.
Note 2. Significant Events
Liberty Media Investment:
In connection with the Concurrent Equity Offerings (defined below)
Emmis entered into a stock purchase agreement with Liberty Media Corporation
(Liberty) and sold 2.7 million shares of the Company's Class A common stock to
Liberty for $148.5 million ($145.3 million net of transaction costs) on November
18, 1999. The stock purchase agreement does not permit Liberty to sell the
shares for a period of twelve months and Liberty has the right (if certain
conditions are met) to acquire additional shares of the Company to maintain its
ownership percentage in
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<PAGE> 12
the Company in the event the Company issues new securities in the future. The
agreement with Liberty includes a financial commitment from Emmis of up to $50
million if certain future radio joint ventures were to occur.
BuyItNow.com L.L.C.:
On November 16, 1999 Emmis purchased one million shares of BuyItNow.com
L.L.C. for $5 million in cash, which represented an investment of 2.49%. This
investment will be accounted for using the cost method of accounting and is
reflected in other assets in the accompanying condensed consolidated balance
sheets. In a separate transaction, BuyitNow.com L.L.C. agreed to a cash purchase
of $2.5 million of advertisements from Emmis through February 2001.
Votionis Acquisition:
On November 9, 1999, the Company completed its acquisition of 75% of
the outstanding common stock of Votionis, S.A. ("Votionis") for $12.8 million in
cash plus assumed liabilities of $1.8 million. Additional consideration of up to
$2.2 million will be paid if certain conditions are met. Votionis consists of
one FM and one AM radio station located in Buenos Aires, Argentina (the
"Votionis Acquisition"). The acquisition was accounted for as a purchase and was
financed with proceeds from the Concurrent Equity Offerings. The $14.6 million
purchase price was allocated to property and equipment and broadcast licenses
based on a preliminary estimate. Broadcast licenses are included in intangible
assets in the accompanying condensed consolidated balance sheets and this
broadcast license is being amortized over 23 years.
Concurrent Equity Offerings:
On October 29, 1999, the Company completed the sale of 3.992 million
shares of its Class A Common Stock at $62.50 per share and 2.875 million shares
of 6.25% Series A Cumulative Convertible Preferred Stock at $50 per share (the
"Concurrent Equity Offerings"). The net proceeds of $376.8 million were used to
fund the acquisition of WKCF-TV in Orlando, Florida, and the Votionis
Acquisition, to repay certain outstanding obligations under the Company's credit
facility (the "Credit Facility") and to temporarily invest in cash equivalents.
The 6.25% Series A cumulative convertible preferred stock has a
liquidation preference of $50 per share and a par value of $.01 per share. Each
preferred share is convertible at the option of the holder into 0.64 shares of
Class A Common Stock, subject to certain events. Dividends are cumulative and
payable quarterly in arrears on January 15, April 15, July 15, and October 15 of
each year at an annual rate of $3.125 per preferred share.
The Company may not redeem the preferred stock prior to April 15, 2001.
From April 15, 2001 to October 15, 2002, the Company may redeem the preferred
stock at a redemption premium equal to 104.911% of the stated liquidation
preference of $50 per share (plus accumulated and unpaid dividends, if any) if
certain conditions are met. Beginning on October 15, 2002, the Company may
redeem in cash the preferred stock,
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<PAGE> 13
during the twelve-month periods commencing on October 15 of the years indicated
below, at the following redemption premiums (which are expressed as a percentage
of the stated liquidation preference of $50 per share), plus in each case
accumulated and unpaid dividends, if any, whether or not declared to the
redemption date:
YEAR AMOUNT
---- ------
2002 103.571%
2003 102.679%
2004 101.786%
2005 100.893%
2006 and thereafter 100.000%
The Company cannot redeem any shares of the preferred stock if any
dividends on the preferred stock are in arrears.
WKCF-TV: Orlando, FL
On October 29, 1999, the Company completed its acquisition of
substantially all of the assets of television station WKCF in Orlando, Florida (
the "WKCF Acquisition") from Press Communications, L.L.C. for approximately
$197.1 million. The purchase price included the purchase of land and a building
for $2.2 million. The Company financed the acquisition through a $12.5 million
advance payment and proceeds from the Concurrent Equity Offerings. In connection
with the acquisition, the Company recorded $49.3 million in contract
liabilities. The acquisition was accounted for as a purchase. The total purchase
price was allocated to property and equipment, television program rights and
broadcast licenses based on a preliminary appraisal. Broadcast licenses are
included in intangible assets in the accompanying condensed consolidated balance
sheet and are being amortized over 40 years. Television program rights are
included in prepaid expenses and other and in other assets in the accompanying
condensed consolidated balance sheets.
WKCF is an affiliate of the WB Television Network. As part of this
transaction, the Company has entered into an agreement with the WB Television
Network which, among other things, extends the existing network affiliation
agreement through December 2009.
St. Louis Acquisition:
In June 1999, the Company entered into an agreement with a former
executive of Sinclair Broadcasting Group, Inc. ("Sinclair") to purchase the
executive's right to acquire the assets of certain broadcast properties in St.
Louis, Missouri under an option agreement (the "St. Louis Acquisition"). The
right was exercised and allows the Company to purchase, at fair market value,
six radio stations (five FM and one AM) and one ABC-affiliated television
station from Sinclair.
In November 1999, through completion of an appraisal process, the
purchase price of the St. Louis Acquisition was determined to be $366.5 million.
The Company and Sinclair are currently in the process of determining other
material terms of the acquisition in accordance with the option agreement. In
addition, the acquisition will be subject to approval by both the Federal
Communications Commission and the
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<PAGE> 14
Department of Justice. The St. Louis Acquisition will be accounted for as a
purchase and will be financed through available cash, additional debt or equity
securities, depending on market conditions and other factors.
Under FCC regulations, Emmis can own no more than five FM and three AM
stations in the St. Louis market. Since Emmis already owns three FM stations in
the St. Louis market, concurrent with the consummation of the St. Louis
Acquisition, Emmis will have to divest three FM stations. Management intends to
divest the stations in the St. Louis market with the three weakest transmitting
signals.
Country Sampler Acquisition
On April 1, 1999, the Company completed its acquisition of
substantially all of the assets of Country Sampler, Inc.( the "Country Sampler
Acquisition") for approximately $21.0 million plus assumed liabilities of
approximately $4.7 million. The purchase price was payable $18.5 million in cash
at closing, which was financed through additional borrowings under the Credit
Facility, $2.0 million payable under a contract with the principal shareholder
through April 2003, and $.5 million paid in October 1999. The acquisition was
accounted for as a purchase. The excess of the purchase price over the estimated
fair value of identifiable assets was $17.7 million, which is included in
intangible assets in the accompanying condensed consolidated balance sheets and
is being amortized over 15 years.
Other:
On July 17, 1999, in accordance with the Company's Credit Facility,
total borrowing capacity under the Credit Facility decreased $100.0 million to
$650.0 million.
The Company enters into employment agreements with certain officers and
employees. These agreements generally specify base salary, along with bonuses
and grants of stock and/or stock options based on certain criteria. At November
30, 1999, 775,000 options to purchase stock have been granted in connection with
current employment agreements. Additionally, 80,200 shares and options to
purchase up to 83,750 shares of the Company's Class A common stock may be
granted over the next two years. The Company finalized negotiations on several
new employment contracts with key executives, including the Chief Executive
Officer, during the nine months ended November 30, 1999.
Note 3. Pro Forma Acquisitions
Unaudited pro forma summary information is presented below for the
three and nine months ended November 30, 1998 and 1999, assuming the June 1998
WQCD Acquisition, the July 1998 SF Acquisition, the October 1998 Wabash
Acquisition, the April 1999 Country Sampler Acquisition, the October 1999
WKCF-TV Acquisition, the November 1999 Votionis Acquisition and the use of
proceeds from the June 1998 Equity Offering, the July 1998 Credit Facility, the
February 1999 Senior Subordinated Notes Offering, the October 1999 Concurrent
Equity Offerings and the November
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<PAGE> 15
1999 Liberty Investment all had occurred on the first day of the pro forma
periods presented below.
Preparation of the pro forma summary information was based upon
assumptions deemed appropriate by the Company. The pro forma summary information
presented below is not necessarily indicative of the results that actually would
have occurred if the transactions indicated above had been consummated at the
beginning of the periods presented, and is not intended to be a projection of
future results.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended November 30, Ended November 30,
(Pro Forma) (Pro Forma)
--------------------------- ---------------------------
(Dollars in thousands, except per share data)
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues $ 86,890 $ 98,837 $ 242,078 $ 274,901
=========== =========== =========== ===========
Broadcast/publishing
cash flow $ 35,116 $ 42,446 $ 92,918 $ 114,374
=========== =========== =========== ===========
Net Income $ 7,275 $ 7,612 $ 14,618 $ 19,145
=========== =========== =========== ===========
Net income available to
common shareholders $ 5,029 $ 5,366 $ 7,880 $ 12,407
=========== =========== =========== ===========
Basic net income per
common share $ .23 $ .24 $ .35 $ .55
=========== =========== =========== ===========
Diluted net income per
common share $ .22 $ .23 $ .35 $ .54
=========== =========== =========== ===========
Weighted average shares outstanding:
Basic 22,346,123 22,749,816 22,327,719 22,607,713
Diluted 22,657,611 23,469,468 22,728,855 23,169,121
</TABLE>
Note 4. Basic and Diluted Net Income Per Share
Basic net income per common share is computed by dividing net income
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted net income per common share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted. Potentially dilutive securities at
November 30, 1998 consisted solely of stock options. Potentially dilutive
securities at November 30, 1999 consisted of stock options and the 6.25% Series
A cumulative convertible preferred stock. The 6.25% Series A cumulative
convertible preferred stock is not included in the calculation of diluted net
income per common share for the three and nine months ended November 30, 1999 as
the effect of their conversion to common stock would be antidilutive. Thus, for
the three and nine months ended November 30, 1998 and 1999, the difference
between the weighted-average
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<PAGE> 16
shares outstanding used to compute basic and diluted EPS is attributable to
dilution caused by stock options. Weighted average shares excluded from the
calculation of diluted net income per share that would result from the
conversion of the 6.25% Series A cumulative convertible preferred stock amounted
to approximately 0.6 million and 0.2 million for the three and nine months ended
November 30, 1999, respectively.
Note 5. Comprehensive Income
Comprehensive income was comprised of the following for the three and
nine months ended November 30, 1998 and 1999 (dollars in thousands):
Three Months Nine Months
Ended November 30, Ended November 30,
-------------------- --------------------
1998 1999 1998 1999
------- ------- ------- -------
Net income $ 3,012 $ 2,456 $ 7,364 $ 3,913
Translation adjustment (7) 13 (653) (843)
------- ------- ------- -------
Total comprehensive
income $ 3,005 $ 2,469 $ 6,711 $ 3,070
======= ======= ======= =======
Note 6. Segment Information
The Company's operations are aligned into three business segments:
Radio, Television and Publishing. These business segments are consistent with
the Company's management of these businesses and its financial reporting
structure.
The Radio and Television segments derive revenue from the sale of
commercial broadcast inventory. The Publishing segment derives revenue from
subscriptions and the sale of print advertising inventory.
Corporate and Other represents the results of insignificant operations
and income and expense not allocated to reportable segments.
The Company's segments operate primarily in the United States with one
radio station located in Hungary and two radio stations located in Argentina.
Total revenues of the radio station in Hungary for the three and nine months
ended November 30, 1999 were $2.0 million and $5.2 million, respectively.
Revenues of this radio station during the three and nine months ended November
30, 1998 were $0.9 million and $1.6 million, respectively. This station's total
assets as of November 30, 1998 and 1999 were $21.6 million and $17.3 million,
respectively. The operations of the radio stations in Argentina acquired on
November 1, 1999 were not material for the three and nine months ended November
30, 1999.
-16-
<PAGE> 17
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 a magazine,
and general and administrative costs.
The accounting policies as described in the summary of significant
accounting policies included in the Company's Annual Report filed on Form 10-K
for the year ended February 28, 1999, are applied consistently across segments.
<TABLE>
<CAPTION>
THREE MONTHS ENDED CORPORATE
NOVEMBER 30, 1999 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
- ----------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $ 51,747 $ 23,124 $ 15,921 $ 465 $ 91,257
Operating expenses 26,059 13,143 12,660 309 52,171
---------- ---------- ---------- ---------- ----------
Broadcast/publishing
cash flow 25,688 9,981 3,261 156 39,086
International business
development expenses - - - 301 301
Corporate expenses - - - 3,533 3,533
Depreciation and
amortization 4,808 4,492 1,864 853 12,017
Non-cash compensation - - - 2,306 2,306
---------- ---------- ---------- ---------- ----------
Operating income (loss) $ 20,880 $ 5,489 $ 1,397 $ (6,837) $ 20,929
========== ========== ========== ========== ==========
Total assets $ 483,705 $ 710,539 $ 68,230 $ 323,897 $1,586,371
========== ========== ========== ========== ==========
</TABLE>
-17-
<PAGE> 18
<TABLE>
<CAPTION>
NINE MONTHS ENDED CORPORATE
NOVEMBER 30, 1999 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
- ----------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $ 144,489 $ 58,170 $ 41,131 $ 1,348 $ 245,138
Operating expenses 72,825 36,880 34,633 955 145,293
---------- ---------- ---------- ---------- ----------
Broadcast/publishing
cash flow 71,664 21,290 6,498 393 99,845
International business
development expenses - - - 1,048 1,048
Corporate expenses - - - 10,217 10,217
Depreciation and
amortization 12,937 11,477 5,127 2,521 32,062
Non-cash compensation - - - 4,599 4,599
---------- ---------- ---------- ---------- ----------
Operating income (loss) $ 58,727 $ 9,813 $ 1,371 $ (17,992) $ 51,919
========== ========== ========== ========== ==========
Total assets $ 483,705 $ 710,539 $ 68,230 $ 323,897 $1,586,371
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED CORPORATE
NOVEMBER 30, 1998 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
- ----------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $ 43,049 $ 18,475 $ 9,728 $ 387 $ 71,639
Operating expenses 22,688 10,783 7,990 202 41,663
---------- ---------- ---------- ---------- ----------
Broadcast/publishing
cash flow 20,361 7,692 1,738 185 29,976
International business
development expenses - - - 413 413
Corporate expenses - - - 2,453 2,453
Depreciation and
amortization 4,068 2,959 1,138 518 8,683
Non-cash compensation - - - 342 342
---------- ---------- ---------- ---------- ----------
Operating income (loss) $ 16,293 $ 4,733 $ 600 $ (3,541) $ 18,085
========== ========== ========== ========== ==========
Total assets $ 458,227 $ 442,374 $ 43,689 $ 65,548 $1,009,838
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED CORPORATE
NOVEMBER 30, 1998 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
- ----------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $ 120,806 $ 24,271 $ 27,986 $ 1,069 $ 174,132
Operating expenses 63,563 14,629 23,688 641 102,521
---------- ---------- ---------- ---------- ----------
Broadcast/publishing
cash flow 57,243 9,642 4,298 428 71,611
International business
development expenses - - - 974 974
Corporate expenses - - - 6,379 6,379
Time brokerage fee 2,220 - - - 2,220
Depreciation and
amortization 10,023 4,291 3,698 583 18,595
Non-cash compensation - - - 2,378 2,378
---------- ---------- ---------- ---------- ----------
Operating income (loss) $ 45,000 $ 5,351 $ 600 $ (9,886) $ 41,065
========== ========== ========== ========== ==========
Total assets $ 458,227 $ 442,374 $ 43,689 $ 65,548 $1,009,838
========== ========== ========== ========== ==========
</TABLE>
-18-
<PAGE> 19
Note 7. Financial Information for Subsidiary Guarantors
and Subsidiary Non-Guarantors
Emmis conducts a significant portion of its business through
subsidiaries. The Senior Subordinated Notes are fully and unconditionally
guaranteed, jointly and severally, by certain direct and indirect subsidiaries
(the "Subsidiary Guarantors"). As of February 28, 1999, subsidiaries holding
Emmis' interest in its radio station in Hungary did not guarantee the Senior
Subordinated Notes. As of November 30, 1999, subsidiaries holding Emmis'
interest in its radio stations in Hungary and Argentina, as well as certain
other subsidiaries conducting joint ventures with third parties, did not
guarantee the Senior Subordinated Notes (the "Subsidiary Non-Guarantors"). The
claims of creditors of Emmis subsidiaries have priority over the rights of Emmis
to receive dividends or distributions from such subsidiaries.
Presented below is condensed consolidating financial information for
the Parent Company Only, the Subsidiary Guarantors and the Subsidiary
Non-Guarantors as of February 28, 1999 and November 30, 1999 and for the three
and nine months ended November 30, 1998 and 1999.
Emmis uses the equity method with respect to investments in
subsidiaries. Separate financial statements for Subsidiary Guarantors are not
presented based on management's determination that they do not provide
additional information that is material to investors.
-19-
<PAGE> 20
Emmis Communications Corporation
Condensed Consolidating Balance Sheet
As of November 30, 1999
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 229,908 $ 14,356 $ 710 $ - $ 244,974
Accounts receivable, net - 74,936 1,482 - 76,418
Prepaid expenses and other 2,622 23,845 268 - 26,735
----------- ----------- ----------- ----------- -----------
Total current assets 232,530 113,137 2,460 - 348,127
Property and equipment, net 38,688 84,406 4,838 - 127,932
Intangible assets, net 734 1,027,220 23,996 - 1,051,950
Investment in affiliates 1,133,825 - - (1,133,825) -
Other assets, net 40,738 21,510 629 (4,515) 58,362
----------- ----------- ----------- ----------- -----------
Total assets $ 1,446,515 $ 1,246,273 $ 31,923 $(1,138,340) $ 1,586,371
=========== =========== =========== =========== ===========
CURRENT LIABILITIES:
Current portion of other
long-term debt $ 34 $ 17 $ 2,237 $ (1,453) $ 835
Accounts payable 8,627 10,454 1,858 - 20,939
Accrued salaries and
commissions 299 6,385 - - 6,684
Accrued interest 6,192 84 - - 6,276
Deferred revenue - 14,855 - - 14,855
Current portion of TV
program rights payable - 10,259 - - 10,259
Income taxes payable 5,981 262 - - 6,243
Other 1,177 3,045 - - 4,222
----------- ----------- ----------- ----------- -----------
Total current liabilities 22,310 45,361 4,095 (1,453) 70,313
CREDIT FACILITY AND SENIOR
SUBORDINATED NOTES 550,000 - - - 550,000
TV PROGRAM RIGHTS PAYABLE,
NET OF CURRENT PORTION - 68,349 - - 68,349
OTHER LONG-TERM DEBT, NET OF
CURRENT PORTION 41 727 21,940 (3,062) 19,646
OTHER NONCURRENT LIABILITIES - 5,390 - - 5,390
DEFERRED INCOME TAXES 96,374 - - - 96,374
----------- ----------- ----------- ----------- -----------
Total liabilities 668,725 119,827 26,035 (4,515) 810,072
----------- ----------- ----------- ----------- -----------
Shareholders' Equity
6.25% Series A cumulative
convertible preferred stock 29 - - - 29
Class A common stock 205 - - - 205
Class B common stock 24 - - - 24
Additional paid-in capital 798,723 - 4,393 (4,393) 798,723
Subsidiary investment - 861,785 13,253 (875,038) -
Retained earnings /
(accumulated deficit) (21,191) 264,661 (10,267) (254,394) (21,191)
Accumulated other
comprehensive loss - - (1,491) - (1,491)
----------- ----------- ----------- ----------- -----------
Total shareholders' equity 777,790 1,126,446 5,888 (1,133,825) 776,299
----------- ----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity $ 1,446,515 $ 1,246,273 $ 31,923 $(1,138,340) $ 1,586,371
=========== =========== =========== =========== ===========
</TABLE>
-20-
<PAGE> 21
Emmis Communications Corporation
Condensed Consolidating Balance Sheet
As of February 28, 1999
(Note 1, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,286 $ 3,146 $ 685 $ - $ 6,117
Accounts receivable, net - 50,436 1,043 - 51,479
Prepaid expenses and other 5,720 7,694 72 - 13,486
----------- ----------- ----------- ----------- -----------
Total current assets 8,006 61,276 1,800 - 71,082
Property and equipment, net 33,769 71,342 949 - 106,060
Intangible assets, net 151 785,219 16,937 - 802,307
Investment in affiliates 856,701 - - (856,701) -
Other assets, net 31,866 7,648 702 (4,834) 35,382
----------- ----------- ----------- ----------- -----------
Total assets $ 930,493 $ 925,485 $ 20,388 $ (861,535) $ 1,014,831
=========== =========== =========== =========== ===========
CURRENT LIABILITIES:
Current portion of other
long-term debt $ 34 $ 16 $ 2,239 $ (1,454) $ 835
Accounts payable 7,527 7,739 369 - 15,635
Accrued salaries and
commissions 1,262 2,719 564 - 4,545
Accrued interest 6,222 1 - - 6,223
Deferred revenue - 7,238 - - 7,238
Current portion of TV program
rights payable - 9,471 - - 9,471
Income taxes payable 11,790 267 - - 12,057
Other 146 13,683 - - 13,829
----------- ----------- ----------- ----------- -----------
Total current liabilities 26,981 41,134 3,172 (1,454) 69,833
CREDIT FACILITY AND SENIOR
SUBORDINATED NOTES 577,000 - - - 577,000
TV PROGRAM RIGHTS PAYABLE, NET
OF CURRENT PORTION - 25,161 - - 25,161
OTHER LONG-TERM DEBT, NET OF
CURRENT PORTION 2,543 (45) 19,687 (3,380) 18,805
OTHER NONCURRENT LIABILITIES (4) 3,470 - - 3,466
DEFERRED INCOME TAXES 87,776 (2,759) - - 85,017
----------- ----------- ----------- ----------- -----------
Total liabilities 694,296 66,961 22,859 (4,834) 779,282
----------- ----------- ----------- ----------- -----------
Shareholders' Equity
Class A common stock 132 - - - 132
Class B common stock 26 - - - 26
Additional paid-in capital 260,344 - 4,297 (4,297) 260,344
Subsidiary investment - 637,223 - (637,223) -
Retained earnings /
(accumulated deficit) (24,305) 221,301 (6,120) (215,181) (24,305)
Accumulated other
comprehensive loss - - (648) - (648)
----------- ----------- ----------- ----------- -----------
Total shareholders' equity 236,197 858,524 (2,471) (856,701) 235,549
----------- ----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity $ 930,493 $ 925,485 $ 20,388 $ (861,535) $ 1,014,831
=========== =========== =========== =========== ===========
</TABLE>
-21-
<PAGE> 22
Emmis Communications Corporation
Condensed Consolidating Statement of Operations
For the Three Months Ended November 30, 1999
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 465 $ 88,798 $ 1,994 $ - $ 91,257
Operating expenses 309 50,404 1,458 - 52,171
International business - 301 - - 301
development expenses
Corporate expenses 3,533 - - - 3,533
Depreciation and amortization 853 10,436 728 - 12,017
Non-cash compensation 1,729 577 - - 2,306
-------- -------- -------- -------- --------
OPERATING INCOME (5,959) 27,080 (192) - 20,929
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (13,020) (348) (864) 192 (14,040)
Other income (expense), net 1,377 (389) 34 15 1,037
-------- -------- -------- -------- --------
Total other income (expense) (11,643) (737) (830) 207 (13,003)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (17,602) 26,343 (1,022) 207 7,926
PROVISION (BENEFIT) FOR INCOME
TAXES (4,277) 9,747 - - 5,470
-------- -------- -------- -------- --------
(13,325) 16,596 (1,022) 207 2,456
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARIES 15,781 - - (15,781) -
-------- -------- -------- -------- --------
NET INCOME (LOSS) 2,456 16,596 (1,022) (15,574) 2,456
PREFERRED STOCK DIVIDENDS 799 - - - 799
-------- -------- -------- -------- --------
NET INCOME (LOSS) AVAILABLE TO
COMMON SHAREHOLDERS $ 1,657 $ 16,596 $ (1,022) $(15,574) $ 1,657
======== ======== ======== ======== ========
</TABLE>
-22-
<PAGE> 23
Emmis Communications Corporation
Condensed Consolidating Statement of Operations
For the Nine Months Ended November 30, 1999
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 1,348 $ 238,622 $ 5,168 $ - $ 245,138
Operating expenses 955 140,187 4,151 - 145,293
International business - 1,048 - - 1,048
development expenses
Corporate expenses 10,217 - - - 10,217
Depreciation and amortization 2,521 27,363 2,178 - 32,062
Non-cash compensation 3,449 1,150 - - 4,599
--------- --------- --------- --------- ---------
OPERATING INCOME (15,794) 68,874 (1,161) - 51,919
--------- --------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (39,027) (83) (2,670) 575 (41,205)
Other income (expense), net 1,393 35 (316) 1,157 2,269
--------- --------- --------- --------- ---------
Total other income (expense) (37,634) (48) (2,986) 1,732 (38,936)
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (53,428) 68,826 (4,147) 1,732 12,983
PROVISION (BENEFIT) FOR INCOME
TAXES (16,396) 25,466 - - 9,070
--------- --------- --------- --------- ---------
(37,032) 43,360 (4,147) 1,732 3,913
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARIES 40,945 - - (40,945) -
--------- --------- --------- --------- ---------
NET INCOME (LOSS) 3,913 43,360 (4,147) (39,213) 3,913
PREFERRED STOCK DIVIDENDS 799 - - - 799
--------- --------- --------- --------- ---------
NET INCOME (LOSS) AVAILABLE TO
COMMON SHAREHOLDERS $ 3,114 $ 43,360 $ (4,147) $ (39,213) $ 3,114
========= ========= ========= ========= =========
</TABLE>
-23-
<PAGE> 24
Emmis Communications Corporation
Condensed Consolidating Statement of Operations
For the Three Months Ended November 30, 1998
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 387 $ 70,349 $ 903 $ - $ 71,639
Operating expenses 202 40,477 984 - 41,663
International business
development expenses - 413 - - 413
Corporate expenses 2,453 - - - 2,453
Time brokerage fees - - - - -
Depreciation and amortization 52 7,863 768 - 8,683
Non-cash compensation 273 69 - - 342
-------- -------- -------- -------- --------
OPERATING INCOME (2,593) 21,527 (849) - 18,085
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (12,290) (40) (563) 580 (12,313)
Other income (expense), net 19,005 (17,543) 308 (580) 1,190
-------- -------- -------- -------- --------
Total other income (expense) 6,715 (17,583) (255) - (11,123)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 4,122 3,944 (1,104) - 6,962
PROVISION (BENEFIT) FOR INCOME
TAXES 2,491 1,459 - - 3,950
-------- -------- -------- -------- --------
1,631 2,485 (1,104) - 3,012
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARIES 1,381 - - (1,381) -
-------- -------- -------- -------- --------
NET INCOME (LOSS) $ 3,012 $ 2,485 $ (1,104) $ (1,381) $ 3,012
======== ======== ======== ======== ========
</TABLE>
-24-
<PAGE> 25
Emmis Communications Corporation
Condensed Consolidating Statement of Operations
For the Nine Months Ended November 30, 1998
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 1,069 $ 171,484 $ 1,579 $ - $ 174,132
Operating expenses 641 99,029 2,851 - 102,521
International business - 974 - - 974
development expenses
Corporate expenses 6,379 - - - 6,379
Time brokerage fees - 2,220 - - 2,220
Depreciation and amortization 117 16,434 2,044 - 18,595
Non-cash compensation 1,902 476 - - 2,378
--------- --------- --------- --------- ---------
OPERATING INCOME (7,970) 52,351 (3,316) - 41,065
--------- --------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (23,560) (46) (2,476) 1,140 (24,942)
Other income (expense), net 19,478 (16,279) 254 735 4,188
--------- --------- --------- --------- ---------
Total other income (expense) (4,082) (16,325) (2,222) 1,875 (20,754)
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (12,052) 36,026 (5,538) 1,875 20,311
PROVISION (BENEFIT) FOR INCOME
TAXES (1,980) 13,330 - - 11,350
--------- --------- --------- --------- ---------
NET INCOME BEFORE EXTRAORDINARY
ITEM (10,072) 22,696 (5,538) 1,875 8,961
--------- --------- --------- --------- ---------
EXTRAORDINARY LOSS, NET OF TAX
BENEFIT (1,597) - - - (1,597)
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARIES 19,033 - - (19,033) -
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 7,364 $ 22,696 $ (5,538) $ (17,158) $ 7,364
========= ========= ========= ========= =========
</TABLE>
-25-
<PAGE> 26
Emmis Communications Corporation
Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended November 30, 1999
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 3,913 $ 43,360 $ (4,147) $ (39,213) $ 3,913
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities -
Depreciation and amortization 4,361 31,833 2,178 - 38,372
Provision for bad debts - 1,592 - - 1,592
Provision for
deferred income taxes 5,529 - - - 5,529
Non-cash compensation 3,449 1,150 - - 4,599
Equity in earnings of
subsidiaries (40,945) - - 40,945 -
Other 1,713 - (843) (1,732) (862)
Changes in assets and
liabilities -
Accounts receivable - (23,911) (439) - (24,350)
Prepaid expenses and other
current assets 3,098 (15,768) (196) - (12,866)
Other assets (7,444) 5,256 73 - (2,115)
Accounts payable and accrued
liabilities 107 5,375 925 - 6,407
Deferred revenue - 3,748 - - 3,748
Other liabilities (5,696) (19,493) 453 - (24,736)
--------- --------- --------- --------- ---------
Net cash provided (used) by
operating activities (31,915) 33,142 (1,996) - (769)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (7,316) (17,719) (42) - (25,077)
Acquisition of Country Sampler - (18,954) - - (18,954)
Acquisition of WKCF-TV - (197,105) - - (197,105)
Acquisition of Votionis, S.A - - (12,800) - (12,800)
Deposits on acquisitions
and other (5,000) (6,500) - - (11,500)
--------- --------- --------- --------- ---------
Net cash used in investing
activities (12,316) (240,278) (12,842) - (265,436)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on long-term debt (156,668) - - - (156,668)
Proceeds from long-term debt 129,668 - - - 129,668
Proceeds from issuance of
Class A common stock, net of
transaction costs 238,328 - - - 238,328
Proceeds from issuance of
Series A cumulative
convertible preferred stock,
net of transaction costs 138,454 - - - 138,454
Proceeds from sale of Class A
common stock to Liberty Media
Corporation, net of
transaction costs 145,287 - - - 145,287
Intercompany transactions (233,209) 218,346 14,863 - -
Proceeds from exercise of
stock options 9,993 - - - 9,993
--------- --------- --------- --------- ---------
Net cash provided by
financing activities 271,853 218,346 14,863 - 505,062
--------- --------- --------- --------- ---------
INCREASE IN CASH AND
CASH EQUIVALENTS 227,622 11,210 25 - 238,857
CASH AND CASH EQUIVALENTS:
Beginning of period 2,286 3,146 685 - 6,117
--------- --------- --------- --------- ---------
End of period $ 229,908 $ 14,356 $ 710 $ - $ 244,974
========= ========= ========= ========= =========
</TABLE>
-26-
<PAGE> 27
Emmis Communications Corporation
Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended November 30, 1998
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 7,364 $ 22,696 $ (5,538) $ (17,158) $ 7,364
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities -
Extraordinary item 1,597 - - - 1,597
Depreciation and amortization 1,027 18,445 2,044 - 21,516
Provision for bad debts - 1,013 - - 1,013
Provision for deferred income
taxes 4,247 - - - 4,247
Non-cash compensation 1,902 476 - - 2,378
Equity in earnings of
subsidiaries (19,033) - - 19,033 -
Other - (337) (818) (1,875) (3,030)
Changes in assets and
liabilities -
Accounts receivable 345 (26,474) 679 - (25,450)
Prepaid expenses and other
current assets (11,527) 7,626 (230) - (4,131)
Other assets (575) 3,382 1,029 - 3,836
Accounts payable and accrued
liabilities 6,246 45 931 - 7,222
Deferred revenue - (991) - - (991)
Other liabilities 8,076 6,762 (697) - 14,141
--------- --------- --------- --------- ---------
Net cash provided (used) by
operating activities (331) 32,643 (2,600) - 29,712
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (19,925) (5,809) (490) - (26,224)
Acquisition of Wabash Valley
Broadcasting - (88,905) - - (88,905)
Acquisition of WQCD-FM - (128,449) - - (128,449)
Acquisition of SF Broadcasting - (287,293) - - (287,293)
Other - 607 - - 607
--------- --------- --------- --------- ---------
Net cash used by investing
activities (19,925) (509,849) (490) - (530,264)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on long-term debt (410,157) - - - (410,157)
Proceeds from long-term debt 733,500 - - - 733,500
Purchase of interest rate cap
agreements and other debt
related costs (8,912) - - - (8,912)
Proceeds from issuance of
Class A common stock, net of
transaction costs 182,640 - - - 182,640
Proceeds from exercise of
stock options 3,016 - - - 3,016
Intercompany (477,697) 477,544 153 - -
--------- --------- --------- --------- ---------
Net cash provided by
financing activities 22,390 477,544 153 - 500,087
--------- --------- --------- --------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,134 338 (2,937) - (465)
CASH AND CASH EQUIVALENTS:
Beginning of period 623 243 4,919 - 5,785
--------- --------- --------- --------- ---------
End of period $ 2,757 $ 581 $ 1,982 $ - $ 5,320
========= ========= ========= ========= =========
</TABLE>
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<PAGE> 28
Note 8. Subsequent Events
On December 16, 1999, the Company purchased substantially all of the
assets of Country Marketplace from H&S Media, Inc. for approximately $2.0
million in cash plus assumed liabilities of approximately $.4 million. The
acquisition will be accounted for as a purchase.
On December 21, 1999, the Company announced a 2-for-1 split of its
Class A and Class B common stock, subject to shareholder approval of an increase
in the number of authorized shares. The split is not expected to take effect
until late February.
On December 31, 1999, the Company donated radio station WTHI-AM in
Terre Haute, Indiana to a not-for-profit organization. In connection with the
donation, the Company will record a loss of approximately $0.3 million in the
quarter ended February 28, 2000, which represents the net book value of the
station at the date of the donation.
Note 9. Reclassifications
Certain reclassifications have been made to the November 30, 1998 and
February 28, 1999 financial statements to be consistent with the November 30,
1999 presentation. The reclassifications have no impact on net income previously
reported.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Note: Certain statements in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such risks may include decreased advertising
expenditures, competitive nature of broadcasting, substantial leverage, Federal
regulation and future capital cost of digital conversion, among others.
GENERAL
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
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<PAGE> 29
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 a magazine,
and general and administrative costs.
The Company's results are subject to seasonal fluctuations. Therefore,
results shown on a quarterly basis are not necessarily indicative of results for
a full year.
RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED NOVEMBER 30, 1999 COMPARED TO
NOVEMBER 30, 1998
Net revenues for the three months ended November 30, 1999 were $91.3
million compared to $71.6 million for the same period of the prior year, an
increase of $19.7 million or 27.4%. Net revenues for the nine months ended
November 30, 1999 were $245.1 million compared to $174.1 million for the same
period of the prior year, an increase of $71.0 million or 40.8%. The increase in
net revenues for the three and nine-month periods ended November 30, 1999 is
primarily the result of the SF, Wabash and WKCF Acquisitions (the "TV
Acquisitions")($5.2 million and $29.4 million, respectively) and Country Sampler
Acquisition ($4.6 million and $10.1 million, respectively). Excluding these
transactions, net revenues for the three months ended November 30, 1999 would
have increased $9.9 million or 18.6% and net revenues for the nine months ended
November 30, 1999 would have increased $31.5 million or 20.8%. Included in this
increase is a decrease in political advertising revenue at our television
stations as 1999 was not a significant year for political campaigns. The
remaining increase in net revenues is due to the ability to realize higher
advertising rates at certain broadcasting properties, resulting from higher
ratings at certain broadcasting properties, increases in general radio spending
in the markets in which the Company operates, the ability to sell more
advertising in our publications and an increase in single copy newsstand sales.
Operating expenses for the three months ended November 30, 1999 were
$52.2 million compared to $41.7 million for the same period of the prior year,
an increase of $10.5 million or 25.2%. Operating expenses for the nine months
ended November 30, 1999 were $145.3 million compared
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<PAGE> 30
to $102.5 million for the same period of the prior year, an increase of $42.8
million or 41.7%. The increase in operating expenses for the three and
nine-month periods ended November 30, 1999 is primarily the result of the TV
Acquisitions ($4.3 million and $21.1 million, respectively) and Country Sampler
Acquisition ($3.2 million and $7.9 million, respectively). Excluding these
transactions, operating expenses for the three months ended November 30, 1999
would have increased $3.0 million or 9.2% and operating expenses for the nine
months ended November 30, 1999 would have increased $13.8 million or 15.4%. This
increase is principally due to higher advertising and promotional spending at
certain of the Company's properties as well as an increase in sales related
costs.
Broadcast/publishing cash flow for the three months ended November 30,
1999 was $39.1 million compared to $30.0 million for the same period of the
prior year, an increase of $9.1 million or 30.4%. Broadcast/publishing cash flow
for the nine months ended November 30, 1999 was $99.8 million compared to $71.6
million for the same period of the prior year, an increase of $28.2 million or
39.4%. The increase in broadcast/publishing cash flow for the three and
nine-month periods ended November 30, 1999 is primarily the result of the TV
Acquisitions ($.8 million and $8.4 million, respectively) and Country Sampler
Acquisition ($1.4 million and $2.2 million, respectively). Excluding these
transactions, broadcast/publishing cash flow for the three months ended November
30, 1999 would have increased $6.9 million or 33.2% and broadcast/publishing
cash flow for the nine months ended November 30, 1999 would have increased $17.6
million or 28.6%. This increase is principally due to increased net revenues
partially offset by increased operating expenses as discussed above.
International business development expenses for the three months ended
November 30, 1999 were $.3 million compared to $.4 million for the same period
of the prior year. International business development expenses for the nine
months ended November 30, 1999 and 1998 were $1.0 million. 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.
Corporate expenses for the three months ended November 30, 1999 were
$3.5 million compared to $2.5 million for the same period of the prior year, an
increase of $1.0 million or 44.0%. Corporate expenses for the nine months ended
November 30, 1999 were $10.2 million compared to $6.4 million for the same
period of the prior year, an increase of $3.8 million or 60.2%. These increases
are due to an increase in the number of corporate employees in all departments
as a result of the growth of the Company.
EBITDA before certain charges is defined as broadcast/publishing cash
flow less corporate and international business development expenses. EBITDA
before certain charges for the three months ended November 30, 1999 was $35.3
million compared to $27.1 million for the same period of the prior year, an
increase of $8.2 million or 30.0%. EBITDA before certain charges for the nine
months ended November 30, 1999 was $88.6 million compared to $64.3 million for
the same period of
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<PAGE> 31
the prior year, an increase of $24.3 million or 37.9%. This increase is
principally due to an increase in broadcast/publishing cash flow partially
offset by an increase in corporate expenses.
Depreciation and amortization expense for the three months ended
November 30, 1999 was $12.0 million compared to $8.7 million for the same period
of the prior year, an increase of $3.3 million or 38.4%. Depreciation and
amortization expense for the nine months ended November 30, 1999 was $32.1
million compared to $18.6 million for the same period of the prior year, an
increase of $13.5 million or 72.4%. The increase in depreciation and
amortization expense for the three and nine-month periods ended November 30,
1999 is primarily the result of the TV Acquisitions ($1.6 million and $6.3
million, respectively), WQCD Acquisition, which was previously operated under a
time brokerage agreement, ($.3 million and $2.1 million, respectively) and
Country Sampler Acquisition ($.6 million and $1.6 million, respectively).
Non-cash compensation expense for the three months ended November 30,
1999 was $2.3 million compared to $.3 million for the same period of the prior
year, an increase of $2.0 million or 574.3%. Non-cash compensation expense for
the nine months ended November 30, 1999 was $4.6 million compared to $2.4
million for the same period of the prior year, an increase of $2.2 million or
93.4%. Non-cash 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 increase was
due to shares granted to certain executives under employment agreements for
which the fair market value of the shares at the date of grant was higher than
the fair market value of shares granted under previous employment agreements
coupled with appreciation in the Company's stock price.
Interest expense for the three months ended November 30, 1999 was $14.0
million compared to $12.3 million for the same period of the prior year, an
increase of $1.7 million or 14.0%. Interest expense for the nine months ended
November 30, 1999 was $41.2 million compared to $24.9 million for the same
period of the prior year, an increase of $16.3 million or 65.2%. This increase
reflects higher outstanding debt due to the TV Acquisitions, WQCD Acquisition
and Country Sampler Acquisition and an increase in interest rates offset by a
reduction in interest expense resulting from the paydown of debt with the
proceeds of the Concurrent Equity Offerings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash provided by
operations and availability under the Credit Facility. At November 30, 1999, the
Company had cash and cash equivalents of $245.0 million, net working capital of
$277.8 million and $400.0 million available under the Credit Facility. The
Company intends to use its cash and cash equivalents to repay outstanding term
loans under the Credit Facility. If the Company were to repay the term loans,
total borrowing capacity under the Credit Facility would be reduced from $650.0
million to $400.0 million. The Company expects that cash flow from operating
activities will be sufficient to fund all debt service for debt existing at
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<PAGE> 32
November 30, 1999, working capital and capital expenditure requirements. In
addition, the Company also has access to public equity and debt markets.
In June 1999, the Company entered into an agreement with a former
executive of Sinclair Broadcasting Group, Inc. ("Sinclair") to purchase the
right to acquire the assets of certain broadcast properties in St. Louis,
Missouri (the "St. Louis Acquisition"). The right was exercised and allows the
Company to purchase, at fair market value, six radio stations (five FM and one
AM) and one ABC-affiliated television station from Sinclair. In November
1999,through completion of an appraisal process, the purchase price of the St.
Louis Acquisition was determined to be $366.5 million. The Company and Sinclair
are currently in the process of determining other material terms of the
acquisition in accordance with the option agreement. The St. Louis Acquisition
will be accounted for as a purchase and will be financed through available cash,
additional debt or equity securities, depending on market conditions and other
factors. Under FCC regulations, concurrent with the consummation of the St.
Louis Acquisition, Emmis will have to divest three FM stations. Management
intends to divest the stations in the St. Louis market with the three weakest
transmitting signals.
On December 16, 1999, the Company purchased substantially all of the
assets of Country Marketplace from H&S Media, Inc. for approximately $2.0
million in cash plus assumed liabilities of approximately $.4 million. The
acquisition will be accounted for as a purchase.
On December 21, 1999, the Company announced a 2-for-1 split of its
Class A and Class B common stock, subject to shareholder approval of an increase
in the number of authorized shares. The split is not expected to take effect
until late February.
The Company has signed an agreement to purchase the outstanding common
stock of one FM radio station and one AM radio station in Buenos Aires,
Argentina. This will bring the Company's total radio holdings in Buenos Aires to
four radio stations (two FM stations and two AM stations). Emmis expects that
this acquisition will have an aggregate purchase price of approximately $10
million.
Capital expenditures incurred for the nine months ended November 30,
1999 were approximately $25.1 million, including $15.3 million at KHON-TV in
Hawaii for the construction of new operating facilities.
As part of its business strategy, the Company continually evaluates
potential acquisitions of radio and television stations as well as publishing
properties. In connection with future acquisition opportunities, the Company may
incur additional debt or issue additional equity or debt securities depending on
market conditions and other factors.
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<PAGE> 33
YEAR 2000
Emmis has not experienced significant problems related to systems
properly recognizing date sensitive information as a result of the year 2000.
However, if Emmis were to experience such problems in the future, Emmis could
implement temporary solutions or processes not involving the malfunctioning
equipment. Contingency plans have been documented in the event Emmis must
implement such temporary solutions. Emmis completed its assessment of year 2000
compliance for information technology, other equipment, including broadcast
equipment, and embedded technology in October 1999. Emmis began tracking costs
relating to year 2000 compliance in May 1999. Emmis estimates that the total
cost of year 2000 remediation efforts were less than $1.0 million, which was
funded from operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management monitors and evaluates changes in market conditions on a
regular basis. Based upon the most recent review, management has determined that
there have been no material developments affecting market risk since the filing
of the Company's Annual Report on Form 10-K for the year ended February 28,
1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Discussion regarding these items is included in management's discussion
and analysis of financial condition and results of operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising in the
ordinary course of business. In the opinion of management of the Company,
however, there are no legal proceedings pending against the Company likely to
have a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
SALE OF UNREGISTERED SECURITIES. On November 18, 1999, the Company sold
2.7 million shares of its Class A Common Stock to Liberty EMMS, Inc., a wholly
owned subsidiary of Liberty Media Corporation, for proceeds of $148,500,000.
There were no discounts or commissions. The sale was effected pursuant to the
exemption from registration in Section 4(2) of the Securities Act of 1933, as
amended. The purchaser of the shares is a sophisticated institutional investor
with substantial assets and experience in the communications industry, and the
sale of the shares was privately negotiated without any form of public offering.
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<PAGE> 34
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following exhibits are filed or incorporated by reference as a
part of this report:
3.1 Amended and Restated Articles of Incorporation of Emmis
Communications Corporation, incorporated by reference from
Exhibit 3.1 to the Company's Form 10-Q for the period ended
August 31, 1999, as amended by an amendment incorporated by
reference from Exhibit 3 to Form 8-K filed by the Company on
November 3, 1999. *
3.2 Amended and Restated Bylaws of Emmis Communications
Corporation, incorporated by reference from Exhibit 3.2 to the
Company's Form 10-Q for the period ended August 31, 1999. *
10.1 Stock Purchase Agreement dated October 25, 1999 by and between
Liberty Media Corporation and Emmis Communications Corporation
with Registration Rights Agreement as Exhibit A thereto (Edgar
version only)
10.2 Employment Agreement, effective March 1, 1999, between the
Company and Jeffrey H. Smulyan (Edgar version only)
15 Letter re: unaudited interim financial information
27 Financial data schedule (Edgar version only)
* Previously submitted
(b) Reports on Form 8-K
On November 3, 1999, the Company filed a Form 8-K that included
underwriting agreements dated October 26, 1999 for the common and
preferred stock sales that were completed during the three months
ended November 30, 1999, and an amendment to the Company's Articles
of Incorporation for the 6.25% Series A cumulative convertible
preferred stock.
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<PAGE> 35
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EMMIS COMMUNICATIONS CORPORATION
Date: January 14, 2000 By: /s/ WALTER Z. BERGER
Walter Z. Berger
Executive Vice President
(Authorized Corporate
Officer), Chief Financial
Officer and Treasurer
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<PAGE> 1
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BETWEEN
LIBERTY MEDIA CORPORATION
AND
EMMIS COMMUNICATIONS CORPORATION
DATED AS OF OCTOBER 25, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I
PURCHASE AND SALE OF SHARES
<S> <C>
SECTION 1.01 Purchase and Sale...............................5
SECTION 1.02 Payment of Purchase Price.......................5
SECTION 1.03 Closing.........................................5
SECTION 1.04 Deliveries by Emmis.............................6
SECTION 1.05 Deliveries by Liberty...........................6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EMMIS
SECTION 2.01 Brokers or Finders..............................6
SECTION 2.02 Disclosure......................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LIBERTY
SECTION 3.01 Authorization and Validity of Agreement........14
SECTION 3.02 No Conflict with Instruments...................14
SECTION 3.03 Brokers or Finders.............................15
SECTION 3.04 Investment Purpose.............................15
ARTICLE IV
TRANSACTIONS PRIOR TO CLOSING
SECTION 4.01 Interim Conduct of Business....................16
SECTION 4.02 Access to Information Concerning
Properties and Records.........................17
SECTION 4.03 Public Announcements...........................17
SECTION 4.04 Reasonable Efforts.............................17
</TABLE>
2
<PAGE> 3
<TABLE>
ARTICLE V
CONDITIONS PRECEDENT
<S> <C>
SECTION 5.01 Conditions Precedent to the
Obligations of Liberty and Emmis...............18
SECTION 5.02 Conditions Precedent to the
Obligations of Liberty ........................19
SECTION 5.03 Conditions Precedent to the
Obligations of Emmis...........................20
ARTICLE VI
TERMINATION
SECTION 6.01 Termination and Abandonment....................21
SECTION 6.02 Effect of Termination..........................21
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Survival.......................................22
SECTION 7.02 Indemnification Relating to the
Agreement......................................22
SECTION 7.03 Indemnification Procedures.....................23
SECTION 7.04 Remedies Cumulative............................25
ARTICLE VIII
POST-CLOSING COVENANTS
SECTION 8.01 Ownership Attribution..........................26
SECTION 8.02 Lockup.........................................28
SECTION 8.03 Preemptive rights..............................28
SECTION 8.04 Urban Stations.................................30
SECTION 8.05 Strategic Alliance.............................31
SECTION 8.06 Potential Future Venture.......................31
</TABLE>
3
<PAGE> 4
<TABLE>
ARTICLE IX
MISCELLANEOUS
<S> <C>
SECTION 9.01 Further Assurances.............................32
SECTION 9.02 Expenses.......................................32
SECTION 9.03 Notices........................................32
SECTION 9.04 Entire Agreement...............................33
SECTION 9.05 Assignment; Binding Effect; Benefit............34
SECTION 9.06 Amendment......................................34
SECTION 9.07 Extension; Waiver..............................34
SECTION 9.08 Interpretation.................................35
SECTION 9.09 Counterparts...................................35
SECTION 9.10 Applicable Law.................................35
SECTION 9.11 Definition of "Subsidiary".....................35
</TABLE>
4
<PAGE> 5
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of October 25, 1999, by and between
LIBERTY MEDIA CORPORATION, a Delaware corporation ("Liberty") and EMMIS
COMMUNICATIONS CORPORATION, an Indiana corporation ("Emmis").
RECITALS
WHEREAS, Liberty desires to acquire, and Emmis desires to issue and
sell to Liberty, 2,700,000 shares (the "Purchased Shares") of Emmis' Class A
Common Stock, par value $.01 per share ("Class A Common Stock"), for the
consideration and upon the terms and conditions set forth in this Agreement;
WHEREAS, the parties hereto desire to enter into the other agreements
and arrangements described herein.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
SECTION 1.01 Purchase and Sale. On the terms and subject to the conditions set
forth in this Agreement, on the Closing Date (as defined in Section 1.03) Emmis
shall sell, issue and deliver to Liberty two million seven hundred thousand
(2,700,000) shares of Class A Common Stock for a total purchase price of
$148,500,000 (the "Purchase Price").
SECTION 1.02 Payment of Purchase Price. On the terms and subject to the
conditions set forth in this Agreement, on the Closing Date, in consideration
for the sale, issuance and delivery of the Purchased Shares, Liberty shall pay
the Purchase Price to Emmis by wire transfer of immediately available funds to
an account designated by Emmis in writing to Liberty at least two days prior to
the Closing Date.
SECTION 1.03 Closing. Subject to the provisions of Articles V and VI, the
closing (the "Closing") of the transactions contemplated by this Agreement shall
take place (i) at the offices of Baker & Botts, L.L.P., 599 Lexington Avenue,
New York, NY 10022, as promptly as practicable following the date the last of
the conditions set forth in Article V is satisfied or, if permissible, waived,
or (ii) at such
5
<PAGE> 6
time, or at such other place or time as Liberty and Emmis may mutually agree
(the date and time of the Closing being herein referred to as the "Closing
Date").
SECTION 1.04 Deliveries by Emmis. At the Closing, Emmis will deliver or cause
to be delivered to Liberty the following:
(a) The opinions, certificates and other documents contemplated by Section
5.02;
(b) A stock certificate representing the Purchased Shares, with all
necessary stock issuance or transfer stamps affixed thereto, duly
completed and registered in the name of Liberty, or its permitted
assignee under Section 9.05, on the stock transfer books of Emmis; and
(c) A duly executed registration rights agreement of Emmis, in
substantially the form set forth as Exhibit A hereto (the
"Registration Rights Agreement").
SECTION 1.05 Deliveries by Liberty. At the Closing, Liberty will deliver or
cause to be delivered to Emmis the following:
(a) The Purchase Price, in accordance with Section 1.02; and
(b) A duly executed Registration Rights Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EMMIS
Emmis hereby represents and warrants to Liberty as follows:
SECTION 2.01 Brokers or Finders. Except for Donaldson, Lufkin & Jenrette whose
fees shall be paid entirely by Emmis, no agent, broker, investment banker,
financial advisor or other person or entity is or will be entitled, by reason of
any agreement, act or statement by Emmis or any of its Subsidiaries, directors,
officers, employees or affiliates, to any financial advisory, broker's, finder's
or similar fee or commission, to reimbursement of expenses or to indemnification
or contribution in connection with any of the transactions contemplated by this
Agreement, and Emmis agrees to indemnify and hold Liberty and each of its
Subsidiaries and affiliates harmless from and against any and all claims,
liabilities or obligations with respect to any such fees, commissions, expenses
or claims for indemnification or contribution asserted by any person on the
basis of any act or statement made by Emmis or any of its Subsidiaries,
directors, officers, employees or affiliates.
6
<PAGE> 7
SECTION 2.02 Disclosure. All facts relating to the assets, business,
operations, financial condition and prospects (as such prospects relate to Emmis
and its Subsidiaries, not to business conditions in the radio or television
broadcast industries generally) of Emmis and its Subsidiaries necessary for a
reasonably prudent investor to make an investment decision with respect to the
acquisition of the Purchased Shares contemplated hereby have been disclosed to
Liberty. Neither this Agreement, nor any other agreement, document, certificate
or other written instrument delivered pursuant hereto, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements herein and therein, when taken
together, not misleading.
SECTION 2.03 Each of Emmis and its Subsidiaries (as defined in Section 8.11) has
been duly incorporated or organized, is validly existing as a corporation,
partnership or limited liability company in good standing under the laws of its
jurisdiction of incorporation or organization and has the corporate, partnership
or limited liability company power and authority to carry on its business as
described in the prospectus (the "PROSPECTUS") contained in the registration
statement on Form S-3 (file no. 333-88219) filed by Emmis (the "REGISTRATION
STATEMENT") and to own, lease and operate its properties, and each is duly
qualified and is in good standing as a foreign corporation, partnership or
limited liability company authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified would
not have a material adverse effect on the business, prospects, financial
condition or results of operations of Emmis and its Subsidiaries, taken as a
whole (a "MATERIAL ADVERSE EFFECT").
SECTION 2.04 The entities listed on Schedule I are the only Subsidiaries, direct
or indirect, of Emmis. All of the outstanding equity interests of each of Emmis'
Subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable and, except as set forth on Schedule I hereto, are owned by
Emmis, directly or indirectly through one or more Subsidiaries, free and clear
of any security interest, claim, lien, encumbrance, or adverse interest of any
nature (each, a "LIEN").
SECTION 2.05 There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
Emmis or any of its Subsidiaries relating to or entitling any person to purchase
or otherwise to acquire any shares of the capital stock of Emmis or any of its
Subsidiaries, except as otherwise disclosed in the Registration Statement or
pursuant to Emmis' employee benefit plans.
7
<PAGE> 8
SECTION 2.06 All the outstanding shares of capital stock of Emmis have been duly
authorized and validly issued and are fully paid, non-assessable and not subject
to any preemptive or similar rights.
SECTION 2.07 All of the outstanding shares of capital stock or other equity
interests of each of Emmis' Subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable, and, except as set forth on
Schedule I hereto, are owned by Emmis, directly or indirectly through one or
more Subsidiaries, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature.
SECTION 2.08 The authorized and outstanding capital stock of Emmis conforms to
the first paragraph under the caption "Description of Capital Stock" in the
Prospectus and as to legal matters to the description thereof contained in the
Prospectus.
SECTION 2.09 Neither Emmis nor any of its Subsidiaries is in violation of its
respective charter, by-laws or equivalent organizational document or in default
in the performance of any obligation, agreement, covenant or condition contained
in any indenture, loan agreement, mortgage, lease or other agreement or
instrument to which Emmis or any of its Subsidiaries is a party or by which
Emmis or any of its Subsidiaries or their respective property is bound, except
for defaults that are not material to Emmis and its Subsidiaries, taken as a
whole.
SECTION 2.10 The execution, delivery and performance of this Agreement by Emmis,
the compliance by Emmis with all the provisions hereof and the consummation of
the transactions contemplated hereby will not (i) require any consent, approval,
authorization or other order (a "Governmental Consent") of, or qualification,
registration or filing (a "Governmental Filing") with, any court or governmental
body or agency (except such as may be required under the securities or Blue Sky
laws of the various states), (ii) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the charter or by-laws of Emmis
or any of its Subsidiaries or any indenture, loan agreement, mortgage, lease or
other agreement or instrument that is material to Emmis and its Subsidiaries,
taken as a whole, to which Emmis or any of its Subsidiaries is a party or by
which Emmis or any of its Subsidiaries or their respective property is bound,
(iii) violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency having
jurisdiction over Emmis, any of its Subsidiaries or their respective property,
(iv) result in the imposition or creation of (or the obligation to create or
impose) a Lien under, any agreement or instrument to which Emmis or any of its
Subsidiaries is a party or by which Emmis or any of its Subsidiaries or their
respective property is bound or (v) result in the suspension, termination or
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revocation of any Authorization (as defined below) of Emmis or any of its
Subsidiaries or any other impairment of the rights of the holder of any such
Authorization.
SECTION 2.11 There are no legal or governmental proceedings pending or
threatened to which Emmis or any of its Subsidiaries is or could be a party or
to which any of their respective property is or could be subject that are
required to be described in the Registration Statement or the Prospectus and are
not so described; nor are there any statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that are not
so described or filed as required.
SECTION 2.12 Neither Emmis nor any of its Subsidiaries has violated any foreign,
federal, state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("ENVIRONMENTAL LAWS"), any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or any provisions
of the Foreign Corrupt Practices Act or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate, would
not have a Material Adverse Effect.
SECTION 2.13 There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any Authorization, any related constraints on operating activities and
any potential liabilities to third parties) which would, singly or in the
aggregate, have a Material Adverse Effect.
SECTION 2.14 Each of Emmis and its Subsidiaries has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
"AUTHORIZATION") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals (each, a "Governmental Entity"), including, without
limitation, under any applicable Environmental Laws, as are necessary to own,
lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make any
such filing or notice would not, singly or in the aggregate, have a Material
Adverse Effect. Each such Authorization is valid and in full force and effect
and each of Emmis and its Subsidiaries is in compliance with all the terms and
conditions thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event has
occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of
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time or both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are burdensome to Emmis or
any of its Subsidiaries; except where such failure to be valid and in full force
and effect or to be in compliance, the occurrence of any such event or the
presence of any such restriction would not, singly or in the aggregate, have a
Material Adverse Effect.
SECTION 2.15 This Agreement has been duly authorized, executed and delivered by
Emmis.
SECTION 2.16 Arthur Andersen LLP are independent public accountants with respect
to Emmis and its Subsidiaries as required by the Securities Act of 1933, as
amended (the "ACT").
SECTION 2.17 The consolidated financial statements included or incorporated by
reference in the Registration Statement and the Prospectus (and any amendment or
supplement thereto), together with related schedules and notes, present fairly
in all material respects the consolidated financial position, results of
operations and changes in financial position of Emmis and its Subsidiaries on
the basis stated therein at the respective dates or for the respective periods
to which they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; the supporting schedules, if any, included in the Registration
Statement present fairly in all material respects in accordance with generally
accepted accounting principles the information required to be stated therein;
and the other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and records of
Emmis.
SECTION 2.18 Emmis is not and, after giving effect to the sale of the Purchased
Shares, will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
SECTION 2.19 There are no contracts, agreements or understandings between Emmis
and any person granting such person the right to require Emmis to file a
registration statement under the Act with respect to any securities of Emmis.
SECTION 2.20 Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the
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date of this Agreement), (i) there has not occurred any material adverse change
or any development involving a prospective material adverse change in the
condition, financial or otherwise, or the earnings, business, management or
operations of Emmis and its Subsidiaries, taken as a whole, (ii) there has not
been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of Emmis
or any of its Subsidiaries and (iii) neither Emmis nor any of its Subsidiaries
has incurred any material liability or obligation, direct or contingent.
SECTION 2.21 No consent or approval of the Federal Communications Commission
(the "FCC") is required under the Communications Act of 1934, as amended, and
the regulations promulgated thereunder (the "COMMUNICATIONS LAWS") for the
issuance and sale of the Purchased Shares. The execution, delivery and
performance of this Agreement in accordance with the terms hereof does not
violate the Communications Laws.
SECTION 2.22 The Subsidiaries of Emmis identified on Schedule II hereto (the
"LICENSE SUBSIDIARIES") hold all necessary authorizations, approvals, consents,
orders, licenses, certificates and permits issued by the FCC to own and operate
each of the respective radio or television broadcast stations (the "STATIONS")
as identified on Schedule II hereto (all such FCC authorizations, approvals,
consents, order, licenses, certificates and permits of the License Subsidiaries
collectively the "FCC LICENSES").
SECTION 2.23 Emmis and its Subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of Emmis and its
Subsidiaries, taken as a whole, in each case free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by Emmis and its Subsidiaries; and any real property and buildings
held under lease by Emmis and its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by Emmis and its Subsidiaries.
SECTION 2.24 Emmis and its Subsidiaries own or possess, or can acquire on
reasonable terms, all patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks and trade names ("INTELLECTUAL PROPERTY") currently employed by
them in connection with the businesses now operated by them except where the
failure to own or possess or otherwise acquire such intellectual
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property would not, singly or in the aggregate, have a Material Adverse Effect;
and neither Emmis nor any of its Subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
of such intellectual property which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a Material Adverse
Effect.
SECTION 2.25 Emmis and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; and neither Emmis nor any of its Subsidiaries (i) has received notice
from any insurer or agent of such insurer that substantial capital improvements
or other material expenditures will have to be made in order to continue such
insurance or (ii) has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers at a cost that would not have a Material
Adverse Effect.
SECTION 2.26 Except as disclosed or incorporated by reference in the Prospectus,
no relationship, direct or indirect, exists between or among Emmis or any of its
Subsidiaries on the one hand, and the directors, officers, shareholders,
customers or suppliers of Emmis or any of its Subsidiaries on the other hand,
which is required by the Act to be described in the Registration Statement or
the Prospectus which is not so described.
SECTION 2.27 There is no (i) significant unfair labor practice complaint,
grievance or arbitration proceeding pending or threatened against Emmis or any
of its Subsidiaries before the National Labor Relations Board or any state or
local labor relations board, (ii) strike, labor dispute, slowdown or stoppage
pending or threatened against Emmis or any of its Subsidiaries or (iii) union
representation question existing with respect to the employees of Emmis and its
Subsidiaries, except for such actions specified in clause (i), (ii) or (iii)
above, which, singly or in the aggregate, would not have a Material Adverse
Effect. To the best of Emmis' knowledge, no collective bargaining organizing
activities are taking place with respect to Emmis or any of its Subsidiaries.
SECTION 2.28 Emmis and each of its Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
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compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
SECTION 2.29 All material tax returns required to be filed by Emmis and each of
its Subsidiaries in any jurisdiction have been filed, other than those filings
being contested in good faith, and all material taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges due pursuant
to such returns or pursuant to any assessment received by Emmis or any of its
Subsidiaries have been paid, other than those being contested in good faith and
for which adequate reserves have been provided.
SECTION 2.30 Emmis has reviewed its operations and the operations of its
Subsidiaries and any third parties with which Emmis or any of its Subsidiaries
has a material relationship to evaluate the extent to which the business or
operations of Emmis or any of its Subsidiaries will be affected by the Year 2000
Problem (as defined below). As a result of such review, Emmis has no reason to
believe, and does not believe, that the Year 2000 Problem will have a Material
Adverse Effect. The "YEAR 2000 PROBLEM" as used herein means any risk that the
computer hardware or software used in the receipt, transmission, storage,
retrieval, retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of dates or
time periods occurring after December 31, 1999, function at least as effectively
as in the case of dates or time periods occurring prior to January 1, 2000.
SECTION 2.31 No "nationally recognized statistical rating organization" as such
term is defined for purposes of Rule 436(g)(2) under the Act has indicated to
Emmis that it is considering (i) the downgrading, suspension or withdrawal of,
or any review for a possible change that does not indicate the direction of the
possible change in, any rating assigned to Emmis or any securities of Emmis or
(ii) any change in the outlook for any rating of Emmis or any securities of
Emmis.
SECTION 2.32 Any documents which at the date hereof are incorporated by
reference in the Registration Statement, the Prospectus or any amendment or
supplement thereto, or any preliminary prospectus (the "INCORPORATED DOCUMENTS")
were filed in a timely manner and, when they were filed (or, if any amendment
with respect to any such document was filed, when such amendment was filed),
conformed with the requirements of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
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SECTION 2.33 The Class A Common Stock is registered pursuant to Section 12(g) of
the Exchange Act and is listed on The Nasdaq National Market, and Emmis has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Class A Common Stock under the Exchange Act or delisting the
Class A Common Stock from The Nasdaq National Market, nor has Emmis received any
notification that the Securities and Exchange Commission (the "COMMISSION") or
the National Association of Securities Dealers, Inc. ("NASD") is contemplating
terminating such registration or listing. Upon issuance to Liberty or its
permitted assignee under Section 9.05, the Purchased Shares shall be approved
for listing on The Nasdaq National Market.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LIBERTY
Liberty hereby represents and warrants to Emmis as follows:
SECTION 3.01 Authorization and Validity of Agreement . Liberty has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby. The
execution, delivery and performance by Liberty of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Liberty. This Agreement has
been duly executed and delivered by Liberty and is a valid and binding
obligation of Liberty, enforceable in accordance with its terms (except insofar
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
SECTION 3.02 No Conflict with Instruments . Neither the execution or delivery of
this Agreement by Liberty, nor the purchase by Liberty of the Purchased Shares
pursuant hereto, (i) violates, conflicts in any material respect with, or
results in a material breach of any provision of, or constitutes a material
default (or an event which, with notice or lapse of time or both, would
constitute a material default) under, any of the terms, conditions or provisions
of (x) its Certificate of Incorporation or By-Laws, or (y) any material note,
bond, mortgage, indenture, lease, agreement or other instrument or obligation to
which Liberty is a party or to which it or any of its properties or assets may
be subject, (ii) results in a material violation of any material law applicable
to Liberty or (iii) violates any material judgment applicable to any of its
properties or assets, except, in the case of each of the clauses (i), (ii) and
(iii) above, for such violations, conflicts, breaches or defaults, which,
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individually or in the aggregate, would not have any material adverse effect on
the ability of Liberty to perform its obligations hereunder.
SECTION 3.03 Brokers or Finders . No agent, broker, investment banker, financial
advisor or other person or entity is or will be entitled, by reason of any
agreement, act or statement by Liberty or any of its directors, officers or
employees, to any financial advisory, broker's, finder's or similar fee or
commission, to reimbursement of expenses or to indemnification or contribution
in connection with any of the transactions contemplated by this Agreement, and
Liberty agrees to indemnify and hold Emmis harmless from and against any and all
claims, liabilities or obligations with respect to any such fees, commissions,
expenses or claims for indemnification or contribution asserted by any person on
the basis of any act or statement made by Liberty or any of its directors,
officers or employees.
SECTION 3.04 Investment Purpose . Liberty is acquiring the Purchased Shares
solely for the purpose of investment and, except as provided in the Registration
Rights Agreement, not with a view to, or for offer or sale in connection with,
any distribution thereof in any transaction which would be in violation of the
securities laws of the United States of America or any state thereof. Liberty
understands that the certificate representing the Purchased Shares will contain
a legend stating in substance:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and such shares may not be sold or
transferred unless such sale or transfer will be effected in accordance
with the registration requirements of the Securities Act of 1933, as at
that time amended, or in accordance with any exemption from the
registration requirements of such Act, which may then be available
thereto."
RESTRICTIONS ON TRANSFER AND VOTING: The Amended and Restated Articles
of Incorporation of the Corporation provide that (i) the Corporation
shall not issue to or for the account of an Alien any share of capital
stock of the Corporation if such issuance would cause the total capital
stock of the Corporation held by or voted by Aliens to exceed, in
violation of the Communications Act of 1934, as amended (the
"Communications Act"), 25% of (A) the total capital stock of the
Corporation outstanding at any time or (B) the total voting power of
all shares of such capital stock outstanding and entitled to vote at
any time; and (ii) the Corporation shall not permit the transfer on its
books of any capital stock to any Alien that would result in the total
capital stock of the Corporation held or voted
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by Aliens to exceed such 25% limits in violation of the Communications
Act; and (iii) no Alien or Aliens, individually or collectively, shall
be entitled to vote or direct or control the vote of more than 25% of
(A) the total capital stock of the Corporation outstanding at any time,
or (B) the total voting power of all shares of capital stock of the
Corporation outstanding and entitled to vote at any time, if to do so
would violate the Communications Act. The term "Alien" means (i) a
person who is a citizen of a country other than the United States; (ii)
an entity organized under the laws of a government other than the
government of the United States or any state, territory, or possession
of the United States; (iii) a government other than the government of
the United States or any state, territory, or possession of the United
States; or (iv) a representative of, or an individual or entity
controlled by, any of the foregoing. The Amended and Restated Articles
of Incorporation also provide that the Board of Directors of the
Corporation shall have all powers necessary to implement the provisions
of the Amended and Restated Articles of Incorporation regarding Alien
ownership and to insure compliance with the Alien ownership
restrictions of the Communications Act including, without limitation,
the power to prohibit the transfer of any shares of capital stock of
the Corporation to any Alien, the power to redeem shares of capital
stock of the Corporation determined by the Board of Directors to be
owned beneficially by an Alien or Aliens and the power to take or cause
to be taken such other action as it deems appropriate to implement such
restrictions.
ARTICLE IV
TRANSACTIONS PRIOR TO CLOSING
SECTION 4.01 Interim Conduct of Business . During the period commencing on the
date of this Agreement and ending on the Closing Date, except as expressly
contemplated by this Agreement or any Exhibit hereto or consented to in writing
by Liberty (which consent shall not be unreasonably withheld), Emmis shall not
(i) make any change in or amendments to its Certificate of Incorporation (except
the amendment to create the Series A Cumulative Convertible Preferred Stock) or
Bylaws, (ii) reclassify the outstanding shares of its capital stock or make any
other changes in its capital structure or (iii) declare, set aside, pay or make
any dividend or other distribution or payment (whether in cash, property or
securities) with respect to its capital stock or other securities (other than a
dividend or distribution consisting solely of Class A Common Stock).
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SECTION 4.02 Access to Information Concerning Properties and Records . From the
date hereof until the Closing and subject to contractual and legal restrictions
applicable to Emmis (or its Subsidiaries), upon reasonable notice, Emmis shall
(and shall cause each of its Subsidiaries to) afford to the officers, employees,
counsel, accountants and other authorized representatives of Liberty access
during normal business hours to all its properties, personnel, books and records
and furnish promptly to such persons such information concerning its business,
properties, personnel and affairs as such persons shall from time to time
reasonably request in connection with or to facilitate the consummation of the
transactions contemplated hereby.
SECTION 4.03 Public Announcements . Neither Liberty nor Emmis shall, nor shall
either Liberty or Emmis permit any of its Subsidiaries to (and each such party
shall use its reasonable efforts to cause its directors, officers, employees and
authorized representatives not to), issue any press release, make any public
announcement or furnish any written statement to its employees or stockholders
generally concerning the transactions contemplated by this Agreement without the
consent of the other party (which consent shall not be unreasonably withheld),
except to the extent required by applicable law or the applicable requirements
of the New York Stock Exchange or the National Association of Securities
Dealers, Inc. with respect to issuers whose securities are quoted on the Nasdaq
Stock Market (and in either such case such party shall, to the extent consistent
with timely compliance with such requirement, consult with the other party prior
to making the required release, announcement or statement).
SECTION 4.04 Reasonable Efforts . Subject to the terms and conditions of this
Agreement and applicable law, each of the parties shall use its reasonable
efforts to take, or cause to be taken, all actions, and do, or cause to be done,
all things reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement as soon as reasonably
practicable, including such actions or things as either party hereto may
reasonably request in order to cause any of the conditions to such other party's
obligation to consummate such transactions specified in Article V to be fully
satisfied. Without limiting the generality of the foregoing, the parties shall
(and shall cause their respective Subsidiaries, and use their reasonable efforts
to cause their respective directors, officers, employees, agents, attorneys,
accountants and representatives, to) consult and fully cooperate with and
provide reasonable assistance to each other in obtaining all necessary consents,
approvals, waivers, licenses, permits, authorizations, registrations,
qualifications or other permission or action by, and giving all necessary
notices to and making all necessary filings with and applications and
submissions to, any Governmental Entity or other person or entity; filing all
applicable Notification and Report Forms
<PAGE> 18
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") as a result of the transactions contemplated by this
Agreement and promptly complying with any requests for additional information
and documentary material that may be requested pursuant to the HSR Act; using
commercially reasonable efforts (which does not require the commencement of
litigation) to lift any permanent or preliminary injunction or restraining order
or other similar order issued or entered by any court or governmental entity (an
"Injunction") of any type referred to in Section 5.01(b); providing all such
information about such party, its Subsidiaries and its officers, directors,
partners and affiliates and making all applications and filings as may be
necessary or reasonably requested in connection with any of the foregoing; and
in general, consummating and making effective the transactions contemplated
hereby; provided, however, that in order to obtain any consent, approval,
waiver, license, permit, authorization, registration, qualification or other
permission or action or the lifting of any injunction referred to in clause (i)
or (iii) of this sentence, no party nor any of their respective stockholders
(including, in the case of Liberty, AT&T Corp.), Subsidiaries or affiliates
shall be required to (x) pay any consideration, to divest itself of any of, or
otherwise rearrange the composition of, its assets or to agree to any conditions
or requirements which are materially adverse or burdensome (or, in the case of
AT&T Corp., adverse or burdensome in any respect) or (y) amend, or agree to
amend, in any material respect any contract. Prior to making any application to
or filing with any Governmental Entity or other person or entity in connection
with this Agreement, each of Liberty and Emmis shall provide the other party
with drafts thereof and afford the other party a reasonable opportunity to
comment on such drafts.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 Conditions Precedent to the Obligations of Liberty and Emmis . The
obligations of each of Liberty and Emmis to consummate the transactions
contemplated by this Agreement are subject to the satisfaction at or prior to
the Closing Date of each of the following conditions:
(a) HSR Act. All applicable waiting periods under the HSR Act shall have expired
or been terminated without receipt of any objections or commencement of
litigation or threat thereof by the appropriate governmental enforcement agency
to restrain the transactions contemplated hereby.
<PAGE> 19
(b) Absence of Injunctions. No permanent or preliminary injunction or
restraining order or other order by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or prohibition preventing
consummation of the transactions contemplated hereby as provided herein shall be
in effect.
(c) No Proceedings or Adverse Enactments. There shall not have been any action
taken, or any statute, rule, regulation, order, judgment or decree enacted,
promulgated, entered, issued or enforced by any foreign or United States
federal, state or local Governmental Entity, and there shall be no action, suit
or proceeding pending which makes the transactions contemplated by this
Agreement illegal or imposes, or is reasonably likely to result in the
imposition of, material damages or penalties in connection therewith.
(d) Receipt of Governmental Approvals and Consents. All Government Consents as
are required in connection with the consummation of the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect, all Governmental Filings as are required in connection with the
consummation of such transactions shall have been made, and all waiting periods,
if any, applicable to the consummation of such transactions imposed by any
Governmental Entity shall have expired, other than those which, if not obtained,
in force or effect, made or expired (as the case may be) would not, either
individually or in the aggregate, have any adverse effect on AT&T Corp. or a
material adverse effect on (i) the transactions contemplated hereby or (ii) the
business, assets, results of operations, financial condition or prospects of
Liberty and its Subsidiaries, taken as a whole, or Emmis and its Subsidiaries,
taken as a whole.
SECTION 5.02 Conditions Precedent to the Obligations of Liberty . The obligation
of Liberty to consummate the transactions contemplated by this Agreement are
also subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, unless waived by Liberty:
(a) Accuracy of Representations and Warranties. All representations and
warranties of Emmis contained in this Agreement shall, if specifically qualified
by materiality, be true and correct and, if not so qualified, be true and
correct in all material respects in each case as of the date of this Agreement
and (except to the extent such representations and warranties speak as of a
specified earlier date) on and as of the Closing Date, with the same force and
effect as though made on and as of the Closing Date, except for changes
permitted or contemplated by this Agreement.
(b) Performance of Agreements. Emmis shall have performed in all material
respects all obligations and agreements, and complied in all material respects
with all covenants and conditions, contained in this
<PAGE> 20
Agreement to be performed or complied with by it prior to or on the Closing
Date.
(c) No Proceedings or Adverse Enactments. There shall not have been any action
taken, or any statute, rule, regulation, order, judgment or decree enacted,
promulgated, entered, issued or enforced by any foreign or United States
federal, state or local Governmental Entity, and there shall be no action, suit
or proceeding pending which would, as of or after the Closing, impose material
limitations on the ability of Liberty effectively to exercise full rights of
ownership of the Purchased Shares (including the right to vote such shares on
all matters properly presented to the stockholders of Emmis).
(d) Officer's Certificates. Liberty shall have received certificates of Emmis,
dated the Closing Date, signed by executive officers of Emmis to evidence
satisfaction of the conditions set forth in Sections 5.02 (a) and (b), which
certificates shall be given by such officers after due inquiry.
(e) Opinion of Counsel. Liberty shall have received the favorable opinion from
Emmis' counsel, Bose, McKinney & Evans, LLP, dated the Closing Date, in form
customary for transactions of the type contemplated by this Agreement.
(f) Other Deliveries. All other documents and instruments required under this
Agreement to have been delivered by Emmis to Liberty at or prior to the Closing
(including those specified in Section 1.04) shall have been delivered.
SECTION 5.03 Conditions Precedent to the Obligations of Emmis . The obligation
of Emmis to consummate the transactions contemplated by this Agreement is also
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, unless waived by Emmis:
(a) Accuracy of Representations and Warranties. All representations and
warranties of Liberty contained in this Agreement shall, if specifically
qualified by materiality, be true and correct and, if not so qualified, be true
and correct in all material respects in each case as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of a specified earlier date) on and as of the Closing Date, with the same force
and effect as though made on and as of the Closing Date, except for changes
permitted or contemplated by this Agreement.
(b) Performance of Agreements. Liberty shall have performed in all material
respects all obligations and agreements, and complied in all material respects
with all covenants and conditions, contained in this
<PAGE> 21
Agreement to be performed or complied with by them prior to or on the Closing
Date.
(c) Officer's Certificates. Emmis shall have received a certificate of Liberty,
dated the Closing Date, signed by executive officers of Liberty to evidence
satisfaction of the conditions set forth in Sections 5.03 (a) and (b), which
certificates shall be given by such officers after due inquiry.
(d) Other Deliveries. All other documents and instruments required under this
Agreement to have been delivered by Liberty to Emmis at or prior to the Closing
(including those specified in Section 1.05) shall have been delivered.
ARTICLE VI
TERMINATION
SECTION 6.01 Termination and Abandonment . This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time prior to the
Closing: (i) by mutual written consent of Liberty and Emmis; or (ii) by either
Liberty or Emmis: (A) if the Closing shall not have occurred before February 29,
2000, provided that the right to terminate this Agreement pursuant to this
clause (ii)(A) shall not be available to any party whose failure to perform any
of its obligations under this Agreement required to be performed by it at or
prior to the Closing has resulted in the failure of the Closing to occur before
such date, (B) if there has been a material breach by the other party of any of
its representations, warranties, covenants or agreements contained in this
Agreement and such breach shall not have been cured within five business days
after written notice thereof shall have been received by the party alleged to be
in breach, or (C) if any court of competent jurisdiction or other competent
Governmental Entity shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting any of
the transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and nonappealable.
SECTION 6.02 Effect of Termination . In the event of any termination of this
Agreement by Liberty or Emmis pursuant to Section 6.01, this Agreement forthwith
shall become void, and there shall be no liability or obligation on the part of
any party hereto or any of their respective officers and directors, except that
(i) Section 9.02 and Article VII shall survive the termination of this
Agreement, (ii) nothing herein will relieve any party from liability for any
breach of any of its representatives, warranties, covenants or agreements set
forth in this Agreement occurring prior to such termination, and (iii)
<PAGE> 22
nothing herein shall relieve any party from liability for the willful breach of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Survival . The representations and warranties of the parties
contained in this Agreement shall survive the Closing for a period of two years.
The covenants and agreements of the parties contained in this Agreement that
contemplate actions to be taken (a) prior to the Closing shall not survive the
Closing and (b) after the Closing shall survive until such actions shall have
been taken or performed in accordance with the terms of the applicable covenant
or agreement.
SECTION 7.02 Indemnification Relating to the Agreement . (a) Emmis shall
indemnify Liberty and each director, officer, employee, agent, successor and
permitted assign of Liberty, from and against any and all losses, liabilities,
claims, damages, obligations, liens, assessments, judgments, awards, fines,
interest, penalties, costs and expenses (including reasonable attorneys' fees
and expenses) ("Losses") resulting or arising from:
(i) any breach by Emmis of any representation or warranty of
Emmis set forth in this Agreement or in any agreement, certificate or
other document executed by Emmis and delivered to Liberty pursuant to
the provisions of this Agreement; and
(ii) any failure of Emmis to comply with or non-
fulfillment of any covenant or agreement of Emmis set forth in this
Agreement.
(b) Liberty shall indemnify Emmis, and each director, employee, agent,
officer, employee, agent, successor and assign of Emmis, from and against all
Losses resulting or arising from:
(i) any breach by Liberty of any representation or warranty of
Liberty set forth in this Agreement or in any agreement, certificate or
other document executed by Liberty and delivered to Emmis pursuant to
the provisions of this Agreement; and
(ii) any failure of Liberty to comply with or non-
fulfillment of any covenant or agreement of Liberty set forth in this
Agreement.
<PAGE> 23
SECTION 7.03 Indemnification Procedures.
--------------------------
(a) Procedures for Indemnification of Third Party Claims.
----------------------------------------------------
(i) If a party entitled to indemnification under Section 7.02 (an
"Indemnitee") shall receive notice or otherwise learn of the assertion
by a person, company or other entity (including, without limitation,
any Governmental Entity) (a "Person") who is not a party to this
Agreement, of any claim or of the commencement or threat by any such
Person of any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court or other Governmental Agency (a
"Third Party Claim") with respect to which the other party may be
obligated to provide indemnification pursuant to Section 7.02 (an
"Indemnifying Party"), such Indemnitee shall give such Indemnifying
Party written notice thereof promptly after becoming aware of such
Third Party Claim and in no event later than the second anniversary of
the Closing Date; provided that the failure of any Indemnitee to give
notice or any delay in giving notice as provided in this Section
7.03(a) shall not relieve the related Indemnifying Party of its
obligations under this Article VII, except to the extent that such
Indemnifying Party is prejudiced by such failure to give or delay in
giving notice. Such notice shall describe the Third Party Claim in
reasonable detail and, if ascertainable, shall indicate the amount
(estimated if necessary) of the Loss that has been or may be sustained
by such Indemnitee.
(ii) An Indemnifying Party may elect to defend or to seek to settle
or compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30
days of the receipt of notice from an Indemnitee in accordance with
Section 7.03(a)(i) (or sooner, if the nature of such Third Party Claim
so requires), the Indemnifying Party shall notify the Indemnitee of
its election whether the Indemnifying Party will assume responsibility
for defending such Third Party Claim, which election shall specify any
reservations or exceptions. If the Indemnifying Party assumes the
defense of a Third Party Claim, the Indemnitee shall be kept
reasonably informed with respect to, and shall have the right to
employ separate counsel and to participate in (but not control) the
defense, compromise or settlement thereof, but the fees and expenses
of such separate counsel shall be the expense of such Indemnitee
unless (x) the Indemnifying Party agrees in advance to pay such fees
and expenses or (y) the Indemnitee shall have been advised by its
counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the
Indemnifying Party, in which case the fees and expenses of such
separate counsel shall be borne by the Indemnifying Party. If an
Indemnifying Party elects
<PAGE> 24
not to assume responsibility for defending a Third Party Claim, or
fails to notify an Indemnitee of its election as provided in this
Section 7.03(a)(ii), such Indemnitee may defend or seek to compromise
or settle such Third Party Claim at the expense of the Indemnifying
Party. Neither an Indemnifying Party nor an Indemnitee shall consent
to entry of any judgment or enter into any settlement of any Third
Party Claim which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnitee, in the
case of a consent or settlement by an Indemnifying Party, or the
Indemnifying Party, in the case of a consent or settlement by the
Indemnitee, of a written release from all liability in respect of such
Third Party Claim.
(iii) If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third Party Claim, the related Indemnitee
shall make available to such Indemnifying Party (in a manner that will
not unreasonably interfere with the conduct of the Indemnitee's
business) any personnel or any books, records or other documents
within its control or which it otherwise has the ability to make
available that are necessary or appropriate for such defense,
settlement or compromise, and shall otherwise cooperate (in a manner
that will not unreasonably interfere with the conduct of the
Indemnitee's business) in the defense, settlement or compromise of
such Third Party Claim.
(iv) Notwithstanding anything in this Section 7.03(a) to the
contrary, (A) neither an Indemnifying Party nor an Indemnitee shall,
without the written consent of the other party, settle or compromise
or consent to the entry of any judgment with respect to any Action or
Third Party Claim if the effect thereof is to admit any criminal
liability by, or to permit any injunctive relief or other order
providing non-monetary relief to be entered against, the other party
and (B) neither an Indemnifying Party nor an Indemnitee may settle or
compromise any claim without the consent of the other (which consent
shall not be unreasonably withheld). Subject to clause (A) of this
paragraph (iv), if an Indemnifying Party notifies the related
Indemnitee in writing of such Indemnifying Party's desire to settle or
compromise a Third Party Claim on the basis set forth in such notice
(provided that such settlement or compromise includes as an
unconditional term thereof the giving by the claimant or plaintiff of
a written release of the Indemnitee from all liability in respect
thereof) and the Indemnitee shall notify the Indemnifying Party in
writing that such Indemnitee declines to accept any such settlement or
compromise, such Indemnitee may continue to contest such Third Party
Claim, free of any participation by such Indemnifying Party, at such
Indemnitee's sole expense. In such event, the obligation of such
Indemnifying Party to such Indemnitee with
<PAGE> 25
respect to such Third Party Claim shall be equal to (1) the costs and
expenses of such Indemnitee prior to the date such Indemnifying Party
notifies such Indemnitee of the offer to settle or compromise (to the
extent such costs and expenses are otherwise indemnifiable hereunder)
plus (2) the lesser of (x) the amount of any offer of settlement or
compromise which such Indemnitee declined to accept and (y) the actual
out-of-pocket amount such Indemnitee is obligated to pay subsequent to
such date as a result of such Indemnitee's continuing to contest such
Third Party Claim.
(v) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third Party Claim, such Indemnifying
Party shall be subrogated to and shall stand in the place of such
Indemnitee as to any events or circumstances in respect of which such
Indemnitee may have any right or claim relating to such Third Party
Claim against any claimant or plaintiff asserting such Third Party
Claim or against any other Person. Such Indemnitee shall cooperate
with such Indemnifying Party in a reasonable manner, and at the cost
and expense of such Indemnifying Party, in prosecuting any subrogated
right or claim.
(b) Other Procedures for Indemnification.
------------------------------------
(i) Any claim on account of a Loss which does not result from a
Third Party Claim shall be asserted by written notice given by the
Indemnitee to the related Indemnifying Party, in no event later than
the second anniversary of the Closing Date. Such Indemnifying Party
shall have a period of 30 days after the receipt of such notice within
which to respond thereto. If such Indemnifying Party does not respond
within such 30 day period, such Indemnifying Party shall be deemed to
have refused to accept responsibility to make payment. If such
Indemnifying Party does not respond within such 30 day period or
rejects such claim in whole or in part, such Indemnitee shall be free
to pursue such remedies as may be available to such party under
applicable law.
(ii) If the amount of any Liability shall, at any time subsequent to
the payment required by this Agreement, be reduced by recovery,
settlement or otherwise, the amount of such reduction, less any
expenses incurred in connection therewith, shall promptly be repaid by
the Indemnitee to the Indemnifying Party.
SECTION 7.04 Remedies Cumulative . Subject to the limitations set forth in
Section 7.04 hereof, the remedies provided in this Article VII shall be
cumulative, and the remedies provided in this Article VII shall not preclude
assertion by an Indemnitee of any other rights or
<PAGE> 26
the seeking of any and all other remedies against any Indemnifying Party.
ARTICLE VIII
POST-CLOSING COVENANTS
SECTION 8.01 Ownership Attribution. Emmis and Liberty intend that the ownership
of the Purchased Shares by Liberty or any FCC Affiliate (as defined below) shall
not cause (i) the direct or indirect ownership, now or in the future, by Liberty
or an FCC Affiliate of any broadcast station, newspaper, cable television system
or multipoint distribution system (each, a "Media Property") to be attributed to
Emmis under applicable rules (the "FCC Attribution Rules") of the Federal
Communications Commission (the "FCC"); or (ii) the direct or indirect ownership,
now or in the future, by Emmis or an FCC Affiliate of any Media Property to be
attributed to Liberty under the FCC Attribution Rules, if in either case such
attribution of ownership would result in the violation of any applicable
multiple ownership or cross-ownership rules of the FCC (the "FCC Ownership
Rules"). If at any time the ownership by Liberty or an FCC Affiliate of
Purchased Shares causes attribution to Emmis or to Liberty as set forth in (i)
or (ii), respectively ("Ownership Attribution"), that would result in a
violation of any applicable FCC Ownership Rule, then:
<PAGE> 27
(a) Liberty shall, and shall cause each FCC Affiliate to, promptly
execute and deliver a proxy to a designee selected by Liberty entitling such
designee to exercise the voting power of the Purchased Shares for the election
of directors of Emmis. Each proxy shall pertain to such percentage of the
Purchased Shares and otherwise be in form and substance sufficient to eliminate
such Ownership Attribution to the extent a proxy is then acceptable to the FCC
for such purpose. Each such proxy granted by Liberty or an FCC Affiliate shall
remain in effect until (i) ownership of the Purchased Shares subject to the
proxy is transferred to a person or entity other than Liberty or an FCC
Affiliate; or (ii) such time as the grantor of the proxy may vote its Purchased
Shares without resulting in the violation of any FCC Ownership Rule.
(b) If the granting of a proxy as contemplated by foregoing Subsection
(a) is not then acceptable to the FCC as a means to eliminate such Ownership
Attribution, Liberty agrees, and shall cause each FCC Affiliate that holds any
Purchased Shares to agree, to exchange all or such portion of the Purchased
Shares as required by the FCC to eliminate such Ownership Attribution for an
equal number of duly authorized, validly issued, fully paid and non-assessable
shares of non-voting common stock of Emmis having the same rights and privileges
as the Purchased Shares other than the right to vote except as required by
applicable law. Liberty, at its option, may elect for any reason to exchange all
or any portion of the Purchased Shares for an equal number of duly authorized,
validly issued, fully paid and non-assessable shares of such non-voting common
stock of Emmis at any time after Emmis' Articles of Incorporation have been
amended to create such non-voting common stock, which amendment Emmis shall use
its reasonable efforts to effect as soon as practicable. Each such share of
non-voting common stock shall be exchangeable into one share of Class A Common
Stock (i) upon the transfer of such share of non-voting common stock to a person
or entity other than Liberty or an FCC Affiliate; or (ii) at such time as the
holder of such share could vote its Purchased Shares without resulting in the
violation of any FCC Ownership Rule.
(c) In the event that the actions contemplated by foregoing Subsections
(a) and (b) are not acceptable to the FCC as a means to eliminate such Ownership
Attribution, Emmis and Liberty agree, and Liberty shall cause each of its FCC
Affiliates that own any of the Purchased Shares to agree, to promptly take such
other action as reasonably necessary and appropriate to eliminate such Ownership
Attribution in a manner acceptable to the FCC.
The term "FCC Affiliate" shall mean, when used with respect to Liberty
or Emmis, respectively, any person or entity whose ownership of any Media
Property would be attributable to Liberty or Emmis, respectively, under the FCC
Attribution Rules, or any person or entity
<PAGE> 28
that is an affiliate of Liberty or Emmis, respectively.
Emmis and Liberty intend that, as between themselves, neither Emmis,
Liberty nor any of their respective FCC Affiliates shall be restricted or
prohibited from acquiring, owning or operating any Media Property in any market.
Emmis and Liberty, however, recognize that ownership by Emmis, Liberty or their
respective FCC Affiliates of Media Properties in the same market could result in
the violation of the FCC Ownership Rules by reason of Ownership Attribution.
Emmis and Liberty agree, as between themselves and on behalf of their respective
FCC Affiliates, that the sole action that any of them will be required to take
to avoid such a violation shall be compliance by Liberty and its FCC Affiliates
with the terms of this Section 8.01. Without limiting the generality of the
foregoing, in the event that Emmis in good faith gives written notice to Liberty
that Emmis intends to acquire a Media Property in a market which, by reason of
Ownership Attribution, would result in the violation of any FCC Ownership Rule,
Liberty shall, and shall cause each FCC Affiliate to, promptly take such action
as provided in foregoing subsections (a), (b) or (c) to prospectively prevent
such violation by eliminating such Ownership Attribution as soon as practicable
to permit Emmis to consummate the intended acquisition without unreasonable
delay by reason of such prospective violation.
SECTION 8.02 Lockup. Liberty covenants and agrees that Liberty shall not, and
shall cause each of its affiliates (including, but not limited to, controlled
Subsidiaries) not to, sell or otherwise transfer any of the Purchased Shares for
a period of twelve (12) months commencing on the Closing Date; provided that (i)
Liberty may transfer all or any portion of the Purchased Shares to one or more
controlled Subsidiaries of Liberty, (ii) Liberty may transfer up to one-third of
the Purchased Shares to one or more affiliates of Liberty that are not
controlled Subsidiaries, and (iii) Liberty, any controlled Subsidiary and any
affiliate of Liberty holding Purchased Shares may pledge any Purchased Shares to
secure bona fide indebtedness owed to an unrelated party or in support of
hedging transactions, puts, calls, exchangeable securities, collars and
derivative transactions.
SECTION 8.03 Preemptive Rights.
<PAGE> 29
(a) If at any time that Liberty and its Affiliates own at least One
Million Four Hundred Thousand (1,400,000) of the Purchased Shares (as adjusted
from time to time to account for any stock dividend, stock split or reverse
stock split) Emmis issues any New Securities except as provided in Subsection
(c) below, Liberty and any Permitted Assignee shall each have the right, but not
the obligation, to purchase such New Securities up to an amount sufficient to
permit it to maintain its percentage common equity interest in Emmis (based on
the Number of Common Shares Outstanding existing immediately prior to the
issuance of the New Securities). The "Number of Common Shares Outstanding" as of
any time means the sum of (i) the number of shares of Emmis common stock which
then are actually issued and outstanding, plus (ii) the total number of
additional shares of common stock which would then be issued and outstanding if
it were assumed that all outstanding Qualifying Rights, if any, were then duly
exercised in full (whether or not then exercisable). If Emmis desires to issue
New Securities, it will first give written notice (an "Issuance Notice") thereof
to Liberty and each Permitted Assignee stating the number of New Securities
proposed to be issued, the total consideration to be received by Emmis upon sale
of the New Securities and any other material terms of the transaction. Within
three (3) days after the receipt of such notice, Liberty and each Permitted
Assignee may exercise its rights under this Section 8.03 by giving written
notice to that effect to Emmis. Failure to give such notice within that three
(3) days period will constitute a waiver of the rights granted by this Section
8.03 as to the particular issuance of New Securities specified in the Issuance
Notice.
(b) The per share purchase price to be paid upon exercise of the rights
granted under this Section 8.03 will be equal to the lowest per share
consideration at which the New Securities are offered or proposed to be offered
by Emmis to any purchasers of New Securities before any underwriter's discount.
The consideration for which New Securities are offered or proposed to be offered
will be determined as follows:
(i) in case of the proposed issuance of New Securities for cash,
the consideration to be received by Emmis will be the amount of cash for
which the New Securities are proposed to be issued and
<PAGE> 30
(ii) in case of the proposed issuance of New Securities in whole or
in part for consideration other than cash, the value of the consideration to be
received by Emmis other than cash will be the Fair Market Value of that
consideration.
(c) The provisions of this Section 8.01 will not apply to shares of
common stock of Emmis, or rights to purchase shares of common stock of Emmis,
issued pursuant to any employee stock option, equity incentive, profit-sharing
or other employee benefit plan approved by the Board of Directors of Emmis.
(d) As used in this Section 8.03, the term
(i) "New Securities" means any shares of common stock of Emmis or
any rights to subscribe for, purchase or otherwise acquire any share or shares
of common stock of Emmis;
(ii) "Qualifying Rights" means, as of any time, all outstanding
rights to subscribe for, purchase or otherwise acquire any share or shares of
common stock of Emmis which, by their terms, are exercisable for shares of
common stock of Emmis only upon payment, conversion, surrender, exchange or
delivery by the holder of additional consideration in cash or property in an
amount or having a Fair Market Value per share of common stock of Emmis which,
as of such time, is equal to or less than the Fair Market Value per share of the
common stock of Emmis as of such time;
(iii) "Fair Market Value" means, as to any securities or other
assets or property, the price at which a willing seller would sell and a willing
buyer would buy such securities, assets or property having full knowledge of the
facts, in an arm's-length transaction without time constraints, and without
being under any compulsion to buy or sell.
(iv) "Permitted Assignee" means (A) any controlled Subsidiary of
Liberty to which Liberty transfers Purchased Shares and (B) any affiliate of
Liberty to which Liberty transfers Purchased Shares except that in the case of
clause (B), the rights granted under this Section 8.01 shall not apply in
respect of any Purchased Shares held by any such affiliate which are in excess
of one-third of the total number of Purchased Shares issued under this Agreement
(as adjusted to take into account stock splits, stock dividends,
reclassifications and similar transactions)
SECTION 8.04 Urban Stations. So long as Liberty and its affiliates retain in the
aggregate ownership of at least One Million Four Hundred Thousand (1,400,000) of
the Purchased Shares (as adjusted from time to time to account for any stock
dividend, stock split or reverse stock split), Emmis shall not, without
Liberty's prior written consent,
<PAGE> 31
directly or indirectly acquire an interest or invest in any joint venture, or
form any joint venture, with any radio broadcast company that derives more than
seventy percent (70%) of its broadcast cash flow or fifty percent (50%) of its
revenues from urban format radio stations. Emmis, however, shall in no manner be
restricted from acquiring any urban format radio station or from converting any
radio station owned by Emmis to an urban format.
SECTION 8.05 Strategic Alliance. Emmis and Liberty and will work together in
good faith to explore opportunities for a strategic alliance which would benefit
both Emmis or its Affiliates and Liberty or its Affiliates.
SECTION 8.06 Potential Future Venture.
(a) In the event Liberty or any of its Affiliates determines to engage in
the radio broadcast business, Liberty or its affiliate may, but shall not be
obligated to, form a new entity ("Radio Entity") for the purpose of acquiring
radio broadcast properties with urban formats in major United States markets. If
requested by Liberty, Emmis agrees to make equity ownership investments in the
Radio Entity, provided that (i) the Radio Entity shall not own or acquire any
radio station in Los Angeles, (ii) Emmis' aggregate investment in Radio Entity
shall at no time exceed ten percent (10%) of the total cash capital
contributions by all owners of the Radio Entity, (iii) the aggregate amount of
all such investments by Emmis shall not exceed Fifty Million Dollars
($50,000,000), (iv) the business of the Radio Entity shall be limited to the
acquisition, ownership and operation of radio stations with urban formats in
major United States markets, and Emmis shall not be obligated to make a
particular equity investment in the Radio Entity unless such investment is
solely used to fund, contemporaneously with such investment, ten percent (10%)
of the purchase price of one or more such radio stations specified by Liberty in
its investment request, and (v) Emmis shall not be required to make any
investment in the Radio Entity if the investment would result in Emmis having an
attributable ownership interest, within the meaning of the FCC Attribution
Rules, in any broadcast license held by the Radio Entity.
(b) No owner of an interest in Radio Entity shall receive any ownership
interest in Radio Entity in exchange for any services provided or to be provided
as a promoter or otherwise, and the economic rights and benefits of Emmis'
investment in Radio Entity shall be in proportion to the total cash investment
made by Emmis in Radio Entity compared to the total cash investments made by all
owners in Radio Entity. All transactions between Radio Entity, on the one hand,
and any of its owners or their respective Affiliates, on the other hand, shall
be on an arms-length basis, and Radio Entity shall be structured in a manner
that will provide each owner with reasonable
<PAGE> 32
liquidity opportunities. If Emmis is an investor in the Radio Entity at the time
that Radio Entity acquires any radio station in the New York or Chicago market,
Liberty shall request that Emmis invest, and Emmis shall be entitled to invest,
in Radio Entity in connection with such acquisition in accordance with clauses
(ii) through (v) of foregoing Subsection (a).
(c) Except as contemplated by this Section, Emmis shall not be entitled to
participate or otherwise acquire any interest in Radio Entity. Regardless of
whether Emmis invests in Radio Entity, Emmis shall in no event be restricted in
any manner from owning, operating or acquiring any type of radio station in any
market, including, but not limited to, a radio station that competes with Radio
Entity in any market.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Further Assurances . From and after the Closing Date, each of
Liberty and Emmis shall, at any time and from time to time, make, execute and
deliver, or causes to be made, executed and delivered, such instruments,
agreements, consents and assurances and take or cause to be taken all such
actions as may reasonably be requested by the other party hereto for the
effectual consummation, confirmation and particularization of this Agreement and
the transactions contemplated hereby.
SECTION 9.02 Expenses . Except as otherwise provided herein, all costs and
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses, whether or not the Closing shall occur.
SECTION 9.03 Notices . All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given on (i) the day on which
delivered personally or by telecopy (with prompt confirmation by mail) during a
business day to the appropriate location listed as the address below, (ii) three
business days after the posting thereof by United States registered or certified
first class mail, return receipt requested, with postage and fees prepaid or
(iii) one business day after deposit thereof for overnight delivery. Such
notices, requests, demands, waivers or other communications shall be addressed
as follows:
<PAGE> 33
(a) if to Liberty, to:
Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Attention: Charles Y. Tanabe
Facsimile: (720) 875-5382
with a copy to:
Lee D. Charles, Esq.
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Telecopy No.: (212) 705-5125
(a) if to Emmis, to:
Emmis Communications Corporation
One Emmis Plaza
40 Monument Circle
Indianapolis, Indiana 46204
Attention: J. Scott Enright
Telecopy No.: (317) 631-3750
with a copy to:
David L. Wills, Esq.
Bose McKinney & Evans LLP
135 North Pennsylvania Street
Suite 2700
Indianapolis, Indiana 46204
Telecopy No.: (317) 684-5173
or to such other person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery or
on the third business day after the mailing thereof, except that any notice of a
change of address shall be effective only upon actual receipt thereof.
SECTION 9.04 Entire Agreement . This Agreement (including the Exhibits and other
documents referred to herein) constitutes the entire agreement between the
parties and, except as expressly provided herein, supersedes all prior
agreements and understandings, oral and written, between the parties with
respect to the subject matter hereof.
<PAGE> 34
SECTION 9.05 Assignment; Binding Effect; Benefit . Neither this Agreement nor
any of the rights, benefits or obligations hereunder may be assigned by any
party or Subsidiary or affiliate of any party without the prior written consent
of the other party; provided, however, that Liberty may, without such consent,
assign its rights under this Agreement to any controlled Subsidiary or affiliate
of Liberty in respect of any Purchased Shares that Liberty is permitted under
any other section of this Agreement to transfer to such entity. Such assignment
shall not relieve Liberty of its obligations hereunder in the event such
assignee fails to perform such obligations. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties or their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, other than
rights conferred upon Indemnified Parties under Article VII.
SECTION 9.06 Amendment . This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
SECTION 9.07 Extension; Waiver . Liberty or Emmis may, to the extent legally
allowed, (i) extend the time specified herein for the performance of any of the
obligations of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto, (iii) waive compliance by the other party
with any of the agreements or covenants of such other party contained herein or
(iv) waive any condition to such waiving party's obligation to consummate the
transactions contemplated hereby or to any of such waiving party's other
obligations hereunder. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. Any such extension or waiver by any party shall
be binding on such party but not on the other party entitled to the benefits of
the provision of this Agreement affected unless such other party also has agreed
to such extension or waiver. No such waiver shall constitute a waiver of, or
estoppel with respect to, any subsequent or other breach or failure to comply
strictly with the provisions of this Agreement. The failure of any party to
insist on strict compliance with this Agreement or to assert any of its rights
or remedies hereunder or with respect hereto shall not constitute a waiver of
such rights or remedies. Whenever this Agreement requires or permits consent or
approval by any party, such consent or approval shall be effective if given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in this Section 8.07.
<PAGE> 35
SECTION 9.08 Interpretation . When a reference is made in this Agreement to
Sections, Articles or Exhibits, such reference shall be to a Section, Article or
Exhibit (as the case may be) of this Agreement unless otherwise indicated. When
a reference is made in this Agreement to a "party" or "parties", such reference
shall be to a party or parties to this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The use of any gender herein shall be deemed to be or include the
other genders and the use of the singular herein shall be deemed to be or
include the plural (and vice versa), wherever appropriate. The use of the words
"hereof", "herein", "hereunder" and words of similar import shall refer to this
entire Agreement, and not to any particular article, section, subsection,
clause, paragraph or other subdivision of this Agreement, unless the context
clearly indicates otherwise.
SECTION 9.09 Counterparts . This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument.
SECTION 9.10 Applicable Law . This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of New York, without regard to the conflict of laws rules thereof.
SECTION 9.11 Definition of "Subsidiary" . As used in this Agreement, a
"Subsidiary" of any party means any corporation or other organization, whether
incorporated or unincorporated, of which (a), in the case of a corporation,
securities or other interests having by their terms ordinary voting power to
elect at least one-half of the board of directors or others performing similar
functions with respect to such corporation are directly or indirectly owned or
controlled by such party, by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries or (b) in the case of any organization
or entity other than a corporation, such party, one or more of its Subsidiaries,
or such party and one or more of its Subsidiaries (x) owns at least one-half of
the equity interests thereof or (y) has the power to elect or direct the
election of at least one-half of the members of the governing body thereof or
otherwise has "control" (within the meaning of Rule 12b-2 under the Securities
Exchange Act of 1934) over such organization or entity.
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LIBERTY MEDIA CORPORATION
By:
---------------------------------
Name:
Title:
EMMIS COMMUNICATIONS CORPORATION
By:
---------------------------------
Name:
Title:
<PAGE> 37
SCHEDULE I
SUBSIDIARIES
Corporations
- ------------
Emmis DAR, Inc.
Emmis International Corporation
Emmis License Corporation
Emmis International Broadcasting Corporation
Emmis Television License Corporation of Honolulu
KPWR, Inc.
KPWR License, Inc.
Emmis FM Broadcasting Corporation of St. Louis
Emmis FM License Corporation of St. Louis
Emmis Meadowlands Corporation
Mediatex Communications Corporation
Mediatex Development Corporation
Emmis Pledge Corporation
Emmis Publishing Corporation
Radio Hungaria Co., Ltd. (54% equity interest only)
Emmis 1380 AM Radio Corporation of St. Louis
Texas Monthly, Inc.
Emmis Television License Corporation of Mobile
Emmis 104.1 FM Radio Corporation of St. Louis
Emmis 104.1 FM Radio License Corporation of St. Louis
Emmis FM Broadcasting Corporation of Indianapolis
Emmis FM License Corporation of Indianapolis
Emmis Television License Corporation of Cape Coral
Emmis AM Radio Corporation of Indianapolis
Emmis AM Radio License Corporation of Indianapolis
Emmis 106.5 FM Broadcasting Corporation of St. Louis
Emmis 106.5 FM License Corporation of St. Louis
Emmis FM Broadcasting Corporation of Chicago
Emmis FM License Corporation of Chicago
Emmis Television License Corporation of Green Bay
Emmis FM Radio Corporation of Indianapolis
Emmis FM Radio License Corporation of Indianapolis
Emmis FM Holding Corporation of New York
Emmis 101.9 FM Radio Corporation of New York
Emmis Broadcasting Corporation of New York
Emmis License Corporation of New York
Emmis Radio Corporation of New York
Emmis Radio License Corporation of New York
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 1310 AM Radio Corporation of Indianapolis
<PAGE> 38
Emmis 1310 AM Radio License Corporation of Indianapolis
Emmis 105.7 FM Radio Corporation of Indianapolis
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 Big Hit Marketing, Inc.
Big Hit Marketing, Inc.
Emmis Television License Corporation of Orlando
Emmis Latin America Broadcasting Corporation
Emmis South America Broadcasting Corporation
Emmis Argentina Broadcasting, S.A.
Emmis Buenos Aires Broadcasting, S.A.
Partnerships and Limited Liability Companies
- --------------------------------------------
Emmis Indiana Broadcasting, L.P.
Emmis Publishing, L.P.
Emmis Television Broadcasting, L.P.
1050, L.P. (Emmis Meadowlands is a 50% limited partner)
Duncan American Radio, LLC (40% equity interest only)
Country Sampler Stores, LLC (51% equity interest only)
The equity interests in substantially all of these subsidiaries are pledged to
secure amounts outstanding under the bank credit agreement of Emmis
Communications Corporation.
<PAGE> 39
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of November 18, 1999, by and between Emmis Communications Corporation,
an Indiana corporation (the "Company") and each of the Investors listed on
Schedule A attached hereto.
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in The City of
New York or Indianapolis, Indiana are authorized or obligated by law or
executive order to close.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" means the Class A Common Stock of the Company, $.01 par
value per share.
"Demand Registration" means a registration pursuant to Section 2
hereof.
"Effectiveness Period" means the period commencing with the one year
anniversary of the date hereof and ending on the date that all
Registrable Securities have ceased to be Registrable Securities.
"Initiating Investors" means holders of shares of Common Stock who make
a request for registration pursuant to Section 2(a) hereof.
"Investor or Investors" means the Investors listed on Schedule A
attached hereto and their permitted successors and assigns pursuant to
Section 9 hereof who hold Registrable Securities.
"Registrable Securities" shall mean (i) the shares of Common Stock of
the Company issued to the Investors pursuant to the terms of the Stock
Purchase Agreement dated as of October 25, 1999 by and between the
Investors and the Company, and (ii) any other shares of Common Stock
issued to the Investors with respect to such shares of Common Stock
upon any stock dividend, stock split, reclassification,
recapitalization, merger, consolidation
<PAGE> 40
or similar event (it being understood that amounts or percentages of
Registrable Securities as of or on any particular date shall be deemed
to refer to amounts or percentages after giving effect to any such
applicable events); provided, however, that shares of Common Stock of
the Company which are Registrable Securities shall cease to be
Registrable Securities upon the earlier of (A) any sale or transfer in
any manner to any person or entity, including, but not limited to,
sales pursuant to a registration statement, Rule 144(k) sales or
otherwise, but excluding any sale or transfer in connection with which
the rights of the Investors hereunder are assignable pursuant to
Section 9 or (B) such shares are saleable by the holder thereof
pursuant to Rule 144(k) (or any successor provision) under the
Securities Act, or (C) twelve (12) months after the date of dissolution
of the Investor listed on Schedule A attached hereto who originally
owned the Common Stock (including Common Stock issued upon any stock
dividend, stock split or similar event), except in the case of this
clause (C) for Registrable Securities transferred to an Investor listed
on Schedule A attached hereto as a result of the dissolution of such an
Investor, which shall remain Registrable Securities notwithstanding
such dissolution.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement
in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.
"Registration Expenses" means all expenses, other than Selling Expenses
(as defined below), incurred by the Company in complying with this
Agreement, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses if
any, and the expense of any special audits incident to or required by
any such registration.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" means all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities
registered by the Investors and all fees and disbursements of counsel
for the Investors.
2. Demand Registration.
<PAGE> 41
(a) Request for Registration. In case the Company shall receive during
the Effectiveness Period a written request from the Initiating Investors that
the Company effect any registration, qualification or compliance with respect to
Registrable Securities under the Securities Act, the Company will, as soon as
practicable but in no event more than 30 days from receipt by the Company of
such written request, use its reasonable best efforts to effect such
registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable (if any) blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this Section 2:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act, nor in any jurisdiction in which the Company would be required to subject
itself to taxation by such act;
(B) After the Company has already effected a total of two such
registrations under the Securities Act pursuant to Section 2(a), with it being
understood that such registrations have been declared or ordered effective;
(C) During the period starting with the date 10 days prior to the
Company's estimated date of filing of any registration statement or preliminary
or final prospectus supplement (other than a registration of securities in a
Rule 145 transaction or with respect to an employee benefit plan or with respect
to a dividend reinvestment or direct stock purchase plan (DRIP) or with respect
to which Section 3(a) applies), and continuing up to the earlier of (x) 90 days
immediately following the effective date of any such registration statement
pertaining to securities of the Company, (y) the date when the Common Stock is
trading at an average (for the trailing 20 trading days) of 110% of the offering
price for such registration statement, and (z) the expiration of any lock-up
periods to which the Company is subject in an underwritten offering, provided
that the Company is actively employing in good faith all reasonable efforts to
cause any such registration statement to become effective;
(D) If the Company shall furnish to the Initiating Investors a
certificate signed by the Chief Executive Officer of the
<PAGE> 42
Company stating that in the good faith judgment of the Board of Directors the
Company is in possession of material non-public information (including, but not
limited to, information regarding a contemplated debt or equity financing),
disclosure of which would cause a serious detrimental effect to the Company or
its shareholders if a registration statement were filed in the near future, then
the Company's obligation to use its reasonable best efforts to register, qualify
or comply under this Section 2(a) shall be deferred for a period not to exceed
45 days; provided, however, that in no event may the Company delay a
registration pursuant to this Section 2(E) more than once in any twelve (12)
month period;
Subject to the foregoing clauses (A) through (D), the Company shall
give prompt written notice (the "Notice of Demand Request") of the Initiating
Investors' request to all Investors and, thereupon, the Company shall, as
expeditiously as possible, use its reasonable best efforts to effect the
registration under the Securities Act of (i) the Registrable Securities which
the Company has been so requested to register in the registration request, for
disposition in accordance with the intended method of disposition stated in the
registration statement and (ii) all other Registrable Securities the holders of
which shall have made a written request to the Company for registration thereof
within 30 days after the giving of the Notice of Demand Request, all to the
extent necessary to permit the sale or other disposition by the holders of the
securities to be registered. Whenever a requested registration is for a firmly
underwritten offering, if the managing underwriter for such offering determines
that the number of shares of Common Stock requested to be included that are to
be sold by Investors is limited due to market conditions, any shares of Common
Stock requested to be included by shareholders other than the Investors shall be
excluded and, if the number of shares of Common Stock must be further reduced,
the Investors proposing to sell their Registrable Securities in such
underwriting and registration shall share pro rata in the available portion of
the registration statement in question, such sharing to be based upon the number
of Registrable Securities then held by such Investors, respectively.
(b) Form of Registration. The Company shall be entitled to use a Form
S-3 or any similar short form registration statement for a Demand Registration
if the Company is eligible to use such a form. Notwithstanding anything to the
contrary herein, if at any time the Company is not eligible to use a Form S-3 or
any similar short form registration statement for any reason, any references in
this Agreement to registrations on Form S-3 or any similar short form
registration statement shall be deemed to be references to registrations on Form
S-1 or any similar long form registration statement which the Company is then
eligible to use.
<PAGE> 43
3. Company Registration.
(a) Notice of Registration. If at any time or from time to time the
Company shall determine to register any of its Common Stock, either for its own
account or the account of a security holder or holders (including but not
limited to registration of the sale of Common Stock which will be automatically
converted from Class B Common Stock, $.01 par value per share, upon sale), other
than (A) a registration relating solely to employee benefit plans, (B) a
registration relating solely to a Commission Rule 145 transaction, (C) a
registration relating to a dividend reinvestment or direct stock purchase plan
or (D) a shelf registration of multiple classes of securities for sale on a
delayed basis pursuant to Rule 415 under the Securities Act, or any subsequent
sale therefrom, the Company will:
(i) promptly give to the Investors written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 14 days after receipt of such written notice from the
Company, by the Investors; provided, however, if any registration pursuant to
this Section 3 involves an underwritten offering and the managing underwriter
shall advise the Company that, in its view, the number of securities requested
to be included in such registration exceeds the number that can be sold in an
orderly manner in such offering within a price range acceptable to the Company,
the Company shall include in such offering first, all the securities the Company
proposes to register for its own account, and second, the Registrable Securities
and securities to be sold for the account of other security holders, with each
Investor or other security holder proposing to sell Registrable Securities or
other securities participating in such registration on a pro rata basis, such
participation to be based upon the number of Registrable Securities or other
securities then held by such Investors or other security holders, respectively.
(b) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 3
prior to the effectiveness of such registration whether or not the Investors
have elected to include Registrable Securities in such registration. Each
Investor who holds Registrable Securities included in the registration agrees
that, upon receipt of notice from the Company that the Company has determined to
withdraw any registration statement pursuant to this subsection, such Investor
will discontinue its disposition of securities pursuant to such registration
statement and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other
<PAGE> 44
than permanent file copies, then in such Investor's possession of the prospectus
covering securities which was in effect at the time of such notice.
4. Limitations on Subsequent Registration Rights. From and after the
date hereof, the Company shall not enter into any agreement granting any holder
or prospective holder of any securities of the Company registration rights with
respect to such securities that would allow such holder or prospective holder to
include such securities in any registration filed under Section 2 hereof, unless
under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion
of its securities will not reduce the amount of the Registrable Securities of
the Investors which is included.
5. Expenses of Registration. All Registration Expenses incurred in
connection with all registrations shall be borne by the Company, except to the
extent that the Initiating Investors alone, but not the Company, initiate the
request that a Demand Registration be withdrawn prior to its effectiveness, and
if the Initiating Investors elect not to have such withdrawn registration
counted as a Demand Registration requested under Section 2 in which case all
Registration Expenses incurred in connection with that registration shall be
borne by the Initiating Investors on a pro rata basis. All Selling Expenses
relating to securities registered on behalf of the Investors shall be borne by
the Investors.
6. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to a request under
Section 2(a) or 3(a) of this Agreement, the Company will keep the Investors
advised in writing as to the initiation of each registration, qualification and
compliance and as to the completion thereof. The Company will use its reasonable
best efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof and
pursuant thereto the Company will as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Securities and use its reasonable best efforts to
cause such registration statement to become effective (provided that before
filing a Demand Registration statement or prospectus or any amendments or
supplements thereto, the Company will furnish to the counsel selected by the
Initiating Investors copies of all such documents proposed to be filed);
(b) in the case of a Demand Registration, prepare and file with the
Commission such amendments and post-effective amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration
<PAGE> 45
statement effective for a period of not less than 120 days, and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) during the period in which the Company is required under the
provisions hereof to keep a registration statement effective, furnish to the
seller of Registrable Securities such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(d) subject to Section 2(a)(A) - (D) herein, use its reasonable best
efforts to register or qualify such Registrable Securities under any applicable
securities or blue sky laws of such jurisdictions as any seller reasonably
requests and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller;
(e) notify the seller of such Registrable Securities, any time the
Company becomes aware a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, subject to the rights of the Company to suspend or delay
sales stated elsewhere in this Agreement, at the request of such seller, the
Company will prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
(f) use its reasonable best efforts to cause all such Registrable
Securities to be listed on each securities exchange on which similar securities
issued by the Company are then listed and, if not so listed, to be listed on the
NASD automated quotation system and, if listed on the NASD automated quotation
system, use its reasonable best efforts to secure designation of all such
Registrable Securities covered by such registration statement as a Nasdaq
National Market System Security within the meaning of Rule 11Aa2-1 of the
Commission or, failing that, use its best efforts to secure Nasdaq authorization
for such Registrable Securities;
<PAGE> 46
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form with underwriters selected, in the case of a
registration under Section 2, by the Initiating Investors subject to the
Company's reasonable approval, not to be unreasonably withheld) and take all
such other actions as the holders of a majority of the Registrable Securities
being sold or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities (including, without
limitation, (i) not effecting any public sale or distribution of its equity
securities, or any securities convertible into or exchangeable or exercisable
for such securities, during a period customary for such agreements of no more
than seven days prior to and no more than 90 days following the effective date
of any underwritten registration (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor form or
registrations involving dividend reinvestment or direct share purchase plans),
unless the underwriters managing the registered public offering otherwise agree,
and (ii) using its reasonable efforts to cause each executive officer and
director to agree not to effect any public sale or distribution (excluding sales
pursuant to Rule 144) of any such securities during such period (except as part
of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree);
(i) upon receipt and execution of such confidentiality agreements as
the Company may reasonably request from parties who are not otherwise subject to
confidentiality obligations because of the nature of their profession (e.g.,
underwriters, attorneys and accountants), make available for inspection by the
seller of Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent accountants
to supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement
(including, without limitation, accountants' "cold comfort" letters and opinions
of counsel);
(j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months beginning with the first day of the
Company's first full calendar
<PAGE> 47
quarter after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order;
(l) if the disposition of the Registrable Securities is pursuant to an
underwritten offering, cause the appropriate officers, underwriters and advisors
of the Company to meet with the investors whose Common Stock is registered for
resale thereunder.
7. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses arising out of or
based upon any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except insofar as losses, claims, damages, liabilities or expenses
are caused by written information supplied by or on behalf of such holder
specifically for use in the preparation of such registration statement,
prospectus or preliminary prospectus relating to such holder's ownership of
Registrable Securities or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with the number of copies of the
same reasonably requested by such holder.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits relating to such holder's
ownership of Registrable Securities or as otherwise required under the
Securities Act as the Company reasonably requests for use in connection with any
such registration statement or prospectus and, to the extent permitted by law,
will indemnify the Company, its directors and officers and each person who
controls the Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue or
<PAGE> 48
alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, but only
to the extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such holder which was
expressly provided for use in such registration statement and was included in
such registration statement in reliance on and in conformity with such written
information or affidavit.
(c) Any person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed or not
defended because of a conflict of interest pursuant to clause (ii) of the
preceding sentence, the indemnifying party will not be subject to any liability
for any settlement made by the indemnified party without its consent (but such
consent will not be unreasonably withheld). An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless (A) in
the reasonable judgment of any indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified parties
with respect to such claim or (B) such counsel is not admitted to practice in a
jurisdiction where an action is pending, in which case the indemnified parties
shall pay the fees and expenses of one additional firm of attorneys to act as
local counsel in such jurisdiction.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and will survive the transfer of securities. If recovery is
not available under the foregoing indemnification provisions, for any reason
other than as specified therein, the parties entitled to indemnification by the
terms thereof shall be entitled to contribution for any and all losses, claims,
damages or liabilities, joint or several, and expenses to which they may become
subject, in such proportion as is appropriate to reflect the relative fault of
the parties entitled to indemnification, on the one hand, and the indemnifying
parties, on the other, in connection with the matter out of which such losses,
claims,
<PAGE> 49
damages, liabilities or expenses arise or result from. In determining the amount
of contribution to which the respective parties are entitled, there shall be
considered the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances.
8. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, for so
long as any Investor owns Registrable Securities, the Company agrees to use its
reasonable best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
hereafter.
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Securities
Exchange Act of 1934, as amended.
(c) So long as any Investor owns any Registrable Securities, to furnish
to such Investor forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 and of the Securities
Act and the Securities Exchange Act of 1934, and a copy of the most recent
annual or quarterly report of the Company.
9. Transfer of Registration Rights. Subject to the termination
provisions of Section 10 and the definition of "Registrable Securities," the
rights granted to the Investors hereunder may be assigned, in connection with
any transfer or assignment of Registrable Securities by an Investor, to any
affiliate of the assigning Investor.
10. Termination of Registration Rights. The Company's obligations
pursuant to Sections 2, 3 and 4 shall expire when (i) all Registrable Securities
held by the Investors or any assignee have been sold or transferred in any
manner to any person or entity, including, but not limited to, sales pursuant to
a registration statement, Rule 144 sales or otherwise, but excluding any sale or
transfer in connection with which the rights of any Investor hereunder are
assigned pursuant to Section 9, or (ii) all Registrable Securities have ceased
to be Registrable Securities, whichever first occurs.
11. Confidentiality. Each Investor hereby agrees that it shall maintain
in confidence, and shall not use or disclose without the prior written consent
of the Company, any information identified as confidential that is furnished to
it by the Company in connection with
<PAGE> 50
this Agreement, including (without limitation) all financial statements, budget
and other information delivered or provided to such Investor. This obligation of
confidentiality shall not apply, however, to any information (a) in the public
domain through no unauthorized act or failure to act by such Investor, (b)
lawfully disclosed to such Investor by a third party who possessed such
information without any obligation of confidentiality, or (c) known previously
by such Investor or lawfully developed by such Investor independent of any
disclosure by the Company. Each Investor further agrees that it shall return to
the Company or destroy all tangible materials containing such information upon
request by the Company.
12. Miscellaneous.
(a) Governing Law. This Agreement shall be governed in all respects by
the internal laws of the State of Indiana.
(b) Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Investors and the
closing of the transactions contemplated hereby.
(c) Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, permitted assigns, heirs,
executors and administrators of the parties hereto, including as specifically
provided by Section 10 hereof.
(d) Entire Agreement; Amendment. This Agreement and its attachments
constitute the full and entire understanding and agreement between the parties
with regard to the subject hereof. Except as expressly provided herein, neither
this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and
Investors holding at least 67% of the Registrable Securities.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
(f) Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
(g) Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
<PAGE> 51
IN WITNESS WHEREOF, the parties below have executed this Agreement all
as of the date first written above.
EMMIS COMMUNICATIONS CORPORATION
By: _______________________________________
Jeffrey H. Smulyan
Chairman, President and Chief Executive Officer
LIBERTY MEDIA CORPORATION
By: ________________________________________
Printed: ___________________________________
Title ______________________________________
<PAGE> 52
SCHEDULE A
SCHEDULE OF INVESTORS
Liberty Media Corporation or its assignee as permitted under Section 8.05 of the
Stock Purchase Agreement dated as of October 25, 1999 between Liberty Media
Corporation and Emmis Communications Corporation
<PAGE> 1
Exhibit 10.2
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is effective March
1, 1999, by and between Emmis Communications Corporation (f/k/a Emmis
Broadcasting Corporation), an Indiana corporation ("Employer") and Jeffrey H.
Smulyan, an Indiana resident (the "Executive").
WHEREAS, Employer and Executive entered into an Employment
Agreement effective March 1, 1994 (the "Agreement") pursuant to which
Executive was employed by Employer as Chairman of the Board and Chief
Executive Officer; and
WHEREAS, Any capitalized term not otherwise defined in this
Amendment shall have the meaning ascribed to it in the Agreement; and
WHEREAS, Employer and Executive have agreed to enter into a
new employment agreement, and want to effect the new agreement through
an amendment to the existing Agreement.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Employer and
Executive, intending to be legally bound, agree as follows:
1. Section 2 of the Agreement is amended to extend the Term to February
29, 2004 and to provide that the term "Contract Year" means the twelve
month period commencing March 1, 1999. With this Amendment, the
Agreement shall be deemed to commence on March 1, 1999.
2. During the first Contract Year, Executive shall continue to receive the
same Base Salary he received during the last year of the Agreement. In
addition, Clause (i) of Section 6 is amended as follows: "one hundred
percent (100%) of the Base Salary for the immediately preceding
Contract Year."
3. Section 7.1 is hereby amended to increase the maximum Bonus for any
Contract Year to 100% of Base Salary for such Contract Year. Beginning
with the Contract Year commencing March 1, 2000, Employer's
Compensation Committee (or other committee authorized by the Board of
Directors) shall establish annual performance targets for the award of
the Bonus so that the Bonus qualifies as performance-based under
Section 162(m) of the Internal Revenue Code. Any provision calling for
the payment of an average of Bonuses paid or payable pursuant to the
Agreement shall be
<PAGE> 2
calculated commencing with Bonuses paid for the fiscal year ended
February 29, 2000.
4. Exhibit A to the Agreement shall be deleted. All references to Exhibit
A in the Agreement shall be deemed to refer to the Grant Agreement
dated October 24, 1999 for the options to purchase 500,000 shares of
the Employer's Class B Common Stock. Because all of the options have
been granted, Section 14.4(f) is deleted.
5. In all other respects, the Agreement remains in full force and effect.
Executed this 17th day of December 1999.
EMMIS COMMUNICATIONS CORPORATION
By: _________________________________
Walter Z. Berger, Executive Vice
President and Chief Financial Officer
"Employer"
______________________________________
Jeffrey H. Smulyan
"Executive"
<PAGE> 1
Exhibit 15
January 14, 2000
Mr. Walter Z. Berger
Chief Financial Officer
Emmis Communications Corporation
One Emmis Plaza
40 Monument Circle Suite 700
Indianapolis, Indiana 46204
Dear Mr. Berger:
We are aware that Emmis Communications Corporation has incorporated by reference
in its Registration Statement Nos. 33-83890 and 333-14657 its Form 10-Q for the
three and nine-months ended November 30, 1999, which includes our report dated
December 20, 1999, covering the unaudited interim financial information
contained therein. Pursuant to Regulation C of the Securities Act of 1933, that
report is not considered a part of the registration statement prepared or
certified by our firm or a report prepared or certified by our firm within the
meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ ARTHUR ANDERSEN LLP
- ------------------------
ARTHUR ANDERSEN LLP
-36-
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<FISCAL-YEAR-END> FEB-29-2000 FEB-29-2000
<PERIOD-START> SEP-01-1999 MAR-01-1999
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