UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 2)

Filed by the Registrant þ
Filed by a Party other than the Registrant o

Check the appropriate box:

þ      Preliminary Proxy Statement
o      Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o      Definitive Proxy Statement
o      Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.

EMMIS COMMUNICATIONS CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than Registrant)

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o		Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.

	(1)		Title of each class of securities to which transaction applies:
	(2)		Aggregate number of securities to which transaction applies:
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)		Proposed maximum aggregate value of transaction:
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o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)		Amount Previously Paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

 

          , 2010                                       

 

Dear Preferred and Common Shareholders:

 

As you may know, on May 25, 2010, Emmis Communications Corporation signed a Merger Agreement, which will result in Emmis being taken private by Jeffrey H. Smulyan, our Chairman, Chief Executive Officer and President. The attached Proxy Statement/Offer to Exchange describes the steps that are being proposed to take Emmis private and provides information that will help you to make certain decisions with respect to your Emmis stock. While this letter provides some background on the transactions, our board’s determinations and the mechanics of what to do with your shares, I urge you to carefully read the entire Proxy Statement/Offer to Exchange.

 

The Transactions

 

On May 24, 2010, Mr. Smulyan and two companies formed by him, JS Acquisition Inc. (“JS Acquisition”) and JS Acquisition, LLC (“JS Parent”), signed a Securities Purchase Agreement with various entities affiliated with Alden Global Capital (together with its affiliates and related parties, “Alden”), under which Alden will provide financing for the going-private transaction. The next day, Emmis signed a Merger Agreement, which provides for a series of transactions, all of which are conditioned upon one another (the “Transactions”):

 

 

The Exchange Offer and the JS Acquisition Tender Offer are expected to be completed simultaneously, as soon as practicable following the approval of the Proposed Amendments at the special meeting. If another special meeting is required under Indiana law, the Merger is expected to occur shortly after the requisite vote for the Merger is received from Emmis shareholders at the second special meeting. If a second special meeting is not required for the Merger, the Merger will occur shortly after the completion of the Exchange Offer and the JS Acquisition Tender Offer.

 

Board Determinations

 

A Committee of Disinterested Directors of Emmis (the “Committee”), which does not include Mr. Smulyan or any non-independent members of the board of directors, was formed on April 29, 2010. The Committee has unanimously determined that the Merger Agreement, including the JS Acquisition Tender Offer and the Merger, were advisable and fair to, and in the best interest of, Emmis and the unaffiliated shareholders who hold Class A Common Stock. The Committee unanimously determined to recommend that the board adopt resolutions, on terms and subject to the conditions of the Merger Agreement and the Indiana Business Corporation Law:

 

 

but has not made any determinations or recommendations with respect to the Exchange Offer or the Proposed Amendments.

 

The full Emmis board of directors unanimously determined that the Exchange Offer is fair to unaffiliated shareholders who hold Existing Preferred Stock and unaffiliated shareholders who hold Class A Common Stock. Nevertheless, the Emmis board of directors is not making any recommendation as to whether holders of Existing Preferred Stock should participate in the Exchange Offer or vote for the Proposed Amendments. In considering the determination, holders of Existing Preferred Stock should consider the circumstances surrounding the Transactions, including the background of the Transactions, the conflicts of interest inherent therein and the lack of a recommendation by the board of directors of Emmis. Accordingly, the board of directors of Emmis believes that, in light of the foregoing, each holder of Existing Preferred Stock should make its own independent analysis and determination.

 

Voting and Exchange Mechanics

 

This document is a combined Proxy Statement/Offer to Exchange. It describes the Proposed Amendments to be voted upon at the special meeting, as well as the terms of the Exchange Offer by Emmis to issue New Notes in exchange for your Existing Preferred Stock.

 

 

As of the date of this Proxy Statement/Offer to Exchange, Mr. Smulyan owns shares of common stock entitling him to cast approximately 60.0% of the votes able to be cast by holders of Common Stock at the special meeting, and Alden owns shares of Common Stock entitling it to cast approximately 1.7% of the votes able to be cast by holders of Common Stock at the special meeting. Mr. Smulyan and Alden have each agreed to vote their shares of Common Stock in favor of the Proposed Amendments. Therefore, the Proposed Amendments will be approved by the holders of the Common Stock.

 

 

 

 

Your vote is important regardless of the number of shares you own. We urge you to complete, sign, date and return the enclosed proxy card as soon as possible, even if you currently plan to attend the meeting. Returning a proxy card will not prevent you from attending the special meeting and voting in person but will ensure that your vote is counted if you are unable to attend the meeting.

 

Thank you for your interest and participation.

 

By order of the Board of Directors,

 

J. Scott Enright
Executive Vice President, General Counsel and Secretary

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved or passed upon the merits or fairness of the Exchange Offer or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

 

This Proxy Statement/Offer to Exchange is dated          , 2010 and is first being mailed, along with the associated proxy card and means to tender, to our shareholders on or about          , 2010.

EMMIS COMMUNICATIONS CORPORATION
INDIANAPOLIS, INDIANA

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

The special meeting of the shareholders of Emmis Communications Corporation will be held on          , 2010, at          , local time, at One Emmis Plaza, 40 Monument Circle, Indianapolis, Indiana 46204.

 

The holders of Emmis Class A common stock, par value $0.01 per share (the “Class A Common Stock”), and Class B common stock, par value $0.01 per share (“Class B Common Stock,” and, together with the Class A Common Stock, the “Common Stock”), voting together as a single class, and the holders of Emmis’ 6.25% Series A Cumulative Convertible Preferred Stock (the “Existing Preferred Stock”) will be asked to consider and to vote on the following matters:

 

 

 

 

 

We refer to proposals 1 through 3 collectively as the “Proposed Amendments.” The effectiveness of each of the Proposed Amendments is conditioned upon the approval of the other Proposed Amendments, and the approval of all of the Proposed Amendments is necessary for the completion of the Transactions.

 

While the holders of Emmis Existing Preferred Stock have the right to nominate and elect two directors to Emmis’ board of directors under § 7.2 of Exhibit A of the Articles of Incorporation, no nominations were timely received for this meeting of shareholders. Accordingly, the holders of the Existing Preferred Stock will not be voting on the election of directors at the special meeting. We are also not asking our shareholders to vote at this special meeting on the merger of JS Acquisition with and into Emmis. We expect that, if required by Indiana law, we will call another special meeting after the completion of the Exchange Offer and other transactions described in the accompanying Proxy Statement/Offer to Exchange to consider the merger proposal.

 

We describe each of these proposals in more detail in the accompanying Proxy Statement/Offer to Exchange, which you should read in its entirety before voting.

 

The affirmative vote of:

 

 

 

will be required in order to adopt each of the Proposed Amendments. The text of the Proposed Amendments is attached to this Proxy Statement/Offer to Exchange as Schedule B. You should read the text of the Proposed Amendments in their entirety.

 

The full Emmis board of directors unanimously determined that the Exchange Offer is fair to unaffiliated shareholders who hold Existing Preferred Stock and unaffiliated shareholders who hold Class A Common Stock. Nevertheless, the Emmis board of directors is not making any recommendation as to whether holders of Existing Preferred Stock should participate in the Exchange Offer or vote for the Proposed Amendments. In considering the determination, holders of Existing Preferred Stock should consider the circumstances surrounding the Transactions, including the background of the Transactions, the conflicts of interest inherent therein and the lack of a recommendation by the board of directors of Emmis. Accordingly, the board of directors of Emmis believes that, in light of the foregoing, each holder of Existing Preferred Stock should make its own independent analysis and determination.

 

Only holders of record of Common Stock or Existing Preferred Stock at the close of business on          , 2010 are entitled to notice of and to vote at this meeting and any adjournments or postponements of this meeting. The Proxy Statement/Offer to Exchange and proxy card(s) are enclosed.

 

By order of the Board of Directors,

 

J. Scott Enright
Executive Vice President,
General Counsel and Secretary

 

Indianapolis, Indiana

          , 2010

 

IMPORTANT: Whether or not you plan to attend the special meeting, please promptly either complete, sign, date and mail the enclosed form of proxy or submit your proxy or voting instructions by telephone or Internet. A self-addressed envelope is enclosed for your convenience. Details are outlined in the enclosed proxy card. If you hold your shares of Common Stock or Existing Preferred Stock through a broker, dealer, trustee, bank or other nominee, you may be also able to submit your proxy or voting instructions by telephone or by Internet in accordance with the instructions your broker, dealer, trustee, bank or other nominee provides. Returning a signed proxy will not prevent you from attending the meeting and voting in person, if you wish to do so. Please note that if you execute multiple proxies, the last proxy you execute revokes all previous proxies.

 

FOR HOLDERS OF EXISTING PREFERRED STOCK: This document is also an Offer to Exchange, which sets forth the terms of an offer by Emmis to issue New Notes in exchange for your Existing Preferred Stock. Record holders of Existing Preferred Stock may be receiving letters of transmittal and instruction letters in a separate package. If you hold Existing Preferred Stock, you must tender your shares of Existing Preferred Stock as you have been instructed in order to validly tender your shares into the Exchange Offer. Separately, in order to vote your shares of Existing Preferred Stock, you must send in the proxy card you have provided or give voting instructions, as you have been instructed. Voting your shares of Existing Preferred Stock in favor of the Proposed Amendments is not sufficient to tender your shares of Existing Preferred Stock into the Exchange Offer. Similarly, tendering your shares of Existing Preferred Stock in the Exchange Offer is not sufficient to vote those shares in favor of the Proposed Amendments.

 

 

Preliminary Proxy Statement/Offer to Exchange

 

 

EMMIS COMMUNICATIONS CORPORATION

 

PROXY STATEMENT/OFFER TO EXCHANGE

Any and All Shares of Outstanding 6.25% Series A Cumulative Convertible Preferred Stock

 

 

 

 

This Proxy Statement/Offer to Exchange and the related letter of transmittal relate to an offer (the “Exchange Offer”) by Emmis Communications Corporation to exchange any and all shares of its outstanding 6.25% Series A Cumulative Convertible Preferred Stock, par value $0.01 per share, (the “Existing Preferred Stock”) for $84,275,100 principal amount of newly issued 12% PIK Senior Subordinated Notes due 2017 (the “New Notes”), at a rate of $30.00 principal amount of New Notes for each $50.00 of liquidation preference (excluding accrued and unpaid dividends) of Existing Preferred Stock. The Exchange Offer is being made in connection with a series of transactions proposed by Mr. Jeffrey H. Smulyan, the Chairman, Chief Executive Officer and President of Emmis, to take Emmis private, including a cash tender offer (the “JS Acquisition Tender Offer”) by JS Acquisition, Inc. (“JS Acquisition”) for the outstanding shares of Class A Common Stock, par value $0.01 per share, of Emmis. Jeffrey H. Smulyan, JS Acquisition, LLC and JS Acquisition, Inc. are deemed to be co-bidders and offerors in the Exchange Offer.

 

The Exchange Offer is conditioned on the satisfaction of certain conditions as specified in “The Exchange Offer — Conditions to the Exchange Offer,” including, among other things:

 

 

 

Tendering holders of Existing Preferred Stock will not be entitled to receive any dividends with respect to their tendered shares, including unpaid dividends accumulated to date.

 

 

 

 

You should consider the risk factors beginning on page 57 of this Proxy Statement/Offer to Exchange before you decide whether to participate in the Exchange Offer.

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved or passed upon the merits or fairness of the Exchange Offer or passed upon the adequacy or accuracy of the disclosure in this Proxy Statement/Offer to Exchange. Any representation to the contrary is a criminal offense.

 

The New Notes are exempt from the registration requirements of the Securities Act of 1933 (the “Securities Act”) under Section 3(a)(9) of the Securities Act. The Exchange Offer is exempt from state securities law requirements by virtue of Section 18(b)(4)(C) of the Securities Act.

 

If your shares of Existing Preferred Stock are freely transferable without registration under the Securities Act, any New Notes you receive in the Exchange Offer will also be freely transferable.

 

          , 2010

 

Table of Contents

 

 

SUMMARY TERM SHEET

 

Summary of the Proposed Transactions

	•	JS Acquisition Tender Offer (pages 72 to 73):   On June 2, 2010, JS Acquisition commenced a tender offer (the “JS Acquisition Tender Offer”) for all of the outstanding shares of Class A Common Stock. The offer price is $2.40 per share in cash (without interest and less any applicable withholding taxes). The completion of the JS Acquisition Tender Offer is conditioned on, among other things:

	°	the effectiveness of the Proposed Amendments, and

	°	the valid tender without a valid withdrawal of shares of Class A Common Stock, that, when combined with the Rollover Shares and the shares of Common Stock beneficially owned by JS Parent, JS Acquisition, Mr. Smulyan and his affiliates (collectively, the “Purchaser Group”) and the Alden Fund, will constitute a majority of the votes able to be cast with respect to the Merger (as defined below). Based on the number of outstanding shares as of June 16, 2010, a minimum of approximately 32.8% of our Class A Common Stock would need to be tendered and not withdrawn for this condition to be satisfied;

	•	Alden Purchase Agreement (pages 74 to 77):  Simultaneously with completion of the JS Acquisition Tender Offer, Alden Media will provide all necessary funds for the JS Acquisition Tender Offer and the other Transactions under the Alden Purchase Agreement, under which it will purchase for an aggregate of $90 million in cash, subject to adjustment as described below:

	°	Series A Convertible Redeemable PIK Preferred Interests (the “JS Parent Preferred Interests”) of JS Parent, with an initial preferred unrecovered balance of $96.9 million and having a preferred return of 5% per annum until the second anniversary of the closing and 15% per annum thereafter; and

	°	common interests (the “JS Parent Common Interests”) of JS Parent initially having a percentage interest of JS Parent equal to 24%, subject to adjustment as provided in the JS Parent operating agreement;

	•	Exchange Offer (pages 97 to 105):  In this Exchange Offer, we are offering to issue an aggregate of $84,275,100 principal amount of new 12% PIK Senior Subordinated Notes due 2017 (the “New Notes”), which will be offered in exchange for all of the outstanding 6.25% Series A Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Existing Preferred Stock”) at a rate of $30.00 principal amount of New Notes for each $50.00 of liquidation preference (excluding accrued and unpaid dividends) of Existing Preferred Stock, as described in more detail in this Proxy Statement/Offer to Exchange, which is conditioned on, among other things:

	°	obtaining the requisite 2/3 vote of the holders of Existing Preferred Stock and the affirmative vote of more shares of Class A Common Stock and Class B common stock, par value $0.01 per share (“Class B Common Stock,” and, together with the Class A Common Stock, the “Common Stock”), voting together as a single class (with each share of Class A Common Stock entitled to one vote per share and each share of Class B Common Stock entitled to 10 votes per share), voting in favor than against each of the Proposed Amendments, assuming a quorum is present, (collectively, the “Required Vote”), and

	°	the minimum number of shares of Class A Common Stock, which as of June 16, 2010 would equal 32.8% of the outstanding shares of Class A Common Stock, having been validly tendered and not validly withdrawn in the JS Acquisition Tender Offer;

	•	Proxy Solicitations (pages 93 to 94):  Using this Proxy Statement/Offer to Exchange, we are also soliciting proxies (the “Proxy Solicitations”) from holders of Existing Preferred Stock and Common Stock to vote for the Proposed Amendments, as described in more detail in this Proxy Statement/Offer to Exchange. We are not seeking proxies with respect to the Merger (as defined below). As of the date of this Proxy Statement/Offer to Exchange, Mr. Smulyan directly owns shares of Common Stock entitling him to cast approximately 60.0% of the votes able to be cast by holders of Common Stock at the special meeting, and the Alden Fund directly owns shares of Common Stock entitling it to cast approximately 1.7% of the votes able to be cast by holders of Common Stock at the special meeting. Under the Alden Purchase Agreement, Mr. Smulyan has agreed to vote his shares of Common Stock in favor of the Proposed Amendments, and the Alden Fund has agreed to vote its shares of Common Stock in favor of the Proposed Amendments, so the Proposed Amendments will be approved by the holders of the Common Stock. As of the date of this Proxy Statement/Offer to Exchange, the Alden Fund directly owns approximately 41.4% of the outstanding Existing Preferred Stock. Under the Alden Purchase Agreement, the Alden Fund has agreed to vote its shares of Existing Preferred Stock in favor of the Proposed Amendments;

	•	Merger Proxy Solicitation (page 77):  If the JS Acquisition Tender Offer and this Exchange Offer are completed and the Proposed Amendments are adopted and effected, to the extent required by Indiana law, we will seek the affirmative votes of holders of Common Stock (a majority of which will be beneficially owned, following the JS Acquisition Tender Offer, by JS Acquisition) to approve a merger of JS Acquisition with and into Emmis, with Emmis surviving the merger as a subsidiary of JS Parent, with Mr. Smulyan holding all of the shares of a newly issued class of voting common stock of Emmis and JS Parent holding all of the shares of a newly issued class of non-voting common stock of Emmis.

	•	The Merger (pages 77 to 85):  Once the Merger is approved, we will complete the Merger, in which:

	°	immediately prior to the effective time of the Merger:

	–	Mr. Smulyan will retain 9,755 shares of Class A Common Stock directly, 190,245 shares of Class B Common Stock directly (which he will convert into Class A Common Stock immediately prior to the Merger) and 8,441 shares of Class A Common Stock in Emmis’ 401(k) plan, and The Smulyan Family Foundation will retain 30,625 shares of Class A Common Stock (collectively, the “Retained Shares”);
	–	all shares of Class A Common stock held by the Purchaser Group (other than Retained Shares) and each Rollover Share of the Rolling Shareholders will be contributed to Emmis and cancelled, in satisfaction of each’s respective obligations under the Alden Purchase Agreement and the Rollover Agreement and in consideration for JS Parent Common Interests; and
	–	all shares of Class B Common Stock (other than Retained Shares), all of which are held by Mr. Smulyan, and all of the stock options held by Mr. Smulyan, will be contributed to Emmis and cancelled, in satisfaction of his obligations to under the Alden Purchase Agreement, and in consideration for JS Parent Common Interests.

	°	each share of Class A Common Stock remaining outstanding, including the Retained Shares, will be converted into the right to receive $2.40 in cash (without interest and less any applicable withholding taxes) from Emmis;
	°	all remaining outstanding options to purchase Class A Common Stock, will vest if unvested, and each option with an exercise price of less than $2.40 per share (without interest and less any applicable withholding taxes) will be converted into the right to receive an amount of cash per option equal to $2.40 (without interest and less any applicable withholding taxes) minus the exercise price of the option, and all other options will be cancelled;
	°	each outstanding share of Existing Preferred Stock held by the Alden Fund will be converted into New Notes at a rate of $30.00 principal amount of New Notes per $50.00 of liquidation preference of Existing Preferred Stock, excluding accrued and unpaid dividends;
	°	each other outstanding share of Existing Preferred Stock will be converted into the right to receive $5.856 in cash (without interest and less any applicable withholding taxes) from Emmis, which is equal to the conversion rate of the Existing Preferred Stock of 2.44 shares of Class A Common Stock per share times the $2.40 in cash (without interest and less any applicable withholding taxes) per share of Class A Common Stock that is being offered in the JS Acquisition Tender Offer;
	°	each share of JS Acquisition Class A Common Stock will be converted into one share of new nonvoting common stock of Emmis; and
	°	each share of JS Acquisition Class B Common Stock will be converted into one share of new voting common stock of Emmis.

		Class A				Class B				Existing
		Common Stock				Common Stock				Preferred Stock
JS Parent			—				—				—
JS Acquisition			—				—				—
Jeffrey H. Smulyan			62,941	(1)			4,930,680				—
Rolling Shareholders			1,718,446	(1)			—				—
The Alden Fund			1,406,500	(2)			—				1,162,737

(1)		Does not include any shares underlying any options. See “Principal Shareholders” for more information regarding these shares.

(2)		Does not include shares of Class A Common Stock that underlie outstanding Existing Preferred Stock or other derivatives. See “Principal Shareholders” for more information regarding these shares.

	•	each share of Class A Common Stock held by the Alden Fund will be converted into the right to receive $2.40 in cash (without interest and less any applicable withholding taxes) from Emmis, which is equivalent to the consideration offered by JS Acquisition in the JS Acquisition Tender Offer, and
	•	each share of Existing Preferred Stock held by the Alden Fund will be converted into New Notes at the same rate as in the Exchange Offer.

HISTORICAL AND AS-ADJUSTED CORPORATE AND CAPITAL STRUCTURE

(1)		As of February 28, 2010, there were $339.2 million of term loans, $2.0 million of revolving borrowings and $0.9 million of outstanding letters of credit under the Credit Facility, with $17.1 million available for borrowing under the revolving facility.

(1)		As of February 28, 2010, there were $339.2 million of term loans, $2.0 million of revolving borrowings and $0.9 million of outstanding letters of credit under the Credit Facility, with $17.1 million available for borrowing under the revolving facility.

 

QUESTIONS AND ANSWERS ABOUT THE PROPOSED AMENDMENTS,
THE TRANSACTIONS AND THE SPECIAL MEETING

Q:	What is this document, and why am I receiving it?

Q:	What is Emmis seeking to accomplish?

	•	a cash tender offer by JS Acquisition, a company indirectly owned by Mr. Smulyan, for all of the outstanding shares of Emmis Class A Common Stock for $2.40 per share in cash (without interest and less any applicable withholding taxes);
	•	the purchase of preferred equity interests in JS Parent by Alden Media in order to finance the tender offer by JS Acquisition and the other Transactions, which amount will be adjusted, to the extent funds are required to provide cash consideration to holders of Existing Preferred Stock that do not tender their shares in the Exchange Offer and/or to pay various expenses in connection with the Transactions;
	•	the “Exchange Offer” to issue New Notes to holders of Existing Preferred Stock that is described in this Proxy Statement/Offer to Exchange;

	•	the solicitation of proxies from holders of Common Stock and Existing Preferred Stock to vote in favor of the Proposed Amendments to the terms of the Existing Preferred Stock, as described in this Proxy Statement/Offer to Exchange; and
	•	if the other Transactions are completed, the Merger of JS Acquisition with and into Emmis, in which, among other things, most shares of Class A Common Stock not held by the Purchaser Group will be converted into the right to receive $2.40 in cash (without interest and less any applicable withholding taxes) from Emmis, and each share of Existing Preferred Stock owned by anyone other than the Alden Fund will be converted into the right to receive $5.856 in cash (without interest and less any applicable withholding taxes) from Emmis, which is equal to the conversion rate of the Existing Preferred Stock of 2.44 shares of Class A Common Stock per share times the $2.40 in cash (without interest and less any applicable withholding taxes) per share of Class A Common Stock that is being offered in the JS Acquisition Tender Offer, and each share of Existing Preferred stock owned by the Alden Fund will be converted into the right to receive New Notes at the same rate as in the Exchange Offer.

Q:	When are the Transactions expected to be completed?

Q:	Are the Transactions conditioned on one other, and if so, how?

	•	obtaining the required votes for each of the Proposed Amendments;
	•	the adoption and effectiveness of the Proposed Amendments;
	•	the minimum number of shares of Class A Common Stock, which as of June 16, 2010 would equal 32.8% of the outstanding shares of Class A Common Stock, having been validly tendered and not withdrawn in the JS Acquisition Tender Offer; and
	•	the Alden Purchase Agreement remaining in full force and effect and the conditions to the closing of the transactions under the Alden Purchase Agreement having been satisfied or waived.

	•	there being validly tendered and not withdrawn prior to the expiration of the JS Acquisition Tender Offer a minimum number of shares, which as of June 16, 2010 would equal at least 32.8% of the outstanding Class A Common Stock;
	•	the Alden Purchase Agreement remaining in full force and effect and the conditions to the closing of the transactions under the Alden Purchase Agreement having been satisfied or waived;

	•	obtaining the required votes for each of the Proposed Amendments; and

	•	the adoption and effectiveness of the Proposed Amendments.

Q:	What are the Proposed Amendments?

	•	eliminate the rights of the holders of the Existing Preferred Stock to require Emmis to redeem all or a portion of their shares on the first anniversary after the occurrence of certain going private transactions;

	•	eliminate the rights of the holders of the Existing Preferred Stock to nominate directors to Emmis’ board of directors; and

	•	provide for the automatic conversion upon the Merger (i) of the Existing Preferred Stock (other than the Existing Preferred Stock held by Alden) not exchanged for the New Notes into that amount of consideration that would be paid to holders of Class A Common Stock into which the Existing Preferred Stock was convertible immediately prior to the Merger and (ii) of the Existing Preferred Stock held by Alden into the New Notes, as described in this Proxy Statement/Offer to Exchange.

Q:	What shareholder vote is required to adopt the Proposed Amendments?

	•	more shares of Common Stock, voting together as a single class, voting in favor than against each of the Proposed Amendments, assuming a quorum is present, with the shares of Class B Common Stock being entitled to ten votes per share, and

	•	holders of at least 2/3 of the outstanding Existing Preferred Stock, voting as a separate class.

Q:	Am I being asked to vote to approve the Merger?

Q:	Has a special committee of the Emmis board of directors been formed? Is Mr. Smulyan voting on or participating in any of the deliberations of the Emmis board of directors with respect to the Transactions?

Q:	Do the Transactions involve any conflicts of interest?

Q:	Has the Committee made any fairness determination or recommendation with respect to the Exchange Offer or the Proxy Solicitation?

Q:	Has the full board of directors made any fairness determination or recommendation with respect to the Exchange Offer or the Proxy Solicitation?

Q:	Has JS Acquisition or Mr. Smulyan made any fairness determination or recommendation with respect to the Exchange Offer or the Proxy Solicitation?

Q:	Did the board of directors and the Committee consider alternatives to the Transactions?

Q:	Will Mr. Smulyan be willing to complete only some of the Transactions?

Q:	Will Mr. Smulyan be willing to support a competing transaction?

Q:	Will Emmis be willing to complete only some of the Transactions?

Q:	Will the Transactions result in a change of control of Emmis?

Q.	Why has Mr. Heath Freeman been appointed to the board of directors of Emmis? Did he vote on or participate in any of the deliberations with respect to the Transactions?

Q:	Do Mr. Smulyan, JS Acquisition or Alden own shares of stock that can be voted at the special meeting? Will they vote their shares in favor of the Proposed Amendments?

		Class A				Class B				Existing
		Common Stock				Common Stock				Preferred Stock
JS Acquisition, LLC			—				—				—
JS Acquisition, Inc.			—				—				—
Jeffrey H. Smulyan			62,941	(1)			4,930,680				—
The Rolling Shareholders			1,718,446	(1)			—				—
The Alden Fund			1,406,500	(2)			—				1,162,730

(1)		Does not include any shares underlying any options. See “Principal Shareholders” for more information regarding these shares.

(2)		Does not include shares of Class A Common Stock that underlie outstanding Existing Preferred Stock or other derivatives. See “Principal Shareholders” for more information regarding these shares.

Q:	What effect will the Transactions have on the listing and Exchange Act registration of the securities of Emmis? Will Emmis be a reporting company under the Exchange Act after the closing of the Transactions?

Q:	Will anything happen to my Class A Common Stock if I vote in favor of the Proposed Amendments?

Q:	Can I tender my shares of Class A Common Stock into the JS Acquisition Tender Offer and still submit a proxy or vote my shares at the special meeting?

Q:	Will the Class A Common Stock vote on the Proposed Amendments separately from the Class B Common Stock?

Q:	What happens to outstanding stock options?

Q:	What happens to restricted stock and restricted stock units?

Q:	Where is the means to tender my Existing Preferred Stock?

Q:	If I tender my shares of Existing Preferred Stock into the Exchange Offer, will that also constitute a vote in favor of the Proposed Amendments?

Q:	Will the Proposed Amendments become effective if the Exchange Offer is not completed?

Q:	Will anything happen to my Existing Preferred Stock if I vote in favor of the Proposed Amendments?

Q:	If I do not tender my shares of Existing Preferred Stock, what will happen to those shares?

Q:	Will there be significant differences between the rights and privileges of the New Notes, compared to the rights and privileges of the Existing Preferred Stock?

Q:	Will holders of Existing Preferred Stock be entitled to dissenters’ rights?

Q:	Who will serve as the information agent with respect to the special meeting and the Exchange Offer? Who will serve as Exchange Agent with respect to the Exchange Offer?

Q:	When and where is the special meeting?

Q:	What will be voted on at the special meeting?

Q:	Who is entitled to vote at the special meeting?

Q:	How do I vote?

Q:	If my shares are held in “street name” by my broker, will my broker vote my shares for me?

Q:	What does it mean if I get more than one proxy card?

Q:	What are the voting rights of the Class A Common Stock and the Class B Common Stock?

Q:	What are the voting rights of the Existing Preferred Stock?

Q:	What constitutes a quorum?

Q:	What do I need to do now?

Q:	May I Change My Vote After I Have Mailed In My Signed Proxy Card Or Otherwise Voted?

	•	send in a later-dated, signed proxy card or a written revocation before the special meeting; or
	•	attend the meeting in person and give oral notice of your intention to vote in person.

Q:	What do I do if I have additional questions?

 

SUMMARY OF THE EXCHANGE OFFER

Securities Sought		We are offering to issue New Notes in exchange for any and all outstanding shares of Existing Preferred Stock. As of June 16, 2010, there were 2,809,170 shares of Existing Preferred Stock outstanding.

		The Existing Preferred Stock is listed on the NASDAQ Global Select Market under the ticker symbol, “EMMSP.” See “Price Range and Other Information with Respect to the Existing Preferred Stock” for trading price, dividend and other information regarding the Existing Preferred Stock.
Is it Sufficient to Send in a Proxy Card if I Wish to Participate in the Exchange Offer?		Voting your shares of Existing Preferred Stock in favor of the Proposed Amendments is NOT sufficient to tender your shares of Existing Preferred Stock into the Exchange Offer. In order to participate in the Exchange Offer, you must tender your shares of Existing Preferred Stock as instructed.
Exchange Ratio		We will issue New Notes at a rate of $30.00 aggregate principal amount of New Notes for each $50.00 liquidation preference of Existing Preferred Stock (excluding accrued and unpaid dividends).
Accrued and Unpaid Dividends		Accrued and unpaid dividends will not be paid on any shares of Existing Preferred Stock tendered into the Exchange Offer, and you will no longer have the right to receive such dividends after your shares of Existing Preferred Stock are accepted and paid for in the Exchange Offer. As of April 15, 2010, $4.87 per share of unpaid dividends had accrued on the Existing Preferred Stock.

Fairness; Recommendation		The full Emmis board of directors unanimously determined that the Exchange Offer is fair to the unaffiliated shareholders who hold Common Stock or Existing Preferred Stock. Nevertheless, the Emmis board of directors is not making any recommendation as to whether holders of Existing Preferred Stock should participate in the Exchange Offer or vote for the Proposed Amendments.

		In considering the determination, holders of Existing Preferred Stock should consider the circumstances surrounding the Transactions, including the background of the Transactions, the conflicts of interest inherent therein and the lack of a recommendation by the board of directors of Emmis. Accordingly, the board of directors of Emmis believes that, in light of the foregoing, each holder of Existing Preferred Stock should make its own independent analysis and determination.

Proposed Amendments		We are simultaneously soliciting proxies from holders of at least 2/3 of outstanding Existing Preferred Stock to vote in favor of the Proposed Amendments at the special meeting. Holders of Existing Preferred Stock must submit proxies in the Preferred Proxy Solicitation in order to vote in favor of the Proposed Amendments. Under the Alden Purchase Agreement, the Alden Fund, which

		holds approximately 41.4% of the votes eligible to be cast by holders of the Existing Preferred Stock with respect to the Proposed Amendments, has agreed to vote in favor of the Proposed Amendments.

		We are also simultaneously soliciting proxies to obtain the affirmative votes of more shares of Common Stock, voting together as a single class, voting in favor than against each of the Proposed Amendments, assuming a quorum is present, at the special meeting. We will not complete the Exchange Offer unless the Required Vote each of for the Proposed Amendments is received and the Proposed Amendments are effected. The effectiveness of each of the Proposed Amendments is conditioned upon the approval of the other Proposed Amendments, and the approval of all of the Proposed Amendments is necessary for the completion of the Transactions. As of the date of this Proxy Statement/Offer to Exchange, Mr. Smulyan directly owns shares of Common Stock entitling him to cast approximately 60.0% of the votes able to be cast by holders of Common Stock at the special meeting, and the Alden Fund directly owns shares of Common Stock entitling it to cast approximately 1.7% of the votes able to be cast by holders of Common Stock at the special meeting. Under the Alden Purchase Agreement, Mr. Smulyan has agreed to vote his shares of Common Stock in favor of the Proposed Amendments, and the Alden Fund has agreed to vote its shares of Common Stock in favor of the Proposed Amendments, so the Proposed Amendments will be approved by the holders of the Common Stock.

		We will not complete the Exchange Offer unless the Proposed Amendments are adopted and effected.
Conditions to the Exchange Offer		Our obligation to complete this Exchange Offer, to accept your shares of Existing Preferred Stock tendered in the Exchange Offer and to issue the New Notes in exchange for such shares of Existing Preferred Stock is conditioned on, among other things:
		• the Proposed Amendments having been adopted by the holders of Common Stock and Existing Preferred Stock;

		• not less than a minimum number of shares, which as of June 16, 2010 would equal 32.8% of the outstanding shares of Class A Common Stock, having been validly tendered and not validly withdrawn in the JS Acquisition Tender Offer and having been simultaneously accepted for payment by JS Acquisition;

		• the Alden Purchase Agreement remaining in full force and effect and the conditions to the closing of the transactions under the Alden Purchase Agreement having been satisfied or waived; and
		• other customary conditions precedent.
		See “The Exchange Offer — Conditions to the Exchange Offer.”
Eligible Offerees; Transfer Restrictions		The Exchange Offer will be exempt from registration under the Securities Act under Section 3(a)(9) of that Act. All holders of

		Existing Preferred Stock are eligible to participate in the Exchange Offer.
		If your shares of Existing Preferred Stock are freely transferable without registration under the Securities Act, any New Notes you receive in the Exchange Offer will also be freely transferable.

Expiration Date		The offer will expire at 11:59 p.m., New York City time, on          , 2010, unless extended by Emmis with respect to any or all series of old notes (such date and time, as the same may be extended, the “Expiration Date”). We, in our sole discretion, may extend the Expiration Date for any offer for any purpose, including in order to permit the satisfaction or waiver of any or all conditions to any offer. See “The Exchange Offer — Expiration Time, Extensions, Termination and Amendments.”

Settlement Date		The settlement date for the Exchange Offers will be promptly following the Expiration Date.
Procedures for Tendering		The means to tender your shares of Existing Preferred Stock may be sent to you separately from the proxy card and proxy instructions. Voting your shares of Existing Preferred Stock in favor of the Proposed Amendments is not sufficient to tender your shares of Existing Preferred Stock into the Exchange Offer. If you wish to participate in the Exchange Offer and your Existing Preferred Stock is held by a custodial entity, such as a bank, broker, dealer, trust company or other nominee, you must instruct that custodial entity to tender your Existing Preferred Stock on your behalf pursuant to the procedures of that custodial entity. If your Existing Preferred Stock is registered in your name, you must complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal, according to the instructions contained in this Proxy Statement/Offer to Exchange and the letter of transmittal. See “The Exchange Offer — How to Tender.”
Withdrawal Deadline		You may withdraw your tendered shares of Existing Preferred Stock at any time prior to the Expiration Date.
Withdrawal of Tenders and Revocation of Proxies		You may withdraw the tender of your Existing Preferred Stock prior to the Expiration Date by submitting a notice of withdrawal to the exchange agent using ATOP procedures and/or upon compliance with the other procedures described in this Proxy Statement/Offer to Exchange.
		Proper withdrawal of your Existing Preferred Stock will not be deemed to revoke the related proxy in favor of the Proposed Amendments. You must separately revoke your proxy in order to not have your shares of Existing Preferred Stock voted in favor of the Proposed Amendments.
Consequences of Failure to Tender		If the Exchange Offer is completed, a failure to tender your shares of Existing Preferred Stock in the Exchange Offer could have the following consequences, among others:

		• claims with respect to your shares of Existing Preferred Stock would be junior in right of payment to all of the New Notes issued in the Exchange Offer;
		• your Existing Preferred Stock would no longer have the covenant protections, such as the right to nominate directors and protections against going private transactions, that were removed by the Proposed Amendments; and
		• if the Merger is completed, you will not receive New Notes for your shares of Existing Preferred Stock, but, instead, each share of your Existing Preferred Stock will be converted into the right to receive $5.856 in cash (without interest and less any applicable withholding taxes), which is equal to the conversion rate of the Existing Preferred Stock of 2.44 shares of Class A Common Stock per share times the $2.40 in cash (without interest and less any applicable withholding taxes) per share of Class A Common Stock that is being offered in the JS Acquisition Tender Offer.
		For a description of the consequences of failing to exchange your old notes, see “Risk Factors — Risks Applicable to Existing Preferred Stock Not Tendered in the Exchange Offer.”
Taxation		For a summary of the material U.S. federal income tax consequences of the Exchange Offer, see “Certain Material U.S. Federal Income Tax Consequences.”

Accounting Treatment		The Transactions will not be accounted for as a purchase, because there is no change of ownership involved. Mr. Jeffrey H. Smulyan, who beneficially owned approximately 60.0% of the total voting power of the outstanding Common Stock of Emmis as of June 16, 2010, will own all of Emmis’ voting stock after the completion of the Transactions.

Interests of Certain Persons in the Transactions		A number of directors and executive officers of Emmis have interests in the Transactions, which may be different from yours. See “Special Factors — Executive Officer and Director Participation; Interests of Certain Persons in the Transactions.”

Dealer Managers and Solicitation Agents		No dealer managers or solicitation agents have been retained to solicit tenders or proxies.
Exchange Agent and Information Agent		BNY Mellon Shareowner Services. The addresses and telephone numbers of BNY Mellon Shareowner Services are listed on the back cover page of this Proxy Statement/Offer to Exchange.

 

SUMMARY OF THE PROXY SOLICITATIONS

Special Meeting		The special meeting of the shareholders of Emmis Communications Corporation will be held on          ,          , 2010, at     , local time, at One Emmis Plaza, 40 Monument Circle, Indianapolis, Indiana 46204. The shareholders of Emmis will consider the Proposed Amendments at the special meeting. The text of the Proposed Amendments is attached to this Proxy Statement/Offer to Exchange as Schedule B. Shareholders should read the text of the Proposed Amendments in their entirety.
Does a Tender of my Existing Preferred Stock in the Exchange Offer Constitute a Vote in Favor of the Proposed Amendments?		Unlike a tender offer/consent solicitation relating to debt securities, in order to vote your shares of Existing Preferred Stock, you must also sign and mail in the provided proxy card or follow the instructions given to you by your broker or other nominee in order to vote in favor of the Proposed Amendments. Failure to vote your shares of Existing Preferred Stock in favor of the Proposed Amendments will make it less likely that the Exchange Offer will be completed.

Recommendation		The full Emmis board of directors unanimously determined that the Exchange Offer is fair to the unaffiliated shareholders who hold Common Stock or Existing Preferred Stock. Nevertheless, the Emmis board of directors is not making any recommendation as to whether holders of Existing Preferred Stock should participate in the Exchange Offer or vote for the Proposed Amendments.

		In considering the determination, holders of Existing Preferred Stock should consider the circumstances surrounding the Transactions, including the background of the Transactions, the conflicts of interest inherent therein and the lack of a recommendation by the board of directors of Emmis. Accordingly, the board of directors of Emmis believes that, in light of the foregoing, each holder of Existing Preferred Stock should make its own independent analysis and determination.

Record Date		Holders of record of Class A Common Stock, Class B Common Stock and/or Preferred Stock as of          , 2010 will be entitled to vote those shares of stock at the special meeting.

Condition to Effectiveness of the Proposed Amendments		The Proposed Amendments will not become effective unless all conditions precedent to the completion of the Exchange Offer (other than the adoption and effectiveness of the Proposed Amendments) have been satisfied or waived.

		The effectiveness of each of the Proposed Amendments is conditioned upon the approval of the other Proposed Amendments, and the approval of all of the Proposed Amendments is necessary for the completion of the Transactions.

Existing Preferred Stock		We are soliciting proxies from holders of record, as of          , 2010, of the Existing Preferred Stock to vote at the special meeting in favor of the following Proposed Amendments:

		• to eliminate the rights of the holders of the Existing Preferred Stock to require Emmis to redeem all or a portion of their shares on the first anniversary after the occurrence of certain going private transactions;

		• to eliminate the rights of the holders of the Existing Preferred Stock to nominate directors to Emmis’ board of directors; and

		• to provide for the automatic conversion upon the Merger (i) of the Existing Preferred Stock (other than the Existing Preferred Stock held by Alden) not exchanged for the New Notes into that amount of consideration that would be paid to holders of Class A Common Stock into which the Existing Preferred Stock was convertible immediately prior to the Merger and (ii) of the Existing Preferred Stock held by Alden into the New Notes, as described in this Proxy Statement/Offer to Exchange.

		The effectiveness of each of the Proposed Amendments is conditioned upon the approval of the other Proposed Amendments, and the approval of all of the Proposed Amendments is necessary for the completion of the Transactions.

		The affirmative vote of holders of at least 2/3 of the outstanding shares of Existing Preferred Stock will be required in order to adopt each of the Proposed Amendments. Holders of Existing Preferred Stock must submit proxies in the Proxy Solicitation in order to vote in favor of the Proposed Amendments. As of the record date, there were 2,809,170 shares of Existing Preferred Stock outstanding.

		Under the Alden Purchase Agreement, the Alden Fund, which holds approximately 41.4% of the votes eligible to be cast by holders of the Existing Preferred Stock with respect to the Proposed Amendments, has agreed to vote in favor of the Proposed Amendments.
Common Stock		We are also soliciting proxies from holders of record, as of          , 2010, of Class A and Class B Common Stock, voting together as a single class, to vote at the special meeting in favor of the following Proposed Amendments:

		• to eliminate the rights of the holders of the Existing Preferred Stock to require Emmis to redeem all or a portion of their shares on the first anniversary after the occurrence of certain going private transactions;

		• to eliminate the rights of the holders of the Existing Preferred Stock to nominate directors to Emmis’ board of directors; and

		• to provide for the automatic conversion upon the Merger (i) of the Existing Preferred Stock (other than the Existing Preferred Stock held by Alden) not exchanged for the New Notes into that amount of consideration that would be paid to holders of Class A Common Stock into which the Existing Preferred Stock was

		convertible immediately prior to the Merger and (ii) of the Existing Preferred Stock held by Alden into the New Notes, as described in this Proxy Statement/Offer to Exchange.

		The effectiveness of each of the Proposed Amendments is conditioned upon the approval of the other Proposed Amendments, and the approval of all of the Proposed Amendments is necessary for the completion of the Transactions.

		The affirmative vote of more shares of Common Stock, voting together as a single class, voting in favor than against each of the Proposed Amendments, assuming a quorum is present, will be required in order to adopt such Proposed Amendments. As of the record date, there were outstanding           shares of Class A Common Stock, with one vote per share on each of the Proposed Amendments, and           shares of Class B Common Stock, with ten votes per share on each of the Proposed Amendments.

		As of the date of this Proxy Statement/Offer to Exchange, Mr. Smulyan directly owns shares of Common Stock entitling him to cast approximately 60.0% of the votes able to be cast by holders of Common Stock at the special meeting, and the Alden Fund directly owns shares of Common Stock entitling it to cast approximately 1.7% of the votes able to be cast by holders of Common Stock at the special meeting. Under the Alden Purchase Agreement, Mr. Smulyan has agreed to vote his shares of Common Stock in favor of the Proposed Amendments, and the Alden Fund has agreed to vote its shares of Common Stock in favor of the Proposed Amendments, so the Proposed Amendments will be approved by the holders of the Common Stock.

Abstentions and Broker Non-Votes		If you mark “abstain” on your proxy card, your shares will be counted as present for purposes of determining the presence of a quorum. If your shares of Common Stock or Existing Preferred Stock are held in “street name” or through nominees, brokers and other nominees will not be permitted to vote on the Proposed Amendments unless instructed by you since the Proposed Amendments are not “routine matters” for purposes of the NASDAQ rules. Proxies submitted by brokers and other nominees who do not indicate a vote for the Proposed Amendments because the holders do not have discretionary voting authority and have not received instructions from the beneficial owners on how to vote on those proposals are called “broker non-votes.” Abstentions and broker non-votes will not affect the voting on the Proposed Amendments for shares of Class A and Class B Common Stock, but will have the same effect as voting against the Proposed Amendments for shares of Existing Preferred Stock.

Required Vote in order to Complete the Exchange Offer		In order to adopt each of the Proposed Amendments, the requisite vote of holders of both the Existing Preferred Stock and the Common Stock, as described above, will be required. The effectiveness of each of the Proposed Amendments is conditioned upon the approval of the other Proposed Amendments, and the approval

		of all of the Proposed Amendments is necessary for the completion of the Transactions. It is a condition precedent to the completion of the Exchange Offer that the Required Vote be obtained and the Proposed Amendments be adopted and effected.

Revocation of Proxies		You may change your vote if you send in a later-dated, signed proxy card or a written revocation with respect to your shares of Common Stock or Existing Preferred Stock, as applicable, prior to the special meeting. You can also attend the special meeting in person and give oral notice of your intention to vote in person.

 

SUMMARY OF THE NEW NOTES

Issuer		Emmis Communications Corporation
Title of Security		12% PIK Senior Subordinated Notes due 2017
Maximum Aggregate Principal Amount		$84,275,100, assuming all holders of the Existing Preferred Stock tender their shares.
Maturity		, 2017, unless redeemed earlier by Emmis as described under the heading “Description of the New Notes — Optional Redemption.”
Interest		12.00% per annum accruing from the date of issuance, payable in- kind, in arrears, annually on each          , beginning on          , 2011.
Subsidiary Guarantees		The New Notes will not be guaranteed by any of Emmis’ subsidiaries.
Security		The New Notes will not be secured by any assets.
Mandatory Redemption		Except as provided below, Emmis is not required to make mandatory redemption or sinking fund payments with respect to the New Notes.
		If the New Notes would otherwise constitute “applicable high yield discount obligations” within the meaning of Section 163(i)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), at the end of each accrual period ending after the fifth anniversary of the New Notes’ issuance (each, an “AHYDO Redemption Date”), Emmis will be required to redeem for cash a portion of each New Note then outstanding equal to the “mandatory principal redemption amount” (such redemption, a “mandatory principal redemption”). The redemption price for the portion of each New Note redeemed pursuant to a mandatory principal redemption will be 100% of the principal amount of such portion plus any accrued interest thereon to the date of redemption. The “mandatory principal redemption amount” means the portion of a New Note required to be redeemed to prevent such New Note from being treated as an “applicable high yield discount obligation” within the meaning of Section 163(i)(1) of the Code. No partial redemption or repurchase of the New Notes prior to any AHYDO Redemption Date pursuant to any other provision of the indenture governing the New Notes will alter Emmis’ obligations to make the mandatory principal redemption with respect to any New Notes that remain outstanding on any AHYDO Redemption Date.
Optional Redemption		Emmis may redeem the New Notes, in whole at any time or in part from time to time, at its option on not less than 30 nor more than 60 days’ notice, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but not including, the date of

		redemption. See “Description of the New Notes — Optional Redemption.”
Ranking		The New Notes will be senior subordinated obligations of Emmis and will rank upon liquidation:
		• senior in right of payment to any of Emmis’ existing and future indebtedness that is expressly subordinated in right of payment to the New Notes, including the 15% PIK Junior Subordinated Notes due 2017 (“Junior Subordinated Notes”) that may be issued in connection with a redemption of the Exchanged ECC Shares;
		• senior in right of payment to any shares of Existing Preferred Stock not tendered in the Exchange Offer;
		• subordinated in right of payment to any of Emmis’ existing and future senior indebtedness, including Emmis’ guarantee of the Credit Facility;
		• equal in right of payment with any of Emmis’ existing and future senior subordinated indebtedness;
		• effectively subordinated to any of Emmis’ future secured indebtedness, to the extent of the assets securing such indebtedness; and
		• effectively subordinated to all indebtedness, liabilities (including trade payables) and preferred stock of Emmis’ subsidiaries, including under the Credit Facility.
		On an as-adjusted basis, as of February 28, 2010, the New Notes would be effectively subordinated to $341.2 million of indebtedness under the Credit Facility, with $17.1 million of additional indebtedness available for borrowing under the Credit Facility, net of $0.9 million of letters of credit, and $146.1 million of other liabilities. Because of Emmis’ guarantee of the Credit Facility, the New Notes would also be subordinated in right of payment to that guarantee.
		The ability of Emmis to prepay the New Notes (including its right to optionally redeem New Notes or the requirement that it mandatorily redeem the New Notes) is also subject to limitations, as described under “Description of the New Notes — Subordination.”
Covenants		The indenture for the New Notes will not contain any material restrictive covenants. See “Description of the New Notes.”
Reports		The indenture for the New Notes will not contain any requirement to file with the SEC or provide periodic or current reports, except as may be required under the Trust Indenture Act of 1939. Based on currently applicable interpretations of the TIA and the lack of rules promulgated thereunder, we would not be required to file or provide any such reports. See “Risk Factors — Risks Related to the Exchange Notes — After completion of the Transactions, we may no longer be a company that has any classes of securities listed on a stock exchange or registered under the Exchange Act, and we

		will not be required, under the indenture governing the New Notes, to provide any such reports to holders of the New Notes.”

Effects on Rights of Holders		The rights of holders of New Notes, which will be indebtedness of Emmis, will be significantly different from those of holders of Existing Preferred Stock, which are equity securities of Emmis. For more information on these differences, please see “Special Factors — Purposes, Alternatives, Reasons and Effects — Emmis — Effects.”

Form and Denomination		The New Notes will be represented by one or more global notes, deposited with a trustee as a custodian for the Depository Trust Company and registered in the name of Cede & Co., DTC’s nominee. Beneficial interests in the global notes will be shown on, and any transfers will be effective only through, records maintained by DTC and its participants. Interests in the global notes will be issued in minimum denominations of $1.00 and integral multiples of $1.00. No cash will be paid in lieu of any fractional New Notes that would otherwise be issuable.
Securities Law Restrictions		The Exchange Offer will be exempt from registration under the Securities Act under Section 3(a)(9) of that Act. All holders of Existing Preferred Stock are eligible to participate in the Exchange Offer.
		If your shares of Existing Preferred Stock are freely transferable without registration under the Securities Act, any New Notes you receive in the Exchange Offer will also be freely transferable.
No Registration Rights		The New Notes will not have any registration rights.
Trust Indenture Act of 1939		The indenture governing the New Notes will be qualified under the Trust Indenture Act of 1939 (the “TIA”), and the terms of the New Notes and the indenture governing the New Notes will include those stated in the New Notes and such indenture and those made part of such indenture by reference to the TIA. Emmis has filed an application on Form T-3 to qualify the indenture under the TIA.
No Listing		We will not list the New Notes for trading on any securities exchange or automated quotation system.
Use of Proceeds		We will not receive any proceeds from the Exchange Offer.
Governing Law		The indenture for the New Notes will be governed by New York law.

SPECIAL FACTORS

 

Background

 

In Mr. Smulyan’s Statement on Schedule 13D, as amended, with respect to his beneficial ownership of the Class A Common Stock, Mr. Smulyan has stated that he does not intend to sell his Class A Common Stock or Class B Common Stock but may seek to acquire additional Class A Common Stock or engage in an extraordinary corporate transaction with respect to Emmis. Accordingly, during the last two years, Mr. Smulyan has had preliminary discussions with various hedge funds, private equity funds and other strategic investors with respect to providing financing in connection with a going private transaction of Emmis. The board of directors of Emmis required that any such parties enter into confidentiality agreements with Emmis prior to Emmis providing them with non-public information. In connection with such discussions, Emmis entered into confidentiality agreements with 20 such parties over the course of the last two years, but none of those discussions proceeded beyond the preliminary stage.

 

On May 12, 2009, JS Acquisition, which was formed by Mr. Smulyan in April 2009 for the purposes of exploring potential going private transactions with Emmis, entered into an engagement letter with Party A, an investment bank. Under the engagement letter, Party A would act as a financial intermediary in connection with such potential transactions with a list of specified parties. No discussions other than preliminary discussions resulted from this arrangement.

 

On October 2, 2009, JS Acquisition engaged BIA Capital Strategies, LLC (“BIA”), another investment bank, to assist the company with regards to strategic advice and fundraising related to going private. BIA provided these services to Mr. Smulyan and Emmis through April 2010.

 

During November 2009, Mr. Smulyan also discussed the framework of a potential going private transaction with a private equity investor, Party B, and its legal advisors. Party B conducted a preliminary due diligence investigation with respect to Emmis but no firm offers to provide financing for a going private transaction materialized.

 

In early January 2010, Mr. Heath Freeman, Managing Director of Alden Global Capital, and Messrs. Ryan A. Hornaday and J. Scott Enright of Emmis had a series of discussions regarding the terms and provisions of the Existing Preferred Stock held by Alden.

 

During March and April 2010, BIA continued to advise JS Acquisition with respect to possible going private transactions and continued to seek financing sources for such transactions. In the course of BIA’s fundraising efforts on behalf of JS Acquisition, BIA prepared marketing materials based on a proposed transaction structure that was significantly different from that used for the Transactions. Those materials described funding for a hypothetical transaction in which Emmis common shareholders would receive $1.10 per share of Class A Common Stock, and the holders of the Existing Preferred Stock would receive less than 30% of the liquidation preference per share of Existing Preferred Stock. Those marketing materials contained a valuation summary of Emmis properties prepared by BIA using various metrics, including a range of per population multiples for domestic radio and multiples of broadcast cash flow that were then projected by Emmis for the fiscal year ended February 28, 2011 (all of which projections were also provided to Morgan Stanley for their work on behalf of the Committee), or, in the case of certain stations, based on BIA’s assumptions of the value of the stations. BIA did not receive any offers based on those marketing materials, and Mr. Smulyan did not use those materials in the course of negotiating the Transactions. Mr. Smulyan did not adopt those materials because the transactions described in them were significantly different from the Transactions and were based on assumptions that he determined were unrealistic.

 

On March 23, 2010, Mr. Freeman and Messrs. Hornaday and Enright of Emmis had further discussions regarding the terms and provisions of the Existing Preferred Stock and a preliminary discussion regarding the required vote of the holders of the Existing Preferred Stock that would enable a possible exchange offer for the Existing Preferred Stock.

 

On April 11, 2010, Mr. John Momtazee of Moelis & Company (“Moelis”) indicated to Mr. Smulyan and Patrick M. Walsh that Alden was interested in discussing a potential exchange of the Existing Preferred Stock

for debt. Mr. Smulyan indicated at that time that an exchange of Existing Preferred Stock for debt without a concurrent going-private transaction was unattractive because it would curtail Emmis’ access to the financing markets.

 

This exchange of views led to a meeting in Indianapolis on April 15, 2010 among Mr. Freeman, Mr. Smulyan, Messrs. Walsh, Enright and Hornaday of Emmis and Messrs. Momtazee and Navid Mahmoodzadegan of Moelis. At this meeting, Mr. Freeman and Mr. Smulyan first discussed the possibility of Alden providing one or more forms of financing for a going private transaction with respect to Emmis in which Mr. Smulyan or an entity controlled by him would acquire all of the outstanding stock of Emmis not already controlled by Mr. Smulyan.

 

The structure of the Transactions proposed to Alden had been developed by Mr. Smulyan, after consultation with his outside legal advisors, Paul, Weiss, Rifkind, Wharton & Garrison LLP, over time, including in connection with Mr. Smulyan’s previously-proposed going-private transactions with respect to Emmis. On April 19, 2010, Moelis prepared certain materials showing illustrative transaction scenarios, which materials have been filed with the SEC as an exhibit to Emmis’ and the Purchaser Group’s Statement on Schedule TO. The materials illustrated potential outcomes for the illustrative transaction scenarios across a broad range of future EBITDA and asset dispositions possibilities. Mr. Smulyan did not adopt any of the illustrative transaction scenarios because he did not believe the assumptions underlying the illustrative transaction scenarios were realistic and he was not willing to assume the risks contemplated in the scenarios. Instead, Mr. Smulyan, with the assistance of Moelis, utilized assumptions that were more realistic to develop his initial proposal with respect to the Transactions that was negotiated as described below and eventually publicized in the Letter of Intent.

 

JS Acquisition engaged Moelis as its financial advisor, effective as of April 21, 2010.

 

Beginning on April 22, 2010, Mr. Smulyan and Alden, together with their respective legal advisors, Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul, Weiss”) and Skadden, Arps, Slate, Meagher & Flom LLP, their respective Indiana counsel, Taft Stettinius & Hollister LLP and Krieg DeVault LLP (“Taft”), and Moelis, began negotiating the terms of a letter of intent relating to the proposed going private transaction and a related financing by Alden.

 

The negotiations continued throughout the weekend of April 24 to 25, 2010.

 

On April 26, 2010, JS Acquisition and Alden entered into the non-binding Letter of Intent. Based on the framework laid out in the Letter of Intent, Mr. Smulyan, Alden, their respective legal advisors and Moelis began to prepare definitive documentation with respect to the Transactions designed to result in Emmis being taken private by JS Acquisition.

 

Shortly after the announcement of the proposed Transactions, several putative stockholder class action lawsuits were filed against Emmis and each member of its board of directors. Certain of the lawsuits also named JS Acquisition and Alden as defendants. As of July 1, 2010, a total of seven putative class action complaints were filed, six of which were filed in the Marion County Superior Court of Indiana, and one of which was filed in the United States District Court of the Southern District of Indiana, and each of which seeks, among other things, injunctive relief against the proposed Transactions based on allegations of breach of fiduciary duty.

On April 28, 2010, JS Acquisition sent the following letter to the board of directors:

 

JS Acquisition, Inc.

 

April 28, 2010

 

Board of Directors

Emmis Communications Corporation

One Emmis Plaza

40 Monument Circle, Suite 700

Indianapolis, Indiana 46204

 

Ladies and Gentlemen:

 

We would like to take this opportunity to brief you on the terms of the letter of intent (the “LOI”) entered into between JS Acquisition, Inc. (“JS Acquisition”) and Alden Global Capital (“Alden”) relating to a going private transaction (the “Transaction”) involving Emmis Communications Corporation (“Emmis”). Pursuant to the LOI, JS Acquisition intends to purchase all of the shares of Class A common stock of Emmis (excluding shares owned by JS Acquisition, Mr. Jeffrey H. Smulyan and his affiliates) at a price per share of $2.40. The consideration to be offered for Emmis’ Class A common stock represents a 74% premium over the 30-trading day average closing price of the Class A common stock and a 118% premium over the 180-trading day average closing price of the Class A common stock. Our offer will be conditioned upon, among other things including regulatory approvals and other customary conditions, a number of shares of Class A common stock of Emmis being tendered for purchase that, when combined with the Class A and Class B common stock owned by Mr. Smulyan and his affiliates and the Class A common stock owned by Alden, represents a majority of the aggregate number of shares of outstanding Class A and Class B common stock of Emmis (the “Minimum Condition for the Common Stock Tender Offer”). Following the closing of our offer to purchase, the remaining outstanding Class A common stock (excluding shares held by Mr. Smulyan and his affiliates) would be cashed out in a merger (the “Back-end Merger”) at the same price per share as our offer.

 

The LOI also contemplates an offer to exchange all of the outstanding shares of preferred stock of Emmis (the “Preferred Stock”) for newly-issued 12% senior subordinated notes due 2017 of Emmis (the “Debt”) with an aggregate principal amount equal to 60% of the aggregate liquidation preference (excluding accrued and unpaid dividends) of the Preferred Stock. The consideration offered for the Preferred Stock represents a 73% premium over the 30-trading day average closing price of the Preferred Stock and a 133% premium over the 180-trading day average closing price of the Preferred Stock.

 

The exchange offer is expected to be exempt from registration under the Securities Act of 1933 pursuant to Section 3(a)(9). In connection with the exchange offer, exchanging holders will be required to consent to (i) eliminate Section 11 of Exhibit A to Emmis’ Articles of Incorporation (providing for a Going Private Redemption), (ii) provide for the automatic conversion upon the Back-end Merger of (X) the Preferred Stock (other than the Preferred Stock held by Alden) into that amount of consideration that would be paid to holders of shares of the Class A common stock into which the Preferred Stock was convertible immediately prior to the Back-end Merger and (Y) the Preferred Stock held by Alden into Debt, (iii) eliminate the right of the holders of the Preferred Stock to nominate directors to Emmis’ board of directors and (iv) any further amendments as may be necessary or appropriate to avoid any requirement for Emmis to register the Debt under the Securities Exchange Act of 1934, as amended (the “Preferred Stock Amendments”). The Preferred Stock Amendments will require approval of two-thirds of the holders of the Preferred Stock. Alden, which currently holds 42% of the Preferred Stock, has agreed to

consent to such amendments and exchange its Preferred Stock for Debt as part of the Back-end Merger. Our offer to purchase will also be conditioned upon the tender in the exchange offer of a number of shares of Preferred Stock that, when combined with the Preferred Stock being exchanged by Alden in the Back-end Merger, represents at least two-thirds of the outstanding Preferred Stock and the effectiveness of the Preferred Stock Amendments (the “Minimum Condition for the Preferred Stock Exchange Offer”).

 

In order to provide this opportunity to Emmis common shareholders, we will require the following from the Emmis board of directors (the “Board”) prior to our launch of our offer to purchase:

 

1. the Board approving the Transaction as contemplated by §§ 23-1-43-1 to 23-1-43-24 of the Ind. BCL prior to the contribution to JS Acquisition of any shares of Emmis stock by Mr. Smulyan and the purchase by JS Acquisition of shares tendered in the offer, the effectiveness of which is conditioned upon satisfaction of the Minimum Condition of the Common Stock Tender Offer and the Minimum Condition of the Preferred Stock Exchange Offer;

 

2. the Board authorizing Emmis to enter into a merger agreement providing for the Back-end Merger, adopting the plan of merger contemplated thereby and agreeing to utilize Ind. BCL § 23-1-40-3(b)(1) to submit such agreement and plan of merger directly to the Emmis common shareholders for approval without a Board recommendation, the effectiveness of such authorization, adoption and agreement being conditioned upon satisfaction of the Minimum Condition of the Common Stock Tender Offer and the Minimum Condition of the Preferred Stock Exchange Offer;

 

3. the Board causing the appointment of Mr. Heath Freeman, as designee of Alden, to serve as an additional director on the Board (Mr. Freeman’s bio is attached for your review);

 

4. the Board approving, promptly following such appointment, the exemption pursuant to Rule 16b-3 under the Exchange Act of the consideration to be delivered to Alden in respect of the Class A common stock and Preferred Stock owned by it in the Back-end Merger; and

 

5. the Board approving Emmis’ cooperation with all other documentation and filings necessary or appropriate to effectuate the Transaction subject to satisfaction of the Minimum Condition for the Common Stock Tender Offer, including, in particular, cooperation with launching the exchange offer and obtaining the necessary approvals of the Preferred Stock Amendments.

 

We look forward to working with the Board to provide Emmis common shareholders this exciting opportunity. Just as a reminder, Jeff Smulyan is not interested in any transaction involving the sale of his Class A or Class B common stock and will not support another transaction in his capacity as controlling common shareholder.

 

Timing is critical to the success of the Transaction and our plan is for each of the offers to be launched as soon as possible. Accordingly, we encourage the Board to form an independent committee to engage independent legal counsel to consider the foregoing requests and respond to us as soon as possible.

 

Very truly yours,

 

JS Acquisition, Inc.

 

President & CEO

 

On April 29, 2010 at a special meeting of the board of directors, Mr. Smulyan described the proposed transaction to the board of directors and the proposed establishment of a committee of independent directors to consider and act with respect to the proposed offer. Also present at the meeting were representatives of Paul, Weiss and Taft, counsel to JS Acquisition. The Taft representatives explained the duties of the directors under Indiana law. The board of directors then formed the Committee of Disinterested Directors consisting of Ms. Susan B. Bayh and Messrs. Peter A. Lund and Lawrence B. Sorrel, all of whom qualify as “Independent Directors” under NASDAQ Listing Rule 5605 are “disinterested directors” as defined in §23-1-35-1(h) of the IBCL and have no interest in the Transactions other than as holders of Class A Common Stock and outstanding options to purchase shares of Class A Common Stock. None of the members of the Committee will be a director of Emmis following the completion of the Transactions. The board of directors of Emmis authorized the Committee to exercise the power of the board of directors with respect to the consideration and negotiation of the proposed offer, including the authority to make recommendations to the full board of directors with respect to the proposed offer. In addition, the board of directors authorized the Committee to retain the services of its own legal and financial advisors at Emmis’ expense. The board of directors further authorized Emmis to pay each member of the Committee $2,000 per meeting attended in person or by telephone, in accordance with Emmis’ Director Compensation Policy.

 

On May 2, 2010, at a meeting of the Committee, the Committee selected Davis Polk & Wardwell, LLP (“Davis Polk”) as its legal counsel and Barnes & Thornburg LLP (“B&T”) as its Indiana counsel. With the assistance of Davis Polk and B&T, the Committee determined that there were no relationships with Emmis, Mr. Smulyan, JS Acquisition or Alden or any of their respective representatives that would interfere with the independence of Ms. Bayh or Messrs. Lund or Sorrel in connection with considering the proposed offer. In addition, representatives of Davis Polk and B&T reviewed with Ms. Bayh and Messrs. Lund and Sorrel their responsibilities, as well as the process to be expected in connection with the Committee’s and the full board of directors’ consideration of the proposed offer. The members of the Committee also discussed the scope of the authority of the Committee and the process for selecting an investment banking firm to serve as financial advisor to the Committee.

 

On May 4, 2010, the members of the Committee and representatives of Davis Polk, interviewed representatives of three investment banking firms with the objective of selecting a firm as financial advisor to the Committee. These representatives discussed their expertise, experience in and perspective on the media and communications industry, their preliminary view of the substance and process of evaluating JS Acquisition’s proposal, as well as information about their respective firms. They also responded to a variety of questions from the members of the Committee regarding their experience in advising committees in a controlling common shareholder context and their independence, objectivity and any relationships that might pose potential conflicts.

 

At a meeting of the Committee held on May 5, 2010, the Committee and representatives of Davis Polk discussed the credentials of the investment banking firms and determined, after further discussions with certain of the firms, to retain Morgan Stanley as its independent financial advisor in connection with its review of the proposed offer.

 

Among the factors the Committee considered in selecting Morgan Stanley were its familiarity with the media and communications industry and their recent experience in similar transactions. The Committee also considered any relationships that Morgan Stanley had with Mr. Smulyan or Alden, as well as any other relationships that would affect Morgan Stanley’s ability to act as independent financial advisor to the Committee. After consideration of the foregoing, the Committee concluded that Morgan Stanley had no prior relationships with Mr. Smulyan or Alden that would adversely impact its independence. The Committee then unanimously approved the selection of Morgan Stanley as financial advisor, subject to negotiation of a mutually satisfactory engagement letter between the Committee and Morgan Stanley. Over the next few days, the Committee and representatives of Davis Polk negotiated the terms of the engagement letter with Morgan Stanley. Also during that period, Davis Polk provided Morgan Stanley with Emmis’ internal budget for its fiscal year ending February 28, 2011 and updated projections for the same period dated May 7, 2010 (the “2011 Financials”).

On May 6, 2010, JS Acquisition was recapitalized so that Mr. Smulyan held all 10 shares of JS Acquisition Class B Common Stock and all 1,000,000 shares of JS Acquisition Class A Common Stock. Also on May 6, 2010, Mr. Smulyan contributed the JS Acquisition Class A Common Stock to JS Parent.

 

From April 26, 2010 to May 24, 2010, representatives of JS Acquisition and Alden Media, together with their respective counsel and Moelis, negotiated the terms of the various agreements governing the Transactions. On May 24, 2010, JS Parent, the Alden Fund, Alden Global Value Recovery Master Fund, L.P. and Alden Media entered into the Alden Purchase Agreement, under which Alden Media will, among other things, purchase from JS Parent the JS Parent Preferred Interests and the JS Parent Common Interests to finance the cash consideration to be paid in the JS Acquisition Tender Offer and the Merger and to fund other cash used in the Transactions.

 

On May 11, 2010, representatives of Morgan Stanley met with Mr. Smulyan, in his capacity as Chief Executive Officer of Emmis, Patrick M. Walsh, Executive Vice President, Chief Financial Officer and Chief Operating Officer of Emmis, and Ryan A. Hornaday, Senior Vice President, Finance and Treasurer of Emmis to discuss Emmis’ financial performance, the 2011 Financials and other financial matters relating to Emmis. During this meeting, Morgan Stanley was provided with various materials relating to the financial performance of Emmis but was not provided with financial projections for any year or period beyond February 28, 2011 as the Emmis management team indicated that Emmis did not generate financial projections in the ordinary course of its business. In addition, the management team noted that, given the state of the industry and the general economy, they did not believe that any financial projections generated by Emmis (other than the 2011 Financials) would be reliable predictors of Emmis’ future performance. The management team also confirmed that financial projections were not provided to Alden and that, in addition to the 2011 Financials, Morgan Stanley had received all financial information provided to Alden.

 

Between May 13, 2010 and May 19, 2010, representatives of Morgan Stanley had several follow-up calls with Mr. Hornaday to discuss certain financial covenant metrics, the 2011 Financials and other items.

 

At a meeting of the Committee held on May 19, 2010, representatives of Davis Polk and B&T discussed the Committee’s fiduciary duties in connection with evaluating the proposal generally and, more specifically, evaluating whether “special circumstances” under Indiana Business Corporations Law special circumstances statute (§ 23-1-40-3(b)(1) IBCL, the “Special Circumstances Statute”) were present which would permit the board of directors to submit the transaction directly to the shareholders of Emmis without making a recommendation that the shareholders approve the transaction. The board of directors considered various factors, including Mr. Smulyan’s statement to the board of directors that the transaction needed to move expeditiously at the risk of Alden electing not to participate in the transaction, the limited covenant compliance cushion Emmis had under its existing credit facilities which restrained Emmis’ ability to undergo a lengthy and expensive process to consider the proposal and Mr. Smulyan’s public statements that he would not approve an alternative transaction, that, alone or in the aggregate, might constitute “special circumstances”. The Committee concluded that it would need to further consider these factors and any additional factors that the Committee determined to be relevant, such as the state of the media industry and the financial condition of Emmis, together with Morgan Stanley, before considering further whether “special circumstances” existed.

 

At the same meeting, representatives of Morgan Stanley reviewed with the Committee, among other things, the state of the media industry, the financial condition of Emmis and their preliminary views regarding the financial aspects of the proposal. The Committee and the Morgan Stanley representatives discussed Emmis’ ability to meet certain financial covenants under its existing credit facility, in particular, following August 31, 2011 when the existing financial covenants were scheduled to revert to more restrictive covenants. The Morgan Stanley representatives described their discussions with Emmis management concerning the impact of potential asset sales on Emmis’ ability to generate the cash necessary to service its existing indebtedness and other obligations. The Morgan Stanley representatives noted the current lack of potential acquirers of Emmis’ assets because, among other reasons, likely acquirers were heavily leveraged and had potential regulatory issues. The Morgan Stanley representatives also discussed with the Committee the current lack of refinancing options available to Emmis. The Committee then discussed with the representatives of Morgan Stanley whether, based on publicly-available information, the additional information that had been

provided and the terms of the proposal, they would be in a position to complete their financial analysis and their review of the documentation for the proposed offer and give the Committee their view as to the fairness of the consideration to be received by the holders of Class A Common Stock (other than the Purchaser Group, the Alden Fund and the Rolling Shareholders) pursuant to the JS Acquisition Tender Offer within the timetable that had been proposed.

 

The Committee then concluded that, if Morgan Stanley could complete its financial analysis and if the Committee had sufficient time to carefully consider the analysis and the terms of the proposal, it would be in the interests of Emmis and Emmis’ common shareholders that the Committee make a recommendation to the board of directors with respect to the proposed offer rather than submit it directly to the common shareholders of Emmis without making a recommendation to such shareholders. The Committee also considered the benefits of attempting to negotiate a higher offer price per share against the risk that the proposal would be withdrawn or Alden would elect not to participate in the transaction. The Committee then discussed with its legal advisors how best to communicate its views to JS Acquisition.

 

Immediately following the meeting on May 19, 2010, representatives of Davis Polk conveyed to Paul, Weiss the Committee’s preliminary view that, subject to review of details with respect to the proposal and completion of the financial analysis by Morgan Stanley, it could foresee making a recommendation to the board of directors with respect to the proposed JS Acquisition Tender Offer and whether common shareholders tender their Class A Common Stock in the JS Acquisition Tender Offer.

 

Also on May 19, 2010, representatives of Paul, Weiss delivered drafts of various draft documents relating to the proposal, including a draft of the Merger Agreement.

 

On May 20, 2010, Paul, Weiss sent a revised draft of the Merger Agreement to Davis Polk.

 

On May 20, 2010 and May 21, 2010, representatives of Davis Polk had several conversations with certain members of the Committee regarding, among other things, requested changes to certain of the terms of the proposal. The Committee determined to request an increase in the offer price per share of Class A Common Stock and discussed certain areas of concern with respect to conditions to the completion of the JS Acquisition Tender Offer. On May 21, 2010, Davis Polk representatives conveyed the requests and concerns to representatives of Paul, Weiss. The Paul, Weiss representatives indicated that they would discuss the requested modifications with JS Acquisition.

 

Between May 21, 2010 and May 23, 2010 representatives of Davis Polk provided various additional comments to Paul, Weiss with respect to the draft Merger Agreement and Paul, Weiss distributed several revised versions of the draft Merger Agreement reflecting, among other things, Davis Polk’s comments to the various drafts.

 

On May 22, 2010, Davis Polk sent a current draft of the Merger Agreement, together with a summary of the draft and other materials, to the members of the Committee.

 

On May 24, 2010, representatives of Paul, Weiss contacted representatives of Davis Polk to inform them that JS Acquisition considered Emmis’ request for an increased offer price, as well as the specified areas of concern with respect to conditions to the closing of the JS Acquisition Tender Offer. The Paul, Weiss representatives stated that JS Acquisition believed that it had fully priced the acquisition and that it was unwilling to increase the offer price, and that Alden was not willing to provide the financing necessary for an increased offer price. Further, Paul, Weiss informed Davis Polk that JS Acquisition was unwilling to modify any of the material conditions to the closing of the JS Acquisition Tender Offer. Davis Polk conveyed this message to the members of the Committee. The Committee considered JS Acquisition’s response to its request and concerns, along with the risk that JS Acquisition would not proceed with the proposed offer or that Alden would withdraw its financing of the proposed offer. Thereafter, the Committee determined to continue considering the proposed offer, since the Committee believed it was in the interests of Emmis’ shareholders for the Committee to make a recommendation to the board of directors with respect to the proposed offer.

 

Also on May 24, 2010, Paul, Weiss circulated draft JS Acquisition Tender Offer documents to Davis Polk. Davis Polk sent the draft to the members of the Committee.

 

On the morning of May 25, 2010, Paul, Weiss sent the current draft Merger Agreement, draft JS Acquisition Tender Offer documents and other documents to the board of directors.

 

At a meeting of the Committee held on May 25, 2010, representatives of Davis Polk and B&T discussed the fiduciary duties of the members of the Committee with respect to their consideration of the proposal. Representatives of Morgan Stanley then discussed certain financial analyses related to the proposed offer and Davis Polk representatives summarized the material terms of the Merger Agreement. Thereafter, at the request of the Committee, Morgan Stanley delivered its oral opinion, which was subsequently confirmed in writing, that as of May 25, 2010, and based upon and subject to the various assumptions, considerations, limitations and qualifications set forth in the written opinion, the offer price, to be received by the holders of Class A Common Stock (other than the Purchaser Group, the Alden Fund and the Rolling Shareholders) pursuant to the JS Acquisition Tender Offer and the Merger was fair from a financial point of view to such holders.

 

During and following the presentation, the Committee posed questions to its advisors. After consideration and review, the Committee unanimously determined that the Merger Agreement, including the JS Acquisition Tender Offer and the Merger, was advisable and fair to and in the best interests of Emmis and unaffiliated shareholders, and unanimously determined to recommend that the board of directors adopt resolutions, on terms and subject to the conditions of the Merger Agreement and the IBCL:

 

 

Following the meeting of the Committee, the board of directors of Emmis met to, among other things, receive the recommendation of the Committee with respect to the JS Acquisition Tender Offer. Following receipt of the Committee’s recommendation, the board of directors unanimously:

 

 

At that meeting the board of directors of Emmis approved the Exchange Offer and the issuance of the New Notes, authorized Emmis to submit the Proposed Amendments to shareholders without a recommendation from the board of directors and approved all other actions needed to effectuate the Proposed Amendments, subject to receipt of requisite shareholder approval. For a summary of factors considered by the board of directors in making its determinations to approve the Exchange Offer and authorize the submission of the Proposed Amendments to shareholders without a recommendation See “Purposes, Alternatives, Reasons and Effects — Emmis.”

 

On May 25, 2010, Emmis, JS Acquisition and JS Parent entered into the Merger Agreement. That same day, Emmis issued a press release announcing the execution of the Merger Agreement.

 

As contemplated by the Letter of Intent, Mr. Heath Freeman was elected to the board of directors on May 25, 2010. Mr. Freeman has not participated in any deliberations of the board of directors or the Committee regarding the Transactions.

On May 27, 2010, Emmis filed with the SEC a preliminary Proxy Statement/Offer to Exchange with respect to the Exchange Offer.

 

On June 2, 2010, JS Acquisition commenced the JS Acquisition Tender Offer.

 

On June 23, 2010, Alden, JS Parent and Mr. Smulyan entered into an Amendment and Consent Letter Agreement, with respect to, among other things, the extension of the JS Acquisition Tender Offer and certain other amendments and consents relating to the Alden Purchase Agreement, the Exchange Offer, the JS Parent operating agreement, the Registration Rights Agreement and the Rollover Agreement. On that same day, JS Acquisition, JS Parent, Mr. Smulyan and Emmis filed an Amendment to their combined Statement on Schedule TO and Schedule 13E-3. In addition, on June 23, 2010, JS Acquisition issued a press release announcing, among other things, the extension of the JS Acquisition Tender Offer and the removal of the condition to the JS Acquisition Tender Offer that Alden Media pay the purchase price pursuant to the Alden Purchase Agreement. Also on that same day, Emmis filed an Amended and Restated Preliminary Proxy Statement/Offer to Exchange with the SEC with respect to the Exchange Offer and issued a press release regarding the filing.

 

In the course of the SEC review process, in order to fulfill the requirements of Rule 13e-3 under the Exchange Act, the board of directors of Emmis was reconvened on June 30, 2010 to consider the fairness of the JS Acquisition Tender Offer to unaffiliated holders of Existing Preferred Stock. Mr. Heath Freeman did not attend the meeting. At that meeting, the board of directors, by the affirmative vote of all members present, determined that the JS Acquisition Tender Offer is fair to the unaffiliated holders of Existing Preferred Stock, without making a recommendation to such holders with respect to the Exchange Offer or the Proposed Amendments. For a summary of factors considered by the board of directors in making its determination and a description of important qualifications and considerations relating to the determination, see “Fairness of the JS Acquisition Tender Offer to Unaffiliated Holders of Existing Preferred Stock — Emmis.”

 

On July 1, 2010, JS Acquisition, JS Parent, Mr. Smulyan and Emmis filed with the SEC an Amendment to their combined Statement on Schedule TO and Schedule 13E-3 with respect to the JS Acquisition Tender Offer. On that same day, JS Acquisition, JS Parent, Mr. Smulyan and Emmis filed with the SEC an Amended and Restated Preliminary Proxy Statement/Offer to Exchange on Schedule 14A, and an amendment to their Schedule TO and Schedule 13E-3 with respect to the Exchange Offer.

 

Purposes, Alternatives, Reasons and Effects — Emmis

 

Purposes

 

The Committee has determined that the JS Acquisition Tender Offer and the Merger were advisable and fair to and in the best interest of Emmis and unaffiliated shareholders who own Class A Common Stock and, based on the Committee’s recommendation, the board of directors of Emmis has recommended that holders of Class A Common Stock tender their shares into the JS Acquisition Tender Offer. Because JS Acquisition has conditioned its obligation to accept shares in the JS Acquisition Tender Offer on, among other things, the commencement of the Exchange Offer, Emmis’ purpose in commencing the Exchange Offer is to permit the holders of the Class A Common Stock to tender their shares into the JS Acquisition Tender Offer.

 

Alternatives

 

Mr. Smulyan, in his capacity as the controlling shareholder of Emmis, has informed Emmis that he would not be willing to approve any other transaction that competes with or impedes the Transactions. For this reason, the board of directors of Emmis did not consider alternative transactions.

 

Reasons

 

The board of directors of Emmis has approved the Exchange Offer in order to permit the holders of the Class A Common Stock to tender their shares into the JS Acquisition Tender Offer.

Effects

 

The Exchange Offer will have both positive and negative effects on the holders of the Existing Preferred Stock. A holder of shares of Existing Preferred Stock who accepts the Exchange Offer will hold a New Note, which will be a different instrument from the Existing Preferred Stock. The following table compares certain rights of holders of the Existing Preferred Stock with those of holders of the New Notes:

 

 

The above table is provided for informational purposes only and does not take into account all factors relating to a comparison of the shares of Existing Preferred Stock to the New Notes, nor does it take into account any factors relating to the tax consequences of accepting the Exchange Offer. For a more complete description of the New Notes and the Existing Preferred Stock, see “Description of New Notes” included in this Proxy Statement/Offer to Exchange. See also “Certain Material U.S. Federal Income Tax Consequences.” The New Notes are also subject to various risks, including those set forth in “Risk Factors — Risks Related to the New Notes.” Any shares of Existing Preferred Stock acquired by Emmis in the Exchange Offer will be cancelled.

 

After the Transactions are completed, we expect that we will no longer be subject to requirements under the Exchange Act to file periodic or current reports with the SEC because no class of our securities will be held by more than 300 holders of record. In addition, the indenture governing the New Notes will not contain any covenants requiring Emmis to file such reports. As a result, we will no longer be required to provide financial and other information in filings on Forms 10-K, 10-Q or 8-K. Furthermore, we expect that none of our securities will be listed on a stock exchange after completion of the Exchange Offer. As a result, we will no longer be subject to SEC and stock exchange regulations with respect to financial reporting, internal control over financial reporting, disclosure controls, audit committee independence, short-swing profits reporting, beneficial ownership reporting or any other similar requirements to which public companies are subject. Our status as a private company may have an adverse effect on the value of our securities and evidences of our indebtedness, including the New Notes.

 

If the Proposed Amendments are adopted and effected, holders of the Existing Preferred Stock will no longer be entitled to appoint directors to the Emmis board of directors if sufficient dividends on the Existing Preferred Stock are accrued and unpaid. The Proposed Amendments would also remove the requirement for Emmis to redeem the Existing Preferred Stock following specified going-private transactions. If the JS Acquisition Tender Offer and this Exchange Offer are completed and the Proposed Amendments are adopted and effected, we will seek the affirmative votes of holders of Common Stock (a majority of which will be beneficially owned, following the JS Acquisition Tender Offer, by Mr. Smulyan and the Alden Fund) to approve the Merger of JS Acquisition with and into Emmis, with Emmis surviving the merger as a subsidiary of JS Parent. Mr. Smulyan will hold all of the shares of a newly issued class of voting common stock of Emmis, and JS Parent will hold all of the shares of a newly issued class of non-voting common stock of Emmis. In the Merger, each outstanding share of Existing Preferred Stock not held by the Alden Fund will be converted into the right to receive $5.856 in cash (without interest and less any applicable withholding taxes) from Emmis, which is equal to the conversion rate of the Existing Preferred Stock of 2.44 shares of Class A Common Stock per share times the $2.40 in cash (without interest and less any applicable withholding taxes) per share of Class A Common Stock that is being offered in the JS Acquisition Tender Offer, and is less than the value of the New Notes you would receive in the Exchange Offer, assuming the New Notes are paid in full at maturity, and each share of Existing Preferred Stock owned by the Alden Fund will be converted into the right to receive New Notes at the same rate as in the Exchange Offer.

 

Following the completion of the Transactions, Mr. Smulyan, through JS Parent, will beneficially own securities that would entitle him to an approximately 67.8% indirect common equity interest in Emmis.

 

Fairness of the Exchange Offer — Emmis

 

Indiana law does not impose any duty upon Emmis or its board of directors or executive officers to seek or obtain any particular price or a fair price for the Existing Preferred Stock in the Exchange Offer. Under Indiana law the duties of a board of directors or executive officers are first to the corporation itself. In considering, what is in the best interests of the corporation, the directors may take into account the interests of

constituents, including shareholders, employees, customers, communities or anything else they deem relevant. Likewise, Indiana law does not impose on the directors or executive officers any duty to make a recommendation to holders of Existing Preferred Stock as to whether to participate in the Exchange Offer or, in special circumstances which would include the Proposed Amendments as a result of the conflicts of interests, whether to vote to approve the Proposed Amendments. Furthermore, Indiana law does not impose any duty on any such persons to obtain advice from or retain any outside person or financial advisor to prepare any report, opinion or appraisal relating the Exchange Offer or the Proposed Amendments.

 

Federal securities laws and regulations, however, require disclosure of the board of directors’ position as to the fairness of the Exchange Offer to the unaffiliated shareholders of Emmis. Accordingly, the board of directors considered and reviewed the terms, purposes, alternatives and effects of the proposed Exchange Offer and Proposed Amendments in order to determine what its position was with respect to the question of whether the Exchange Offer is fair to unaffiliated shareholders who hold Existing Preferred Stock or Class A Common Stock.

 

Since the Proposed Amendments and the Exchange Offer are necessary steps to completion of the JS Acquisition Tender Offer, an inherent conflict of interest was created for the Emmis board of directors, as not even the Committee, who is disinterested in the Transactions other than as a result of their ownership of Class A Common Stock, could be asked to fairly represent the interests of the holders of Existing Preferred Stock while at the same time serving the best interest of Emmis and its holders of Class A Common Stock.

 

Indiana law contemplates just such a conflict and has provided that under this special circumstance a board of directors need not recommend amendments to the articles of incorporation and can adopt such amendments subject to the requisite shareholder vote and submit the amendments directly to shareholders without a recommendation.

 

In light of the special circumstances described above, management recommended to the Emmis board of directors that it consider the fairness to unaffiliated shareholders who hold Common Stock and Existing Preferred Stock of the Exchange Offer and Proposed Amendments for purposes of making disclosure of that determination in compliance with federal securities law but that it not provide a recommendation to holders of Existing Preferred Stock as to how to vote on the Proposed Amendments. Emmis’ senior management, all of whom are interested in the Transactions, also assisted the board of directors of Emmis in determining the considered factors described below.

 

The board of directors of Emmis did not engage an independent financial advisor to advise on the fairness of the Exchange Offer or to appraise or otherwise calculate the value of our Existing Preferred Stock or the New Notes or the exchange ratio being used in the Exchange Offer.

 

Factors Considered

 

The board of directors considered a number of factors, including the following, when determining whether the Exchange Offer is fair to unaffiliated shareholders who hold Common Stock and Existing Preferred Stock:

 

 

 

 

The board of directors of Emmis also considered a number of negative factors that would result from the Exchange Offer when determining whether it was fair, including the following:

 

 

The board of directors did not consider going concern value or liquidation value of our assets because the board of directors does not consider a liquidation or sale of the entire company (other than as a result of the Transactions) to be a viable course of action, particularly given the intentions expressed by our controlling shareholder in his capacity as such. While the board of directors considered that the Existing Preferred Stock does have a conversion feature that allows conversion to Class A Common Stock, the board of directors did not consider that residual value as material to its consideration of the value of the Existing Preferred Stock given the extent to which the cost of conversion is in excess of the current value of the Class A Common Stock. The board of directors also did not consider net book value because it does not believe net book value

is material or relevant to its determination, since it is an accounting concept based on specific accounting methodologies that is historical in nature and therefore not forward-looking.

 

The foregoing discussion of the information and factors considered is not intended to be exhaustive. In view of the wide variety of factors considered in connection with its evaluation of the Exchange Offer, the board of directors of Emmis has found it impractical to, and therefore has not, quantified or otherwise attempted to assign relative weights to the specific factors considered in reaching a decision to approve of the Exchange Offer.

 

Conclusions

 

The board of directors unanimously determined that the Exchange Offer is fair to the unaffiliated shareholders who hold Common Stock or Existing Preferred Stock. Nevertheless, our board of directors is not making any recommendation as to whether holders of Existing Preferred Stock should participate in the Exchange Offer or vote for the Proposed Amendments. In considering the determination, holders of Existing Preferred Stock should consider the circumstances surrounding the Transactions, including the background of the Transactions, the conflicts of interest inherent therein and the lack of a recommendation by the board of directors of Emmis. Accordingly, the board of directors of Emmis believes that, in light of the foregoing, each holder of Existing Preferred Stock should make its own independent analysis and determination.

 

Fairness of the JS Acquisition Tender Offer to Unaffiliated Holders of Existing Preferred Stock — Emmis

 

In the course of the SEC review process, in order to fulfill the requirements of Rule 13e-3 under the Exchange Act to make a determination on the fairness of the JS Acquisition Tender Offer to unaffiliated holders of Existing Preferred Stock, the board of directors was reconvened on June 30, 2010. Mr. Heath Freeman did not attend the meeting. While such fairness determination is not required under Indiana law, the board of directors of Emmis agreed to consider the question in order to address the rule requirements. In addition to the conflicts of interest described above (under “— Fairness of the Exchange Offer — Emmis”) that were present in considering the fairness of the Exchange Offer to the unaffiliated shareholders who own Common Stock or Existing Preferred Stock, the fairness determination described below involved two additional conflicts of interest:

 

 

 

Factors Considered

 

Because the completion of the JS Acquisition Tender Offer is a necessary step for the completion of the Exchange Offer, the board of directors of Emmis considered the positive and negative factors described under “— Fairness of the Exchange Offer — Emmis — Factors Considered.”

 

In making its determination, the board of directors of Emmis also considered a number of additional positive factors, including the following:

 

 

 

 

 

 

In making its determination, the board of directors of Emmis considered a number of additional negative factors, including the following:

 

 

 

The above discussion of the information and factors considered is not intended to be exhaustive. In view of the wide variety of factors considered in connection with its evaluation of the JS Acquisition Tender Offer, the board of directors of Emmis has found it impractical to, and therefore has not, quantified or otherwise attempted to assign relative weights to the specific factors considered in reaching its determination with respect to the JS Acquisition Tender Offer.

 

Conclusions

 

The board of directors, by the affirmative vote of all directors present, determined that the JS Acquisition Tender Offer is fair to the unaffiliated holders of Existing Preferred Stock. Nevertheless, the board of directors has not made any recommendation as to whether holders of Existing Preferred Stock should participate in the Exchange Offer or vote for the Proposed Amendments. In considering the determination, holders of Existing Preferred Stock should consider:

 

 

 

 

 

 

Accordingly, the board of directors of Emmis believes that, in light of the foregoing, each holder of Existing Preferred Stock should make its own independent analysis and determination.

 

Reports, Opinions, Appraisals and Negotiations — Emmis

 

The board of directors of Emmis did not engage an independent financial advisor to advise on the fairness of the Exchange Offer or to appraise or otherwise calculate the value of the Existing Preferred Stock or the New Notes or the exchange ratio being used in the Exchange Offer.

 

Purposes, Alternatives, Reasons and Effects — Purchaser Group

 

Purpose

 

From the point of view of the Purchaser Group, the purpose of the Exchange Offer is to facilitate the Transactions, of which the Exchange Offer is a part. The completion of the Exchange Offer is a condition precedent to the completion of the JS Acquisition Tender Offer and the Merger, and the Purchaser Group wishes to complete the JS Acquisition Tender Offer and the Merger. In addition, the adoption and effectiveness of the Proposed Amendments are necessary in order to complete the JS Acquisition Tender Offer and the Merger without triggering a repurchase right in favor of the holders of the Existing Preferred Stock, and JS Acquisition views the Exchange Offer as a form of inducement to holders of Existing Preferred Stock to approve the Proposed Amendments.

 

In addition, under the Alden Purchase Agreement, Alden Media has conditioned its purchase obligations, which are the sole source of financing for the JS Acquisition Tender Offer and the Merger, on the commencement of the Exchange Offer and the effectiveness of the Proposed Amendments.

 

The purpose of the JS Acquisition Tender Offer is to acquire all of the shares of Class A Common Stock that are not beneficially owned by the Purchaser Group or the Alden Fund, other than the Rollover Shares. The purpose of the Merger is to acquire all outstanding shares of Class A Common Stock not tendered and purchased in the JS Acquisition Tender Offer or contributed to Emmis under the Alden Purchase Agreement or the Rollover Agreement.

 

Plans for Emmis after the Exchange Offer and the Other Transactions.

 

Upon the successful completion of the JS Acquisition Tender Offer and the Exchange Offer, JS Acquisition, together with the Alden Fund, the Purchaser Group and the Rolling Shareholders, will own a majority of the outstanding shares of Common Stock and will have sufficient voting power to approve the Merger without the affirmative vote of any other shareholders of Emmis. If a meeting is necessary under applicable law in order to complete the Merger, under the Alden Purchase Agreement, Mr. Smulyan, JS Parent and the Alden Fund have agreed to vote all of their shares of Common Stock in favor of the Merger and, under the Rollover Agreement, the Rolling Shareholders have agreed to vote their Rollover Shares in favor of the Merger.

 

In the Merger, the Retained Shares and all of the other outstanding shares of Class A Common Stock (except for the shares of Class A Common Stock held by the Purchaser Group and the Rollover Shares), will be converted into the right to receive $2.40 in cash. Immediately prior to the effective time of the Merger, each share of Common Stock held by the Purchaser Group (other than the Retained Shares) and the Rollover Shares will be contributed to Emmis and cancelled in satisfaction of the respective obligations under the Alden Purchase Agreement or the Rollover Agreement, as applicable, and in consideration for JS Parent Common Interests. Each share of Class B Common Stock (other than any converted to Retained Shares before the Merger), all of which are held by Mr. Smulyan, and all of Mr. Smulyan’s options to acquire Common Stock will be contributed to Emmis and cancelled in satisfaction of his obligations under the Alden Purchase Agreement, and in consideration for JS Parent Common Interests. Each outstanding share of the Existing Preferred Stock not held by the Alden Fund will be converted into the right to receive $5.856 in cash from JS Parent, and each share of Existing Preferred Stock held by the Alden Fund will be converted into the right to receive New Notes at a rate of $30.00 principal amount of New Notes per $50.00 of liquidation preference of Existing Preferred Stock, excluding accrued and unpaid dividends. In the Merger, each share of JS Acquisition Class A Common Stock, all of which are held by JS Parent will be converted into one share of new Nonvoting Class A Common Stock, par value $0.01 per share (“New Class A Common Stock”) of Emmis and each share

of JS Acquisition Class B Common Stock, which are all held by Mr. Smulyan will be converted into one share of new Class B Common Stock, par value $0.01 per share (“New Class B Common Stock”) of Emmis.

 

JS Acquisition is not offering to acquire outstanding options in the JS Acquisition Tender Offer. Under the Merger Agreement, all options not exercised, other than shares of restricted stock or restricted stock units held by Mr. Smulyan, will be cancelled in exchange for the payment of the excess, if any, of $2.40 per share (without interest and less any applicable withholding taxes) over the exercise price for such options, less any applicable income and employment taxes required to be withheld by applicable law. Each share of restricted stock units will vest and be cancelled and the holders of restricted stock and restricted stock units will be entitled to receive $2.40 for each share of such restricted stock and each share underlying its restricted stock units.

 

Except as otherwise described in this Proxy Statement/Offer to Exchange, the Purchaser Group has no current plans or proposals which relate to or would result in:

 

 

If the JS Acquisition Tender Offer and the Merger are successfully completed, and the Amended and Restated Operating Agreement of JS Parent, to be entered into upon the closing of the Alden Purchase Agreement by and among Alden Media, Mr. Smulyan, JS Parent and certain other parties (the “Operating Agreement”) is entered into, the members of the board of the surviving corporation will be composed of five members nominated by Mr. Smulyan and two members nominated by Alden Media. In addition, Mr. Smulyan has agreed that following completion of the Merger he will vote the New Class B Common Stock held by him in favor of amendments to the Articles of Incorporation of Emmis and the operating agreement of Emmis Operating Company to mirror the governance provisions in the Operating Agreement.

 

In addition, pursuant to the Operating Agreement JS Parent must use its commercially reasonable efforts to cause Emmis to sell assets of Emmis and its subsidiaries to be used to refinance existing indebtedness of Emmis subsidiaries in order to permit the redemption of the New Notes, the JS Parent Preferred Interests and/or Junior Subordinated Notes. Emmis has had discussions with various third parties and financing sources in the past regarding potential asset sales, but such discussions have not resulted in any firm offers.

 

The Purchaser Group further expects to operate Emmis as a going concern under its control and to review Emmis’ assets, corporate structure, capitalization, operations, properties, policies, management and personnel to determine which changes may be necessary following the completion of the Exchange Offer and the other Transactions to best organize and integrate the activities of JS Parent and Emmis (and its affiliates). The Purchaser Group expressly reserves the right to make any changes to future plans that they deem necessary or appropriate in light of its review or future developments.

 

Reasons of the Purchaser Group for the Exchange Offer

 

As discussed above, the Exchange Offer is a necessary transaction in order to complete the other Transactions, including the JS Acquisition Tender Offer and the Merger.

 

In connection with the Transactions, the Purchaser Group considered the following material factors:

 

 

 

Certain Effects of the Exchange Offer

 

As a result of the completion of the Exchange Offer and the JS Acquisition Tender Offer, the direct and indirect interest of the Purchaser Group and Alden in Emmis’ net book value and net earnings will increase to the extent of the number of shares of Class A Common Stock acquired under the JS Acquisition Tender Offer. Emmis’ net book value at February 28, 2010, inclusive of preferred dividends in arrears, was $(190,281,000), and for the year then ended it had a net loss attributable to common shareholders of $(131,777,000). Assuming the Purchaser Group, the Rolling Shareholders and the Alden Fund owned 21.5% of the outstanding shares of Class A Common Stock and Class B Common Stock throughout 2010, their aggregate interest in Emmis’ net book value, inclusive of preferred dividends in arrears, and their net loss attributable to common shareholders would have been approximately $(40,720,000) and $(28,200,278), respectively.

 

Immediately following completion of the Merger, the Purchaser Group, the Rolling Shareholders and Alden Media’s indirect interest in such items will increase to 100%, and the Purchaser Group, the Rolling Shareholders and Alden Media will be entitled to all benefits resulting from that interest, including all income generated by Emmis’ operations and any future increase in Emmis’ value. The Purchaser Group, the Rolling Shareholders and Alden Media will also bear the risk of losses generated by Emmis’ operations and any decrease in the value of Emmis after the Merger. Upon completion of the Merger, Emmis will become a privately-held corporation. Accordingly, former shareholders of Emmis, other than the Purchaser Group, Alden and the Rolling Shareholders, will not have the opportunity to participate in the earnings and growth of Emmis after the Merger and will not have any right to vote on corporate matters. Similarly, such former shareholders of Emmis will not face the risk of losses generated by Emmis’ operations or decline in the value of Emmis after the Merger.

 

Alternatives to the Exchange Offer and the Transactions

 

The Purchaser Group, having come to a determination to pursue the acquisition of the remaining shares of Common Stock of Emmis, considered various alternative transaction structures by which the acquisition might be achieved and determined to make the Exchange Offer, coupled with the JS Acquisition Tender Offer followed by the Merger. In choosing this transaction structure, the Purchaser Group considered the following material factors:

 

 

These factors represent all of the material factors considered by the Purchaser Group in deciding to structure the proposed Transactions as a cash tender offer, coupled with an exchange offer, followed by a merger. The Purchaser Group did not consider any structures other than a negotiated merger, open-market purchases and privately-negotiated purchases.

Fairness of the Exchange Offer — Purchaser Group

 

Because Mr. Smulyan, who controls the Purchaser Group, is a member of the board of directors of Emmis, he participated in the deliberations of the board of directors with respect to the fairness of the Exchange Offer to the unaffiliated shareholders who hold Common Stock or Existing Preferred Stock. Mr. Smulyan voted, together with the rest of the members of Emmis’ board of directors, in favor of the determination that the Exchange Offer is fair to the unaffiliated shareholders who hold Common Stock or Existing Preferred Stock for the same reasons and after considering the same factors as the Emmis board of directors as a whole. The Purchaser Group expressly adopts the analysis of the board of directors with respect to the determination that the Exchange Offer is fair to the unaffiliated shareholders who hold Common Stock or Existing Preferred Stock. The Purchaser Group has made no recommendation as to the Exchange Offer. See “— Fairness of the Exchange Offer — Emmis.”

 

Reports, Opinions, Appraisals and Negotiations — Purchaser Group

 

The Purchaser Group did not engage an independent financial advisor to advise on the fairness of the Exchange Offer or to appraise or calculate the value of the Existing Preferred Stock or the New Notes or the exchange ratio being used in the Exchange Offer.

 

Moelis

 

Moelis prepared certain materials showing illustrative transaction scenarios, which materials are summarized in the “Special Factors — Background” section of this Proxy Statement/Offer to Exchange. These materials will be made available for inspection and copying at the principal executive offices of JS Acquisition during its regular business hours by any interested Emmis shareholder or representative who has been so designated in writing and have been filed with the SEC as an exhibit to Emmis’ and the Purchaser Group’s Statement on Schedule TO.

 

JS Acquisition retained Moelis based upon Moelis’ experience and knowledge. Moelis is an investment banking firm with substantial experience in transactions similar to the proposed Transactions. Moelis, as part of its investment banking business, is continually engaged in the valuation of businesses and securities in connection with business combinations and acquisitions and for other purposes.

 

Moelis acted as financial advisor to JS Acquisition in connection with the Transactions and JS Acquisition has agreed to pay Moelis for its services an aggregate fee of $3,500,000 in connection with the Transactions. JS Acquisition has agreed to reimburse Moelis for its expenses, including the fees and expenses of its counsel, and to indemnify Moelis and certain related parties against certain liabilities that may arise out of the rendering of its services, including liabilities under the federal securities laws. Moelis’ engagement letter with JS Acquisition contemplates that Moelis will have the right of first refusal to be retained by JS Acquisition in the event that JS Acquisition pursues certain other corporate finance transactions.

 

BIA

 

BIA Capital Strategies, LLC prepared marketing materials in connection with fundraising efforts on behalf of JS Acquisition, which materials are summarized in the “Special Factors — Background” section of this Proxy Statement/Offer to Exchange. These materials will be made available for inspection and copying at the principal executive offices of JS Acquisition during its regular business hours by any interested Emmis shareholder or representative who has been so designated in writing and have been filed with the SEC as an exhibit to Emmis’ and the Purchaser Group’s Statement on Schedule TO and Schedule 13E-3 relating to the JS Acquisition Tender Offer.

 

JS Acquisition retained BIA because of BIA’s experience and knowledge. BIA is an investment bank serving the media and communications industries. JS Acquisition retained BIA from October 2009 until April 2010. A fee of $500,000 is payable by JS Acquisition to BIA in connection with such engagement. A firm affiliated with BIA provides customary annual valuations for Emmis in connection with financial reporting and asset impairment analyses and receives less than $100,000 annually as payment for such services.

Agreements Involving Emmis Securities

 

The Merger Agreement contains provisions relating to the treatment of the various outstanding Emmis securities following the completion of the Exchange Offer. See “The Transactions—Merger.”

 

The amended and restated operating agreement of JS Parent contains provisions under which JS Parent Preferred Interests may, through a series of steps, be converted into Junior Subordinated Notes of Emmis. See “The Transactions—JS Parent Operating Agreement.”

 

In the Transactions, some executive officers of Emmis will be receiving securities of JS Parent in respect of their shares of Class A Common Stock, as described more fully below, under the caption “—Executive Officer and Director Participation; Interests of Certain Persons in the Transactions.”

 

Under the Alden Purchase Agreement, Mr. Smulyan and the Alden Fund have agreed to vote their securities for the Proposed Amendments. See “The Special Meeting—Agreements to Vote by the Members of the Purchaser Group and Alden.” Under the Alden Purchase Agreement, Mr. Smulyan is also agreeing to cancel all of his outstanding options.

 

Pursuant to the Rollover Agreement, each of the Rolling Shareholders is required to contribute its Rollover Shares to Emmis immediately prior to the Merger and, in exchange for this commitment, JS Parent will issue to each Rolling Shareholder common interests in JS Parent (the “Rolling Shareholder Parent Interests”) at the closing of the transactions contemplated by the Alden Purchase Agreement. Each Rolling Shareholder has also agreed in the Rollover Agreement to grant JS Acquisition an irrevocable proxy to vote in favor of the Merger Agreement and the Merger at any meeting of Emmis shareholders called to vote on the Merger Agreement and the Merger.

 

Executive Officer and Director Participation; Interests of Certain Persons in the Transactions

 

The required votes of the holders of Common Stock and the holders of the Existing Preferred Stock must be obtained in order for the Transactions to be completed. None of the members of the Emmis board of directors will be participating in the Proxy Solicitations or the solicitation of tenders into the Exchange Offers other than Messrs. Smulyan, Walsh and Freeman.

 

Each of the following executive officers of Emmis is participating in the Proxy Solicitations:

 

 

The above-listed executive officers may have interests in the Transactions that are different from those of holders of Common Stock or Existing Preferred Stock.

 

If the Transactions are completed, each of the above-listed executive officers is expected to remain as an executive officer of Emmis following completion of the Transactions, subject to the terms of each executive officer’s existing employment agreement. See “Compensation Table — Employment Agreements.” The executive officers who remain at Emmis are expected to receive incentive compensation or equity awards under a new management incentive plan to be adopted after the completion of the Transactions, although the terms of the equity awards have not yet been determined.

Each of the above-listed executive officers and the directors of Emmis will also receive consideration in respect of his or her equity and equity awards as described in the following table: