UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

SCHEDULE 14D-9

 

SOLICITATION/RECOMMENDATION STATEMENT UNDER

SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934

(Amendment No. 1)

 

 

 

 

EMMIS COMMUNICATIONS CORPORATION

(Name of Subject Company)

 

EMMIS COMMUNICATIONS CORPORATION

(Name of Person(s) Filing Statement)

 

 

 

 

Class A Common Stock, par value $0.01 per share

(Title of Class of Securities)

 

 

 

 

291525103

(CUSIP Number of Class of Securities)

 

 

 

 

J. SCOTT ENRIGHT

ONE EMMIS PLAZA

40 MONUMENT CIRCLE, SUITE 700

Indianapolis, Indiana 46204

(317) 266-0100

 

(Name, Address and Telephone Number of Persons Authorized

to Receive Notices and Communications on Behalf of Filing Persons)

 

 

 

 

Copy to:

 

JOHN J. MCCARTHY, JR.

DAVIS POLK & WARDWELL LLP

450 LEXINGTON AVENUE

NEW YORK, NY 10017

(212) 450-4000

 

 

 

TABLE OF CONTENTS

 

This Amendment No. 1 (this “Amendment No. 1”) amends and supplements the Solicitation/Recommendation Statement filed under cover of Schedule 14D-9 (as amended and supplemented, the “Schedule 14D-9”) with the Securities and Exchange Commission (the “SEC”) on June 2, 2010, by Emmis Communications Corporation, an Indiana corporation (“Emmis”). The Schedule 14D-9 relates to the offer by JS Acquisition, Inc., an Indiana corporation (“JS Acquisition”) whose equity securities are owned entirely by Mr. Jeffrey H. Smulyan, the Chairman, Chief Executive Officer and President of Emmis to purchase all of the outstanding shares of Class A Common Stock, par value $0.01 per share, of Emmis (the “Shares”), pursuant to and subject to the terms and conditions set forth in the Offer to Purchase, dated June 2, 2010 (as amended and supplemented, the “Offer to Purchase”) and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the “Offer”).

 

All capitalized terms used in this Amendment No. 1 without definition have the meanings ascribed to them in this Amendment No. 1 or the Schedule 14D-9.

 

The items of the Schedule 14D-9 set forth below are hereby amended and supplemented as follows:

 

A more legible copy of the Materials Prepared for Discussion of Morgan Stanley & Co. Incorporated, which were attached and filed as Annex B to Emmis’ Solicitation/Recommendation Statement filed under cover of Schedule 14D-9 with the SEC on June 2, 2010, are hereby attached and re-filed as Annex B to this Amendment No. 1 in response to a comment from the SEC.

 

 

Item 1 of the Schedule 14D-9 is hereby amended and supplemented as follows:

 

1. The third paragraph of Item 1 is hereby amended by deleting the reference to “1,714,431”, which describes the number of Rollover Shares, and replacing it with “1,718,446”.

 

2. The third paragraph of Item 1 is hereby amended by deleting the reference to “21.4%”, which describes the percentage of the shares of Emmis Common Stock owned by the Purchaser Group, the Alden Fund and the Rolling Shareholders, and replacing it with “21.5%”.

 

 

Item 2 of the Schedule 14D-9 is hereby amended and supplemented as follows:

 

1. The second paragraph of Item 2 is hereby amended and restated in its entirety as follows:

 

“This Statement relates to the tender offer by JS Acquisition, Inc., an Indiana corporation (“JS Acquisition”) that is owned by Mr. Smulyan and JS Acquisition, LLC, an Indiana limited liability company that is wholly-owned by Mr. Smulyan (“JS Parent”), to purchase all of the outstanding Shares (the “Shares”). The offer price is $2.40 per Share in cash, without interest and less any applicable withholding taxes (the “Offer Price”). The Offer is made upon the terms and subject to the conditions set forth in the Offer to Purchase dated June 2, 2010 (as amended and supplemented, the “Offer to Purchase”) and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the “Offer”). Certain shares held by JS Acquisition, JS Parent, Mr. Smulyan, his affiliates (collectively with JS Acquisition, JS Parent and Mr. Smulyan, the “Purchaser Group”), Alden Global Capital (together with its affiliates and related parties, “Alden”), a private asset management company with over $3 billion under management, and the shareholders set forth in the Rollover Agreement (the “Rolling Shareholders”), dated May 24, 2010, by and among JS Parent and the Rolling Shareholders (the “Rollover Agreement,” and the Shares to be contributed to Emmis by the Rolling Shareholders pursuant to the Rollover Agreement, the “Rollover Shares”) will not be tendered in the Offer. As further described below, Shares held by Alden and the Retained Shares (as defined below) will be cashed out in the Merger (as defined below) for the Offer Price and all other Shares held by the Purchaser Group and the Rollover Shares will be contributed to Emmis and cancelled in the Merger. The Offer is disclosed in a Tender Offer Statement and Rule 13e-3 Transaction Statement filed under cover of Schedule TO by JS Acquisition with the U.S. Securities and Exchange Commission (the “SEC”) on

June 2, 2010 (as amended and supplemented, the “Schedule TO”). Based on the information relating to the ownership of Shares by the Purchaser Group, the Alden Fund and the Rolling Shareholders (collectively, the “Interested Parties” and the Shares beneficially owned by them, the “Interested Party Shares”) set forth in Item 1 (Subject Company Information) above, the Offer to Purchase assumes the purchase of 29,722,866 Shares for $71,334,878. The Offer to Purchase also assumes the payment in the Merger of $3,375,600 in respect of the Shares held by the Alden Fund, $4,377,160 in respect of outstanding in-the-money options to purchase Shares, $631,059 in respect of Retained Shares beneficially owned by Mr. Smulyan and $10,280,000 of related fees and expenses in connection with the transactions, bringing the total amount of Alden funding anticipated in connection with the Offer to Purchase and the Merger to approximately $90 million.”

 

Similarly, all other references in the Schedule 14D-9 to the Offer being made by JS Acquisition only for Shares other than the Rollover Shares or Shares beneficially owned by the Purchaser Group and Alden are hereby amended as set forth above to clarify that the Offer is being made for all outstanding Shares.

 

2. The third paragraph of Item 2 is hereby amended by deleting the reference to “the valid tender (without withdrawal) in the Offer of at least 10,809,949 Shares” with respect to the satisfaction of the Minimum Tender Condition and replacing it with “the valid tender (without withdrawal) in the Offer of at least 10,805,934 Shares”.

 

Similarly, all other references in the Schedule 14D-9 to “the valid tender (without withdrawal) in the Offer of at least 10,809,949 Shares” with respect to the satisfaction of the Minimum Tender Condition are hereby amended as set forth above.

 

 

Item 3 of the Schedule 14D-9 is hereby amended and supplemented as follows:

 

1. The first paragraph of Item 3 is hereby amended by deleting the reference “to the best of Emmis’ knowledge,” in its entirety.

 

2. The first paragraph under the heading “Certain Arrangements between Emmis and its Executive Officers, Directors and Affiliates” is hereby amended and restated in its entirety as follows:

 

“Emmis has engaged in certain transactions and is a party to certain arrangements with Mr. Smulyan and his affiliates, the summaries of which are qualified by reference to Emmis’ Annual Report on Form 10-K for the year ended February 28, 2010 under Note 16 to the Consolidated Financial Statements, and Item 13 of Part III, “Certain Relationships and Related Transactions,” included in that report and Emmis’ annual proxy statement on Schedule 14A for 2009 dated June 8, 2009 under the sections entitled “Corporate Governance — Certain Transactions.”

 

Although Emmis no longer makes loans to executive officers and directors, it currently has a loan outstanding to Mr. Jeffrey H. Smulyan, its Chairman, Chief Executive Officer and President, that is grandfathered under the Sarbanes-Oxley Act of 2002. The largest aggregate amount outstanding on this loan at any month-end during fiscal 2010 was approximately $1,046,818 and the balance at February 28, 2009 and 2010 was approximately $1,010,592 and $1,046,818, respectively. This loan bears interest at Emmis’ cost of debt under the Credit Facility, which at February 28, 2009 and 2010 was approximately 4.8% and 7.6% per annum, respectively.

 

Prior to 2002, Emmis had made certain life insurance premium payments for the benefit of Mr. Smulyan. Emmis discontinued making such payments in 2001. However, pursuant to a Split Dollar Life Insurance Agreement and Limited Collateral Assignment dated November 2, 1997, Emmis retains the right, upon Mr. Smulyan’s death, resignation or termination of employment, to recover all of the premium payments it has made, which total $1,119,000.

 

During the years ended February 29, 2008 and February 28, 2009, Emmis leased an airplane and was party to a timeshare agreement with Mr. Smulyan with respect to his personal use of the airplane. Emmis purchased the airplane in December 2008, and on April 14, 2009, Emmis sold the airplane and the

timeshare agreement terminated. Under the timeshare agreement, whenever Mr. Smulyan used the airplane for non-business purposes, he paid Emmis for the aggregate incremental cost to Emmis of operating the airplane up to the maximum amount permitted by Federal Aviation Authority regulations (which maximum generally approximates the total direct cost of operating the airplane for the applicable trip). With respect to the personal flights during the years ended February 29, 2008 and February 28, 2009, Mr. Smulyan paid Emmis approximately $171,213 and $31,186 respectively, for expenses under the timeshare arrangement. In addition, under IRS regulations, to the extent Mr. Smulyan or any other officer or director allows non-business guests to travel on the airplane on a business trip or takes the airplane on a non-business detour as part of a business trip, additional compensation is attributed to Mr. Smulyan or the applicable officer or director. Generally, these trips on which compensation is assessed pursuant to IRS regulations do not result in any material additional cost or expense to Emmis.

 

The sister of Richard Leventhal, one of Emmis’ independent directors, owns Simon Seyz, an Indianapolis business that provides corporate gifts and specialty items. During the three years ended February 2010, Emmis made purchases from Simon Seyz of approximately $127,666, $149,970 and $31,668, respectively.

 

The Merger Agreement involves transactions by Emmis with JS Parent and JS Acquisition, both of which are affiliates of Mr. Smulyan. For more information regarding the Merger Agreement, see Item 8 “Additional Information. — Merger.” ”

 

3. The first paragraph under the heading “Executive Compensation, Employment Matters and Employment Agreements; Ownership of Shares by Directors and Executive Officers” is hereby amended and restated in its entirety as follows:

 

“Compensation of Directors

 

Directors who are not officers of Emmis are compensated for their services at the rate of $3,000 per regular meeting attended in person, $1,500 per regular meeting attended by phone and $2,000 per committee meeting attended, whether in person or by phone. These fees are paid in the form of Shares at the end of each calendar year. The per share price used for payment of these fees is established using the market value of the Shares prior to the end of the previous fiscal year, discounted by 20% to the extent the director attends at least 75% of the board and committee meetings applicable to the director. In addition, each director who is not an officer or employee of Emmis receives a $30,000 annual retainer, the chair of the Emmis Audit Committee receives a $10,000 annual retainer, the chair of the Emmis Compensation Committee receives a $5,000 annual retainer, the chair of the Emmis Corporate Governance and Nominating Committee receives a $3,000 annual retainer, and the Lead Director receives a $3,000 annual retainer. These annual retainers are paid in cash. In addition, directors who are not officers of Emmis are entitled to receive annually 2,195 shares of restricted stock and options to purchase 7,317 Shares. The options are granted on the date of the Emmis annual meeting of shareholders at the fair market value of the underlying shares on that date and are to vest annually in three equal installments. Restricted stock is also granted on the date of the Emmis annual meeting of shareholders and will vest on the earlier of the end of the director’s three-year term or the third anniversary of the date of grant.

 

Included in the table below is information regarding the compensation for the fiscal year ended February 28, 2010, received by each of Emmis’ directors as of February 28, 2010 who is not an officer of Emmis. The dollar amounts in the table below for stock and option awards are the grant date fair market values associated with such awards.

2010 Director Compensation Table

 

 

 

 

 

 

 

Compensation Tables

 

The following table sets forth the compensation awarded to, earned by, or paid to the chief executive officer, the two most highly compensated executive officers other than the chief executive officer and two other individuals who were not executive officers at the end of the 2010 fiscal year (collectively, the “Named Executive Officers”) during the fiscal years ended February 28, 2010, February 28, 2009 and February 29, 2008.

 

2010 Summary Compensation Table(1)

 

 

 

 

 

 

 

Employment Agreements

 

Effective March 1, 2008, Emmis entered into a one-year employment agreement with Mr. Smulyan, who serves as Chairman, Chief Executive Officer and President of Emmis, which automatically renews each year following the initial one-year term for additional one-year terms unless either Emmis or Mr. Smulyan provides the other with written notice of non-renewal prior to December 31 of the then-current term. When neither Emmis nor Mr. Smulyan delivered such notice of non-renewal prior to December 31, 2008, the employment agreement automatically renewed for an additional one-year term ending February 28, 2010. Mr. Smulyan’s base salary for the initial term of the employment agreement was $905,000; however, effective December 1, 2008, Mr. Smulyan consented to a 3% decrease to his base salary and waived any increase provided for in the employment agreement for the one-year term ending February 28, 2010. He also agreed to an additional 5% decrease to his base salary for the fiscal year ended February 28, 2010. Mr. Smulyan’s base salary upon any subsequent annual renewal will increase at a rate equal to the greater of 3%, the annual percentage increase in the CPI (All Urban Consumers-U.S Cities Average, all items (1982/84 = 100) as published by the Bureau of Labor Statistics), U.S. Department of Labor or such other amount as approved by the Emmis Compensation Committee. Mr. Smulyan’s annual incentive compensation target is 125% of his base salary and will be paid, if at all, based upon achievement of certain performance goals to be determined by the Emmis Compensation Committee. Emmis retains the right to pay any annual incentive compensation in cash or Shares. Each year the agreement remains in effect, Mr. Smulyan is entitled to receive an option to acquire 146,349 Shares. Mr. Smulyan will continue to receive an automobile allowance of $24,000 annually and will continue to

be reimbursed for up to $10,000 per year in premiums for life and disability insurance and retains the right to participate in all of Emmis’ employee benefit plans for which he is otherwise eligible.

 

Effective December 15, 2009, Emmis entered into a new three-year employment agreement with Mr. Smulyan, who serves as Chairman, Chief Executive Officer and President of Emmis. The term of the agreement commenced on March 1, 2010. Mr. Smulyan’s base salary will be reduced from $833,957 to $792,259 for the first year, then increase to $825,000 for the second year, and $850,000 for the third year. Mr. Smulyan will receive a $200,000 signing bonus in connection with execution of the agreement, as well as performance units having a value, if earned, of $700,000. The performance units will be earned quarterly during the first year of the term, depending upon whether Emmis meets certain consolidated EBITDA requirements set forth in the Credit Facility. Both the signing bonus and any earned performance units will be repayable to Emmis in full in the event that Mr. Smulyan is terminated for cause or resigns without good reason prior to completion of the term. Mr. Smulyan’s employment agreement will automatically renew each year following the initial three-year term for additional one-year terms unless either Emmis or Mr. Smulyan provides the other with written notice of non-renewal prior to December 31 of the final year of the initial or subsequent term, as applicable. Mr. Smulyan’s base salary upon any such annual renewal will increase by $25,000. Mr. Smulyan’s annual incentive compensation target remains 125% of his base salary and will be paid, if at all, based upon achievement of certain performance goals to be determined by the Emmis Compensation Committee. Emmis retains the right to pay any annual incentive compensation in cash, forgiveness of indebtedness or Shares. Mr. Smulyan will not be entitled to stock options during the first year of the term, but will be entitled to receive an option to acquire 150,000 Shares in each of the second and third years of the term, as well as in any additional one-year renewal term. Mr. Smulyan will continue to receive an automobile allowance and will continue to be reimbursed for up to $10,000 per year in premiums for life and disability insurance and retains the right to participate in all of Emmis’ employee benefit plans for which he is otherwise eligible.

 

Effective December 15, 2008, Emmis entered into an employment agreement with Patrick Walsh, who serves as Chief Financial Officer and Chief Operating Officer of Emmis, extending his employment through September 3, 2011. Under the terms of his employment agreement, Mr. Walsh’s annual base compensation for the first year of the employment agreement is $540,000, and is $556,200 for the remainder of the term. However, Mr. Walsh agreed to a 5% decrease to his base salary for the fiscal year ended February 28, 2010. Mr. Walsh’s annual incentive compensation targets for fiscal years 2010, 2011, and 2012 are 100% of his base compensation. In the event that Mr. Walsh’s employment terminates upon expiration of the employment agreement, Mr. Walsh’s annual incentive compensation for fiscal year 2012 will be pro-rated based upon the seven months he will have been employed during the 2012 fiscal year. The award of annual incentive compensation is to be based upon achievement of certain performance goals to be determined each year by the Emmis Compensation Committee, and Emmis retains the right to pay any annual incentive compensation in cash or Shares. For the remainder of the 2009 fiscal year, Mr. Walsh’s annual incentive compensation target was $400,000, with $200,000 to be earned based upon the performance goals established in the spring under his prior employment agreement, $100,000 to be earned depending upon the extent to which Emmis met certain radio station operating income targets during the fiscal year, and the final $100,000 to be earned in the discretion of the Compensation Committee based upon Mr. Walsh’s performance in transitioning to his new position. Since Mr. Walsh continued to be employed as of September 3, 2009, his existing completion bonus of 20,000 Shares and $200,000 was awarded and paid as previously provided under his previous employment agreement. Mr. Walsh is also scheduled to receive a completion bonus upon the expiration of the agreement equal to at least 100% of his annual base compensation minus $200,000, with additional targets (inclusive of the minimum completion bonus amount) of $750,000 and $1,100,000 based upon certain levels of total shareholder return set forth in the employment agreement. Mr. Walsh will receive an automobile allowance of $12,000 annually and will be reimbursed for up to $5,000 per year in premiums for life and disability insurance and retains the right to participate in all of Emmis’ employee benefit plans for which he is otherwise eligible.

Effective March 1, 2008, Emmis entered into a one-year employment agreement with Mr. Cummings, which automatically renews each year following the initial one-year term for additional one-year terms unless either Emmis or Mr. Cummings provides the other with written notice of non-renewal prior to December 31 of the then-current term. Prior to December 31, 2008, Emmis delivered such notice of non-renewal to Mr. Cummings; and, therefore, the employment agreement terminated as of February 28, 2009. Under the employment agreement, Mr. Cummings was eligible for a completion bonus payable upon his continued employment for a period through February 28, 2011 in an amount equal to Mr. Cummings’ average annual base salary over such three-year period. The employment agreement provided that, in the event that, prior to expiration of such three-year term, Emmis elected not to renew the employment agreement, Mr. Cummings was entitled to a pro-rata portion of such completion bonus. Effective March 1, 2009, Emmis entered into a one-year employment agreement with Mr. Cummings to serve as President — Emmis Radio Programming.

 

On March 2, 2010, Emmis entered into a new one-year employment agreement with Mr. Cummings to serve as President of Emmis Radio Programming, effective March 1, 2010. Mr. Cummings’ employment agreement will automatically renew each year following the initial one-year term for additional one-year terms unless either Emmis or Mr. Cummings provides the other with written notice of non-renewal prior to December 31 of the initial or subsequent term, as applicable. Under the agreement, Mr. Cummings’ base salary is $446,500 and his annual incentive compensation target is 60% of his base salary. The annual incentive bonus will be paid, if at all, based upon achievement of certain performance goals to be determined by Emmis. Emmis retains the right to pay such annual incentive compensation in cash or Shares. Mr. Cummings will continue to receive an automobile allowance and will continue to be reimbursed for up to $5,000 per year in premiums for life or other insurance and retains the right to participate in all of Emmis’ employee benefit plans for which he is otherwise eligible. He will also be entitled to severance equal to his previous base salary in the event he is not offered substantially similar employment upon the expiration of the term and his employment terminates. If he is entitled to severance, Mr. Cummings will be offered a four year part-time programming role with total payments over the four years of $530,000. The switch from full-time to part-time employment is designed to constitute a “separation from service” within the meaning of section 409A of the Internal Revenue Code.

 

Effective March 1, 2009, Emmis entered into a one-year employment agreement with Paul W. Fiddick, who served as President — International Division of Emmis, which automatically renews each year following the initial one-year term for additional one-year terms unless either Emmis or Mr. Fiddick provides the other with written notice of non-renewal prior to December 31 of the then-current term. Mr. Fiddick’s base salary for the initial term of the employment agreement was $360,000. However, Mr. Fiddick agreed to a 5% decrease in his annual base salary for the fiscal year ended February 28, 2010. Mr. Fiddick’s base salary upon any subsequent annual renewal would have increased at a rate equal to the greater of 3%, the annual percentage increase in the CPI (All Urban Consumers-U.S Cities Average, all items (1982/84 = 100) as published by the Bureau of Labor Statistics, U.S. Department of Labor) or such other amount as approved by the Emmis Compensation Committee. Mr. Fiddick’s annual incentive compensation target was 58.33% of his base salary and was to be paid, if at all, based upon achievement of certain performance goals to be determined each year by the Emmis Compensation Committee. Emmis retained the right to pay any annual incentive compensation in cash or shares of Class A Common Stock. Each year the agreement remained in effect, Mr. Fiddick was entitled to receive an option to acquire 21,952 Shares and 6,585 restricted Shares. Mr. Fiddick was also eligible for a completion bonus payable upon his continued employment for a period through February 29, 2012 in an amount equal to Mr. Fiddick’s average annual base salary over such three-year period. In the event that, prior to expiration of such three-year term, Mr. Fiddick died or became disabled, Emmis terminated Mr. Fiddick’s employment other than for Cause (as defined in the agreement) or Emmis elected not to renew the employment agreement, Mr. Fiddick was entitled to a pro-rata portion of such completion bonus. Mr. Fiddick was to continue to receive an automobile allowance of $12,000 annually and retained the right to participate in all of Emmis’ employee benefit plans for which he was otherwise eligible.

Effective December 15, 2009, Emmis entered into an agreement with Mr. Fiddick under which he resigned as International Division President and terminated his employment agreement dated March 1, 2009 and his change in control severance agreement dated January 1, 2008. Under the agreement, Mr. Fiddick received a lump sum payment of approximately $509,000. While Mr. Fiddick no longer has day to day involvement in the operations of Emmis’ international radio stations, he will continue as a director of Emmis International, providing strategic advisory services with respect to Emmis’ international division in a manner that is designed to constitute a “separation from service” within the meaning of section 409A of the Internal Revenue Code.

 

Effective March 1, 2008, Emmis entered into a one-year employment agreement with Gary A. Thoe, who served as Emmis’ President — Publishing Division until December 2009. Mr. Thoe’s base salary was $275,000. Mr. Thoe’s employment agreement automatically renewed each year following the initial one-year term for additional one-year terms unless either Emmis or Mr. Thoe provided the other with written notice of non-renewal prior to December 31 of the initial or subsequent term, as applicable. Mr. Thoe’s base salary upon any annual renewal was to increase at a rate equal to the greater of 3%, the annual percentage increase in the CPI (All Urban Consumers-U.S Cities Average, all items (1982/84 = 100) as published by the Bureau of Labor Statistics, U.S. Department of Labor) or such other amount as approved by the Emmis Compensation Committee. Mr. Thoe’s annual incentive compensation target was 45.45% of his base salary and was to be paid, if at all, based upon achievement of certain performance goals to be determined each year by the Emmis Compensation Committee. Emmis retained the right to pay any annual incentive compensation in cash or shares of Class A Common Stock. Each year the agreement remained in effect, Mr. Thoe was entitled to receive an option to acquire 12,806 Shares and a grant of 4,940 restricted Shares. Mr. Thoe was also eligible for a completion bonus payable upon his continued employment for a period through February 28, 2011 in an amount equal to Mr. Thoe’s average annual base salary over such three-year period. In the event that, prior to expiration of such three-year term, Mr. Thoe died or became disabled, Emmis terminated Mr. Thoe’s employment other than for Cause (as defined in the agreement) or Emmis elected not to renew the employment agreement, Mr. Thoe was entitled to a pro-rata portion of such completion bonus. Mr. Thoe was to continue to receive an automobile allowance and retained the right to participate in all of Emmis’ employee benefit plans for which he was otherwise eligible.

 

In December, 2009, Emmis entered into an agreement with Mr. Thoe under which his employment agreement and his change in control severance agreement were terminated. Under the agreement, Mr. Thoe received a lump sum payment of approximately $547,000.

 

It is expected that the existing employment agreements of Emmis with its executive officers will continue in full force and effect following the Transactions, which will not constitute a change of control under any of those agreements, since Mr. Smulyan will continue to control Emmis after the Transactions through holding 100% of the voting stock of Emmis.

2010 Outstanding Equity Awards At Fiscal Year-End Table

 

 

 

 

Retirement Plan

 

Emmis sponsors a Section 401(k) retirement savings plan that is available to substantially all employees age 18 years and older who have at least 30 days of service. Employees may make pretax contributions to the plans up to 50% of their compensation, not to exceed the annual limit prescribed by the Internal Revenue Service. Emmis may make discretionary matching contributions to the plans in the form of cash or Shares. During the year ended February 29, 2008, Emmis elected to match annual employee 401(k) contributions up to a maximum of $2,000 per employee, one-half of the contribution made in Emmis stock. During the year ended February 28, 2009, Emmis suspended the cash match, but continued to make the discretionary stock match. During the year ended February 28, 2010, Emmis also suspended the discretionary stock match. Emmis’ discretionary contributions to the plan for continuing operations totaled $1.8 million, $1.7 million and $0.9 million for the years ended February 28, 2007, February 29, 2008 and February 28, 2009, respectively. In April 2010, Emmis reinstated the stock match, retroactive to January 1, 2010, with a revised matching formula.

 

Potential Payments upon Termination or Change in Control

 

The employment agreements Emmis entered into with Messrs. Smulyan, Cummings, Walsh, Fiddick and Thoe provide for certain payments and benefits to the named executive officer in the event that executive officer is terminated by Emmis without “cause,” and/or terminates his own employment with “good reason.” Mr. Smulyan is also entitled to certain payments upon his death or disability.

Emmis has also entered into a Change in Control Severance Agreement with each of the executives named in the preceding tables. Each such agreement provides that if the executive’s employment is terminated by Emmis within two years after a change in control of Emmis (or, in certain instances, in anticipation of a change in control), other than for cause, or is terminated by the executive for good reason, the executive is entitled to (1) a payment equal to the executive’s base salary through the termination date, plus a pro-rata portion of the executive’s target bonus for the year and accrued vacation pay; (2) a severance payment equal in the case of Messrs. Smulyan, Walsh and Cummings to three times, and in the case of Messrs. Fiddick and Thoe to 1.5 times, the executive’s highest annual base salary and highest annual incentive bonus during the preceding three years; (3) continued accident and life insurance benefits for three years; (4) reimbursement for COBRA premiums for continuation of medical and dental benefits for 18 months and reimbursement for private medical and dental benefits of an equivalent level for 18 months following termination of the COBRA reimbursement; and (5) if the payments to the executive exceed certain limits, additional tax “gross up” payments to compensate the executive for the excise tax imposed by section 4999 of the Internal Revenue Code; provided, however that the amount of the “gross up” payment may be reduced by up to 10% if such reduction would prevent payment of the excise tax. In each case, the executive is obligated not to voluntarily leave employment with Emmis during the pendency of (and prior to the consummation or abandonment of) a change in control other than as a result of disability, retirement or an event that would constitute good reason if the change-of-control had occurred. In addition, under the Emmis 2004 Equity Compensation Plan, all outstanding restricted shares held by the executive vest immediately upon a change in control.

 

Under the Change in Control Severance Agreement, change in control, cause and good reason are defined as follows:

 

Change in Control.  A “change in control” of Emmis occurs if:

 

 

Cause.  “Cause” generally means:

 

 

Good Reason.  “Good Reason” generally means:

 

 

 

In addition to the occurrence of one of more of the events constituting “Good Reason” set forth above, in order to resign his employment, each of the executives named above is also required to give Emmis notice of the occurrence of any such event (except during the 30-day period commencing one year after the occurrence of a change in control, which is not so limited) within 90 days of such occurrence; and Emmis has the right to cure such occurrence within 30 days of such notice.

 

When the Board determines that it is in the best interest of Emmis, Emmis may negotiate severance arrangements with a departing executive in addition to or in place of the arrangements described above. Circumstances under which the board may negotiate additional or different severance arrangements include but are not limited to:

 

 

4. The second paragraph under the heading “Executive Compensation, Employment Matters and Employment Agreements; Ownership of Shares by Directors and Executive Officers” is hereby amended and restated in its entirety as follows:

 

“PRINCIPAL SHAREHOLDERS

 

As of May 17, 2010, there were 32,910,753 shares of Class A Common Stock and 4,930,680 shares of Class B Common Stock issued and outstanding. The holders of Class A Common Stock are entitled to an aggregate of 32,910,753 votes, and the holder of Class B Common Stock, Mr. Jeffrey H. Smulyan, is entitled to an aggregate of 49,306,800 votes.

 

On an as adjusted basis, all 10 shares of voting Common Stock of Emmis will be held by Mr. Smulyan, and all 1,000,000 shares of non-voting common stock of Emmis will be held by JS Parent. After the completion of the Transactions, it is expected that JS Parent will have 21,029,093 JS Parent Common Interests outstanding of which Mr. Smulyan will own 14,263,665, Alden Media will own 5,046,982 and the Rolling Shareholders will hold 1,718,446. Alden Media will have consent rights over a number of actions of JS Parent and Emmis. See “The Offer” (Section 13 — Merger Agreement; Other Agreements — Operating Agreement — JS Parent Preferred Interests”) in the Offer to Purchase.

 

The following table shows, as of May 17, 2010, the number and percentage of shares of Emmis Common Stock held by each person known to us to own beneficially more than five percent of the issued and outstanding Common Stock, by Emmis’ executive officers and directors, and by Emmis’ executive

officers and directors as a group. None of Emmis’ executive officers or directors beneficially owned any Existing Preferred Stock.

 

 

 

 

 

5. The first sentence of the last paragraph under the heading “Certain Arrangements between Emmis, the Purchaser Group, Alden, the Rolling Shareholders and their respective Affiliates” is hereby amended by inserting the following after “Alden,”:

 

“the Rolling Shareholders or any of their respective affiliates or subsidiaries”.

 

 

Item 4 of the Schedule 14D-9 is hereby amended and supplemented as follows:

 

1. All of the references under the heading “The Solicitation or Recommendation” to “holders of shares (other than the Interested Parties)” are hereby deleted in their entirety and replaced with “unaffiliated holders of Shares”.

 

2. Under the heading “Background and Reasons for the Recommendation of the Board — Background,” the following sentence is hereby inserted at the end of the second paragraph on page 10:

 

“The Board further authorized Emmis to pay each member of the Committee $2,000 per meeting attended in person or by telephone in accordance with Emmis’s Director Compensation Policy.”

 

3. The reference in the penultimate line on page 12 to “holders of shares (other than the Interested Parties)” is hereby deleted in its entirety and replaced with “unaffiliated holders of Shares”.

 

4. All of the references on page 13 to “holders of shares (other than the Interested Parties)” are hereby deleted in their entirety and replaced with “unaffiliated holders of Shares”.

 

5. All of the references in the third and fourth full paragraphs on page 22 to “holders of shares (other than the Interested Parties)” are hereby deleted in their entirety and replaced with “unaffiliated holders of Shares”.

 

6. All of the references in the first, third, fourth and fifth full paragraphs, but not in any of the bullet points, on page 25 to “holders of shares (other than the Interested Parties)” are hereby deleted in their entirety and replaced with “unaffiliated holders of Shares”.

 

7. The following text is hereby inserted after the last paragraph of “Background and Reasons for the Recommendation of the Board — Background”:

 

“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 Offer and certain other amendments and consents relating to the Alden Purchase Agreement, the Exchange Offer, the 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, and JS Acquisition issued a press release announcing, among other things, the extension of the Offer and the removal of the condition to the 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.

 

The Amendment and Consent Letter Agreement is filed as Exhibit (d)(v), the Amendment to the combined Statement on Schedule TO and Schedule 13E-3 is filed as Exhibit (a)(1)(viii), JS Acquisition’s press release is filed as Exhibit (a)(1)(ix), the Amended and Restated Preliminary Proxy Statement is filed as Exhibit (a)(1)(vii) and Emmis’ press release is filed as Exhibit (a)(1)(x). All five documents are incorporated herein by reference.”

 

8. The seventh full paragraph on page 12 is hereby amended by deleting the “.” at the end of the paragraph and replacing it with “and thereafter, the Committee determined to continue its consideration of the proposed offer.”

 

9. The penultimate paragraph under the heading “Budgeted and Projected Results for the Year Ending February 28, 2011 — Cautionary Considerations” is hereby amended by deleting the last sentence thereof in its entirety.

 

10. The second paragraph under the heading “Historical Share Price Performance” is hereby amended by inserting the following text to the end of the second paragraph: “Morgan Stanley selected March 26, 2010 as the Unaffected Date because it was the most recent date on which neither the Shares price nor trading volumes experienced the increases that preceded the announcement of the Letter of Intent. Although Morgan Stanley was not aware of any public announcements of the intention to effect the Transactions other than the announcement of the Letter of Intent on April 26, 2010, it noted the increases in the trading prices of the Shares and the relatively high trading volumes subsequent to March 26, 2010, and therefore determined that March 26, 2010 would be the most appropriate date for comparison.”

 

11. The sixth bullet point under the heading “Comparable Company Analysis” is hereby amended by inserting the phrase “plus preferred equity” after the phrase “plus minority interests.”

 

12. After the seventh bullet point under the heading “Comparable Company Analysis,” the following new paragraph is hereby inserted:

 

“Emmis’ implied Aggregate Value, based on the Offer Price, is $613 million. Emmis’ Adjusted EBITDA and Adjusted BCF were $33.5 million and $44.7 million, respectively.”

 

13. The third paragraph under the heading “Comparable Company Analysis” is hereby amended and restated in its entirety as follows:

 

“Based on this analysis, Morgan Stanley selected a range of financial multiples of the comparable companies and applied this range of multiples to the relevant financial metrics of Emmis. For purposes of calculating the Implied Equity Reference Range of Emmis Common Stock, Morgan Stanley multiplied Emmis’ Adjusted EBITDA by the selected multiple ranges of Aggregate Value to Adjusted EBITDA ratios, subtracted total debt of approximately $341 million, minority interests of approximately $49 million and preferred equity of approximately $141 million, and added cash and cash equivalents of approximately $7 million and equity method investments of approximately $3 million. The Implied Equity Reference Range per share of Emmis Common Stock was derived by dividing the Implied Equity Reference Range by the fully diluted outstanding shares of Emmis Common Stock of approximately 38 million. Morgan Stanley then repeated the analysis with respect to the Adjusted BCF. For purposes of estimated calendar year 2010 Adjusted EBITDA and estimated calendar year 2010 Adjusted BCF, Morgan Stanley utilized the 2011 Financials (as converted to a calendar basis) that were prepared by Emmis’ management and are discussed above under “Projected and Budgeted Financial Information.” Based on the number of Emmis’ current outstanding Shares and options, Morgan Stanley estimated the implied value per share of Emmis Common Stock as of May 21, 2010 as follows:”

 

14. Under the heading “Comparable Company Analysis,” the table on page 19 is hereby amended by deleting the phrase “Estimated Calendar 2010” from the phrases “Aggregate Value to Estimated Calendar 2010 Adjusted EBITDA” and “Aggregate Value to Estimated Calendar 2010 Adjusted BCF”.

 

15. Under the heading “Analysis of Selected Comparable Transactions,” the following new paragraph is hereby inserted prior to the first full paragraph on page 20:

 

“Emmis’ implied Aggregate Value, based on the Offer Price, is $613 million. Emmis’ Adjusted BCF was $44.7 million.”

 

16. The third paragraph under the heading “Analysis of Selected Comparable Transactions,” is hereby amended by inserting the following text after the first sentence: “For purposes of calculating the Implied Equity Reference Range of Emmis Common Stock, Morgan Stanley multiplied Emmis’ Adjusted BCF by the selected multiple ranges of Aggregate Value to Adjusted BCF ratios, subtracted total debt of approximately $341 million, minority interests of approximately $49 million and preferred equity of approximately $141 million, and added cash and cash equivalents of approximately $7 million and equity method investments of approximately $3 million. The Implied Equity Reference Range per share of Emmis Common Stock was derived by dividing the Implied Equity Reference Range by the fully diluted outstanding shares of Emmis Common Stock of approximately 38 million.”

 

17. The table following the third paragraph under the heading “Analysis of Selected Comparable Transactions,” is hereby amended by deleting the phrase “Estimated Calendar Year 2010” from the phrase “Aggregate Value to Estimated Calendar Year 2010 Adjusted BCF.”

 

18. The first sentence under the heading “Sum-of-the-Parts Analysis,” is hereby amended and restated in its entirety as follows:

 

“Morgan Stanley also performed a sum-of-the-parts analysis for Emmis based upon (i) the Adjusted BCF of Emmis’ radio broadcasting business and (ii) the Adjusted EBITDA of Emmis’ magazine publishing business, as separate and independent businesses at value levels for each consistent with financial multiples for comparable publicly traded companies.”

 

19. Under the heading “Sum-of-the-Parts Analysis,” the following new paragraph is hereby inserted after the second bullet point:

 

“The Adjusted EBITDA of Emmis’ magazine publishing business was $2.4 million and the Adjusted BCF of Emmis’ radio broadcasting business was $42.4 million.”

 

20. The third paragraph under the heading “Premia Paid Analysis” is hereby amended by inserting the following sentence at the end of the paragraph: “Morgan Stanley selected March 26, 2010 as the Unaffected Date because it was the most recent date on which neither the Shares price nor trading volumes experienced the increases that preceded the announcement of the Letter of Intent. Although Morgan Stanley was not aware of any public announcements of the intention to effect the Transactions other than the announcement of the Letter of Intent on April 26, 2010, it noted the increases in the trading prices of the Shares and the relatively high trading volumes subsequent to March 26, 2010, and therefore determined that March 26, 2010 would be the most appropriate date for comparison.”

 

21. The third paragraph under the heading “Reasons and Factors for the Recommendation of the Board” is hereby amended and restated in its entirety as follows:

 

“In making its recommendation, the Board expressly adopted the recommendation of the Committee and the analyses and discussion of the Committee with respect to the fairness of the Offer and the Merger to unaffiliated holders of Shares, as summarized below. Morgan Stanley’s opinion was rendered solely for the benefit of the Committee and Morgan Stanley did not make a presentation or deliver any materials for discussion to the Board. The Board did not adopt Morgan Stanley’s opinion or the related analyses in making its fairness determination. However, the Board took into account, in concluding that the Offer Price is fair from a financial point of view, among other considerations, the fact that the Committee received from Morgan Stanley a fairness opinion dated May 25, 2010 to the effect that, as of such date 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 Shares (other than the Purchaser Group, Alden and the Rolling Shareholders) pursuant to the Offer and the Merger was fair from a financial point of view to such holders.”

 

22. The paragraph under the heading “Reasons and Factors for the Recommendation of the Board — Supportive Factors — Premium Relative to Market Prices” is hereby amended by inserting the following sentence before the last sentence of the paragraph: “In considering these premiums, the Committee took into account that, although the Committee was not aware of any public announcements of the intention to commence the Offer other than the announcement of JS Acquisition’s proposal on April 26, 2010, there was an increase in the trading price of the Shares and relatively high trading volumes during the 30-day period prior to such announcement.”

 

23. The paragraph under the heading “General — Reasons and Factors for the Recommendation of the Board — Supportive Factors — Possible Decline in Emmis Market Price if the Proposal is Withdrawn” is hereby amended by inserting the following sentence at the end of the paragraph: “In considering this possibility, the Committee took into account that, although the Committee was not aware of any public announcements of the intention to commence the Offer other than the announcement of JS Acquisition’s proposal on April 26, 2010, there was an increase in the trading price of the Shares and relatively high trading volumes during the 30-day period prior to such announcement.”

 

 

Item 7 of the Schedule 14D-9 is hereby amended and supplemented by deleting all of the references in Item 7 to “holders of shares (other than the Interested Parties)” and replacing them with “unaffiliated holders of Shares”.

 

 

Item 8 of the Schedule 14D-9 is hereby amended and supplemented as follows:

 

1. The first sentence under the heading “Dissenters’ Rights” is hereby amended and restated in its entirety as follows: “Dissenters’ rights are not available in connection with the Offer.”

 

Similarly, all other references in the Schedule 14D-9 to the sentence “It is not expected that dissenters’ rights will be available in connection with the Offer.” are hereby deemed to be amended as set forth above.

 

2. The text under the heading “Shareholder Litigation” is hereby amended and restate in its entirety as follows:

 

“On April 26, 2010, JS Acquisition announced its intention to commence the proposed tender offer. Thereafter, a number of purported class actions were filed against various combinations of Emmis, JS Acquisition, Alden, and members of the Board concerning the proposed tender offer. Emmis is aware of the following seven class action lawsuits:

 

 

 

In those cases where Defendants have been served, Defendants have been granted automatic 30-day extensions, pursuant to Court rules, to respond to the complaints.

 

On May 6, 2010, Plaintiffs in the Jarosclawicz action served initial discovery requests on Defendants.

 

On May 10, 2010, Plaintiffs in the Ross and McQueen actions moved to consolidate those two actions into one and also moved for the appointment of Brower Piven, A Professional Corporation and Kroger Gardis & Regas, LLP as Interim Co-Lead Counsel. By order dated May 11, 2010, the Court conditionally approved the consolidation and set a hearing for June 1, 2010 on the issue of lead counsel.

 

On May 14, 2010, Plaintiffs in the Stabosz action served initial discovery requests on Defendants.

 

On May 20, 2010, Plaintiffs in the Stabosz action filed a Motion for Expedited Response to certain document requests.

 

On May 20, 2010, Plaintiffs in the Hinkle, Jarosclawicz, and Stabosz actions moved to consolidate those actions into the Ross/McQueen action.

 

On May 21, 2010, certain of the Defendants in the Ross action filed a Motion for Change of Venue from the Judge. By Order dated May 24, 2010, the Court granted the motion, and a new judge has qualified.

 

On May 26, 2010, the law firms representing the Stabosz and Hinkle Plaintiffs filed in the Ross, Stabosz, and Hinkle actions motions to appoint Cohen & Malad LLP and Wolf Popper LLP as co-lead counsel and in opposition to the appointment of Brower Piven and Kroger Gardis & Regas, LLP as co-lead counsel.

 

On May 28, 2010, the law firms representing the plaintiffs in the Ross and McQueen cases filed a memorandum in opposition to the consolidation of the Stabosz, Hinkle and Jarosclawicz cases and further moved to stay those two actions. In addition, those firms moved for expedited discovery from the defendants.

 

Also on May 28, 2010, the plaintiff in Hinkle filed an emergency motion for preliminary injunction to enjoin the defendants from taking any steps to complete the transaction. That plaintiff also requested expedited discovery from the defendants and the setting of an expedited briefing schedule.

 

On June 4, 2010, a sixth purported class action complaint was filed, styled Richard Frank v. Jeffrey H. Smulyan, Susan Bayh, Gary Kaseff, Richard Leventhal, Peter Lund, Greg Nathanson, Lawrence Sorrel, Patrick Walsh, Emmis Communications Corporation, JS Acquisition, Inc., JS Acquisition, LLC, and Alden Global Capital, Cause No. 49D10 1006 PL 025149. Like the five previously filed actions, the Frank action was filed in the Marion Superior Court in Indiana. Since that time, Plaintiff Frank has filed motions seeking to have his case consolidated into the Ross matter and to have his counsel appointed as lead counsel for a Preferred Stock Class, the latter having been opposed by Plaintiffs Hinkle and Stabosz. The motion to consolidate was granted by the original court, subject to the approval of the judge before whom the Ross case is pending. The judge in the Ross case has not yet approved the consolidation, and the other motions filed by Plaintiff Frank also remain pending.

On June 8, 2010, Defendants filed an Objection to Plaintiffs’ Motion for Expedited Discovery. Also on June 8, Plaintiffs in the Hinkle and Stabosz actions filed Amended Complaints.

 

On June 9, 2010, the Court in the Ross action granted Plaintiffs’ Motion to Consolidate Related Actions, consolidating the Hinkle, McQueen, Jarosclawicz, and Stabosz actions into the Ross action before Judge Moberly. The consolidated action was re-captioned In re: Emmis Shareholder Litigation by order of the Court dated June 15, 2010. Also, on June 9, 2010, Plaintiffs Stabosz and Hinkle filed a Reply in Further Support of Their Motions for Expedited Discovery and Preliminary Injunction.

 

On June 10, 2010, Defendants moved to dismiss the five consolidated purported class actions.

 

On June 11, 2010, Defendants filed a Sur-Reply in Opposition to Motions for Expedited Discovery by Plaintiffs Stabosz and Hinkle.

 

On June 14, 2010, Plaintiffs Stabosz and Hinkle filed their Response to Defendants’ Sur-Reply in Opposition to Motions for Expedited Discovery.

 

On June 15, 2010, the Court issued an Order Appointing Cohen & Malad, LLP and Wolf Popper LLP as Co-Lead Counsel for Plaintiffs, and also issued an Order Granting Plaintiff’s Motion to Expedite Response to Document Requests and For Four Depositions of Defendants and their Representatives Relating to Emergency Motion for Preliminary Injunction. The parties currently are exchanging discovery in accordance with the latter order pursuant to an agreed-upon schedule.

 

On June 18, 2010, a seventh purported class action complaint was filed, styled Ted Primich v. Jeffrey Smulyan, Patrick Walsh, Susan Bayh, Gary Kaseff, Richard Leventhal, Lawrence Sorrel, Greg Nathanson, Peter Lund, Emmis Communications Corporation, JS Acquisition, Inc., and JS Acquisition, LLC, action number 1:10-cv-0782SEB-TAB, in the United States District Court for the Southern District of Indiana.

 

A hearing on Plaintiffs’ motion for preliminary injunction in In re: Emmis Shareholder Litigation has been scheduled for July 19, 2010.

 

In addition, several law firms and investor advocacy groups that have not appeared in the above-listed lawsuits, including but not limited to Finkelstein Thompson LLP, the Law Offices of Howard G. Smith, Levi & Korinsky, LLP, Rigrodsky & Long, P.A., Tripp Levy PLLC, Wolf Haldenstein Adler Freeman & Herz LLP and the Shareholders Foundation, Inc., have commenced investigations into potential claims with respect to the transactions described in the Offer to Purchase.”

 

Item 9 of the Schedule 14D-9 is hereby amended and supplemented by inserting the following exhibits:

 

SIGNATURE

 

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

EMMIS COMMUNICATIONS CORPORATION

 

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

Date: June 23, 2010

EXHIBIT INDEX

 

 

 

ANNEX B

     

PREPARED AT THE DIRECTION OF COUNSEL
HIGHLY CONFIDENTIAL

     

     

PREPARED AT THE DIRECTION OF COUNSEL
HIGHLY CONFIDENTIAL

 

We have prepared this document solely for the use of the Committee of Disinterested Directors (the “Committee”) of the Board of Directors of Miller (“Miller” or the “Company”) in connection with its review and evaluation of the transactions contemplated in the form of draft documentation received May 24, 2010 between the Company, Miller’s Chairman and CEO, John Starks (“Starks”), JS Acquisition, Inc. (“JS Acquisition”) and Alonzo Global Capital (“Alonzo”). You must hold this document and any oral information provided in connection with this document in strict confidence and may not communicate, reproduce, distribute or disclose it to any other person, or refer to it publicly, in whole or in part at any time except with our prior written consent.

We have prepared this document and the analyses contained in it based, in part, on certain assumptions and information obtained by us from the Committee, the directors, officers, employees, agents or affiliates of Miller and/or from other sources. Our use of such assumptions and information does not imply that we have independently verified or necessarily agree with any of such assumptions or information, and we have assumed and relied upon the accuracy and completeness of such assumptions and information for purposes of this document. Neither we nor any of our affiliates, or our or their respective officers, employees or agents, make any representation or warranty, express or implied, in relation to the accuracy or completeness of the information contained in this document or any oral information provided in connection herewith, or any data it generates and accept no responsibility, obligation or liability (whether direct or indirect, in contract, tort or otherwise) in relation to any of such information. We and our affiliates and our and their respective officers, employees and agents expressly disclaim any and all liability which may be based on this document and any errors therein or omissions therefrom. Neither we nor any of our affiliates, or our or their respective officers, employees or agents, make any representation or warranty, express or implied, that any transaction has been or may be effected on the terms or in the manner stated in this document, or as to the achievement or reasonableness of future projections, management targets, estimates, prospects or returns, if any. Any views or terms contained herein are preliminary only, and are based on financial, economic, market and other conditions prevailing as of the date of this document and are therefore subject to change. We undertake no obligation or responsibility to update any of the information contained in this document. Past performance does not guarantee or predict future performance.

This document and the information contained herein do not constitute an offer to sell or the solicitation of an offer to buy any security, commodity or instrument or related derivative, nor do they constitute an offer or commitment to lend, syndicate or arrange a financing, underwrite or purchase or act as an agent or advisor or in any other capacity with respect to any transaction, or commit capital, or to participate in any trading strategies, and do not constitute legal, regulatory, accounting or tax advice to the Committee. We recommend that the Committee seek independent third party legal, regulatory, accounting and tax advice regarding the contents of this document. This document does not constitute and should not be considered as any form of financial opinion or recommendation by us or any of our affiliates. This document is not a research report and was not prepared by the research department of Morgan Stanley or any of its affiliates.

Notwithstanding anything herein to the contrary, each recipient hereof (and their employees, representatives, and other agents) may disclose to any and all persons, without limitation of any kind from the commencement of discussions, the U.S. federal and state income tax treatment and tax structure of the proposed transaction and all materials of any kind (including opinions or other tax analyses) that are provided relating to the tax treatment and tax structure. For this purpose, “tax structure” is limited to facts relevant to the U.S. federal and state income tax treatment of the proposed transaction and does not include information relating to the identity of the parties, their affiliates, agents or advisors.

This document is provided by Morgan Stanley & Co. Incorporated and/or certain of its affiliates, which may include Morgan Stanley Realty Incorporated, Morgan Stanley Senior Funding, Inc., Morgan Stanley Bank, Morgan Stanley & Co. International Limited, Morgan Stanley Securities Limited, Morgan Stanley Bank AG, Morgan Stanley MUFG Securities Co., Ltd, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd, Morgan Stanley Dean Witter Asia Limited, Morgan Stanley Dean Witter Australia Securities Limited, Morgan Stanley Dean Witter Australia Limited, Morgan Stanley Dean Witter Asia (Singapore) Pte., Morgan Stanley Services Limited, Morgan Stanley & Co. International Limited Seoul Branch, Morgan Stanley Canada Limited and/or Morgan Stanley, S.V., S.A. Unless governing law permits otherwise, you must contact an authorized Morgan Stanley entity in your jurisdiction regarding this document or any of the information contained herein.

© Morgan Stanley and/or certain of its affiliates. All rights reserved.

     

PREPARED AT THE DIRECTION OF COUNSEL
HIGHLY CONFIDENTIAL

Project Miller

     

                                                                                                                                                                                                                                                            3

     

PREPARED AT THE DIRECTION OF COUNSEL
HIGHLY CONFIDENTIAL

     

     

PREPARED AT THE DIRECTION OF COUNSEL
HIGHLY CONFIDENTIAL

     

     

PREPARED AT THE DIRECTION OF COUNSEL
HIGHLY CONFIDENTIAL