Alden files Emmis going private letter of intent

It turns out that Alden Global Capital not only owns a big chunk of the preferred stock of Emmis Communications, it also owns – directly or indirectly – over 10% of the Class A common stock of Emmis. Here is the Letter of Intent that Alden sent to Emmis CEO Jeff Smulyan, in his capacity as President and CEO of JS Acquisition, agreeing to the terms of their proposal to take Emmis private. The document was filed Monday with the SEC.
Alden Global Capital
885 Third Avenue, 34th Floor
New York, NY 10022
April 26, 2010
JS Acquisition, Inc.
Jeffrey H. Smulyan,
President and CEO
Dear Mr. Smulyan:
On behalf of Alden Global Capital (“Alden”) we appreciate the opportunity to submit this letter of intent relating to the contemplated equity financing by Alden of JS Acquisition, Inc., an Indiana corporation (the “Company”), to fund a going private transaction involving Emmis Communications Corporation (“ECC”) on the terms contemplated below (the “Transaction”).
Alden owns 1,162,737 shares of ECC 6.25% Series A Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Preferred Stock”) and has a direct or indirect economic interest (excluding its shares of Preferred Stock) in approximately 10.4% of ECC’s outstanding Class A Common Stock, par value $0.01 per share (the “Class A Common Stock”).
The Transaction.  Going private transaction involving the Company and ECC upon completion of which (i) Jeffrey H. Smulyan (the “Controlling Stockholder”) shall hold substantially all of a new class of voting common stock of ECC (representing nominal economic value) and the Controlling Stockholder and his affiliates hold all of the outstanding common stock of the Company (the “Company Common Stock”), and (ii) the Company shall own 100% of a new class of non-voting common stock of ECC (which will represent substantially all of the outstanding equity value of ECC).
Consideration to ECC Stockholders.  The Transaction would offer (a) $2.40 per share in cash to the holders of ECC’s outstanding Class A Common Stock (excluding shares owned by the Company, Mr. Smulyan and his affiliates) and (b) 12% subordinated debt securities due 2017 of ECC (the “Debt”) to holders of ECC’s Preferred Stock with an aggregate principal amount equal to 60% of the aggregate liquidation preference for the Preferred Stock (excluding accrued and unpaid dividends); the Preferred Stock owned by Alden would be exchanged for Debt in a merger with ECC (the “Merger”).  The Debt will have the terms set forth on Annex B.

Conditions.  Completion of the Transaction shall be subject to the following conditions:
receipt of stockholder approval of the Merger,
at least 662¤3% of the Preferred Stock shall have been exchanged for Debt,
the terms of any remaining Preferred Stock have been amended by receipt of the requisite vote to (i) eliminate § 11 of Exhibit A to the ECC Articles of Incorporation (providing for a Going Private Redemption); (ii) provide for the automatic conversion of the Preferred Stock upon a merger 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 merger; and (iii) eliminate the right of the holders of the Preferred Stock to nominate directors to the board of ECC (collectively, the “ECC Preferred Stock Amendments”),
the satisfaction of applicable regulatory requirements and of customary conditions precedent for similar transactions, including HSR and FCC approval,
the tender offer for Common Stock will be subject to (i) the ECC Board of Directors (the “Board”) granting a waiver of §§ 23-1-43-1 to 23-1-43-24 of the Ind. BCL by approving of the purchase by the Company of shares tendered in the offer, (ii) the Board agreeing to utilize the Ind. BCL special circumstances statute (Ind. BCL § 23-1-40-3(b)(1)) to submit the back-end merger directly to the ECC shareholders for approval without Board recommendation of the merger and (iii) the effectiveness of the ECC Preferred Stock Amendments,
the execution of definitive documentation to reflect the terms of the Transaction consistent with the terms of this letter and Exhibit A hereto; and
simultaneous completion of all parts of the Transaction.

Financing; Support.  Upon consummation of the Transaction, Alden shall purchase up to $80 million liquidation preference of Series A Convertible Redeemable PIK Preferred Stock of the Company, having the terms set forth in Annex A hereto (the “Company Preferred Stock”). We hereby represent and warrant that we have sufficient cash on hand or capital commitments to satisfy such obligation, and will take no action that would limit our ability or obligation to satisfy such obligation.  In addition, Alden will agree to vote its Preferred Stock in favor of the ECC Preferred Stock Amendments and its Class A Common Stock in favor of the Merger.
Approvals.  We hereby represent and warrant that we have all corporate power and authority to execute this letter agreement and to perform our obligations hereunder.
Board of Directors.  Upon our entry into binding documentation regarding the Transaction, you will use all commercially reasonable efforts to cause a representative designated by Alden to be elected to the Board of Directors of ECC prior to the commencement of the tender offer for the Common Stock and the exchange offer for the Preferred Stock; provided that such right shall be without duplication of any right of Alden to otherwise nominate a director pursuant to the terms of the Preferred Stock.  Our willingness to engage in the Transaction is conditioned on the Board of Directors, promptly following the election of such representative to the Board, approving the exemption pursuant to Rule 16b-3 under the Securities Exchange Act of 1934, as amended, of the payments to be made to Alden in respect of the Class A Common Stock and Preferred Stock owned by it.
Good Faith Efforts.  We will use commercially reasonable efforts in good faith to complete the Transaction as promptly as possible.
Governing Law.  This letter shall be governed by the laws of the State of Indiana without regard to the conflict of laws principles thereof.
Press Release.  Promptly after the execution and delivery of this letter by the parties hereto, the parties shall issue a joint press release, substantially in the form attached hereto as Annex C.  Thereafter, except as may be required by applicable law or securities exchange rules or regulations neither party shall, and each party shall cause their respective affiliates and representatives not to, issue or cause the publication of any press release or other announcement with respect to the Transaction without the consent of the other party hereto.

Counterparts. This letter may be executed in two or more counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument.
Non Binding.  With the exception of paragraphs 8 (Governing Law), 9 (Press Release), 11 (Non Binding), and the second sentence of paragraph 4 (Financing; Support), which shall each be legally binding, this letter of intent shall be non-binding.  No party hereto shall be liable for any indirect or consequential damages of any kind in connection with this letter of intent.

 By:  /s/ Jason Pecora
        Jason Pecora
Its: Managing Director
Agreed to this 26th day of April, 2010
By:  /s/ Jeffrey H. Smulyan
       Jeffrey H. Smulyan
Its:  President and CEO