Long-term Debt

Long-term debt was comprised of the following at February 29, 2016 and November 30, 2016:



	February 29, 2016			November 30, 2016
2014 Credit Agreement debt :
Revolver	$	3,000		$	2,000
Term Loan	181,762			156,955
Total 2014 Credit Agreement debt	184,762			158,955

98.7FM non-recourse debt	65,411			61,356
Digonex non-recourse debt ⁽¹⁾	4,714			5,270
Less: Current maturities	(17,573		)	(10,583		)
Less: Unamortized original issue discount	(9,287		)	(7,570		)
Total long-term debt	$	228,027		$	207,428

⁽¹⁾ The face value of Digonex non-recourse debt is $6.2 million

2014 Credit Agreement

On June 10, 2014, Emmis entered into the 2014 Credit Agreement, by and among the Company, EOC, as borrower (the “Borrower”), certain other subsidiaries of the Company, as guarantors (the “Subsidiary Guarantors”), the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Fifth Third Bank, as syndication agent.

The 2014 Credit Agreement includes a senior secured term loan facility (the “Term Loan”) of $185.0 million and a senior secured revolving credit facility of $20.0 million, and contains provisions for an uncommitted increase of up to $20.0 million principal amount (plus additional amounts so long as a pro forma total net senior secured leverage ratio condition is met) of the revolving credit facility and/or the Term Loan subject to the satisfaction of certain conditions. The revolving credit facility includes a sub-facility for the issuance of up to $5.0 million of letters of credit. Pursuant to the 2014 Credit Agreement, the Borrower borrowed $185.0 million of the Term Loan on June 10, 2014; $109.0 million was disbursed to the Borrower (the “Initial Proceeds”) and the remaining $76.0 million was funded into escrow (the “Subsequent Acquisition Proceeds”).

The Initial Proceeds, coupled with $13.0 million of revolving credit facility borrowings, were used by the Borrower on June 10, 2014 to repay all amounts outstanding under the 2012 Credit Agreement, to make a $55.0 million initial payment associated with our acquisition of WBLS-FM and WLIB-AM, and to pay fees and expenses. The Subsequent Acquisition Proceeds were used to make the final $76.0 million payment related to the acquisition of WBLS-FM and WLIB-AM on February 13, 2015.

The Term Loan is due not later than June 10, 2021 and initially amortized in an amount equal to 1% per annum (subsequently amended, see below) of the original principal amount of the Term Loan, payable in quarterly installments commencing April 1, 2015, with the balance payable on the maturity date. The revolving credit facility expires not later than June 10, 2019. An unused commitment fee of 50 basis points per annum will be payable quarterly on the average unused amount of the revolving credit facility. Prior to the amendments to the 2014 Credit Agreement discussed below, the Term Loan and amounts borrowed under the revolving credit facility bore interest, at the Borrower’s option, at either (i) the Alternate Base Rate (as defined in the 2014 Credit Agreement) (but not less than 2.00%) plus 3.75% or (ii) the Adjusted LIBO Rate (as defined in the 2014 Credit Agreement) (but not less than 1.00%) plus 4.75%.

The 2014 Credit Agreement is carried on our condensed consolidated balance sheets net of an original issue discount. The original issue discount, which was $7.1 million and $5.5 million as of February 29, 2016 and November 30, 2016, respectively, is being amortized as additional interest expense over the life of the 2014 Credit Agreement.

The obligations under the 2014 Credit Agreement are secured by a perfected first priority security interest in substantially all of the assets of the Company, the Borrower and the Subsidiary Guarantors.

On November 7, 2014, Emmis entered into the First Amendment to the 2014 Credit Agreement. The First Amendment (i) increased the maximum Total Leverage Ratio to 6.00:1.00 for the period February 28, 2015 through February 29, 2016, (ii) adjusted the definition of Consolidated EBITDA to exclude during the term of the 2014 Credit Agreement up to $5 million in severance and/or contract termination expenses and up to $2.5 million in losses attributable to the reformatting of the Company’s radio stations, (iii) extended the requirement for the Borrower to pay a 1.00% fee on certain prepayments of the Term Loan to November 7, 2015, (iv) increased the Applicable Margin by 0.25% for at least six months from the date of the First Amendment and until the Total Leverage Ratio is less than 5.00:1.00, and (v) made certain technical adjustments to the definition of Consolidated Excess Cash Flow and to address the Foreign Account Tax Compliance Act. Emmis paid a total of approximately $1.0 million of transaction fees to the Lenders that consented to the First Amendment, which were recorded as original issue discount and are being amortized over the remaining life of the 2014 Credit Agreement.

On April 30, 2015, Emmis entered into the Second Amendment to the 2014 Credit Agreement. The Second Amendment (i) increased the maximum Total Leverage Ratio to (A) 6.75:1.00 during the period from May 31, 2015 through February 29, 2016, (B) 6.50:1.00 for the quarter ended May 31, 2016, (C) 6.25:1.00 for the quarter ended August 31, 2016, (D) 6.00:1.00 for the quarter ended November 30, 2016, and (E) 5.75:1.00 for the quarter ended February 28, 2017, after which it reverts to the original ratio of 4.00:1.00 for the quarters ended May 31, 2017 and thereafter, (ii) required Emmis to pay a 2.00% fee on certain prepayments of the Term Loan prior to the first anniversary of the Second Amendment and requires Emmis to pay a 1.00% fee on certain prepayments of the Term Loan from the first anniversary of the Second Amendment until the second anniversary of the Second Amendment, (iii) increased the Applicable Margin throughout the remainder of the term of the Credit Agreement to 5.00% for ABR Loans (as defined in the Credit Agreement) and 6.00% for Eurodollar Loans (as defined in the 2014 Credit Agreement), and (iv) increased the amortization to 0.50% per calendar quarter through January 1, 2016 and to 1.25% per calendar quarter thereafter commencing April 1, 2016. Emmis paid a total of approximately $1.1 million of transaction fees to the Lenders that consented to the Second Amendment, which were recorded as original issue discount and are being amortized over the remaining life of the 2014 Credit Agreement.

On August 22, 2016, Emmis entered into the Third Amendment to the 2014 Credit Agreement. The Third Amendment made certain changes to the Credit Agreement to facilitate the Company's consideration of and, if approved by the Company's Board of Directors and shareholders, entry into a transaction that would have resulted in the Class A common stock of the Company ceasing to be registered under the Securities Act of 1934 (such potential transaction, a "Going Private Transaction"). Specifically, the Third Amendment added an exception to the covenant restricting transactions with affiliates that (i) permitted the Company to enter into a Going Private Transaction with an affiliate of the Company and (ii) permitted the Borrower to pay any costs incurred or reimbursed by an affiliate of the Company in connection with a Going Private Transaction, whether or not the transaction was consummated. The Third Amendment also allowed the Company to add certain costs and expenses incurred in connection with a Going Private Transaction to Consolidated EBITDA, as defined in the Credit Agreement, for purposes of determining compliance with the financial covenants in the Credit Agreement, subject to caps of (i) $2.5 million if a Going Private Transaction was not recommended by a special committee of the Company’s Board of Directors and (ii) $8.0 million if a Going Private Transaction was recommended by a special committee of the Company’s Board of Directors but not consummated. Finally, the Third Amendment made certain changes to the Credit Agreement that would have been effective only if a Going Private Transaction was consummated. The Third Amendment also required the Borrower to pay a 50 basis point fee to the lenders that consented to it either if a Going Private Transaction was consummated or if such a transaction was recommended by a special committee of the board of directors of the Company but not consummated. The special committee of the board of directors did not recommend the Going Private Transaction and no such transaction was consummated. See Note 10 for discussion of the Going Private Transaction.

In connection with the closing of the sale of Texas Monthly on November 1, 2016, Emmis repaid $15.0 million of Term Loans and $8.5 million of Revolver borrowings (see Note 10 for more discussion of the sale of Texas Monthly). Under the terms of the 2014 Credit Agreement, Emmis was required to use all Net Available Proceeds (as defined in the 2014 Credit Agreement) from the sale of Texas Monthly to repay Term Loans unless it exercised its right under the 2014 Credit Agreement to reinvest a portion of the Net Available Proceeds in new long-term assets of the Company. On November 1, 2016, Emmis exercised this reinvestment right for up to $10.0 million of Net Available Proceeds. This election allows the Company to reduce the amount of Net Available Proceeds by amounts used to purchase assets within 365 days of the election, or 545 days of the election so long as the asset purchase is under contract within 365 days. Routine capital expenditures qualify as a reinvestment under the terms of the 2014 Credit Agreement. The calculation of Net Available Proceeds is also reduced for transaction-related costs and certain other estimates including severance obligations that Emmis may be required to fund if employees are terminated by the buyer of Texas Monthly prior to February 28, 2017. Future changes in these estimates will impact the calculation of Net Available Proceeds. The current calculation of Net Available Proceeds, reinvestments and Term Loan repayments related to the sale of Texas Monthly is as follows:



	Term Loan Repayments Texas Monthly Sale
Gross proceeds from the sale of Texas Monthly	$	25,000
Working capital and other closing adjustments	(747		)
Estimate of transaction costs	(126		)
Estimate of employee-related transaction costs, including maximum reimbursement to buyer for severance	(2,977		)
Subtotal	21,150
Less: Reinvestments - capital expenditures since November 1, 2016	(388		)
Less: Term Loan repayment on November 1, 2016	(15,000		)
Remaining Net Available Proceeds, subject to finalization of estimates and reinvestments	$	5,762

This amount is not included as a current maturity of long-term debt in the accompanying condensed consolidated balance sheet as of November 30, 2016 because the amount, if any, of additional Net Available Proceeds required to be used to repay Term Loans within one year is not determinable primarily because such amounts are reduced by future capital expenditures that we may incur.

We were in compliance with all financial and non-financial covenants as of November 30, 2016. Our Total Leverage Ratio and Interest Coverage Ratio (each as defined in the 2014 Credit Agreement) requirements and actual amounts as of November 30, 2016 were as follows:



	As of November 30, 2016
	Covenant Requirement	Actual Results
Maximum Total Leverage Ratio	6.00 : 1.00	5.53 : 1.00
Minimum Interest Coverage Ratio	2.00 : 1.00	2.32 : 1.00

98.7FM Non-recourse Debt

On May 30, 2012, the Company, through wholly-owned, newly-created subsidiaries, issued $82.2 million of non-recourse notes. Teachers Insurance and Annuity Association of America, through a participation agreement with Wells Fargo Bank Northwest, National Association, is entitled to receive payments made on the notes. The notes are obligations only of the newly-created subsidiaries, are non-recourse to the rest of the Company and its subsidiaries, and are secured by the assets of the newly-created subsidiaries, including the payments made to the newly-created subsidiary related to the 98.7FM LMA, which are guaranteed by Disney Enterprises, Inc. The notes bear interest at 4.1%. The 98.7FM non-recourse notes are carried on our condensed consolidated balance sheets net of an original issue discount. The original issue discount, which was $2.2 million and $2.0 million as of February 29, 2016 and November 30, 2016, respectively, is being amortized as additional interest expense over the life of the notes.

Digonex Non-recourse Debt

Digonex non-recourse notes payable consist of notes payable issued by Digonex, which were recorded at fair value on June 16, 2014, the date that Emmis acquired a controlling interest in Digonex. The notes payable, some of which are secured by the assets of Digonex, are non-recourse to the rest of the Company and its subsidiaries. The notes payable mature on December 31, 2017 and accrue interest at 5.0% per annum. Interest is due at maturity. The face value of the notes payable is $6.2 million. The Company is accreting the difference between this face value and the original $3.6 million fair value of the notes payable recorded in the acquisition of its controlling interest of the business as interest expense over the remaining term of the notes payable.

As a result of our mandatory repayment of Term Loans in connection with our sale of Texas Monthly, quarterly mandatory Term Loan repayments decreased from $2.3 million per quarter to $1.6 million per quarter. Also, no quarterly amortization payment is due on January 1, 2017. Quarterly amortization payments will resume effective April 1, 2017. Based on amounts outstanding at November 30, 2016, mandatory principal payments of long-term debt for the next five years and thereafter are summarized below:



Year Ended	2014 Credit Agreement						Digonex		Total
February 28 (29),	Revolver		Term Loan		98.7FM Debt		Notes payable		Payments
2017	$	—	$	—	$	1,398	$	—	$	1,398
2018	—		6,265		6,039		6,199		18,503
2019	—		6,265		6,587		—		12,852
2020	2,000		6,265		7,150		—		15,415
2021	—		6,265		7,756		—		14,021
Thereafter	—		131,895		32,426		—		164,321
Total	$	2,000	$	156,955	$	61,356	$	6,199	$	226,510