def14a
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by Registrant þ
Filed by Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 |
EMMIS COMMUNICATIONS CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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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): |
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Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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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. |
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Amount previously paid: |
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Form, schedule or registration statement no.: |
January 8, 2007
Dear Shareholder:
The directors and officers of Emmis Communications Corporation join me in inviting you to
attend our annual meeting of our shareholders on Tuesday, February 13, 2007 at 2:00 p.m., local
time, at our headquarters, One Emmis Plaza, 40 Monument Circle, Indianapolis, Indiana. The formal
notice of this annual meeting and the proxy statement appear on the following pages, and are
accompanied by a copy of our Annual Report on Form 10-K (as amended) for the fiscal year ended
February 28, 2006. After reading the proxy statement and other materials, please mark, sign, and
return the enclosed proxy card(s) to ensure that your votes on the business matters of the meeting
will be recorded.
We hope that you will attend this meeting. Whether or not you attend, we urge you to return
your proxy promptly in the postage paid envelope provided. After returning the proxy, you may, of
course, vote in person on all matters brought before the meeting.
We look forward to seeing you on February 13.
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Sincerely, |
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/s/ Jeffrey H. Smulyan |
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Jeffrey H. Smulyan |
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Chief Executive Officer, President
and Chairman of the Board |
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(This page intentionally left blank)
EMMIS COMMUNICATIONS CORPORATION
INDIANAPOLIS, INDIANA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of the shareholders of Emmis Communications Corporation will be held on
Tuesday, February 13, 2007, at 2:00 p.m., local time, at One Emmis Plaza, 40 Monument Circle,
Indianapolis, Indiana 46204.
The holders of common stock will be asked to consider and to vote on the following matters:
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election of two directors to Emmis board of directors for terms of three
years; |
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ratification of the selection of Ernst & Young LLP as Emmis independent
registered public accountants for the fiscal year ending February 28, 2007; |
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shareholder proposal recommending that the board of directors adopt a
recapitalization plan providing for all outstanding Emmis stock to have one vote per
share; and |
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transaction of any other business that may properly come before the meeting
and any adjournments or postponements of the meeting. |
We describe each of these proposals in more detail in the accompanying proxy statement, which
you should read in its entirety before voting.
Only shareholders of record at the close of business on December 15, 2006 are entitled to
notice of and to vote at this meeting and any adjournments or postponements of this meeting. The
proxy statement and proxy card(s) are enclosed.
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By order of the Board of Directors, |
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/s/ J. Scott Enright |
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J. Scott Enright |
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Secretary |
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Indianapolis, Indiana
January 8, 2007
TABLE OF CONTENTS
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Exhibit A: Emmis Communications Corporation Audit Committee Charter
EMMIS COMMUNICATIONS CORPORATION
ONE EMMIS PLAZA
40 MONUMENT CIRCLE
INDIANAPOLIS, INDIANA 46204
PROXY STATEMENT
In this proxy statement, Emmis Communications Corporation is referred to as we, us,
our, our company or Emmis.
QUESTIONS AND ANSWERS ABOUT THIS ANNUAL MEETING
Q: Why did I receive this proxy statement?
You received this proxy statement because our board of directors is soliciting your proxy to
vote at the annual meeting of shareholders. The annual meeting will be held on Tuesday, February
13, 2007, at 2:00 p.m., local time, at One Emmis Plaza, 40 Monument Circle, Indianapolis, Indiana
46204.
This proxy statement summarizes the information you need to know to vote on an informed basis
at the annual meeting; however, you do not need to attend the annual meeting to vote your shares.
See How do I vote? We expect to begin sending this proxy statement, the attached notice of
annual meeting and the enclosed proxy card(s) on January 8, 2007 to all shareholders entitled to
vote.
Q: What am I voting on?
You are being asked to consider and vote on the following:
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election of two directors to our board of directors for terms of three years; |
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ratification of the selection of Ernst & Young LLP as our independent registered
public accountants for the fiscal year ending February 28, 2007; and |
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shareholder proposal recommending that the board of directors adopt a
recapitalization plan providing for all outstanding Emmis stock to have one vote per
share. |
Q: Who is entitled to vote?
Holders of outstanding Class A common stock and holders of outstanding Class B common stock as
of the close of business on December 15, 2006, the record date, are entitled to vote at the annual
meeting. As of November 15, 2006, 32,380,282 shares of Class A common stock and 4,929,881 shares
of Class B common stock were issued and outstanding. As of November 15, 2006, there were no shares
of Class C common stock issued or outstanding.
Q: How do I vote?
You may attend the meeting and vote in person or you may vote by proxy. To vote by proxy,
sign and date each proxy card you receive and return it in the prepaid envelope. If you return
your signed proxy card but do not indicate your voting preferences, we will vote on your behalf FOR
each of the nominees and FOR the ratification of Ernst & Young LLP as our independent registered
public accountants. The board of directors is not making a recommendation regarding the shareholder
proposal that the board adopt a recapitalization plan, and accordingly, your shares will not be
voted on the shareholder proposal if you have not marked a voting preference on the shareholder
proposal. If you mark abstain on your proxy card, your shares will be counted as present for
purposes of determining the presence of a quorum. You have the right to revoke your proxy at any
time before the meeting by either notifying our corporate secretary or returning a later-dated
proxy. You may also revoke your proxy by voting in person at the annual meeting.
If you hold your shares through a broker, you should contact your broker to determine the
procedure by which you can vote on these proposals. If your shares are held in the name of a bank,
broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder
of record to be able to vote in person at the meeting.
1
Q: What does it mean if I get more than one proxy card?
If you receive more than one proxy card, it means you hold shares registered in more than one
account. Sign and return ALL proxy cards to ensure that all your shares are voted.
Q: What are the voting rights of the Class A common stock and the Class B common stock?
On each matter submitted to a vote of our shareholders, each share of Class A common stock is
entitled to one vote and each share of Class B common stock is entitled to ten votes. Generally,
the Class A and Class B common stock vote together as a single group. However, the two classes
vote separately in connection with the election of certain directors, certain going private
transactions and other matters as provided by law.
At this annual meeting, the Class A and Class B common stock will vote together on the
election of directors (other than the director designated as the Class A director as to which
only the Class A common stock is entitled to vote), the ratification of Ernst & Young LLP as our
independent registered public accountants and the shareholder proposal.
Q: Who will count the vote?
Representatives of American Stock Transfer and Trust Company, our transfer agent, will count
the votes.
Q: What constitutes a quorum?
A majority of the combined voting power of the outstanding Class A and Class B common stock
entitled to vote at the meeting constitutes a quorum for the annual meeting (i.e., counting one
vote for each share of outstanding Class A common stock and ten votes for each share of outstanding
Class B common stock, present in person or represented by proxy). No additional quorum
requirements apply to matters on which the holders of Class A and Class B common stock will vote
together as a single class.
Q: How many votes are needed for approval of each proposal?
Directors will be elected by a plurality of the votes cast by the holders of existing common
stock entitled to vote in the election who are present, in person or by proxy, at the meeting.
Consequently, the Class A director nominee receiving the most votes of holders of Class A common
stock will be elected as a Class A director and the other director nominees receiving the most
votes of the holders of Class A and Class B common stock, voting together, will be elected to fill
the remaining director positions. Only votes cast for a nominee will be counted. The accompanying
proxy card will be voted for all nominees listed on the proxy unless the proxy contains
instructions to the contrary. Instructions on the accompanying proxy card to withhold authority to
vote for one or more of the nominees will result in those nominees receiving fewer votes.
The ratification of Ernst & Young LLP as our independent registered public accountants for the
fiscal year ending February 28, 2007 and the shareholder proposal each requires that the number of
votes cast in favor of that proposal by holders of our outstanding Class A common stock and Class B
common stock, voting together, exceed the number of votes cast against that proposal by such
holders of our outstanding Class A common stock and Class B common stock.
Proxies submitted by brokers that do not indicate a vote for some of the proposals 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 proposals.
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What percentage of stock does our significant shareholder own? How does he intend to vote?
What about all executive officers and directors? |
Jeffrey H. Smulyan, the Chief Executive Officer, President and Chairman of our board of
directors, is our largest single shareholder, beneficially owning less than 1.0% of our Class A
common stock and 100% of our Class B common stock as of November 15, 2006. Mr. Smulyan has
informed us that he intends to vote for each of the nominees for director (with respect to his
Class B common stock, other than the Class A director), in favor of the proposal regarding the
ratification of the selection of Ernst & Young LLP and against the shareholder proposal. If he
does so, the nominee and proposal for ratification of the selection of the selection of Ernst &
Young LLP will likely be approved, and the shareholder proposal will likely not be approved because
Mr. Smulyan controls
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approximately 60.5% of the combined voting power of our outstanding common stock (not
including the potential voting power of unexercised options).
All directors and executive officers together own outstanding Class A common stock and Class B
common stock representing approximately 61.3% of the combined voting power of our outstanding
common stock (not including the potential voting power of unexercised options).
Q: Does Emmis offer an opportunity to receive future proxy materials electronically?
Yes. If you are a shareholder of record, you may, if you wish, receive future proxy statements
and annual reports online. If you elect this feature, you will receive either a proxy card or an
e-mail message notifying you when the materials are available, along with a web address for viewing
the materials. You may sign up for electronic delivery by marking and signing the appropriate
spaces on your proxy card or by contacting our Investor Relations Department by e-mail at
ir@emmis.com or toll-free by phone at (866) 366-4703. If you received these materials
electronically, you do not need to do anything to continue receiving materials electronically in
the future.
If you hold your shares in a brokerage account, you may also have the opportunity to receive
proxy materials electronically. Please follow the instructions of your broker.
If you are an Emmis employee or a shareholder who has previously consented to electronic
delivery of shareholder communications, you may view this proxy statement and our annual report at
the Investors section of our website (www.emmis.com).
Q: What are the benefits of electronic delivery?
Electronic delivery saves Emmis money by reducing printing and mailing costs. It will also
make it convenient for you to receive your proxy materials online.
Q: What are the costs of electronic delivery?
Emmis charges nothing for electronic delivery. You may, of course, incur the usual expenses
associated with Internet access, such as telephone charges or charges from your Internet service
provider.
Q: May I change my mind later?
Yes. You may discontinue electronic delivery at any time. For more information, contact our
Investor Relations Department by e-mail at ir@emmis.com or toll-free by phone at (866) 366-4703.
Q: Who can attend the Annual Meeting?
All shareholders as of December 15, 2006 can attend.
Q: What do I do if I have additional questions?
If you have any questions prior to the annual meeting, please contact our Investor Relations
Department by e-mail at ir@emmis.com or toll-free by phone at (866) 366-4703.
3
PROPOSAL 1: ELECTION OF DIRECTORS
Two directors are to be elected, one of which is designated as a Class A Director. Susan B.
Bayh and Gary L. Kaseff have been nominated for a term of three years and until their successors
have been elected and qualified. Mr. Kaseff will be elected by the Class A and Class B common
stock voting together as a single class. Mrs. Bayh will be elected by the holders of the Class A
common stock voting as a single class.
Mrs. Bayh and Mr. Kaseff are members of the present board of directors. Frank V. Sica is a
member of the present board of directors whose term will expire at the annual meeting, but Mr. Sica
has opted not to stand for re-election. Effective as of the annual meeting, Emmis board of
directors has reduced the number of members of the board to seven, and consequently Mr. Sicas
position will not be filled. If, at the time of this annual meeting, any nominee is unable or
declines to serve, the discretionary authority provided in the proxy may be exercised to vote for a
substitute or substitutes. The board of directors has no reason to believe that any substitute
nominee or nominees will be required.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THE ELECTION OF EACH OF THE FOLLOWING NOMINEES.
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Name, Age, Principal Occupation(s) and |
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Director |
Business Experience During Past 5 Years |
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Since |
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Nominated for a term expiring in 2009: |
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Susan B. Bayh,* Age 47
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1994 |
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Mrs. Bayh was the Commissioner of the International Joint Commission of
the United States and Canada until 2001. She served as a Distinguished
Visiting Professor at the College of Business Administration at Butler
University from 1994 through 2003. Previously, she was an attorney
with Eli Lilly & Company. She is a director of Wellpoint, Inc., a Blue
Cross/Blue Shield company; Curis, Inc., a therapeutic drug development
company; Dendreon Corporation, a biotechnology company; Dyax Corp., a
biopharmaceutical company; and Nastech Pharmaceutical Company, Inc., a
pharmaceutical company. |
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Gary L. Kaseff, Age 58
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1994 |
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Mr. Kaseff is employed as Executive Vice President and General Counsel
of Emmis, a post he has held since 1998. Before becoming general
counsel, Mr. Kaseff practiced law in Southern California. Previously,
he was President of the Seattle Mariners major league baseball team and
partner with the law firm of Epport & Kaseff. |
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Director whose term expires at the annual meeting not standing for reelection: |
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Frank V. Sica, Age 55
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1998 |
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Mr. Sica is President of Menemsha Capital Partners, Ltd., a private
investment firm. From 1998 to 2006, Mr. Sica worked at Soros Fund
Management and was responsible for private equity and real estate
investment activities. Prior to joining Soros in 1998, Mr. Sica had
been a Managing Director and Co-Head of the Merchant Banking Division
at Morgan Stanley Dean Witter & Co. He is a director of CSG Systems
International, Inc., a customer care and billing software services
company; JetBlue Airways, an airline company; Kohls Corporation, a
retail company; and NorthStar Realty Finance Corp., a commercial real
estate company. |
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4
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Name, Age, Principal Occupation(s) and |
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Director |
Business Experience During Past 5 Years |
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Since |
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Directors whose terms expire in 2008: |
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Richard A. Leventhal, Age 59
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1992 |
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Mr. Leventhal is President and majority owner of LMCS, LLC an
investment, management and consulting company. Previously, Mr.
Leventhal co-owned and operated Top Value Fabrics, Inc., a wholesale
fabric and textile company in Carmel, Indiana, for 27 years. |
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Peter A. Lund,* Age 65
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2002 |
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Mr. Lund is a private investor and media consultant who formerly served
as Chairman of Eos International, Inc., a holding company. Mr. Lund
has over 40 years of broadcasting experience and most recently served
as President and Chief Executive Officer of CBS Inc. and President and
Chief Executive Officer of CBS Television and Cable. He is a director
of The DIRECTV Group, Inc., a communications company, and Crown Media
Holdings, Inc., an owner and operator of cable television channels. |
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Lawrence B. Sorrel, Age 47
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1993 |
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Mr. Sorrel is Managing Partner and Co-CEO of Tailwind Capital Group, an
independent private equity firm that manages the $1.3 billion private
equity fund TWCP, L.P. and its related funds. Mr. Sorrel was a general
partner of private equity firm Welsh, Carson, Anderson & Stowe from
1998-2002. Prior to May 1998, he was a Managing Director of Morgan
Stanley and the firms private equity affiliate, Morgan Stanley Capital
Partners, where he had been employed since 1986. |
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Directors whose terms expire in 2007: |
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Jeffrey H. Smulyan, Age 59
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1979 |
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Mr. Smulyan founded Emmis in 1979 and is the Chairman of the Board of
Directors, President and Chief Executive Officer. He has held the
positions of Chairman of the Board of Directors and Chief Executive
Officer since 1981 and the position of President since 1994. Mr.
Smulyan began working in radio in 1973, and has owned one or more radio
stations since then. Formerly, he was also the owner and chief
executive officer of the Seattle Mariners major league baseball team.
He is former Chairman of the Radio Advertising Bureau, a director of
The Finish Line, a sports apparel manufacturer, and serves as a Trustee
of his alma mater, the University of Southern California. Mr. Smulyan
has been chosen Radio Executive of the Year by a radio industry
publication. |
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Greg A. Nathanson, Age 59
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1998 |
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Mr. Nathanson joined Emmis in 1998 as Television Division President.
Mr. Nathanson has over 30 years of television broadcasting experience,
having served as President of Programming and Development for Twentieth
Television from 1996 to 1998, as General Manager of KTLA-TV in Los
Angeles, California from 1992 to 1996 and as President of Fox
Television Stations from 1990 to 1992. Mr. Nathanson resigned as
Television Division President effective October 1, 2000. |
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Independent director elected by the holders of the Class A common
stock voting as a single class. |
5
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
As of November 15, 2006, there were 32,380,282 shares of our Class A common stock and
4,929,881 shares of our Class B common stock issued and outstanding. The Class A common stock is
entitled to an aggregate of 32,380,282 votes and the Class B common stock is entitled to an
aggregate of 49,298,810 votes. The following table shows, as of November 15, 2006, the number and
percentage of shares of our common stock held by each person known to us to own beneficially more
than five percent of the issued and outstanding common stock, by the executive officers named in
the Summary Compensation Table below and our directors and nominees, and by our executive officers
and directors as a group:
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Class A |
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Class B |
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Common Stock |
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Common Stock |
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Five Percent Shareholders, |
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Amount and Nature |
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Amount and Nature |
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Directors and Certain |
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of Beneficial |
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of Beneficial |
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Percent of Total |
Executive Officers |
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Ownership |
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Ownership |
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Voting Power |
Jeffrey H. Smulyan |
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147,598 |
(1) |
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6,429,881 |
(19) |
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100.0 |
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66.7 |
% |
Susan B. Bayh |
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47,735 |
(2) |
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Richard F. Cummings |
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402,252 |
(3) |
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Gary L. Kaseff |
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362,786 |
(4) |
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Richard A. Leventhal |
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69,056 |
(5) |
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Peter A. Lund |
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32,205 |
(6) |
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Greg A. Nathanson |
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247,198 |
(7) |
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* |
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* |
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Frank V. Sica |
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43,015 |
(8) |
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* |
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* |
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Lawrence B. Sorrel |
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53,201 |
(9) |
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Michael Levitan |
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76,717 |
(10) |
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* |
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Neuberger Berman Inc. |
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1,890,785 |
(11) |
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5.9 |
% |
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2.3 |
% |
Eubel Brady & Suttman Asset
Management, Inc. |
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2,150,356 |
(12) |
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6.6 |
% |
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2.6 |
% |
Reed Conner & Birdwell LLC. |
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1,855,710 |
(13) |
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5.7 |
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2.3 |
% |
Martin Capital Management,
LLP |
|
|
2,669,245 |
(14) |
|
|
8.2 |
% |
|
|
|
|
|
|
|
|
|
|
3.3 |
% |
Westport Asset Management,
Inc. |
|
|
2,480,257 |
(15) |
|
|
7.7 |
% |
|
|
|
|
|
|
|
|
|
|
3.0 |
% |
TCS Capital Gp, LLC |
|
|
1,681,300 |
(16) |
|
|
5.2 |
% |
|
|
|
|
|
|
|
|
|
|
2.1 |
% |
Farallon Capital Partners,
L.P. and Noonday Capital
Partners, L.L.C. |
|
|
3,185,000 |
(17) |
|
|
9.8 |
% |
|
|
|
|
|
|
|
|
|
|
3.9 |
% |
All Executive Officers and
Directors as a Group (13
persons) |
|
|
1,673,373 |
(18) |
|
|
5.0 |
% |
|
|
6,429,881 |
(19) |
|
|
100.0 |
% |
|
|
67.6 |
% |
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
Consists of 4,016 shares held in the 401(k) Plan, 101,837 shares owned individually, 11,120
shares held by Mr. Smulyan as trustee for his children over which Mr. Smulyan exercises or
shares voting control and 30,625 shares held by The Smulyan Family Foundation, as to which Mr.
Smulyan shares voting control. |
|
(2) |
|
Consists of 12,735 shares owned individually and 35,000 shares represented by stock options
exercisable currently or within 60 days of December 15, 2006. |
|
(3) |
|
Consists of 160,007 shares owned individually, 8,260 shares owned for the benefit of Mr.
Cummings children, 3,985 shares held in the 401(k) Plan and 230,000 shares represented by
stock options exercisable currently or within 60 days of December 15, 2006. Of the shares
owned individually, 68,000 are restricted stock subject to forfeiture if certain employment
agreement or other conditions are not satisfied. |
|
(4) |
|
Consists of 86,005 shares owned individually by Mr. Kaseff, 3,411 shares owned by Mr.
Kaseffs spouse, 1,346 shares held by Mr. Kaseffs spouse for the benefit of their children,
1,021 shares held in the 401(k) Plan, and 271,003 shares represented by stock options
exercisable currently or within 60 days of December 15, 2006. Of the shares owned
individually, 43,250 are restricted stock subject to forfeiture if certain employment
agreement or other conditions are not satisfied. |
|
(5) |
|
Consists of 13,456 shares owned individually, 3,000 shares owned by Mr. Leventhals spouse,
17,600 shares owned by a corporation of which Mr. Leventhal is a 50% shareholder and 35,000
shares represented by stock options exercisable currently or within 60 days of December 15,
2006. |
|
(6) |
|
Consists of 7,205 shares owned individually and 25,000 shares represented by stock options
exercisable currently or within 60 days of December 15, 2006. |
|
(7) |
|
Consists of 128,073 shares owned individually or jointly with his spouse, 44,000 shares owned
by trusts for the benefit of Mr. Nathansons children, 124 shares held in the 401(k) Plan and
75,001 shares represented by stock options exercisable currently or within 60 days of December
15, 2006. |
|
(8) |
|
Consists of 8,015 shares owned individually and 35,000 shares represented by stock options
exercisable currently or within 60 days of December 15, 2006. |
|
(9) |
|
Consists of 18,201 shares owned individually and 35,000 shares represented by stock options
exercisable currently or within 60 days of December 15, 2006. |
|
(10) |
|
Consists of 19,000 shares owned individually, 217 shares held in the 401(k) Plan, and 57,500
shares represented by stock options exercisable currently or within 60 days of December 15,
2006. Of the shares owned individually, 19,000 are restricted stock subject to forfeiture if
certain employment agreement or other conditions are not satisfied. |
|
(11) |
|
Information concerning these shares was obtained from a Schedule 13G filed on February 15,
2006 by Neuberger Berman Inc. on behalf of itself and various affiliates, each of which has a
mailing address of 605 Third Avenue, New York, New York 10158. |
6
|
|
|
(12) |
|
Information concerning these shares was obtained from a Schedule 13G filed on February 14,
2006 by Eubel Brady & Suttman Asset Management, Inc. on behalf of itself and various
affiliates, each of which has a mailing address of 7777 Washington Village Drive, Suite 210,
Dayton, Ohio 45459. |
|
(13) |
|
Information concerning these shares was obtained from an Amendment to Schedule 13G filed on
February 14, 2006 by Reed Conner & Birdwell LLC on behalf of itself and various affiliates,
each of which has a mailing address of 11111 Santa Monica Boulevard, Suite 1700, Los Angeles,
California 90025. |
|
(14) |
|
Information concerning these shares was obtained from a Schedule 13D filed on May 18, 2006 by
Martin Capital Management, LLP on behalf of itself and various affiliates (including Frank K.
Martin), each of which has a mailing address of 300 Junior Achievement Drive, Suite 301,
Elkhart, IN 46516. |
|
(15) |
|
Information concerning these shares was obtained from an Amendment to a Schedule 13G filed
February 13, 2006 by Westport Asset Management, Inc. and Westport Advisers LLC, each of which
has a mailing address of 253 Riverside Avenue, Westport, Connecticut 06880. |
|
(16) |
|
Information concerning these shares was obtained from a Schedule 13G filed on February 9,
2006 by TCS Capital GP, LLC on behalf of itself and various affiliates, each of which has a
mailing address of 888 Seventh Avenue, Suite 1504, New York, New York 10019. |
|
(17) |
|
Information concerning these shares was obtained from an amended Schedule 13D filed on August
15, 2006 by Noonday Capital Partners, L.L.C. and Farallon Capital Partners, L.P. on behalf of
themselves and certain related parties. The address of Noonday Capital Partners, L.L.C. and
its related parties is 227 Charlotte, North Carolina 28202. The address of Farallon Capital
Partners and its related parties is One Maritime Plaza Suite 1325, San Francisco, California
94111. |
|
(18) |
|
Includes 926,004 shares represented by stock options exercisable currently or within 60 days
of December 15, 2006. |
|
(19) |
|
Consists of 4,929,881 shares owned individually and 1,500,000 shares represented by stock
options exercisable currently or within 60 days of December 15, 2006. Of the shares owned
individually, 11,349 are restricted stock issued pursuant to the Emmis Stock Compensation
Program. |
CORPORATE GOVERNANCE
General
Emmis aspires to the highest ethical standards for our employees, officers and directors, and
remains committed to the interests of our shareholders. We believe we can achieve these objectives
only with a plan for corporate governance that clearly defines responsibilities, sets high
standards of conduct and promotes compliance with the law. The board of directors has adopted
formal corporate governance guidelines, as well as policies and procedures designed to foster the
appropriate level of corporate governance. Some of these guidelines and procedures are discussed
below. For further information, including electronic versions of our Code of Business Conduct and
Ethics, our Corporate Governance Guidelines, our Audit Committee Charter, our Compensation
Committee Charter, our Corporate Governance and Nominating Committee Charter and our Auditor
Independence Policy, please visit the Corporate Governance section of our website (www.emmis.com)
located under the Investors heading.
Independent Directors
Our board of directors currently consists of eight members. Of these, six (Mrs. Bayh and
Messrs. Leventhal, Lund, Nathanson, Sica and Sorrel) qualify as independent directors under the
listing standards of The Nasdaq Stock Market, Inc.
Code of Ethics
Emmis has adopted a Code of Business Conduct and Ethics to document the ethical principles and
conduct we expect from our employees, officers and directors. A copy of our Code of Business
Conduct and Ethics is available on our website.
Lead Director
Our independent directors have appointed Susan B. Bayh as the Lead Director. In that role,
Mrs. Bayh is responsible for coordinating and leading the independent directors, presiding over
executive sessions of the independent directors and acting as a liaison between the independent
directors and the rest of the board of directors and Emmis management.
Communications with Independent Directors
Any employee, officer, shareholder or other interested party who has an interest in
communicating with the Lead Director or any other Emmis independent directors regarding any matter
may do so by directing communication to Mrs. Bayh as the Lead Director addressed to Lead Director,
Emmis Communications Corporation, One Emmis Plaza, 40 Monument Circle, Suite 700, Indianapolis,
Indiana 46204, by facsimile to (317)
7
684-5583, or by e-mail message to LeadDirector@emmis.com. The communication will be delivered
to the independent directors as appropriate. For matters related to nominations or corporate
governance, communications should specify that they are directed to the Corporate Governance and
Nominating Committee. For matters related to finance or auditing, communications should specify
that they are directed to the Audit Committee. For matters related to compensation, communications
should specify that they are directed to the Compensation Committee. Messages for any director or
the board of directors as a whole may be delivered through the Lead Director as well.
Certain Committees of the Board of Directors
Our board of directors currently has several committees, including an Audit Committee, a
Corporate Governance and Nominating Committee and a Compensation Committee.
Audit Committee. The Audit Committees primary responsibility is to engage the independent
auditor and otherwise to monitor and oversee the audit process. The Audit Committee also
undertakes other related responsibilities as summarized in the Report of the Audit Committee below
and detailed in the Audit Committees charter, which is available on our website. The board of
directors has determined that the members of the Audit Committee, Peter A. Lund, Frank V. Sica
(chair) and Richard A. Leventhal, are independent directors under the Securities Exchange Act of
1934 and the Nasdaq listing standards. The board of directors has also determined that Frank V.
Sica is an audit committee financial expert as defined in rules adopted under the Securities
Exchange Act of 1934. The Audit Committee held five meetings during the last fiscal year.
Corporate Governance and Nominating Committee. The Corporate Governance and Nominating
Committees primary responsibility is to assist the board of directors by (1) identifying
individuals qualified to become members of the board of directors and recommending nominees to the
board of directors for the next annual meeting of shareholders and (2) evaluating and assessing
corporate governance issues affecting Emmis. The Corporate Governance and Nominating Committees
charter is available in the Corporate Governance section of our website (www.emmis.com) located
under the Investors heading. The Corporate Governance and Nominating Committee evaluates current
members of the board of directors and potential candidates with respect to their independence,
business, strategic and financial skills, as well as overall experience in the context of the needs
of the board of directors as a whole. The Corporate Governance and Nominating Committee
concentrates its focus on candidates with the following characteristics and qualifications, though
they are not necessarily limited thereto:
|
|
|
Chief executive officers or senior executives, particularly those with experience in
broadcasting, finance, marketing, and information technology. |
|
|
|
|
Individuals representing diversity in gender and ethnicity. |
|
|
|
|
Individuals who meet the current criteria to be considered as independent directors. |
The Corporate Governance and Nominating Committee will consider and evaluate potential
nominees submitted by holders of our Class A common stock to our corporate secretary on or before
the date for shareholder nominations specified in the Shareholder Proposals section of this proxy
statement. These potential nominees will be considered and evaluated using the same criteria as
potential nominees obtained by the committee from other sources.
The members of the Corporate Governance and Nominating Committee are Susan B. Bayh (chair),
Peter A. Lund and Greg A. Nathanson, all of whom are independent directors under Nasdaq standards.
The Corporate Governance and Nominating Committee held two meetings during the last fiscal year.
Compensation Committee. The Compensation Committee provides a general review of our
compensation and benefit plans to ensure that they meet our corporate objectives, establishes
compensation arrangements and approves compensation payments to our executive officers, and
generally administers our stock option and incentive plans. The members of the Compensation
Committee are Susan B. Bayh, Frank V. Sica and Lawrence B. Sorrel (chair), all of whom are
independent directors under Nasdaq standards. The Compensation Committee held four meetings during
the last fiscal year.
8
Meeting Attendance
During our last fiscal year, our board of directors held eight meetings, either in person or
by telephone. Each director attended at least 75% of the aggregate of (1) the total number of
meetings of our board of directors held while he or she was a director and (2) the total number of
meetings held by all committees on which he or she served during the periods that he or she served
on the committee.
We believe that communication between our shareholders and the members of our board of
directors is enhanced by the opportunity for personal interaction at our annual meeting of
shareholders. Accordingly, we encourage the members of our board of directors to attend our annual
meeting of shareholders whenever possible. At our annual meeting of shareholders held on July 13,
2005, eight of the then nine members of our board of directors were in attendance.
Compensation of Directors
Our directors who are not officers or employees of Emmis were 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. In addition,
each director who is not an officer or employee of Emmis receives an annual retainer of $30,000,
the chair of our Audit Committee receives a $10,000 annual retainer, the chair of our Compensation
Committee receives a $5,000 annual retainer, the chair of our Corporate Governance and Nominating
Committee receives a $3,000 annual retainer, and the Lead Director receives a $5,000 annual
retainer. All of these fees are paid in the form of Class A common stock at the end of each
calendar year, discounted in accordance with our stock compensation program for the applicable
calendar year. In addition, directors who are not officers or employees of Emmis are entitled to
receive annually options to purchase 7,317 shares of Class A common stock and 2,195 shares of
restricted stock. The options are granted on the date of our 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 our annual meeting of shareholders
and will vest at the conclusion of each directors three year term. Directors who are not officers
or employees of Emmis are also eligible to participate in our health insurance program by paying
premiums equal to the COBRA rate charged to former employees of the company.
Certain Transactions
Although Emmis generally prohibits loans to executive officers and directors, we currently
have a loan outstanding to Jeffrey H. Smulyan, our 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 the last fiscal year was $1,042,311 and the
balance at February 28, 2006 was $912,282. This loan bears interest at our cost of senior debt,
which at February 28, 2006 was approximately 6.32% per annum. 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 the death, resignation
or termination of Mr. Smulyans employment, to recover all or the premium payments it has made,
which total $1.1 million. During the last fiscal year, Emmis leased an airplane and was party to a
timeshare agreement with Mr. Smulyan with respect to his personal use of the plane. Under the
timeshare agreement, whenever Mr. Smulayn uses the plane for non-business purposes, he pays Emmis
for the aggregate incremental cost to Emmis of operating the plane up to the maximum amount
permitted by Federal Aviation Authority regulations (which maximum generally approximates the total
direct cost of operating the plan for the applicable trip). With respect to the personal flights
during the last fiscal year, Mr. Smulyan paid Emmis approximately $72,246 for expenses under the
timeshare arrangement. In addition, under Internal Revenue Service regulations, to the extent Mr.
Smulyan allows non-business guests to travel on the plane on a business trip or takes the plane on
a non-business detour as part of a business trip, additional compensation is attributed to Mr.
Smulyan. Generally, these trips on which compensation is assessed pursuant to IRS regulations do
not result in any material additional cost or expense to Emmis. During the last fiscal year, Emmis
purchased approximately $124,264 of corporate gifts and specialty items from a company owned by the
sister of Richard Leventhal, one of our directors.
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any of our filings under
the Securities Act of 1933, as
9
amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the we
specifically incorporate this information by reference, and shall not otherwise be deemed filed
under such Acts.
The Audit Committee is composed of three directors whom the board of directors has determined
are independent as defined by Nasdaq listing standards. The Audit Committees responsibilities
are set forth in its written charter approved by the board of directors. The charter is reviewed
annually by the Audit Committee. A copy of the Audit Committee charter is attached as Exhibit A to
this Proxy Statement. As required by Nasdaq listing standards, the Audit Committee has determined
that its charter is adequate. The Audit Committee has also determined that its members meet the
financial literacy requirements of Nasdaq listing standards.
Management is responsible for the companys internal controls and the financial reporting
process. The independent registered public accountants are responsible for performing an
independent audit of the companys consolidated financial statements in accordance with auditing
standards generally accepted in the United States of America and to issue a report on them. The
Audit Committees responsibility is to engage the independent auditor and otherwise to monitor and
oversee these processes. For the fiscal year ended February 28, 2006, the Audit Committee engaged
Ernst & Young LLP to serve as the companys independent auditor.
The Audit Committee has met and held discussions with management and Ernst & Young LLP.
Management represented to the Audit Committee that the companys consolidated financial statements
as of and for the fiscal year ended February 28, 2006 were prepared in accordance with accounting
principles generally accepted in the United States of America, and the Audit Committee has reviewed
and discussed these consolidated financial statements with management. The Audit Committee
discussed with the independent registered public accountants matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
In June 2002, the board of directors, upon the recommendation of the Audit Committee, adopted
an Auditor Independence Policy that, among other things, prohibits the companys independent
auditor from performing certain non-audit services for the company, requires prior approval of the
Audit Committee for any services provided by the companys independent auditor, limits the hiring
by the company of former employees of the companys independent auditor who have worked on the
Emmis account and requires enhanced disclosure both to the Audit Committee and to shareholders of
matters related to auditor independence.
Ernst & Young LLP also provided to the Audit Committee the written disclosures required by
Independence Standards Board No. 1 (Independence Discussions with Audit Committees), and the Audit
Committee discussed with the independent registered public accountants that firms independence.
In addition, the Audit Committee (or the chairman of the Audit Committee with respect to
engagements of less than $100,000) approves in advance all engagements of the companys independent
auditor. The Audit Committee determined that Ernst & Youngs provision of non-audit services to
the company as described in Matters Relating to Independent Registered Public Accountants is
compatible with maintaining that firms independence.
Based on these discussions and reviews, the Audit Committee members agreed that the audited
financial statements for the companys last fiscal year should be included in our companys Form
10-K, and made a formal recommendation to the board of directors to that effect.
The Audit Committees reviews and discussions with management and the independent registered
public accountants do not assure that the companys financial statements are presented in
accordance with generally accepted accounting principles, that the audit of the companys financial
statements has been carried out in accordance with generally accepted auditing standards or that
the companys independent registered public accountants are in fact independent. The Audit
Committee has relied, without independent verification, on managements representations that the
financial statements have been prepared with integrity and objectivity and are presented in
conformity with generally accepted accounting principles and on the representations of the
independent registered public accountants included in that firms report on the companys financial
statements.
Audit Committee Members
Frank V. Sica, Chair
Peter A. Lund
Richard A. Leventhal
10
REPORT OF THE COMPENSATION COMMITTEE
The following Report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy statement into any of our
filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that we specifically incorporate this Report by reference, and shall
not otherwise be deemed filed under such Acts.
The Compensation Committee oversees our executive compensation program. The Committee
membership is determined by the board, and is composed of non-employee independent directors. They
provide a general review of our compensation and benefit plans to ensure that they meet our
corporate objectives. The Compensation Committee also establishes compensation arrangements and
approves compensation payments to Mr. Smulyan and our other executive officers, and generally
administers our equity compensation plans and corporate incentive plan. With respect to
compensation decisions affecting executive officers other than Mr. Smulyan, the Committee receives
input from Mr. Smulyan in the course of making its decisions. With respect to compensation
decisions affecting non-executive officers and employees, the Committee has delegated this
authority to Mr. Smulyan and the other executive officers, provided such authority is exercised in
accordance with any parameters established by the Committee. During the last fiscal year, Susan B.
Bayh, Frank V. Sica and Lawrence B. Sorrel were members of the Compensation Committee.
Policy and Performance Measures
We historically have entered into multi-year employment agreements with certain of our
executive officers. All named executive officers currently have employment agreements in place;
except for Mr. Bongarten, who is no longer an executive officer. These agreements generally
provide for a base salary, annual performance bonus, and restricted stock and stock option awards.
The Compensation Committee believes that entering into these agreements assists us in retaining our
key officers for a certain period of time and enables us to focus the officers efforts and
energies on enhancing the long-term value of our company to our shareholders. The total
compensation reflected in these employment agreements is generally based upon the officers prior
compensation levels, changes in duties and peer group benchmarking surveys. In order to attract
and retain highly qualified employees, we believe overall compensation to our executive officers
should be targeted at the top third of our peer group, with exceptions made in appropriate
circumstances.
The Committee established a corporate incentive plan for the fiscal year that set for each
executive officer a target bonus and a performance goal, with 65%-70% of an executive officers
target bonus based on specified annual operating income goals and the remainder based on individual
performance. Target bonus payout depends upon the extent to which the applicable division of the
company meets or exceeds the specified operating income targets and depends upon the Committees
assessment of the performance of the executive during the year. At the end of the fiscal year, the
company achieved 98% of its domestic radio station operating income target, 102% of its television
station operating income target, and 99% of its total Emmis operating income target. However, the
results were adjusted to exclude WVUE-TV in New Orleans following Hurricane Katrina. Based on
these results, the Committee approved the bonus awards shown in the Summary Compensation Table.
Stock options and stock awards also were granted to our executive officers during the last fiscal
year under our various equity incentive plans. All options were granted at the fair market value
of our Class A common stock on the date of grant.
During the last fiscal year, we administered a stock compensation program under our 2004
Equity Compensation Plan. The program operates on a calendar year basis and was continued in 2006.
The program is designed to replace cash compensation with non-cash compensation in order to
improve the leverage ratios under our debt indentures and to further focus our employees efforts
and attention on delivering shareholder value. During 2005, each participant in the program could
elect to receive stock compensation under the program in the form of payroll stock every two weeks
or in the form of restricted stock in the January following the end of the applicable calendar
year. The payroll stock was awarded based on the fair market value of our Class A common stock on
the date it is issued and was only subject to a de minimis transfer restriction. The option to
receive payroll stock every two weeks was discontinued in 2006. Our executive officers are
prohibited from receiving payroll stock. The restricted stock is subject to forfeiture in the
event the employee voluntarily terminates employment or is terminated for cause prior to the date
the stock vests in the succeeding January, and is awarded based on a discount from the value of our
Class A common stock at the beginning of the calendar year. For the 2005 program, participants
electing restricted stock received up to 5% of their compensation in restricted stock at $16.08 per
share and could elect an amount in excess of 5% of their compensation in restricted stock at $14.29
per share. The majority of our executive officers elected to receive restricted stock, most
electing amounts in excess of 10% of their compensation.
11
During the last fiscal year we changed the companys equity program to substitute restricted
stock for some of the annual stock option grants. We believe this change will further enhance the
retention of our officers and key employees. In general, for officers and other key employees we
cut in half the number of options awarded each year and replaced those options with a discounted
restricted stock grant. For example, an officer who had historically received a grant of options
for 5,000 Class A shares, last year received a grant of options for 2,500 shares and a grant of
750 shares of restricted stock. The options vest in three equal annual installments. The
restricted stock vests on the third anniversary of the initial grant. Most officers received both
options and restricted stock under this new program. However, certain officers under employment
agreements, including Mr. Smulyan, elected to continue to receive all stock options.
The Internal Revenue Code generally limits to $1 million the amount of compensation that we
may deduct in any year with respect to certain of our officers. The Compensation Committee
endeavors to structure executive compensation so that most of that compensation will be deductible.
At the same time, the Compensation Committee has the authority to award compensation in excess of
the $1 million limit, regardless of whether such additional compensation will be deductible, in
cases where compensation is appropriate. Compensation awards in excess of the $1 million limit, if
any, are most likely to occur in connection with awards earned upon the completion of an executive
officers multi-year employment or similar agreement. As shown on the Summary Compensation Table,
Mr. Smulyans compensation for the fiscal year exceeded $1 million. A portion of the amount in
excess of $1 million is deductible because the payments meet the requirements for deductibility
under the Internal Revenue Code.
Chief Executive Officer Compensation
Mr. Smulyan is employed as our Chief Executive Officer pursuant to an employment agreement
that was effective March 1 2004 and will continue until February 29, 2008. The employment
agreement provides for specified annual adjustments to Mr. Smulyans base salary and provides for a
target bonus equal to 125% of his annual salary (prior to any election Mr. Smulyan may make under
the stock compensation program). Based on the success of the companys television station sales,
companys performance in achieving the operating income targets discussed above and Mr. Sumlyans
general leadership of the company during the fiscal year, the Committee approved the bonus award to
Mr. Smulyan shown in the Summary Compensation Table. Pursuant to the terms of Mr. Smulyans
employment agreement, he was granted the option to acquire 200,000 shares of our Class B common
stock of Emmis Communications Corporation, subject to the 2004 Equity Compensation Plan and the
terms of the 2006 grant award.
Compensation Analyses and Reviews
The Committee periodically retains an outside compensation consultant to compare base salary
and incentive compensation programs for the companys executive officers with those of other media
companies and other companies to ensure that they are appropriate to the companys objectives. The
Committee exercises its judgment and discretion in reviewing and considering these analyses. In
addition, the Committee periodically obtains advice from outside consultants, including the
consultant retained by the company, on compensation objectives and policies and the setting of
executive officer compensation.
Other Benefits and Perquisites
The Company provides benefits such as health, retirement and other general benefits to its
eligible employees and named executive officers. Emmis provides very limited perquisites to its
named executive officers that it does not provide to employees in general.
Compensation Committee Members
Lawrence B. Sorrel, Chair
Susan B. Bayh
Frank V. Sica
12
COMPENSATION TABLES
The following table sets forth the compensation awarded to, earned by, or paid to the chief
executive officer and the four most highly compensated executive officers other than the chief
executive officer and an additional former officer (collectively, the Named Executive Officers)
during each of the last three fiscal years.
Summary Compensation Table
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Compensation |
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Annual Compensation |
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Awards |
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Securities |
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Options/ |
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Other |
Principal Position |
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February 28(29) |
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Salary (1) |
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Bonus (2) |
|
Awards (3) |
|
SARs |
|
Compensation (4) |
JEFFREY H. SMULYAN |
|
|
2006 |
|
|
$ |
684,000 |
|
|
$ |
1,088,600 |
|
|
$ |
170,788 |
|
|
|
200,000 |
|
|
$ |
2,000 |
|
Chief Executive Officer, President |
|
|
2005 |
|
|
|
664,000 |
|
|
|
1,084,561 |
|
|
|
162,522 |
|
|
|
300,000 |
|
|
|
2,000 |
|
and Chairman of the Board |
|
|
2004 |
|
|
|
640,105 |
|
|
|
822,246 |
|
|
|
244,375 |
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RANDALL D. BONGARTEN |
|
|
2006 |
|
|
$ |
391,500 |
|
|
$ |
300,000 |
|
|
$ |
64,210 |
|
|
|
25,000 |
|
|
$ |
2,707,150 |
|
Television Division President |
|
|
2005 |
|
|
|
382,800 |
|
|
|
360,691 |
|
|
|
50,494 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
2004 |
|
|
|
382,800 |
|
|
|
315,558 |
|
|
|
76,945 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RICHARD F. CUMMINGS |
|
|
2006 |
|
|
$ |
400,950 |
|
|
$ |
338,983 |
|
|
$ |
58,865 |
|
|
|
30,000 |
|
|
$ |
2,000 |
|
Radio Division President |
|
|
2005 |
|
|
|
391,500 |
|
|
|
277,014 |
|
|
|
472,097 |
|
|
|
50,000 |
|
|
|
2,000 |
|
|
|
|
2004 |
|
|
|
391,500 |
|
|
|
291,255 |
|
|
|
63,056 |
|
|
|
50,000 |
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GARY L. KASEFF |
|
|
2006 |
|
|
$ |
325,065 |
|
|
$ |
243,439 |
|
|
$ |
132,198 |
|
|
|
25,000 |
|
|
$ |
2,000 |
|
Executive Vice President and |
|
|
2005 |
|
|
|
333,333 |
|
|
|
235,207 |
|
|
|
441,212 |
|
|
|
50,000 |
|
|
|
2,000 |
|
General Counsel |
|
|
2004 |
|
|
|
340,000 |
|
|
|
227,844 |
|
|
|
90,269 |
|
|
|
50,000 |
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MICHAEL LEVITAN |
|
|
2006 |
|
|
$ |
202,300 |
|
|
$ |
140,500 |
|
|
$ |
50,351 |
|
|
|
15,000 |
|
|
$ |
2,000 |
|
Executive Vice President of |
|
|
2005 |
|
|
|
195,500 |
|
|
|
78,403 |
|
|
|
33,428 |
|
|
|
17,500 |
|
|
|
2,000 |
|
Human Resources |
|
|
2004 |
|
|
|
196,167 |
|
|
|
77,084 |
|
|
|
31,501 |
|
|
|
25,000 |
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WALTER Z. BERGER |
|
|
2006 |
|
|
$ |
345,769 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
2,000 |
|
Former Executive Vice |
|
|
2005 |
|
|
|
366,125 |
|
|
|
315,858 |
|
|
|
172,699 |
|
|
|
50,000 |
|
|
|
2,000 |
|
President, Chief Financial |
|
|
2004 |
|
|
|
369,750 |
|
|
|
308,292 |
|
|
|
193,840 |
|
|
|
50,000 |
|
|
|
2,000 |
|
Officer and Treasurer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Pursuant to our equity compensation program, our executive officers elected to forego payment
of 10-20% of their cash salaries during each fiscal year reported and received instead shares
of restricted stock at a discount as described in the Report of the Compensation Committee.
These amounts are listed under Restricted Stock Awards in the year in which the restricted
stock vests. The contractual base salaries during the last fiscal year for Messrs. Smulyan,
Bongarten, Cummings, Kaseff, Levitan and Berger were $855,000, $435,000, $445,000, $424,000,
$238,000 and 435,000, respectively. The amounts shown for Mr. Berger in 2006 reflect a
prorated salary as a result of a January 2, 2006 contract termination date. |
|
(2) |
|
Includes both cash and stock bonuses. |
|
(3) |
|
Amounts listed for the fiscal year ended February 28, 2006 generally represent the value of
restricted stock that vested in January 2006 under the 2004 stock compensation program,
amounts listed for the fiscal year ended February 28, 2005 generally represent the value of
restricted stock that vested in January 2005 under the 2004 stock compensation program and
amounts listed for the fiscal year ended February 29, 2004 represent the value of restricted
stock that vested in January 2004 under the 2003 stock compensation program. In the case of
Messrs. Cummings and Kaseff, the amounts include the value of 22,500 shares and 20,000 shares,
respectively, representing shares of restricted stock that vested upon the expiration of their
employment agreements on February 28, 2005. Additionally, an aggregate of 120,500 shares of
restricted stock were outstanding as of February 28, 2006, with a value of $1,972,585 based on
the $16.37 closing price of the Class A common stock as of February 28, 2006. To the extent
we pay any dividends on our common stock, outstanding shares of restricted stock would be
entitled to such dividends. Aside from a recently approved special dividend, we do not
presently intend to pay dividends on our common stock. |
|
(4) |
|
Amounts noted consist of the value of Emmis matching contributions in cash and stock to
401(k) accounts. With respect to Mr. Bongarten, Emmis has sold substantially all of its
television business to unrelated parties. Accordingly, pursuant to the terms of the Change in
Control Severance Agreement, Mr. Bongartens employment agreement was terminated effective
February 28, 2006 and he received a severance payment in the amount of $2,707.150. |
13
Option/SAR Grants in Last Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants |
|
|
|
|
Number of |
|
% of Total |
|
|
|
|
|
|
|
|
|
|
Securities |
|
Options/SARs |
|
|
|
|
|
Potential Realizable Value at Assumed |
|
|
Underlying |
|
Granted to |
|
|
|
|
|
Annual Rates of Stock Price |
|
|
Options/SARs |
|
Employees in |
|
Exercise or Base |
|
|
|
Appreciation for Option Term |
Name |
|
Granted (#) |
|
Fiscal Year |
|
Price ($/Share) |
|
Expiration Date |
|
5% |
|
10% |
Jeffrey H. Smulyan |
|
|
200,000 |
|
|
|
32.0 |
% |
|
$ |
18.74 |
|
|
|
2/28/15 |
|
|
$ |
2,357,097 |
|
|
$ |
5,973,347 |
|
Randall D. Bongarten |
|
|
25,000 |
|
|
|
4.0 |
% |
|
|
18.74 |
|
|
|
2/28/15 |
|
|
$ |
294,637 |
|
|
$ |
746,668 |
|
Richard F. Cummings |
|
|
30,000 |
|
|
|
5.0 |
% |
|
|
18.74 |
|
|
|
2/28/15 |
|
|
$ |
353,565 |
|
|
$ |
896,002 |
|
Gary L. Kaseff |
|
|
25,000 |
|
|
|
4.0 |
% |
|
|
18.74 |
|
|
|
2/28/15 |
|
|
$ |
294,637 |
|
|
$ |
746,668 |
|
Michael Levitan |
|
|
15,000 |
|
|
|
2.0 |
% |
|
|
18.74 |
|
|
|
2/28/15 |
|
|
$ |
176,782 |
|
|
$ |
448,001 |
|
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option /SAR Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number Of Securities Underlying |
|
Value of Unexercised In-the-Money |
|
|
Shares |
|
|
|
Unexercised Options/SARs At Fiscal |
|
Options/SARs at Fiscal Year |
|
|
Acquired on |
|
Value |
|
Year End |
|
End (2) |
Name |
|
Exercise |
|
Realized (1) |
|
Exercisable |
|
Unexercisable |
|
Exercisable |
|
Unexercisable |
Jeffrey H. Smulyan |
|
|
|
|
|
|
|
|
|
|
900,000 |
|
|
|
600,000 |
|
|
$ |
|
|
|
$ |
|
|
Randall D. Bongarten |
|
|
|
|
|
|
|
|
|
|
198,334 |
|
|
|
41,666 |
|
|
$ |
|
|
|
$ |
|
|
Richard F. Cummings |
|
|
|
|
|
|
|
|
|
|
370,834 |
|
|
|
46,666 |
|
|
$ |
|
|
|
$ |
|
|
Gary L. Kaseff |
|
|
|
|
|
|
|
|
|
|
229,337 |
|
|
|
41,666 |
|
|
$ |
|
|
|
$ |
|
|
Michael Levitan |
|
|
|
|
|
|
|
|
|
|
34,167 |
|
|
|
23,333 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
(1) |
|
Based on the sale price if the shares were sold or on the closing price on the date of
exercise if the shares were retained. |
|
(2) |
|
Based on a stock price of $16.37 as of the close of business on February 28, 2006. |
EMPLOYMENT AND CHANGE-IN-CONTROL AGREEMENTS
Effective March 1, 2004, we entered into a four-year employment agreement with Jeffrey H.
Smulyan, who currently serves as our Chairman of the Board of Directors and Chief Executive
Officer. As of March 1, 2004, Mr. Smulyans annual base compensation was $830,000; as of March 1,
2005, Mr. Smulyans base compensation was increased from $830,000 to $855,000; as of March 1, 2006,
Mr. Smulyans base compensation was increased from $855,000 to $880,000; as of March 1, 2007, Mr.
Smulyans base compensation is increased from $880,000 to $905,000. The company retains the right
to pay up to 10% of Mr. Smulyans annual base compensation in the form of shares
of our common
stock. Additionally, as of March 1, 2004, Mr. Smulyans annual incentive compensation target was
$1,037,500; as of March 1, 2005, Mr. Smulyans annual incentive compensation target was increased
from $1,037,500 to $1,068,750; as of March 1, 2006, Mr. Smulyans annual incentive compensation
target was increased from $1,068,750 to $1,100,000; as of March 1, 2007, Mr. Smulyans annual
incentive compensation target is increased from $1,100,000 to $1,131,250. The company retains the
right to pay any annual incentive compensation in cash or shares of our common stock.
Additionally, the award of annual incentive compensation is based upon achievement of certain
performance goals to be determined each year by our Compensation Committee. As of March 1, 2004,
Mr. Smulyan received an option to acquire 300,000 shares of our Class B Common Stock. Mr. Smulyan
received an option to acquire 200,000 shares of our Class B Common Stock on or about March 1, 2005
and March 1, 2006. Mr. Smulyan is scheduled to receive an option to acquire 100,000 shares of our
Class B Common Stock on or about March 1, 2007. 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 our employee benefit plans for
which he is otherwise eligible. The agreement remains subject to termination by our board of
directors for cause (as defined in the agreement) or without cause upon payment of certain amounts
and benefits, and by Mr. Smulyan for good reason (as defined in the agreement) upon written notice.
Mr. Smulyan continues to be entitled to certain termination benefits upon disability or death, and
certain severance benefits.
Effective February 7, 2005, we amended the employment agreement of Richard F. Cummings, who
currently serves as our President Radio Division. The term of Mr. Cummings employment was
extended for a period of
three years from February 28, 2005 to and including February 29, 2008. As of March 1, 2005,
Mr. Cummings
14
annual base compensation was increased from $435,000 to $495,000, of which we may pay
up to 10% in the form of shares of our common stock. Additionally, as of March 1, 2005, Mr.
Cummings annual incentive compensation target was increased from $300,000 to $341,500 (payable in
cash or shares of our common stock at our option) based upon achievement of certain performance
goals to be determined each year by our Compensation Committee. As of March 1, 2005, Mr. Cummings
annual grant of an option to acquire 50,000 shares of our common stock was replaced with an option
to acquire 30,000 shares of our common stock and a grant of 9,000 shares of restricted stock. Mr.
Cummings is also entitled to receive a completion bonus of 50,000 shares of our common stock upon
the expiration of the agreement. 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 and disability
insurance and retains the right to participate in all of our employee benefit plans for which he is
otherwise eligible. The agreement remains subject to termination by our board of directors for
cause (as defined in the agreement) and by Mr. Cummings for good reason (as defined in the
agreement) upon written notice. Mr. Cummings continues to be entitled to certain termination
benefits upon disability or death.
Effective February 7, 2005, we amended the employment agreement of Gary L. Kaseff, who
currently serves as our Executive Vice President and General Counsel. The term of Mr. Kaseffs
employment was extended for a period of three years from February 28, 2005 to and including
February 29, 2008. As of March 1, 2005, Mr. Kaseffs annual base compensation was increased from
$400,000 to $424,000; as of March 1, 2006, Mr. Kaseffs annual base compensation was increased from
$424,000 to $437,500; as of March 1, 2007, Mr. Kaseffs annual base compensation is increased from
$437,500 to $450,000. The company retains the right to pay up to 10% of Mr. Kaseffs annual base
compensation in the form of shares of our common stock. Additionally, as of March 1, 2005, Mr.
Kaseffs annual incentive compensation target was increased from $225,000 to $239,000; as of March
1, 2006, Mr. Kaseffs annual incentive compensation target was increased from $239,000 to $246,000;
as of March 1, 2007, Mr. Kaseffs annual incentive compensation target is increased from $246,000
to $253,000. The company retains the right to pay any annual incentive compensation in cash or
shares of our common stock. Additionally, the award of annual incentive compensation is based upon
achievement of certain performance goals to be determined each year by our Compensation Committee.
As of March 1, 2005, Mr. Kaseffs annual grant of an option to acquire 50,000 shares of our common
stock was replaced with an option to acquire 25,000 shares of our common stock and a grant of 7,500
shares of restricted stock. Mr. Kaseff is also entitled to receive a completion bonus of 28,250
shares of our common stock upon the expiration of the agreement. Mr. Kaseff will continue to
receive an automobile allowance and will continue to 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 our
employee benefit plans for which he is otherwise eligible. The agreement remains subject to
termination by our board of directors for cause (as defined in the agreement) and by Mr. Kaseff for
good reason (as defined in the agreement) upon written notice. Mr. Kaseff continues to be entitled
to certain termination benefits upon disability or death, and certain severance benefits.
Effective February 7, 2005, we amended the employment agreement of Michael Levitan, who
currently serves as our Executive Vice President of Human Resources. The term of Mr. Levitans
employment was extended for a period of three years from February 28, 2005 to and including
February 29, 2008. As of March 1, 2005, Mr. Levitans annual base compensation was increased from
$230,000 to $280,000. The company retains the right to pay up to 10% of Mr. Levitans annual base
compensation in the form of shares of our common stock. Additionally, as of March 1, 2005, Mr.
Levitans annual incentive compensation target was increased from $75,000 to $140,000. The company
retains the right to pay any annual incentive compensation in cash or shares of our common stock.
Additionally, the award of annual incentive compensation is based upon achievement of certain
performance goals to be determined each year by our Compensation Committee. As of March 1, 2005,
Mr. Levitans annual grant of an option to acquire 17,500 shares of our common stock was replaced
with an option to acquire 15,000 shares of our common stock and a grant of 4,500 shares of
restricted stock. Mr. Levitan is also entitled to receive a completion bonus of 10,000 shares of
our common stock upon the expiration of the agreement. Mr. Levitan will continue to receive an
automobile allowance and retains the right to participate in all of our employee benefit plans for
which he is otherwise eligible. The agreement remains subject to termination by our board of
directors for cause (as defined in the agreement) and by Mr. Levitan for good reason (as defined in
the agreement) upon written notice. Mr. Levitan continues to be entitled to certain termination
benefits upon disability or death, and certain severance benefits.
Effective September 4, 2006, we entered into a three-year employment agreement with Patrick
Walsh, who will serve as Executive Vice President, Chief Financial Officer and Treasurer. Mr.
Walshs annual base compensation is $400,000. Mr. Walshs annual incentive compensation target is
$150,000 for the fiscal year ended February 28, 2007 and $200,000 thereafter. The company retains
the right to pay any annual incentive compensation in cash or shares of our common stock.
Additionally, the award of annual incentive compensation is based upon achievement of certain
performance goals to be determined each year by our Compensation Committee. On or about September
4, 2006, Mr. Walsh received an option to acquire 10,000 shares of our Class A Common Stock and
3,000 shares of
15
restricted stock. Mr. Walsh is scheduled to receive an option to acquire 20,000 shares of our
Class A Common Stock and 6,000 restricted shares on or about March 1, 2007, March 1, 2008, and
March 1, 2009. Mr. Walsh is also scheduled to receive a completion bonus of 20,000 shares of our
common stock upon the expiration of the agreement. Mr. Walsh will receive an automobile allowance
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 our employee benefit plans for which he is otherwise
eligible. The agreement remains subject to termination by our board of directors for cause (as
defined in the agreement), and by Mr. Walsh for good reason (as defined in the agreement) upon
written notice. Mr. Walsh is entitled to certain termination benefits upon disability or death,
and certain severance benefits.
Effective August 11, 2003, Emmis entered into Change in Control Severance Agreements with
Messrs. Cummings and Kaseff. Emmis entered into a Change in Control Severance Agreement with Mr.
Smulyan effective March 1, 2004; a Change in Control Severance Agreement with Mr. Levitan effective
February 7, 2005; and a Change in Control Severance Agreement with Mr. Walsh effective August 24,
2006. Each such agreement provides that if the executives employment is terminated within two
years after a change-in-control (or, in certain instances, in anticipation of a change-in-control)
by Emmis other than for cause or by the executive for good reason (as defined in the agreement),
the executive is entitled to (1) a payment equal to the executives base salary through the
termination date, plus a pro rata portion of the executives target bonus for the year and accrued
vacation pay; (2) a severance payment equal to three times the executives highest annual base
salary and highest annual incentive bonus during the preceding three years; (3) continued insurance
benefits for three years; (4) immediate vesting of all stock options; and (5) in certain
circumstances, additional tax gross up payments. 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Compensation Committee members are Susan B. Bayh, Frank V. Sica and
Lawrence B. Sorrel, all of whom are independent directors under Nasdaq listing standards. No
member of the Compensation Committee is or was formerly an officer or an employee of Emmis. No
executive officer of Emmis serves as a member of the board of directors or compensation committee
of any entity that has one or more executive officers serving as a member of the Emmis board of
directors, nor has such an interlocking relationship existed in the past.
PERFORMANCE GRAPH
The following Performance Graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any of our filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to
the extent that we specifically incorporate this information by reference, and shall not otherwise
be deemed filed under such Acts.
The following line graph compares the yearly percentage change in the cumulative total
shareholder return on the Class A common stock with the cumulative total return of the Nasdaq Stock
Market Index and the cumulative total return of the Nasdaq Telecommunications Stock Market Index
(an index containing performance data of radio, telephone, telegraph, television and cable
television companies) from February 28, 2001, to the fiscal year ended February 28, 2006. The
performance graph assumes that an investment of $100 was made in the Class A common stock and in
each index on February 28, 2001 and that all dividends were reinvested.
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Feb-01 |
|
Feb-02 |
|
Feb-03 |
|
Feb-04 |
|
Feb-05 |
|
Feb-06 |
Emmis |
|
$ |
100 |
|
|
$ |
101 |
|
|
$ |
75 |
|
|
$ |
95 |
|
|
$ |
71 |
|
|
$ |
62 |
|
Nasdaq Stock Market (U.S.) |
|
$ |
100 |
|
|
$ |
81 |
|
|
$ |
63 |
|
|
$ |
95 |
|
|
$ |
97 |
|
|
$ |
109 |
|
Nasdaq Telecommunications |
|
$ |
100 |
|
|
$ |
48 |
|
|
$ |
35 |
|
|
$ |
49 |
|
|
$ |
52 |
|
|
$ |
52 |
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and
directors, and persons who own more than 10% of existing common stock, to file with the Securities
and Exchange Commission reports detailing their ownership of existing common stock and changes in
such ownership. Officers, directors and greater than 10% shareholders are required by Commission
regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on review
of the copies of such forms furnished to us, we believe that during the last fiscal year all
officers, directors and greater than 10% shareholders complied with the filing requirements of
Section 16(a), except that David R. Newcomer, who became our interim Chief Financial Officer on
December 2, 2005, filed Form 3 on December 13, 2005.
PROPOSAL 2: RATIFICATION OF SELECTION OF REGISTERED PUBLIC ACCOUNTANTS
The Audit Committee, a committee of the board of directors, has appointed Ernst & Young LLP to
serve as our independent registered public accountants for the fiscal year ending February 28,
2007, subject to ratification by the holders of our common stock. Our financial statements for the
fiscal year ended February 28, 2006 were certified by Ernst & Young LLP. Representatives of Ernst
& Young LLP are expected to attend the annual meeting with the opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions.
If shareholders do not ratify the selection of Ernst & Young LLP as our independent registered
public accountants, or if prior to the 2007 annual meeting of shareholders Ernst & Young LLP ceases
to act as our independent registered public accountants, then the Audit Committee will reconsider
the selection of independent registered public accountants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF ERNST &
YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.
17
MATTERS RELATING TO INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Fees Paid to Independent Registered Public Accountants
The following table sets forth the amount of fees (including cost reimbursements) we paid to
Ernst & Young LLP for the fiscal years ended February 28, 2006 and February 28, 2005, for various
categories of professional services they performed as our independent registered public
accountants.
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Year ended February 28, |
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2006 |
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2005 |
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Audit Fees (1) |
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$ |
1,974,265 |
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$ |
1,412,728 |
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Audit Related Fees (2) |
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51,000 |
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63,000 |
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Tax Fees: |
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Tax Compliance and Tax Return
Preparation |
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Tax Consulting and Advisory Services |
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55,000 |
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90,600 |
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Total Tax Fees |
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55,000 |
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90,600 |
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All Other Fees |
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Total Fees |
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$ |
2,080,265 |
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$ |
1,566,328 |
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(1) |
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Includes annual financial statement and internal controls audits and limited
quarterly review services, statutory audits of foreign subsidiaries, review of
registration statements and providing consents for SEC filings and other services that
are normally provided by the independent registered public accountants in connection
with statutory and regulatory filings or engagements. |
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(2) |
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Includes benefit plan audits, internal control review, audit-related
consultation services for potential corporate transactions and other audit-related
services. |
Engagement of the Independent Registered Public Accountants and Approval of Services
During the fiscal years ended February 28, 2006 and 2005, prior to engaging the independent
registered public accountants to render the above services and pursuant to its charter, the Audit
Committee approved the engagement for each of the services, and determined that the provision of
such services by the independent registered public accountants was compatible with the maintenance
of Ernst & Youngs independence in the conduct of its auditing services. Under its current
charter, it is the policy of the Audit Committee to pre-approve the retention of the independent
registered public accountants for any audit services and for any non-audit services, including tax
services. No services were performed during the fiscal year ended February 28, 2006 under the de
minimis exception in Rule 2-01(c) (7)(i)(C) of Regulation S-X.
PROPOSAL 3: SHAREHOLDER PROPOSAL REGARDING ADOPTION OF A RECAPITALIZATION PLAN
One of our shareholders, Mr. Frank K. Martin, has submitted a letter to us requesting that the
proposal set forth below be submitted to our shareholders for consideration at the annual meeting.
Mr. Martin has stated that he, or someone acting on his behalf, intends to introduce the following
proposal at the meeting. Mr. Martins address is 300 Junior Achievement Drive, Suite 301, Elkhart,
IN 46516. He beneficially owns 2,586,723 shares of Class A common stock (approximately 8.0% of the
outstanding shares of Class A common stock, representing approximately 3.2% of the total voting
power of our outstanding shares). Our board of directors is not making a voting recommendation
regarding this proposal for the reasons set forth following the proposal.
In accordance with applicable rules of the Securities and Exchange Commission, we have set
forth Mr. Martins proposal below, for which we accept no responsibility.
Proposal
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RESOLVED: |
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That the shareholders of Emmis Communications Corporation (the Company) request that
the Board of Directors take the steps that may be necessary to adopt a recapitalization plan
that would provide for all of the Companys outstanding stock to have one vote per share. |
18
Mr. Martins Supporting Statement
The Company has two classes of common stockClass A and Class B. According to the Companys
latest proxy statement (page 2), each share of Class A stock is entitled to one vote, each share of
Class B, ten votes. On most matters that come before the shareholders, the votes of Class A and
superior voting Class B are aggregated.
The Companys 2006 amended 10-K report also reveals that, on the basis of his ownership of
147,533 shares of Class A and 4,929,881 shares of Class B, Jeff Smulyan, the Companys Chairman and
CEO, controlled approximately 60.4% of the total voting power of all the Companys shares, even
though he owned only 13.7% of the total A and B shares outstanding. These numbers exclude 1,500,000
Class B Stock Options (a class of stock option historically issued exclusively to Mr. Smulyan)
primarily because theyre substantially out of the money.
Such disparity in voting power and economic interests becomes contentious when it provides the
irrevocable means for the perpetual entrenchment of a manager whose record may not otherwise
warrant such a privileged untouchable status. Furthermore, dual-class shares permit a minority
economic owner, such as Mr. Smulyan with his ownership of superior voting Class B shares, to
disregard the interests of the majority owners who are essentially powerless to oppose. The one
share/one vote standard of American democracy has been suspended for far too long at Emmis. The
inequality is further compounded when the CEO (normally the agent) is, through the skewed voting
power of the different share classes, also the principal. The traditional system of checks and
balances, common to the management of most organizations, is thereby abrogated. It is our belief,
based on Mr. Smulyans record as CEO and Chairman of Emmis, that he has not earned the right to be
above accountability to the majority owners of the Company.
Due to word limits on shareholder proxy proposals, additional information regarding the many
published articles on the subjectincluding all known public statements on the matter made by Mr.
Smulyanmay be viewed on the Martin Capital Management website (www.mcmadvisors.com).
Finally, under the current ownership structure, despite a compelling argument for the Board of
Directors at Emmis to recommend that shareholders vote in favor of this proposal, Mr. Smulyan, with
60.4% of the votes, can still carry the day. Nonetheless, if the Board of Directors endorses the
proposal and a majority of the Class A shareholders cast their votes accordingly, Mr. Smulyan may
win the battle (a Pyrrhic victory perhaps) for absolute control of Emmis but in the process further
estranges himself from directors and shareholders alike, increasing the likelihood that he will in
due course be held accountable.
Statement by the Board of Directors in Response
Emmis board of directors has reviewed the proposal set forth above and has determined to make
no voting recommendation to shareholders. Our companys voting structure has been in place from
the day it went public more than 12 years ago. The Class A common stock is publicly traded on
Nasdaq and the Class B common stock is held by our companys founder, Jeff Smulyan. In general,
the two classes vote together on all matters, with the Class A common stock entitled to one vote
per share and the Class B common stock entitled to ten votes per share (except in certain specified
situations). Shareholders may debate the merits of the voting structure, but Indiana corporate law
makes it clear that neither the board nor any one class of shareholders is entitled to change the
our companys voting structure without the consent of the other classes of shareholders. The
approval of the Class B shareholders, voting as a separate class, would be required to approve a
recapitalization plan of the type suggested by this proposal. Mr. Smulyan, as the sole holder of
the Class B common stock, has advised the Board that he would vote against such a recapitalization
plan. Accordingly, the Board believes that this proposal is moot.
SHAREHOLDER PROPOSALS
Any of our shareholders wishing to have a proposal considered for inclusion in our 2007 proxy
solicitation materials must set forth such proposal in writing and file it with our corporate
secretary on or before the close of business on February 5, 2007. In addition, under our by-laws
any shareholder wishing to nominate a candidate for director or propose other business at the
Annual Meeting must generally give us written notice on or before April 21, 2007 (unless we hold
our annual meeting more than 30 days earlier next year, in which case the deadline will be 10 days
after our first public announcement of the annual meeting date), and the notice must provide
certain specific information as described in the by-laws. Copies of the by-laws are available to
shareholders free of charge upon
request to our corporate secretary. Our board of directors will review any shareholder
proposals that are filed as required and will determine whether such proposals meet applicable
criteria for inclusion in our 2007 proxy solicitation materials or consideration at the 2007 annual
meeting. In addition, we retain discretion to vote proxies
19
on matters of which we are not properly
notified at our principal executive offices on or before the close of business on April 21, 2007,
and also retain that authority under certain other circumstances.
ANNUAL REPORT
A copy of our Annual Report on Form 10-K (as amended) for the year ended February 28, 2006 was
sent to all of our shareholders of record as of December 15, 2006. The Annual Report is not to be
considered as proxy solicitation material.
OTHER MATTERS
Our board of directors knows of no other matters to be brought before this annual meeting.
However, if other matters should come before the meeting, it is the intention of each person named
in the proxy to vote such proxy in accordance with his or her judgment on such matters.
NON-INCORPORATION OF CERTAIN MATTERS
The Report of the Compensation Committee, the Report of the Audit Committee, the Performance
Graph and the information on the Emmis website do not constitute soliciting material and should not
be deemed filed or incorporated by reference into any other Emmis filing under the Securities Act
of 1933 or the Securities Exchange Act of 1934, except to the extent Emmis specifically
incorporates the respective Report, Performance Graph or website information therein by reference.
EXPENSES OF SOLICITATION
The entire expense of soliciting proxies, including preparing, assembling, printing and
mailing the proxy form and the material used in the solicitation of proxies, will be paid by us.
Solicitations may be made in person, or by mail, telephone, facsimile or other means of electronic
communication by our directors, officers and other employees and none of those persons will receive
any additional compensation in connection with the solicitation. We also will request record
holders of shares beneficially owned by others to forward this proxy statement and related
materials to the beneficial owners of such shares, and will reimburse those record holders for
their reasonable expenses incurred in doing so.
HOUSEHOLDING OF PROXY MATERIALS
We have adopted a procedure permitted by Securities and Exchange Commission rules that is
commonly referred to as householding. Under this procedure, a single proxy statement and annual
report are delivered to multiple shareholders sharing an address unless we receive contrary
instructions from any shareholder at that address. We will continue to send a separate proxy card
to each shareholder of record. We have adopted this procedure because we believe it reduces the
volume of duplicate information shareholders receive and helps to reduce our printing and postage
costs. A number of brokers with accountholders who are Emmis shareholders will be householding
our proxy materials and annual reports as well.
If, at any time, you no longer wish to participate in householding and would prefer to
receive a separate proxy statement and annual report, please notify your broker if you hold your
Emmis shares through a broker, or notify us directly if you are a shareholder of record by sending
us an e-mail at ir@emmis.com, calling us toll-free at 1-866-Emmis-03 (1-866-366-4703) or writing to
us at Emmis Communications Corporation, Investor Relations, One Emmis Plaza, 40 Monument Circle,
Indianapolis, Indiana 46204.
If you currently receive multiple copies of our proxy statement and annual report at your
address and would like to request householding of your communications, you should contact your
broker or, if you are a record holder of Emmis shares, you should submit a written request to
American Stock Transfer & Trust Company, our transfer agent, at American Stock Transfer & Trust
Company, Operations Center, 6201 15th Avenue, Brooklyn, New York 11219.
20
Exhibit A
EMMIS COMMUNICATIONS CORPORATION
AUDIT COMMITTEE CHARTER
I. Purpose
The primary objective of the Audit Committee is to assist the Board in fulfilling its
oversight responsibilities with respect to (a) the financial statements and other financial
information provided by the Company to its stockholders, the public and others, (b) the Companys
compliance with legal and regulatory requirements, (c) the independent auditors qualifications and
independence and (d) the performance of the Companys internal audit function and independent
auditors.
Although the Audit Committee has the powers and responsibilities set forth in this Charter,
the role of the Audit Committee is oversight. The members of the Audit Committee are not full-time
employees of the Company and may or may not be accountants or auditors by profession or experts in
the fields of accounting or auditing and, in any event, do not serve in such capacity.
Consequently, it is not the duty of the Audit Committee to conduct audits or to determine that the
Companys financial statements and disclosures are complete and accurate and are in accordance with
generally accepted accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditors.
II. Organization
The Audit Committee shall consist of three or more directors, each of whom shall satisfy the
independence, financial literacy and experience requirements of Section 10A of the Securities
Exchange Act, Nasdaq and any other regulatory requirements.
The members of the Audit Committee shall be appointed by the Board on the recommendation of
the Nominating & Governance Committee.
The Audit Committee may form and delegate authority to subcommittees when appropriate.
III. Meetings
The Audit Committee shall meet at least four times per year on a quarterly basis, or more
frequently as circumstances require. As part of its job to foster open communication, the Audit
Committee shall meet at least quarterly with management, the persons performing the internal audit
function and the independent auditors in separate executive sessions to discuss any matters that
the Audit Committee or each of these groups believe should be discussed privately.
The members of the Audit Committee shall select a chair who will preside at each meeting of
the Audit Committee, and in consultation with the other members of the Audit Committee, shall set
the frequency and length of each meeting and the agenda of items to be addressed at each upcoming
meeting. In addition, at the first meeting of the Audit Committee to be held upon its formation
and at each first meeting held following the annual meeting of shareholders, the chair, in
consultation with the other members of the Audit Committee, shall determine the list of items to be
addressed by the Audit Committee during the coming year (the Annual Agenda).
The chair shall ensure that the agenda for each upcoming meeting of the Audit Committee is
circulated to each member of the Audit Committee in advance of the meeting, and that the Annual
Agenda is circulated to each member of the Audit Committee as well as each other director promptly
after it is finalized.
IV. Authority and Responsibilities
In recognition of the fact that the independent auditors are ultimately accountable to the
Audit Committee, the Audit Committee shall have the sole authority and responsibility to select,
evaluate and, where appropriate, replace the independent auditors (or to nominate the independent
auditors for shareholder approval), and shall approve all audit engagement fees and terms and all
non-audit engagements with the independent auditors. The Audit Committee may consult with
management and the persons performing the internal audit function but shall not delegate these
responsibilities.
To fulfill its responsibilities, the Audit Committee shall:
A-1
With respect to the independent auditors:
1. Be directly responsible for the appointment, compensation and oversight of the work of the
independent auditors (including resolution of disagreements between management and the independent
auditors regarding financial reporting) for the purpose of preparing the audit report or related
work.
2. Have the sole authority to review in advance, and grant any appropriate pre-approvals, of (a)
all auditing services to be provided by the independent auditors and (b) all non-audit services to
be provided by the independent auditors as permitted by Section 10A of the Securities Exchange Act,
and in connection therewith to approve all fees and other terms of engagement. The Audit Committee
shall also review and approve disclosures required to be included in Securities and Exchange
Commission periodic reports filed under Section 13(a) of the Securities Exchange Act with respect
to non-audit services.
3. Review on an annual basis the performance of the independent auditors, including the lead audit
partner.
4. Ensure that the independent auditors submit to the Audit Committee on an annual basis a written
statement consistent with Independent Standards Board Standard No. 1, discuss with the independent
auditors any disclosed relationships or services that may impact the objectivity and independence
of the independent auditors and satisfy itself as to the independent auditors independence.
5. At least annually, obtain and review an annual report from the independent auditors describing
(a) the independent auditors internal quality control procedures and (b) any material issues
raised by the most recent internal quality control review, or peer review, of the independent
auditors, or by any inquiry or investigation by governmental or professional authorities, within
the preceding five years, respecting one or more independent audits carried out by the independent
auditors, and any steps taken to deal with any such issues.
6. Confirm that the lead audit partner and the audit partner responsible for reviewing the audit,
has not performed audit services for the Company for each of the five previous fiscal years.
Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a
policy of rotating the independent auditors on a regular basis.
7. Review all reports required to be submitted by the independent auditors to the Audit Committee
under Section 10A of the Securities Exchange Act.
8. Review, based upon the recommendation of the independent auditors and the persons performing the
internal audit function, the scope and plan of the work to be done by the independent auditors.
With respect to the annual financial statements:
9. Review and discuss with management, the persons performing the internal audit function and the
independent auditors the Companys annual audited financial statements, including disclosures made
in Managements Discussion and Analysis of Financial Condition and Results of Operations.
10. Discuss with the independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended, relating to the conduct of the audit.
11. Recommend to the Board, if appropriate, that the Companys annual audited financial statements
be included in the Companys annual report on Form 10-K for filing with the Securities and Exchange
Commission.
12. Prepare the report required by the Securities and Exchange Commission to be included in the
Companys annual proxy statement and any other reports of the Audit Committee required by
applicable securities laws or stock exchange listing requirements or rules.
A-2
With respect to quarterly financial statements:
13. Review and discuss with management, the persons performing the internal audit function and the
independent auditors the Companys quarterly financial statements, including disclosures made in
Managements Discussion and Analysis of Financial Condition and Results of Operations and the
independent auditors review of the quarterly financial statements, prior to submission to
stockholders, any governmental body, any stock exchange or the public.
Annual reviews:
14. Discuss with management and the independent auditors major issues regarding accounting
principles used in the preparation of the Companys financial statements, including any significant
changes in the Companys selection or application of accounting principles. Review and discuss
analyses prepared by management and/or the independent auditors setting forth significant financial
reporting issues and judgments made in connection with the preparation of the financial statements,
including analyses of the effects of alternative approaches under GAAP.
Periodic reviews:
15. Periodically review separately with each of management, the independent auditors and the
persons performing the internal audit function (a) any significant disagreement between management
and the independent auditors or the persons performing the internal audit function in connection
with the preparation of the financial statements, (b) any difficulties encountered during the
course of the audit, including any restrictions on the scope of work or access to required
information and (c) managements response to each.
16. Periodically discuss with the independent auditors, without management being present, (a) their
judgments about the quality and appropriateness of the Companys accounting principles and
financial disclosure practices as applied in its financial reporting and (b) the completeness and
accuracy of the Companys financial statements.
17. Consider and approve, if appropriate, significant changes to the Companys accounting
principles and financial disclosure practices as suggested by the independent auditors, management
or the persons performing the internal audit function. Review with the independent auditors,
management and the persons performing the internal audit function, at appropriate intervals, the
extent to which any changes or improvements in accounting or financial practices, as approved by
the Audit Committee, have been implemented.
18. Review and discuss with management, the persons performing the internal audit function, the
independent auditors and the Companys in-house and independent counsel, as appropriate, any legal,
regulatory or compliance matters that could have a significant impact on the Companys financial
statements, including applicable changes in accounting standards or rules.
Discussions with management:
19. Review and discuss with management the Companys earnings press releases, including the use of
non-GAAP financial information (as defined in Regulation G), as well as financial information and
earnings guidance provided to analysts and rating agencies.
20. Review and discuss with management all material off-balance sheet transactions, arrangements,
obligations (including contingent obligations) and other relationships of the Company with
unconsolidated entities or other persons, that may have a material current or future effect on
financial condition, changes in financial condition, results of operations, liquidity, capital
resources, capital reserves or significant components of revenues or expenses.
21. Review and discuss with management the Companys major risk exposures and the steps management
has taken to monitor, control and manage such exposures, including the Companys risk assessment
and risk management guidelines and policies.
A-3
With respect to the internal audit function and internal controls:
22. Review, based upon the recommendation of the independent auditors and the persons performing
the internal audit function, the scope and plan of the work to be done by the persons performing
the internal audit function and the responsibilities, budget and staffing needs of the persons
performing the internal audit function.
23. Review and approve the appointment and replacement of the person overseeing the persons
performing the internal audit function.
24. Review on an annual basis the performance of the persons performing the internal audit
function.
25. In consultation with the independent auditors and the persons performing the internal audit
function, review the adequacy of the Companys internal control structure and procedures designed
to insure compliance with laws and regulations, and any special audit steps adopted in light of
material deficiencies and controls.
26. Establish procedures for (a) the receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls or auditing matters and (b) the
confidential, anonymous submission by employees of the Company of concerns regarding the
questionable accounting or auditing matters.
27. Review (i) the internal control report prepared by management, including managements
assessment of the effectiveness of the Companys internal control structure and procedures for
financial reporting and (ii) the independent auditors attestation, and report, on the assessment
made by management.
Other:
28. Review and approve all related-party transactions.
29. Review and approve (a) any change or waiver in the Companys Code of Business Conduct and
Ethics applicable to the Chief Executive Officer or any senior financial officers and (b) any
public disclosure regarding such change or waiver.
30. Establish a policy addressing the Companys hiring of employees or former employees of the
independent auditors who were engaged on the Companys account.
31. Review and reassess the adequacy of this Charter annually and adopt any changes deemed
appropriate.
32. Review its own performance annually.
33. Report regularly to the Board. Review with the Board when appropriate any issues that have
arisen with respect to the quality or integrity of the Companys financial statements, the
Companys compliance with legal or regulatory requirements, the performance and independence of the
Companys independent auditors or the performance of the persons performing the internal audit
function.
34. Perform any other activities consistent with this Charter, the Companys by-laws and governing
law, as the Audit Committee or the Board deems necessary or appropriate.
V. Resources
The Audit Committee shall have the authority to retain independent legal, accounting and other
consultants to advise the Audit Committee. The Audit Committee may request any officer or employee
of the Company or the Companys outside counsel or independent auditors to attend a meeting of the
Audit Committee or to meet with any members of, or consultants to, the Audit Committee.
A-4
The Audit Committee shall determine the extent of funding necessary for payment of
compensation to the independent auditors for the purpose of rendering or issuing the annual audit
report and to any independent legal,
accounting and other consultants retained to advise the Audit Committee.
A-5
ELECTRONIC ACCESS TO FUTURE DOCUMENTS
We are pleased to offer our shareholders the option to access shareholder communications (for
example, annual reports and proxy statements) from us or on our behalf over the Internet, instead
of receiving those documents in printed form. Your participation is completely voluntary. If you
give your consent, we will notify you when material is available over the Internet and provide you
with the Internet location where the material is available. Once you give your consent, it will
remain in effect until you inform us otherwise.
To give your consent, check the box located at the bottom of the attached proxy card. You may also
give your consent by telephone or e-mail as described in the proxy statement.
To enable us to send you notification of shareholder communications by e-mail, please provide your
e-mail address in the space at the bottom of the attached proxy card. There is no cost to you for
this service other than any charges you may incur from your Internet provider, telephone company
and/or cable company. If you have already consented to electronic delivery, you need not consent
again.
If you are an Emmis employee or a shareholder who has previously consented to electronic delivery
of shareholder communications and have received this proxy card without an accompanying proxy
statement and annual report, you may view those documents at the Investors section of
www.emmis.com.
6FOLD AND DETACH HERE6
EMMIS COMMUNICATIONS CORPORATION
40 Monument Circle
Indianapolis, Indiana 46204
This Proxy is Solicited on Behalf of the Emmis Communications Corporation Board of Directors
The undersigned hereby appoints Jeffrey H. Smulyan and J. Scott Enright, and each of them,
attorneys-in-fact and proxies, with full power of substitution, to vote as designated below all
shares of Class A Common Stock of Emmis Communications Corporation which the undersigned would be
entitled to vote if personally present at the annual meeting of Shareholders to be held on February
13, 2007, at 2:00 p.m., and at any adjournment thereof.
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1.
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ELECTION OF DIRECTORS FOR A TERM OF THREE YEARS. |
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o FOR all nominees listed below (except as written below)
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o WITHHOLD AUTHORITY to vote for all nominees |
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Nominees: Susan B. Bayh* and Gary L. Kaseff
* Class A Director |
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(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominees name in the space below.) |
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PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS. |
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o FOR
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o AGAINST
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o ABSTAIN |
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SHAREHOLDER PROPOSAL REGARDING ADOPTION OF A RECAPITALIZATION PLAN. |
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o FOR
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o AGAINST
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o ABSTAIN |
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In their discretion, the Proxies are authorized to vote upon such other business as may
properly come before the meeting. |
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o
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I consent to access future shareholder communications released after
February 13, 2007 over the Internet as described above and in the proxy
statement. My e-mail address is:
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(continued on other side)
6FOLD AND DETACH HERE6
This proxy is solicited on behalf of the Emmis Communications Corporation Board of Directors.
This proxy when properly executed will be voted in the manner directed herein by the undersigned
shareholder. If no direction is made, this proxy will be voted FOR Proposals 1 and 2, and will not
be voted with respect to Proposal 3.
The undersigned acknowledges receipt, prior to the execution of this proxy, of notice of the
meeting, a proxy statement, and an annual report to shareholders.
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Dated: , 2007 |
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(Signature) |
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(Signature if held jointly) |
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Please sign exactly as name
appears below. When shares are held
as joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person. |
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IMPORTANT: Please mark, sign, date
and return the proxy card promptly
using the enclosed envelope |
REVOCABLE PROXY