def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a 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)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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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June 13, 2008
Dear Shareholder:
The directors and officers of Emmis Communications Corporation join me in inviting you to
attend the annual meeting of our shareholders on Tuesday, July 15, 2008, at 11:00 a.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 Form 10-K for the fiscal year ended February 29, 2008. 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 Tuesday, July 15.
Sincerely,
Jeffrey H. Smulyan
Chief Executive Officer, President
and Chairman of the Board
(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, July 15, 2008, at 11:00 a.m., local time, at One Emmis Plaza, 40 Monument Circle,
Indianapolis, Indiana 46204.
The holders of common stock will be asked to consider and vote on the following matters:
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election of three 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, 2009; 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 May 14, 2008 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.
By order of the Board of Directors,
![-s- J. Scott Enright](c27252c2725202.gif)
J. Scott Enright
Secretary
Indianapolis, Indiana
June 13, 2008
TABLE OF CONTENTS
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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?
As an Emmis shareholder, 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, July 15, 2008, at 11:00 a.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 June 13, 2008, 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 three directors to our board of directors for terms of three years; and |
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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, 2009. |
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 May 14, 2008, the record date, are entitled to vote at the annual
meeting. As of May 1, 2008, 31,193,693 shares of Class A common stock and 4,956,305 shares of
Class B common stock were issued and outstanding. As of May 1, 2008, 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. 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.
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.
1
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 holders of 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 two directors and the ratification of Ernst & Young LLP as our independent registered
public accountants, and the Class A common stock will vote separately as a class on the election of
one other director (the Class A director).
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). A majority of the outstanding
Class A common stock constitutes a quorum for the election of the Class A director.
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 director nominees receiving the most votes of the holders of Class A and Class B
common stock, voting together, will be elected to fill two director positions, and the Class A
director nominee receiving the most votes of holders of Class A common stock, voting as a class,
will be elected as a Class A director. 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. There are instructions on the accompanying proxy card on
how to withhold authority to vote for one or more of the nominees; the result will be those
nominees will receive fewer votes.
The ratification of Ernst & Young LLP as our independent registered public accountants for the
fiscal year ending February 28, 2009 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.
Q: What percentage of stock does our largest individual 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 the 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 May 1, 2008. 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) and in favor of the proposal regarding the ratification of
the selection of Ernst & Young LLP. If he does so, the election of Messrs. Leventhal and Sorrel
and the proposal for ratification of the selection of Ernst & Young LLP are expected to be approved
because Mr. Smulyan controls approximately 61.6% 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 62.5% of the combined voting power of our outstanding
common stock (not including the potential voting power of unexercised options).
2
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 May 14, 2008 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
Three directors are to be elected. Richard A. Leventhal, Peter A. Lund and Lawrence B. Sorrel
have each been nominated for a term of three years and until his successor has been elected and
qualified. Mr. Leventhal and Mr. Sorrel will be elected by the Class A and Class B common stock
voting together as a single class. Mr. Lund will be elected by the Class A common stock voting as
a class.
Mr. Leventhal, Mr. Sorrel and Mr. Lund are members of the present board of directors. 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.
Name, Age, Principal Occupation(s) and
Business Experience
Nominated for a term expiring in 2011:
Richard A. Leventhal, Age 61
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.
Peter A. Lund,* Age 67
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.
Lawrence B. Sorrel, Age 49
Mr. Sorrel is Managing Partner and Co-CEO of Tailwind Capital Group, an independent private
equity firm that manages approximately $2 billion through private equity funds Tailwind
Capital Partners, L.P. and TWCP, L.P. 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.
Directors whose terms expire in 2009:
Susan B. Bayh,* Age 48
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.
Gary L. Kaseff, Age 60
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.
4
Directors whose terms expire in 2010:
Jeffrey H. Smulyan, Age 61
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.
Greg A. Nathanson, Age 61
Mr. Nathanson joined Emmis in 1998 as Television Division President, resigning effective
October 1, 2000. He is currently a media consultant. 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 General Manager of the Fox television
station KTTV from 1988 to 1992. In addition, he was President of all the Fox Television
stations from 1990 to 1992.
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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 May 1, 2008, there were 31,193,693 shares of our Class A common stock and 4,956,305
shares of our Class B common stock issued and outstanding. The holders of Class A common stock are
entitled to an aggregate of 31,193,693 votes, and the holder of Class B common stock is entitled to
an aggregate of 49,563,050 votes. The following table shows, as of May 1, 2008, 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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Percent of Total |
Executive Officers |
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Ownership |
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of Class |
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Ownership |
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of Class |
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Voting Power |
Jeffrey H. Smulyan |
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152,530 |
(1) |
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7,395,471 |
(19) |
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100.0 |
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71.2 |
% |
Susan B. Bayh |
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86,904 |
(2) |
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Richard F. Cummings |
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559,825 |
(3) |
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1.8 |
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Paul W. Fiddick |
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138,047 |
(4) |
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Gary L. Kaseff |
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510,990 |
(5) |
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1.6 |
% |
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Richard A. Leventhal |
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109,324 |
(6) |
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Peter A. Lund |
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66,293 |
(7) |
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Greg A. Nathanson |
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270,213 |
(8) |
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Lawrence B. Sorrel |
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91,211 |
(9) |
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Patrick M. Walsh |
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55,424 |
(10) |
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Martin Capital Management, LLP |
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3,167,715 |
(11) |
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10.2 |
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3.9 |
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TCS Capital Investments, LP |
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3,012,300 |
(12) |
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9.7 |
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3.7 |
% |
Farallon Capital Partners, LP and Noonday Capital
Partners, LLC |
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3,185,000 |
(13) |
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10.2 |
% |
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3.9 |
% |
Chesapeak Partners Management Co., Inc. |
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2,247,065 |
(14) |
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7.2 |
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2.8 |
% |
State Teachers Retirement Board of Ohio |
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1,561,745 |
(15) |
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5.0 |
% |
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1.9 |
% |
Barclays Global Investors, NA |
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1,750,931 |
(16) |
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5.6 |
% |
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2.2 |
% |
Dimensional Fund Advisors LP |
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2,651,835 |
(17) |
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8.5 |
% |
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3.3 |
% |
All Executive Officers and Directors as a Group
(12 persons) |
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2,322,510 |
(18) |
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7.1 |
% |
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7,395,471 |
(19) |
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100.0 |
% |
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72.5 |
% |
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Less than 1%. |
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(1) |
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Consists of 5,948 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, 3,000 shares held by Mr. Smulyan as trustee for his niece over which
Mr. Smulyan exercises or shares voting control and 30,625 shares held by The Smulyan Family
Foundation, over which Mr. Smulyan shares voting control. Of the shares he owns individually,
Mr. Smulyan has pledged 80,000 to secure a bank loan. |
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Consists of 33,242 shares owned individually and 53,662 shares represented by stock options
exercisable currently or within 60 days of May 1, 2008. Of the shares owned individually,
4,390 are restricted stock subject to forfeiture if certain conditions are not satisfied. |
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Consists of 165,128 shares owned individually, 8,260 shares owned for the benefit of Mr.
Cummings children, 5,932 shares held in the 401(k) Plan and 380,505 shares represented by
stock options exercisable currently or within 60 days of May 1, 2008. Of the shares owned
individually, 35,342 are restricted stock subject to forfeiture if certain employment
agreement or other conditions are not satisfied. |
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Consists of 27,886 shares owned individually, 399 shares held in the 401(k) Plan, and 109,762
shares represented by stock options exercisable currently or within 60 days of May 1, 2008.
Of the shares owned individually, 17,670 are restricted stock subject to forfeiture if certain
employment agreement or other conditions are not satisfied. |
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Consists of 94,857 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, 1,601 shares held in the 401(k) Plan, and 409,775 shares represented by stock
options exercisable currently or within 60 days of May 1, 2008. Of the shares owned
individually, 29,452 are restricted stock subject to forfeiture if certain employment
agreement or other conditions are not satisfied. |
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Consists of 35,062 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 53,662
shares represented by stock options exercisable currently or within 60 days of May 1, 2008.
Of the shares owned individually, 5,890 are restricted stock subject to forfeiture if certain
conditions are not satisfied. |
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Consists of 27,266 shares owned individually and 39,027 shares represented by stock options
exercisable currently or within 60 days of May 1, 2008. Of the shares owned individually,
5,890 are restricted stock subject to forfeiture if certain conditions are not satisfied. |
|
(8) |
|
Consists of 143,283 shares owned individually or jointly with his spouse, 44,000 shares owned
by trusts for the benefit of Mr. Nathansons children and 82,930 shares represented by stock
options exercisable currently or within 60 days of May 1, 2008. Of the shares owned
individually, 2,195 are restricted stock subject to forfeiture if certain conditions are not
satisfied. |
|
(9) |
|
Consists of 37,549 shares owned individually and 53,662 shares represented by stock options
exercisable currently or within 60 days of May 1, 2008. Of the shares owned individually,
5,890 are restricted stock subject to forfeiture if certain conditions are not satisfied. |
|
(10) |
|
Consists of 40,560 shares owned individually, 228 shares held in the 401(k) Plan and 14,636
shares represented by stock options exercisable currently or within 60 days of May 1, 2008. Of
the shares owned individually, 40,560 are restricted stock subject to forfeiture if certain
employment agreement or other conditions are not satisfied. |
6
|
|
|
(11) |
|
Information concerning these shares was obtained from a Schedule 13D/A filed on September 14,
2007 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, Indiana 46516. |
|
(12) |
|
Information concerning these shares was obtained from a Schedule 13G/A filed on February 14,
2008, by TCS Capital Investments, LP on behalf of itself and various affiliates, each of which
has a mailing address of 350 Park Avenue, Fourth Floor, New York, New York 10022. |
|
(13) |
|
Information concerning these shares was obtained from an amended Schedule 13D filed on
October 10, 2007 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 West Trade Street, Suite 2140, Charlotte, North Carolina
28202. The address of Farallon Capital Partners and its related parties is One Maritime Plaza
Suite 1325, San Francisco, California 94111. |
|
(14) |
|
Information concerning these shares was obtained from a Schedule 13D filed on October 22,
2007, by Chesapeake Partners Management Co., Inc. on behalf of itself and various affiliates,
each of which has a mailing address of 2800 Quarry Lake Drive, Suite 300, Baltimore, Maryland
21209. |
|
(15) |
|
Information concerning these shares was obtained from a Schedule 13G filed on January 25,
2008, by The State Teachers Retirement Board of Ohio, which has a mailing address of 275 East
Broad Street, Columbus, Ohio 43215 . |
|
(16) |
|
Information concerning these shares was obtained from a Schedule 13G filed on February 5,
2008, by Barclays Global Investors NA, on behalf of itself and various affiliates, each of
which has a mailing address of 45 Fremont Street, San Francisco, California 94105. |
|
(17) |
|
Information concerning these shares was obtained from a Schedule 13G filed on February 6,
2008, by Dimensional Fund Advisors LP, on behalf of itself and various affiliates, each of
which has a mailing address of 1299 Ocean Avenue, Santa Monica, CA 90401. |
|
(18) |
|
Includes 1,414,094 shares represented by stock options exercisable currently or within
60 days of May 1, 2008. |
|
(19) |
|
Consists of 4,956,305 shares owned individually and 2,439,166 shares represented by stock
options exercisable currently or within 60 days of May 1, 2008. Of the shares he owns
individually, Mr. Smulyan has pledged an aggregate of 4,928,882 to secure a bank line of
credit. The line of credit is subject to certain customary default provisions. If Mr. Smulyan
defaults on the line of credit and the pledge is foreclosed, the sale of the shares by the
pledgee could result in a change in control of the company. |
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 seven members. Of these, our board has
determined that four (Mrs. Bayh and Messrs. Leventhal, Lund 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.
7
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,
c/o Corporate Secretary, Emmis Communications Corporation, One Emmis Plaza, 40 Monument Circle,
Suite 700, Indianapolis, Indiana 46204, by facsimile to (317) 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, a communications should
specify that it is directed to the Corporate Governance and Nominating Committee. For matters
related to finance or auditing, a communication should specify that it is directed to the Audit
Committee. For matters related to compensation, a communication should specify that it is 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 our independent
auditors 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 Committee Charter, which is available on our website. The board of
directors has determined that the members of the Audit Committee, Richard A. Leventhal (chair),
Peter A. Lund and Lawrence B. Sorrel, are independent directors under the Securities Exchange Act
of 1934 and the Nasdaq listing standards. The board of directors has also determined that Lawrence
B. Sorrel is an Audit Committee financial expert as defined in rules adopted under the Securities
Exchange Act of 1934. The Audit Committee held six 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 Committee
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
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 Corporate Governance and Nominating Committee from other
sources.
The members of the Corporate Governance and Nominating Committee are Susan B. Bayh (chair) and
Richard A. Leventhal, both 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 our corporate objectives are met, establishes
compensation arrangements and approves compensation payments to our executive officers, and
generally administers our stock option and incentive plans. The Compensation Committees charter
is available in the Corporate Governance section of our website
8
(www.emmis.com) located under the Investors heading. The members of the Compensation Committee
are Peter A. Lund (chair), Susan B. Bayh and Lawrence B. Sorrel, all of whom are independent
directors under Nasdaq standards. The Compensation Committee held two meetings during the last
fiscal year.
Meeting Attendance
During our last fiscal year, our board of directors held seven 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 11,
2007, four of the seven members of our board of directors were in attendance.
Compensation of Directors
Directors who are not officers or employees of Emmis are compensated for their services at the
rate of $3,000 per regular meeting attended in person, $1,500 per regular meeting attended by phone
and $2,000 per committee meeting attended, whether in person or by phone. 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 $3,000 annual
retainer. All of these fees are paid in the form of Class A common stock at the end of each
calendar year. The per share price used for payment of these fees is established using the market
value of Emmis Class A common stock prior to the end of the previous fiscal year, discounted by 20%
to the extent the director attends at least 75% of the board and committee meetings applicable to
the director. In addition, directors who are not officers or employees of Emmis are entitled to
receive annually 2,195 shares of restricted stock and options to purchase 7,317 shares of Class A
common 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 on the earlier of the end of the directors three-year term or the third anniversary
of the date of grant.
In the table below, we have set forth information regarding the compensation for the fiscal
year ended February 29, 2008, received by each of our directors as of February 29, 2008 who is not
an officer or employee of Emmis.
9
2008 DIRECTOR COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or |
|
|
|
|
|
|
Name |
|
Paid in Cash |
|
Stock Awards1,2 |
|
Option Awards3,4 |
|
Total |
Susan B. Bayh |
|
|
|
|
|
$ |
55,642 |
|
|
$ |
11,146 |
|
|
$ |
66,788 |
|
Richard A. Leventhal |
|
|
|
|
|
$ |
65,559 |
|
|
$ |
11,146 |
|
|
$ |
76,705 |
|
Peter A. Lund |
|
|
|
|
|
$ |
60,577 |
|
|
$ |
11,146 |
|
|
$ |
71,723 |
|
Lawrence B. Sorrel |
|
|
|
|
|
$ |
57,062 |
|
|
$ |
11,146 |
|
|
$ |
68,208 |
|
Greg A. Nathanson |
|
|
|
|
|
$ |
60,437 |
|
|
$ |
11,146 |
|
|
$ |
71,583 |
|
|
|
|
1 |
|
On July 11, 2007, each director named in the table above received a grant of 2,195
restricted shares, having an aggregate date of grant fair value of $19,075. In the following table
we set forth for each named director the number of unrestricted shares the director received on
January 1, 2008, for retainers and meeting fees for the 2008 calendar year, and the aggregate grant
date fair market value of the shares: |
|
|
|
|
|
Name |
|
Shares # |
|
Fair Market Value $ |
Mrs. Bayh
|
|
9,437
|
|
36,332 |
Mr. Leventhal
|
|
11,188
|
|
43,074 |
Mr. Lund
|
|
9,894
|
|
38,092 |
Mr. Sorrel
|
|
8,981
|
|
34,577 |
Mr. Nathanson
|
|
7,383
|
|
28,425 |
|
|
|
2 |
|
At February 29, 2008, each named director other than Mrs. Bayh held restricted stock
awards for an aggregate of 5,890 shares, having an aggregate fair market value of $17,434. Mrs.
Bayh held 4,390 restricted shares having a fair market value of $12,994, as 1,500 restricted shares
had vested on February 13, 2007, the expiration of her last three-year term. Restricted stock
awards vest on the earlier of the end of the directors three-year term or the third anniversary of
the date of grant. Of Mrs. Bayhs restricted shares, 2,195 will vest on the earlier of February
13, 2010, or the day before the companys annual meeting for fiscal year 2009, and 2,195 shares
will vest on the earlier of July 11, 2010, or the day before the companys annual meeting for
fiscal year 2009. With respect to each of Messrs. Leventhal, Lund and Sorrel, 1,500 restricted
shares will vest on the earlier of July 13, 2008, or the day before the companys annual meeting
for fiscal year 2008, 2,195 restricted shares vest on the earlier of February 13, 2010, or the day
before the companys annual meeting for fiscal year 2008, and 2,195 restricted shares vest on the
earlier of July 11, 2010, or the day before the companys annual meeting for fiscal year 2008. For
Mr. Nathanson, 1,500 restricted shares will vest on the earlier of July 13, 2008, or the day before
the companys annual meeting for fiscal year 2008, and 2,195 restricted shares vest on the earlier
of February 13, 2010, or the day before of the companys annual meeting for fiscal year 2008. |
|
3 |
|
In the following table we have set forth information regarding options held by each
named director as of February 29, 2008. Options vest on the earlier of the dates shown, or the day
before the annual meeting for the fiscal year in which the date shown falls. |
|
|
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|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
|
|
Underlying |
|
|
|
|
|
|
Name |
|
Options # |
|
Option Exercise Price $ |
|
Option Expiration Date |
|
Option Vesting Date |
Mrs. Bayh |
|
|
7,317 |
|
|
|
8.84 |
|
|
|
7/11/17 |
|
|
1/3 on each of 7/11/08, 09 & 10 |
|
|
|
7,317 |
|
|
|
8.71 |
|
|
|
2/13/17 |
|
|
1/3 on each of 2/13/08, 09 & 10 |
|
|
|
7,317 |
|
|
|
12.19 |
|
|
|
7/13/15 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
14.21 |
|
|
|
6/30/14 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
15.48 |
|
|
|
6/5/13 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
13.56 |
|
|
|
6/24/12 |
|
|
Fully Vested |
|
|
|
Mr. Leventhal |
|
|
7,317 |
|
|
|
8.84 |
|
|
|
7/11/17 |
|
|
1/3 on each of 7/11/08, 09 & 10 |
|
|
|
7,317 |
|
|
|
8.71 |
|
|
|
2/13/17 |
|
|
1/3 on each of 2/13/08, 09 & 10 |
|
|
|
7,317 |
|
|
|
12.19 |
|
|
|
7/13/15 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
14.21 |
|
|
|
6/30/14 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
15.48 |
|
|
|
6/5/13 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
13.56 |
|
|
|
6/24/12 |
|
|
Fully Vested |
|
|
|
Mr. Lund |
|
|
7,317 |
|
|
|
8.84 |
|
|
|
7/11/17 |
|
|
1/3 on each of 7/11/08, 09 & 10 |
|
|
|
7,317 |
|
|
|
8.71 |
|
|
|
2/13/17 |
|
|
1/3 on each of 2/13/08, 09 & 10 |
|
|
|
7,317 |
|
|
|
12.19 |
|
|
|
7/13/15 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
14.21 |
|
|
|
6/30/14 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
15.48 |
|
|
|
6/5/13 |
|
|
Fully Vested |
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
|
|
Underlying |
|
|
|
|
|
|
Name |
|
Options # |
|
Option Exercise Price $ |
|
Option Expiration Date |
|
Option Vesting Date |
Mr. Nathanson |
|
|
7,317 |
|
|
|
8.84 |
|
|
|
7/11/17 |
|
|
1/3 on each of 7/11/08, 09 &10 |
|
|
|
7,317 |
|
|
|
8.71 |
|
|
|
2/13/17 |
|
|
1/3 on each of 2/13/08, 09 &10 |
|
|
|
7,317 |
|
|
|
12.19 |
|
|
|
7/13/15 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
14.21 |
|
|
|
6/30/14 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
15.48 |
|
|
|
6/5/13 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
13.56 |
|
|
|
6/24/12 |
|
|
Fully Vested |
|
|
|
14,634 |
|
|
|
19.82 |
|
|
|
8/01/11 |
|
|
Fully Vested |
|
|
|
14,634 |
|
|
|
24.18 |
|
|
|
3/01/10 |
|
|
Fully Vested |
|
|
|
Mr. Sorrel |
|
|
7,317 |
|
|
|
8.84 |
|
|
|
7/11/17 |
|
|
1/3 on each of 7/11/08, 09 &10 |
|
|
|
7,317 |
|
|
|
8.71 |
|
|
|
2/13/17 |
|
|
1/3 on each of 2/13/08, 09 & 10 |
|
|
|
7,317 |
|
|
|
12.19 |
|
|
|
7/13/15 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
14.21 |
|
|
|
6/30/14 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
15.48 |
|
|
|
6/05/13 |
|
|
Fully Vested |
|
|
|
14,635 |
|
|
|
13.56 |
|
|
|
6/24/12 |
|
|
Fully Vested |
|
|
|
4 |
|
The aggregate grant date fair value of the options granted to each director on July 11,
2007, was $32,268. |
Certain Transactions
Although Emmis no longer makes 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 fiscal 2008 was $984,028 and the balance at February 29, 2008 was
$984,028. This loan bears interest at our cost of senior debt, which at February 29, 2008 was
approximately 6.8% per annum.
Prior to 2002, Emmis had made certain life insurance premium payments for the benefit of Mr.
Smulyan. The company discontinued making such payments in 2001; however, pursuant to a Split
Dollar Life Insurance Agreement and Limited Collateral Assignment dated November 2, 1997, Emmis
retains the right, upon Mr. Smulyans death, resignation or termination of employment, to recover
all of the premium payments it has made, which total $1,119,000.
During the last fiscal year, Emmis leased an airplane and was party to a time-share agreement
with Mr. Smulyan with respect to his personal use of the plane. Under the time-share agreement,
whenever Mr. Smulyan 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 plane for the applicable trip). With respect to personal flights during the last
fiscal year, Mr. Smulyan paid Emmis approximately $171,000 for expenses under the time-share
arrangement. In addition, under IRS regulations, to the extent Mr. Smulyan or any other officer or
director allows non-business guests to travel on the 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 or the applicable officer or director. Generally, these trips on which compensation is
assessed pursuant to IRS regulations do not result in any material additional cost or expense to
Emmis.
A person who shares a household with Michael Levitan, our Executive Vice President of Human
Resources, is the President of EchoPoint Media, a media buying agency in Indianapolis. In fiscal
2008, Emmis paid EchoPoint approximately $156,000 in agency commissions, and paid approximately
$195,000 for advertisements placed for Emmis by EchoPoint. Emmis revenues prior to agency
commissions from advertisements placed by EchoPoint were $1,041,000.
The sister of Mr. Leventhal owns Simon Seyz, an Indianapolis business that provides corporate
gifts and specialty items. In fiscal 2008, Emmis made purchases from Simon Seyz of approximately
$128,000.
Review and Approval of Related Party Transactions
Our board of directors has adopted a written policy for review, approval and monitoring of
transactions between the company and related parties. Related parties are directors, executive
officers, nominees to become a director, any person beneficially owning more than 5% of any class
of our stock, immediate family members of any of the foregoing, and any entity in which any of the
forgoing persons is employed or is a general partner or principal or in which the person has a 10%
or greater beneficial ownership interest. The policy covers transactions involving amounts
exceeding $120,000 in which a related party had, has or will have a direct or indirect interest.
11
Procedures. The related party is required to notify our legal department of the facts and
circumstances of any proposed related party transaction. The legal department makes an initial
determination of whether the transaction is subject to the policy. If the legal department
determines that the policy is applicable, the transaction is referred to our Audit Committee.
Either the Audit Committee, or the chair of the Audit Committee between Audit Committee meetings,
considers the facts and circumstances of the proposed transaction and determines whether to approve
the transaction. The Audit Committee or the chair, as the case may be, considers, among other
things:
|
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|
The benefits of the transaction to the company; |
|
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|
|
The impact of the transaction on a directors independence; |
|
|
|
|
The availability of other sources for comparable products or services; |
|
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|
|
The terms of the transaction; and |
|
|
|
|
The terms available to unrelated third parties. |
The Audit Committee may seek bids, quotes or independent valuations from third parties in
connection with assessing a related party transaction. The Audit Committee or the chair may approve
only transactions that they determine are in, or are not inconsistent with, the best interest of
the company.
Ratification. If a transaction that was not a related party transaction when it was entered
into becomes a related party transaction, or our CEO, CFO, general counsel or secretary become
aware that a transaction that was not approved is a related party transaction, they must promptly
submit the transaction for review by the Audit Committee, or the chair of the Audit Committee
between Audit Committee meetings.
Annual Review. From time to time, the Audit Committee will review previously approved related
party transactions that have a remaining term of six months or more or remaining amounts involved
in excess of $120,000. Based on the factors described above, the Audit Committee determines whether
to continue, modify or terminate the transaction.
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 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 Audit Committee is composed of three directors who 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 may be found in the
Corporate Governance section of our website (www.emmis.com) located under the Investors heading.
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 29, 2008, 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 29, 2008 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
12
matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
The board of directors, upon the recommendation of the Audit Committee, has 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) as adopted by
the Public Company Accounting Oversight Board in Rule 3600T, 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 determined 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.
COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Policy
The Compensation Committee oversees our executive compensation program. The Compensation
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 such
plans 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 Compensation
Committee typically receives input from Mr. Smulyan in the course of making its decisions. With
respect to compensation decisions affecting non-executive officers and employees, the Compensation
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 Compensation
Committee.
The Compensation Committee bases its executive compensation programs on the following
objectives:
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We historically have entered into multi-year employment agreements with our executive
officers. All executive officers named in the compensation tables in this proxy statement
currently have employment agreements in place. The 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 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 on the officers prior compensation
levels, changes in duties, market data 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. |
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Compensation should be based on the level of job responsibility, individual performance
and company performance. As executives progress to higher levels in the organization, an
increasing proportion of their pay should be linked to company performance, because the
performance of senior executives is more likely to affect the companys results. |
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Compensation should reflect the value of the job in the marketplace. To attract and
retain highly skilled executives, we must remain competitive with the pay of other
employers who compete with us for talent. |
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Compensation should reward performance. The objectives of pay-for-performance and
retention of |
13
employees must be balanced. Even in periods of temporary downturns in company
performance, the programs should continue to ensure that successful, high-achieving
employees will remain motivated and committed to the company.
While the committee continues to adhere to the objectives cited above, the committee modified
its practices with respect to executive employment agreements entered into immediately after the
completion of the last fiscal year. Faced with a downturn in the economy, increasingly tight
credit markets and the underperformance of the companys domestic radio business, the committee
replaced expiring multi-year employment agreements for Messrs. Smulyan, Cummings and Kaseff with
one-year agreements containing automatic renewal provisions (absent notice of termination by either
the company or the executive). The committee believes that these one-year agreements give the
company greater flexibility and further enhances the performance-based aspects of each executives
overall compensation. Consistent with the current operating environment, the committee determined
to keep base salaries and annual target bonuses at the same level as in the expiring agreements and
only provide for cost-of-living increases in the event of any annual rollover. The committee also
kept the number of stock options and/or shares of restricted stock to be awarded annually the same
as under the expiring agreements, and did so even though the expected Black-Scholes value of the
annual equity awards had decreased dramatically from the value of the awards under the expiring
agreements. In making this determination, the committee expressed concern about the dilution that
would result from increasing the number of shares to be awarded under the new agreements if the
Black-Scholes value of the new awards were to equal the Black-Scholes value of the awards under the
expiring agreements. In addition, in the case of Mr. Smulyan, the committee provided for equity
awards to be made in shares of Class A common stock rather than Class B common stock. While all
prior employment agreements with Mr. Smulyan had provided for the award of Class B shares to Mr.
Smulyan, the committee determined that the new agreement should provide for the awards to be made
in Class A shares. Finally, for Messrs. Cummings and Kaseff, the committee included a retention
bonus to provide incentive for the executives to remain with the company for more than the one-year
term of the agreements. While most of the previous retention bonuses were in the form of
restricted stock grants, these retention bonuses are cash-based because the committee wanted to
avoid making large, stock-based awards (i.e., mega-grants) to executives at a time when the stock
price was near an all-time low. At the same time, the Committee added a cash completion bonus to
Mr. Walshs employment agreement, out of concern that the value of the equity awards under the
employment agreement may not provide sufficient retention incentive for a high-performing finance
executive.
The Committees Processes
The Compensation Committee has established a number of processes to assist it in ensuring that
the companys executive compensation program is achieving its objectives. Among those are:
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Assessment of Company Performance. The Compensation Committee has historically used
station operating income as its principal measure of company performance. For
corporate-level executives such as Messrs. Smulyan, Walsh and Kaseff, the Compensation
Committee measures company-wide station operating income. For executives in the companys
business units, such as Mr. Cummings in the Radio Division and Mr. Fiddick in Emmis
International, the company uses station operating income for the applicable business unit
as its principal measure. |
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Assessment of Individual Performance. Individual performance has a strong impact on the
compensation of all employees, including the CEO and the other executive officers. The
Compensation Committee meets annually with Mr. Smulyan to assess the performance of the
executive officers other than himself. Generally, the Compensation Committee assigns a
numerical rating reflecting the performance of the executive. The numerical rating scale
runs from zero to five, with a rating of three meaning the executive is meeting the
companys expectations and a rating of five meaning that the executive is far exceeding the
companys expectations. In most years, the rating directly affects the executives
performance bonus element of the companys 2008 Corporate Incentive Plan discussed below. |
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Significant Decisions. When the company is hiring a new executive, assigning substantial
new duties to a current executive or contemplating a significant change in its compensation
policy, the Compensation Committee will from time to time engage in one or more of the
following additional processes: |
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Engaging Consultants. The Compensation Committee may engage the
services of compensation consultants when it is considering new policies or
engaging new executives. Among other things, the Compensation Committee has used
consultants to compare cash and non-cash compensation
programs for the companys executive officers with those of other companies and
assess whether |
14
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they are appropriate to the companys objectives, and to ensure
compensation arrangements comply with applicable law. The Compensation Committee
exercises its judgment and discretion in reviewing and considering these analyses. |
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Benchmarking. The Compensation Committee may look to a peer group of
media companies as a benchmark. Although changes and consolidation in the industry
will change the identity of peer companies from time to time, at present the
company considers Citadel Broadcasting Corporation, Cox Radio, Inc., Entercom
Communications Corporation and Radio One, Inc. to be among the peer group of
companies that the company would benchmark. The Compensation Committee would
compare the peer companies executive compensation programs as a whole, and also
compare the pay of individual executives if the jobs are sufficiently similar to
make the comparison meaningful. The Compensation Committee would use the peer group
data primarily to ensure that the executive compensation program as a whole is
competitive, meaning generally within the upper third of comparative pay of the
peer group companies when the company achieves the targeted performance levels. |
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Total Compensation Review. Each time an executives employment agreement is up for
renewal, the Compensation Committee reviews the executives base pay, bonus and equity
incentives, as well as perquisites and other compensation, and, if applicable, payments
that would be required under certain severance and change in control scenarios. |
Components of Executive Compensation for Fiscal 2008
For fiscal 2008, the compensation of executives consisted of four primary components base
salary, a performance and incentive bonus under our 2008 Corporate Incentive Plan, stock options
and restricted shares, and a benefits package. The Compensation Committee believes that this
program balances both the mix of cash and equity compensation, the mix of currently paid and
longer-term compensation, and the security of foundational benefits in a way that furthers the
compensation objectives discussed above.
Base Salary. Base salary is the guaranteed element of executives annual cash compensation.
The value of base salary reflects the employees role and responsibilities, long-term performance,
skill set and the market value of that skill set. Base salaries for the named executives were
fixed for fiscal 2008 in accordance with each executives employment agreement, with Mr. Smulyan
forgoing his base salary for the entire fiscal year.
2008 Corporate Incentive Plan. Our 2008 Corporate Incentive Plan has two components, a target
bonus and a performance goal. Generally, for fiscal 2008, payment of 70% of an executive officers
target bonus is based on achievement of station (publishing) operating income targets for the
applicable business unit, and the remainder is based on a review of individual performance.
Because our international radio division is more of a start-up operation than our radio and
publishing divisions, Mr. Fiddicks award was allocated 60% to international radio station
operating income and 40% to individual performance. The total target award for each executive
officer is fixed by the executives employment agreement. The table below sets forth the target
awards for each executive officer named in the compensation tables below:
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Individual |
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Operating Income |
|
Performance Target |
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|
Name |
|
Target Award |
|
Award |
|
Total Target Award |
Mr. Smulyan |
|
$ |
791,875 |
|
|
$ |
339,375 |
|
|
$ |
1,131,250 |
|
Mr. Walsh |
|
$ |
140,000 |
|
|
$ |
60,000 |
|
|
$ |
200,000 |
|
Mr. Cummings |
|
$ |
239,050 |
|
|
$ |
102,450 |
|
|
$ |
341,500 |
|
Mr. Kaseff |
|
$ |
177,100 |
|
|
$ |
75,900 |
|
|
$ |
253,000 |
|
Mr. Fiddick |
|
$ |
123,000 |
|
|
$ |
82,000 |
|
|
$ |
205,000 |
|
The actual awards earned are set forth in the Summary Compensation Table in the columns
denominated Bonus for the individual performance portion of the award, and Non-Equity Incentive
Compensation for the operating income portion. The executive earned a percentage of the operating
income target award depending on the extent to which the operating income goals were attained in
accordance with the following scale:
15
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Percentage of Performance Goal Attained |
|
Percentage of Target Award Earned |
115% or more (130% for Mr. Fiddick) |
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150% |
110% (115% for Mr. Fiddick) |
|
125% |
100% |
|
100% |
90% (70% for Mr. Fiddick) |
|
70% (50% for Mr. Fiddick) |
Less than 90% (less than 70% for Mr.
Fiddick) |
|
0% |
The company believes the operating income goals set for its executives under the 2008
Corporate Incentive Plan are appropriate. Station operating income is widely used as a performance
measure within the broadcasting and publishing industries. The operating income targets were set
early in the fiscal year in accordance with Section 162(m) of the Internal Revenue Code, based upon
a combination of internal budgets and Wall Street analyst expectations. The operating income
target award for Messrs. Smulyan, Walsh and Kaseff was based on a goal of total Emmis station
operating income of $112.9 million. The operating income target award for Mr. Cummings was based
on a goal of domestic Emmis radio station operating income of $88.2 million. The operating income
target award for Mr. Fiddick was based on a goal of international radio Emmis station operating
income of $12.3 million. For purposes of calculating attainment of the targets, operating income
excluded corporate overhead (with the exception of publishing division overhead), excluded the
performance of Orange Coast (which was acquired in the middle of the fiscal year), and excluded all
remaining television stations and Emmis Books. The Compensation Committee may from time to time
adjust the performance goals of the executives to eliminate the effect of extraordinary events.
For fiscal 2008, the Compensation Committee made no such adjustments.
The attainment of the operating income performance goals was determined by the Compensation
Committee in a manner consistent with the station operating income reported by the corporation in
its filings with the Securities and Exchange Commission, with the exception of noncash
compensation, which was only included in the determination to the extent the costs are normally
reflected in station financial statements in the corporations accounting system, and non-cash
accounting adjustments, which were excluded. For fiscal 2008, the Compensation Committee
determined total Emmis station operating income to be $93.8 million, domestic radio station
operating income to be $67.3 million, international radio station operating income to be $14.6
million and publishing operating income to be $11.9 million. Of the named executive officers, only
Mr. Fiddick achieved his target in fiscal 2008 and received any portion of his operating income
target award.
Total station operating income must be at least 75% of the target total station operating
income goal in order for the executive to receive the portion of the award based upon a review of
individual performance. After review of the executives performance, based upon the recommendation
of Mr. Smulyan in the case of executive officers other than Mr. Smulyan, the Compensation
Committees usual practice has been to assign a numerical rating from zero to five reflecting its
judgment of the executives performance. The executive would then receive a percentage of the
individual performance portion of his target award based on the following scale:
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|
Rating |
|
Percentage of Target Award Earned |
5.0 (far exceeds expectations) |
|
120% |
4.0 (exceeds expectations) |
|
110% |
3.0 (meets expectations) |
|
100% |
2.5 |
|
95% |
Less than 2.5 |
|
0% |
In light of the challenging economic environment and the overall performance of the
corporation, the Compensation Committee determined that no executive would receive more than the
base portion of the individual performance component under the Corporate Incentive Plan. Awards to
executive officers under the 2008 plan were paid, subject to minimum tax withholdings, in shares of
common stock.
2004 Equity Compensation Plan. We award the equity component of executive compensation under
our 2004 Equity Compensation Plan. On or about March 1 of each year, we grant to each executive a
number of options and restricted shares fixed in accordance with the executives employment
agreement. The grant date is tied to the date on which the company makes annual equity awards to
substantially all of its full-time employees. The options become exercisable in three equal annual
installments, on the first, second and third anniversaries of the date of grant. The exercise price
is equal to the fair market value of our shares on the date of grant. Restricted shares vest on the
third anniversary of the initial grant. Most officers received both options and restricted stock
under this new program. However, Mr. Smulyan continued to receive all stock options as provided in
his employment agreement.
16
By fixing the annual grant date for options and restricted stock grants at March 1 of each
year (the first day of our fiscal year), we believe we have substantially eliminated the
possibility of manipulation of the timing of grants. We do make an exception to this policy in the
case of new hires. We also may delay grants to executive officers if the paperwork for grants to
employees other than executive officers is not completed by March 1 of each year. We believe that
it is important for employee morale that equity awards to executives and other employees be made on
the same date and at the same share valuations.
We also grant restricted shares that vest on the completion of the executives employment
agreement. We intend the grant of these completion shares to provide incentive to the executive
to remain with the company throughout the term of his employment agreement.
If the company pays a dividend on its common shares, the dividend is paid on shares of
restricted stock.
Perquisites. The company provides certain limited perquisites or personal benefits to its
executive officers. Most of the companys executive officers receive a monthly automobile
allowance, reimbursement for certain life, disability and long-term care insurance, and matching
contributions to the companys 401(k) plan. At its discretion, the company will also reimburse the
relocation expenses of new hires who must move to one of the companys locations. The 401(k)
matching contributions are made on the same terms available to all participants in the plan. In
addition, the company aircraft is made available for the personal use of Mr. Smulyan and other
executive officers. The Compensation Committee believes that the use of the corporate aircraft
allows the executive officers to conduct company business while traveling, and offers security and
efficiency that are worth more to the company than the cost. However, the company requires that
executives using the plane for purely personal trips reimburse the company for the incremental cost
of the trip to the extent permitted for non-commercial aircraft under FAA regulations. Accordingly,
Mr. Smulyan has entered into a time-share arrangement for the corporate aircraft under which he
pays the company a lease fee for personal use based upon the lesser of the Gulfstream IV Total
Direct Cost Per Flight as published by Conklin & de Decker Aviation Information or the maximum
amount of expense reimbursement permitted under FAA regulations for non-commercial aircraft.
Occasionally, Mr. Smulyan and other executive officers may use the corporate aircraft for personal
side trips on otherwise business flights. Because these trips are part of a business trip, the
company accounts for such side trips using the Standard Industry Fair Level Rates as published by
the Internal Revenue Service (SIFL), and is not fully reimbursed for the incremental cost of such
side trips. In addition, depending on seat availability, friends or family members of executive
officers may travel on the company aircraft to accompany executives who are traveling on business.
There is no incremental cost to the company for these trips, but compensation expense is added to
the applicable executive officers W-2 wages in accordance with SIFL.
Severance Benefits
The employment agreements we have entered into with Messrs. Smulyan, Cummings, Walsh, Kaseff
and Fiddick provide for certain payments and benefits to the named executive officer in the event
that the executive officer is terminated by the company without cause, and/or terminates his own
employment with good reason. Mr. Smulyan is also entitled to certain payments upon his voluntary
termination or in the event of his death or disability.
We have also entered into a Change in Control Severance Agreement with each of the executives
named in the following tables. Each such agreement provides that if the executives employment is
terminated by the company within two years after a change in control of the company (or, in certain
instances, in anticipation of a change in control) other than for cause, or is terminated by the
executive for good reason, the executive is entitled to (1) a payment equal to the 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 from one and one-half 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; and (4) if the payments to the
executive exceed certain limits, additional tax gross up payments to compensate the executive for
the excise tax imposed by section 4999 of the Internal Revenue Code. In each case, the executive
is obligated not to voluntarily leave employment with Emmis during the pendency of (and prior to
the consummation or abandonment of) a change in control other than as a result of disability,
retirement or an event that would constitute good reason if the change-of-control had occurred. In
addition, under our 2004 Equity Compensation Plan, all outstanding stock options, restricted shares
and other awards held by the executive vest immediately if the Compensation Committee determines
that a change in control has occurred.
The Change in Control Severance Agreements are intended to preserve productivity and encourage
17
retention in the face of the disruptive impact of an actual or rumored change in control of
the company. In addition, the agreements are intended to align executive and shareholder interests
by enabling executives to consider corporate transactions that are in the best interests of the
shareholders and other constituents of the company without undue concern over whether the
transactions may jeopardize the executives own employment.
Although there are some differences in benefit levels depending on the executives job level
and seniority, the basic elements of the Change in Control Severance Agreements are comparable for
the named executives:
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Double trigger. Unlike single trigger plans that pay out immediately upon a change in
control, the agreements require a double trigger a change in control followed by an
involuntary loss of employment within two years thereafter, or in the case of Messrs.
Smulyan, Cummings, Kaseff and Walsh, a voluntary termination during a 30-day period
beginning one year after the change in control. This is consistent with the purpose of the
agreements, which is to provide executives with a guaranteed level of financial protection
upon loss of employment and to provide for a smooth transition in connection with a change
in control. |
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Covered terminations. Executives are eligible for payments if, within two years of the
change in control, their employment is terminated (i) without cause by the company, (ii)
for good reason by the employee, or (iii) in certain cases, for any reason by the employee
during a 30-day period beginning one year after the change in control. |
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Severance payment. Executives would receive a severance payment ranging from eighteen
months to three years base salary, plus from one and one-half to three times the highest
annual bonus paid in the three years prior to the change in control. |
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Benefits continuation. Basic employee benefits such as health, dental, accident and life
insurance would be continued for up to three years following termination of employment. |
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Excise tax. In the event the payments made to the executive, or the value of other
benefits received by the executive, in connection with a change in control exceed certain
limits, Section 4999 of the Internal Revenue Code imposes an excise tax on the employee.
The costs of this excise tax, including related tax gross-ups, would be borne by the
company. |
Deductibility Cap on Executive Compensation
U.S. federal income tax law prohibits the company from taking a tax deduction for certain
compensation paid in excess of $1,000,000 to the named executive officers listed in the summary
compensation table below. However, performance-based compensation, as defined in the tax law, is
fully deductible if the programs are approved by shareholders and meet other requirements. Our
policy is to qualify our incentive compensation programs for full corporate deductibility to the
extent feasible and consistent with our overall compensation goals as reflected in the summary
compensation table below. The Compensation Committee believes that substantially all of the
compensation paid to any executive officer in excess of $1,000,000 in fiscal 2008 was fully
deductible. However, the Compensation Committee may approve payments that are not fully deductible
if, in its judgment, such payments are necessary to achieve the companys compensation objectives
and to protect shareholder interests.
Executive Compensation Recovery Policy
The Compensation Committee has adopted an executive compensation recovery policy applicable to
executive officers. Under this policy, the company may recover incentive compensation (cash or
equity) that was based on achievement of financial results that were subsequently the subject of a
restatement if an executive officer engaged in intentional misconduct that caused or partially
caused the need for the restatement, and the effect of the wrongdoing was to increase the amount of
bonus or incentive compensation. This policy covers income related to cash bonuses and performance
awards.
Equity Ownership Requirements
While the company encourages all of its employees to invest in the company by including them
in its equity award programs, the company does not require any executives or other employees to
maintain a certain level of equity ownership in the company. The board of directors believes that
the decision to invest in the company is a highly personal one, and consequently should not be
mandated.
18
Fiscal 2009 Compensation Decisions
The companys 2009 Corporate Incentive Plan is substantially similar to the 2008 plan. The
target awards of the named executive officers for fiscal 2009 are fixed in accordance with their
respective employment agreements, and the operating income goals are based on the approved budgets.
The companys other compensation programs are expected to remain in place without material
change for fiscal 2009.
None of our current executive officers has received any bonus in connection with the sale of
the companys television division, even though television sales bonuses were paid to substantially
all television division and corporate employees. The Compensation Committee determined not to
address the issue of television sale bonuses, if any, for executive officers until all the
television stations had been sold. When the final television station is sold, the Compensation
Committee may determine to award discretionary bonuses to executives and other employees.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis
set forth above with management, and based on such review and discussions, the Compensation
Committee recommended to the board of directors that the Compensation Discussion and Analysis be
included in this proxy statement.
THE COMPENSATION COMMITTEE
Peter A. Lund, Chairman
Susan B. Bayh
Lawrence B. Sorrel
19
COMPENSATION TABLES
The following table sets forth the compensation awarded to, earned by, or paid to the chief
executive officer, the chief financial officer and the three most highly compensated executive
officers other than the chief executive officer and the chief financial officer (collectively, the
Named Executive Officers) during the fiscal years ended February 29, 2008 and February 28, 2007.
2008 SUMMARY COMPENSATION TABLE1
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|
|
|
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|
|
|
|
|
|
Non-Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
Incentive Plan |
|
All Other |
|
|
|
|
|
|
|
|
Salary2,3 |
|
Bonus4 |
|
Awards5 |
|
Awards5 |
|
Compensation4 |
|
Compensation6 |
|
Total |
Name and Principal Position |
|
Year |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
Jeffrey H. Smulyan, Chief |
|
|
2008 |
|
|
|
1 |
|
|
|
339,375 |
|
|
|
|
|
|
|
849,019 |
|
|
|
|
|
|
|
73,391 |
|
|
|
1,261,786 |
|
Executive Officer |
|
|
2007 |
|
|
|
880,000 |
|
|
|
369,600 |
|
|
|
|
|
|
|
642,667 |
|
|
|
|
|
|
|
52,207 |
|
|
|
1,944,474 |
|
|
|
Patrick M. Walsh, |
|
|
2008 |
|
|
|
400,000 |
|
|
|
60,000 |
|
|
|
117,394 |
|
|
|
63,236 |
|
|
|
|
|
|
|
110,268 |
|
|
|
750,898 |
|
Executive Vice President, |
|
|
2007 |
|
|
|
176,923 |
|
|
|
89,135 |
|
|
|
46,537 |
|
|
|
10,984 |
|
|
|
76,081 |
|
|
|
121,342 |
|
|
|
521,002 |
|
Chief Financial Officer
and Treasurer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard F. Cummings, |
|
|
2008 |
|
|
|
495,000 |
|
|
|
102,450 |
|
|
|
455,918 |
|
|
|
158,305 |
|
|
|
|
|
|
|
19,074 |
|
|
|
1,230,747 |
|
Radio Division President |
|
|
2007 |
|
|
|
495,000 |
|
|
|
110,134 |
|
|
|
419,433 |
|
|
|
96,400 |
|
|
|
|
|
|
|
291,074 |
|
|
|
1,412,041 |
|
|
|
Gary L. Kaseff, Executive |
|
|
2008 |
|
|
|
450,000 |
|
|
|
75,900 |
|
|
|
295,720 |
|
|
|
131,921 |
|
|
|
|
|
|
|
19,074 |
|
|
|
972,615 |
|
Vice
President and General Counsel |
|
|
2007 |
|
|
|
437,500 |
|
|
|
83,025 |
|
|
|
282,916 |
|
|
|
80,333 |
|
|
|
|
|
|
|
192,000 |
|
|
|
1,075,774 |
|
|
|
|
Paul W. Fiddick, |
|
|
2008 |
|
|
|
350,000 |
|
|
|
82,000 |
|
|
|
101,195 |
|
|
|
79,152 |
|
|
|
160,583 |
|
|
|
6,111 |
|
|
|
779,041 |
|
International Division |
|
|
2007 |
|
|
|
340,000 |
|
|
|
115,000 |
|
|
|
68,355 |
|
|
|
48,200 |
|
|
|
103,333 |
|
|
|
20,000 |
|
|
|
694,888 |
|
President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
We have adjusted the exercise prices and numbers of shares subject to options
referred to in this and the following tables and accompanying text and footnotes for the effect of
the $4.00 per share special dividend we paid on November 22, 2006. We have also adjusted the
numbers of restricted shares granted or to be granted after that date to reflect the split. The
shares we refer to in this and the following tables are Class A common shares of the company,
except with respect to Mr. Smulyan, whose shares are Class B common shares. |
|
2 |
|
In fiscal 2008, Mr. Smulyan elected to voluntarily forgo all but $1 of his contractual
base salary of $905,000. |
|
3 |
|
Under our 2006 stock compensation program, some of our executives elected to forgo a
portion of their salary in fiscal year 2007 in exchange for restricted shares of the companys
stock. The restricted shares were valued at a discount from the fair market value of the companys
shares at the beginning of the calendar year. The discount was 10% for the first 5% of salary
foregone, and 20% for amounts foregone in excess of 5%. The following table sets forth the amount
of salary foregone and the number of shares received by each of the named executives who elected to
forgo a portion of salary in fiscal year 2007: |
|
|
|
|
|
|
|
|
|
Name |
|
Salary Forgone ($) |
|
Shares (#) |
Mr. Smulyan |
|
|
146,667 |
|
|
|
10,038 |
|
Mr. Cummings |
|
|
41,250 |
|
|
|
4,694 |
|
Mr. Kaseff |
|
|
54,687 |
|
|
|
6,307 |
|
|
|
|
4 |
|
Under our 2008 Corporate Incentive Plan, we paid discretionary performance bonuses and
non-equity incentive plan awards to executive officers in stock valued at the fair market value of
the companys shares on the day the shares are issued. The number of shares issued to each
executive officer under the plan, is as follows: Mr. Smulyan, 102,841; Mr. Walsh, 18,182; Mr.
Cummings, 31,045; Mr. Kaseff, 23,000; and Mr. Fiddick, 73,510. |
|
5 |
|
These values represent the amounts we recognized as compensation expense in accordance
with Statement of Financial Accounting Standards No. 123R. They may include amounts attributable to
awards made in past years. A discussion of the assumptions used in calculating these values may be
found in Note 5 to our audited financial statements beginning on page 79 of our annual report on
Form 10-K for the fiscal year ended February 29, 2008. |
20
|
|
|
6 |
|
The following table sets forth the items comprising All Other Compensation for each
named executive officer. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
|
|
|
|
|
|
|
|
Perquisites |
|
|
|
|
|
|
|
|
|
Contributions |
|
Dividends |
|
|
|
|
|
|
|
|
and Other |
|
|
|
|
|
|
|
|
|
to Retirement |
|
Paid on |
|
|
|
|
|
|
|
|
Personal |
|
Tax |
|
Insurance |
|
and |
|
Restricted |
|
|
|
|
|
|
|
|
BenefitsA |
|
Reimbursements |
|
PremiumsB |
|
401(k) Plans |
|
StockC |
|
|
Name |
|
Year |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
Total ($) |
Jeffrey H. Smulyan |
|
|
2008 |
|
|
|
70,794 |
|
|
|
759 |
|
|
|
|
|
|
|
1,838 |
|
|
|
|
|
|
|
73,391 |
|
|
|
|
2007 |
|
|
|
49,561 |
|
|
|
646 |
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
52,207 |
|
|
|
Patrick M. Walsh |
|
|
2008 |
|
|
|
83,741 |
|
|
|
24,124 |
|
|
|
403 |
|
|
|
2,000 |
|
|
|
|
|
|
|
110,268 |
|
|
|
|
2007 |
|
|
|
22,301 |
|
|
|
3,735 |
|
|
|
1,306 |
|
|
|
2,000 |
|
|
|
92,000 |
|
|
|
121,342 |
|
|
|
Richard F. Cummings |
|
|
2008 |
|
|
|
12,000 |
|
|
|
74 |
|
|
|
5,000 |
|
|
|
2,000 |
|
|
|
|
|
|
|
19,074 |
|
|
|
|
2007 |
|
|
|
12,000 |
|
|
|
|
|
|
|
5,074 |
|
|
|
2,000 |
|
|
|
272,000 |
|
|
|
291,074 |
|
|
|
Gary L. Kaseff |
|
|
2008 |
|
|
|
12,000 |
|
|
|
74 |
|
|
|
5,000 |
|
|
|
2,000 |
|
|
|
|
|
|
|
19,074 |
|
|
|
|
2007 |
|
|
|
12,000 |
|
|
|
|
|
|
|
5,000 |
|
|
|
2,000 |
|
|
|
173,000 |
|
|
|
192,000 |
|
|
|
Paul W. Fiddick |
|
|
2008 |
|
|
|
4,051 |
|
|
|
60 |
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
6,111 |
|
|
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
18,000 |
|
|
|
20,000 |
|
|
|
|
A |
|
Perquisites and other personal benefits for named executive officers other than Mr. Fiddick includes an automobile allowance. The figures for Mr. Walsh include
relocation expenses, including approximately $8,000 of relocation expenses that were over and above the amount included in Mr. Walshs contract. This additional amount, which was
approved by the Compensation Committee, was reimbursement for unanticipated rent and travel expenses incurred by Mr. Walsh due to a delay in selling his primary residence. The
figures for Messrs. Smulyan, Walsh and Fiddick include the incremental cost to the company of personal use of the companys airplane. From time to time, family members and guests of
the named executives may accompany the executives on business flights on the companys airplane, at no incremental cost to the company. |
|
B |
|
The company paid premiums for life, disability or long-term care insurance for Messrs. Walsh, Cummings and Kaseff. |
|
C |
|
The company paid a special dividend of $4.00 per share on November 22, 2006. The figures shown reflect dividends paid on restricted shares held by the executives that
were not included in the calculation of compensation expense set forth in the Stock Awards column above. |
21
2008 GRANTS OF PLAN-BASED AWARDS TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards: |
|
|
Option Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Number of |
|
|
Exercise or |
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under |
|
|
Shares of |
|
|
Securities |
|
|
Base Price |
|
|
Grant Date Fair |
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards1 |
|
|
Stock or |
|
|
Underlying |
|
|
of Option |
|
|
Value of Stock and |
|
|
|
Grant |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Units2 |
|
|
Options2 |
|
|
Awards |
|
|
Option Awards |
|
Name |
|
Date |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
(#) |
|
|
(#) |
|
|
($/Sh) |
|
|
($) |
|
Jeffrey H. Smulyan |
|
|
3/01/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146,349 |
|
|
|
8.21 |
|
|
|
619,056 |
|
|
|
|
5/12/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,841 |
|
|
|
|
|
|
|
|
|
|
|
339,375 |
|
|
|
|
|
|
|
|
554,313 |
|
|
|
791,875 |
|
|
|
1,187,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick M. Walsh |
|
|
3/01/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,269 |
|
|
|
8.21 |
|
|
|
123,808 |
|
|
|
|
3/01/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,780 |
|
|
|
|
|
|
|
|
|
|
|
72,962 |
|
|
|
|
5/12/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,182 |
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
|
|
|
|
|
98,000 |
|
|
|
140,000 |
|
|
|
210,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard F. Cummings |
|
|
3/01/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,904 |
|
|
|
8.21 |
|
|
|
185,714 |
|
|
|
|
3/01/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,171 |
|
|
|
|
|
|
|
|
|
|
|
109,451 |
|
|
|
|
5/12/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,045 |
|
|
|
|
|
|
|
|
|
|
|
102,450 |
|
|
|
|
|
|
|
|
167,335 |
|
|
|
239,050 |
|
|
|
358,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary L. Kaseff |
|
|
3/01/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,587 |
|
|
|
8.21 |
|
|
|
131,921 |
|
|
|
|
3/01/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,976 |
|
|
|
|
|
|
|
|
|
|
|
91,211 |
|
|
|
|
5/12/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,000 |
|
|
|
|
|
|
|
|
|
|
|
75,900 |
|
|
|
|
|
|
|
|
123,970 |
|
|
|
177,100 |
|
|
|
265,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul W. Fiddick |
|
|
3/01/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,952 |
|
|
|
8.21 |
|
|
|
92,587 |
|
|
|
|
3/01/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,585 |
|
|
|
|
|
|
|
|
|
|
|
54,271 |
|
|
|
|
5/12/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,510 |
|
|
|
|
|
|
|
|
|
|
|
242,583 |
|
|
|
|
|
|
|
|
86,100 |
|
|
|
123,000 |
|
|
|
184,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
These columns show the range of payouts for fiscal year 2008 station (publishing)
operating income performance under the companys 2008 Corporate Incentive Plan. The 2008 Corporate
Incentive Plan is described under the caption 2008 Corporate Incentive Plan in the Compensation
Discussion and Analysis section above. The amounts actually earned for fiscal 2008 (which are shown
in the Summary Compensation Table in the Non-Equity Incentive Plan Compensation column) were $0
for all named executive officers except Mr. Fiddick, who earned $160,583. |
|
2 |
|
These columns show stock and option awards granted under the companys 2004 Equity
Compensation Plan. The 2004 Equity Compensation Plan is described under the caption Equity
Compensation Plan in the Compensation Discussion and Analysis section above. |
22
Employment Agreements
Effective March 1, 2008, we entered into a one-year employment agreement with Mr. Smulyan.
Mr. Smulyans base salary is $905,000. Mr. Smulyans employment agreement will automatically renew
each year following the initial one-year term for additional one-year terms unless either the
company or Mr. Smulyan provides the other with written notice of non-renewal prior to December 31
of the initial or subsequent term, as applicable. Mr. Smulyans base salary upon any annual
renewal will increase at a rate equal to the greater of 3%, the annual percentage increase in the
CPI [All Urban Consumers-U.S Cities Average, all items (1982/84 = 100) as published by the Bureau
of Labor Statistics, U.S. Department of Labor] or such other amount as approved by our Compensation
Committee. Mr. Smulyans annual incentive compensation target is 125% of his base salary and will
be paid, if at all, based upon achievement of certain performance goals to be determined by our
Compensation Committee. The company retains the right to pay any annual incentive compensation in
cash or shares of our Class A common stock. Each year the agreement remains in effect, Mr. Smulyan
is entitled to receive an option to acquire 146,349 shares of our Class A common stock. Mr.
Smulyan will continue to receive an automobile allowance of $24,000 annually and will continue to
be reimbursed for up to $10,000 per year in premiums for life and disability insurance and retains
the right to participate in all of our employee benefit plans for which he is otherwise eligible.
Effective September 4, 2006, we entered into a three-year employment agreement with Mr. Walsh.
Mr. Walshs annual base compensation is $400,000. Mr. Walshs annual incentive compensation
target was $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. Mr. Walsh received an option to acquire 14,634 of our common stock and a grant of 3,000
restricted shares on September 4, 2006. Mr. Walsh received an option to acquire 29,269 shares and a
grant of 8,780 restricted shares on each of March 1, 2007 and March 1, 2008, and will receive
options to acquire the same number of shares and a grant of the same number of restricted shares on
March 1, 2009. Mr. Walsh is also scheduled to receive a completion bonus of 20,000 shares of our
common stock upon his completion of the agreement. Mr. Walsh receives an annual automobile
allowance of $12,000 and is 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. Effective March 1, 2008, we amended the employment agreement of
Mr. Walsh to further enhance the companys retention objectives. In addition to the completion
bonus of 20,000 shares of our Class A common stock for which Mr. Walsh was eligible under his
existing employment agreement, the amendment makes Mr. Walsh eligible for a $200,000 payment if at
the end of the term Mr. Walshs employment agreement has not been terminated (other than for
material breach by the company) and Mr. Walsh has performed his duties under the employment
agreement. The company retains the right to make the $200,000 payment in cash or shares of our
Class A common stock. The amendment also makes or permits certain amendments to the employment
agreement and Mr. Walshs Change of Control Severance Agreement due to Section 409A of the Internal
Revenue Code.
Effective March 1, 2008, we entered into a one-year employment agreement with Mr. Kaseff. Mr.
Kaseffs base salary is $450,000. Mr. Kaseffs employment agreement will automatically renew each
year following the initial one-year term for additional one-year terms unless either the company or
Mr. Kaseff provides the other with written notice of non-renewal prior to December 31 of the
initial or subsequent term, as applicable. Mr. Kaseffs base salary upon any annual renewal will
increase at a rate equal to the greater of 3%, the annual percentage increase in the CPI [All Urban
Consumers-U.S Cities Average, all items (1982/84 = 100) as published by the Bureau of Labor
Statistics, U.S. Department of Labor] or such other amount as approved by our Compensation
Committee. Mr. Kaseffs annual incentive compensation target is 56.22% of his base salary and will
be paid, if at all, based upon achievement of certain performance goals to be determined by our
Compensation Committee. The company retains the right to pay any annual incentive compensation in
cash or shares of our Class A common stock. Each year the agreement remains in effect, Mr. Kaseff
is entitled to receive an option to acquire 36,587 shares of our Class A common stock and a grant
of 10,976 restricted shares of Class A common stock. Mr. Kaseff is also eligible for a completion
bonus payable upon his continued employment for a period through February 28, 2011 in an amount
equal to Mr. Kaseffs average annual base salary over such three-year period. In the event that,
prior to expiration of such three-year term, Mr. Kaseff dies or becomes disabled, the company
terminates Mr. Kaseffs employment other than for Cause (as defined in the agreement) or the
company elects not to renew the employment agreement, Mr. Kaseff will be entitled to a pro-rata
portion of such completion bonus. Mr. Kaseff will continue to receive an annual automobile
allowance of $12,000 and will continue to be reimbursed for up to $5,000 per year in premiums for
life and disability insurance, retains the right to participate in all of our employee benefit
plans for which he is otherwise eligible, and has the right to continued employment on a part-time
basis following the expiration or termination of his employment agreement.
23
Effective March 1, 2008, we entered into a one-year employment agreement with Mr. Cummings.
Mr. Cummings base salary is $495,000. Mr. Cummings employment agreement will automatically renew
each year following the initial one-year term for additional one-year terms unless either the
company or Mr. Cummings provides the other with written notice of non-renewal prior to December 31
of the initial or subsequent term, as applicable. Mr. Cummings base salary upon any annual renewal
will increase at a rate equal to the greater of 3%, the annual percentage increase in the CPI [All
Urban Consumers-U.S Cities Average, all items (1982/84 = 100) as published by the Bureau of Labor
Statistics, U.S. Department of Labor] or such other amount as approved by our Compensation
Committee. Mr. Cummings annual incentive compensation target is 69% of his base salary and will
be paid, if at all, based upon achievement of certain performance goals to be determined by our
Compensation Committee. The company retains the right to pay any annual incentive compensation in
cash or shares of our Class A common stock. Each year the agreement remains in effect, Mr.
Cummings is entitled to receive an option to acquire 43,904 shares of our Class A common stock and
a grant of 13,171 restricted shares of Class A common stock. Mr. Cummings is also eligible for a
completion bonus payable upon his continued employment for a period through February 28, 2011 in an
amount equal to Mr. Cummings average annual base salary over such three-year period. In the event
that, prior to expiration of such three-year term, Mr. Cummings dies or becomes disabled, the
company terminates Mr. Cummings employment other than for Cause (as defined in the agreement) or
the company elects not to renew the employment agreement, Mr. Cummings will be entitled to a
pro-rata portion of such completion bonus. Mr. Cummings will continue to receive an annual
automobile allowance of $12,000 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.
Effective May 31, 2006, we amended the employment agreement of Mr. Fiddick. The term of Mr.
Fiddicks employment was extended for a period of three years from February 28, 2006, to February
28, 2009. As of March 1, 2008, Mr. Fiddicks annual base compensation was $360,000. As of March
1, 2008, Mr. Fiddicks annual incentive compensation target was $210,000. 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 on achievement of certain
performance goals to be determined each year by our Compensation Committee. On March 1, 2008, Mr.
Fiddick received an option to acquire 21,952 shares of our common stock and a grant of 6,585
restricted shares. Mr. Fiddick is also entitled to receive a minimum completion bonus of 10,000
shares of our common stock upon his completion of the agreement. Mr. Fiddick retains the right to
participate in all of our employee benefit plans for which he is otherwise eligible.
24
2008 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
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Option Awards |
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Stock Awards |
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Market |
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Number of |
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Value of |
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Number of |
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Number of |
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Shares or |
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Shares or |
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Securities |
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Securities |
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Units of |
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Units of |
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Underlying |
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Underlying |
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Option |
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Stock That |
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Stock That |
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Unexercised |
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Unexercised |
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Exercise |
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Option |
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Have Not |
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Have Not |
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Options |
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Options1 |
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Price |
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Expiration |
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Vested |
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Vested7 |
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(#) |
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(#) |
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($) |
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Date |
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(#) |
|
($) |
Name |
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Exercisable |
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Unexercisable |
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|
|
|
|
|
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Jeffrey H. Smulyan |
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|
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146,349 |
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8.21 |
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3/01/17 |
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|
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|
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|
|
|
|
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97,567 |
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195,132 |
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11.17 |
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|
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3/01/16 |
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|
|
|
|
|
|
|
|
|
|
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292,699 |
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|
|
|
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|
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12.81 |
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3/01/15 |
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|
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|
|
|
|
|
|
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|
439,049 |
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17.45 |
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3/01/14 |
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|
|
|
|
|
|
|
|
|
|
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1,463,500 |
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|
|
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19.31 |
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10/23/09 |
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|
|
|
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Patrick M. Walsh |
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|
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29,269 |
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8.21 |
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3/01/17 |
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|
|
|
|
|
|
|
|
|
|
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4,878 |
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|
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9,756 |
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8.30 |
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9/04/16 |
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|
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|
|
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|
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8,780 |
2 |
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25,989 |
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|
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|
|
|
|
|
|
|
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|
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|
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3,000 |
3 |
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8,880 |
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20,000 |
4 |
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59,200 |
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|
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Richard F. Cummings |
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43,904 |
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8.21 |
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3/01/17 |
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|
|
|
|
|
|
|
|
|
|
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14,635 |
|
|
|
29,269 |
|
|
|
11.17 |
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|
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3/01/16 |
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|
|
|
|
|
|
|
|
|
|
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43,904 |
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|
|
|
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|
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12.81 |
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3/01/15 |
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|
|
|
|
|
|
|
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73,174 |
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|
|
|
|
|
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17.45 |
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3/01/14 |
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|
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|
|
|
|
|
|
|
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73,174 |
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|
|
|
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11.22 |
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3/04/13 |
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73,174 |
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19.90 |
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3/06/12 |
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73,174 |
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19.82 |
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3/01/11 |
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13,171 |
5 |
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38,986 |
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9000 |
6 |
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26,640 |
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9,000 |
7 |
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26,640 |
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50,000 |
7 |
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148,000 |
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Gary L. Kaseff |
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36,587 |
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8.21 |
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3/01/17 |
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12,196 |
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24,391 |
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11.17 |
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3/01/16 |
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36,587 |
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12.81 |
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3/01/15 |
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|
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73,174 |
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17.45 |
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3/01/14 |
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73,174 |
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|
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11.22 |
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3/04/13 |
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|
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73,174 |
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19.90 |
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3/01/12 |
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58,539 |
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19.82 |
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3/01/11 |
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58,539 |
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24.18 |
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3/01/10 |
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|
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|
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|
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|
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|
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10,976 |
5 |
|
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32,489 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500 |
6 |
|
|
22,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500 |
7 |
|
|
22,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,250 |
7 |
|
|
83,620 |
|
|
|
Paul W. Fiddick |
|
|
|
|
|
|
21,952 |
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|
|
8.21 |
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|
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3/01/17 |
|
|
|
|
|
|
|
|
|
|
|
|
7,318 |
|
|
|
14,634 |
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|
|
11.17 |
|
|
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3/01/16 |
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|
|
|
|
|
|
|
|
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|
38,416 |
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|
|
|
|
|
|
12.81 |
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|
|
3/01/15 |
|
|
|
|
|
|
|
|
|
|
|
|
38,416 |
|
|
|
|
|
|
|
17.45 |
|
|
|
3/01/14 |
|
|
|
|
|
|
|
|
|
|
|
|
10,976 |
|
|
|
|
|
|
|
11.22 |
|
|
|
3/04/13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,585 |
5 |
|
|
19,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,500 |
6 |
|
|
13,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
8 |
|
|
29,600 |
|
|
|
|
1 |
|
Options expiring 3/01/17 will become exercisable 1/3 on March 1, 2009, 1/3 on March 1,
2010, and 1/3 on March 1, 2011. Options expiring 3/01/16 became exercisable 1/3 on March 1,
2008, and will become exercisable 1/3 on March 1, 2009, and 1/3 on March 1, 2010. Mr. Walshs
options expiring 9/04/16 became exercisable 1/3 on September 4, 2007, and will become
exercisable 1/3 on September 4, 2008 and 1/3 on September 4, 2009. |
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2 |
|
Shares vest March 1, 2017. |
|
3 |
|
Shares vest September 4, 2009. |
|
4 |
|
Shares vest September 3, 2009. |
|
5 |
|
Shares vest March 1, 2010. |
25
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|
|
6 |
|
Shares vest March 1, 2009. |
|
7 |
|
Shares vested March 1, 2008 |
|
8 |
|
Shares vest on February 28, 2009 |
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9 |
|
Calculated based on the $2.96 per share closing market price of our shares on February
29, 2008. |
None of the named executive officers exercised options or realized value upon the vesting of a
stock award in the year ended February 29, 2008.
Potential Payments upon Termination or Change in Control
The employment agreements we have entered into with Messrs. Smulyan, Cummings, Walsh, Kaseff
and Fiddick provide for certain payments and benefits to the named executive officer in the event
that executive officer is terminated by the company without cause, and/or terminates his own
employment with good reason. Mr. Smulyan is also entitled to certain payments upon his death or
disability.
We have also entered into a Change in Control Severance Agreement with each of the executives
named in the preceding tables. Each such agreement provides that if the executives employment is
terminated by the company within two years after a change in control of the company (or, in certain
instances, in anticipation of a change in control), other than for cause, or is terminated by the
executive for good reason, the executive is entitled to (1) a payment equal to the 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 (one
and one-half times for Mr. Fiddick); (3) continued insurance benefits for three years; and (4) if
the payments to the executive exceed certain limits, additional tax gross up payments to
compensate the executive for the excise tax imposed by section 4999 of the Internal Revenue Code.
In each case, the executive is obligated not to voluntarily leave employment with Emmis during the
pendency of (and prior to the consummation or abandonment of) a change in control other than as a
result of disability, retirement or an event that would constitute good reason if the
change-of-control had occurred. In addition, under our 2004 Equity Compensation Plan, all
outstanding restricted shares held by the executive vest immediately upon a change in control.
Under the Change in Control Severance Agreement, change in control, cause and good reason are
defined as follows:
Change in Control. A change in control of the company occurs if:
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|
|
any individual, entity or group other than Mr. Smulyan or his affiliates becomes the
beneficial owner of 25% or more of the companys outstanding shares, or of the voting power
of the outstanding shares; |
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|
|
the current members of the board of directors of the company (or persons approved by
two-thirds of the current directors) cease to constitute at least a majority of the board; |
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the company is a party to a merger that results in less than 60% of the outstanding
shares or voting power of the surviving corporation being held by persons who were not our
shareholders immediately prior to the merger; |
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our shareholders approve a liquidation or dissolution of the company; or |
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any other event is determined by our board to constitute a change in control. |
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Cause. Cause generally means: |
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the willful and continual failure of the executive to perform substantially his duties;
or |
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the willful engaging in illegal conduct or gross misconduct which is materially
injurious to the company. |
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Good Reason. Good Reason generally means: |
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any materially adverse change in the duties or responsibilities of the executive; |
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a material breach by the company of the executives employment agreement or Change in
Control Severance Agreement; |
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a reduction in the executives annual base salary or target bonus; |
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any requirement that the executive relocate more than 35 miles from the office where the
executive works; |
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the failure by the company to continue any material benefit plan or the amendment of any
plan that would reduce or eliminate the benefits available to the executive; |
26
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any refusal by the company to allow the executive to engage in activities that were
permitted to the executive immediately before the change in control; |
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any purported termination of the executive without specified written notice; |
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the failure by the company to assure the assumption by any successor to the company of
the companys obligations under the Change in Control Severance Agreement; and |
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except with respect to Mr. Fiddick, voluntary termination by the executive during a
30-day period commencing one year after the occurrence of a change in control. |
We have set forth below, for each named executive officer, a description of the payments they
would have received had the events described below occurred on February 29, 2008, the last day of
our most recently completed fiscal year.
Jeffrey H. Smulyan. If Mr. Smulyan had been terminated by the company without cause, or had
terminated his employment for good reason, he would have been entitled to a lump sum payment of
$7,112,053. The payment would have been without regard to whether a change in control had occurred.
In addition, Mr. Smulyan would have been entitled to continued health and welfare benefits for
three years, having an estimated value of approximately $40,391, and outplacement services with an
estimated value of approximately $54,000.
On Mr. Smulyans death, his estate would have been entitled to a lump sum payment of $905,000.
On termination of his employment due to disability, Mr. Smulyan would have been entitled to receive
an amount equal to 75% of his most recent fiscal year base salary for a period of five years,
payable in accordance with the companys regular payroll procedures. The aggregate amount of the
disability payments would have been $3,393,750.
Patrick M. Walsh. If Mr. Walsh had terminated his employment for good reason in the absence
of a change in control, he would have been entitled to a lump sum payment of $200,000. He also
would be entitled to receive an amount equal to his most recent fiscal year base salary for a
period of one year, payable in accordance with the companys regular payroll procedures. The
aggregate amount of such payments would have been $600,000. Further, Mr. Walsh would have been
entitled to continued health and welfare benefits for one year having a value of approximately
$12,203. Unvested restricted shares held by Mr. Walsh having an aggregate fair market value of
approximately $94,069 would have vested immediately.
If Mr. Walsh had been terminated by the company without cause or terminated his employment for
good reason following a change in control, he would have been entitled to a lump sum payment of
$1,895,648. In addition, Mr. Walsh would have been entitled to continued health and welfare
benefits for three years, having an estimated value of approximately $40,391, and outplacement
services with an estimated value of approximately $54,000. Unvested restricted shares held by Mr.
Walsh having an aggregate fair market value of approximately $94,069 would have vested immediately
upon a change in control without regard to whether Mr. Walshs employment was terminated.
Richard F. Cummings. Following a change in control, if Mr. Cummings had been terminated by
the company without cause or terminated his employment for good reason, he would have been entitled
to a lump sum payment of $2,843,446. In addition, Mr. Cummings would have been entitled to
continued health and welfare benefits for three years, having an estimated value of approximately
$40,391, and outplacement services with an estimated value of approximately $54,000. Unvested
restricted shares held by Mr. Cummings having an aggregate fair market value of approximately
$240,266 would have vested immediately upon a change in control without regard to whether Mr.
Cummings employment was terminated.
Gary L. Kaseff. If the company had terminated Mr. Kaseffs employment without cause or Mr.
Kaseff had terminated his employment for good reason in the absence of a change in control, he
would have been entitled to a lump sum payment of $246,000. He also would be entitled to receive an
amount equal to 20% of his most recent fiscal year base salary, automobile allowance and insurance
payments for a period of five years, payable in accordance with the companys regular payroll
procedures. The aggregate amount of such payments would have been $467,000. Unvested restricted
shares held by Mr. Kaseff having an aggregate fair market value of approximately $160,509 would
have vested immediately.
Following a change in control, if Mr. Kaseff had been terminated by the company without cause
or terminated his employment for good reason, he would have been entitled to a lump sum payment of
$2,333,317. In addition, Mr. Kaseff would have been entitled to continued health and welfare
benefits for three years, having an estimated value of approximately $40,391, and outplacement
services with an estimated value of approximately
27
$54,000. Unvested restricted shares held by Mr. Kaseff having an aggregate fair market value
of approximately $160,509 would have vested immediately upon a change in control without regard to
whether Mr. Kaseffs employment was terminated.
Paul W. Fiddick. Following a change in control, if Mr. Fiddick had been terminated by the
company without cause or had terminated his employment for good reason, he would have been entitled
to a lump sum payment of $1,093,875. In addition, Mr. Fiddick would have been entitled to
continued health and welfare benefits for three years, having an estimated value of approximately
$40,391, and outplacement services with an estimated value of approximately $54,000. Unvested
restricted shares held by Mr. Fiddick having an aggregate fair market value of approximately
$62,412 would have vested immediately upon a change in control without regard to whether Mr.
Fiddicks employment was terminated.
In calculating the amounts shown above for each named executive, we have made the following
assumptions:
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Excise Tax Gross Up. We have assumed a combined 40% rate of federal and state
income taxes and Medicare tax, and a 20% excise tax under Section 4999 of the
Internal Revenue Code. We also assumed that incentive bonuses for fiscal 2007 were
fully earned and payable. Based on those assumptions, no executive would have
received an excess parachute payment subject to the excise tax. |
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Health and Welfare Benefits. We have assumed our current cost of health
benefits will increase by 10% per year, and our current cost of life insurance
will increase at a rate of 10% per year. |
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Outplacement Benefits. We have assumed our current cost of outplacement
services will not increase. |
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Accelerated Vesting of Options and Restricted Shares. The value of restricted
shares reflects the $2.96 per share closing market price of our shares on February
29, 2008. Because all of our outstanding options have exercise prices greater
than $2.96 per share, we have assumed that the value of options, the vesting of
which is accelerated, is zero. |
When the companys board of directors determines that it is in the best interest of the
company, the company may negotiate severance arrangements with a departing executive in addition to
or in place of the arrangements described above. Circumstances under which the board may negotiate
additional or different severance arrangements include but are not limited to:
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to avoid or settle litigation with the executive; |
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to reduce an adverse financial effect on the company; |
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to reduce adverse tax consequences on the executive; or |
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to reward meritorious service by the executive. |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Compensation Committee members are Peter A. Lund, Susan B. Bayh, 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.
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
28
fiscal year all officers, directors and greater-than-10%
shareholders complied with the filing requirements of Section 16(a).
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,
2009, subject to ratification by the holders of our common stock. Our financial statements for the
fiscal year ended February 29, 2008 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 2008 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.
29
MATTERS RELATING TO INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Fees Paid to Independent Registered Public Accountants
The following table sets forth the fees (including cost reimbursements) paid to Ernst & Young
LLP for the fiscal years ended February 29, 2008 and February 28, 2007, for various categories of
professional services they performed as our independent registered public accountants.
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Year ended February 28 (29), |
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894,011 |
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1,340,514 |
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50,500 |
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30,000 |
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Tax Compliance and Tax Return
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59,571 |
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131,000 |
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Total Tax Fees |
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59,571 |
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131,000 |
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1,501,514 |
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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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Includes benefit plan audits, internal control review, audit-related
consultation services for potential corporate transactions and other audit-related
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Engagement of the Independent Registered Public Accountants and Approval of Services
During the fiscal years ended February 29, 2008 and February 28, 2007, 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 (or in certain instances, the chairman 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 29, 2008, under the de minimis exception in Rule
2-01(c) (7)(i)(C) of Regulation S-X.
SHAREHOLDER PROPOSALS
Any of our shareholders wishing to have a proposal considered for inclusion in our 2009 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 16, 2009 (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 our 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, with the assistance of the companys
secretary, will determine whether such proposals meet applicable criteria for inclusion in our 2009
proxy solicitation materials or consideration at the 2009 annual meeting. In addition, we retain
discretion to vote proxies on matters of which we are not properly notified at our principal
executive offices on or before the close of business on February 16, 2009, and also retain that
authority under certain other circumstances.
ANNUAL REPORT
A copy of our Annual Report on Form 10-K for the year ended February 29, 2008, was sent to all
of our shareholders of record as of May 14, 2008, and is available in the Investors section of our
website (www.emmis.com). The Annual Report is not to be considered as proxy solicitation material.
30
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 Audit Committee 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 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 account holders 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- 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 our
transfer agent, American Stock Transfer & Trust Company, Operations Center, 6201 15th
Avenue, Brooklyn, New York 11219.
31
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.
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 (the "Proxies"), 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 July 15, 2008, at 11:00 a.m., and at any adjournment thereof.
(Continued and to be signed on the reverse side.)
ANNUAL MEETING OF SHAREHOLDERS OF
EMMIS COMMUNICATIONS CORPORATION
July 15, 2008
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
ê
Please detach along perforated line and mail in the envelope provided.
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n 20330000000000000000 9 |
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071508 |
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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ELECTION OF DIRECTORS FOR A TERM OF THREE YEARS. |
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NOMINEES: |
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FOR ALL NOMINEES
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Richard A. Leventhal
Peter A. Lund* |
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WITHHOLD AUTHORITY FOR ALL NOMINEES |
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Lawrence B. Sorrel |
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FOR ALL EXCEPT
(See instructions below)
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INSTRUCTIONS:
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To withhold authority to vote for
any individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here: |
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To
change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note
that changes to the registered name(s) on the account may not be
submitted via this method. |
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FOR |
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PROPOSAL TO
RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS. |
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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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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.
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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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ELECTRONIC ACCESS TO FUTURE DOCUMENTS |
To consent to access future shareholder communications released after July 15, 2008 over the Internet as described above and in the proxy statement, please visit http://www.amstock.com. Click on Shareholder Account Access to enroll. Please enter your account number and tax identification number to log in, then select Receive Company Mailings via E-Mail and provide your e-mail address. |
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Signature of Shareholder |
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Date: |
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Signature of Shareholder |
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Please sign exactly as your name or
names appear on this Proxy. When shares are held jointly, each holder
should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person. |
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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 J. Scott Enright, attorney-in-fact and proxy, with full power of substitution (the Proxy),
to vote as designated below all shares of Class B 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 July 15, 2008, at 11:00 a.m., and at any adjournment thereof.
(Continued
and to be signed on the reverse side.)
ANNUAL
MEETING OF SHAREHOLDERS OF
EMMIS COMMUNICATIONS CORPORATION
July 15, 2008
Please
sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
ê
Please detach along perforated line and mail in the envelope provided.
ê
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n 20230000000000000000 0 |
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071508 |
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
1. |
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ELECTION OF DIRECTORS FOR A TERM OF THREE YEARS. |
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NOMINEE: |
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FOR ALL NOMINEES
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Richard A. Leventhal
Lawrence B. Sorrel |
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WITHHOLD AUTHORITY FOR ALL NOMINEES |
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FOR ALL EXCEPT
(See instructions below)
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INSTRUCTIONS:
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To withhold authority to vote for
any individual nominee(s), mark FOR ALL EXCEPT and
fill in the circle next to each nominee you wish to withhold, as
shown here: = |
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. |
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FOR |
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PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS. |
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In his discretion, the Proxy is authorized to vote upon such other business as may properly come before the meeting. |
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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.
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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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ELECTRONIC ACCESS TO FUTURE DOCUMENTS
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To consent to access future shareholder communications released after July 15, 2008 over the Internet as described above and in the proxy statement, please visit http://www.amstock.com. Click on Shareholder Account Access to enroll. Please enter your account number and tax identification number to log in, then select Receive Company Mailings via E-Mail and provide your e-mail address. |
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Signature of Shareholder |
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Signature of Shareholder |
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
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