Upon a change in control, all outstanding equity awards held by the NEOs will vest, with the options remaining exercisable for the remainder of the original terms. A change in control generally means (i) the acquisition of a majority of the Company’s voting common shares by someone other than The Edward W. Scripps Trust or a party to the Scripps Family Agreement; (ii) the disposition of assets accounting for 90 percent90% or more of the Company’s revenues, unless the Trust or the parties to the Scripps Family Agreement have a direct or indirect controlling interest in the acquiring entity,entity; or (iii) with respect to Mr. Lowe only, a change in the membership of the Company’s boardBoard of directors,Directors, such that the current incumbents and their approved successors no longer constitute a majority.
DIRECTOR COMPENSATION
The following table sets forth information regarding the compensation earned in 20082009 by our non-employee directors for services provided to the Company commencing July 1, 2008, the effective date of the spin-off transaction:Company:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fees Earned
| | | | | | | | | Fees Earned
| | | | | | |
| | or Paid in
| | Option
| | All Other
| | | | | or Paid in
| | Option
| | All Other
| | |
| | Cash
| | Awards
| | Compensation
| | | | | Cash
| | Awards
| | Compensation
| | |
Name | | ($) | | ($)(1) | | ($)(2) | | Total ($) | | | ($) | | ($)(1) | | ($)(2) | | Total ($) |
|
John H. Burlingame | | | 31,000 | | | | 42,300 | | | | 3,000 | | | | 76,300 | | | | 76,000 | | | | 94,396 | | | | 5,000 | | | | 175,396 | |
Michael Costa | | | | 72,056 | | | | 91,797 | | | | 5,000 | | | | 168,853 | |
David A. Galloway | | | 32,000 | | | | 32,572 | | | | 0 | | | | 64,572 | | | | 76,000 | | | | 93,882 | | | | | | | 169,882 | |
Jarl Mohn | | | 29,000 | | | | 32,572 | | | | 0 | | | | 61,572 | | | | 77,500 | | | | 96,968 | | | | | | | 174,468 | |
Nicholas B. Paumgarten | | | 27,000 | | | | 32,572 | | | | 0 | | | | 59,572 | | | | 63,500 | | | | 96,968 | | | | | | | 160,468 | |
Mary Peirce | | | 27,000 | | | | 42,300 | | | | 0 | | | | 69,300 | | | | 66,000 | | | | 91,797 | | | | | | | 157,797 | |
Dale Pond | | | 30,000 | | | | 42,300 | | | | 0 | | | | 72,300 | | | | 77,500 | | | | 91,797 | | | | | | | 169,297 | |
Jeffrey Sagansky | | | 32,000 | | | | 32,572 | | | | 0 | | | | 64,572 | | | | 86,000 | | | | 94,933 | | | | | | | 180,933 | |
Nackey E. Scagliotti | | | 28,500 | | | | 42,300 | | | | 0 | | | | 70,800 | | | | 69,000 | | | | 94,396 | | | | | | | 163,396 | |
Ronald W. Tysoe | | | 38,500 | | | | 32,572 | | | | 0 | | | | 71,072 | | | | 104,000 | | | | 98,357 | | | | 5,000 | | | | 207,357 | |
| | |
(1) | | RepresentsReflects the expense recognizedaggregate grant date fair value of the stock options granted our non-employee directors in the Company’s financial statements for 2008 related to stock option awards.2009. The expenseaggregate grant date fair value was determined in accordance with FAS 123(R).FASB ASC Topic 718. See footnote 21Note 35 of the 2008Consolidated Financial Statements contained in our Annual Report for an explanation of the assumptions usedmade in valuing these awards. Also includes the incremental fair value recognized in the valuation of these awards. The grant date fair value ofexchange offer with respect to each stock option granted to Mr. Burlingame, Ms. Peirce, Mr. Pond and Ms. Scagliotti in 2008 was $8.46.director. |
|
(2) | | Represents matchingMatching gift program charitable contributions made on behalf of the directors by the Scripps Howard Foundation.contributions. |
| | | | | | | | |
| | Stock Options
| | Incremental
|
| | Grant Date
| | Value -
|
Name | | Fair Value | | Exchange Offer |
|
Mr. Burlingame | | | 91,797 | | | | 2,599 | |
Mr. Costa | | | 91,797 | | | | 0 | |
Mr. Galloway | | | 91,797 | | | | 2,085 | |
Mr. Mohn | | | 91,797 | | | | 5,171 | |
Mr. Paumgarten | | | 91,797 | | | | 5,171 | |
Ms. Peirce | | | 91,797 | | | | 0 | |
Mr. Pond | | | 91,797 | | | | 0 | |
Mr. Sagansky | | | 91,797 | | | | 3,136 | |
Ms. Scagliotti | | | 91,797 | | | | 2,599 | |
Mr. Tysoe | | | 91,797 | | | | 6,560 | |
Description of Director Compensation Program
The Company’s director compensation program is designed to enhance its ability to attract and retain highly qualified directors and to align their interests with the long-term interests of its shareholders. The program includes a cash component, which is designed to compensate non-employee directors for their service on the board of directors and an equity component, which is designed to align the interests of non-employee directors and shareholders. The Company also provides certain other benefits to non-employee directors, which are described below. Directors who are employees of the company receive no additional compensation for their service on the board of directors.board.
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Cash Compensation
Each non-employee director is entitled to receive an annual cash retainer of $40,000. Committee chairs also receive an annual retainer as described in the table below. The retainers are paid in equal quarterly installments.
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Each non-employee director is also entitled to receive a fee for each board of directors meeting and committee meeting attended, as follows:
| | | | | | | | |
Meeting Fees | | | | | | | |
Board of Directors | | $ | 2,500 | | |
Board | | | $ | 2,500 | |
Executive, Compensation and Nominating and Governance Committees | | $ | 2,000 | | | $ | 2,000 | |
Audit Committee | | $ | 2,500 | | | $ | 2,500 | |
Annual Chair Fees | | | | | | | |
Executive Committee | | $ | 3,000 | | | $ | 3,000 | |
Audit Committee | | $ | 9,000 | | | $ | 9,000 | |
Compensation Committee | | $ | 6,000 | | | $ | 6,000 | |
Nominating and Governance Committee | | $ | 3,000 | | | $ | 3,000 | |
Pricing Committee | | | $ | 2,500 | |
Equity Compensation
In June 2008Each non-employee directors who were appointed by EWS priordirector is entitled to the spin-off receivedreceive a nonqualified stock option award to purchase 10,000 shares atgrant with a price equal to the fair markettarget value of the shares on the date of grant. The stock options have a term of ten years and are exercisable on the anniversary of the date of grant. They may be forfeited only upon removal from the board of directors for cause.$91,800.
In connection with the spin-off, the stock options held by non-employee directors generally were substituted for an option to purchase shares of the Company’s Class A common stock. However, stock options held by Mr. Burlingame and Ms. Scagliotti who serve on the Company’s board of directors and the EWS board of directors were treated as follows: (i) one half of the options were substituted for an option to purchase shares of the Company’s Class A common stock; (ii) the other one-half of the options were split 80 percent — 20 percent between Company stock options and EWS stock options. In each case, the number of shares underlying the options, and the exercise price of the options, were adjusted to preserve the intrinsic value of the awards.
In July 2008, the board of directors granted a nonqualified stock option award to purchase 5,000 shares at a price equal to the fair market value of the shares on the date of grant to new directors Mr. Pond and Ms. Peirce. This same amount was also granted to both Mr. Burlingame and Ms. Scagliotti, who serve on the Company’s board of directors and the EWS board of directors.
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The following table provides the number of unexercisable stock options and restricted shares that had not been exercised and remained outstanding as of December 31, 2008. The table reflects the equitable adjustments to the number and type of shares and the exercise price that occurred in connection with the spin-off.2009 for each director. The stock options are exercisable one year from the date of grant, but may be forfeited upon removal from the board of directors for cause. The restricted shares vest 50% on June 26, 2010 and 50% on June 26, 2011.
| | | | |
| | Aggregate
| |
| | Number of
| |
| | Company Shares
| |
| | Underlying Stock
| |
| | Options Awards
| |
Name
| | (#)(1) | |
|
Mr. Burlingame | | | 77,828 | |
Mr. Galloway | | | 69,615 | |
Mr. Mohn | | | 74,970 | |
Mr. Paumgarten | | | 100,674 | |
Ms. Peirce | | | 5,000 | |
Mr. Pond | | | 5,000 | |
Mr. Sagansky | | | 58,905 | |
Ms. Scagliotti | | | 91,322 | |
Mr. Tysoe | | | 107,100 | |
| | | | | | | | |
| | Aggregate
| | |
| | Number of
| | Aggregate
|
| | Company Shares
| | Number of
|
| | Underlying Stock
| | Unvested Stock
|
| | Options Award
| | Awards
|
Name | | (#) | | (#)(1) |
|
Mr. Burlingame | | | 19,926 | | | | 8,872 | |
Mr. Costa | | | 14,571 | | | | 0 | |
Mr. Galloway | | | 14,571 | | | | 13,978 | |
Mr. Mohn | | | 14,571 | | | | 15,237 | |
Mr. Paumgarten | | | 78,831 | | | | 6,261 | |
Ms . Peirce | | | 14,571 | | | | 1,253 | |
Mr. Pond | | | 14,571 | | | | 1,253 | |
Mr. Sagansky | | | 14,571 | | | | 11,755 | |
Ms. Scagliotti | | | 25,281 | | | | 8,872 | |
Mr. Tysoe | | | 25,281 | | | | 19,785 | |
| | |
(1) | | As a resultRepresents the number of restricted shares each director received as part of the adjustments to the stock options in connection with the spin-off, Mr. Burlingame still holds stock options covering 56,332 shares of EWS and Ms. Scagliotti still holds stock options covering 62,903 shares of EWS. These options are not reflected in the table above.option exchange program. |
Other Benefits
In addition to the above compensation, the Scripps Howard Foundation, an affiliate of EWS, matched, on adollar-for-dollar basis up to $3,000 annually, charitable contributions made by non-employee directors to qualifying organizations. This program was also available to all of the Company’s employees.
In 2009, the Company, through its matching gift program, matches, on adollar-for-dollar basis up to $5,000$3,000 annually, charitable contributions made by non-employee directors to qualifying organizations. This program is also available to all of the Company’s employees.
Deferred Compensation and Stock Plan for Directors
A non-employee director may elect to defer payment of a designated percentage of the cash compensation received as a director under the Company’s Deferred Compensation and Stock Plan for Directors. The director may allocate the deferrals between a phantom stock account that credits earnings including dividends, based on Class A Common shares,Shares, or to a fixed income account that credits interest based on the twelve month average of the10-year treasury rate (as of November of each year), plus 1 percent.1%. The deferred amounts (as adjusted for earnings, interest and
38
losses) are paid to the director at the time he or she ceases to serve as a director or upon a date predetermined by the director, either in a lump sum or annual installments over a specified number of years (not to exceed 15) as elected by the director. Payments generally are made in the form of cash, except that the director may elect to receive all or a portion of the amounts credited to his or her phantom stock account in the form of Class A Common shares.Shares.
PROPOSAL 2
Approval of Amended and Restated
2008 Long-Term Incentive Plan
Introduction
Upon recommendation of the compensation committee, the board of directors has amended and restated the Scripps Networks Interactive, Inc. 2008 Long-Term Incentive Plan, as amended (the “Amended Plan”) to, among other things, (i) revise the limits on awards that can be granted to any participant during any calendar year, (ii) enhance our ability to recover equity awards if a participant engages in certain misconduct, (iii) revise the share counting procedures to be consistent with best practices, and (iv) expand the types of awards that may be granted under the plan to specifically include performance shares and other share-based awards.
Approval of the Amended Plan to make the changes to the plan described above requires the affirmative vote of the majority of the Common Voting Shares present in person or by proxy at the annual shareholder meeting and entitled to vote on this proposal. In the event the shareholders fail to approve the Amended Plan, the plan will continue in operation pursuant to its terms without change.
Background
Our board of directors believes that we must offer a competitive equity incentive program if we are to continue to successfully attract and retain the best possible candidates for positions of responsibility within our company. We expect that the Amended Plan will continue to be an important factor in attracting, retaining and rewarding the high caliber employees and directors essential to our success, and in motivating these individuals to strive to enhance our growth and profitability. The Amended Plan provides for the grant of a full range of equity and cash-based awards, including incentive stock options (or “ISOs”), nonqualified stock options, stock appreciation rights (or “SARs”), restricted shares, restricted share units, performance units, performance shares, dividend equivalents and other awards relating to our Class A Common Shares.
Your approval of the Amended Plan will permit us to structure incentive compensation that preserves our tax deductions under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). We refer to these awards as qualified performance-based awards. Section 162(m) provides that a public company cannot take a federal income tax deduction for compensation paid to any “covered employee” to the extent the compensation exceeds $1 million in any tax year. A “covered employee” is any employee who on the last day of the tax year is either (i) the Chief Executive Officer or (ii) among the other three highest compensated executive officers (other than the Chief Financial Officer). This deduction limitation does not, however, apply to certain performance-based compensation, including stock options and other performance-based awards granted under a plan approved by shareholders. Pursuant to a special transition rule applicable to spin-off transactions, in order for awards granted after the 2010 annual meeting to qualify for the performance-based compensation exception, our shareholders must approve the material terms of the plan. To that end, your approval of the Amended Plan also will constitute approval of the performance objectives upon which qualified performance-based awards may be based (as further described below under the heading “Performance Objectives”), the annual maximum limits per individual (as further described below under the heading “Individual Limits”), and the eligible employees (as further described below under the heading “Eligibility”).
The complete text of the Amended Plan is attached as Exhibit A to this proxy statement. The following summary of the plan does not purport to be complete and is qualified in its entirety by reference to Exhibit A.
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PROPOSAL 2
Approval of Offer to Exchange Certain Outstanding Stock
Options held by Employees and Directors for Restricted
Shares to be Issued Under the Company’s 2008 Long-Term Incentive Plan
SummaryAmended Plan Limits
On February 18, 2009, the compensation committee approved and recommended to the boardThe maximum number of directors, and on February 19, 2009, the board of directors approved, subject to shareholder approval, a program (the “Exchange Program”) that will permit current employees and directors of the Company to exchange certain outstanding stock options with exercise prices substantially above the current market price of the Company’sour Class A Common Shares that may be issued or transferred with respect to awards under the amended plan is 19,000,000, which may include authorized but unissued shares, treasury shares, or a combination of the foregoing. Shares covering awards that terminate or are forfeited will again be available for issuance under the amended plan, and upon payment in cash of the benefit provided by any award granted under the amended plan, any shares that were covered by that award will be available for issue or transfer under the amended plan. Shares surrendered for the payment of the exercise price under stock options, repurchased by us with option proceeds, or withheld for taxes upon exercise or vesting of an award, will not again be available for issuance under the amended plan. In addition, when a lesserSAR is exercised and settled in shares, all of the shares underlying the SAR will be counted against the amended plan limit regardless of the number of restrictedshares used to settle the SAR.
In order to comply with the rules applicable to ISOs, the amended plan provides that the aggregate number of shares actually issued or transferred upon the exercise of ISOs may not exceed 5,000,000 shares.
Individual Limits
The Amended Plan imposes various individualsub-limits on the number of our Class A Common Shares tothat may be issued or transferred under the Company’s 2008 Long-Term Incentive Plan, that areAmended Plan. In order to comply with the exemption from Section 162(m) of the same value asInternal Revenue Code relating to performance-based compensation, the “out ofAmended Plan imposes the money” options.following additional individualsub-limits on awards intended to satisfy that exemption:
| | |
| • | the maximum aggregate number of shares that may be subject to stock options or SARs granted in any calendar year to any one participant will be 1,000,000 shares, |
|
| • | the maximum aggregate number of shares of restricted shares and shares subject to restricted share units, performance shares and other stock-based awards granted in any calendar year to any one participant will be 750,000 shares, |
|
| • | the maximum aggregate compensation that can be paid pursuant to performance units or other cash-based awards granted in any calendar year to any one participant will be $5,000,000 or a number of shares having an aggregate fair market value not in excess of such amount, and |
|
| • | the maximum dividend equivalents that may be paid in any calendar year to any one participant will be $500,000. |
Administration
The Amended Plan will be administered by our compensation committee or such other committee as our board of directors selects consisting of two or more directors, each of whom is intended to be a “non-employee director” within the meaning ofRule 16b-3 of the Securities Exchange Act of 1934, as amended, an “outside director” under regulations promulgated under Section 162(m) of the Internal Revenue Code, and an “independent director” under the NYSE rules. The compensation committee will have full and final authority in its discretion to take all actions determined by the committee to be necessary in the administration of the Amended Plan.
Our board of directors may reserve to itself any or all of the authority and responsibility of the compensation committee under the Amended Plan or may act as administrator of the Amended Plan for any and all purposes. In addition, our board of directors or compensation committee may expressly delegate to a special committee, consisting of one or more directors who are also our officers, some or all of the compensation committee’s authority, within specified parameters, to grant awards to eligible participants who, at the time of grant, are not officers.
Eligibility
The Amended Plan provides that awards may be granted to our employees (including employees of our subsidiaries) and non-employee directors, except that ISOs may be granted only to employees. Approximately 10 non-employee directors and approximately 190 employees would currently be eligible to participate in the Amended Plan.
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Duration and Modification
The Amended Plan will terminate on June 30, 2018, or such earlier date as our board of directors may determine. The Amended Plan will remain in effect for outstanding awards until no awards remain outstanding. The board of directors believes thatmay amend, suspend or terminate the Exchange ProgramAmended Plan at any time but shareholder approval is required for any amendment to the extent necessary to retain and motivate employees and directors whose energy and commitment will be critical tocomply with the future successNYSE rules or applicable laws. Currently, the NYSE rules would require shareholder approval for a material revision of the Company. In addition, because participantsAmended Plan, which would generally include a material increase in the Exchange Offer will receive fewer restricted shares than the number of Class A Common Shares covered by the stock options they surrender, the Exchange Program will reduce the Company’s equity award overhang while increasing the number of Class A Common Sharesshares available for future awards under the Company’s Long-Term Incentive Plan.
If implemented, the Exchange Program will provideplan, a one-time opportunity to approximately 254 current employees (including executive officers) and directorsmaterial extension of the Company to elect to surrender outstanding stock options having exercise prices of $30.00 or more in exchange for a lesser number of newly issued restricted shares vesting over two years, subject to accelerated vesting upon the occurrence of certain events, including death or disabilityterm of the holder or a change in controlplan, an expansion of the Company. The outstanding stock optionsclass of participants eligible for the Exchange Program have a weighted average exercise price approximately 2.00 times the current market value of the Class A Common Shares. The Company currently estimates that an employee or director electing to participate in the Exchange Program would receive, on average, one new restricted share for every nine shares underlyingplan, an expansion of the types of awards provided under the plan, a material change in the method of determining the exercise price of stock options, surrendered underand the Exchange Program.deletion or limitation of the provision of the plan prohibiting re-pricing of stock options and SARs. An amendment of the Amended Plan or any award may not adversely affect any outstanding award without the consent of the affected participant, provided that the Committee may amend the plan or any award without a participant’s consent to the extent the Committee deems necessary to comply with applicable law.
Background and Reasons for the Exchange ProgramStock Options
In connection withOur compensation committee may, at any time and from time-to-time, grant stock options to participants in such number as the July 1, 2008 spin-offcommittee determines in its discretion. Stock options may consist of ISOs, non-qualified stock options or any combinations of the Company from EWS, outstanding stockforegoing awards.
Stock options held by employees and directors ofprovide the Company were converted into optionsright to purchase Class A Common Shares at a price not less than their fair market value on the date of grant (which date may not be earlier than the Company underdate that the Company’s Long-Term Incentive Plan.compensation committee takes action with respect to such grants). The outstandingfair market value of our common stock as reported on the NYSE on March 4, 2010 was $39.43 per share. No stock options were granted for the purpose of aligning the interests of the employees and directors with those of the shareholders, since the value of the options increases when the stock price increases over the option exercise price. The stock options also were intended to help retain employees and directors, since they generally vested over threemay be exercised more than 10 years from the date of grant.
The exercise pricesEach grant must specify (i) the period of continuous employment that is necessary (or the Company’s outstandingperformance objectives that must be achieved) before the stock options range from $21.10 per sharebecome exercisable, and (ii) the extent to $50.38 per share, with a weighted averagewhich the option holder will have the right to exercise the stock options following termination. Our compensation committee will determine the terms in its discretion, which terms need not be uniform among all option holders.
The option price is payable at the time of $40.02 per share. Since October 1, 2008, the price of theexercise (i) in cash, (ii) by tendering unrestricted Class A Common Shares has averaged $25.51 per share. Asthat are already owned by the option holder and have a result,value at the outstandingtime of exercise equal to the option price, (iii) with any other legal consideration that our compensation committee may deem appropriate, or (iv) by any combination of the foregoing methods of payment. Any grant of stock options largely have lostmay provide for deferred payment of the option price from the proceeds of sale through a broker on the date of exercise of some or all of the shares (although, in the case of executive officers and directors, this payment method may be affected by the restrictions on personal loans to executive officers provided by the Sarbanes-Oxley Act of 2002).
SARs
Our compensation committee may, at any meaningful incentivetime and from time-to-time, grant SARs to participants in such number as the committee determines in its discretion. SARs can be tandem (granted with stock options to provide an alternative to exercise of the option) or retention value.free-standing.
The Exchange Program is intendedgrant price for each freestanding SAR will be determined by the committee, in its discretion, and will be at least equal to address the incentive and retention issues by giving employees and directorsfair market value of a share on the opportunitydate of grant. The grant price of tandem SARs will be equal to surrender their substantially “outthe exercise price of the money” options forrelated stock option. No SAR may be exercised more than 10 years from the date of grant.
Upon the exercise of a fewerSAR, the holder is entitled to receive payment in an amount determined by multiplying (i) the excess of the fair market value of a Class A Common Share on the date of exercise over the grant price, by (ii) the number of restricted shares. The retention issueshares with respect to which the SAR is addressed byexercised. Each grant will specify whether the two-year vesting schedulepayment will be in cash, Class A Common Shares of equivalent value, or in some combination thereof.
Tandem SARs may only be exercised at a time when the newrelated stock option is exercisable and the spread is positive. Upon exercise of a tandem SAR, the related stock option will be surrendered for cancellation.
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Each grant of a free-standing SAR must specify (i) the period of continuous employment that is necessary (or the performance objectives that must be achieved) before the SAR becomes exercisable and (ii) the extent to which the holder will have the right to exercise the SAR following termination. Our compensation committee will determine these terms in its discretion, and these terms need not be uniform among all participants.
Restricted Shares
Our compensation committee may, at any time and from time-to-time, grant or sell shares of restricted shares which will apply even ifto participants in such number as the stock options being surrendered were fully vested. The incentive issue is addressed because thecommittee determines in its discretion.
An award of restricted shares constitutes an immediate transfer of ownership of a specified number of Class A Common Shares to be issuedthe recipient in the Exchange Program, although fewer in number than the shares covered by the stock options being surrendered, will provide employees and directors with the benefit of future price appreciation that is not dependent on the priceconsideration of the Class A Common Shares rising above the exercise priceperformance of the stock options surrendered (a price substantially higher than the current price of the Class A Common Shares). The Exchange Program will enable the Company to realign outstanding equity awards so that they once again become important tools for motivating and retaining employees, thereby maintaining the competitiveness of the Company’s
39
compensation program. While the Exchange Program will not restore any of the lost value of any of the outstanding stock options, it will provide an opportunity for employees and directors to participate in future shareholder value creation through appreciation in the price of the Class A Common Shares over the existing fair value of the stock options surrendered.
Under New York Stock Exchange rules, the Exchange Program constitutes a “repricing” that must be approvedservices. Unless otherwise provided by the holders of the Common Voting Shares.
Terms of the Exchange Program
Compensation Committee to Set Exchange Program Terms. If the shareholders approve the Exchange Program, the compensation committee, of the board of directors will determine, in its sole discretion, whether or not to implement the Exchange Program and, if itparticipant is implemented, the timing and specific terms. The Exchange Program will be effectuated by means of a formal offer to eligible employees to exchange specified outstanding stock options for restricted Class A Common Shares, subject to the terms and conditions that will be described in the “tender offer” documents and related materials to be filed with the Securities and Exchange Commission and distributed to eligible employees (the “Exchange Offer”). When filed by the Company, the Exchange Offer documents will be available without charge to shareholders on the SEC’s website,www.sec.gov. If the Exchange Offer is not commenced prior to December 31, 2009, the Exchange Program will not be implemented without further approval of the holders of the Common Voting Shares.
Restricted Shares to be Issued Under the Long-Term Incentive Plan. The restricted Class A Common Shares to be issued in the Exchange Program will be issued under the Company’s Long-Term Incentive Plan. The restricted shares, including those issued in exchange for fully vested stock options, will not be vested at the time they are issued, will not be transferable and will be subject to forfeiture, although recipients will be entitled immediately to voting, dividend and other ownership rights in the shares. The transfer may be made without additional consideration or in consideration of a payment by the recipient that is less than the fair market value per share on the date of grant.
Restricted shares must be subject to a “substantial risk of forfeiture,” within the meaning of Section 83 of the Internal Revenue Code, based on continued service, the achievement of performance objectives, or upon the occurrence of other events as determined by our compensation committee, at its discretion. In order to enforce these forfeiture provisions, the transferability of restricted shares will vestbe prohibited or restricted in two installments,the manner prescribed by the compensation committee on the date of grant for the period during which such forfeiture provisions are to continue.
Restricted Share Units
Our compensation committee may, at any time and from time-to-time, grant or sell restricted share units to participants in such number as the committee determines in its discretion.
Restricted share units constitute an agreement to deliver Class A Common Shares to the recipient in the future at the end of a restriction period and subject to the fulfillment of such conditions as the compensation committee may specify. The transfer may be made without additional consideration or in consideration of a payment by the recipient that is less than the fair market value per share on the date of grant.
During the restriction period the participant has no right to transfer any rights under his or her award and no right to vote or receive dividends on the shares covered by the restricted share units, but the compensation committee may authorize the payment of dividend equivalents with 50 percentrespect to the restricted share units.
Performance Shares and Performance Units
Our compensation committee may, at any time and from time-to-time, grant performance shares or performance units to participants in such number as the committee determines in its discretion. A performance share is the equivalent of one Class A Common Share and a performance unit is the equivalent of a dollar value established at the time of the total number vestingaward.
The participant will be required to meet one or more performance objectives (as described below) within a specified period. Payment of the performance shares or performance units depends on the first anniversaryextent to which the performance objectives have been achieved. To the extent earned, the participant will receive payment of the issuance dateperformance shares or performance units at the time and within the other 50 percent vestingmanner determined by our compensation committee, in cash, Class A Common Shares, restricted shares, or any combination thereof.
The participant has no right to transfer any rights under his or her award and no right to vote or receive dividends on the second anniversaryshares covered by the performance shares, but the compensation committee may authorize the payment of dividend equivalents with respect to the performance shares.
Other Awards
Our compensation committee may, at any time and from time to time, grant or sell other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, our
42
Class A Common Shares or factors that may influence the value of such shares. For example, the awards may include convertible or exchangeable debt securities or other securities, purchase rights for shares, or awards with value and payment contingent upon performance of our company or our subsidiaries or other factors determined by the compensation committee.
The compensation committee will determine the terms and conditions of these awards. Class A Common Shares delivered pursuant to these types of awards will be purchased for such consideration, by such methods and in such forms as the compensation committee determines. We may also grant cash awards, as an element of or supplement to any other award granted under the Amended Plan.
The compensation committee may also grant Class A Common Shares as a bonus, or may grant other awards in lieu of obligations of our company or a subsidiary to pay cash or deliver other property under the Amended Plan or under other plans or compensatory arrangements, subject to such terms as are determined by the compensation committee.
Performance Objectives
Our compensation committee may designate any award as a qualified performance-based award in order to make the award fully deductible for federal income tax purposes without regard to the $1 million executive compensation limit imposed by Section 162(m) of the issuance date; however,Internal Revenue Code. If an award is so designated, the compensation committee must establish objectively determinable performance objectives for the award within certain time limits. Performance objectives for such awards will be based on one or more of the following criteria: earnings per share; segment profit; gross margin; operating or other expenses; earnings before interest and taxes (“EBIT”), earnings before interest, taxes, depreciation and amortization; free cash flow; net income; return on investment (determined with reference to one or more categories of income or cash flow and one or more categories of assets, capital or equity); stock price appreciation; viewer ratings or impressions; online revenue; online segment profit; website traffic; market share; and revenue.
Performance objectives may be described in terms of either company-wide objectives or objectives that are related to the performance of the individual participant or the performance of our company or one or more of its subsidiaries, divisions, departments, regions, units, functions, partnerships, joint ventures or minority investments, product lines or products. The performance objectives may be relative to the performance of a group of comparable companies, a published or special index that our compensation committee, in its discretion, deems appropriate, or we may also select performance objectives as compared to various stock market indices.
Acceleration of Awards
Our compensation committee may in its discretion determine at any unvestedtime that: (i) all or a portion of a participant’s stock options, SARs and other awards in the nature of rights that may be exercised will become fully or partially exercisable; (ii) all or a part of the time-based vesting restrictions on all or a portion of the outstanding awards will lapse; (iii) any performance-based criteria with respect to any awards will be deemed to be wholly or partially satisfied;and/or (iv) any other limitation or requirement under any such award will be waived, in each case, as of such date as the compensation committee, in its discretion, declares. Any such decisions by the compensation committee need not be uniform among all participants or awards. Unless our compensation committee otherwise determines, any such adjustment that is made with respect to an award that is intended to qualify for the performance-based exception of Section 162(m) of the Internal Revenue Code will be specified at such times and in such manner as will not cause such awards to fail to qualify under the performance-based exception. Additionally, the compensation committee will not make any adjustment that would cause an award that is otherwise exempt from Section 409A of the Internal Revenue Code to become subject to Section 409A or that would cause an award that is subject to Section 409A of the Internal Revenue Code to fail to satisfy the requirements of Section 409A.
Change in Control
If we experience a change in control, unless otherwise provided under applicable laws or an award agreement: (i) outstanding stock options and SARs shall become fully vested and exercisable and shall remain exercisable for
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the remainder of their terms; (ii) outstanding restricted shares, will immediatelyrestricted share units and other stock-based awards shall become fully vested; and (iii) outstanding performance shares, performance units and other performance-based awards shall vest uponat the death or disabilitytarget level. Further, our compensation committee may, in its sole discretion, provide for cash payments in termination of the holder oroutstanding awards upon a change in control, with the cash payments equal to the difference between the fair market value of the Company. A recipient of restrictedcovered shares will forfeit any portionand the exercise price of the restricted shares that remain unvested at the time the recipient’s employment with the Company orawards, if applicable.
A change in control generally means any subsidiary terminates or the recipient ceases to be a director of the Company (other than as a result of his or her death or disability). A “change in control” generally meansfollowing: (i) the acquisition of a majority of the Company’s Common Votingcompany’s voting common shares by someone other than The Edward W. Scripps Trust or a party to the Scripps Family Agreement; (ii) a change in the membership of our Board of Directors, so that the current incumbents and their approved successors no longer constitute a majority; or (iii) the disposition of assets accounting for 90 percent90% or more of the Company’sour revenues, unless theThe Edward W. Scripps Trust or the parties to the Scripps Family Agreement have a direct or indirect controlling interest in the acquiring entity, or (iii)entity. In addition, with respect to any of our subsidiaries (or any division of a subsidiary), a change in control generally means either (i) the membershipacquisition of a majority of the Company’s boardsubsidiary’s voting shares by someone other than the company or an affiliate of directors, such that the current incumbents and their approved successors no longer constitutecompany; or (ii) the disposition of all or substantially all of the assets of a majority.division of any of our subsidiaries.
Shares underlying stock options surrendered in the Exchange OfferTermination for restricted shares will be cancelled and will become available for future grant under and in accordance with the Long-Term Incentive Plan. These newly available shares may be utilized both for the restricted shares to be issued in the Exchange Program and for other future equity awards under the Long-Term Incentive Plan. At January 13, 2009, the number of restricted shares and Class A Common Shares subject to outstanding stock options granted under the Long-Term Incentive Plan was 12,366,500. If the Exchange Program is implemented and the compensation committee does not exclude any otherwise eligible stock options, the holders of outstanding stock options covering 5,647,378 million Class A Common Shares, or 45 percent of the total outstanding awards under the Long-Term Incentive Plan held by current employees and directors, will be eligible to participate in the Exchange Program.Cause
Eligible Employees; Participation by Executive Officers and Directors. All current employees of the Company and its subsidiaries, including the Company’s executive officers, and all current directors will be eligible to participate in the Exchange Program, unless otherwise determined by the compensation committee. Former employees and directors of the Company and current and former employees and directors of EWS who are not currently employedIf a participant’s employment or service is terminated by the Company and do not currently serve as directors of the Company will not be eligible to participate in the Exchange Program even if they hold otherwise eligible stock options. At January 13, 2009, there
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were approximately 254 employees and directors who held outstanding stock options eligible for the Exchange Program.
The board of directors and the compensation committee approved the participation of executive officers and directors in the Exchange Program because they believed that the retention and incentive benefits of the Exchange Program apply to the executive officers and directors equally with the other employees of the Company and, therefore, they concluded that it would be in the best interests of the Company and its shareholders to permit executive officers and directors to participate in the Exchange Program. In approving the participation of executive officers and directors in the Exchange Program, the board of directors also considered that the Exchange Program would be subject to the approval of the holders of the Common Voting Shares of the Company at the meeting.
Only persons who are employees or directors of the Company or employees of a subsidiary of the Company both on the date the Exchange Offer commences and on the closing date of the Exchange Offer when the surrendered stock options will be cancelled and restricted shares issued in exchange will be eligible to participate in the Exchange Program. Any person holding eligible stock options whose employment terminates, and any director who ceases to be a director, for any reason (including retirement, death, disability or discharge“cause,” as determined by the Company) prior to the cancellation of his or her stock options and the issuance of the replacement restricted shares at the closing of the Exchange Offer will not be permitted to exchange eligible stock options for restricted shares, even if the options were previously tendered in the Exchange Offer. The Company may exclude from the Exchange Program employees innon-U.S. jurisdictions or any other employees or directors the compensation committee determines appropriate.
Outstanding Stock Options Eligible for the Exchange Program. All outstanding stock options with an exercise price of $30.00 or more held by eligible employees or directors of the Company may be exchanged for restricted Class A Common Shares in the Exchange Program, unless the compensation committee in its sole discretion, then, promptly upon receiving notice of the committee’s determination, the participant shall:
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| • | forfeit all outstanding awards held by the participant; |
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| • | return to the Company or the subsidiary all shares that the participant has not disposed of that had been acquired pursuant to awards granted under the Amended Plan, in exchange for any amount actually paid by the participant for the shares; and |
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| • | with respect to any shares acquired pursuant to an award granted under the Amended Plan that were disposed of, pay to the Company or the subsidiary, in cash, the excess, if any, of: (i) the fair market value of the shares on the date acquired, over (ii) any amount actually paid by the participant for the shares. |
Transferability
Except as our board of directors or compensation committee otherwise determines, to further limitawards granted under the Amended Plan will not be transferable by a participant other than by will or the laws of descent and distribution. Except as otherwise determined by our compensation committee, stock options and SARs will be exercisable during a participant’s lifetime only by him or her or, in the event of the participant’s legal incapacity to do so, by his or her guardian or legal representative. Any award made under the Amended Plan may provide that are eligible for exchange. Stock options to purchase 65,973any Class A Common Shares held by two directors of the Companycommon shares issued or transferred as a result of their servicethe award will be subject to further restrictions upon transfer.
Adjustments
In the event of any equity restructuring, such as directorsa stock dividend, stock split, spinoff, rights offering or recapitalization through a large, nonrecurring cash dividend, our compensation committee will adjust the number and kind of EWS, however, will notshares that may be includeddelivered under the Amended Plan, the individual award limits, and, with respect to outstanding awards, the number and kind of shares subject to outstanding awards, the exercise price, and the grant price or other price of shares subject to outstanding awards, to prevent dilution or enlargement of rights. In the event of any other change in corporate capitalization, such as a merger, consolidation or liquidation, the compensation committee may, in its discretion, cause there to be such equitable adjustment as described in the Exchange Program. Asforegoing sentence, to prevent dilution or enlargement of January 13, 2009, current employees and directors of the Company held stock options with an exercise price of $30.00 or more covering 5,647,378 Class A Common Shares.
Exchange Ratios. The total number of restricted shares to be issued in the Exchange Program to an eligible employee or director who elects to surrender eligible stock options will berights. However, unless otherwise determined by dividing the compensation committee, we will always round down to a whole number of shares subject to the surrendered options by an exchange ratio established for each group of outstanding options with a different exercise price or expiration date (each, a separate “tranche”) and rounding the result to the nearest whole Class A Common Share. The exchange ratio for each of the 48 tranches of stock optionsany award. Any such adjustment will be establishedmade by theour compensation committee, shortly before the Exchange Offer commences.
The compensation committee intends that the restricted shares issued in connection with the Exchange Programwhose determination will have an aggregate fair value as of the date the exchange ratios are established (determined based on the most recent closing price of Class A Common Shares on the New York Stock Exchange) that is no greater than the aggregate fair value of the stock options exchanged (determined based on the binomial option valuation model). The binomial valuation model takes into account, among other factors, the exercise price of the stock option being valued, the fair market value of the shares subject to the option, the expected holding period of the option, the expected annual dividend yield of the shares, the anticipated volatility of the share price over the holding period and the risk-free interest rate during the holding period. If the exchange ratios had been established by the compensation committee as of January 13, 2009, the assumptions used to calculate the binomial value of the stock options would have included option exercise prices ranging from $30.00 per share to $50.38 per share, the actual closing price of the shares on that date ($23.44 per share), expected holding periods equal to one-half of the remaining term of vested options (option expiration dates range from January 11, 2011 to July 28, 2018) and one-half of the remaining term plus the remainder of the vesting period for unvested options, an expected annual dividend yield of 1.28 percent, volatility ranging from 34.0 percent (for the maximum assumed holding period of 72 months) to 61.9 percent (for the minimum assumed holding period of one year or less) and an interest rate ranging from 0.38 percent (for the minimum assumed holding period of six months or less) to 1.96% (for the maximum assumed holding period of 72 months).be conclusive.
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UsingProhibition on Re-Pricing
Subject to adjustment as described under “Adjustments” immediately above, the binomial valuation model and applying these assumptions,Amended Plan does not permit, without the fair valueapproval of our shareholders, what is commonly known as the 48 tranches“re-pricing” of stock options eligible for inclusion in the Exchange Offer as of January 13, 2009 would have ranged from $1.57 to $4.42 for each share covered by the option, with the resulting exchange ratios (based on the $23.44 per share closing price of the Class A Common Shares on January 13, 2009) ranging from one new restricted share for each 14.9 shares covered by an option exchanged to one new restricted share for each 5.3 shares covered by an option exchanged. If all of the eligible stock options held by current employees and directors of the Company were exchanged for restricted shares in accordance with these exchange ratios, stock options to purchase approximately 5,647,378 Class A Common Shares having an aggregate fair value of approximately $14,161,772 would be exchanged for approximately 604,186 restricted shares having approximately the same assumed aggregate fair value. Of these amounts, stock options to purchase approximately 2,649,118 Class A Common Shares having an aggregate fair value of approximately $6,781,006 held by named executive officers, and stock options to purchase approximately 501,950 Class A Common Shares having an aggregate fair value of approximately $1,293,062 held by directors, would be exchanged for approximately 289,293 and 55,165 restricted shares, respectively. These amounts are only an example, showing the exchange ratios and possible amounts exchanged if the Exchange Program had commenced on January 13, 2009. The actual exchange ratio for each tranche of stock options will be determined by the compensation committee shortly before the commencement of the Exchange Offer.or SARs, including:
Once the compensation committee sets the exchange ratios for the Exchange Program, changes in the market price of the Class A Common Shares as well as interest rates and the market volatility of the price for the Class A Common Shares through the closing date of the Exchange Offer could affect the ratio of the fair value of the surrendered stock options to the fair value of the restricted shares issued in exchange. As a general matter, however, increases in the market price of the Class A Common Shares during that period will increase the fair value of both the surrendered stock options and the restricted shares while decreases in the market price of the Class A Common Shares during the period will decrease the fair value of both the surrendered stock options and the restricted shares.
Other Terms of Exchange Offer. If the Exchange Program is approved by the holders of the Common Voting Shares and the Exchange Offer is implemented by the compensation committee, employees and directors will be given at least 20 business days to decide whether to surrender their eligible stock options in exchange for restricted Class A Common Shares in the Exchange Offer. The eligible stock options tendered for cancellation in the Exchange Offer will be cancelled on the specified closing date, unless the compensation committee elects, in its sole discretion, not to accept some or all of the tendered stock options. If an employee or director surrenders any outstanding stock options from a particular tranche, he or she must surrender all outstanding options from that tranche that are held.
Participation in the Exchange Offer will be voluntary on the part of eligible employees and directors, and the Company will not make any recommendation as to whether or not employees or directors should participate. Any employee or director who chooses not to participate with respect to any tranche of outstanding stock options will continue to hold his or her outstanding stock options of that tranche subject to the existing terms and conditions of the options.
A vote on approval of the Exchange Program at the meeting by a shareholder who holds eligible options will not constitute an election by that shareholder to participate in, or not to participate in, the Exchange Offer.
Potential Modifications of Terms of the Exchange. The terms of the Exchange Offer will be described in tender offer documents that will be filed with the SEC and distributed to eligible employees and directors. It is possible that the SEC will require modification of the terms of the Exchange Offer, in which case the Company will make the required modifications. The Company reserves the right, in its discretion, to suspend, modify or terminate the Exchange Offer at any time for any reason prior to the closing date, except that a modification that would materially increase the cost of the Exchange Program, broaden eligibility or otherwise materially adversely impact dilution to shareholders, or that otherwise would require shareholder approval under applicable rules of the New York Stock Exchange, will be subject to the further approval of the holders of the Common Voting Shares.
Accounting Consequences. Under the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123R (“FAS 123R”), the issuance in the Exchange Program of restricted shares with a fair value in excess of the aggregate fair value of the surrendered stock options would result in additional compensation expense to the Company. Since the exchange ratio will be set by the compensation committee at the
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commencement of the Exchange Offer so that the fair value of the restricted shares issued in the Exchange Program will be equal to the fair value of the stock options surrendered, additional compensation expense will be recognized only if the price of the Class A Common Shares on the closing date for the Exchange Offer is higher than it was on the date the exchange ratio was established. The amount of this expense, if any, will be determinable only at the time restricted shares are issued at the closing of the Exchange Offer. The compensation expense related to stock options surrendered in the Exchange Program will continue to be recognized by the Company over the original service period of those options, but will not be accelerated by the Exchange Program.
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| • | an amendment to reduce the exercise price of any outstanding stock option or base price of any outstanding SAR; |
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| • | the cancellation of an outstanding stock option or SAR and replacement with a stock option having a lower exercise price or with a SAR having a lower base price; and |
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| • | the cancellation of an outstanding stock option or SAR and replacement with another award under the Amended Plan. |
U.S. Federal Income Tax Consequences
The following discussion providesis limited to a summary of the materialU.S. federal income tax provisions relating to the grant, exercise and vesting of awards under the Amended Plan. The tax consequences of awards may vary according to country of participation. Also, the tax consequences of the exchangegrant, exercise or vesting of stock options for restricted shares pursuant toawards vary depending upon the Exchange Program for those eligible employeesparticular circumstances, and directors subject to U.S. federal income tax. The discussion is for general information only and is based on the federalit should be noted that income tax laws, now inregulations and interpretations change frequently. Participants should rely upon their own tax advisors for advice concerning the specific tax consequences applicable to them, including the applicability and effect which are subject to change, possibly retroactively. Moreover, this summary does not addressof state, local orand foreign tax consequences.
The Company believes that the Exchange Program should be treated as a non-taxable exchange for U.S. federal income tax purposes. Therefore, the Company believes that participating U.S. employees and directors should not realize income for U.S. federal income tax purposes upon the issuance of restricted shares in exchange for eligible stock options, unless the recipient affirmatively elects to file a Section 83(b) election with respect to the restricted shares (if permitted by the compensation committee) as described below. A summary of the material U.S. federal income tax consequences of the restricted shares is set forth immediately below.laws.
Restricted Shares.Tax Consequences to Participants
Nonqualified Stock Options. Recipients generallyIn general, (i) a participant will not be subject to federalrecognize income tax uponat the issuancetime a nonqualified option is granted; (ii) a participant will recognize ordinary income at the time of restricted sharesexercise in the Exchange Program. If the recipient does not make a Section 83(b) election for the restricted shares (discussed below), his or her taxable income with respect to those shares will be calculated, and tax will be owed, in the year in which the restricted shares vest. Thean amount of taxable income will be equal to the numberexcess of vested shares multiplied by the market price per share on the vesting date. The recipient’s adjusted tax basis in the shares will be the fair market value of the shares on the date they vest, andof exercise over the holding periodoption price paid for the shares will begin just after they vest. Any gain or loss recognized when restricted shares that have vested are sold will be capital gain or loss,shares; and will be long-term capital gain or loss if the vested shares have been held for more than one year(iii) at the time of sale.sale of shares acquired pursuant to the exercise of the nonqualified option, appreciation (or depreciation) in value of the shares after the date of exercise will be treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held.
Incentive Stock Options. A participant will not recognize income at the time an ISO is granted or exercised. However, the excess of the fair market value of the shares on the date of exercise over the option price paid may constitute a preference item for the alternative minimum tax. If shares are issued to the optionee pursuant to the exercise of an ISO, and if no disqualifying disposition of such shares is made by such optionee within two years after the date of the grant or within one year after the issuance of such shares to the optionee, then upon sale of such shares, any amount realized in excess of the option price will be taxed to the optionee as a long-term capital gain and any loss sustained will be a long-term capital loss. If shares acquired upon the exercise of an ISO are disposed of prior to the expiration of either holding period described above, the optionee generally will recognize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares as of the time of exercise (or, if less, the amount realized on the disposition of such shares if a sale or exchange) over the option price paid for such shares. Any dividend payments received with respect to restricted shares for which a Section 83(b) election is not madefurther gain (or loss) realized by the participant generally will be taxed as short-term or long-term capital gain (or loss) depending on the holding period.
SARs. A participant will not recognize income upon the grant of a tandem SAR or a free-standing SAR. The participant generally will recognize ordinary income duringwhen the periodSAR is exercised in an amount equal to the cash and the fair market value of any unrestricted shares received on the exercise.
Restricted Shares. A participant will not be subject to tax until the shares of restricted shares are no longer subject to forfeiture or restrictions on transfer for purposes of Section 83 of the Internal Revenue Code. At that time, the participant will be subject to tax at ordinary income rates on the fair market value of the restricted shares are unvested, and will not be treated as qualified dividend income. Any dividends received with respect to vested shares may be qualified dividend income subject to(reduced by any amount paid by the participant for such restricted shares). However, a current maximum federal tax rate of 15 percent, provided certain other requirements are satisfied.
participant who so elects under Section 83(b) Election. Ifof the compensation committee permits, a recipient of restricted shares in the Exchange Program may make a Section 83(b) election with respect to the restricted shares received. This election must be madeInternal Revenue Code within 30 days of the date of issuance.transfer of the shares will have taxable ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares over the purchase price, if any, of such restricted shares. Any appreciation (or depreciation) realized upon a
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later disposition of such shares will be treated as long-term or short-term capital gain depending upon how long the shares have been held. If a Section 83(b) election ishas not been made, for restricted shares, the amount of taxable income will be calculated, and tax will be owed, in the year in which the restricted shares are received in the exchange. The amount of taxable income will be equal to the number of restricted shares received multiplied by the market price per share on the date of issuance. The recipient’s adjusted tax basis in the shares will be their aggregate fair market value on the date of issuance, and the holding period for the shares will begin just after the issuance date. Anyany dividends received with respect to restricted shares for which a Section 83(b) election is made may be qualified dividend incomethat are subject to a current maximum federal tax rate of 15 percent, provided certain other requirements are satisfied.forfeiture and restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the participant.
Unrestricted “Bonus” Stock. A participant will recognize ordinary income upon the grant of an unrestricted “bonus” stock award equal to the fair market value of the shares received by the participant.
Restricted Share Units, Performance Shares, Performance Units. A participant will not recognize income upon the grant of restricted share units, performance shares or performance units. Upon payment of the awards, the participant generally will recognize ordinary income in an amount equal to the cash and the fair market value of any unrestricted shares received.
Dividend Equivalents. Any dividend equivalents awarded with respect to awards granted under the Amended Plan and paid in cash or unrestricted shares will be taxed to the participant at ordinary income rates when received by the participant.
Section 409A. The Amended Plan permits the grant of various types of awards that may or may not be exempt from Section 409A of the Internal Revenue Code. If an award is subject to Section 409A, and if the requirements of Section 409A are not met, the taxable events as described above could apply earlier than described, and could result in the imposition of additional taxes and penalties. Restricted shares awards, unrestricted stock awards, stock options and stock appreciation rights that comply with the terms of the Amended Plan are designed to be exempt from the application of Section 409A. Restricted share units, performance shares, performance units and dividend equivalents granted under the Amended Plan will be subject to Section 409A unless they are designed to satisfy the short-term deferral exemption (or another applicable exception). If not exempt, those awards will be designed to meet the requirements of Section 409A in order to avoid early taxation and penalties.
Tax Consequences to the Company.Us
To the extent that an employee or directora participant recognizes ordinary income in the circumstances described above, our Company or our subsidiary for which the Companyparticipant performs services will be entitled to a corresponding federal income taxcompensation deduction provided that, among other things, the deductioncompensation meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code, and is not disallowed by the $1 million limitation on certain executive compensation or the golden parachute rules under Section 280G162(m) of the Internal Revenue Code.
New Plan Benefits
Our compensation committee will determine all awards under the Amended Plan for our fiscal year 2010 but no awards to our officers, employees or non-employee directors are currently determinable.
Current Equity Compensation Plan Information
The following table provides information as of December 31, 2009 about our equity compensation plans under which awards are currently outstanding.
| | | | | | | | | | | | |
| | Number of Shares
| | | | | | Number of Shares
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| | Issuable Upon
| | | | | | Remaining Available for
| |
| | Exercise
| | | Weighted-Average
| | | Issuance Under
| |
| | of Outstanding
| | | Exercise Price of
| | | Equity Compensation
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| | Options,
| | | Outstanding Options,
| | | Plans (Excluding Shares
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| | Warrants and Rights
| | | Warrants and Rights
| | | Reflected in Column (a))
| |
Plan Category | | (a)(1) | | | (b) | | | (c)(2) | |
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Equity compensation plans approved by security holders | | | 8,016,108 | | | $ | 36.20 | | | | 7,896,436 | |
Equity compensation plans not approved by security holders | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total | | | 8,016,108 | | | $ | 36.20 | | | | 7,896,436 | |
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(1) | | Column (a) represents the number of our Class A Common Shares that may be issued in connection with the exercise of outstanding stock options and SARs granted under the Amended Plan. |
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(2) | | Column (c) represents the number of our Class A Common Shares available for future issuance under the Amended Plan. |
New Plan Benefits Under the Long-Term Incentive PlanRecommendation of Our Board of Directors
The numberApproval of restricted Class A Common Shares that will be issued under the 2008 Long-Term Incentive Plan pursuant to the Exchange Program will be determined by the number of eligible employees and directors who elect to participate in the Exchange Offer and the number of shares covered by the eligible stock options tendered by them and, therefore, cannot be determined at this time. If the holders of the Common Voting Shares do not approve the Exchange Program at the meeting, the Exchange Program will not be effectuated. In any event, the Long-Term Incentive Plan will remain in effect.
Vote Required to Approve Proposal
This Proposal 2 must be approved byrequires the affirmative vote of the holders of a majority of the outstanding Common Voting Shares presentrepresented, in person or by proxy, and entitled to vote at the meeting, provided that the total vote cast on the proposal represents over 50 percent in interest of all of the outstanding Common Voting Shares.
Under Ohio law, abstention and broker non-votes will be counted towards the establishment of a quorum but, because abstentions and broker non-votes are not affirmative votes for the proposal, will have the same effect as votes against the proposal.Meeting.
THE BOARD OF DIRECTORS CONSIDERS THEHAS APPROVED AND UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL 2, THE EXCHANGE PROGRAM TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND, THEREFORE, RECOMMENDS THAT THE HOLDERS OF THE COMMON VOTING SHARES VOTEFOR APPROVAL OF THE EXCHANGE PROGRAM AT THE MEETING.2008 LONG-TERM INCENTIVE PLAN.
PROPOSAL 3
Our Executive Annual Incentive Plan
Introduction
We are requesting your approval of the Scripps Networks Interactive, Inc. Executive Annual Incentive Plan (the “AIP”). The AIP was adopted by our board of directors, and approved by our sole shareholder, effective immediately prior to the spin off from The E. W. Scripps Company in 2008. Even though the AIP continues to be in full force and effect since that time, shareholder approval is required to ensure that annual cash incentive awards under the plan continue to comply with the performance-based compensation exception to Section 162(m) of the Internal Revenue Code.
Section 162(m) provides that a public company cannot take a federal income tax deduction for compensation paid to any “covered employee” to the extent the compensation exceeds $1 million in any tax year. A “covered employee” is any employee who on the last day of the tax year is either (i) the Chief Executive Officer or (ii) among the other three highest compensated executive officers (other than the Chief Financial Officer). This deduction limitation does not, however, apply to certain performance-based compensation paid under a plan approved by shareholders. Pursuant to a special transition rule applicable to spin-off transactions, awards paid under the AIP prior to the 2010 annual meeting are eligible to qualify for the performance-based compensation exception. In order for awards paid after that meeting to qualify for the performance-based compensation exception, our shareholders must approve the material terms of the AIP.
Approval of Proposal No. 3 requires the affirmative vote of a majority of our Common Voting Shares that are present at the annual meeting and cast on the proposal. If our shareholders do not approve the AIP, then we will not pay any awards to our covered employees under the plan for performance periods beginning in 2010 or later. Nonetheless, we retain the discretion to make awards outside of the AIP without regard to whether such awards would be deductible under Section 162(m).
The complete text of the AIP is attached as Exhibit B to this proxy statement. The following summary of the plan does not purport to be complete and is qualified in its entirety by reference to Exhibit B.
Administration
The AIP is administered by our compensation committee, or asub-committee thereof. The committee is authorized to interpret the AIP and to make any other determinations that it deems necessary or desirable for the administration of the plan. Any decision of the committee shall be final, conclusive and binding.
Eligibility and Participation
The compensation committee, in its sole discretion, designates the executives who are eligible to participate in the AIP. The executives will be selected from among our employees who are in a position to have a material impact on our results of operations. Approximately seven employees are currently eligible to participate in the AIP.
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Determination of Awards
The compensation committee will designate one or more performance periods, which may be based on a calendar year or any other period designated by the committee. Within the first quarter of the performance period, the committee will establish written performance goals and payout formulas for each participant. The performance goals and payout formulas need not be the same for each participant. The maximum amount payable to any participant for any calendar year under the AIP shall be $4,000,000. Participants must achieve the performance goals established by the committee in order to receive an award under the AIP.
Performance Goals
The performance goals, which must be objective, are based solely on one or more of the following criteria: earnings per share; segment profit; gross margin; operating or other expenses; earnings before interest and taxes (“EBIT”); earnings before interest, taxes, depreciation and amortization (“EBITDA”); free cash flow; net income; return on investment (determined with reference to one or more categories of income or cash flow and one or more categories of assets, capital or equity); stock price appreciation; viewer ratings or impressions; online revenue; online segment profit; website traffic; market share; and revenue. The foregoing criteria may relate to the company, one or more of its subsidiaries, or one or more of its divisions, units, partnerships, joint ventures or minority investments, product lines or products or any combination thereof, and may be applied on an absolute basis or be relative to our annual budget, one or more peer group companies or indices, or any combination, all as the committee shall determine. In addition, to the extent consistent with Section 162(m) of the Code, the performance goals may be calculated without regard to extraordinary items.
Certification
No awards will be paid for a performance period until the compensation committee has certified in writing whether the applicable performance goals have been met. The committee retains the discretion to reduce or eliminate (but not to increase) any award payable to a participant.
Payment
The award determined by the compensation committee must be paid after the end of the performance period, but in no event later than March 15 of the calendar year immediately following the end of the performance period. If, however, a participant dies, retires, is assigned to a different position, is granted a leave of absence, or if the participant’s employment is otherwise terminated (except for “cause,” as determined by the committee in its sole discretion) during a performance period, then the participant’s award shall be pro-rated and paid at the same time as other awards under the plan, based upon actual performance during the performance period (or at a lower amount, at the discretion of the committee). If a participant terminates employment within one year after a “change in control,” then he or she shall receive an award determined as if the performance goals had been achieved at the 100% level. The award is generally payable within 30 days following termination, but payment will be delayed for 6 months if required to comply with Section 409A of the Code.
Amendment or Termination
The board of directors or the compensation committee may amend, alter or discontinue the AIP at any time, provided that the action does not impair any of the rights or obligations under any award previously granted to a participant without that participant’s consent. No consent is required, however, if the board of directors or the committee, as the case may be, determines in good faith that the action is necessary to comply with Section 409A of the Code, Section 162(m) of the Code or applicable laws. The board of directors may not amend, alter or discontinue the provisions relating to payments in connection with a “change in control” after the occurrence of a change in control.
Plan Benefits
Future benefits to be received by a person or group under the AIP are not determinable at this time and will depend on individual and corporate performance.
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Recommendation of Our Board of Directors
Approval of the Executive Annual Incentive Plan requires the affirmative vote of the holders of a majority of the Common Voting Shares represented, in person or by proxy, and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS HAS APPROVED AND UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL 3, THE EXECUTIVE ANNUAL INCENTIVE PLAN.
REPORT ON RELATED PARTY TRANSACTIONS
Related Party Transactions
There were no related party transactions in fiscal 2008.2009. Under its charter, the audit committee of the board of directors is responsible for reviewing any proposed related party transaction. The audit committee has approved a “Statement of Policy With Respect to Related Party Transactions” which recognizes that related party transactions can present a heightened risk of conflicts of interestand/or improper valuation (or the perception thereof). This policy defines a “related party,” requires that management present to the audit committee for its approval any related party transaction, and defines disclosure procedures.
Scripps Family Agreement
General. The Company and certain persons and trusts are parties to an agreement (the “Scripps Family Agreement”) restricting the transfer and governing the voting of Common Voting Shares that such persons and trusts may acquire or own at or after the termination of The Edward W. Scripps Trust. Such persons and trusts (the “Signatories”) consist of certain descendants of Robert Paine Scripps who are beneficiaries of the Trust, descendants of John P. Scripps, and certain trusts of which descendants of John P. Scripps are trustees and beneficiaries. Robert Paine Scripps was a son of the founder of the Company. John P. Scripps was a grandson of the founder and a nephew of Robert Paine Scripps.
If the Trust were to have terminated as of January 31, 2009,2010, the Signatories would have held in the aggregate approximately 93 percent93% of the outstanding Common Voting Shares as of such date.
Once effective, the provisions restricting transfer of Common Voting Shares under the Scripps Family Agreement will continue until 21 years after the death of the last survivor of the descendants of Robert Paine Scripps and John P. Scripps alive when the Trust terminates. The provisions of the Scripps Family Agreement governing the voting of Common Voting Shares will be effective for a10-year period after termination of the Trust and may be renewed for additional10-year periods.
Transfer Restrictions. No Signatory will be able to dispose of any Common Voting Shares (except as otherwise summarized below) without first giving other Signatories and the Company the opportunity to purchase such shares. Signatories will not be able to convert Common Voting Shares into Class A Common Shares except for
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a limited period of time after giving other Signatories and the Company the aforesaid opportunity to purchase and except in certain other limited circumstances.
Signatories will be permitted to transfer Common Voting Shares to their lineal descendants or trusts for the benefit of such descendants, or to any trust for the benefit of such a descendant, or to any trust for the benefit of the spouse of such descendant or any other person or entity. Descendants to whom such shares are sold or transferred outright, and trustees of trusts into which such shares are transferred, must become parties to the Scripps Family Agreement or such shares shall be deemed to be offered for sale pursuant to the Scripps Family Agreement. Signatories will also be permitted to transfer Common Voting Shares by testamentary transfer to their spouses provided such shares are converted to Class A Common Shares and to pledge such shares as collateral security provided that the pledgee agrees to be bound by the terms of the Scripps Family Agreement. If title to any such shares subject to any trust is transferred to anyone other than a descendant of Robert Paine Scripps or John P. Scripps, or if a person who is a descendant of Robert Paine Scripps or John P. Scripps acquires outright any such shares held in trust but is not or does not become a party to the Scripps Family Agreement, such shares shall be deemed to be offered for sale pursuant to the Scripps Family Agreement. Any valid transfer of Common Voting
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Shares made by Signatories without compliance with the Scripps Family Agreement will result in automatic conversion of such shares to Class A Common Shares.
Voting Provisions. The Scripps Family Agreement provides that the Company will call a meeting of the Signatories prior to each annual or special meeting of the shareholders of the Company held after termination of the Trust (each such meeting hereinafter referred to as a “Required Meeting”). At each Required Meeting, the Company will submit for decision by the Signatories, each matter, including election of directors, that the Company will submit to its shareholders at the annual meeting or special meeting with respect to which the Required Meeting has been called. Each Signatory will be entitled, either in person or by proxy, to cast one vote for each Common Voting Share owned of record or beneficially by him on each matter brought before the Required Meeting. Each Signatory will be bound by the decision reached by majority vote with respect to each matter brought before the Required Meeting, and at the related annual or special meeting of the shareholders of the Company each Signatory will vote his Common Voting Shares in accordance with decisions reached at the Required Meeting of the Signatories.
John P. Scripps Newspapers
In connection with the merger in 1986 of the John P. Scripps Newspaper Group (“JPSN”) into a wholly owned subsidiary of The E.W. Scripps Company (“EWS”) (the “JPSN Merger”), E.W. ScrippsEWS and The Edward W. Scripps Trust entered into the agreement discussed below.
Stockholder Agreement. The former shareholders of the John P. Scripps Newspaper Group, including John P. Scripps and Paul K. Scripps, entered into a Stockholder Agreement with EWS in connection with the JPSN Merger. This agreement restricts to certain transferees the transfer of EWS or Company Common Voting Shares received by such shareholders pursuant to the JPSN Merger. These restrictions on transfer will terminate on the earlier of the termination of The Edward W. Scripps Trust or completion of a public offering of Common Voting Shares. In connection with the Separation, EWS assigned any and all of its rights under the Stockholder Agreement with respect to Company Common Voting shares to the Company. Under the agreement, if a shareholder has received a written offer to purchase 25 percent25% or more of his Common Voting Shares, the Company has a “right of first refusal” to purchase such shares on the same terms as the offer. Under certain other circumstances, such as bankruptcy or insolvency of a shareholder, the Company has an option to buy all Common Voting Shares of the Company owned by such shareholder. Under the agreement, stockholders owning 25 percent25% or more of the outstanding Common Voting Shares issued pursuant to the JPSN Merger may require the Company to register Common Voting Shares (subject to the right of first refusal mentioned above) under the Securities Act of 1933 for sale at the shareholders’ expense in a public offering. In addition, the former shareholders of the John P. Scripps Newspaper Group will be entitled, subject to certain conditions, to include Common Voting Shares (subject to the right of first refusal) that they own in any registered public offering of shares of the same class by the Company. The registration rights expire three years from the date of a registered public offering of Common Voting Shares.
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INDEPENDENT AUDITORS
The audit committee of the board of directors appointed Deloitte & Touche LLP as independent registered public accountants for the Company for the fiscal year ending December 31, 2008.2009. It is expected that Deloitte & Touche LLP will continue as the independent registered public accountants for the Company for the fiscal year ending December 31, 2009.2010. A representative of Deloitte & Touche LLP the Company’s independent registered public accounting firm during 2008, is expected to be present at the Annual Meeting of Shareholders and will have an opportunity to make a statement if he or she desires.
Independence of the External Auditors. The audit committee has established a pre-approval policy and procedures for audit, audit-related and tax services that can be performed by the independent auditors without specific authorization from the audit committee subject to certain restrictions. The policy sets out the specific services pre-approved by the committee and the applicable limitations, while ensuring the independence of the independent auditors to audit the Company’s financial statements is not impaired.
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Service Fees Paid to the Independent Registered Public Accounting Firm. The following table sets forth fees for all professional services rendered by Deloitte & Touche LLP to the Company for the yearyears ended December 31, 2008. Any such fees incurred prior to the spin-off were for professional services rendered to EWS2009 and are not presented here.2008.
| | | | | | | | | | | | |
| | | | | 2008 | | | | |
|
Audit fees(1) | | | | | | $ | 1,134,500 | | | | | |
| | | | | | | | | | | | |
Audit-related fees | | | | | | | — | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Total fees | | | | | | $ | 1,134,500 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | |
| | 2009 | | | 2008 | |
|
Audit fees(1) | | $ | 1,668,230 | | | $ | 1,134,500 | |
Audit-related fees(2) | | | 233,000 | | | | — | |
Tax Fees(3) | | | 65,726 | | | | — | |
| | | | | | | | |
Total Fees | | $ | 1,966,956 | | | $ | 1,134,500 | |
| | | | | | | | |
| | |
(1) | | The 2008 auditAudit fees representinclude the audit of our financial statements,the parent company and certain subsidiary companies, quarterly reviews and accounting consultations related to such workconsultations. It also includes fees for consents and other services provided in connection with SEC filings.comfort letters. |
|
(2) | | Audit-related fees include fees for due diligence assistance. |
|
(3) | | Tax fees include fees for tax compliance and consultation. |
REPORT OF THE AUDIT COMMITTEE
The audit committeeAudit Committee has reviewed and discussed with the Company’s management and Deloitte & Touche LLP, the Company’s independent registered public accounting firm, the audited financial statements of the Company for the fiscal year ended December 31, 2008.2009. The audit committeeAudit Committee has also discussed with Deloitte & Touche LLP all matters required by generally accepted auditing standards to be discussed. The audit committeeAudit Committee has received the written disclosures and the letter from Deloitte & Touche LLP required by the applicable regulations of the Public Accounting Oversight Board regarding Deloitte & Touche LLP’s communications with the audit committee,Audit Committee, and discussed with Deloitte & Touche LLP the independent public accountant’s independence, and has concluded that Deloitte & Touche LLP is independent.
Based on the review and discussions noted above, the audit committeeAudit Committee recommended to the board of directorsBoard that the audited financial statements be included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2008,2009, for filing with the Securities and Exchange Commission.SEC.
Respectfully submitted,
Ronald W. Tysoe, Chair
Michael R. Costa
Dale C. Pond
Jeffrey Sagansky
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REPORT ON SHAREHOLDER PROPOSALS FOR 20102011 ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company’s 20102011 Annual Meeting of Shareholders must be received by the Company at 312 Walnut Street, Suite 2800,1800, Cincinnati, Ohio, 45202, on or before November 16, 2009,15, 2010, for inclusion in the Company’s proxy statement and form of proxy relating to the 20102011 Annual Meeting of Shareholders.
If a shareholder intends to raise a proposal at the Company’s 20102011 annual meeting that he or she does not seek to have included in the Company’s proxy statement, the shareholder must notify the Company of the proposal on or before January 30, 2010.29, 2011. If the shareholder fails to notify the Company, the Company’s proxies will be permitted to use their discretionary voting authority with respect to such proposal when and if it is raised at such annual meeting, whether or not there is any discussion of such proposal in the 20102011 proxy statement.
HOUSEHOLDING
The Securities and Exchange Commission permits a single set of annual reports and proxy statements to be sent to any household at which two or more shareholders reside if they appear to be members of the same family. Each shareholder continues to receive a separate proxy card. This procedure, referred to as householding, reduces the volume of duplicate information shareholders receive and reduces mailing and printing costs. A number of brokerage firms have instituted householding. Only one copy of this proxy statement and the attached annual report will be sent to certain beneficial shareholders who share a single address, unless any shareholder residing at that address gave contrary instructions.
If any beneficiary shareholder residing at such an address desires at this time to receive a separate copy of this proxy statement and the attached annual report or if any such shareholder wishes to receive a separate proxy statement and annual report in the future, the shareholder should provide such instructions to the Company by calling Mark Kroeger, Vice President, Corporate Communications and Investor Relations,513-824-3255 or by writing to Scripps Networks Interactive, Inc., Investor Relations at 312 Walnut Street, Suite 1800, Cincinnati, Ohio, 45202.
OTHER MATTERS
The solicitation of proxies is made by and on behalf of the board of directors. The cost of the solicitation will be borne by the Company. The Company may also reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of the Company’s Class A Common Shares.
The presence of any shareholder at the meeting will not operate to revoke his or her proxy. A proxy may be revoked at any time, insofar as it has not been exercised, by giving written notice to the Company or in open meeting.
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The persons named in the enclosed proxy, or their substitutes, will vote the shares represented by such proxy at the meeting. The forms of proxy for the two respective classes of stock permit specification of a vote for persons nominated for election as directors by each such class of stock, as set forth under “Election of Directors” above, and the withholding of authority to vote in the election of such directors or the withholding of authority to vote for one or more specified nominees. Where a choice has been specified in the proxy, the shares represented thereby will be voted in accordance with such specification. If no specification is made, such shares will be voted to elect directors as set forth under “Election of Directors.”
Under Ohio law and the Company’s Articles of Incorporation, broker non-votes for Class A Common Shares and abstaining votes for both Class A Common Shares and Common Voting Shares will not be counted in favor of, or against, election of any nominee. Holders of Class A Common Shares and Common Voting Shares do not have cumulative voting.
If any other matters shall properly come before the meeting, the persons named in the proxy, or their substitutes, will vote thereon in accordance with their judgment. The board of directors does not know of any other matters which will be presented for action at the meeting.
A copy of the Company’s Annual Report for the year ended December 31, 20082009 is enclosed.
By order of the board of directors,
ANATOLIO B. CRUZ III
Executive Vice President
Chief Legal Officer and Corporate Secretary
March 16, 200915, 2010
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EXHIBIT ASCRIPPS NETWORKS INTERACTIVE, INC.
2008 LONG-TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED)
1. Establishment, Purpose, Duration.
a. Scripps Networks Interactive, Inc., an Ohio corporation (hereinafter referred to as the “Company”), maintains the Scripps Networks Interactive, Inc. 2008 Long-Term Incentive Plan, as amended (hereinafter referred to as the “Plan”).
b. The purpose of the Plan is to attract and retain Directors, officers and other key employees of the Company and its Subsidiaries and to provide to such persons incentives and rewards for superior performance.
c. The Plan was initially adopted effective immediately prior to the “Distribution Date” as defined in the Employee Matters Agreement by and between The E. W. Scripps Company and the Company (the “Effective Date”). The Company has amended and restated the Plan as provided herein effective as of February 18, 2010, subject to approval of the shareholders of the Company at the annual shareholder meeting to be held on April 28, 2010 (the “Approval Date”). Each outstanding Award granted under the Plan prior the Approval Date shall be administered under, and be subject to the terms and conditions of, the Plan; provided that an Award shall continue to be governed by the terms of the Plan as in effect prior to the Approval Date to the extent that a provision of the Plan, as amended and restated, would result in adverse tax consequences to the Participant with respect to such Award, impair the rights of a Participant under such Award, or result in adverse financial accounting treatment to the Company. Definitions of capitalized terms used in the Plan are contained in Section 25 of the Plan.
d. No Award may be granted under the Plan after the close of business on the tenth (10th) anniversary of the Effective Date, or such earlier date as the Board shall determine. The Plan will remain in effect with respect to outstanding Awards until no Awards remain outstanding.
2. Shares Available Under the Plan.
a. The maximum number of Shares that may be issued or delivered pursuant to Awards under the Plan shall be 19,000,000 Shares. The aggregate number of Shares available for issuance or delivery under the Plan shall be subject to adjustment as provided in Section 15. Shares issued or delivered pursuant to an Award may be authorized but unissued Shares, treasury Shares, including Shares purchased in the open market, or a combination of the foregoing.
b. If any Award granted pursuant to the Plan terminates or is forfeited without having been exercised in full, or if any Award granted pursuant to the Plan is settled (or can be paid only) in cash, then the underlying Shares, to the extent of any such forfeiture, termination or cash settlement, again shall be available for grant under the Plan and credited toward the Plan limit as set forth in Section 2(a). Except as may be required by reason of Section 422 and related provisions of the Code, Shares issued or delivered under the Plan as a Substitute Award or in settlement of a Substitute Award shall not reduce or be counted against the Shares available for Awards under the Plan and will not count against the Plan limit as set forth in Section 2(a) to the extent that the rules and regulations of any stock exchange or other trading market on which the Shares are listed or traded provide an exemption from shareholder approval for assumption, substitution, conversion, adjustment, or replacement of outstanding awards in connection with mergers, acquisitions, or other corporate combinations.
c. Notwithstanding any other provision herein, the following Shares shall not again be available for grant as described above: (i) Shares tendered in payment of the Exercise Price of a Stock Option, (ii) Shares withheld by the Company or any Subsidiary to satisfy a tax withholding obligation, and (iii) Shares that are repurchased by the Company with Stock Option proceeds. Moreover, all Shares covered by a SAR, to the extent that it is exercised and settled in Shares, and whether or not Shares are actually issued or delivered to the Participant upon exercise of the right, shall be considered issued or delivered pursuant to the Plan for purposes of Section 2(a).
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d. Subject to adjustment as provided in Section 15 of the Plan, up to 5,000,000 Shares may be issued or delivered with respect to ISOs.
e. Subject to adjustment as provided in Section 15 of the Plan, the following limits shall apply with respect to Awards that are intended to qualify for the Performance-Based Exception:
i. The maximum aggregate number of Shares that may be subject to Stock Options or SARs granted in any calendar year to any one Participant shall be 1,000,000 Shares.
ii. The maximum aggregate number of Restricted Shares and Shares issuable or deliverable under Performance Shares, Restricted Share Units and Other Stock-Based Awards granted in any calendar year to any one Participant shall be 750,000 Shares.
iii. The maximum aggregate compensation that can be paid pursuant to Performance Units or cash-based Awards under Section 10 granted in any calendar year to any one Participant shall be $5,000,000 or a number of Shares having an aggregate Fair Market Value not in excess of such amount.
iv. The maximum Dividend Equivalents that may be paid in any calendar year to any one Participant shall be $500,000.
3. Administration of the Plan.
a. The Plan shall be administered by the Compensation Committee of the Board or such other committee (the “Committee”) as the Board shall select consisting of two or more members of the Board each of whom is a “non-employee director” within the meaning ofRule 16b-3 (or any successor rule) of the Exchange Act, an “outside director” under regulations promulgated under Section 162(m) of the Code, and an “independent director” under the New York Stock Exchange rules. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board.
b. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Committee hereunder), and except as otherwise provided by the Board, the Committee shall have full and final authority in its discretion to take all actions determined by the Committee to be necessary in the administration of the Plan, including, without limitation, discretion to: select Award recipients; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; grant waivers of terms, conditions, restrictions and limitations applicable to any Award, or accelerate the vesting or exercisability of any Award, in a manner consistent with the Plan; construe and interpret the Plan and any Award Agreement or other agreement or instrument entered into under the Plan; establish, amend, or waive rules and regulations for the Plan’s administration; and take such other action, not inconsistent with the terms of the Plan, as the Committee deems appropriate.
c. The Board may reserve to itself any or all of the authority and responsibility of the Committee under the Plan or may act as administrator of the Plan for any and all purposes. To the extent the Board has reserved any authority and responsibility or during any time that the Board is acting as administrator of the Plan, it shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 3(c)) shall include the Board. To the extent any action of the Board under the Plan conflicts with actions taken by the Committee, the actions of the Board shall control.
d. Notwithstanding the above, the Board or Committee may, by resolution, expressly delegate to a special committee, consisting of one or more directors who are also officers of the Company, the authority, within specified parameters established by the Board or Committee, to (i) designate Employees or Directors to be recipients of Awards under the Plan, and (ii) to determine the type and number of such Awards to be received by any such Participants;provided,however, that such delegation of duties and responsibilities to a special committee of the Board may not be made with respect to the grant of Awards to Employees who are subject to Section 16(a) of the Exchange Act on the Date of Grant, or who as of the Date of Grant are reasonably anticipated to become “covered employees” within the meaning of Section 162(m) of the Code during the term of the Award. The acts of such special committee shall be treated hereunder as acts of the Board or Committee, as applicable, and such special committee shall report regularly to the Board or Committee, as applicable, regarding the delegated duties and responsibilities and any Awards so granted.
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e. The Committee shall have no obligation to treat Participants or eligible Participants uniformly, and the Committee may make determinations made under the Plan selectively among Participants who receive, or Employees or Directors who are eligible to receive, Awards (whether or not such Participants or eligible Employees or Directors are similarly situated). All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Committee shall be final, conclusive and binding on all persons, including the Company, its Subsidiaries, its shareholders, Directors, Employees, and their estates and beneficiaries.
4. Eligibility and Participation.
a. Each Employee and Director is eligible to participate in the Plan.
b. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees and Directors those to whom Awards shall be granted and shall determine, in its sole discretion, the nature of any and all terms permissible by Applicable Law and the amount of each Award.
c. Notwithstanding the foregoing provisions of this Section 4, Incentive Stock Options may be granted only to eligible Participants who are Employees of the Company (or a “parent” or “subsidiary” as defined in Section 424(e) and (f) of the Code). Eligible Participants who are Employees of a Subsidiary may be granted Stock Options or Stock Appreciation Rights under the Plan only if the Subsidiary qualifies as an “eligible issuer of service recipient stock” within the meaning of Section 409A of the Code.
5. Stock Options. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Stock Options to Participants in such number as the Committee shall determine. Each Stock Option grant shall be evidenced by an Award Agreement and shall be subject to the following provisions:
a. The Award Agreement shall separately designate whether the Stock Options are intended to be Incentive Stock Options or Nonqualified Stock Options. Any Incentive Stock Option granted under the Plan shall contain such terms and conditions, consistent with the Plan, as the Committee may determine to be necessary to comply with Section 422 of the Code.
b. The Award Agreement shall specify an Exercise Price for each grant of a Stock Option, which shall be at least equal to the Fair Market Value of a Share on the Date of Grant. In the case of an Incentive Stock Option granted to a Ten Percent Shareholder, the Exercise Price for each grant of a Stock Option shall be at least equal to one hundred ten percent (110%) of the Fair Market Value of a Share on the Date of Grant.
c. The Award Agreement shall specify the expiration date for each Stock Option;provided,however, that no Stock Option shall be exercisable later than the tenth (10th) anniversary of its Date of Grant. In the case of an Incentive Stock Option granted to a Ten Percent Shareholder, the Incentive Stock Option shall not be exercisable later than the fifth (5th) anniversary of its Date of Grant.
d. The Award Agreement shall specify the period or periods of continuous service by the Participant with the Company or any Subsidiary that is necessary, the Performance Objectives that must be achieved, or any other conditions that must be satisfied, before the Stock Option or installments thereof will become exercisable.
e. The Award Agreement shall specify whether the Exercise Price shall be payable to the Company: (i) in cash or its equivalent; (ii) subject to such terms, conditions and limitations as the Committee may prescribe, by tendering (either by actual delivery or attestation) unencumbered Shares previously acquired by the Participant exercising such Stock Option having an aggregate Fair Market Value at the time of exercise equal to the total Exercise Price; (iii) by any other method approved or accepted by the Committee in its sole discretion, including, if the Committee so determines, a cashless broker-assisted exercise that complies with all Applicable Laws; or (iv) by a combination of the foregoing methods. The Committee may limit any method of payment for administrative convenience, to comply with Applicable Laws, or otherwise.
f. The Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Stock Option following termination of the Participant’s employment or provision of services to the Companyand/or its Subsidiaries, as the case may be.
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g. Notwithstanding anything in this Section 5 to the contrary, Stock Options designated as ISOs shall not be eligible for treatment under the Code as ISOs, and shall instead be treated as Nonqualified Stock Options, to the extent that either (i) the aggregate Fair Market Value of Shares (determined as of the Date of Grant) with respect to which such Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Subsidiary) exceeds $100,000, taking Stock Options into account in the order in which they were granted; or (ii) such Stock Options otherwise remain exercisable but are not exercised within three (3) months after termination of employment (or such other period of time provided in Section 422 of the Code).
h. The Committee or its delegate will automatically order the cashless exercise ofin-the-money Nonqualified Stock Options that have vested but have not been exercised on the expiration date of the Award. Participants who are subject to the preclearance section of the Company’s Insider Trading Policy are excluded from this automatic exercise provision.
6. Stock Appreciation Rights. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant SARs to Participants in such number as the Committee shall determine. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SAR. Each SAR grant shall be evidenced by an Award Agreement and shall be subject to the following provisions:
a. The Award Agreement shall specify a Grant Price for each grant of a SAR. The Grant Price for a Freestanding SAR shall be at least equal to the Fair Market Value of a Share on the Date of Grant. The Grant Price of Tandem SARs shall be equal to the Exercise Price of the related Stock Option.
b. The Award Agreement shall set forth the expiration date for each SAR;provided,however, that no SAR shall be exercisable later than the tenth (10th) anniversary of its Date of Grant.
c. The Award Agreement for a Freestanding SAR shall specify the period or periods of continuous service by the Participant with the Company or any Subsidiary that is necessary, the Performance Objectives that must be achieved, or any other conditions that must be satisfied, before the Freestanding SAR or installments thereof will become exercisable. Each vested Freestanding SAR that has not yet been exercised will be exercised automatically on the last day prior to the expiration date established by the Committee and set forth in the Award Agreement.
d. Tandem SARs may be exercised for all or part of the Shares subject to the related Stock Option upon the surrender of the right to exercise the equivalent portion of the related Stock Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Stock Option is then exercisable. Notwithstanding any other provision of the Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the excess of the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised over the Exercise Price of the underlying ISO; and (c) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Exercise Price of the ISO. Each vested Tandem SAR that has not yet been exercised will be exercised automatically on the last day prior to the expiration date of the related Stock Option, so long as the Fair Market Value of a Share on that date exceeds the Exercise Price of the related Stock Option.
e. Upon the exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (i) the excess of the Fair Market Value of a Share on the date of exercise over the Grant Price, by (ii) the number of Shares with respect to which the SAR is exercised. The payment upon the SAR exercise shall be in cash, Shares of equivalent value, or in some combination thereof, as determined by the Committee in its sole discretion. The determination of the Committee with respect to the form of payout of SARs shall be set forth in the Award Agreement pertaining to the grant of the Award.
f. The Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment with or provision of services to the Companyand/or its Subsidiaries, as the case may be.
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7. Restricted Shares. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant or sell Restricted Shares to Participants in such number as the Committee shall determine. Each grant or sale of Restricted Shares shall be evidenced by an Award Agreement and shall be subject to the following provisions:
a. Each grant or sale of Restricted Shares shall constitute an immediate transfer of the ownership of Shares to the Participant in consideration of the performance of services, subject to the substantial risk of forfeiture and restrictions on transfer as provided in this Section 7.
b. Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Fair Market Value per Share at the Date of Grant.
c. The Award Agreement shall specify the Period of Restriction for each Restricted Shares grant.
d. During the applicable Period of Restriction, the transferability of the Restricted Shares shall be prohibited or restricted in the manner and to the extent prescribed by the Committee and set forth in the Award Agreement (which restrictions may include, without limitation, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Shares to a continuing substantial risk of forfeiture in the hands of any transferee).
e. Unless otherwise determined by the Committee in its sole discretion and set forth in the Award Agreement, to the extent permitted or required by Applicable Law, as determined by the Committee, Participants holding Restricted Shares may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction.
f. Any such grant or sale of Restricted Shares may require that any or all dividends or other distributions paid thereon during the period of such restrictions be automatically deferred and reinvested in additional Restricted Shares, which may be subject to the same restrictions as the underlying Award.
g. Unless otherwise directed by the Committee, (i) all certificates representing Restricted Shares will be held in custody by the Company until all restrictions thereon have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such Shares, or (ii) all uncertificated Restricted Shares will be in book entry form with appropriate restrictions entered into the records of the Company’s transfer agent relating to the transfer of such Restricted Shares, and any required notice shall be provided.
h. The Committee may provide in an Award Agreement that the Award of Restricted Shares is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Shares Award, the Participant shall be required to file promptly a copy of such election with the Company.
8. Restricted Share Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant or sell Restricted Share Units to Participants in such number as the Committee shall determine. Each grant or sale of Restricted Share Units shall be evidenced by an Award Agreement and shall be subject to the following provisions:
a. Each such grant or sale of Restricted Share Units shall constitute the agreement by the Company to issue or deliver Shares to the Participant following the end of the Period of Restriction in consideration of the performance of services.
b. Each such grant or sale of Restricted Share Units may be made without additional consideration or in consideration of a payment by such Participant that is less than the Fair Market Value per Share at the Date of Grant.
c. The Award Agreement shall specify the Period of Restriction for each Restricted Share Unit grant.
d. Each Award Agreement shall set forth the payment date for the Restricted Share Units, which date shall not be earlier than the end of the applicable Period of Restriction.
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e. The Award Agreement shall specify whether the Company shall pay earned Restricted Share Units by issuance or delivery of Shares or by payment in cash of an amount equal to the Fair Market Value of such Shares (or a combination thereof).
9. Performance Shares and Performance Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance Shares or Performance Units to Participants in such number as the Committee shall determine. Each grant of Performance Shares or Performance Units shall be evidenced by an Award Agreement and shall be subject to the following provisions:
a. Each Performance Unit shall have an initial dollar value determined by the Committee. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the Date of Grant. The Committee shall set Performance Objectives in its sole discretion which, depending on the extent to which they are met, will determine the valueand/or number of Performance Units or Performance Shares that will be paid to the Participant.
b. The Award Agreement shall specify the Performance Period for each grant of Performance Shares and Performance Units.
c. Subject to the terms of the Plan, after the applicable Performance Period has ended, the holder of Performance Units or Performance Shares shall be entitled to receive payout on the value and number of Performance Units or Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Objectives have been achieved.
d. Each Award Agreement shall set forth the date for settlement of the Performance Shares and Performance Units, which date shall not be earlier than the end of the Performance Period and following the Committee’s determination of actual performance against the Performance Objectives and related goals established by the Committee.
e. The Award Agreement shall specify whether the earned Performance Shares and earned Performance Units shall be paid by the Company by issuance or delivery of Shares, Restricted Shares or Restricted Share Units or by payment in cash of an amount equal to the Fair Market Value of such Shares (or a combination thereof).
10. Other Stock-Based Awards.
a. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant or sell Other Stock-Based Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares or factors that may influence the value of Shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, purchase rights for Shares, awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee, and awards valued by reference to the book value of Shares or the value of securities of, or the performance of specified Subsidiaries or affiliates or other business units of, the Company. The Committee shall determine the terms and conditions of such awards, including the Period of Restriction, if applicable. Shares issued or delivered pursuant to an award in the nature of a purchase right granted under this Section 10 shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares, other awards, notes or other property, as the Committee shall determine.
b. Cash awards, as an element of or supplement to any other Award granted under the Plan, may also be granted pursuant to this Section 10.
c. The Committee is authorized to grant Shares purely as a “bonus” and not subject to any restrictions or conditions, or to grant Shares or other Awards in lieu of obligations of the Company or a Subsidiary to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee.
11. Dividend Equivalents. At the discretion of the Committee, Awards granted pursuant to the Plan may provide Participants with the right to receive Dividend Equivalents, which may be paid currently or credited to an
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account for the Participants, and may be settled in cashand/or Shares, as determined by the Committee in its sole discretion, subject in each case to such terms and conditions as the Committee shall establish. No Dividend Equivalents shall relate to Shares underlying a Stock Option or SAR unless such Dividend Equivalent rights are explicitly set forth as a separate arrangement and do not cause any such Stock Option or SAR to be subject to Section 409A of the Code.
12. Compliance with Section 409A. Awards granted under the Plan shall be designed and administered in such a manner that they are either exempt from the application of, or comply with, the requirements of Section 409A of the Code. To the extent that the Committee determines that any award granted under the Plan is subject to Section 409A of the Code, the Award Agreement shall incorporate the terms and conditions necessary to avoid the imposition of an additional tax under Section 409A of the Code upon a Participant. Notwithstanding any other provision of the Plan or any Award Agreement (unless the Award Agreement provides otherwise with specific reference to this Section): (i) an Award shall not be granted, deferred, accelerated, extended, paid out, settled, substituted or modified under the Plan in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon a Participant; and (ii) if an Award is subject to Section 409A of the Code, and if the Participant holding the award is a “specified employee” (as defined in Section 409A of the Code, with such classification to be determined in accordance with the methodology established by the Company), no distribution or payment of any amount shall be made before a date that is six (6) months following the date of such Participant’s “separation from service” (as defined in Section 409A of the Code) or, if earlier, the date of the Participant’s death. Although the Company intends to administer the Plan so that Awards will be exempt from, or will comply with, the requirements of Section 409A of the Code, the Company does not warrant that any Award under the Plan will qualify for favorable tax treatment under Section 409A of the Code or any other provision of federal, state, local, ornon-United States law. The Company shall not be liable to any Participant for any tax, interest, or penalties the Participant might owe as a result of the grant, holding, vesting, exercise, or payment of any Award under the Plan.
13. Compliance with Section 162(m).
a. The Committee may specify that the granting, vesting or payment of an Award will be conditioned upon the degree of attainment of one or more Performance Objectives. If the Award is intended to qualify for the Performance-Based Exception, then the Performance Objectives shall be based on specified levels of or growth in one or more of the following criteria: earnings per share; segment profit; gross margin; operating or other expenses; earnings before interest and taxes (“EBIT”), earnings before interest, taxes, depreciation and amortization; free cash flow; net income; return on investment (determined with reference to one or more categories of income or cash flow and one or more categories of assets, capital or equity); stock price appreciation; viewer ratings or impressions; online revenue; online segment profit; website traffic; market share; and revenue.
b. The Performance Period for any Award that is intended to qualify for the Performance-Based Exception shall be specified in the Award Agreement. The Performance Objectives shall be established not later than 90 days after the beginning of the Performance Period or, if earlier, by the date which is no later than the date that 25% of the applicable Performance Period has elapsed.
c. Notwithstanding any other provision of the Plan, payment or vesting of any such Award shall not be made until the Committee certifies in writing that the applicable Performance Objectives and any other material terms of such Award were in fact satisfied in a manner conforming to applicable regulations under Section 162(m) of the Code. The Committee shall not have discretion to increase the amount of compensation that is payable upon achievement of the designated Performance Objectives, but the Committee may reduce the amount of compensation that is payable upon achievement of the designated Performance Objectives.
14. Transferability.
a. Except as otherwise determined by the Committee pursuant to the provisions of Section 14(c), no Award or Dividend Equivalents paid with respect to Awards made under the Plan shall be transferable by the Participant except by will or the laws of descent and distribution;provided, that if so determined by the Committee, each Participant may, in a manner established by the Board or the Committee, designate a beneficiary to exercise the rights of the Participant with respect to any Award upon the death of the Participant and to receive Shares or other property issued or delivered under such Award. Except as otherwise determined by the Committee, Stock Options
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and SARs will be exercisable during a Participant’s lifetime only by him or her or, in the event of the Participant’s legal incapacity to do so, by his or her guardian or legal representative acting on behalf of the Participant in a fiduciary capacity under state lawand/or court supervision.
b. The Committee may specify in an Award Agreement that part or all of the Shares that are to be issued or delivered by the Company upon the exercise of Stock Options or SARs, upon the termination of the Period of Restriction applicable to Restricted Shares or Restricted Share Units or upon payment under any grant of Performance Shares or Performance Units will be subject to further restrictions on transfer.
c. Notwithstanding Section 14(a), the Committee may determine that Awards (other than Incentive Stock Options) may be transferable by a Participant, without payment of consideration therefor by the transferee, only to any one or more family members (as defined in the General Instructions toForm S-8 under the Securities Act of 1933, or any successor provision) of the Participant;provided,however, that (i) no such transfer shall be effective unless reasonable prior notice (as specified by the Committee and set forth in the Award Agreement) thereof is delivered to the Company and such transfer is thereafter effected in accordance with any terms and conditions that shall have been made applicable thereto by the Board or the Committee, and (ii) any such transferee shall be subject to the same terms and conditions hereunder as the Participant.
15. Adjustments. In the event of any equity restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation), such as a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend, the Committee shall cause there to be an equitable adjustment in the numbers of Shares specified in Section 2 of the Plan and, with respect to outstanding Awards, in the number and kind of Shares subject to outstanding Awards, the Exercise Price, Grant Price or other price of Shares subject to outstanding Awards, in each case to prevent dilution or enlargement of the rights of Participants. In the event of any other change in corporate capitalization, or in the event of a merger, consolidation, liquidation, or similar transaction, the Committee may, in its sole discretion, cause there to be an equitable adjustment as described in the foregoing sentence, to prevent dilution or enlargement of rights;provided,however, that, unless otherwise determined by the Committee, the number of Shares subject to any Award shall always be rounded down to a whole number. Notwithstanding the foregoing, the Committee shall not make any adjustment pursuant to this Section 15 that would (i) cause any Stock Option intended to qualify as an ISO to fail to so qualify; (ii) cause an Award that is otherwise exempt from Section 409A of the Code to become subject to Section 409A, or (iii) cause an Award that is subject to Section 409A of the Code to fail to satisfy the requirements of Section 409A. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan.
16. Fractional Shares. The Company shall not be required to issue or deliver any fractional Shares pursuant to the Plan and, unless otherwise provided by the Committee, fractional shares shall be settled in cash.
17. Withholding Taxes. To the extent required by Applicable Law, a Participant shall be required to satisfy, in a manner satisfactory to the Company or Subsidiary, as applicable, any withholding tax obligations that arise by reason of a Stock Option or SAR exercise, the vesting of or settlement of Shares under an Award, an election pursuant to Section 83(b) of the Code or otherwise with respect to an Award. The Company and its Subsidiaries shall not be required to issue or deliver Shares, make any payment or to recognize the transfer or disposition of Shares until such obligations are satisfied. The Committee may permit or require these obligations to be satisfied by having the Company withhold a portion of the Shares that otherwise would be issued or delivered to a Participant upon exercise of the Stock Option or SAR or upon the vesting or settlement of an Award, or by tendering Shares previously acquired, in each case having a Fair Market Value equal to the minimum amount required to be withheld or paid. Any such elections are subject to such conditions or procedures as may be established by the Committee and may be subject to disapproval by the Committee.
18. Foreign Employees. In order to facilitate the making of any grant or combination of grants under the Plan, the Committee may provide for such special terms for Awards to Participants who are foreign nationals or who are employed by the Company or any Subsidiary outside of the United States of America as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to or amendments, restatements or alternative versions of the Plan as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of the Plan as in effect
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for any other purpose, and the Corporate Secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as the Plan. No such special terms, supplements, amendments or restatements, however, shall include any provisions that are inconsistent with the terms of the Plan as then in effect unless the Plan could have been amended to eliminate such inconsistency without further approval by the shareholders of the Company.
19. Change in Control.
a. Except as otherwise provided in a Participant’s Award Agreement or pursuant to Section 19(b), upon the occurrence of a Change in Control, unless otherwise specifically prohibited under Applicable Laws:
(i) any and all outstanding Stock Options and SARs granted hereunder shall become immediately vested and exercisable and shall remain exercisable for the full duration of their term;
(ii) any Period of Restriction or other restriction imposed on Restricted Shares, Restricted Share Units, and Other Stock-Based Awards shall immediately lapse; and
(iii) any and all Performance Shares, Performance Units and other Awards (if performance-based) shall immediately vest in full at the target level.
b. In connection with a Change in Control, the Committee may, in its sole discretion, either by the terms of the Award Agreement applicable to any Award or by resolution adopted prior to the occurrence of the Change in Control, provide that any outstanding Award (or a portion thereof) shall, upon the occurrence of such Change in Control, be cancelled in exchange for a payment in cash in an amount based on the Fair Market Value of the Shares subject to the Award (less any Exercise Price or Grant Price), which amount may be zero (0) if applicable.
20. Detrimental Activity.
a. Any Award Agreement may provide that if the Committee determines a Participant has engaged in any Detrimental Activity, either during service with the Company or a Subsidiary or within a specified period after termination of such service, then, promptly upon receiving notice of the Committee’s determination, the Participant shall:
(i) forfeit that Award to the extent then held by the Participant;
(ii) return to the Company or the Subsidiary all Shares that the Participant has not disposed of that had been acquired pursuant to that Award, in exchange for payment by the Company or the Subsidiary of any amount actually paid therefor by the Participant; and
(iii) with respect to any Shares acquired pursuant to that Award that were disposed of, pay to the Company or the Subsidiary, in cash, the excess, if any, of: (A) the Fair Market Value of the Shares on the date acquired, over (B) any amount actually paid by the Participant for the Shares.
b. To the extent that such amounts are not immediately returned or paid to the Company as provided herein, the Company may, to the extent permitted by law, seek other remedies, including a set off of the amounts so payable to it against any amounts that may be owing from time to time by the Company or a Subsidiary to the Participant for any reason, including, without limitation, wages, or vacation pay or other benefits;provided, however, that, except to the extent permitted by TreasuryRegulation Section 1.409A-3(j)(4), such offset shall not apply to amounts that are “deferred compensation” within the meaning of Section 409A of the Code.
21. Amendment, Modification and Termination.
a. The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part;provided,however, that no alteration or amendment that requires shareholder approval in order for the Plan to continue to comply with the New York Stock Exchange rules or any rule promulgated by the SEC or any other securities exchange on which Shares are listed or any other Applicable Laws shall be effective unless such amendment shall be approved by the requisite vote of shareholders of the Company entitled to vote thereon within the time period required under such applicable listing standard or rule.
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b. The Committee may in its sole discretion at any time (i) provide that all or a portion of a Participant’s Stock Options, SARs, and other Awards in the nature of rights that may be exercised shall become fully or partially exercisable; (ii) provide that all or a part of the Period of Restriction or other time-based vesting restrictions on all or a portion of the outstanding Awards shall lapse,and/or that any Performance Objectives or other performance-based criteria with respect to any Awards shall be deemed to be wholly or partially satisfied; or (iii) waive any other limitation or requirement under any such Award, in each case, as of such date as the Committee may, in its sole discretion, declare. Unless otherwise determined by the Committee, any such adjustment that is made with respect to an Award that is intended to qualify for the Performance-Based Exception shall be made at such times and in such manner as will not cause such Awards to fail to qualify under the Performance-Based Exception. Additionally, the Committee shall not make any adjustment pursuant to this Section 21(b) that would cause an Award that is otherwise exempt from Section 409A of the Code to become subject to Section 409A; or that would cause an Award that is subject to Section 409A of the Code to fail to satisfy the requirements of Section 409A.
c. Except for adjustments made pursuant to Section 15, the Board or the Committee will not, without the further approval of the shareholders of the Company, authorize the amendment of any outstanding Stock Option or SAR to reduce the Exercise Price or Grant Price, respectively. No Stock Option or SAR will be cancelled and replaced with awards having a lower Exercise Price or Grant Price, respectively, or for another Award, or for cash without further approval of the shareholders of the Company, except as provided in Section 15. Furthermore, no Stock Option or SAR will provide for the payment, at the time of exercise, of a cash bonus or grant or sale of another Award without further approval of the shareholders of the Company. This Section 21(c) is intended to prohibit the repricing of “underwater” Stock Options or SARs without shareholder approval and will not be construed to prohibit the adjustments provided for in Section 15.
d. Notwithstanding any other provision of the Plan to the contrary (other than Section 15, 20(b) and 21(e)), no termination, amendment, suspension, or modification of the Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award. Notwithstanding the preceding sentence, any ISO granted under the Plan may be modified by the Committee to disqualify such Stock Option from treatment as an “incentive stock option” under Section 422 of the Code.
e. Notwithstanding any other provision of the Plan to the contrary, the Committee shall be authorized to make minor or administrative amendments to the Plan and may amend the Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or an Award Agreement to any present or future Applicable Law (including, but not limited to, Section 409A of the Code), and to the administrative regulations and rulings promulgated there under.
22. Applicable Laws. The obligations of the Company with respect to Awards under the Plan shall be subject to all Applicable Laws and such approvals by any governmental agencies as the Committee determines may be required. This Plan and each Award Agreement shall be governed by the laws of the State of Ohio, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, Participants are deemed to submit to the exclusive jurisdiction and venue of the state courts of Hamilton County, Ohio and the federal courts in the Southern District of Ohio, to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.
23. Substitute Awards for Awards Granted by Other Entities. Substitute Awards may be granted under the Plan for grants or awards held by employees of a company or entity who become Employees or Directors of the Company or a Subsidiary as a result of the acquisition, merger or consolidation of the employer company by or with the Company or a Subsidiary. Except as otherwise provided by Applicable Law and notwithstanding anything in the Plan to the contrary, the terms, provisions and benefits of the Substitute Awards so granted may vary from those set forth in or required or authorized by the Plan to such extent as the Committee at the time of the grant may deem appropriate to conform, in whole or part, to the terms, provisions and benefits of grants or awards in substitution for which they are granted.
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24. Miscellaneous.
a. Except with respect to Stock Options and SARs, the Committee may permit Participants to elect to defer the issuance or delivery of Shares or the settlement of Awards in cash under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of the Plan. The Committee also may provide that deferred issuances and settlements include the payment or crediting of Dividend Equivalents or interest on the deferral amounts. All elections and deferrals permitted under this provision shall comply with Section 409A of the Code, including setting forth the time and manner of the election (including a compliant time and form of payment), the date on which the election is irrevocable, and whether the election can be changed until the date it is irrevocable.
b. This Plan shall not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor shall it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time. No Employee or Director shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive future Awards.
c. Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right or title to any assets, funds or property of the Company or any Subsidiary, including without limitation, any specific funds, assets or other property which the Company or any Subsidiary may set aside in anticipation of any liability under the Plan. A Participant shall have only a contractual right to an Award or the amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
d. If any provision of the Plan is or becomes invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended or limited in scope to conform to Applicable Laws or, in the discretion of the Committee, it shall be stricken and the remainder of the Plan shall remain in full force and effect.
e. By accepting any benefit under the Plan, each Participant and each person claiming under or through any such Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any action taken under the Plan by the Committee, the Board or the Company, in any case in accordance with the terms and conditions of the Plan.
f. No Participant or any eligible Employee or Director shall have any claim to be granted any Award under the Plan. No Participant shall have any rights as a shareholder with respect to any Shares subject to Awards granted to him or her under the Plan prior to the date as of which he or she is actually recorded as the holder of such Shares upon the stock records of the Company.
g. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Company or any Subsidiary unless provided otherwise in such other plan.
h. All obligations of the Company under the Plan and with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or other event, or a sale or disposition of all or substantially all of the businessand/or assets of the Company and references to the “Company” herein and in any Award agreements shall be deemed to refer to such successors.
25. Definitions. As used in the Plan, the following definitions shall apply.
“Affiliate”means any Person controlling or under common control with the Company or any Person of which the Company directly or indirectly has Beneficial Ownership of securities having a majority of the voting power.
“Applicable Laws”means the applicable requirements relating to the administration of equity-based compensation plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Shares are listed or quoted and the Applicable Laws of any other country or jurisdiction where Awards are granted under the Plan.
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“Award”means a Nonqualified Stock Option, Incentive Stock Option, SAR, Restricted Shares Award, Restricted Share Unit, Performance Share, Performance Unit, Other Stock-Based Award or Dividend Equivalent granted pursuant to the terms and conditions of the Plan.
“Award Agreement”means either: (i) an agreement, either in written or electronic format, entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under the Plan; or (ii) a statement, either in written or electronic format, issued by the Company to a Participant describing the terms and provisions of such Award, which need not be signed by the Participant.
“Beneficial Ownership”and “Beneficial Owner” have the meanings given such terms inRule 13d-3 promulgated under the Exchange Act.
“Board”means the Board of Directors of the Company.
“Cause”as a reason for a Participant’s termination of employment shall have the meaning assigned such term in (i) the employment agreement, if any, between the Participant and the Company or Subsidiary, or (ii) during the applicable severance protection period under the Scripps Networks Interactive, Inc. Executive Change in Control Plan (the “CIC Severance Plan”), the CIC Severance Plan, if the Participant is a participant in such plan. If the Participant is not a party to an employment agreement with the Company or a Subsidiary in which such term is defined, or if during the applicable severance protection period, the Participant is not a participant in the CIC Severance Plan, then unless otherwise defined in the applicable Award Agreement, “Cause” shall mean: (i) commission of a felony or an act or series of acts that results in material injury to the business or reputation of the Company or any Subsidiary; (ii) willful failure to perform duties of employment, if such failure has not been cured in all material respects within twenty (20) days after the Company or any Subsidiary, as applicable, gives notice thereof; or (iii) breach of any material term, provision or condition of employment, which breach has not been cured in all material respects within twenty (20) days after the Company or any Subsidiary, as applicable, gives notice thereof.
“Change in Control”means (except as may be otherwise prescribed by the Committee in an Award Agreement): (i) any Person becomes a Beneficial Owner of a majority of the outstanding Common Voting Shares, $.01 par value, of the Company (or shares of capital stock of the Company with comparable or unlimited voting rights), excluding, however, The Edward W. Scripps Trust (the “Trust”) and the trustees thereof, and any person that is or becomes a party to the Scripps Family Agreement, dated October 15, 1992, as amended currently and as it may be amended from time to time in the future (the “Family Agreement”); (ii) the majority of the Board consists of individuals other than Incumbent Directors; or (iii) assets of the Company accounting for 90% or more of the Company’s revenues (hereinafter referred to as “substantially all of the Company’s assets”) are disposed of pursuant to a merger, consolidation, sale, or plan of liquidation and dissolution (unless the Trust or the parties to the Family Agreement have Beneficial Ownership of, directly or indirectly, a controlling interest (defined as owning a majority of the voting power) in the entity surviving such merger or consolidation or acquiring such assets upon such sale or in connection with such plan of liquidation and dissolution).
“Code”means the Internal Revenue Code of 1986, as amended.
“Committee”means the Committee, as specified in Section 3(a), appointed by the Board to administer the Plan.
“Company”has the meaning given such term in Section 1 and any successor thereto.
“Date of Grant”means the date as of which an Award is determined to be effective and designated in a resolution by the Committee and is granted pursuant to the Plan. The Date of Grant shall not be earlier than the date of the resolution and action therein by the Committee. In no event shall the Date of Grant be earlier than the Effective Date.
“Detrimental Activity”except as may be otherwise specified in a Participant’s Award Agreement, means activity that results in termination of the Participant’s employment for Cause.
“Director”means any individual who is a member of the Board who is not an Employee.
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“Dividend Equivalents”means the equivalent value (in cash or Shares) of dividends that would otherwise be paid on the Shares subject to an Award but that have not been issued or delivered, as described in Section 11.
“Effective Date”has the meaning given such term in Section 1.
“Employee”means any employee of the Company or a Subsidiary;provided,however, that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, the term “Employee” has the meaning given to such term in Section 3401(c) of the Code, as interpreted by the regulations thereunder and Applicable Law.
“Exchange Act”means the Securities Exchange Act of 1934 and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time.
“Exercise Price”means the price at which a Share may be purchased by a Participant pursuant to a Stock Option.
“Fair Market Value”means, as of any date, the value of a Share determined as follows: (i) the closing sale price per Share as reported on the New York Stock Exchange, or if there are no sales on such day, on the next preceding trading day during which a sale occurred; and (ii) in the absence of such markets for the Shares, the Fair Market Value shall be determined by the Committee in good faith (which determination shall, to the extent applicable, be made in a manner that complies with Section 409A of the Code), and such determination shall be conclusive and binding for all purposes.
“Free-Standing SAR”means a Stock Appreciation Right granted pursuant to Section 6 that is not granted in tandem with a Stock Option.
“Grant Price”means the price established at the time of grant of an SAR pursuant to Section 6, used to determine whether there is any payment due upon exercise of the SAR.
“Incentive Stock Option”or “ISO” means a Stock Option that is designated as an Incentive Stock Option and that is intended to meet the requirements of Section 422 of the Code.
“Nonqualified Stock Option”means a Stock Option that is not intended to meet the requirements of Section 422 of the Code or otherwise does not meet such requirements.
“Other Stock-Based Awards”means an equity-based or equity-related Award not otherwise described by the terms of the Plan, granted in accordance with the terms and conditions set forth in Section 10.
“Participant”means any eligible individual as set forth in Section 4 who holds one or more outstanding Awards.
“Performance-Based Exception”means the performance-based exception from the tax deductibility limitations of Section 162(m) of the Code.
“Performance Objectives”means the measurable performance objective or objectives established by the Committee pursuant to the Plan. Any Performance Objectives may relate to the performance of the Company or one or more of its Subsidiaries, divisions, departments, units, functions, partnerships, joint ventures or minority investments, product lines or products, or the performance of the individual Participant. The Performance Objectives may be made relative to the performance of a group of comparable companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Objectives as compared to various stock market indices. Performance Objectives may be stated as a combination of the listed factors.
“Performance Period”means the period during which a Performance Objective must be met.
“Performance Share”means a bookkeeping entry that records the equivalent of one Share awarded pursuant to Section 9.
“Performance Unit”means a bookkeeping entry that records a unit awarded pursuant to Section 9.
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“Period of Restriction”means the period during which Restricted Shares, Restricted Share Units or Other Stock-Based Awards are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of Performance Objectives, or upon the occurrence of other events as determined by the Committee, at its discretion), as provided in Sections 7, 8 and 10 herein.
“Person”means Section 3(a)(9) of the Exchange Act, and as used in Sections 13(d) and 14(d) thereof, including a “group” (as defined in Section 13(d) of the Exchange Act).
“Plan”means this Scripps Networks Interactive, Inc. 2008 Long-Term Incentive Plan, amended and restated as provided herein, and as further amended from time to time.
“Restricted Shares”means Shares granted or sold pursuant to Section 7 as to which neither the substantial risk of forfeiture nor the prohibition on transfers referred to in such Section 7 has expired.
“Restricted Share Units”means a grant of the right to receive Shares or cash at the end of a specified Period of Restriction made pursuant to Section 8.
“SEC”means the United States Securities and Exchange Commission.
“Share”means a Class A Common Share of the Company, $0.01 par value per share, or any security into which such Share may be changed by reason of any transaction or event of the type referred to in Section 15.
“Stock Appreciation Right”or “SAR” means a right granted pursuant to Section 6, and shall include both Tandem SARs and Free-Standing SARs.
“Stock Option”means a right to purchase a Share granted to a Participant under the Plan in accordance with the terms and conditions set forth in Section 5. Stock Options may be either Incentive Stock Options or Nonqualified Stock Options.
“Subsidiary”means a corporation, company or other entity (i) more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are now or hereafter, owned or controlled, directly or indirectly, by the Company, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, limited liability company, joint venture or unincorporated association), but more than fifty percent (50%) of whose ownership interest representing the right generally to make decisions for such other entity is now or hereafter, owned or controlled, directly or indirectly, by the Company;provided,however, that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, the term “Subsidiary” has the meaning given to such term in Section 424(f) of the Code, as interpreted by the regulations thereunder and Applicable Law.
“Substitute Awards”means Awards that are granted in assumption of, or in substitution or exchange for, outstanding awards previously granted by an entity acquired directly or indirectly by the Company or with which the Company directly or indirectly combines.
“Tandem SAR”means a Stock Appreciation Right granted pursuant to Section 6 that is granted in tandem with a Stock Option.
“Ten Percent Shareholder”shall mean any Participant who owns more than 10% of the combined voting power of all classes of stock of the Company, within the meaning of Section 422 of the Code.
[END OF DOCUMENT]
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EXHIBIT B
Scripps Networks Interactive, Inc.
Executive Annual Incentive Plan
(as Amended and Restated)
1. Purpose of the Plan; Effective Date
The purpose of the Executive Annual Incentive Plan (the “Plan”) is to promote the interests of Scripps Networks Interactive, Inc. (the “Company”) and its shareholders by providing incentive compensation for certain designated key executives and employees of the Company and its subsidiaries.
This Plan was adopted effective immediately prior to the Distribution Date as defined in the Employee Matters Agreement by and between The E. W. Scripps Company and the Company (the “Effective Date”) by the Board of Directors of the Company. The Plan is amended and restated as provided herein, effective as of February 18, 2010.
2. Definitions
As used in this Plan, the following capitalized terms have the respective meanings set forth in this section:
(a) Act: The Securities Exchange Act of 1934, as amended, or any successor thereto.
(b) Affiliate: Means any Person controlling or under common control with the Company or any Person of which the Company directly or indirectly has Beneficial Ownership of securities having a majority of the voting power.
(c) Award: A periodic cash incentive award granted pursuant to the Plan.
(d) Beneficial Owner: As such term is defined inRule 13d-3 under the Act (or any successor rule thereto).
(e) Board: The Board of Directors of the Company.
(f) Change in Controlshall occur with respect to all participants in the Plan when after the Distribution Date:
(i) any Person becomes a “Beneficial Owner” of a majority of the outstanding Common Voting Shares, $.01 par value, of the Company (or shares of capital stock of the Company with comparable or unlimited voting rights), excluding, however, The Edward W. Scripps Trust (the “Trust”) and the trustees thereof, and any person that is or becomes a party to the Scripps Family Agreement, dated October 15, 1992, as amended currently and as it may be amended from time to time in the future (the “Family Agreement”);
(ii) the majority of the Board of Directors of the Company (the “Board”) consists of individuals other than Incumbent Directors; or
(iii) assets of the Company accounting for 90% or more of the Company’s revenues (hereinafter referred to as “substantially all of the Company’s assets”) are disposed of pursuant to a merger, consolidation, sale, or plan of liquidation and dissolution (unless the Trust or the parties to the Family Agreement have Beneficial Ownership of, directly or indirectly, a controlling interest (defined as owning a majority of the voting power) in the entity surviving such merger or consolidation or acquiring such assets upon such sale or in connection with such plan of liquidation and dissolution);
(g) Change in Controlshall occur with respect to a particular participant in the Plan employed by a particular subsidiary or division of a subsidiary when after the Distribution Date:
(i) any Person, other than the Company or an Affiliate, acquires Beneficial Ownership of securities of the particular subsidiary of the Company employing the participant having at least fifty percent (50%) of the voting power of such subsidiary’s then outstanding securities; or
(ii) the particular subsidiary sells to any Person other than the Company or an Affiliate all or substantially all of the assets of the particular division thereof to which the participant is assigned.
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(h) Code: The internal Revenue Code of 1986, as amended, or any successor thereto.
(i) Committee: The Compensation Committee of the Board, or any successor thereto, or any other committee designated by the Board to assume the obligations of the Committee hereunder.
(j) Company: Scripps Networks Interactive, Inc., an Ohio corporation.
(k) Covered Employee: An employee who is, or who is anticipated to become, a covered employee, as such term is defined in Section 162(m) of the Code (or any successor section thereto).
(l) Distribution Date: Has the meaning given that term in Section 1.
(m) Effective Date: Has the meaning given that term in Section 1.
(n) Incumbent Director: Means a member of the Board on the Distribution Date, provided that any person becoming a director subsequent to the Distribution Date, whose election or nomination for election was supported by a majority of the directors who then comprised the Incumbent Directors shall be considered to be an Incumbent Director.
(o) Participant: A Covered Employee of the Company or any of its Subsidiaries who is selected by the
Committee to participate in the Plan pursuant to Section 4 of the Plan.
(p) Performance Period: The calendar year or any other period that the Committee, in its sole discretion, may determine.
(q) Person: As such term is used for purposes of Section 13(d) or 14(d) of the Act or any successor sections thereto.
(r) Plan: The Scripps Networks Interactive, Inc. Executive Annual Incentive Plan.
(s) Separation from Service: A “separation from service” as defined under Section 409A of the Code. Upon a sale or other disposition of the assets of the Company or any Affiliate to an unrelated purchaser, the Committee reserves the right, to the extent permitted by Section 409A of the Code, to determine whether Participants providing services to the purchaser after and in connection with the purchase transaction have experienced a Separation from Service.
(t) Shares: Class A common shares of the Company.
3. Administration
The Plan shall be administered by the Committee or such other persons designated by the Board. The Committee shall have the authority to select the Covered Employees to be granted Awards under the Plan, to determine the size and terms of an Award (subject to the limitations imposed on Awards in Section 5 below), to modify the terms of any Award that has been granted (except for any modification that would increase the amount of the Award), to determine the time when Awards will be made and the Performance Period to which they relate, to establish performance objectives in respect of such Performance Periods and to certify that such performance objectives were attained; provided, however, that any such action shall be consistent with the applicable provisions of Section 162(m) of the Code. The Committee is authorized to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make any other determinations that it deems necessary or desirable for the administration of the Plan; provided, however, that any action permitted to be taken by the Committee may be taken by the Board, in its discretion. Any decision of the Committee in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. Determinations made by the Committee under the Plan need not be uniform and may be made selectively among Participants, whether or not such Participants are similarly situated. The Committee shall have the right to deduct from any payment made under the Plan any federal, state, local or foreign income or other taxes required by law to be withheld with respect to such payment. To the extent consistent with the applicable provisions of Sections 162(m) of the Code, the Committee may delegate to one or more employees of the Company or any of its Subsidiaries the authority to take actions on its behalf pursuant to the Plan.
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4. Eligibility and Participation
The Committee shall designate those persons who shall be Participants for each Performance Period. Participants shall be selected from among the Covered Employees of the Company and any of its Subsidiaries who are in a position to have a material impact on the results of the operations of the Company or of one or more of its Subsidiaries.
5. Awards
(a) Performance Goals. A Participant’s Award shall be determined based on the attainment of written performance goals approved by the Committee for a Performance Period established by the Committee (i) while the outcome for the Performance Period is substantially uncertain and (ii) no more than 90 days after the commencement of the Performance Period to which the performance goal relates. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, the manner in which it conducts business or other events or circumstances render any performance goal to be unsuitable, the Committee may modify the performance goal or the related levels of achievement, in whole or in part, as the Committee deems appropriate; provided, however, that no such action may result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code. The performance goals, which must be objective, shall be based solely upon specified levels of or growth in one or more or the following criteria:
1. Earnings per share;
2. Segment profit;
3. Gross margin;
4. Operating or other expenses;
5. Earnings before interest and taxes (“EBIT”);
6. Earnings before interest, taxes, depreciation and amortization (“EBITDA”);
7. Free cash flow;
8. Net income;
9. Return on investment (determined with reference to one or more categories of income or cash flow and one or more categories of assets, capital or equity);
10. Stock price appreciation;
11. Viewer ratings or impressions;
12. Online revenue;
13. Online segment profit;
14. Website traffic;
15. Market share; and
16. Revenue.
The foregoing criteria may relate to the Company, one or more of its Subsidiaries or one or more of its divisions, units, partnerships, joint ventures or minority investments, product lines or products or any combination of the foregoing, and may be applied on an absolute basis or be relative to the Company’s annual budget, one or more peer group companies or indices, or any combination thereof, all as the Committee shall determine. In addition, to the degree consistent with Section 162(m) of the Code (or any successor section thereto), the performance goals may be calculated without regard to extraordinary items. The maximum amount of an Award to any Participant with respect to a fiscal year of the Company shall be $4,000,000.
(b) Payment. The Committee shall determine whether, with respect to a Performance Period, the applicable performance goals have been met with respect to a given Participant and, if they have, to so certify, and ascertain the
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amount of the applicable Award. No Awards will be paid for such Performance Period until such certification is made by the Committee. The amount of the Award actually paid to a given Participant may be less than the amount determined by the applicable performance goal formula (including zero), at the discretion of the Committee. The amount of the Award determined by the Committee for a Performance Period shall be paid to the Participant at such time as determined by the Committee in its sole discretion after the end of such Performance Period, but in no event later than March 15 of the calendar year immediately following the end of the Performance Period.
(c) Compliance with Section 162(m) of the Code. The provisions of this Section 5 shall be administered and interpreted in accordance with Section 162(m) of the Code as necessary to ensure the deductibility by the Company or its Subsidiaries of the payment of Awards.
(d) Termination of Employment. If a Participant dies, retires, is assigned to a different position, is granted a leave of absence, or if the Participant’s employment is otherwise terminated (except with cause by the Company, as determined by the Committee in its sole discretion) during a Performance Period (other than a Performance Period in which a Change in Control occurs), a pro rata share of the Participant’s award based on the period of actual participation shall be paid to the Participant after the end of the Performance Period, but in no event later than March 15 of the calendar year immediately following the end of the Performance Period, if it would have become earned and payable had the Participant’s employment status not changed; provided, however, that the amount of the Award actually paid to a given Participant may be less than the amount determined by the applicable performance goal formula (including zero), at the discretion of the Committee.
6. Amendments or Termination
The Board or the Committee may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would impair any of the rights or obligations under any Award theretofore granted to a Participant under the Plan without such Participant’s consent, unless the Board or the Committee, as the case may be, determines in good faith that such action is necessary to comply with Section 409A of the Code;provided, however, that the Board or the Committee may amend the Plan in such manner as it deems necessary to permit the granting of Awards meeting the requirements of the Section 162(m) of the Code or other applicable laws. Notwithstanding anything to the contrary herein, the Board may not amend, alter or discontinue the provisions relating to Section 10 of the Plan after the occurrence of a Change in Control.
7. No Right to Employment
Neither the Plan nor any action taken hereunder shall be construed as giving any Participant or other person any right to continue to be employed by or perform services for the Company or any Subsidiary, and the right to terminate the employment of or performance of services by any Participant at any time and for any reason is specifically reserved to the Company and its Subsidiaries.
8. Nontransferability of Awards
An award shall not be transferable or assignable by the Participant otherwise than by will or by the laws of descent and distribution.
9. Reduction of Awards
Notwithstanding anything to the contrary herein, the Committee, in its sole discretion (but subject to applicable law), may reduce any amounts payable to any Participant hereunder in order to satisfy any liabilities owed to the Company or any of its Subsidiaries by the Participant.
10. Change in Control
In the event that (i) a Participant incurs a Separation from Service during a given Performance Period (the “Affected Performance Period”) and (ii) a Change in Control shall have occurred within the 365 days immediately preceding the date of such Separation from Service, then such Participant shall receive an Award for the Affected Performance Period as if the performance goals for such Performance Period had been achieved at 100%. The Award shall be paid to the Participant within 30 days following the date of his or her Separation from Service; provided, however, that if the Participant is a “specified employee,” as determined under the Company’s policy for determining specified employees, on the date of his or her Separation from Service, then to the extent required in
B-4
order to comply with Section 409A of the Code, the Award shall instead be paid (together with interest at the applicable federal rate under Section 7872(f)(2)(A) of the Code in effect on the date of Separation from Service) within 10 days after the first business day following the six month anniversary of such Separation from Service (or, if the Participant dies during such six-month period, within 10 days after the Participant’s death).
11. Compliance with Section 409A
It is intended that the payments of Awards provided under this Plan shall either be exempt from the application of, or comply with, the requirements of Section 409A of the Code. This Plan shall be construed, administered, and governed in a manner that effects such intent, and the Committee shall not take any action that would be inconsistent with such intent.
12. Miscellaneous Provisions
The Company is the sponsor and legal obligor under the Plan and shall make all payments hereunder. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to ensure the payment of any amounts under the Plan, and the Participants’ rights to the payment hereunder shall be no greater than the rights of the Company’s (or Subsidiary’s) unsecured creditors. All expenses involved in administering the Plan shall be borne by the Company.
13. Choice of Law
The Plan shall be governed by and construed in accordance with Ohio law.
[END OF DOCUMENT]
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YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to annual meeting day.
Please mark your votes as indicated in this exampleWITHHOLDFOR AUTHORITY *EXCEPTIONS. To vote for the following nominees for election as directors: FOR AGAINST ABSTAIN2. To approve an offer by the Company to exchange certain outstanding stock options held by employees and directors for restricted shares to be issued under the Company’s Long-Term Incentive Plan.3. On such other business as may properly come before the meeting.Nominees:(01) John H. Burlingame (05) Nicholas B. Paumgarten (02) Michael R. Costa (06) Mary McCabe Peirce(03) Kenneth W. Lowe (07) Jeffrey Sagansky 3. (04) Jarl Mohn (08) Nackey E. Scagliotti (INSTRUCTIONS: To vote for all nominees, mark the “For” box. To withhold authority to vote for all nominees, mark the “Withhold Authority” box. To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below.)*Exceptions ___Mark Here for Address Change or CommentsSEE REVERSESignature Signature DatePlease sign exactly as your name appears hereon, indicating, where proper, official position or representative capacity. When signing as Attorney, Executor, Administrator, Trustee, etc., give full title as such.FOLD AND DETACH HEREWE ENCOURAGE YOU TO TAKE ADVANTAGE OF | | | | | | | | |
| | | | | | | | |
| | | | | | | INTERNET OR TELEPHONE VOTING, BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to annual meeting day.Scripps | |
| | | | | | | http://www.proxyvoting.com/sni | |
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| Scripps Networks Interactive, Inc.INTERNET http://www.proxyvoting.com/sniUseInc. | | | | | Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site.ORTELEPHONE 1-866-540-5760Usesite. |
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| | | | | | Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.Ifcall. |
| | | | | | | | |
| | | | | | If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.Tocard. |
| | | | | | | | |
| | | | | | To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.Yourenvelope. |
| | | | | | Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.Important notice regarding the Internet availability of proxy materials for the Annual Meeting of shareholdersThe Proxy Statement and the 2008 Annual Report to Stockholders are available at: http://www.proxydocs.com/sni44894card. |
WO#
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6FOLD AND DETACH HERE6
| | | | |
| | Please mark your votes as | | x |
| | indicated in this example | |
| | | | | | | | | | | | | | | | | |
| | | FOR | | WITHHOLD AUTHORITY | | *EXCEPTIONS | | | | | | FOR | | AGAINST | | ABSTAIN |
|
1. | To vote for the following nominees for election as directors: | o | | o | | o | | 2. | | To approve the 2008 Long-Term Incentive Plan. | | o | | o | | o |
| | | | | | | | | | | | | | | | | |
| Nominees: | | | | | | | | | | | | | | | | |
| (01) John H. Burlingame | (05) Nicholas B. Paumgarten | | | | | 3. | | To approve the Executive Annual Incentive Plan. | | o | | o | | o |
| (02) Michael R. Costa | (06) Mary McCabe Peirce | | | | | | | | | | |
| (03) Kenneth W. Lowe | (07) Jeffrey Sagansky | | | | | | | | | | | | | |
| (04) Jarl Mohn | (08) Nackey E. Scagliotti | | | | | 3. | | To transact such other business as may properly come before the meeting. |
| | | | | | | | | | | | | | | | | |
(INSTRUCTIONS: To vote for all nominees, mark the “For” box. To withhold authority to vote for all nominees, mark the “Withhold Authority” box. To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below.)
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*Exceptions | | | | | | | | | | | |
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| | Mark Here for Address Change or Comments SEE REVERSE | o |
Please sign exactly as your name appears hereon, indicating, where proper, official position or representative capacity. When signing as Attorney, Executor, Administrator, Trustee, etc., give full title as such.
ChooseMLinkSMfor fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestor ServiceDirect® atwww.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you through enrollment.
SCRIPPS NETWORKS INTERACTIVE, INC.PROXY FOR COMMON VOTING SHARESTHIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. The undersigned hereby appoints KENNETH W. LOWE, JOSEPH G. NECASTRO and ANATOLIO B. CRUZ III and each of them, as the undersigned’s proxies, with full power of substitution, to attend the Annual Meeting of Shareholders of Scripps Networks Interactive, Inc., to be held at the Queen City Club, Cincinnati, Ohio, on Wednesday, April 29, 2009, at 10:00 A.M., local time, and any adjournment or adjournments thereof, and to vote thereat the number of shares which the undersigned would be entitled to vote, with all the power the undersigned would possess if present in person, as follows:The proxies will vote as specified above, or if a choice is not specified, they will vote FOR the nominees listed in item 1 and FOR approval of the offer to exchange outstanding stock options held by employees and directors for restricted shares listed in item 2.(Continued, and to be signed, on the other side.)BNY MELLON SHAREOWNER SERVICESAddress Change/Comments P.O. BOX 3550(Mark the corresponding box on the reverse side) SOUTH HACKENSACK, NJ 07606-9250FOLD AND DETACH HEREChoose MLinkSMfor fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on to Investor ServiceDirect® at www.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you through enrollment. |
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of shareholdersThe Proxy Statement and the 2009 Annual Report to Stockholders are available at:http://www.proxydocs.com/sni
6FOLD AND DETACH HERE6
SCRIPPS NETWORKS INTERACTIVE, INC.
PROXY FOR COMMON VOTING SHARES
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
The undersigned hereby appoints KENNETH W. LOWE, JOSEPH G. NECASTRO and ANATOLIO B. CRUZ III and each of them, as the undersigned’s proxies, with full power of substitution, to attend the Annual Meeting of Shareholders of Scripps Networks Interactive, Inc., to be held at the Queen City Club, Cincinnati, Ohio, on Wednesday, April 28, 2010, at 10:00 A.M., local time, and any adjournment or adjournments thereof, and to vote thereat the number of shares which the undersigned would be entitled to vote, with all the power the undersigned would possess if present in person, as follows:
The proxies will vote as specified above, or if a choice is not specified, they will vote FOR the nominees listed in item 1 and FOR approval of the 2008 Long-Term Incentive Plan and FOR approval of the Executive Annual Incentive Plan.
(Continued, and to be signed, on the other side.)
Address Change/Comments
(Mark the corresponding box on the reverse side) BNY MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
WO#
67249
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to annual meeting day.
Please mark your votes as indicated in this exampleWITHHOLDFOR AUTHORITY *EXCEPTIONS1. To vote for the following nominees for 2. On such other business as may properly come before the meeting. election as directors: Nominees: (01) David A. Galloway (02) Dale Pond (03) Ronald W. Tysoe(INSTRUCTIONS: To vote for all nominees, mark the “For” box. To withhold authority to vote for all nominees, mark the “Withhold Authority” box. To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below.)*Exceptions ___Mark Here for Address Change or CommentsSEE REVERSESignature Signature DatePlease sign exactly as your name appears hereon, indicating, where proper, official position or representative capacity. When signing as Attorney, Executor, Administrator, Trustee, etc., give full title as such.FOLD AND DETACH HEREWE ENCOURAGE YOU TO TAKE ADVANTAGE OF | | | | | | | | |
| | | | | | | | |
| | | | | | | INTERNET OR TELEPHONE VOTING, BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to annual meeting day.INTERNET | |
| | | | | | | http://www.proxyvoting.com/sniScrippssni | |
| | | | | | | | |
| Scripps Networks Interactive, Inc. | | | | | Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site.ORTELEPHONE 1-866-540-5760Usesite. |
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| | | | | | | | |
| | | | | | Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.Ifcall. |
| | | | | | | | |
| | | | | | If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.Tocard. |
| | | | | | | | |
| | | | | | To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.Yourenvelope. |
| | | | | | Your Internet or telephone vote authorizes the named proxiesImportant notice regarding the Internet availability ofproxies to vote your shares in the same manner as if you marked, proxy materials for the Annual Meeting of shareholders signed and returned your proxy card.The Proxy Statement and the 2008 Annual Report to Stockholders are available at: http://www.proxydocs.com/sni44894-blcard. |
WO#
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6FOLD AND DETACH HERE6
| | | | |
| | Please mark your votes as | | x |
| | indicated in this example | |
| | | | | | | | | | | | | | | | | |
| | | FOR | | WITHHOLD AUTHORITY | | *EXCEPTIONS | | | | | | | | | | |
|
1. | To vote for the following nominees for election as directors: | o | | o | | o | | 2. | | To transact such other business as may properly come before the meeting. |
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| Nominees: | | | | | | | | | | | | | | | |
| (01) David A. Gall oway | | | | | | | | | | | | | | | |
| (02) Dale Pond | | | | | | | | | | | | | | | |
| (03) Ronald W. Tysoe | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
|
(INSTRUCTIONS: To vote for all nominees, mark the “For” box. To withhold authority to vote for all nominees, mark the “Withhold Authority” box. To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below.)
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*Exceptions | | | | | | | | | | | | |
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| | Mark Here for Address Change or Comments SEE REVERSE | o |
Please sign exactly as your name appears hereon, indicating, where proper, official position or representative capacity. When signing as Attorney, Executor, Administrator, Trustee, etc., give full title as such.
ChooseMLinkSM for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestor ServiceDirect® atwww.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you through enrollment.
SCRIPPS NETWORKS INTERACTIVE, INC.PROXY FOR CLASS A COMMON SHARESTHIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. The undersigned hereby appoints KENNETH W. LOWE, JOSEPH G. NECASTRO and ANATOLIO B. CRUZ III and each of them, as the undersigned’s proxies, with full power of substitution, to attend the Annual Meeting of Shareholders of Scripps Networks Interactive, Inc., to be held at the Queen City Club, Cincinnati, Ohio, on Wednesday, April 29, 2009, at 10:00 A.M., local time, and any adjournment or adjournments thereof, and to vote thereat the number of shares which the undersigned would be entitled to vote, with all the power the undersigned would possess if present in person, as follows:The proxies will vote as specified above, or if a choice is not specified, they will vote FOR the nominees listed in item 1. Receipt of the Notice of Meeting of Shareholders and related Proxy Statement dated March 16, 2009 is hereby acknowledged.(Continued, and to be signed, on the other side.)BNY MELLON SHAREOWNER SERVICESAddress Change/Comments P.O. BOX 3550(Mark the corresponding box on the reverse side) SOUTH HACKENSACK, NJ 07606-9250FOLD AND DETACH HEREChoose MLinkSMfor fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on to Investor ServiceDirect® at www.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you through enrollment.44894-bl |
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of shareholdersThe Proxy Statement and the 2009 Annual Report to Stockholders are available at:http://www.proxydocs.com/sni
6FOLD AND DETACH HERE6
SCRIPPS NETWORKS INTERACTIVE, INC.
PROXY FOR CLASS A COMMON SHARES
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
The undersigned hereby appoints KENNETH W. LOWE, JOSEPH G. NECASTRO and ANATOLIO B. CRUZ III and each of them, as the undersigned’s proxies, with full power of substitution, to attend the Annual Meeting of Shareholders of Scripps Networks Interactive, Inc., to be held at the Queen City Club, Cincinnati, Ohio, on Wednesday, April 28, 2010, at 10:00 A.M., local time, and any adjournment or adjournments thereof, and to vote thereat the number of shares which the undersigned would be entitled to vote, with all the power the undersigned would possess if present in person, as follows:
The proxies will vote as specified above, or if a choice is not specified, they will vote FOR the nominees listed in item 1.
Receipt of the Notice of Meeting of Shareholders and related Proxy Statement dated March 15, 2010 is hereby acknowledged.
(Continued, and to be signed, on the other side.)
Address Change/Comments
(Mark the corresponding box on the reverse side) BNY MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
WO#
67253-2
67249-2