SECURITIES AND EXCHANGE COMMISSION
SECURITIES
EXCHANGE ACT OF 1934
☑ | Preliminary Proxy Statement | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
☐ | Definitive Proxy Statement | |
☐ | Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2. |
EMMIS COMMUNICATIONS CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
EMMIS COMMUNICATIONS CORPORATION |
(Name of Registrant as Specified In Its Charter) |
(Name of Person(s) Filing Proxy Statement, if other than Registrant) |
☑ | No fee required. | |||
☐ | Fee computed on table below per Exchange Act Rules 14a-6(i) | |||
1. | Title of each class of securities to which transaction applies: | |||
2. | Aggregate number of securities to which transaction applies: | |||
3. | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): | |||
4. | Proposed maximum aggregate value of transaction: | |||
5. | Total fee paid: | |||
☐ | Fee paid previously with preliminary materials. | |||
☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
1. | Amount previously paid: | |||
| ||||
2. | Form, Schedule or Registration Statement No.: | |||
| ||||
3. | Filing Party: | |||
4. | Date Filed: | |||
May 30, 2014
recorded by completing, signing, dating and returning the enclosed proxy card promptly, or accessing the proxy materials and voting via the Internet or telephone in accordance with the “notice and access” letter you will receive.
Sincerely, | ||
/s/ Jeffrey H. Smulyan | ||
Jeffrey H. Smulyan | ||
Chief Executive Officer, President and Chairman of the Board | ||
, 20 .
INDIANAPOLIS, INDIANA
HoldersPlaza, 40 Monument Circle, Indianapolis, Indiana 46204.
We describe each
By order of the | |
Indianapolis, Indiana
May 30, 2014
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be Held on July 10, 2014:
The proxy statement and annual report are available atwww.proxyvote.com.
Also available on the website are the Emmis proxy card, as well as additional voting information.
/s/ J. Scott Enright | ||||
J. Scott Enright Secretary | ||||
ONE EMMIS PLAZA
40 MONUMENT CIRCLE
INDIANAPOLIS, INDIANA 46204
In this proxy statement,
As an
This proxy statement summarizes the information you need to knowallowed to vote on an informed basis atany proposal to amend a company’s articles of incorporation, even if the annual meeting; however, you do not need to attendamendment only affects the annual meeting to vote your shares. See “How do I vote my shares beforerights of preferred shareholders. The requisite votes of holders of both the Annual Meeting?” We expect to begin sending this proxy statement, the attached notice of annual meetingCommon Stock and the proxy card(s) on May 30, 2014,Preferred Stock are required in order to all shareholders entitled to vote.
If you hold shares of common stock, youadopt the Proposed Amendments.
— | the holders of Common Stock, voting together as a single class, casting more votes in favor than against the Proposed Amendments, assuming a quorum is present, with the shares of Class B Common Stock being entitled to ten votes per share, and |
— | the affirmative votes of holders of at least 2/3 of the outstanding Preferred Stock, voting as a separate class. |
Question and Answer that are Primarily Applicable to |
Holders of Preferred Stock
The board As of directors recommends that holdersDecember 1, 2015, there were 866,319 shares of common stock vote FOR Richard A. Leventhal, Peter A. LundPreferred Stock issued and Lawrence B. Sorrel, the persons nominated by the board’s Corporate Governance and Nominating Committee to be elected by the holders of common stock as directors for terms of three years. The board of directors also recommends that holders of common stock vote FOR ratification of Ernst & Young LLP as our independent registered public accountants.
If you receive more than one proxy card, it means you hold shares registered in more than one account. Sign and return ALL proxy cards to ensure that all your shares are voted.
Each share of Class A common stock is entitled to one vote and each share of Class B common stock is entitled to ten votes. Generally, the holders of Class A and Class B common stock vote together as a single group. However, the two classes vote separately in connection with the election of certain directors, certain “going private” transactions and other matters as provided by law.
At this annual meeting, the Class A and Class B common stock will vote together on the election of two directors and the ratification of Ernst & Young LLP as our independent registered public accountants, and the Class A common stock will vote separately as a class on the election of one other director (the “Class A director”).
If you hold your shares in your own name,you may submit a proxy by telephone, via the Internet or by mail.
By casting your vote in any of the three ways listed above, you are authorizing the individuals listed on the proxy to vote your shares in accordance with your instructions. outstanding.
If your shares are heldperson, or you can vote by proxy. To vote by proxy, sign and date each proxy card you receive and return it in the name of a bank, broker or other nominee, you will receive instructions from the holder of record that you must follow for your shares to be voted. The availability of telephonic or Internet voting will depend on the bank’s or broker’s voting process. Please check with your bank or broker and follow the voting procedures your bank or broker provides to vote your shares. Also, please note that if the holder of record of your shares is a broker, bank or other nominee and you wish to vote in person at the Annual Meeting, you must request a legal proxy from your bank, broker or other nominee that holds your shares and present that proxy and proof of identification at the Annual Meeting.
Stock exchange rules applicable to brokers grant your broker discretionary authority to vote your shares without receiving your instructions on certain matters. Your broker has discretionary voting authority under these rules to vote your shares on the ratification of Ernst & Young LLP as our independent registered public accountants. However, unless you provide voting instructions to your broker, your broker does not have discretionary authority to vote on the election of directors. Therefore, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.
If you provide specific voting instructions, your shares will be voted at the Annual Meeting in accordance with your instructions.prepaid envelope. If you return your signed proxy card but do not indicate your voting preferences, we will vote on your behalfFOReach of the nominees for whomproposals to adopt the Proposed Amendments.
An “abstention” occurs when a shareholder sends in amark “abstain” on your proxy with explicit instructions to decline to vote regarding a particular matter. Abstentions arecard, your shares will be counted as present for purposes of determining the presence of a quorum. An abstentionYou have the right to revoke your proxy at any time before the meeting by either notifying our corporate secretary or returning a later-dated proxy. You may also revoke your proxy by voting in person at the special meeting.
combined voting power of the outstanding Class A broker “non-vote” occurs whenand Class B Common Stock, and a broker or other nominee who holds shares formajority of the beneficial owner is unablevoting power of the Preferred Stock, entitled to vote those shares for the beneficial owner because the broker or other nominee does not have discretionary voting power for the proposal and has not received voting instructions from the beneficial owner of the shares. Brokers will have discretionary voting power to vote shares for which no voting instructions have been provided by the beneficial owner only with respect to the ratification of Ernst & Young LLP as our independent registered public accountants. Brokers will not have such discretionary voting power to vote shares with respect to the election of directors. Shares that are the subject of a broker non-vote are included for quorum purposes, but a broker non-vote with respect to a proposal will not be counted as a vote represented at the meeting constitutes a quorum for the special meeting (i.e., counting one vote for each share of outstanding Class A Common Stock, ten votes for each share of outstanding Class B Common Stock and entitledone vote for each share of outstanding Preferred Stock, present in person or represented by proxy). No additional quorum requirements apply to matters on which the holders of Class A and Class B Common Stock will vote and, consequently,together as a general matter, will have no effect onsingle class.
enclosed return envelope as soon as possible.
— | sending in a later-dated, signed proxy card or a written revocation before the special meeting; or |
— | attending the special meeting and voting in person (your attendance at the special meeting will not in and of itself constitute a revocation of your proxy). |
Any written notice of revocation, or later datedlater-dated proxy, should be delivered to:
One Emmis Plaza
40 Monument Circle
Indianapolis, Indiana 46204
Attention: J. Scott Enright, Secretary
Representatives of Broadridge Financial Solutions, Inc. will count
A majority of the combined voting power of the outstanding Class A and Class B common stock entitled to vote at thespecial meeting constitutes a quorum for the items to be voted on by the common stock at the Annual Meeting (i.e., counting one vote for each share of outstanding Class A common stock and ten votes for each share of outstanding Class B common stock, present in person or represented by proxy).
Directors to be elected by the holders of common stock will be elected by a plurality of the votes cast by the holders of outstanding common stock entitled to vote in the election who are present, in person or by proxy, at the meeting. Consequently, the director nominees receiving the most votes of the holders of Class A and Class B common stock, voting together, will be elected to fill two director positions and the Class A director nominee receiving the most votes of holders of Class A common stock, voting as a class, will be elected as a Class A director. Only votes castFORa nominee will be counted.
The ratification of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending February 28, 2015 requires that the number of votes cast in favor of that proposal by holders of our outstanding Class A common stock and Class B common stock, voting together, exceed the number of votes cast against the proposal by such holders of our outstanding Class A common stock and Class B common stock.
Jeffrey H. Smulyan, the Chairman, Chief Executive Officer and President, is our largest single shareholder, beneficially owning approximately 5.1% of our Class A common stock and 100% of our Class B common stock as of May 2, 2014. Mr. Smulyan has informed us that he intends to vote for each of the nominees for director and in favor of the proposal regarding the ratification of Ernst & Young LLP as our independent registered public accountants. If he does so, the election of Messrs. Leventhal and Sorrel and the proposal for the ratification of Ernst & Young LLP as our independent registered public accountants are expected to be approved because Mr. Smulyan controls approximately 56.2% of the combined voting power of our outstanding common stock (not including the potential voting power of unexercised options). Mr. Smulyan is not permitted to vote his Class B common stock with regard to Mr. Lund, the Class A director to be elected solely by the holders of Class A common stock.
All directors and executive officers together own outstanding Class A common stock and Class B common stock representing approximately 60.3% of the combined voting power of our outstanding common stock (not including the potential voting power of unexercised options or unconverted preferred stock).
Yes. If you are a shareholder of record, you may, if you wish, receive future proxy statements and annual reports online. If you elect this feature, you will receive either a proxy card or an e-mail message notifying you when the materials are available, along with a web address for viewing the materials. You may sign up for electronic delivery by marking and signing the appropriate spaces on your proxy card or by contacting our Investor Relations Department by e-mail atir@emmis.com or toll-free by phone at (866) 366-4703. If you received these materials electronically, you do not need to do anything to continue receiving materials electronically in the future.
If you hold your shares in a brokerage account, you may also have the opportunity to receive proxy materials electronically. Please follow the instructions of your broker.
Electronic delivery saves Emmis money by reducing printing and mailing costs. It will also make it convenient for you to receive your proxy materials online. Emmis charges nothing for electronic delivery. You may, of course, incur the usual expenses associated with Internet access, such as telephone charges or charges from your Internet service provider.
You may discontinue electronic delivery at any time. For more information, contact our Investor Relations Department by e-mail atir@emmis.com or toll-free by phone at (866) 366-4703.
All shareholders as of May 2, 2014 can attend.
person?
Special Meeting | The special meeting of the shareholders of Emmis Communications Corporation will be held on , 2016 at 10:00 a.m., local time, at our headquarters, One Emmis Plaza, 40 Monument Circle, Indianapolis, Indiana 46204. The shareholders of the company will consider the Proposed Amendments at the special meeting. A copy of the amended and restated Exhibit A to the Articles of Incorporation, which shows the changes that would result from the Proposed Amendments, is attached to this Proxy Statement as Appendix 1, with deletions indicated by strikeouts and additions indicated by underlining. Shareholders should read Appendix 1 in its entirety. |
Recommendation for the Proposed Amendments | The board of directors has determined that the Proposed Amendments will have a positive effect on the company’s overall capital structure, which will have a beneficial impact on holders of the Common Stock as well as holders of Preferred Stock. In addition, the Proposed Amendments are being proposed as contemplated by the Settlement and Release Agreement, as agreed with the Preferred Group. Accordingly, the board of directors is making a recommendation that holders of the Common Stock vote FOR each of the Proposed Amendments and that holders of the Preferred Stock vote FOR each of the Proposed Amendments. |
Record Date | Holders of record of Class A Common Stock, Class B Common Stock and/or Preferred Stock as of December 10, 2015 will be entitled to vote those shares of stock at the special meeting. |
Preferred Stock; Proposed Amendments | We are soliciting proxies from holders of record as of December 10, 2015 of the Preferred Stock to vote at the special meeting in favor of the following Proposed Amendments: (i) to add a provision that will cause a mandatory conversion of all issued and outstanding shares of Preferred Stock into Class A Common Stock of the company at a ratio of 2.80 shares of Class A Common Stock for each share of Preferred Stock, effective as of the fifth business day after any delisting of the Preferred Stock from Nasdaq is effective and (ii) to change the conversion ratio for optional conversions of shares of Preferred Stock into Class A Common Stock to 2.80 shares of Class A Common Stock for each share of Preferred Stock. The implementation of each proposal is conditioned on shareholder approval of the other proposal. The affirmative vote of holders of at least 2/3 of the outstanding shares of Preferred Stock in favor of each of the Proposed Amendments will be required in order to adopt each of the Proposed Amendments. Holders of Preferred Stock must submit proxies in the Proxy Solicitation in order to vote in favor of the Proposed Amendments. Pursuant to the Settlement and Release Agreement, the Preferred Group, which held, as of December 1, 2015, approximately 80% of the outstanding shares of Preferred Stock, agreed to vote their shares of Preferred Stock in favor of the proposals to adopt the Proposed Amendments. |
Common Stock | We are also soliciting proxies from holders of record as of December 10, 2015 of Class A and Class B Common Stock, voting together as a single class, to vote at the special meeting in favor of the Proposed Amendments, as described under “Summary of the Proxy Solicitations – Preferred Stock.” The implementation of each proposal is conditioned on shareholder approval of the other proposal. The holders of Common Stock, voting together as a single class, casting more votes in favor than against each of the Proposed Amendments, assuming a quorum is present, with the shares of Class B Common Stock being entitled to ten votes per share, will be required in order to approve each of the Proposed Amendments. |
Abstentions and Broker Non-Votes | If you mark “abstain” on your proxy card, your shares will be counted as present for purposes of determining the presence of a quorum. If your Common Stock or Preferred Stock are held in “street name” or through nominees, brokers and other nominees will not be permitted to vote on the Proposed Amendments unless instructed by you since the Proposed Amendments are not “routine matters” for purposes of the Nasdaq rules. Proxies submitted by brokers and other nominees who do not indicate a vote for the proposals because the holders do not have discretionary voting authority and have not received instructions from the beneficial owners on how to vote on those proposals are called “broker non-votes.” Abstentions and broker non-votes will not affect the voting on the Proposed Amendments for shares of Class A and Class B Common Stock, but will have the same effect as voting against the Proposed Amendments for shares of Preferred Stock. |
Required Vote in order to Adopt the Proposed Amendments | In order to adopt the Proposed Amendments, the requisite vote of holders of both the Preferred Stock and the Common Stock, as described above, will be required. The company entered into the Settlement and Release Agreement, dated as of December 3, 2015, with the Preferred Group. As of December 1, 2015, the Preferred Group had the right to vote 695,108 outstanding shares of Preferred Stock, representing approximately 80% of the outstanding Preferred Stock. Under the Settlement and Release Agreement, the Preferred Group has agreed to direct the vote of these shares of Preferred Stock in favor of the proposals to adopt the Proposed Amendments, so both of the proposals are expected to be approved by the requisite holders of the Preferred Stock. As of December 1, 2015, Mr. Jeffrey H. Smulyan, Chairman, Chief Executive Officer and President of the company, directly or indirectly owns shares of Common Stock entitling him to cast approximately 53.2% of the votes able to be cast by holders of Common Stock at the special meeting. Under the Settlement and Release Agreement, Mr. Smulyan has agreed to vote his shares of Common Stock in favor of the proposals to approve the Proposed Amendments, so both of the proposals are expected to be approved by the requisite holders of the Common Stock. |
Revocation of Proxies | You may change your vote if you send in a later-dated, signed proxy card or a written revocation with respect to your Common Stock or Preferred Stock, as applicable, prior to the special meeting. You can also attend the special meeting and vote in person or hand deliver a written revocation notice, or a later-dated proxy, at the special meeting before voting commences. |
— | general economic and business conditions; |
— | fluctuations in the demand for advertising and demand for different types of advertising media; |
— | our ability to service our outstanding debt; |
— | competition from new or different media and technologies; |
— | loss of key personnel; |
— | increased competition in our markets and the broadcasting industry, including our competitors changing the format of a station they operate to more directly compete with a station we operate in the same market; |
— | our ability to attract and secure programming, on-air talent, writers and photographers; |
— | inability to obtain (or to obtain timely) necessary approvals for purchase or sale transactions or to complete the transactions for other reasons generally beyond our control; |
— | increases in the costs of programming, including on-air talent; |
— | new or changing regulations of the Federal Communications Commission or other governmental agencies; |
— | fluctuations in the market prices of our equity or debt securities; |
— | changes in radio audience measurement methodologies; |
— | war, terrorist acts or political instability; and |
— | other factors mentioned in documents filed by the company with the SEC. |
If, atproposals to adopt the time of this annual meeting, any nominee is unable or declines to serve, the discretionary authority provided in the proxy may be exercised to vote for a substitute or substitutes. The board of directors has no reason to believe that any substitute nominee or nominees will be required.
Name, Age, Principal Occupation(s) and
Business Experience
Nominated for a term expiring in 2017:
Richard A. Leventhal, Age 67
Mr. Leventhal is President and majority owner of LMCS, LLC, an investment, management and consulting company. Previously, Mr. Leventhal co-owned and operated Top Value Fabrics, Inc., a wholesale fabric and textile company in Carmel, Indiana, for 27 years. He also serves as a board member of several nonprofit organizations.
Peter A. Lund,(1)(2) Age 73
Mr. Lund is a private investor and media consultant who formerly served as Chairman and Chief Executive Officer of Eos International, Inc., a holding company. Mr. Lund has over 40 years of broadcasting experience and most recently served as President and Chief Executive Officer of CBS Inc., and President and Chief Executive Officer of CBS Television and Cable. He is a director of The DIRECTV Group, Inc., a communications company; Crown Media Holdings, Inc., an owner and operator of cable television channels; and Eos International, Inc., a library automation and knowledge management company.
Lawrence B. Sorrel, Age 55
Mr. Sorrel is Managing Partner of Tailwind Capital where he has worked since 2002. From 1998 to 2002, Mr. Sorrel was a general partner of Welsh, Carson, Anderson & Stowe. Prior to May 1998, he was a Managing Director of Morgan Stanley and the firm’s private equity affiliate, Morgan Stanley Capital Partners, where he had been employed since 1986.
Directors whose terms expire in 2016:
James M. Dubin, Age 67
Mr. Dubin was a partner at the law firm of Paul, Weiss, Rifkind, Wharton & Garrison, LLP for 30 years until his retirement in 2012. Since his retirement he has engaged in private consulting work through Madison Place Partners, LLC. He also serves as a senior advisor, board member and member of the audit committee for Conair Corporation, a manufacturer and marketer of health and beauty products and kitchen and electronic appliances, and a board member for several nonprofit organizations.
Greg A. Nathanson, Age 67
Mr. Nathanson served as our Television Division President before resigning in October 2000. He is currently a media consultant. Mr. Nathanson has over 30 years of television broadcasting experience, having served as President of Programming and Development for Twentieth Television from 1996 to 1998; as General Manager of KTLA-TV in Los Angeles, California from 1992 to 1996; and as General Manager of the Fox television station KTTV from 1988 to 1992. In addition, he was President of all the Fox Television stations from 1990 to 1992.
Jeffrey H. Smulyan, Age 67
Mr. Smulyan founded Emmis in 1979 and is our Chairman, Chief Executive Officer and President. Mr. Smulyan began working in radio in 1973, and has owned directly or indirectly one or more radio stations since then. Formerly, he was also the owner and chief executive officer of the Seattle Mariners Major League Baseball team. In addition to serving as a board member for other nonprofit organizations, he is former Chairman of the Radio Advertising Bureau and serves as a Trustee of his alma mater, the University of Southern California.
Directors whose terms expire in 2015:
Susan B. Bayh,(1) Age 54
Mrs. Bayh was the Commissioner of the International Joint Commission of the United States and Canada until 2001. She served as a Distinguished Visiting Professor at the College of Business Administration at Butler University from 1994 through 2003. Previously, she was an attorney with Eli Lilly & Company. She is a director of Dendreon Corporation, a biotechnology company. Previously, she served as a director for Esperion Therapeutics, Inc., Novavax, Inc., Cubist Pharmaceuticals, Inc., MDRNA (formerly Nastech), Dyax Corp., each of which is a pharmaceutical company, as well as Wellpoint, Inc., a Blue Cross/Blue Shield company; and Curis, Inc., a therapeutic drug development company.
Gary L. Kaseff, Age 66
Mr. Kaseff served as our Executive Vice President and General Counsel until his resignation in March 2009. He remains employed by Emmis. Before becoming general counsel, Mr. Kaseff practiced law in Southern California. Previously, he was President of the Seattle Mariners Major League Baseball team and partner with the law firm of Epport & Kaseff.
Patrick M. Walsh,Age 47
Mr. Walsh became Executive Vice President and Chief Financial Officer of Emmis in September 2006 and added the position of Chief Operating Officer in December 2008. Mr. Walsh came to Emmis from iBiquity Digital Corporation, the developer and licensor of HD Radio technology, where he served as Chief Financial Officer and Senior Vice President from 2002 to 2006. Prior to joining iBiquity, Mr. Walsh was a management consultant for McKinsey & Company, and served in various management positions at General Motors Acceptance Corporation and Deloitte LLP.
the holders of Common Stock, voting together as a single class, casting more votes in favor than against the Proposed Amendments, assuming a quorum is present, with the shares of Class |
— | the affirmative votes of holders of at least 2/3 of the outstanding Preferred Stock, voting as a separate class. |
Recommendation
Our boarddetermining the presence of directors unanimously recommends thata quorum. Abstentions and broker non-votes will not affect the calculation of votes cast on the proposal for shares of Class A and Class B Common Stock, but will count as a negative vote with respect to shares of Preferred Stock.
— | sending in a later-dated, signed proxy card or a written revocation before the special meeting; or |
— | attending the special meeting and voting in person (your attendance at the special meeting will not in and of itself constitute a revocation of your proxy). |
“capital assets,” as defined in the Internal Revenue Code of 1986, as amended (the “Code”). The Corporate Governance and Nominating Committee believesfollowing is not an exhaustive discussion of all possible U.S. federal income tax considerations relating to the Proposed Amendments. It does not address shareholders subject to special rules, such as financial institutions, real estate investment trusts, regulated investment companies, tax-exempt organizations, insurance companies, partnerships, dealers in securities, traders who elect to use the mark-to-market method of accounting, mutual funds, qualified retirement plans, individual retirement accounts, shareholders who are not U.S. persons for federal income tax purposes, shareholders that well functioning boards consisthold the shares of our Preferred Stock as part of a diverse collectionstraddle, hedge or conversion transaction, shareholders who are subject to the alternative minimum tax provisions of individualsthe Code and shareholders that bring a varietyacquired their shares of complementary skills. Althoughour Preferred Stock pursuant to the boardexercise of directorsemployee stock options or otherwise as compensation for services. In addition, it does not address tax consequences under state, local, foreign or other laws.
Susan B. Bayh
Mrs. Bayh is a lawyer with extensive experience in corporate governance and regulatory matters. She has served as a director of several large and small companies in the highly-regulated pharmaceutical and insurance industries. Her experience as a Commissioner of the International Joint Commission of the United States and Canada also provides international relations perspective relevant to our past, and consideration of future, operations in foreign regulatory environments.
James M. Dubin
Mr. Dubin is a lawyer with over 30 years of experience advising businesses on large corporate and securities transactions. During that time, he served for 11 years as chairman of his firm’s finance committee, with responsibility for oversight of the financial affairs of an enterprise with over $500 million in revenues. He has served as a director of Carnival Corporation & PLC and Conair Corporation and as a member of Conair Corporation’s audit committee. His experience with financial markets and complex financing transactions, corporate governance and executive compensation matters, and mergers and acquisitions is helpful to us.
Gary L. Kaseff
Mr. Kaseff is a lawyer with extensive knowledge of the legal issues arising in the broadcast and publishing industries. His professional sports management experience is also helpful in the context of our sports broadcasting operations at certain of our radio stations.
Richard A. Leventhal
Mr. Leventhal is the former owner and operatorresult of a small business, with experienceConversion. A holder’s aggregate tax basis in financial and operational issues affecting organizations, as well as management and development experience. He also brings the perspective to the board of a substantial segment of our local advertisers.
Peter A. Lund
Mr. Lund has over 40 years of experience in the broadcasting industry, with particular concentration in the ownership and operation of radio and television stations. He is also familiar with radio and television network operations.
Greg A. Nathanson
Mr. Nathanson has extensive experience in the broadcasting industry, encompassing both individual station and network operations. He also has an insider’s view of the operation of our company, having served as an executive officer until 2000.
Jeffrey H. Smulyan
Mr. Smulyan is the founder and Chief Executive Officer of Emmis, with extensive broadcasting experience. His experience ranges from running an individual radio station to chairing significant broadcast industry groups. He has developed with the Emmis team a variety of new and highly successful radio formats that contributed to the company’s growth and sustained the company during economic downturns. As our Chief Executive Officer and a recognized industry leader, Mr. Smulyan provides the board with information about the daily operations of the company as well as strategic insights into the broadcast industry and future trends that will likely affect the company’s operations. His experience with sports management and as a former director of a retail company are also valuable to the company’s programming operations and customer relations activities.
Lawrence B. Sorrel
Mr. Sorrel has over 20 years of experience in the investment banking and private capital industries, including the purchase, sale and financing of individual broadcast properties and broadcasting groups. He has extensive experience in arranging and structuring financings for enterprises worldwide, including enterprises with credit profiles similar to ours. In addition, Mr. Sorrel’s experience in the private equity industry adds a long-term strategic perspective to the board’s deliberations.
Patrick M. Walsh
Mr. Walsh serves as the company’s Chief Financial Officer and Chief Operating Officer. In addition to his background in finance, accounting and operations, Mr. Walsh has experience as a management consultant and has served in financial and operations capacities in a business that sold technology to the radio industry. He offers the board an inside view of the company’s finances and operations along with a strategic perspective on aspects of the radio broadcasting industry’s future.
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
As of May 2, 2014, there were 38,480,820its post-Conversion shares of our Class A commonCommon Stock should be equal to its aggregate tax basis in its pre-Conversion shares of our Preferred Stock, and the holding period of its post-Conversion shares of our Class A Common Stock received should include the holding period of its pre-Conversion shares of our Preferred Stock.
Class A Common Stock | Class B Common Stock | |||||||||||||||||||
Five Percent Shareholders, Directors, Nominee and Certain Executive Officers | Amount and Nature of Beneficial Ownership | Percent of Class | Amount and Nature of Beneficial Ownership | Percent of Class | Percent of Total Voting Power | |||||||||||||||
Jeffrey H. Smulyan | 1,998,924 | (1) | 5.1 | % | 4,569,464 | (15) | 100.0 | % | 56.4 | % | ||||||||||
Susan B. Bayh | 267,752 | (2) | * | — | — | * | ||||||||||||||
Richard F. Cummings | 279,443 | (3) | * | — | — | * | ||||||||||||||
James M. Dubin | 58,749 | (4) | * | — | — | * | ||||||||||||||
J. Scott Enright | 170,417 | (5) | * | — | — | * | ||||||||||||||
Gary L. Kaseff | 388,569 | (6) | 1.0 | % | — | — | * | |||||||||||||
Richard A. Leventhal | 571,079 | (7) | 1.5 | % | — | — | * | |||||||||||||
Gregory T. Loewen | 223,241 | (8) | * | — | — | * | ||||||||||||||
Peter A. Lund | 665,882 | (9) | 1.7 | % | — | — | * | |||||||||||||
Greg A. Nathanson | 754,992 | (10) | 2.0 | % | — | — | * | |||||||||||||
Lawrence B. Sorrel | 674,970 | (11) | 1.7 | % | — | — | * | |||||||||||||
Patrick M. Walsh | 633,785 | (12) | 1.6 | % | — | — | * | |||||||||||||
Zazove Associates, LLC | 2,161,307 | (13) | 5.5 | % | — | — | 2.5 | % | ||||||||||||
All Executive Officers and Directors as a Group (12 persons) | 6,687,803 | (14) | 16.7 | % | 4,569,464 | 100.0 | % | 61.0 | % |
Class A Common Stock | Class B Common Stock | 6.25% Series A Cumulative Convertible Preferred Stock | ||||||||||||||||||||||
Five Percent Shareholders, Directors and Certain Executive Officers | Amount and Nature of Beneficial Ownership | Percent of Class | Amount and Nature of Beneficial Ownership | Percent of Class | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||||||||||||
Jeffrey H. Smulyan | 1,165,105 | (1) | 2.8 | % | 4,569,464 | (15) | 100.0 | % | ||||||||||||||||
Susan B. Bayh | 314,814 | (2) | * | — | — | — | — | |||||||||||||||||
James M. Dubin | 89,756 | (3) | * | — | — | — | — | |||||||||||||||||
J. Scott Enright | 267,904 | (4) | * | — | — | — | — | |||||||||||||||||
Ryan A. Hornaday | 348,457 | (5) | * | — | — | — | — | |||||||||||||||||
Gary L. Kaseff | 427,498 | (6) | 1.0 | % | — | — | — | — | ||||||||||||||||
Richard A. Leventhal | 620,684 | (7) | 1.5 | % | — | — | — | — | ||||||||||||||||
Gregory T. Loewen | 441,840 | (8) | 1.1 | % | — | — | — | — | ||||||||||||||||
Peter A. Lund | 712,957 | (9) | 1.7 | % | — | — | — | — | ||||||||||||||||
Greg A. Nathanson | 795,994 | (10) | 1.9 | % | — | — | — | — | ||||||||||||||||
Lawrence B. Sorrel | 722,045 | (11) | 1.7 | % | — | — | — | — | ||||||||||||||||
Patrick M. Walsh | 953,675 | (12) | 2.3 | % | — | — | — | — | ||||||||||||||||
The Preferred Group | 2,473,358 | (13) | 5.5 | % | — | — | 695,108 | (13) | 80.2 | % | ||||||||||||||
All Executive Officers and Directors as a Group (12 persons) | 6,860,729 | (14) | 15.7 | % | — | — | — | — |
(1) | Consists of |
(2) | Consists of |
Consists of |
(4) | Consists of 78,125 shares owned individually, 4,778 shares held in the 401(k) Plan and 185,001 shares represented by stock options exercisable currently or within 60 days of December 1, 2015. |
(5) | Consists of 248,638 shares owned individually, 4,819 shares held in the 401(k) Plan, and 95,000 shares represented by stock options exercisable currently or within 60 days of December 1, 2015. Of the shares owned individually, 200,000 are restricted stock subject to forfeiture if certain conditions are not satisfied. |
(6) | Consists of |
(7) | Consists of |
(8) | Consists of |
(9) | Consists of |
(10) | Consists of |
Consists of |
(12) | Consists of 697,851 shares owned individually and 5,824 shares held in the 401(k) Plan. Of the shares owned individually, 1993,799 are restricted stock subject to forfeiture if certain conditions are not satisfied. |
(13) |
Partners Advisors, LLC (the “Corre General Partner”), Corre Partners Management, LLC and Mr. John Barrett and Mr. Eric Soderlund, managing members of the Corre General Partner. |
(14) | Includes |
(15) | Mr. Smulyan has pledged |
General
Emmis aspires to the highest ethical standards for our employees, officers and directors, and remains committed to the interestsTable of our shareholders. We believe we can achieve these objectives only with a plan for corporate governance that clearly defines responsibilities, sets high standards of conduct and promotes compliance with the law. The board of directors has adopted formal corporate governance guidelines, as well as policies and procedures designed to foster the appropriate level of corporate governance. Some of these guidelines and procedures are discussed below. For further information, including electronic versions of our Code of Business Conduct and Ethics, our Corporate Governance Guidelines, our Audit Committee Charter, our Compensation Committee Charter, our Corporate Governance and Nominating Committee Charter and our Auditor Independence Policy, please visit the Corporate Governance section of our website (www.emmis.com) located under the Investors heading.
Independent Directors
Our board of directors currently consists of nine members. Of these, our board has determined that five (Mrs. Bayh and Messrs. Dubin, Leventhal, Lund and Sorrel) qualify as “independent directors” under the listing standards of The Nasdaq Stock Market, Inc. In addition, Emmis is a “Controlled Company” as defined in the Nasdaq listing standards because more than 50% of the company’s voting power is held by one individual. The company is, therefore, pursuant to Nasdaq Marketplace Rule 5615(c)(2), exempt from certain aspects of Nasdaq’s listing standards relating to independent directors. Nevertheless, the company has voluntarily complied with such rules and a majority of the members of the board of directors are “independent directors” under Nasdaq rules.
Code of Ethics
Emmis has adopted a Code of Business Conduct and Ethics to document the ethical principles and conduct we expect from our employees, officers and directors. A copy of our Code of Business Conduct and Ethics is available in the Corporate Governance section of our website (www.emmis.com) located under the Investors heading.
Leadership Structure, Lead Director and Risk Oversight
The Emmis bylaws provide that the chairman of the board shall be the chief executive officer of the corporation. The board believes that this structure is in the best interest of the company’s shareholders at this time because it makes the best use of the chief executive officer’s extensive knowledge of the company and its industry and also facilitates communication between management and the board of directors.
Our independent directors appointed Richard A. Leventhal as the “Lead Director” effective March 1, 2011. In that role, Mr. Leventhal is responsible for coordinating and leading the independent directors, presiding over executive sessions of the independent directors and acting as a liaison between the independent directors and the rest of the board of directors and Emmis management.
The board of directors expects the company’s management to take primary responsibility for identifying material risks the company faces and communicating them to the board, developing and implementing appropriate risk management strategies responsive to those risks with oversight from the board, and integrating risk management into the company’s decision-making processes. The board, principally through the Audit Committee, regularly reviews information regarding the company’s credit, liquidity and operational risks as well as strategies for addressing and managing such risks. In addition, the Compensation Committee monitors the company’s compensation programs so that such programs do not encourage excessive risk-taking by company employees.
Communications with Independent Directors
Any employee, officer, shareholder or other interested party who has an interest in communicating with the Lead Director or any other Emmis independent directors regarding any matter may do so by directing communication to Mr. Leventhal as the Lead Director addressed to Lead Director, c/o Corporate Secretary, Emmis Communications Corporation, One Emmis Plaza, 40 Monument Circle, Suite 700, Indianapolis, Indiana 46204, by facsimile to (317) 684-5583, or by e-mail message toLeadDirector@emmis.com. The communication will be delivered to the independent directors as appropriate. For matters related to nominations or corporate governance, a communication should specify that it is directed to the Corporate Governance and Nominating Committee. For matters related to finance or auditing, a communication should specify that it is directed to the Audit Committee. For matters related to compensation, a communication should specify that it is directed to the Compensation Committee. Messages for any director or the board of directors as a whole may be delivered through the Lead Director as well.
Certain Committees of the Board of Directors
Our board of directors currently has several committees, including an Audit Committee, a Corporate Governance and Nominating Committee, a Compensation Committee and an Executive Committee.
Audit Committee. The Audit Committee’s primary responsibility is to engage our independent auditors and otherwise to monitor and oversee the audit process. The Audit Committee also undertakes other related responsibilities as summarized in the Report of the Audit Committee below and detailed in the Audit Committee Charter, which is available in the Corporate Governance section of our website (www.emmis.com) located under the Investors heading. The board of directors has determined that the members of the Audit Committee, Richard A. Leventhal (chair), James M. Dubin, Peter A. Lund and Lawrence B. Sorrel, are independent directors under the Securities Exchange Act of 1934 and the Nasdaq listing standards. The board of directors has also determined that Lawrence B. Sorrel is an “Audit Committee financial expert” as defined in rules adopted under the Securities Exchange Act of 1934. The Audit Committee held four meetings during the last fiscal year.
Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee’s primary responsibility is to assist the board of directors by (1) identifying individuals qualified to become members of the board of directors and recommending nominees to the board of directors for the next annual meeting of shareholders and (2) evaluating and assessing corporate governance issues affecting Emmis. The Corporate Governance and Nominating Committee charter is available in the Corporate Governance section of our website (www.emmis.com) located under the Investors heading. The Corporate Governance and Nominating Committee evaluates current members of the board of directors and potential candidates with respect to their independence, business, strategic and financial skills, as well as overall experience in the context of the needs of the board of directors as a whole. The Corporate Governance and Nominating Committee concentrates its focus on candidates with the following characteristics and qualifications, though not necessarily limited thereto:
The Corporate Governance and Nominating Committee will consider and evaluate potential nominees submitted by holders of our Class A common stock to our corporate secretary on or before the date for shareholder nominations specified in the “Shareholder Proposals” section of this proxy statement. These potential nominees will be considered and evaluated using the same criteria as potential nominees obtained by the Corporate Governance and Nominating Committee from other sources.
In its assessment of each potential candidate, including those recommended by shareholders, the Corporate Governance and Nominating Committee takes into account all factors it considers appropriate, which may include (a) ensuring that the board of directors, as a whole, is diverse and consists of individuals with various and relevant career experience, relevant technical skills, industry knowledge and experience, financial expertise (including expertise that could qualify a director as an “audit committee financial expert,” as that term is defined by the rules of the SEC), local or community ties, and (b) minimum individual qualifications, including strength of character, mature judgment, familiarity with our business and related industries, independence of thought and an ability to work collegially. The Corporate Governance and Nominating Committee also may consider the extent to which the candidate would fill a present need on the board of directors. Typically, after conducting an initial evaluation of a candidate, the Corporate Governance and Nominating Committee will interview that candidate if it believes the candidate might be suitable to be a director and may ask the candidate to meet with other directors and management. If the Corporate Governance and Nominating Committee believes a candidate would be a valuable addition to the board of directors, it will recommend to the full board that candidate’s nomination as a director.
The members of the Corporate Governance and Nominating Committee are Susan B. Bayh (chair), James M. Dubin and Richard A. Leventhal, all of whom are “independent directors” under Nasdaq standards. The Corporate Governance and Nominating Committee held two meetings during the last fiscal year.
Compensation Committee. The Compensation Committee provides a general review of our compensation and benefit plans to ensure that our corporate objectives are met, establishes compensation arrangements and approves compensation payments to our executive officers, and generally administers our stock option and incentive plans. The Compensation Committee’s charter is available in the Corporate Governance section of our website (www.emmis.com) located under the Investors heading. The members of the Compensation Committee are Peter A. Lund (chair), Susan B. Bayh, James M. Dubin and Lawrence B. Sorrel, all of whom are independent directors under Nasdaq standards. The Compensation Committee held three meetings during the last fiscal year.
Executive Committee. The Executive Committee has the authority to manage the business of the corporation to the same extent that the board of directors has the authority to manage the business of the corporation except to the extent that the executive committee’s powers may be limited by Ind. Code § 23-1-34-6(e). The members of the Executive Committee are Jeffrey H. Smulyan (chair), Susan B. Bayh, James M. Dubin, Richard A. Leventhal and Lawrence B. Sorrel. The Executive Committee held no meetings during the last fiscal year.
Meeting Attendance
During our last fiscal year, our board of directors held five meetings, either in person or by telephone. Each director attended at least 75% of the aggregate of (1) the total number of meetings of our board of directors held while he or she was a director and (2) the total number of meetings held by all committees on which he or she served during the periods that he or she served on the committee, except for Lawrence B. Sorrel, who attended more than 75% of the applicable meetings during calendar 2013, and eight out of the twelve applicable meetings during the last fiscal year.
We believe that communication between our shareholders and the members of our board of directors is enhanced by the opportunity for personal interaction at our annual meeting of shareholders. Accordingly, we encourage the members of our board of directors to attend our annual meeting of shareholders whenever possible. All nine members of our board of directors attended our annual meeting of shareholders held on July 10, 2013.
Compensation of Directors
Directors who are not officers of Emmis are compensated for their services at the rate of $3,000 per board of directors meeting attended in person, $1,500 per board of directors meeting attended by phone and $2,000 per committee meeting attended, whether in person or by phone. These fees are paid in the form of Class A common stock after the end of each calendar year. The per share price used for payment of these fees is established using the market value of Emmis Class A common stock prior to the end of the previous fiscal year, discounted by 20% to the extent the director attends at least 75% of the board and committee meetings applicable to the director. Each of our non-officer directors attended a sufficient number of meetings to receive the discount for the calendar year ended December 31, 2013. In addition, each director who is not an officer or employee of Emmis receives a $30,000 annual retainer, the chair of our Audit Committee receives a $10,000 annual retainer, the chair of our Compensation Committee receives a $5,000 annual retainer, the chair of our Corporate Governance and Nominating Committee receives a $3,000 annual retainer, and the Lead Director receives a $3,000 annual retainer. These annual retainers were paid in cash for fiscal 2014. In addition, directors who are not officers of Emmis are entitled to receive annually 2,195 shares of restricted stock and options to purchase 7,317 shares of Class A common stock. The options are granted on the date of our annual meeting of shareholders at the fair market value of the underlying shares on that date and are to vest annually in three equal installments. Restricted stock is also granted on the date of our annual meeting of shareholders and will vest on the earlier of the end of the director’s three-year term or the third anniversary of the date of grant. Our directors are also eligible to participate in our health insurance plan by paying the same rate charged for Continuation Coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986.
In the table below, we have set forth information regarding the compensation for the fiscal year ended February 28, 2014, received by each of our directors as of February 28, 2014 who is not an officer of Emmis. The dollar amounts in the table below for stock and option awards are the grant date fair market values associated with such awards.
2014 DIRECTOR COMPENSATION TABLE
Fees Earned or | Stock | Option | All Other | |||||||||||||||||
Name | Paid in Cash | Awards (1)(2) | Awards (3) | Compensation | Total | |||||||||||||||
Susan B. Bayh | $ | 33,000 | $ | 40,069 | $ | 14,267 | $ | — | $ | 87,336 | ||||||||||
James M. Dubin | 30,000 | 43,686 | 14,267 | — | 87,953 | |||||||||||||||
Gary L. Kaseff | 30,000 | 21,985 | 14,267 | (4 | ) | 66,252 | ||||||||||||||
Richard A. Leventhal | 43,000 | 51,827 | 14,267 | (5 | ) | 109,094 | ||||||||||||||
Peter A. Lund | 35,000 | 43,686 | 14,267 | — | 92,953 | |||||||||||||||
Greg A. Nathanson | 30,000 | 21,985 | 14,267 | (5 | ) | 66,252 | ||||||||||||||
Lawrence B. Sorrel | 30,000 | 37,357 | 14,267 | — | 81,624 |
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
|
| ||||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
|
Name | Number of Shares Underlying Options # | Option Exercise Price $ | Option Expiration Date | Option Vesting Date | ||||||||||
Mrs. Bayh | 7,317 | 2.60 | 7/10/2023 | 1/3 on each of 7/10/14, ’15 & ‘16 | ||||||||||
| 7,317 50,000 |
|
| 1.96 1.63 |
|
| 11/5/2022 5/2/2022 |
| 1/3 on each of 11/5/13, ’14 & ‘15 1/3 on each of 5/2/13, ’14 & ‘15 | |||||
7,317 | 1.03 | 7/13/2021 | 1/3 on each of 7/13/12, ’13 & ’14 | |||||||||||
100,000 | 1.15 | 3/4/2021 | Fully Vested | |||||||||||
7,317 | 0.48 | 12/17/20 | Fully Vested | |||||||||||
7,317 | 0.28 | 7/14/19 | Fully Vested | |||||||||||
7,317 | 1.70 | 7/15/18 | Fully Vested | |||||||||||
Mr. Dubin |
| 7,317 7,317 |
|
| 2.60 1.96 |
|
| 7/10/2023 11/5/2022 |
| 1/3 on each of 7/10/14, ’15 & ‘16 1/3 on each of 11/5/13, ’14 & ‘15 | ||||
Mr. Kaseff |
| 7,317 7,317 |
|
| 2.60 1.96 |
|
| 7/10/2023 11/5/2022 |
| 1/3 on each of 7/10/14, ’15 & ‘16 1/3 on each of 11/5/13, ’14 & ‘15 | ||||
50,000 | 1.63 | 5/2/2022 | 1/3 on each of 5/2/13, ’14 & ‘15 | |||||||||||
7,317 | 1.03 | 7/13/2021 | 1/3 on each of 7/13/12, ’13 & ’14 | |||||||||||
100,000 | 1.15 | 3/4/2021 | Fully Vested | |||||||||||
7,317 | 0.48 | 12/17/20 | Fully Vested | |||||||||||
175,000 | 0.295 | 3/2/2019 | Fully Vested | |||||||||||
73,174 | 17.45 | 3/1/2014 | Fully Vested | |||||||||||
Mr. Leventhal |
| 7,317 7,317 |
|
| 2.60 1.96 |
|
| 7/10/2023 11/5/2022 |
| 1/3 on each of 7/10/14, ’15 & ‘16 1/3 on each of 11/5/13, ’14 & ‘15 | ||||
50,000 | 1.63 | 5/2/2022 | 1/3 on each of 5/2/13, ’14 & ‘15 | |||||||||||
7,317 | 1.03 | 7/13/2021 | 1/3 on each of 7/13/12, ’13 & ’14 | |||||||||||
100,000 | 1.15 | 3/4/2021 | Fully Vested | |||||||||||
7,317 | 0.48 | 12/17/20 | Fully Vested | |||||||||||
7,317 | 0.28 | 7/14/19 | Fully Vested | |||||||||||
7,317 | 1.70 | 7/15/18 | Fully Vested |
Name Mr. Lund 7,317 1.96 11/5/2022 1/3 on each of 11/5/13, ’14 & ‘15 Mr. Nathanson 7,317 1.96 11/5/2022 1/3 on each of 11/5/13, ’14 & ‘15 Mr. Sorrel 7,317 1.96 11/5/2022 1/3 on each of 11/5/13, ’14 & ‘15 Number of
Shares
Underlying
Options # Option
Exercise
Price $ Option
Expiration
Date Option Vesting Date 7,317 2.60 7/10/2023 1/3 on each of 7/10/14, ’15 & ‘16 50,000 1.63 5/2/2022 1/3 on each of 5/2/13, ’14 & ‘15 7,317 1.03 7/13/2021 1/3 on each of 7/13/12, ’13 & ’14 100,000 1.15 3/4/2021 Fully Vested 7,317 0.48 12/17/20 Fully Vested 7,317 0.28 7/14/19 Fully Vested 7,317 1.70 7/15/18 Fully Vested 7,317 2.60 7/10/2023 1/3 on each of 7/10/14, ’15 & ‘16 50,000 1.63 5/2/2022 1/3 on each of 5/2/13, ’14 & ‘15 7,317 1.03 7/13/2021 1/3 on each of 7/13/12, ’13 & ’14 100,000 1.15 3/4/2021 Fully Vested 7,317 0.48 12/17/20 Fully Vested 7,317 0.28 7/14/19 Fully Vested 7,317 1.70 7/15/18 Fully Vested 7,317 2.60 7/10/2023 1/3 on each of 7/10/14, ’15 & ‘16 50,000 1.63 5/2/2022 1/3 on each of 5/2/13, ’14 & ‘15 7,317 1.03 7/13/2021 1/3 on each of 7/13/12, ’13 & ’14 100,000 1.15 3/4/2021 Fully Vested 7,317 0.48 12/17/20 Fully Vested 7,317 0.28 7/14/19 Fully Vested 7,317 1.70 7/15/18 Fully Vested
Transactions with Related Persons
Prior to 2002, the Company had made certain life insurance premium payments for the benefit of Mr. Smulyan. The Company discontinued making such payments in 2001; however, pursuant to a Split Dollar Life Insurance Agreement and Limited Collateral Assignment dated November 2, 1997, the Company retains the right, upon Mr. Smulyan’s death, resignation or termination of employment, to recover all of the premium payments it had made, which total $1,119,000.
Review and Approval of Related Party Transactions
Our board of directors has adopted a written policy for review, approval and monitoring of transactions between the company and “related parties.” Related parties are directors, executive officers, nominees to become a director, any person beneficially owning more than 5% of any class of our stock, immediate family members of any of the foregoing, and any entity in which any of the forgoing persons is employed or is a general partner or principal or in which the person has a 10% or greater beneficial ownership interest. The policy covers transactions involving amounts exceeding $120,000 in which a related party had, has or will have a direct or indirect interest.
Procedures. The related party is required to notify our legal department of the facts and circumstances of any proposed related party transaction. The legal department makes an initial determination of whether the transaction is subject to the policy. If the legal department determines that the policy is applicable, the transaction is referred to our Audit Committee. Either the Audit Committee, or the chair of the Audit Committee between Audit Committee meetings, considers the facts and circumstances of the proposed transaction and determines whether to approve the transaction. The Audit Committee or the chair, as the case may be, considers, among other things:
The Audit Committee may seek bids, quotes or independent valuations from third parties in connection with assessing a related party transaction. The Audit Committee or the chair may approve only transactions that they determine are in, or are not inconsistent with, the best interest of the company.
Ratification. If a transaction that was not a related party transaction when it was entered into becomes a related party transaction, or our CEO, CFO or General Counsel become aware that a transaction that was not approved is a related party transaction, they must promptly submit the transaction for review by the Audit Committee, or the chair of the Audit Committee between Audit Committee meetings.
Annual Review. From time to time, the Audit Committee will review previously approved related party transactions that have a remaining term of six months or more or remaining amounts involved in excess of $120,000. Based on the factors described above, the Audit Committee determines whether to continue, modify or terminate the transaction.
The following Report of the Audit Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.
The Audit Committee is a separately-designated, standing committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. It is composed of four directors whom the board of directors has determined are “independent directors” as defined by Nasdaq listing standards. The Audit Committee’s responsibilities are set forth in its written charter approved by the board of directors. The charter is reviewed annually by the Audit Committee. A copy of the Audit Committee charter may be found in the Corporate Governance section of our website (www.emmis.com) located under the Investors heading. As required by Nasdaq listing standards, the Audit Committee has determined that its charter is adequate. The Audit Committee has also determined that its members meet the financial literacy requirements of Nasdaq listing standards.
Management is responsible for the company’s internal controls and the financial reporting process. The independent registered public accountants are responsible for performing an independent audit of the company’s consolidated financial statements in accordance with auditing standards generally accepted in the United States of America and to issue a report on them. The Audit Committee’s responsibility is to engage the independent auditor and otherwise to monitor and oversee these processes. For the fiscal year ended February 28, 2014, the Audit Committee engaged Ernst & Young LLP to serve as the company’s independent auditor.
The Audit Committee has met and held discussions with management and Ernst & Young LLP. Management represented to the Audit Committee that the company’s consolidated financial statements as of and for the fiscal year ended February 28, 2014 were prepared in accordance with accounting principles generally accepted in the United States of America, and the Audit Committee has reviewed and discussed these consolidated financial statements with management. The Audit Committee discussed with the independent registered public accountants matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA,Professional Standards, Vol. 1.AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T, or any successor rule.
The board of directors, upon the recommendation of the Audit Committee, has adopted an Auditor Independence Policy that, among other things, prohibits the company’s independent auditor from performing certain non-audit services for the company, requires prior approval of the Audit Committee for any services provided by the company’s independent auditor, limits the hiring by the company of former employees of the company’s independent auditor who have worked on the Emmis account and requires enhanced disclosure both to the Audit Committee and to shareholders of matters related to auditor independence.
The Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with the independent registered public accountants that firm’s independence. In addition, the Audit Committee (or the chairman of the Audit Committee with respect to engagements of less than $100,000) approves in advance all engagements of the company’s independent auditor. The Audit Committee determined that Ernst & Young’s provision of non-audit services to the company as described in “Matters Relating to Independent Registered Public Accountants” is compatible with maintaining that firm’s independence.
Based on these discussions and reviews, the Audit Committee determined that the audited financial statements for the company’s last fiscal year should be included in our company’sForm 10-K, and made a formal recommendation to the board of directors to that effect.
Richard A. Leventhal, Chair
James M. Dubin
Peter A. Lund
Lawrence B. Sorrel
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis provides a detailed description of our executive compensation policy, our Compensation Committee’s process for setting executive compensation, the elements of our compensation program, the factors the committee considered when setting executive compensation for the fiscal year ended 2014 and how the company’s results affected incentive compensation payments for the most recent fiscal year for our chief executive officer, our chief financial officer and our three next most highly compensated executive officers, which we refer to as a group as the “Named Executive Officers.”
Executive Compensation Policy
The Compensation Committee oversees our executive compensation program. The Compensation Committee membership is determined by the board, and is composed of non-employee independent directors. The Compensation Committee establishes compensation arrangements and approves compensation payments to Mr. Smulyan and our other executive officers, and generally administers our equity compensation plans and corporate incentive plans. With respect to compensation decisions affecting executive officers other than Mr. Smulyan, the Compensation Committee typically receives input from our CEO, COO/CFO and General Counsel in the course of making its decisions. With respect to compensation decisions affecting non-executive officers and employees, the Compensation Committee has delegated this authority to Mr. Smulyan and the other executive officers, provided such authority is exercised in accordance with any parameters established by the Compensation Committee.
The Compensation Committee bases its executive compensation programs on the following objectives:
The Committee’s Processes
The Compensation Committee meets on a regularly scheduled basis at least two times per year, and often more frequently as the Compensation Committee deems necessary or desirable. Members of the Compensation Committee discuss compensation matters with our CEO, our COO/CFO, our General Counsel, and among themselves informally throughout the year. This informal process facilitates the on-going monitoring of the appropriateness of our executive compensation packages and serves to prepare the Compensation Committee members for the formal meetings so that definitive compensation decisions can be more easily made at such meetings. While the Compensation Committee has the authority to engage independent compensation consultants, they have not done so in the past several years.
The Compensation Committee considered the results of our shareholders’ initial “Say on Pay” vote at our 2013 annual meeting of shareholders. In 2013, approximately 84% of the shareholder votes cast were “For” the resolution stating that the shareholders approved the compensation paid to our Named Executive Officers, compared to approximately 16% of the shareholder votes cast that were “Against” the resolution. Based upon comments received from certain shareholders, the Compensation Committee believes that this level of support largely reflects the successful restructuring by our executive team of the company’s balance sheet following the recent recession, mitigated by the occurrence during the fiscal year ended February 28, 2013 of an exchange of underwater stock options for shares of restricted stock and of the forgiveness of a loan (grandfathered under Sarbanes-Oxley) to our CEO. In a review of the results of the shareholder vote, the Compensation Committee determined that the option exchange and loan forgiveness were unique, one-time events that were attributable to the successful efforts of our CEO and other officers and employees to restructure the Company’s balance sheet following the recession and reflected the importance of rewarding and re-incentivizing our employees on a going forward basis.
The Compensation Committee also considered the results of our shareholders’ initial “Say on Frequency” vote at our 2013 annual meeting of shareholders. In 2013, approximately 81% of the shareholder votes cast were in favor of a shareholders’ advisory vote to be held every three years. The Committee reviewed the results of the shareholder vote and determined to recommend to the board that future shareholder advisory “Say on Pay” votes be held every three years.
The Compensation Committee is involved in compensation considerations throughout the year. All of our executive officers are employed under employment agreements, most of which are multi-year agreements. Thus, on an annual basis, the Compensation Committee usually evaluates the terms of a new employment agreement for at least one of our executive officers. In addition, our employment agreements provide for annual bonus targets to be established by the Compensation Committee and for the Compensation Committee to certify the extent to which the targets were attained. Our CEO, COO/CFO and General Counsel usually make recommendations to the Compensation Committee and provide the Compensation Committee with information that the Committee has requested or that they deem appropriate. However, deliberations involving the employment agreement of the CEO, COO/CFO or General Counsel are always conducted without such person present at that portion of the Compensation Committee meeting. While no formal process for determining compensation is prescribed in the Compensation Committee’s charter or otherwise, this informal process has evolved.
The process of determining compensation also involves the Compensation Committee’s consideration of executive compensation levels of other broadcast companies. While the Compensation Committee does not have a policy regarding benchmarking, the Compensation Committee does consider peer compensation in order to obtain a general understanding of compensation levels for other executive officers in the broadcasting industry when establishing compensation levels. The only manner in which peer compensation levels were used by the Compensation Committee in fiscal 2014 was in connection with the adoption of a new employment agreement with Mr. Walsh, our COO/CFO. In that instance, the Compensation Committee reviewed the compensation paid to chief financial officers, chief operating officers and divisional presidents of the following companies as a ‘market check’ on the compensation to be provided under Mr. Walsh’s new employment agreement: Beasley Broadcast Group, Inc., Belo Corp., Cumulus Media, Inc., Entercom Communications Corp., Entravision Communications Corp., Gray Television, Inc., Lin Broadcasting Corp., Nexstar Broadcasting Group, Inc., Radio One, Inc., Saga Communications, Inc., Salem Communications Corp., Sinclair Broadcast Group, Inc. and Spanish Broadcasting System, Inc.
Components of Executive Compensation for Fiscal 2014
For fiscal 2014, the compensation of executives consisted of four primary components – base salary, a performance bonus under our 2014 Corporate Incentive Plan, equity grants in the form of stock options and restricted shares, and a benefits package. In the case of most executive officers, the compensation also includes a bonus that is payable in cash or stock upon the completion of the executive’s employment agreement, although in the past two years we have moved away from cash-based contract completion bonuses, supplanting them with increases in base compensation and restricted stock grants. While the compensation arrangements are different for each executive, the Compensation Committee believes that this program, as a whole, balances the mix of cash and equity compensation, the mix of currently paid and longer-term compensation, and the security of insurance and other benefits in a way that furthers the compensation objectives discussed above. In particular, the Compensation Committee believes that the program:
Base Salary. Base salary is the guaranteed element of executives’ annual cash compensation. The value of base salary reflects the employee’s role and responsibilities, long-term performance, skill set and the market value of that skill set. Base salaries for the named executives were fixed for fiscal 2014 in accordance with each executive’s employment agreement. However, Messrs. Smulyan, Walsh and Enright agreed to take reductions of $19,364, $19,077and $2,640, respectively, to their base salaries in order for the company to give higher merit increases to certain other employees.
2014 Corporate Incentive Plan. Annual bonuses to our executive officers for the fiscal year ended February 28, 2014 were paid under our 2014 corporate incentive plan and were based entirely on the attainment of specified EBITDA performance goals. The EBITDA performance goals are the amounts set forth in the company’s 2014 budget. This is the same bonus plan in which all of the company’s full-time corporate employees participate. Under the 2014 plan, the Committee:
The 2014 plan also provided for an excess bonus pool of 10% of the amount by which total company EBITDA for the year exceeds the total company EBITDA goal for the year, with each participant in the plan who achieves their specified annual EBITDA goal eligible to participate in the excess bonus pool in proportion to their annual target bonus amount. There was no excess bonus pool under the 2014 plan because total company EBITDA did not exceed the performance goal for the year. Quarterly bonuses, if any, are paid following certification of the goal by the Compensation Committee and the filing of the company’s quarterly report on Form 10-Q for the applicable quarter. Annual bonuses, if any, are paid following certification of the goal by the Compensation Committee and the filing of the company’s annual report on Form 10-K. Bonuses are generally expected to be paid in cash, but may be paid in shares of the company’s Class A common stock if the Compensation Committee determines to do so. All bonuses paid under the 2014 plan were paid in cash. The 2014 plan is generally designed to comply with Internal Revenue Code Section 162(m) to maximize the tax deductibility of any bonuses paid under the plan, and is administered under our 2012 Equity Compensation Plan.
The Compensation Committee generally uses the Company’s EBITDA budget for the fiscal year as the basis for its principal measure of company performance. The Compensation Committee believes EBITDA provides a meaningful comparison of operating performance between companies in the industry, is generally recognized by the broadcast and publishing industries as a measure of performance and is used by analysts who report on the performance of broadcasting and publishing groups. By measuring against the EBITDA budget for the fiscal year, the Compensation Committee believes that the targets are more likely to reflect the current macroeconomic environment and what the board of directors has determined to be the reasonable prospects for the Company’s business in the fiscal year.
The following tables set forth the quarterly and annual EBITDA goals and target bonuses for each of the Named Executive Officers, as well as the actual EBITDA percentages attained under the 2014 plan and the actual bonuses paid to Named Executive Officers under the 2014 plan:
Performance Goals | Q1 | YTD Q2 | YTD Q3 | Annual | ||||||||||||||||||||||||||||
Original Goal | Actual | Original Goal | Actual | Original Goal | Actual | Original Goal | Actual | |||||||||||||||||||||||||
Total Emmis EBITDA | $ | 5,534 | $ | 6,835 | $ | 13,924 | $ | 14,847 | $ | 23,291 | $ | 22,207 | $ | 25,406 | $ | 23,845 | ||||||||||||||||
Radio EBITDA | $ | 8,732 | $ | 10,316 | $ | 20,030 | $ | 20,777 | $ | 29,206 | $ | 28,115 | $ | 33,933 | $ | 32,792 | ||||||||||||||||
Publishing EBITDA | $ | (510 | ) | $ | (503 | ) | $ | (852 | ) | $ | (322 | ) | $ | 1,944 | $ | 2,482 | $ | 1,823 | $ | 2,167 |
Participant | Q1 Award | Q2 Award | Q3 Award | Performance Goal | ||||||||||||||||||||||
Target | Actual | Target | Actual | Target | Actual | |||||||||||||||||||||
Jeffrey H. Smulyan | $ | 225,000 | $ | 225,000 | $ | 225,000 | $ | 225,000 | $ | 225,000 | $ | 180,000 | Total Company EBITDA | |||||||||||||
Richard F. Cummings | $ | 55,692 | $ | 55,692 | $ | 55,692 | $ | 55,692 | $ | 55,692 | $ | 46,781 | Radio EBITDA | |||||||||||||
J. Scott Enright | $ | 40,170 | $ | 40,170 | $ | 40,170 | $ | 40,170 | $ | 40,170 | $ | 32,136 | Total Company EBITDA | |||||||||||||
Gregory T. Loewen | $ | 41,000 | $ | 41,000 | $ | 41,000 | $ | 41,000 | $ | 41,000 | $ | 41,000 | Publishing EBITDA | |||||||||||||
$ | 8,200 | $ | 8,200 | $ | 8,200 | $ | 8,200 | $ | 8,200 | $ | 6,560 | Total Company EBITDA | ||||||||||||||
Patrick M. Walsh | $ | 60,000 | $ | 60,000 | $ | 60,000 | $ | 60,000 | $ | 60,000 | $ | 48,000 | Total Company EBITDA | |||||||||||||
$ | 60,000 | $ | 60,000 | $ | 60,000 | $ | 60,000 | $ | 60,000 | $ | 50,400 | Radio EBITDA |
Participant | Annual Award | Performance Goal | ||||||||||||
Target* | Actual | Total Paid for Fiscal Year | ||||||||||||
Jeffrey H. Smulyan | $ | 450,000 | $ | — | $ | 630,000 | Total Company EBITDA | |||||||
Richard F. Cummings | $ | 111,384 | $ | 75,741 | $ | 233,906 | Radio EBITDA | |||||||
J. Scott Enright | $ | 80,340 | $ | — | $ | 112,476 | Total Company EBITDA | |||||||
Gregory T. Loewen | $ | 82,000 | $ | 82,000 | $ | 205,000 | Publishing EBITDA | |||||||
$ | 16,400 | $ | — | $ | 22,960 | Total Company EBITDA | ||||||||
Patrick M. Walsh | $ | 120,000 | $ | — | $ | 168,000 | Total Company EBITDA | |||||||
$ | 120,000 | $ | 81,600 | $ | 252,000 | Radio EBITDA |
2012 Equity Compensation Plan. The Compensation Committee awards the equity component of executive compensation under our 2012 Equity Compensation Plan. Most of our officer’s employment agreements provide for a grant of stock options and restricted stock, and specify the grant and vesting dates therein. To the extent not set forth in the employment agreement, the grant date is generally tied to the date on which the company makes equity awards to other full-time employees (typically at the beginning of our fiscal year), with the options usually becoming exercisable in three equal annual installments on the first, second and third anniversaries of the date of grant or at the end of three years. In any case, the exercise price of our options is equal to the fair market value of our shares on the date of grant. Restricted shares typically vest on the third anniversary of the initial grant or at the completion of the executive officer’s employment agreement.
Near the end of fiscal 2013, we completed a stock option exchange program under which our employees with stock options that were underwater had the ability to exchange those options for shares of restricted stock with a one year vesting requirement. The exchange program was authorized by our shareholders upon their approval of the 2012 Equity Compensation Plan in November 2012 and was completed on February 15, 2013. The exchange ratio for different options varied depending upon the fair value for financial accounting purposes of the options being exchanged, and was designed to ensure that the fair value for financial accounting purposes of the restricted stock received did not exceed the fair value for financial accounting purposes of the options being exchanged as of the date the option exchange program commenced. The restricted stock vested on February 19, 2014. All of our executive officers participated in the exchange.
Perquisites. The company provides certain perquisites or personal benefits to its executive officers. Most of the company’s executive officers receive a monthly automobile allowance and reimbursement for certain life, disability and long-term care insurance. As full-time employees, the executives also receive health insurance, life and disability insurance, and matching contributions to the company’s 401(k) plan. The executive officers’ participation in these benefit programs is on the same terms as our other full-time employees. At its discretion, the company will also reimburse the relocation expenses of new hires that must move to one of the company’s locations.
Fiscal 2014 Named Executive Officer Compensation
Jeffrey H. Smulyan, Chairman, President and CEO. Mr. Smulyan serves as our principal executive officer pursuant to an employment agreement dated December 26, 2012. The general terms of the employment agreement are described under the heading “Executive Compensation– Employment Agreements”. During fiscal 2014, Mr. Smulyan received base salary, annual incentive compensation, equity compensation, and other benefits in accordance with the terms of that agreement, except that he had elected to reduce his contractual base salary by $19,364 in order to enable certain of our corporate employees to receive higher merit raises. Mr. Smulyan’s contractual base salary increased approximately 6% from his base salary the prior year, which had a corresponding effect of increasing his target bonus under the 2014 Corporate Incentive Plan. As with other executive officers, Mr. Smulyan’s incentive compensation was based entirely upon the formulas established under our 2014 Corporate Incentive Plan, with his performance goal based entirely upon Total Company EBITDA (as defined in the plan) because his principal responsibilities are to the performance of the entire company. On March 1, 2013, Mr. Smulyan received a grant of 400,000 restricted shares of our Class A common stock that vests in varying amounts at the end of each fiscal year during the term of the employment agreement, and a grant of options to purchase 150,000 shares of our Class A common stock with an exercise price equal to the fair market value of our stock on the date of grant. The restricted shares had a grant date value that approximated the value of the performance units granted at the beginning of Mr. Smulyan’s prior employment agreement, with the final amount earned dependent upon the value of our Class A common stock at the time of vesting. The options grant is consistent with the annual options granted under his prior agreement.
Patrick M. Walsh, Executive Vice President, CFO and COO. For the first half of fiscal 2014, Mr. Walsh’s compensation was based upon his employment agreement effective September 4, 2011, except that he had elected to reduce his contractual base salary by $19,077 in order to enable certain of our corporate employees to receive higher merit raises. The general terms of the 2011 employment agreement are described under the heading “Executive Compensation – Employment agreements.” At the time Mr. Walsh entered into his 2011 employment agreement, the fair market value of our Class A common stock was approximately $0.68 and Mr. Walsh’s 2011 employment agreement provided for a contract completion bonus of (A) $500,000 if the average fair market value of our Class A common stock at the end of his contract was less than $2.00, (B) $800,000 if the average fair market value was between $2.00 and $3.00, and (C) $1,200,000 if the average fair market value was greater than $3.00. In September 2013, Mr. Walsh received a contract completion bonus of $1,200,000 because the average fair market value of our Class A common stock during the period August 4, 2013 to September 3, 2013 exceeded $3.00. The Compensation Committee determined to pay $700,000 of this amount in shares of Class A common stock (valued at the closing price on September 3, 2013) pursuant to the 2012 Equity Compensation Plan because that amount was attributable to the increase in our stock price over the term of the agreement and due to the timing of the stock price increase, that expense had not previously been accrued.
In October 2013, we entered into a new four year employment agreement with Mr. Walsh, effective as of September 4, 2013. The general terms of the new agreement are described under the heading “Executive Compensation— Employment Agreements.” Under the 2013 agreement, Mr. Walsh’s base salary remains the same as under his 2011 agreement, with annual increases tied to merit increases for our corporate level employees, capped at 2.5% per year. Mr. Walsh’s annual bonus potential, as well as auto allowance, insurance and estate planning and other fringe benefits, also remain the same as the 2011 agreement. The 2013 agreement doubled the number of stock options granted to Mr. Walsh because the new agreement covers a four year term, while the old agreement covered a two year term. 250,000 of the options were granted on September 3, 2014 when the Compensation Committee approved the term sheet for Mr. Walsh’s new agreement, and the balance were awarded on January 2, 2014 in accordance with the terms of the agreement. The options were granted at fair market value on the date of grant. In addition, the 2013 agreement retains the concept of a performance based completion bonus tied to increases in the market value of the company’s Class A common stock, providing for payout possibilities at the end of years two and four of the employment agreement. The 2013 agreement specifically sets the base price of our Class A common stock for calculating payouts under Mr. Walsh’s performance based completion bonus at the same average fair market value of our Class A common stock during the period August 4, 2013 to September 3, 2013 that was used to determine the payout of the contract completion bonus under his 2011 agreement. The 2013 agreement also provides that Mr. Walsh has the right to terminate the 2013 employment agreement upon advance notice to the Company if he accepts a CEO position at another company (subject to the non-competition provisions of his agreement). As a result, the Compensation Committee believed that having a higher year four payout amount under the performance based completion bonus, with a credit for payouts at the end of year two, would help to incentivize Mr. Walsh to remain with the Company and continue to work to increase the price of our Class A common stock even if the year two payouts are not attained, or are not attained at the highest level. Additionally, the Compensation Committee believed that the annual vesting of shares of restricted stock and the vesting of stock options at years two, three and four would help to incentivize Mr. Walsh to remain with the Company through the end of each contract year.
Gregory T. Loewen, President – Publishing Division and Chief Strategy Officer. Mr. Loewen serves as our Publishing Division President and Chief Strategy Officer pursuant to an employment agreement dated December 21, 2012. The general terms of the employment agreement are described under the heading “Executive Compensation– Employment Agreements”. During fiscal 2014, Mr. Loewen received base salary, annual incentive compensation, equity compensation, and other benefits in accordance with the terms of that agreement. Mr. Loewen’s incentive compensation was based entirely upon the formulas established under our 2014 Corporate Incentive Plan, with about 83% of his performance goal based upon Publishing EBITDA (as defined in the plan) and 17% based upon Total Company EBITDA (as defined in the plan). This split reflects Mr. Loewen’s principal responsibility to the performance of our Publishing Division. On March 1, 2013, Mr. Loewen received a grant of 60,000 restricted shares of our Class A common stock that vest at the end of the term of his employment agreement, and a grant of options for 150,000 shares of our Class A common stock with an exercise price equal to the fair market value of our stock on the date of grant. The restricted shares were granted to offset the elimination of the completion bonus under Mr. Loewen’s prior agreement. The options grant is consistent with the options granted under his prior agreement.
Richard F. Cummings, President – Radio Programming. Effective March 1, 2013, the company entered into a new, one-year employment agreement with Mr. Cummings. The general terms of the employment agreement are described under the heading “Executive Compensation – Employment Agreements”. The agreement extended Mr. Cummings’ employment for one year without modification to his compensation. Mr. Cummings is one of the company’s longest tenured employees and the agreement is consistent with the company’s practice over the last several years of entering into successive one-year employment agreements with Mr. Cummings. During fiscal 2014, Mr. Cummings received base salary, annual incentive compensation, equity compensation, and other benefits in accordance with the terms of that agreement. Mr. Cummings’ incentive compensation was based entirely upon the formulas established under our 2014 Corporate Incentive Plan, with his performance goal based entirely upon Radio EBITDA (as defined in the plan) because his principal responsibilities are to the performance of the company’s radio division. Mr. Cummings did not receive any equity grants as none were provided for in his employment agreement.
J. Scott Enright, Executive Vice President, General Counsel and Secretary. Mr. Enright serves in these capacities pursuant to an employment agreement effective March 2, 2012. The general terms of the employment agreement are described under the heading “Executive Compensation– Employment Agreements”. During fiscal 2014, Mr. Enright received base salary, annual incentive compensation, equity compensation, and other benefits in accordance with the terms of that agreement, except that he had elected to reduce his contractual base salary by $2,640 in order to enable certain of our corporate employees to receive higher merit raises. Mr. Enright’s incentive compensation was based entirely upon the formulas established under our 2014 Corporate Incentive Plan, with his entire performance goal based upon Total Company EBITDA (as defined in the plan) because his principal responsibilities are to the performance of the entire company. Mr. Enright did not receive any equity grants as none were provided for in his employment agreement.
Severance Benefits
The employment agreements we have entered into with all of our executive officers provide for certain payments and benefits to the executive officer in the event that the executive officer is terminated by the company without “cause,” and/or terminates his own employment with “good reason.”
We have also entered into a Change in Control Severance Agreement with each of our executive officers. The basic elements of the Change in Control Severance Agreements are the same for each of the named executives and are described under “Executive Compensation— Potential Payments upon Termination or Change in Control.” Unlike “single trigger” plans that pay out immediately upon a change in control, the agreements require a “double trigger” – a change in control followed by an involuntary loss of employment within two years thereafter, or a voluntary termination during a 30-day period beginning one year after the change in control. This is consistent with the purpose of the agreements, which is to provide executives with a guaranteed level of financial protection upon loss of employment and to provide for a smooth transition in connection with a change in control.
Generally, each such agreement provides that if the executive’s employment is terminated by the company within two years after a change in control of the company (or, in certain instances, in anticipation of a change in control), other than for cause, or is terminated by the executive for good reason, the executive is entitled to the following benefits:
In each case, the executive is obligated not to voluntarily leave employment with Emmis during the pendency of (and prior to the consummation or abandonment of) a change in control other than as a result of disability, retirement or an event that would constitute good reason if the change-of-control had occurred. In addition, under our 2012 Equity Compensation Plan, all outstanding stock options and restricted shares held by the executive vest immediately upon a change in control.
The Compensation Committee believes that the Change in Control Severance Agreements will help to preserve productivity and encourage retention in the face of the disruptive impact of an actual or rumored change in control of the company. In addition, the committee believes that the agreements will help to align executive and shareholder interests by enabling executives to consider corporate transactions that are in the best interests of the shareholders and other constituents of the company without undue concern over whether the transactions may jeopardize the executives’ own employment.
Deductibility Cap on Executive Compensation
U.S. federal income tax law prohibits the company from taking a tax deduction for certain compensation paid in excess of $1,000,000 to the named executive officers listed in the summary compensation table below (other than the chief financial officer, who is exempt from this rule). However, performance-based compensation, as defined in the tax law, is fully deductible if the programs are approved by shareholders and meet other requirements. While our Board desires to maximize the tax deductibility of our executive compensation, some elements of executive compensation may not be tax deductible, and our compensation plans and policies may be modified if the Compensation Committee determines that such action is in the best interest of us and our shareholders, even if such action may result in some loss of deductibility. For fiscal 2014, we believe none of our compensation expense exceeded the Section 162(m) limit.
Executive Compensation Recovery Policy
The Compensation Committee has adopted an executive compensation recovery policy applicable to executive officers. Under this policy, the company may recover incentive compensation (cash or equity) that was based on achievement of financial results that were subsequently the subject of a restatement if an executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement, and the effect of the wrongdoing was to increase the amount of bonus or incentive compensation. This policy covers income related to cash bonuses and performance awards.
Equity Ownership Requirements
While the company encourages all of its employees to invest in the company and has historically included most of them in its equity award programs, the company does not require any executives or other employees to maintain a certain level of equity ownership in the company. The board of directors believes that the decision to invest in the company is a highly personal one, and consequently should not be mandated.
Fiscal 2015 Compensation Decisions
New Employment Agreement. Most elements of our executives’ compensation are set forth in their multi-year employment agreements. As Mr. Cummings one-year employment agreement expired on February 28, 2014, the company entered into a new one-year employment agreement with Mr. Cummings effective March 1, 2014. That agreement is comparable to Mr. Cummings expiring agreement, providing for approximately a 2% increase in his base salary to $475,000 and the grant of 150,000 shares of restricted stock that will vest in three equal installments at the end of fiscal years 2015, 2016 and 2017.
2015 Corporate Incentive Plan. The Compensation Committee also adopted a 2015 Corporate Incentive Plan that is substantially similar to the 2014 plan. However, the Compensation Committee (1) changed the standards for attaining the annual performance goals from 95% to 90%, setting the lower end of the graded scale at 70% payout in the event of attaining 90% of the annual performance goal, (2) excluded from the applicable EBITDA calculations payments by the company to its NextRadio, LLC subsidiary that are used to fund payments to Sprint in connection with the radio industry’s efforts to increase the activation of FM chips in mobile devices, and (3) excluded from the applicable EBITDA calculations severance, restructuring and certain other unbudgeted expenses. At the same time, the Compensation Committee expressly increased its discretion to not pay or to reduce bonuses otherwise earned under the 2015 plan. The Compensation Committee’s goal with these changes was to increase the probability that bonuses paid to executive officers would qualify for deductibility under Section 162(m) of the Internal Revenue Code, while at the same time allowing the Compensation Committee increased flexibility to withhold or reduce payments in its discretion.
Supplemental Bonus. On May 20, 2014, the Compensation Committee certified the results under the 2014 Corporate Incentive Plan and authorized the payout of the bonuses listed under the “Annual Award — Actual” column set forth above. In addition, the Committee exercised its discretion to award bonuses to Messrs. Smulyan, Walsh, Loewen, Cummings and Enright in the amount of $405,000, $156,000, $14,760, $44,554, and $72,306, respectively. These supplemental bonuses equal the amount that the participants would have earned under the 2014 Plan had payments to Sprint for the inclusion of the Company’s NextRadio App on Sprint mobile devices been excluded from the Plan, less the amount of bonuses actually paid under the 2014 Plan. In approving the bonuses, the Committee noted the exceptional year delivered by the Company’s radio and publishing divisions, that the agreement with Sprint was signed in the middle of the fiscal year after the 2014 Plan had been adopted, that the Sprint agreement presented a tremendous opportunity for the Company and its investment in the NextRadio App, and that advancing shortfalls in the payments to Sprint that were originally intended to be paid by other members of the U.S. Radio Industry served the Company’s best interests.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with management, and based on such review and discussions, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.
THE COMPENSATION COMMITTEE
Peter A. Lund, Chairman
Susan B. Bayh
James M. Dubin
Lawrence B. Sorrel
The following table sets forth the compensation awarded to, earned by, or paid to the principal executive officer, the principal financial officer and the three most highly compensated executive officers other than the principal executive officer and the principal financial officer (collectively, the “Named Executive Officers”) during the fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012.
2014 SUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary ($) | Bonus (1) ($) | Stock Awards (2) ($) | Option Awards (2) ($) | Non-Equity Incentive Plan Compensation (1) ($) | All Other Compensation (3) ($) | Total ($) | ||||||||||||||||||||||||||
Jeffrey H. Smulyan, | 2014 | 880,636 | — | 656,000 | 190,800 | 630,000 | 31,107 | 2,388,543 | ||||||||||||||||||||||||||
Chief Executive Officer | 2013 | 850,000 | 1,318,750 | 31,051 | 86,100 | 1,084,456 | 1,193,789 | 4,564,146 | ||||||||||||||||||||||||||
2012 | 825,000 | 1,427,380 | — | 128,085 | 412,500 | 37,991 | 2,830,956 | |||||||||||||||||||||||||||
Patrick M. Walsh, | 2014 | 580,923 | 500,000 | 850,000 | 946,326 | 420,000 | 27,947 | 3,325,196 | ||||||||||||||||||||||||||
Executive Vice President, Chief Financial | 2013 | 600,000 | 394,467 | 4,977 | — | 612,398 | 27,620 | 1,639,462 | ||||||||||||||||||||||||||
Officer and Chief Operating Officer | 2012 | 600,000 | 737,440 | — | 143,675 | 205,553 | 19,971 | 1,706,639 | ||||||||||||||||||||||||||
Gregory T. Loewen, | 2014 | 410,000 | — | 98,400 | 190,800 | 227,960 | 22,847 | 950,007 | ||||||||||||||||||||||||||
President – Publishing | 2013 | 350,000 | 467,000 | 2,415 | 86,100 | 140,723 | 17,086 | 1,063,324 | ||||||||||||||||||||||||||
Division and Chief Strategy Officer | 2012 | 325,000 | 12,600 | — | — | 78,000 | 25,551 | 441,151 | ||||||||||||||||||||||||||
Richard F. Cummings, | 2014 | 464,100 | — | — | — | 233,906 | 23,445 | 721,451 | ||||||||||||||||||||||||||
President—Radio Programming | 2013 | 464,100 | 163,800 | 7,870 | 86,100 | 284,214 | 22,446 | 1,028,530 | ||||||||||||||||||||||||||
2012 | 455,000 | 54,600 | — | — | 109,200 | 21,359 | 640,159 | |||||||||||||||||||||||||||
J. Scott Enright, | 2014 | 399,060 | — | — | — | 112,476 | 22,964 | 534,500 | ||||||||||||||||||||||||||
Executive Vice President, | 2013 | 390,000 | 112,500 | 1,564 | 143,500 | 199,030 | 20,899 | 867,493 | ||||||||||||||||||||||||||
General Counsel and Secretary | 2012 | 375,000 | 538,750 | — | — | 75,000 | 19,567 | 1,008,317 |
Name Jeffrey H. Smulyan Patrick M. Walsh Gregory T. Loewen Richard F. Cummings J. Scott Enright Year Perquisites
and Other
Personal
Benefits
(A) Tax
Reimbursements Insurance
Premiums
(B) Company
Contributions
to Retirement
and
401(k) Plans Other
Payments
(C) Total 2014 $ 24,000 — $ 229 $ 6,878 — $ 31,107 2013 24,000 — 10,290 4,988 $ 1,154,511 1,193,789 2012 24,000 $ 599 10,452 2,940 — 37,991 2014 12,000 128 5,090 6,997 3,732 27,947 2013 12,000 155 5,090 4,831 5,544 27,620 2012 12,000 74 5,065 2,832 — 19,971 2014 12,000 228 4,446 6,173 — 22,847 2013 12,000 0 — 5,026 — 17,086 2012 12,000 136 9,282 4,133 — 25,551 2014 12,000 74 5,396 5,975 — 23,445 2013 12,000 73 5,396 4,977 — 22,446 2012 12,000 147 5,396 3,816 — 21,359 2014 12,000 291 5,062 5,611 — 22,964 2013 12,000 236 3,796 4,867 — 20,899 2012 12,000 441 4,467 2,658 — 19,567
Employment Agreements
On December 26, 2012, we entered into a new employment agreement with Mr. Smulyan that is effective through February 29, 2016, and continues his position as our Chairman, President and Chief Executive Officer. Mr. Smulyan’s base salary is $900,000 for the first year, $925,000 for the second year, and $950,000 for the third year. Mr. Smulyan received a $700,000 signing bonus in connection with execution of the agreement, and the company forgave the balance of a loan payable from Mr. Smulyan which had a balance on November 30, 2012 of $1,151,966. Mr. Smulyan’s annual incentive compensation target is 125% of his base salary and will be paid, if at all, based upon achievement of certain performance goals determined by our Compensation Committee. The company retains the right to pay any annual incentive compensation in cash or shares of our Class A common stock. Each year the agreement remains in effect, Mr. Smulyan is entitled to receive an option to acquire 150,000 shares of Class A common stock. On or about March 1, 2013 Mr. Smulyan received a grant of 400,000 restricted shares of Class A common stock, 175,000 of which vested on March 1, 2014, 112,500 of which will vest on March 1, 2015 and 112,500 of which will vest on March 1, 2016. Mr. Smulyan receives an automobile allowance and is reimbursed for up to $10,000 per year in premiums for life and disability insurance and retains the right to participate in all company employee benefit plans for which he is otherwise eligible. Mr. Smulyan’s employment agreement will automatically renew each year following the initial three-year term for additional one-year terms unless either the company or Mr. Smulyan provides the other with written notice of non-renewal prior to December 31 of the final year of the initial or subsequent term, as applicable. Mr. Smulyan’s base salary upon any such annual renewal will increase by $25,000. The agreement is subject to termination by our board of directors for cause (as defined in the agreement), by Mr. Smulyan for good reason (as defined in the agreement), each as set forth in the employment agreement. Mr. Smulyan is entitled to certain termination benefits upon disability or death, and certain severance benefits.
Mr. Walsh had a two year employment agreement that expired on September 3, 2013, which had continued his position as Executive Vice President, Chief Financial Officer and Chief Operating Officer. Mr. Walsh’s annual base compensation for the term of the employment agreement was $600,000. Under the agreement, Mr. Walsh’s annual incentive compensation targets were 100% of his base compensation. The company had the right to pay any annual incentive compensation in cash or shares of our common stock. Additionally, the award of annual incentive compensation was based upon achievement of certain performance goals determined each year by our Compensation Committee. On September 8, 2011, Mr. Walsh received an option to acquire 250,000 shares of our Class A common stock. Mr. Walsh received a completion and performance bonus upon the expiration of the agreement equal to $1,200,000 (paid in cash and shares of our Class A common stock) based upon an increase in share price set forth in the employment agreement. Mr. Walsh received an automobile allowance of $1,000 per month and was reimbursed for up to $5,000 per year in premiums for life and disability insurance and professional fees related to estate planning. Mr. Walsh retained the right to participate in all of our employee benefit plans for which he was otherwise eligible. The agreement was subject to termination by our board of directors for cause (as defined in the agreement), and by Mr. Walsh for good reason (as defined in the agreement) upon written notice. Mr. Walsh is entitled to certain termination benefits upon disability or death, and certain severance benefits.
On October 23, 2013 we entered into a new employment agreement with Mr. Walsh that is effective from September 4, 2013 through July 31, 2017 and continues his position as our Executive Vice President, Chief Financial Officer and Chief Operating Officer. Mr. Walsh’s annual base compensation for the term of the employment agreement is $600,000, with annual increases of up to 2.5% as set forth in the employment agreement. Mr. Walsh’s annual incentive compensation targets for fiscal years 2014, 2015, 2016, 2017 and 2018 are 100% of his base compensation. In the event that Mr. Walsh’s employment terminates upon expiration of the employment agreement, Mr. Walsh’s annual incentive compensation for fiscal year 2018 will be pro-rated. The company retains the right to pay any annual incentive compensation in cash or shares of our Class A common stock. Additionally, the award of annual incentive compensation is based upon achievement of certain performance goals to be determined each year by our Compensation Committee. On September 4, 2013, Mr. Walsh received an option to acquire 250,000 shares of our Class A common stock. Mr. Walsh received an additional option to acquire 250,000 shares of our Class A common stock on January 2, 2014. On the first day of each contract year during the term, Mr. Walsh is scheduled to receive a restricted stock award with a one-year vesting period, in an amount equal to $150,000 (year 1), $350,000 (year 2), $250,000 (year 3) and $250,000 (year 4). Mr. Walsh may also earn performance-based awards of our Class A common stock at the end of year 2 (with a fair market value of $300,000, $500,000 or $700,000) and year 4 (with a fair market value of $600,000, $1,000,000 or $1,400,000, in each case less any amounts earned at the completion of year 2) based on certain increases in share price set forth in the employment agreement. Mr. Walsh receives an automobile allowance of $1,000 per month and is reimbursed for up to $5,000 per year in premiums for life and disability insurance and professional fees related to estate planning. Mr. Walsh has the right to participate in all of our employee benefit plans for which he is otherwise eligible. The agreement is subject to termination by our board of directors for cause (as defined in the agreement), by Mr. Walsh for good reason (as defined in the agreement) or by Mr. Walsh upon the acceptance of a chief executive officer position at a non-competitive company as set forth in the employment agreement. Mr. Walsh is entitled to certain termination benefits upon disability or death, and certain severance benefits.
On December 21, 2012, we entered into a new employment agreement with Mr. Loewen that is effective through February 29, 2016, and continues his position as our President – Publishing and Chief Strategy Officer. Mr. Loewen’s annual base compensation is $410,000 for the first year, $422,000 for the second year and $435,000 for the third year. Mr. Loewen’s annual incentive compensation target for each year is 60% of his base compensation. The company has the right to pay any annual incentive compensation in cash or shares of our Class A common stock. Additionally, the award of annual incentive compensation is based upon achievement of certain performance goals to be determined each year by our Compensation Committee. On March 1 2013, Mr. Loewen received 60,000 restricted shares of our Class A common stock and an option to acquire 150,000 shares of our Class A common stock. Mr. Loewen receives an automobile allowance of $1,000 per month and is reimbursed for up to $5,000 per year in premiums for life and disability insurance and professional fees related to estate planning. Mr. Loewen has the right to participate in all of our employee benefit plans for which he is otherwise eligible. The agreement is subject to termination by the company for cause (as defined in the agreement) and by Mr. Loewen for good reason (as defined in the agreement) upon written notice. Mr. Loewen is entitled to certain termination benefits upon disability or death and certain severance benefits.
Mr. Cummings had a one-year employment agreement that expired February 28, 2014, which had continued his position as President of Emmis Radio Programming. Under the agreement, Mr. Cummings’ base salary was $464,100. Mr. Cummings’ annual incentive compensation target is 60% of his base salary, and the company had the right to pay any annual incentive compensation in cash or shares of our common stock. Additionally, the award of annual incentive compensation was based upon achievement of certain performance goals to be determined for the year by our Compensation Committee. Mr. Cummings received an automobile allowance and was reimbursed for up to $5,000 per year in premiums for life or other insurance. Mr. Cummings had the right to participate in all of our employee benefit plans for which he was otherwise eligible. He was also entitled to severance equal to $470,000 in the event he was not offered substantially similar employment upon the expiration of the term and his employment terminated. If he had been entitled to severance, Mr. Cummings would have been offered a four year part-time programming role with total payments over the four years of $530,000. The switch from full-time to part-time employment was designed to constitute a ‘separation from service’ within the meaning of section 409A of the Internal Revenue Code.
For fiscal 2015 we entered into a new one-year employment agreement with Mr. Cummings that is effective through February 28, 2015 and continues his position as President of Emmis Radio Programming. Under the agreement, Mr. Cummings’ base salary is $475,000. Mr. Cummings’ annual incentive compensation target is 60% of his base salary. The company has the right to pay any annual incentive compensation in cash or shares of our Class A common stock. Additionally, the award of annual incentive compensation is based upon achievement of certain performance goals to be determined each year by our Compensation Committee. On March 1, 2014, Mr. Cummings received a restricted stock award of 150,000 shares of our Class A common stock that is scheduled to vest in three equal, annual installments on the last day of February in 2015, 2016 and 2017. Mr. Cummings receives an automobile allowance of $1,000 per month and is reimbursed for up to $5,000 per year in premiums for life or other insurance. Mr. Cummings has the right to participate in all of our employee benefit plans for which he is otherwise eligible. The agreement remains subject to termination by our board of directors for cause (as defined in the agreement). Mr. Cummings will also be entitled to severance equal to $470,000 in the event he is not offered substantially similar employment upon the expiration of the term and his employment terminates. If he is entitled to severance, Mr. Cummings will be offered a four year part-time programming role with total payments over the four years of $530,000. The switch from full-time to part-time employment is designed to constitute a ‘separation from service’ within the meaning of section 409A of the Internal Revenue Code.
Mr. Enright has a five year employment agreement that was effective as of March 2, 2012 and continues his position as our Executive Vice President, General Counsel and Secretary. Mr. Enright’s annual base compensation for the first year of the employment agreement was $390,000, with 3% annual increases thereafter. Mr. Enright’s annual incentive compensation target is 50% of his base compensation. The company has the right to pay any annual incentive compensation in cash or shares of our Class A common stock. Additionally, the award of annual incentive compensation is based upon achievement of certain performance goals to be determined each year by our Compensation Committee. On March 1, 2012, Mr. Enright received an option to acquire 250,000 shares of our Class A common stock. Mr. Enright is also scheduled to receive a completion bonus upon the expiration of the agreement equal to $500,000. Mr. Enright receives an automobile allowance of $1,000 per month and is reimbursed for up to $5,000 per year in premiums for life and disability insurance and professional fees related to estate planning. Mr. Enright has the right to participate in all of our employee benefit plans for which he is otherwise eligible. The agreement remains subject to termination by our board of directors for cause (as defined in the agreement), and by Mr. Enright for good reason (as defined in the agreement) upon written notice. Mr. Enright is entitled to certain termination benefits upon disability or death, and certain severance benefits.
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR ENDED 2014
Estimated Possible Payouts Under Non- Equity Incentive Plan Awards (1) | ||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold | Target | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards | Closing Market Price on Date of Grant | Grant Date Fair Value of Stock and Option Awards | ||||||||||||||||||||||||
Jeffrey H. Smulyan | ||||||||||||||||||||||||||||||||
Quarter 1 Award | 5/1/2013 | $ | 180,000 | $ | 225,000 | |||||||||||||||||||||||||||
Quarter 2 Award | 5/1/2013 | $ | 180,000 | $ | 225,000 | |||||||||||||||||||||||||||
Quarter 3 Award | 5/1/2013 | $ | 180,000 | $ | 225,000 | |||||||||||||||||||||||||||
Annual Award | 5/1/2013 | $ | 360,000 | $ | 450,000 | |||||||||||||||||||||||||||
3/1/2013 | 150,000 | $ | 1.64 | $ | 1.64 | $ | 190,800 | |||||||||||||||||||||||||
3/1/2013 | 400,000 | $ | 1.64 | $ | 656,000 | |||||||||||||||||||||||||||
5/9/2013 | 135,282 | $ | 1.46 | $ | 197,512 | |||||||||||||||||||||||||||
Patrick M. Walsh | ||||||||||||||||||||||||||||||||
Quarter 1 Award | 5/1/2013 | $ | 96,000 | $ | 120,000 | |||||||||||||||||||||||||||
Quarter 2 Award | 5/1/2013 | $ | 96,000 | $ | 120,000 | |||||||||||||||||||||||||||
Quarter 3 Award | 5/1/2013 | $ | 96,000 | $ | 120,000 | |||||||||||||||||||||||||||
Annual Award | 5/1/2013 | $ | 192,000 | $ | 240,000 | |||||||||||||||||||||||||||
9/4/2013 | 250,000 | $ | 3.15 | $ | 3.15 | $ | 528,850 | |||||||||||||||||||||||||
1/2/2014 | 250,000 | $ | 2.74 | $ | 2.74 | �� | $ | 417,475 | ||||||||||||||||||||||||
9/4/2013 | 222,222 | $ | 3.15 | $ | 700,000 | |||||||||||||||||||||||||||
9/4/2013 | 47,619 | $ | 3.15 | $ | 150,000 | |||||||||||||||||||||||||||
5/9/2013 | 77,324 | $ | 1.46 | $ | 112,893 | |||||||||||||||||||||||||||
Gregory T. Loewen | ||||||||||||||||||||||||||||||||
Quarter 1 Award | 5/1/2013 | $ | 39,360 | $ | 49,200 | |||||||||||||||||||||||||||
Quarter 2 Award | 5/1/2013 | $ | 39,360 | $ | 49,200 | |||||||||||||||||||||||||||
Quarter 3 Award | 5/1/2013 | $ | 39,360 | $ | 49,200 | |||||||||||||||||||||||||||
Annual Award | 5/1/2013 | $ | 78,720 | $ | 98,400 | |||||||||||||||||||||||||||
3/1/2013 | 150,000 | $ | 1.64 | $ | 1.64 | $ | 190,800 | |||||||||||||||||||||||||
3/1/2013 | 60,000 | $ | 1.64 | $ | 98,400 | |||||||||||||||||||||||||||
5/9/2013 | 4,456 | $ | 1.46 | $ | 6,506 | |||||||||||||||||||||||||||
Richard F. Cummings | ||||||||||||||||||||||||||||||||
Quarter 1 Award | 5/1/2013 | $ | 44,554 | $ | 55,692 | |||||||||||||||||||||||||||
Quarter 2 Award | 5/1/2013 | $ | 44,554 | $ | 55,692 | |||||||||||||||||||||||||||
Quarter 3 Award | 5/1/2013 | $ | 44,554 | $ | 55,692 | |||||||||||||||||||||||||||
Annual Award | 5/1/2013 | $ | 89,107 | $ | 111,384 | |||||||||||||||||||||||||||
5/9/2013 | 35,455 | $ | 1.46 | $ | 51,764 | |||||||||||||||||||||||||||
J. Scott Enright | ||||||||||||||||||||||||||||||||
Quarter 1 Award | 5/1/2013 | $ | 32,196 | $ | 40,170 | |||||||||||||||||||||||||||
Quarter 2 Award | 5/1/2013 | $ | 32,196 | $ | 40,170 | |||||||||||||||||||||||||||
Quarter 3 Award | 5/1/2013 | $ | 32,196 | $ | 40,170 | |||||||||||||||||||||||||||
Annual Award | 5/1/2013 | $ | 64,272 | $ | 80,340 | |||||||||||||||||||||||||||
5/9/2013 | 24,829 | $ | 1.46 | $ | 36,250 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END FOR 2014 (1)
Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (2) (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested (3) ($) | ||||||||||||||||||
Exercisable | Unexercisable | |||||||||||||||||||||||
Jeffrey H. Smulyan | 150,000 | 3.33 | 2/28/24 | 400,000 | $ | 1,256,000 | ||||||||||||||||||
150,000 | 1.64 | 3/1/23 | ||||||||||||||||||||||
150,000 | 0.70 | 3/1/22 | ||||||||||||||||||||||
100,001 | 49,999 | 1.02 | 5/4/21 | |||||||||||||||||||||
150,000 | 1.14 | 11/2/19 | ||||||||||||||||||||||
71,989 | 0.295 | 3/2/19 | ||||||||||||||||||||||
439,049 | 17.45 | 3/1/14 | ||||||||||||||||||||||
Patrick M. Walsh | 250,000 | 2.74 | 1/2/24 | 47,619 | $ | 149,524 | ||||||||||||||||||
250,000 | 3.15 | 9/4/23 | ||||||||||||||||||||||
250,000 | 0.69 | 9/8/21 | ||||||||||||||||||||||
14,706 | 0.425 | 12/15/18 | ||||||||||||||||||||||
Gregory T. Loewen | 150,000 | 1.64 | 3/1/23 | 60,000 | $ | 188,400 | ||||||||||||||||||
150,000 | 0.70 | 3/1/22 | ||||||||||||||||||||||
20,000 | 0.90 | 3/1/20 | ||||||||||||||||||||||
40,000 | 1.14 | 11/2/19 | ||||||||||||||||||||||
Richard F. Cummings | 150,000 | 0.70 | 3/1/22 | — | — | |||||||||||||||||||
73,174 | 17.45 | 3/1/14 | ||||||||||||||||||||||
J. Scott Enright | 62,501 | 187,499 | 0.70 | 3/1/22 | — | — | ||||||||||||||||||
120,000 | 0.355 | 4/17/19 | ||||||||||||||||||||||
30,000 | 0.295 | 3/2/19 | ||||||||||||||||||||||
14,378 | 17.45 | 3/1/14 |
OPTION EXERCISES AND STOCK VESTED FOR FISCAL YEAR-ENDED 2014
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | ||||||||||||
Jeffrey H. Smulyan | — | — | 135,282 | $ | 197,512 | |||||||||||
181,890 | $ | 638,434 | ||||||||||||||
Patrick M. Walsh | — | — | 77,324 | $ | 112,893 | |||||||||||
222,222 | $ | 700,000 | ||||||||||||||
29,156 | $ | 102,337 | ||||||||||||||
Gregory T. Loewen | 10,000 | $ | 31,150 | 4,456 | $ | 6,506 | ||||||||||
30,000 | $ | 94,293 | 14,144 | $ | 49,645 | |||||||||||
16,753 | $ | 42,521 | ||||||||||||||
19,547 | $ | 46,195 | ||||||||||||||
13,700 | $ | 32,439 | ||||||||||||||
Richard F. Cummings | 84,825 | $ | 172,186 | 35,455 | $ | 51,764 | ||||||||||
2,675 | $ | 5,457 | 46,100 | $ | 161,811 | |||||||||||
J. Scott Enright | — | — | 24,829 | $ | 36,250 | |||||||||||
9,159 | $ | 32,148 |
Retirement Plan
Emmis sponsors a Section 401(k) retirement savings plan that is available to substantially all employees age 18 years and older who have at least 30 days of service. Employees may make pretax contributions to the plans up to 50% of their compensation, not to exceed the annual limit prescribed by the Internal Revenue Service (“IRS”). Emmis may make discretionary matching contributions to the plans in the form of cash or shares of our Class A common stock. Employee contributions have been matched at 33% up to a maximum of 6% of eligible compensation. Emmis’ contributions to the plan totaled $0.9 million for each of the years ended February 29, 2012, February 28, 2013 and February 28, 2014.
Potential Payments upon Termination or Change in Control
The employment agreements we entered into with Messrs. Smulyan, Loewen, Walsh, Cummings and Enright provide for certain payments and benefits to the named executive officer in the event that executive officer is terminated by the company without “cause,” and/or terminates his own employment with “good reason.”
We have also entered into a Change in Control Severance Agreement with each of the executives named in the preceding tables. Each such agreement provides that if the executive’s employment is terminated by the company within two years after a change in control of the company (or, in certain instances, in anticipation of a change in control), other than for cause, or is terminated by the executive for good reason, the executive is entitled to (1) a payment equal to the executive’s base salary through the termination date, plus a pro-rata portion of the executive’s target bonus for the year and accrued vacation pay; (2) a severance payment equal to three times the executive’s highest annual base salary and highest annual incentive bonus during the preceding three years; (3) continued accident and life insurance benefits for three years; (4) reimbursement for COBRA premiums for continuation of medical and dental benefits for 18 months and reimbursement for private medical and dental benefits of an equivalent level for 18 months following termination of the COBRA reimbursement; (5) accelerated vesting of all stock options and restricted shares and, depending on the terms of the executive’s employment agreement, contract completion bonuses, and (6) if the payments to the executive exceed certain limits, additional tax “gross up” payments to compensate the executive for the excise tax imposed by section 4999 of the Internal Revenue Code; provided, however that the amount of the “gross up” payment may be reduced by up to 10% if such reduction would prevent payment of the excise tax. In each case, the executive is obligated not to voluntarily leave employment with Emmis during the pendency of (and prior to the consummation or abandonment of) a change in control other than as a result of disability, retirement or an event that would constitute good reason if the change-of-control had occurred.
Under the Change in Control Severance Agreement, change in control, cause and good reason are defined as follows:
Change in Control. A “change in control” of the company occurs if:
Cause. “Cause” generally means:
Good Reason. “Good Reason” generally means:
In addition to the occurrence of one of more of the events constituting “Good Reason” set forth above, in order to resign his employment, each of the executives named above is also required to give the company notice of the occurrence of any such event (except during the 30-day period commencing one year after the occurrence of a change in control, which is not so limited) within 90 days of such occurrence; and the company has the right to cure such occurrence within 30 days of such notice.
We have set forth below, for each named executive officer, a description of the payments they would have received had the events described below occurred on February 28, 2014, the last day of our most recently completed fiscal year.
Jeffrey H. Smulyan. If Mr. Smulyan had been terminated by the company without cause, had terminated his employment for good reason, or had the company elected not to renew his employment agreement, each in the absence of a change in control, he would have been entitled to a lump sum payment of $4,101,684. In addition, Mr. Smulyan would have been entitled to continued health and welfare benefits for three years, having an estimated value of approximately $28,127, and outplacement services with an estimated value of approximately $5,000, and would have been entitled to accelerated vesting of unvested stock options and restricted shares with an acceleration value of $227,654 as calculated in accordance with IRS guidelines. If Mr. Smulyan had been terminated due to his incapacity, he would have been entitled to five years of annual payments of $675,000, and if he had been terminated due to his death his estate would have received a payment of $900,000.
If Mr. Smulyan had been terminated by the company without cause, or had terminated his employment for good reason following a change in control, he would have been entitled to a lump sum payment of $6,657,118. In addition, Mr. Smulyan would have been entitled to continued health and welfare benefits for three years, having an estimated value of approximately $28,127, and outplacement services with an estimated value of approximately $5,000, and would have been entitled to accelerated vesting of unvested stock options and restricted shares with an acceleration value of $227,654 as calculated in accordance with IRS guidelines.
Patrick M. Walsh. If Mr. Walsh had been terminated by the company without cause or had terminated his employment for good reason in the absence of a change in control, he would have been entitled to a lump sum payment of $730,000. Further, Mr. Walsh would have been entitled to accelerated vesting of his unvested stock options with an acceleration value of $149,031 as calculated in accordance with IRS guidelines, and to continued health and welfare benefits for one year having a value of approximately $9,765. If Mr. Walsh had been terminated due to his incapacity or death, he or his estate would have received a payment of $300,000.
If Mr. Walsh had been terminated by the company without cause or terminated his employment for good reason following a change in control, he would have been entitled to a lump sum payment of $3,946,507. In addition, Mr. Walsh would have been entitled to continued health and welfare benefits for three years, having an estimated value of approximately $32,322, and outplacement services with an estimated value of approximately $5,000, and would have been entitled to accelerated vesting of unvested stock options and restricted shares with an acceleration value of $158,800 as calculated in accordance with IRS guidelines.
Gregory T. Loewen. If the company had terminated Mr. Loewen’s employment without cause or Mr. Loewen had terminated his employment for good reason in the absence of a change in control, he would have been entitled to a lump sum payment of $656,000. Further, Mr. Loewen would have been entitled to accelerated vesting of his unvested stock options and restricted shares with an acceleration value of $170,339 as calculated in accordance with IRS guidelines, and to continued health and welfare benefits for one year having a value of approximately $9,765.
Following a change in control, if Mr. Loewen had been terminated by the company without cause or terminated his employment for good reason, he would have been entitled to a lump sum payment of $3,133,243. In addition, Mr. Loewen would have been entitled to continued health and welfare benefits for three years, having an estimated value of approximately $32,322, and outplacement services with an estimated value of approximately $5,000, and would have been entitled to accelerated vesting of unvested stock options and restricted shares with an acceleration value of $170,339 as calculated in accordance with IRS guidelines.
Richard F. Cummings. If the company had elected not to renew Mr. Cummings employment agreement on substantially similar terms, in the absence of a change in control, he would have been entitled to a lump sum payment of $470,000. He also would have been offered a four year part time programming role with total payments over the four years of $530,000, plus continuation of health and welfare benefits during that period having a value of approximately $39,438.
Following a change in control, if Mr. Cummings had been terminated by the company without cause or terminated his employment for good reason, he would have been entitled to a lump sum payment of $3,520,116. In addition, Mr. Cummings would have been entitled to continued health and welfare benefits for three years, having an estimated value of approximately $28,127, and outplacement services with an estimated value of approximately $5,000, and would have been entitled to accelerated vesting of unvested stock options and restricted shares with an acceleration value of $59,902 as calculated in accordance with IRS guidelines.
J. Scott Enright. If the company had terminated Mr. Enright’s employment without cause or Mr. Enright had terminated his employment for good reason in the absence of a change in control, he would have been entitled to a lump sum payment of $1,705,100. Further, Mr. Enright would have been entitled to accelerated vesting of his unvested stock options and restricted shares with an acceleration value of $149,441 as calculated in accordance with IRS guidelines, and to continued health and welfare benefits for two years having a value of approximately $20,506. If Mr. Enright had been terminated due to his incapacity or death, he or his estate would have received a payment of $200,000.
Following a change in control, if Mr. Enright had been terminated by the company without cause or had terminated his employment for good reason, he would have been entitled to a lump sum payment of $3,059,819. In addition, Mr. Enright would have been entitled to continued health and welfare benefits for three years, having an estimated value of approximately $32,322, and outplacement services with an estimated value of approximately $5,000, and would have been entitled to accelerated vesting of unvested stock options and restricted shares with an acceleration value of $149,441 as calculated in accordance with IRS guidelines.
In calculating the amounts shown above for each named executive, we have made the following assumptions:
When the company’s board of directors determines that it is in the best interest of the company, the company may negotiate severance arrangements with a departing executive in addition to or in place of the arrangements described above. Circumstances under which the board may negotiate additional or different severance arrangements include but are not limited to:
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors, and persons who own more than 10% of existing common stock, to file with the Securities and Exchange Commission reports detailing their ownership of existing common stock and changes in such ownership. Officers, directors and greater-than-10% shareholders are required by Commission regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to us, we believe that during the last fiscal year all officers, directors and greater-than-10% shareholders complied with the filing requirements of Section 16(a).
PROPOSAL 2: RATIFICATION OF SELECTION OF REGISTERED PUBLIC ACCOUNTANTS
The Audit Committee, a committee of the board of directors, has appointed Ernst & Young LLP to serve as our independent registered public accountants for the fiscal year ending February 28, 2015, subject to ratification by the holders of our common stock. Our financial statements for the fiscal year ended February 28, 2014 were certified by Ernst & Young LLP. Representatives of Ernst & Young LLP are expected to attend the annual meeting with the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.
If shareholders do not ratify the selection of Ernst & Young LLP as our independent registered public accountants, or if prior to the 2014 annual meeting of shareholders Ernst & Young LLP ceases to act as our independent registered public accountants, then the Audit Committee will reconsider the selection of independent registered public accountants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTEFOR THE RATIFICATION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.
MATTERS RELATING TO INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Fees Paid to Independent Registered Public Accountants
The following table sets forth the fees (including cost reimbursements) paid to Ernst & Young LLP for the fiscal years ended February 28, 2013 and 2014, for various categories of professional services they performed as our independent registered public accountants.
Year ended February 28, | ||||||||
2013 | 2014 | |||||||
Audit Fees (1) | $ | 662,500 | $ | 767,142 | ||||
Tax Fees (2) | 70,769 | 127,137 | ||||||
|
|
|
| |||||
Total Fees | $ | 733,269 | $ | 894,279 | ||||
|
|
|
|
Engagement of the Independent Registered Public Accountants and Approval of Services
During the fiscal years ended February 28, 2013 and 2014, prior to engaging the independent registered public accountants to render the above services and pursuant to its charter, the Audit Committee approved the engagement for each of the services and determined that the provision of such services by the independent registered public accountants was compatible with the maintenance of Ernst & Young’s independence in the conduct of its auditing services. Under its current charter, it is the policy of the Audit Committee (or in certain instances, the chairman of the Audit Committee) to pre-approve the retention of the independent registered public accountants for any audit services and for any non-audit services, including tax services. No services were performed during the fiscal year ended February 28, 2014, under thede minimis exception in Rule 2-01(c) (7)(i)(C) of Regulation S-X.
Any of our shareholders wishing to have a proposal considered for inclusion in our 2015 proxy solicitation materials must set forth such proposal in writing and file it with our corporate secretary on or before the close of business on January 30, 2015 (unless we hold our annual meeting more than 30 days earlier next year, in which case the deadline will be 10 days after our first public announcement of the annual meeting date). The notice must provide certain specific information as described in our by-laws. Copies of the by-laws are available to shareholders free of charge upon request to our corporate secretary. Our board of directors will review any shareholder proposals that are filed as required and, with the assistance of the company’s secretary, will determine whether such proposals meet applicable criteria for inclusion in our 2015 proxy solicitation materials or consideration at the 2015 annual meeting. In addition, we retain discretion to vote proxies on matters of which we are not properly notified at our principal executive offices on or before the close of business on the applicable 2015 shareholder proposal filing deadline, and also retain that authority under certain other circumstances.
A copy of our Annual Report on Form 10-K for the year ended February 28, 2014, was sent to all of our shareholders of record as of May 2, 2014, and is available in the Investors section of our website (www.emmis.com). Certain shareholders who have previously given us their consent to receive materials electronically did not receive a physical copy of the Annual Report and can access the Annual Report from the Investors section of our website (www.emmis.com). The Annual Report is not to be considered as proxy solicitation material.
— | our Annual Report on Form 10-K for the fiscal year ended February 28, 2015 (filed on May 7, 2015); |
— | our Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2014 (filed on January 8, 2015); |
— | our Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2015 (filed on July 9, 2015); |
— | our Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2015 (filed on October 8, 2015); and |
— | our Current Reports on Form 8-K reporting events of (filing date in parentheses): |
March 5, 2014 | (March 10, 2014) |
April 3, 2014 | (April 3, 2014) |
April 16, 2014 | (April 16, 2014) |
April 16, 2014 | (April 18, 2014) |
May 20, 2014 | (May 23, 2014) |
June 10, 2014 | (June 10, 2014), as amended by Amendment No. 1 on Form 8-K/A (August 25, 2014) |
June 16, 2014 | (June 16, 2014) |
July 9, 2014 | (July 9, 2014) |
July 10, 2014 | (July 15, 2014) |
October 9, 2014 | (October 9, 2014) |
November 7, 2014 | (November 7, 2014) |
January 8, 2015 | (January 8, 2015) |
March 5, 2015 | (March 10, 2015) |
April 21, 2015 | (April 21, 2015) |
April 30, 2015 | (April 30, 2015) |
May 7, 2015 | (May 7, 2015) |
July 8, 2015 | (July 13, 2015) |
July 9, 2015 | (July 9, 2015) |
August 1, 2015 | (August 3, 2015) |
August 21, 2015 | (August 24, 2015) |
October 8, 2015 | (October 8, 2015) |
December 4, 2015 December 7, 2015 | (December 4, 2015) (December 10, 2015) |
![]() Emmis Communications Corporation One Emmis Plaza 40 Monument Circle Indianapolis, Indiana 46204 | VOTE BY INTERNET – www.proxyvote.com Use the Internet to transmit your voting instructions up until 5:00 p.m. (Eastern time) on , 2016. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by Emmis Communications Corporation in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards, notices of Internet availability and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE – 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 5:00 p.m. (Eastern time) on , 2016. Have your proxy card in hand when you access the website and follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o [Broadridge, 51 Mercedes Way, Edgewood, NY 11717], no later than 5:00 p.m. (Eastern time) on , 2016. |
KEEP THIS PORTION FOR YOUR RECORDS | ||
DETACH AND RETURN THIS PORTION ONLY |
The Board of Directors recommends that you vote FOR Proposal No. 1: | For | Against | Abstain | |||
1. To approve an amendment to our Articles of Incorporation, adding a provision that will cause a mandatory conversion of all issued and outstanding shares of Preferred Stock into Class A Common Stock of the company at a ratio of 2.80 shares of Class A Common Stock for each share of Preferred Stock | o | o | o | |||
The Board of Directors recommends that you vote FOR Proposal No. 2: | ||||||
2. To approve an amendment to our Articles of Incorporation, changing the conversion ratio for optional conversions of shares of Preferred Stock into Class A Common Stock to 2.80 shares of Class A Common Stock for each share of Preferred Stock | o | o | o |
For address change or comments, please mark this box and write them on the reverse side where indicated. Please note that changes to the registered name(s) on the account may not be submitted via this method. | ☐ | |
Please indicate if you plan to attend this meeting. | Yes | No |
☐ | ☐ | |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, trustee, guardian or other fiduciary, please give full title as such. Joint owners must each sign. If shares are held by a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
Signature of Shareholder [PLEASE SIGN WITHIN BOX] | Date | Signature of Shareholder (Joint Owners) | Date |
side and is not transferable.
EMMIS COMMUNICATIONS CORPORATION SPECIAL MEETING OF SHAREHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF EMMIS COMMUNICATIONS CORPORATION THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON ,2016 The undersigned hereby acknowledges receipt of the Emmis Communications Corporation Notice of Special Meeting and Proxy Statement and hereby appoints J. Scott Enright and Jeffrey H. Smulyan, and each of them individually, as attorneys-in-fact and proxies, with full power of substitution, to vote all the shares of common stock of Emmis Communications Corporation (the “Company”) that the undersigned would be entitled to vote if personally present at the Special Meeting of Shareholders of the Company to be held at One Emmis Plaza, 40 Monument Circle, Indianapolis, Indiana, on , 2016, and any adjournment or postponement thereof, upon the matters set forth herein, and in their discretion upon such other matters as may properly come before the meeting. This proxy, if signed, dated and returned, will be voted as specified on the reverse side by the undersigned. If this proxy is signed, dated and returned without specifications, the shares will be voted FOR proposals 1 and 2. If you mark “abstain” on your proxy card, your shares will be counted as present for purposes of determining the presence of a quorum. You have the right to revoke your proxy at any time before the meeting by either notifying our corporate secretary or returning a later-dated proxy. You may also revoke your proxy by voting in person at the special meeting. All proxies previously given or executed by the undersigned with respect to the shares of common stock represented by this proxy are hereby revoked. The undersigned acknowledges receipt of the accompanying Notice of Special Meeting of Shareholders and Proxy Statement for the Special Meeting of Shareholders to be held on , 2016. IMPORTANT - This proxy must be signed and dated on the reverse side. If you vote by the Internet, please DO NOT mail back this proxy card. Proxies submitted by the Internet must be received by 5 p.m. (Eastern time) on , 2016. Address change/comments: __________________________________________________________________________________________________________________________________ (If you provide any address change and/or comments above, please mark the corresponding box on the reverse side.) Continued and to be signed on reverse side |
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. EMMIS COMMUNICATIONS CORP. 40 MONUMENT CIRCLE ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS INDIANAPOLIS, IN 46204 If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet 1 Investor Address Line 1 and, when prompted, indicate that you agree to receive or access proxy materials Investor Address Line 2 electronically in future years. Investor Address Line 3 1 1 OF Investor Address Line 4 VOTE BY PHONE - 1-800-690-6903 Investor Address Line 5 Use any touch-tone telephone to transmit your voting instructions up until 11:59 John Sample P.M. Eastern Time the day before the cut-off date or meeting date. Have your 1234 ANYWHERE STREET 2 proxy card in hand when you call and then follow the instructions. ANY CITY, ON A1A 1A1 VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. CONTROL # 000000000000 NAME THE COMPANY NAME INC. - COMMON SHARES 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS A 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS B 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS C 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS D 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS E 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS F 123,456,789,012.12345 THE COMPANY NAME INC. - 401 K 123,456,789,012.12345 PAGE 1 OF 2 x TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. For Withhold For All To withhold authority to vote for any All All Except individual nominee(s), mark “For All Except” and write the number(s) of the The Board of Directors recommends you vote 0 FOR each of the Nominees listed below to nominee(s) on the line below. 2 serve for a term of 3 years: 0 0 0 1. Election of Directors Nominees 01 Richard A. Leventhal 02 Lawrence B. Sorrel 0000000000 The Board of Directors recommends you vote FOR the following proposal: For Against Abstain 2 Ratification of the selection of Ernst & Young LLP as Emmis’ independent registered public accountants for the fiscal year 0 0 0 ending February 28, 2015. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. For address change/comments, mark here. 0 (see reverse for instructions) Yes No Please indicate if you plan to attend this meeting 0 0 Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. SHARES CUSIP # JOB # SEQUENCE # Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Form 10-K is/are available at www.proxyvote.com . EMMIS COMMUNICATIONS CORPORATION One Emmis Plaza 40 Monument Circle Indianapolis, Indiana 46204 This Proxy is Solicited on Behalf of the Emmis Communications Corporation Board of Directors The undersigned hereby appoints J. Scott Enright and Patrick M. Walsh, and each of them individually, as attorneys-in-fact and proxies, with full power of substitution (the “Proxy”), to vote as designated on the reverse side all shares of Class B Common Stock of Emmis Communications Corporation which the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders to be held on July 10, 2014 at 11:00 a.m., local time, at Emmis Digital - NextRadio Offices, 401 N. Franklin St, Suite 5S Chicago, IL 60654 and at any adjournment thereof. 51160 Address change/comments: 0 . 0 . R1 . 2 _ 0000215373 (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side