SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
EMMIS COMMUNICATIONS CORPORATION
(Name of Registrant as Specified in Its Charter)
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[Emmis Logo]
May 29, 2001
Dear Shareholder:
The directors and officers of Emmis Communications Corporation join
me in extending to you a cordial invitation to attend the annual meeting of our
shareholders. This meeting will be held on Tuesday, June 26, 2001 at 10:00 a.m.,
local time, at One Emmis Plaza, 40 Monument Circle, Indianapolis, Indiana 46204.
The formal notice of this annual meeting and the proxy statement
appear on the following pages. After reading the proxy statement, please mark,
sign, and return the enclosed proxy card to ensure that your votes on the
business matters of the meeting will be recorded.
We hope that you will attend this meeting. Whether or not you
attend, we urge you to return your proxy promptly in the postage paid envelope
provided. After returning the proxy, you may, of course, vote in person on all
matters brought before the meeting.
We look forward to seeing you on June 26th.
Sincerely,
/s/ Jeffrey H. Smulyan
Jeffrey H. Smulyan
Chief Executive Officer, President
and Chairman of the Board
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EMMIS COMMUNICATIONS CORPORATION
INDIANAPOLIS, INDIANA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of the shareholders of Emmis Communications
Corporation will be held on Tuesday, June 26, 2001, at 10:00 a.m., local time,
at One Emmis Plaza, 40 Monument Circle, Indianapolis, Indiana 46204.
The holders of common stock will be asked to consider and to vote on
the following matters:
(1) election of three directors to Emmis' board of directors for terms of three
years;
(2) approval of the 2001 Equity Incentive Plan, as set forth in Exhibit A to
the accompanying proxy statement;
(3) ratification of the selection of Arthur Andersen LLP as Emmis' independent
auditors for the fiscal year ending February 28, 2002; and
(4) transaction of any other business that may properly come before the meeting
and any adjournments or postponements of the meeting.
We describe each of these proposals in more detail in the
accompanying proxy statement, which you should read in its entirety before
voting.
Only shareholders of record at the close of business on April 30,
2001 are entitled to notice of and to vote at this meeting and any adjournments
or postponements of this meeting. The proxy statement and proxy cards are
enclosed.
By order of the Board of Directors,
/s/ Norman H. Gurwitz
Norman H. Gurwitz
Secretary
Indianapolis, Indiana
May 29, 2001
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1
EMMIS COMMUNICATIONS CORPORATION
ONE EMMIS PLAZA
40 MONUMENT CIRCLE
INDIANAPOLIS, INDIANA 46204
PROXY STATEMENT
In this proxy statement, Emmis Communications Corporation is
referred to as "we," "us," "our company" or "Emmis."
Questions and Answers About This Annual Meeting
Q: Why did I receive this proxy statement?
You received this proxy statement because our board of directors is
soliciting your proxy to vote at the annual meeting of shareholders. The annual
meeting will be held on Tuesday, June 26, 2001, at 10:00 a.m., local time, at
One Emmis Plaza, 40 Monument Circle, Indianapolis, Indiana 46204.
This proxy statement summarizes the information you need to know to
vote on an informed basis at the annual meeting; however, you do not need to
attend the annual meeting to vote your shares. See "--How do I vote?". We expect
to begin sending this proxy statement, the attached notice of annual meeting and
the enclosed proxy card(s) on May 29, 2001 to all shareholders entitled to vote.
Q: What am I voting on?
You are being asked to consider and vote on the following:
o election of three directors to our board of directors for terms of
three years;
o approval of the 2001 Equity Incentive Plan; and
o ratification of the selection of Arthur Andersen LLP as our
independent auditors for the fiscal year ending February 28, 2002.
Q: Who is entitled to vote?
Holders of outstanding Class A common stock and holders of
outstanding Class B common stock as of the close of business on April 30, 2001,
the record date, are entitled to vote at the annual meeting. As of April 30,
2001, 42,067,639 shares of Class A common stock and 5,230,396 shares of Class B
common stock were issued and outstanding. As of April 30, 2001, there were no
shares of Class C common stock issued or outstanding.
Q: How do I vote?
You may attend the meeting and vote in person or you can vote by
proxy. To vote by proxy, sign and date each proxy card you receive and return it
in the prepaid envelope. If you return your signed proxy card but do not
indicate your voting preferences, we will vote FOR each of the nominees and each
of the proposals on your behalf. If you mark "abstain" on your proxy card, your
shares will be counted as present for purposes of determining the presence of a
quorum. You have the right to revoke your proxy at any time before the meeting
by either notifying our corporate secretary or returning a later-dated proxy.
You may also revoke your proxy by voting in person at the annual meeting.
If you hold your shares through a broker, you should contact your
broker to determine the procedure by which you can vote on these proposals.
Q: What does it mean if I get more than one proxy card?
If you receive more than one proxy card, it means you hold shares
registered in more than one account. Sign and return ALL proxy cards to ensure
that all your shares are voted.
Q: What are the voting rights of the Class A common stock and the Class B
common stock?
On each matter submitted to a vote of our shareholders, each share
of Class A common stock is entitled to one vote and each share of Class B common
stock is entitled to ten votes. Generally, the Class A and Class B common stock
vote together as a single group. However, the two classes vote separately in
connection with the election of certain directors, certain "going private"
transactions and other matters as provided by law.
At this annual meeting, the Class A and Class B common stock will
vote together on the following issues: (i) the election of directors; (ii) the
approval of the 2001 Equity Incentive Plan; and (iii) the ratification of Arthur
Andersen LLP as our independent auditor for the next fiscal year.
Q: Who will count the vote?
Representatives of First Union National Bank, our transfer agent,
will count the votes.
Q: What constitutes a quorum?
A majority of the combined voting power of the outstanding Class A
and Class B common stock entitled to vote at the meeting constitutes a quorum
for the annual meeting (i.e., counting one vote for each share of outstanding
Class A common stock and ten votes for each share of outstanding Class B common
stock, present in person or represented by proxy). No additional quorum
requirements apply to matters on which the holders of Class A and Class B common
stock will vote together as a single class.
Q: How many votes are needed for approval of each proposal?
Directors will be elected by a plurality of the votes cast by the
holders of existing common stock entitled to vote in the election who are
present, in person or by proxy, at the meeting. Consequently, the three director
nominees receiving the most votes of holders of Class A and Class B common
stock, voting together, will be elected to fill the three director positions.
Only votes cast for a nominee will be counted. The accompanying proxy card will
be voted for all nominees listed on the proxy unless the proxy contains
instructions to the contrary. Instructions on the accompanying proxy card to
withhold authority to vote for one or more of the nominees will result in those
nominees receiving fewer votes.
The approval of the 2001 Equity Incentive Plan and the ratification
of Arthur Andersen LLP as our independent auditors for the next fiscal year each
require that the number of votes cast in favor of that proposal by holders of
our outstanding common stock exceed the number of votes cast against that
proposal by holders of our outstanding common stock.
Proxies submitted by brokers that do not indicate a vote for some of
the proposals because the holders do not have discretionary voting authority and
have not received instructions from the beneficial owners on how to vote on
those proposals are called "broker non-votes." Abstentions and broker non-votes
will not affect the voting on the proposals.
Q: What percentage of stock does our significant shareholder own? How does he
intend to vote?
Jeffrey H. Smulyan, the Chief Executive Officer, President and
Chairman of our board of directors, is our largest single shareholder,
beneficially owning 564,752 shares, or 1.3%, of our Class A common stock and
5,230,396 shares, or 100%, of our Class B common stock as of April 30, 2001. Mr.
Smulyan has informed us that he intends to vote in favor of each of the
proposals and for all of the nominees for director. If he does so, each proposal
on which the existing common stock votes together as a single class will be
approved because Mr. Smulyan controls 58.7% of the combined voting power of our
existing common stock.
All directors and officers together beneficially own approximately
4.9% of our Class A common stock and 100% of our Class B common stock, which
represents approximately 59.6% of the combined voting power of our existing
common stock.
Q: Who can attend the Annual Meeting?
All shareholders as of April 30, 2001 can attend.
Q: What do I do if I have additional questions?
If you have any questions prior to the annual meeting, please call
our Investor Relations Department at (317) 266-0100.
Proposal 1: Election of Directors
Three directors are to be elected, none of which is designated as a
"Class A Director." Jeffrey H. Smulyan, Greg A. Nathanson and Walter Z. Berger
have been nominated for a term of three years and until their successors have
been elected and qualified. The nominees will be elected by the Class A and
Class B common stock voting together as a single class.
Mr. Smulyan and Mr. Nathanson are members of the present board of
directors. If, at the time of this annual meeting, any nominee is unable or
declines to serve, the discretionary authority provided in the proxy may be
exercised to vote for a substitute or substitutes. The board of directors has
no reason to believe that any substitute nominee or nominees will be required.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THE ELECTION OF EACH
OF THE FOLLOWING NOMINEES.
Name, Age, Principal Occupation(s) and Director
Business Experience During Past 5 Years Since
--------------------------------------- -------
Nominated for a term expiring in 2004:
Jeffrey H. Smulyan, Age 54 1979
Mr. Smulyan founded Emmis in 1979 and is the Chairman of the Board of
Directors, President and Chief Executive Officer. He has held the positions of
Chairman of the Board of Directors and Chief Executive Officer since 1981 and
the position of President since 1994. Mr. Smulyan began working in radio in
1973, and has owned one or more radio stations since then. Formerly, he was also
the owner and chief executive officer of the Seattle Mariners major league
baseball team. He is a director of The Finish Line, a sports apparel
manufacturer, and serves as a Trustee of Ball State University. Mr. Smulyan has
been chosen Radio Executive of the Year by a radio industry group and was voted
one of the Ten Most Influential Radio Executives in the Past 20 Years in a poll
in Radio and Records magazine.
Greg A. Nathanson, Age 54 1998
Mr. Nathanson joined Emmis in 1998 as Television Division President. Mr.
Nathanson has over 30 years of television broadcasting experience, most recently
as President of Programming and Development for Twentieth Television from 1996
to 1998, as General Manager of KTLA-TV in Los Angeles, California from 1992 to
1996 and as President of Fox Television Stations from 1990 to 1992. Mr.
Nathanson resigned as Television Division President effective October 1, 2000,
but continues as a consultant and Director of the company.
Walter Z. Berger, Age 45 --
Mr. Berger became our Executive Vice President and Chief Financial Officer
in 1999. Prior to that time, Mr. Berger served as Group Vice President of the
Energy Marketing Division of LG&E Energy Corporation. Prior to that appointment,
he served as Executive Vice President and Chief Financial Officer of LG&E Energy
Corporation. From 1992 to 1996, he held several senior financial and operating
management positions at Enron Corporation and its affiliates. Mr. Berger also
spent seven years in various financial management roles at Baker Hughes
Incorporated after working for eight years at Arthur Andersen & Co.
Directors whose terms expire in 2002:
Richard A. Leventhal, Age 54 1992
Mr. Leventhal has owned and operated Top Value Fabrics, Inc., a wholesale
fabric and textile company in Carmel, Indiana, for 27 years. Mr. Leventhal is
the brother-in-law of Norman H. Gurwitz.
Doyle L. Rose, Age 52 1984
Mr. Rose has been Radio Division President of Emmis since 1989, and served
as General Manager of KPWR-FM in Los Angeles from 1991 through 1995. Previously,
he was our Executive Vice President-Operations. Mr. Rose has been a general
manager of one or more radio stations for approximately twenty years.
Lawrence B. Sorrel, Age 42 1993
Mr. Sorrel is a general partner of Welsh, Carson, Anderson & Stowe, a
private equity investment firm. He is Chairman of the Board of SpectraSite
Communications, Inc., an owner and operator of telecommunications towers, and a
board member of several private companies. Prior to May 1998, he was a Managing
Director of Morgan Stanley Dean Witter & Co. Incorporated, where he had been
employed since 1986.
Directors whose terms expire in 2003:
Susan B. Bayh,* Age 41 1994
Mrs. Bayh is the Commissioner of the International Joint Commission of the
United States and Canada, and also serves as a Distinguished Visiting Professor
at Butler University, positions she has held since 1994. Previously, she was an
attorney with Eli Lilly & Company. She is a director of Anthem, Inc., an
insurance company; Golden State Foods, Cubist, Inc. and Corvis Inc.
Gary L. Kaseff, Age 53 1994
Mr. Kaseff is employed as Executive Vice President and General Counsel to
Emmis, a post he has held since 1998. Before becoming general counsel, Mr.
Kaseff practiced law in Southern California. Previously, he was President of the
Seattle Mariners major league baseball team and partner with the law firm of
Epport & Kaseff.
Frank V. Sica,* Age 49 1998
Mr. Sica is a Managing Director of Soros Fund Management LLC and Managing
Partner of Soros Private Equity Partners. He is director of CSG Systems
International, Inc., a computer software company, Global TeleSystems Group,
Inc., a telecommunications company, Kohl's Corporation, a retail company,
Outboard Marine Corporation, a manufacturer of marine engines and boats, and
Banco Hipotecario S.A., a financial institution. Prior to joining Soros in 1998,
Mr. Sica had been a Managing Director at Morgan Stanley Dean Witter & Co.
Incorporated.
- ----------------
*Independent director elected by the holders of the Class A Common
Stock voting as a single class.
Proposal 2: APPROVAL OF 2001 EQUITY INCENTIVE PLAN
Our board of directors has adopted the Emmis Communications
Corporation 2001 Equity Incentive Plan (the "2001 Plan"). The purpose of the
2001 Plan is to advance our interests by encouraging and facilitating the
acquisition and ownership of our common stock by key employees, directors and
independent contractors, thereby strengthening their commitment to our success
and the continuance of their association with us. We also anticipate that the
opportunity to obtain such a financial interest will prove attractive to
potential new key employees, directors and independent contractors and will
assist in attracting, employing and retaining such individuals. The following
summary of the principal provisions of the 2001 Plan is qualified by reference
to the full text of the 2001 Plan which is attached to this proxy statement as
Exhibit A.
The 2001 Plan permits the delivery of a maximum of 3,000,000 shares
of our common stock on account of the exercise of options, the grant of shares
of restricted stock and the payment of benefits upon the exercise of stock
appreciation rights or performance units. As of April 30, 2001, the shares
subject to the 2001 Plan had an aggregate market value of $76,560,000. If an
award under the 2001 Plan expires or terminates without being exercised in full
or is forfeited, the shares of our common stock subject to the award generally
become available for new awards. If stock appreciation rights expire or
terminate without being exercised in full, such stock appreciation rights again
become available for new awards. Options, stock appreciation rights and
performance units expire no more than 10 years from date of grant.
Options. Options granted under the 2001 Plan allow participants to
purchase shares of our common stock at an exercise price determined by the Emmis
compensation committee which cannot be less than the fair market value of our
common stock on the date of the grant. Options may be granted as incentive stock
options subject to the limitations of Section 422 of the Internal Revenue Code
(the "Code"). For the purpose of complying with Section 162(m) of the Code, the
2001 Plan contains a per-participant limit of 1,000,000 on the number of shares
which may be subject to options granted during any fiscal year.
Restricted Stock. Shares of our common stock subject to such
restrictions ("restricted stock") as determined by the compensation committee
may be granted under the 2001 Plan. Shares of restricted stock may be subject to
forfeiture if conditions established by the compensation committee are not
satisfied and are nontransferable until they become nonforfeitable. Before the
grant, the compensation committee determines the purchase price, if any, of such
shares of restricted stock and the restrictions, if any, applicable to such
shares. If a grantee's shares of restricted stock are forfeited, the grantee is
required to sell such shares to us at the lesser of the purchase price, if any,
paid by the grantee or the fair market value of the shares on the date of such
forfeiture. The compensation committee may accelerate the time at which the
restrictions lapse or remove or, with the consent of the grantee, modify the
restrictions. For the purpose of complying with Section 162(m) of the Code, the
2001 Plan contains a per-participant limit on the number of shares of restricted
stock that may be awarded during any calendar year to that number of shares with
a value on the date of grant equal to the lesser of 700% of the participant's
base salary or $10,000,000.
Stock Appreciation Rights. Each stock appreciation right which may
be granted under the 2001 Plan provides the grantee, upon exercise, a benefit
equal to the difference between the fair market value of one share of our common
stock on the date of the exercise and (1) in the case of a stock appreciation
right identified with a share of our common stock subject to an option, the
option exercise price of such option or such higher price specified in the grant
or (2) in the case of any other stock appreciation right, the fair market value
of a share of our common stock on the grant date or such higher price specified
in the grant. Stock appreciation rights may be granted alone, or identified with
shares of our common stock subject to options, performance units or shares of
restricted stock. The compensation committee may accelerate the exercisability
of any stock appreciation right. Benefits upon the exercise of stock
appreciation rights are payable in cash unless the compensation committee
determines that the benefits will be paid wholly or partly in shares of our
common stock. For the purpose of complying with Section 162(m) of the Code, the
2001 Plan contains a per-participant limit on the number of shares which may be
subject to stock appreciation rights granted during any fiscal year of
1,000,000.
Performance Units. Performance units may be granted under the 2001
Plan to provide a benefit if performance goals determined by the compensation
committee are achieved during the measuring period. The compensation committee,
before the grant of a performance unit, determines the performance goals and
measuring period and assigns a performance percentage (which can exceed 100%) to
each level of attainment of the performance goals during the measuring period.
The compensation committee may modify performance goals at any time. Performance
unit benefits are payable in cash unless the compensation committee determines
that a benefit will be paid wholly or partly in shares of our common stock.
Performance units may be granted alone, or identified with shares of our common
stock subject to an option, shares of restricted stock or stock appreciation
rights. Performance units become exercisable commencing on the first day after
the end of the applicable measuring period or another date specified by the
compensation committee. The benefit for each performance unit exercised equals
the fair market value of a share of our common stock on the date of grant of the
performance unit multiplied by the "performance percentage" attained during the
measuring period for the performance unit. For the purpose of complying with
Section 162(m) of the Code, the 2001 Plan contains a per-participant limit on
the number of shares of stock that may be awarded with respect to a performance
unit during any calendar year to that number of shares with a value on the date
of grant equal to the lesser of 700% of the participant's base salary or
$10,000,000.
Other Information. Payment of the option exercise price or the
purchase price of restricted stock may be made in cash or through the exchange
of shares of our common stock owned by the grantee or by various other payment
methods. The compensation committee may allow a grantee to defer payment of the
option exercise price, the purchase price of restricted stock or any taxes
associated with a benefit provided under the 2001 Plan which is a non-cash
benefit at the time it is taxable, in accordance with such interest rates and
such other terms and conditions as it may determine, or may cause Emmis to
guarantee a loan to the grantee in an amount equal to all or part of the option
exercise price, the purchase price of restricted stock and related taxes. Unless
prohibited by the compensation committee, a grantee may elect to have withheld
shares of our common stock to satisfy withholding tax liability with respect to
the exercise of options, stock appreciation rights or performance units or with
respect to shares of restricted stock becoming nonforfeitable. If the amount to
be withheld is more than the minimum required, such withholding is subject to
compensation committee approval. Subject to certain limitations, the
compensation committee may provide for automatic grants of additional options
for shares of our common stock equal to the number of shares which a grantee has
used to pay the exercise price of a previously granted option and to satisfy a
withholding tax liability in connection with an option exercise. In the event of
a Change in Control, options, stock appreciation rights and performance units
become exercisable, and all shares of restricted stock generally become
nonforfeitable. The benefit payable with respect to any performance unit for
which the measuring period has not ended is prorated based upon the portion of
the measuring period completed before the Change in Control. The aggregate
number of shares of our common stock, shares of restricted stock, stock
appreciation rights and stock options available pursuant to the 2001 Plan, the
number of shares covered by an award, the exercise price of options, the fair
market values used to determine stock appreciation right and performance unit
benefits and other matters related to the 2001 Plan and awards, will be adjusted
by the compensation committee to reflect any stock dividend, stock split, share
combination, merger, consolidation, asset spin-off, reorganization, or similar
event.
Options, stock appreciation rights and performance units may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent and distribution, except that the grantee
may transfer an award to:
o the spouse, child or grandchild of the grantee (provided that such
family members cannot transfer the award, except by will or by the
laws of descent and distribution upon the death of the family
member);
o a trust or trusts for the immediate benefit of such immediate family
members; or
o a partnership or limited liability company of which the grantee and/or
such immediate family members are the only owners.
Awards so transferred may be exercised only upon the same terms and conditions
applicable to the original grantee, and the original grantee or his estate will
remain liable for any federal, state, city or local taxes applicable upon the
exercise of an award by a permitted transferee.
Plan Administration. The 2001 Plan is administered by the
compensation committee unless the board of directors or the compensation
committee designates another committee or subcommittee to administer the 2001
Plan. Subject to the 2001 Plan's provisions, the compensation committee has
broad authority to, among other things, determine when grants may be made (and
the amounts thereof); to interpret, and to adopt rules relating to, the 2001
Plan; to determine the terms of the agreements relating to grants and to modify
any such agreement with the consent of the grantee, when required; and to cancel
existing awards and to substitute new ones. Because of the compensation
committee's broad authority, the type and amount of awards to be received by any
specific individual, or group of individuals, is currently indeterminable.
However, not more than 1,000,000 shares of Class B common stock may be awarded
to Mr. Smulyan.
Amendment and Termination. Subject to any shareholder approval
requirement of applicable law or the rules of any national securities exchange,
stock market or automated quotation service on which our common stock is listed
or quoted, the board of directors may from time to time in its discretion amend
or modify the Plan without the approval of the shareholders. The 2001 Plan will
terminate on June 1, 2011 or such earlier date as the board of directors may
determine. No termination of the 2001 Plan will affect outstanding awards.
Federal Income Tax Consequences. Upon the grant of an award (other
than an award of restricted stock that contains no restrictions) under the 2001
Plan, the grantee does not realize any taxable income and no deduction is
available for us. Any cash received by a grantee in connection with the exercise
of a stock appreciation right or performance unit, as well as the fair market
value of any shares received in connection with the exercise of a stock
appreciation right or a performance unit, is taxable as ordinary income to the
grantee. Generally, upon exercise of an option (other than an incentive stock
option), the grantee will recognize taxable income and we are entitled to a
deduction at the time the grantee is taxed in the amount of the grantee's
taxable income. In the case of an incentive stock option, the grantee incurs no
income tax liability upon exercise (other than possible alternative minimum tax
liability), but we are generally not entitled to a tax deduction. The fair
market value of restricted stock in excess of the purchase price, if any, is
taxable to the grantee when the restrictions lapse. However, if the grantee is
not prohibited by the compensation committee from electing to be taxed on such
value on the date of grant and the grantee elects such tax treatment, the
grantee is taxed on such amount on the date of grant. We are entitled to a
deduction at the time the grantee is taxed in the amount of the grantee's
taxable income.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE 2001
EQUITY INCENTIVE PLAN.
Proposal 3: Ratification of Selection of Auditors
The selection of our independent auditors is being submitted for
ratification by the holders of existing common stock. Our financial statements
for the fiscal year ended February 28, 2001 were certified by Arthur Andersen
LLP. The board of directors has selected Arthur Andersen LLP as our independent
auditors for the fiscal year ending February 28, 2002. Representatives of Arthur
Andersen 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 approve the selection of Arthur
Andersen LLP, the selection of independent auditors will be reconsidered by the
board of directors.
Audit Fees; Financial Information Systems Design and Implementation
Fees. The total fees billed for professional services rendered in connection
with the audit of our annual financial statements and the reviews of the
financial statements included in our Forms 10-Q totaled $410,000 for the fiscal
year ended February 28, 2001. The total fees billed for professional services
rendered in connection with the design and implementation of financial
information systems rendered by the auditors totaled $950,000 for the fiscal
year ended February 28, 2001.
All Other Fees. For the fiscal year ended February 28, 2001, Arthur
Andersen billed us $955,000 for services other than those disclosed in the
preceding paragraph.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF ARTHUR ANDERSEN LLP AS OUR INDEPENDENT AUDITORS.
Security Ownership of Beneficial Owners and Management
As of April 30, 2001, there were 42,067,639 shares of our Class A
common stock and 5,230,396 shares of our Class B common stock issued and
outstanding. The Class A common stock is entitled to an aggregate of 42,067,639
votes and the Class B common stock is entitled to an aggregate of 52,303,960
votes. The following table shows, as of April 30, 2001, the number and
percentage of shares of our common stock held by each person known to us to own
beneficially more than five percent of the issued and outstanding common stock,
by our directors and nominees, and by certain of our executive officers:
Class A Class B
Common Stock Common Stock
--------------------------------- ------------------------------
Five Percent Shareholers, Amount and Nature Amount and Nature
Directos and Certain of Beneficial Percent of Beneficial Percent Percent of Total
Executive Oficers Ownership of Class Ownership of Class Voting Power
---------------------------- -------------------- --------- ------------- -------- ---------------
Jeffrey H. Smulyan....................... 564,752(1) 1.3% 5,830,396(17) 100.0% 58.7%
Susan B. Bayh............................ 32,700(2) * -- -- *
Walter Z. Berger......................... 80,336(3) * -- -- *
Randall D. Bongarten..................... 43,266(4) * -- -- *
Richard F. Cummings...................... 389,446(5) * -- -- *
Norman H. Gurwitz........................ 193,848(6) * -- -- *
Gary L. Kaseff........................... 142,272(7) * -- -- *
Richard A. Leventhal..................... 58,800(8) * -- -- *
Doyle L. Rose............................ 293,273(9) * -- -- *
Greg A. Nathanson........................ 216,032(10) * -- -- *
Frank V. Sica............................ 20,000(11) * -- -- *
Lawrence B. Sorrel....................... 18,000(12) * -- -- *
Liberty Media Corporation................ 5,400,000(13) 12.8 -- -- 5.7
Mellon Financial Corporation............. 3,301,778(14) 7.8 -- -- 3.5
Westport Asset Management, Inc........... 3,481,100(15) 8.3 -- -- 3.7
All Officers and Directors as a Group
(12 persons)........................... 2,042,421(16) 4.9 5,830,396(16) 100.0 59.6
- ------------------------------------
* Less than 1%.
(1) Consists of 387,526 shares held by Mr. Smulyan as trustee for the
Emmis Communications Corporation Profit Sharing Trust (the "Profit
Sharing Trust"), as to which Mr. Smulyan disclaims beneficial
ownership of all but 3,472 held for his benefit, 259 shares held in
the 401(k) Plan, 136,967 shares owned individually and 50,000 shares
held by The Smulyan Family Foundation, as to which Mr. Smulyan
shares voting control.
(2) Consists of 2,700 shares owned individually and 30,000 shares
represented by stock options exercisable within 60 days of April 30,
2001.
(3) Consists of 31 shares held in the 401(k) Plan, 305 shares held in
the Stock Purchase Plan and 80,000 shares represented by stock
options exercisable within 60 days of April 30, 2001.
(4) Consists of 4,000 shares owned individually, 266 shares held in
the Profit Sharing Trust and 39,000 shares represented by stock
options exercisable within 60 days of April 30, 2001.
(5) Consists of 187,867 shares owned individually, 8,260 shares owned
for the benefit of Mr. Cummings' children, 3,472 shares held in the
Profit Sharing Trust, 246 shares held in the 401(k) Plan and 189,600
shares represented by stock options exercisable within 60 days of
April 30, 2001.
(6) Consists of 37,335 shares owned jointly by Mr. Gurwitz and his
spouse, 1,255 shares owned by Mr. Gurwitz's spouse, 6,026 shares
owned for the benefit of Mr. Gurwitz's children, 17,800 shares owned
by a corporation of which Mr. Gurwitz's spouse is a 50% shareholder,
2,284 shares held in the Profit Sharing Trust, 260 shares held in
the 401(k) Plan, 406 shares held in the new Stock Purchase Plan and
128,481 shares represented by stock options exercisable within 60
days of April 30, 2001.
(7) Consists of 11,766 shares owned individually by Mr. Kaseff, 3,411
shares owned by Mr. Kaseff's spouse, 1,346 shares held by Mr.
Kaseff's spouse for the benefit of their children, 749 shares held
in the Profit Sharing Trust, and 125,000 shares represented by stock
options exercisable within 60 days of April 30, 2001.
(8) Consists of 8,000 shares owned individually, 3,000 shares owned by
Mr. Leventhal's spouse, 17,800 shares owned by a corporation of
which Mr. Leventhal is a 50% shareholder and 30,000 shares
represented by stock options exercisable within 60 days of April 30,
2001.
(9) Consists of 99,980 shares owned individually, 3,472 shares held in
the Profit Sharing Trust, 220 shares held in the 401(k) Plan and
189,600 shares represented by stock options exercisable within 60
days of April 30, 2001.
(10) Consists of 111,973 shares owned individually or jointly with his
spouse, 44,000 shares owned by trusts for the benefit of Mr.
Nathanson's children, 59 shares held in the Profit Sharing Trust and
60,000 shares represented by stock options exercisable within 60
days of April 30, 2001.
(11) Consists entirely of shares represented by stock options exercisable
within 60 days of April 30, 2001.
(12) Consists of 8,000 shares owned individually and 20,000 shares
represented by stock options exercisable within 60 days of April 30,
2001, 2000.
(13) Information concerning these shares was obtained from a Schedule 13D
filed in November 1999 by Liberty Media Corporation, which has a
mailing address of 9197 South Peoria Street, Englewood, Colorado
80112. The shares are held by Liberty EMMS, Inc., an affiliate of
Liberty Media Corporation.
(14) Information concerning these shares was obtained from an Amendment
to Schedule 13G filed on May 8, 2001 by Mellon Financial
Corporation on behalf of itself, Boston Group Holdings, Inc., The
Boston Company, Inc. and The Boston Company Asset Management,
Inc., each of which has a mailing address of One Mellon Center,
Pittsburgh, Pennsylvania 15258.
(15) Information concerning these shares was obtained from an Amendment
to a Schedule 13G filed February 14, 2001 by Westport Asset
Management, Inc. on behalf of itself and Westport Advisors LLC, each
of which has a mailing address of 253 Riverside Avenue, Westport,
Connecticut 06880.
(16) Includes 901,681 shares represented by stock options exercisable
within 60 days of April 30, 2001 and 387,526 shares held in the
Profit Sharing Trust.
(17) Consists of 5,230,396 shares owned individually and 600,000 shares
represented by stock options exercisable within 60 days of April
30, 2001.
Board of Directors' Meetings
During our last fiscal year, our board of directors held six
meetings, either in person or by telephone. Each director attended at least 75%
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. Our directors who are not officers or employees of
our company are compensated for their services at the rate of $2,000 per regular
meeting attended in person, $1,000 per regular meeting attended by phone and
$500 per committee meeting attended whether in person or by phone. Pursuant to
the Non-Employee Director Stock Option Plan, directors who are not officers or
employees of our company also are entitled to receive annually options to
purchase 10,000 shares of Class A common stock. The options are granted on the
date of our annual meeting of shareholders at the closing price of the
underlying shares on that date. In addition to her duties as a director, we
separately engaged Susan B. Bayh to continue to develop plans for the
involvement of our company and each of our stations and publications in various
charitable organizations and perform certain other consulting services. During
the last fiscal year, Mrs. Bayh received approximately $50,000 as compensation
for such services. Nominees for election as a director are selected by the board
of directors, acting as a nominating committee. Our board of directors currently
has an audit committee and a compensation committee.
Certain Transactions
We have periodically made interest-bearing loans to various officers
and employees. The largest aggregate amount of indebtedness outstanding at any
month-end during the last fiscal year and the approximate amount of this
indebtedness outstanding at February 28, 2001, was $1,055,299 and $1,055,299,
respectively, for Jeffrey H. Smulyan, Chairman, Chief Executive Officer and
President; $172,152 and $172,152, respectively, for Doyle L. Rose, Radio Group
President and Director; $124,470 and $124,470, respectively, for Richard F.
Cummings, Executive Vice President-Programming; and $93,761 and $93,761,
respectively, for Norman H. Gurwitz, Executive Vice President-Human Resources
and Secretary. These loans bear interest at our cost of senior debt, which at
April 30, 2001 was approximately 8.0% per annum. During the last fiscal year, we
purchased approximately $140,000 in corporate gifts and specialty items from a
company owned by the spouse of Norman H. Gurwitz. Part of these purchases were
awarded through competitive bids. We also made payments of approximately
$320,000 to a company owned by Jeffrey H. Smulyan for our use of an airplane
owned by that company and payments of approximately $484,000 to a management
company to pay a portion of the operating and maintenance costs of the airplane.
Report of the Audit Committee
The audit committee of the board of directors assists the board in
carrying out its oversight responsibilities for Emmis' financial reporting
process, audit process and internal controls in accordance with the Audit
Committee Charter. In December 1999, the Securities and Exchange Commission and
the National Association of Securities Dealers, Inc. adopted new rules
applicable to companies with securities traded on Nasdaq. Under these new rules,
an audit committee is, or will be, required to: (i) adopt a formal written
charter, (ii) consist of at least 3 directors, each of whom meets certain
independence and financial literacy requirements, (iii) conduct quality
discussions with the company's independent auditor prior to the filing of the
company's Form 10-K, (iv) ensure that the company's independent auditors have
conducted quarterly reviews of the company's financial statements, engaging in
quality discussions with the independent auditors when appropriate, (v) disclose
whether it has (A) reviewed and discussed the company's audited financial
statements for the last fiscal year with management; (B) discussed with the
company's independent auditors the matters required to be discussed by SAS 61
(Codification for Statements on Auditing Standards); and (C) received and
discussed the written disclosures and the letter from the company's independent
auditors required by Independence Standards Board Statement No. 1 (Independence
Discussions with Audit Committees), and (vi) disclose whether the audit
committee recommended to the board that the audited financial statements be
included in the company's Form 10-K.
Each of these new rules has different effective dates, and some did not apply to
our company's financial statements for the fiscal year ended February 28, 2001.
However, our audit committee has adopted a formal written charter, a copy of
which was attached as Annex II to our proxy statement for the annual meeting of
shareholders held on January 10, 2001. In addition, the committee has determined
that its members meet the literacy requirements of the new rules and expects to
comply with the other new structural and membership requirements before they
take effect in June 2001. The committee has also made certain that our company's
quarterly financial statements continue to be reviewed by our independent
auditors prior to filing and put in place mechanisms to ensure that committee
members are notified whenever our independent auditors believe that significant
events, transactions or changes in accounting estimates have affected the
quality of our company's financial reporting. In connection with the audit for
the fiscal year ending February 28, 2001, the audit committee discussed the
audited financial statements with management, discussed the items required to be
discussed by SAS 61 with our auditors, and received and discussed the
disclosures and letter required by Independence Standards Board Statement No. 1.
Based on these discussions and reviews, the committee members agreed that the
audited financial statements for our last fiscal year should be included in our
company's Form 10-K, and made a formal recommendation to the board to that
effect. The committee also considered whether the additional services provided
by Arthur Andersen LLP as described in Proposal 3: Ratification of Selection of
Auditors is compatible with maintaining Arthur Andersen LLP's independence.
Based on the committee's and management's assessment of the performance of
Arthur Andersen LLP during the audit for our last fiscal year, the committee has
recommended to the full board of directors that Arthur Andersen LLP be engaged
as our independent auditors for the next fiscal year.
Audit Committee Members
Richard A. Leventhal, Chair
Lawrence B. Sorrel
Report of the Compensation Committee
The compensation committee provides a general review of our
compensation and benefit plans to ensure that they meet our corporate
objectives. The compensation committee also establishes compensation
arrangements and approves compensation payments to Mr. Smulyan and our other
executive officers, and generally administers our various stock option, profit
sharing and incentive plans. With respect to compensation decisions affecting
non-executive officers and employees, the committee has delegated this authority
to Mr. Smulyan and the other executive officers, provided such authority is
exercised in accordance with any general parameters established by the
committee. During the last fiscal year, Susan B. Bayh, Richard A. Leventhal and
Frank V. Sica were members of the compensation committee.
Policy and Performance Measures. We have historically entered into
two and three year employment agreements with our executive officers. These
agreements provide for a base salary, annual performance bonuses, and restricted
stock and stock option awards. They also prohibit the officer from directly or
indirectly competing with us. The compensation committee believes that entering
into these agreements is in our best interest because they assist us in
retaining our key officers for a certain period of time and enable us to focus
the officers' efforts and energies on enhancing the long-term value of our
company to our shareholders. The total compensation reflected in these
employment agreements is generally based upon the officers' prior compensation
levels and peer group benchmarking surveys. In order to attract and retain
highly qualified employees, overall compensation to our executive officers is
targeted at the top half to top quarter of our peer group. For the fiscal year
ended February 28, 2001, the salary of each of our executive officers was the
substantially the same as it was the previous year, with certain officers not
under employment agreements receiving the 3% salary increase applicable to other
Emmis employees.
The compensation committee awarded bonuses to our executive officers
(other than Mr. Smulyan) for the last fiscal year in accordance with a bonus
plan established by the committee at the beginning of the fiscal year. The bonus
plan set for each executive officer a target bonus and a performance goal so
that 65-87% of an executive officer's target bonus potential would be based on
specified annual cash flow goals and the remainder would be earned on a
discretionary basis. A percentage of the target bonus would then be earned
depending upon the extent to which the company or an applicable division of the
company met or exceeded the specified cash flow targets and depending upon the
committee's assessment of the performance of the executive during the year. The
cash flow targets were adjusted upwards during the year to reflect the company's
acquisitions. At the end of the year, the cash flow-based portions of the target
bonuses were paid at 70.03% for company-wide cash flow targets, 92.84% for radio
division cash flow targets, and 0% for television, publishing and international
division cash flow targets. In addition, because of the substantial growth of
the company through the acquisition of nine radio stations, eight television
stations and one magazine, and because of the efforts to amend the company's
senior credit facility and implement a tracking stock proposal, the committee
awarded the discretionary portion of the target bonuses at 120% of target. The
bonuses were paid partially in cash and partially in shares of our Class A
common stock.
Stock options and stock awards were also granted to our executive
officers during the last fiscal year under our various equity incentive plans.
The options, covering from 7,500 to 40,000 shares each, were all granted at the
fair market value of our Class A common stock on the date of grant. In addition,
pursuant to their employment agreements, Messrs. Rose and Cummings each received
a grant of 30,800 shares of our Class A common stock. However, because the radio
division broadcast cash flow for the fiscal year ended February 28, 2001 did not
meet certain performance targets specified in options granted to Messrs. Rose
and Cummings in 1998, each forfeited options to purchase 35,000 shares at an
exercise price of $20 per share.
The Internal Revenue Code generally limits to $1 million the amount
of compensation that we may deduct in any year with respect to certain of our
officers. Accordingly, the compensation committee endeavors to structure
executive compensation so that most of that compensation will be deductible. At
the same time, the compensation committee has the authority to award
compensation in excess of the $1 million limit, regardless of whether such
additional compensation will be deductible, in cases where the compensation
committee determines that such compensation is appropriate.
Chief Executive Officer Compensation. Mr. Smulyan is employed as our
chief executive officer pursuant to an employment agreement that was amended in
1999 to extend the term to February 29, 2004 and to emphasize the
performance-based portion of Mr. Smulyan's compensation. Thus, the amendment to
the employment agreement eliminated the provision that automatically increased
Mr. Smulyan's salary by 10-15% per year and limited the increase to the rate of
inflation. At the same time, the amendment increased the potential annual bonus
of Mr. Smulyan to an amount equal to his annual salary. The compensation
committee included Mr. Smulyan in the annual bonus plan applicable to the other
executive officers, but eliminated the discretionary component by making his
entire bonus tied to the company achieving its cash flow goals. Under the terms
of the plan, Mr. Smulyan would have been entitled to a bonus of $546,963.
However, in our third fiscal quarter Mr. Smulyan waived his bonus and requested
that the monies be invested in training and incentive programs designed to help
Emmis employees compete even more effectively in the future.
When Mr. Smulyan entered into the amendment to his employment
agreement in 1999, the committee also granted to Mr. Smulyan options to purchase
1,000,000 shares of common stock at a price per share of $28.25, the fair market
value on the date of grant. These options are not generally exercisable until
March 1, 2006. However, options to purchase 200,000 shares become exercisable at
the end of each fiscal year in which either our annual broadcast cash flow
increases from the previous year by a percentage specified in the grant
agreement or the percentage increase in the average monthly fair market value of
the Class A common stock during the fiscal year exceeds that of a specified peer
group of broadcasting companies. The committee believes that the performance
accelerated vesting feature of these options is more favorable to our company
than the option provisions contained in Mr. Smulyan's previous employment
arrangement because it creates an incentive for Mr. Smulyan to cause us to meet
certain performance targets but does not require us to take the charge to
earnings that we had been forced to take when options were granted under the
prior employment arrangement. Because our company did not exceed either of the
performance targets specified in the option grant agreement for the last fiscal
year, the vesting of the options to purchase 200,000 shares was not accelerated.
Compensation Committee Members
Susan B. Bayh
Richard A. Leventhal
Frank V. Sica
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Susan Bayh, Richard Leventhal and Frank Sica served on the
Compensation Committee for the entire fiscal year ended February 28, 2001. Mr.
Leventhal is the brother of the spouse of Norman H. Gurwitz, our Executive Vice
President-Human Resources and Secretary. We purchased approximately $140,000 in
corporate gifts and specialty items from a company owned by Mr. Gurwitz's
spouse. Part of these purchases was awarded through competitive bids.
COMPENSATION TABLES
The following table sets forth the compensation awarded to, earned
by, or paid to the chief executive officer and the four most highly compensated
executive officers other than the chief executive officer (collectively, the
"Named Executive Officers") during each of the last three fiscal years. All
stock information in the following tables has been restated for the two-for-one
stock split that occurred in February 2000.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------------------ --------------------------
Securities
Fiscal Other Restricted Underlying All
Name and Year Ended Annual Stock Options/ Other
Principal Position February 28 (29) Salary Bonus(1) Compensation(2) Awards(3) SARs Compensation
- ---------------------------------- --------------- --------- --------- --------------- ---------- ------------ ------------
JEFFREY H. SMULYAN................ 2001 $ 782,324 $ -- $ -- $ -- -- $ 119,400(4)
Chief Executive Officer, President 2000 765,175 765,175 -- -- 1,200,000 130,000
And Chairman of the Board 1999 762,656 271,301 -- -- 200,000 40,000
DOYLE L. ROSE..................... 2001 $ 434,665 $ 137,844 $ 14,400 $ 814,275 -- $ --
Radio Division President 2000 435,769 479,593 14,400 -- -- --
1999 433,867 -- 14,400 -- 300,000 --
RICHARD F. CUMMINGS............... 2001 $ 434,665 $ 137,844 $ 14,400 $ 814,275 -- $ --
Executive Vice President-- 2000 460,781 479,593 14,400 -- -- --
Programming 1999 408,855 -- 14,400 -- 300,000 --
WALTER Z. BERGER.................. 2001 $ 340,972 $ 87,519 $ 12,000 $ -- 40,000 $ 65,109(5)
Executive Vice President, Chief 2000 342,192 119,745 12,000 -- 40,000 86,307
Financial Officer and Treasurer 1999 23,539 -- -- -- -- --
GARY L. KASEFF.................... 2001 $ 340,972 $ 87,519 $ 12,000 $ -- 40,000 $ --
Executive Vice President and 2000 338,532 119,745 12,000 -- 40,000 --
General Counsel 1999 272,852 75,000 13,529 -- 24,000 --
- ------------------------------------
(1) Includes both cash and stock bonuses. The bonuses for Mr. Cummings
and Mr. Rose include a signing bonus for entering into new
employment agreements with our company.
(2) Represents automobile allowance.
(3) Represents shares of restricted stock awarded to Messrs. Cummings and
Rose upon completion of their employment agreements at the end of the
fiscal year.
(4) Represents the value of premiums accrued by us on a split-dollar life
insurance policy.
(5) Represents reimbursement of relocation expenses.
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
-------------------------------------------------------------------- ----------------------------------
Number % of Total
of Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base
Name Granted (#) Fiscal Year Price ($/Share) Expiration Date 5% 10%
- -------------------------- -------------- -------------- ---------------- --------------- -------- ------------
Jeffrey H. Smulyan........ -- -- $ -- -- $ -- $ --
Doyle L. Rose............. 7,500 0.9% 21.50 9/25/06 54,840 124,414
Richard F. Cummings....... 7,500 0.9% 21.50 9/25/06 54,840 124,414
Walter Z. Berger.......... 40,000 4.9% 35.375 2/28/10 889,886 2,255,146
Gary L. Kaseff............ 40,000 4.9% 35.375 2/28/10 889,886 2,255,146
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option /SAR Values
Number Of Securities Underlying
Unexercised Options/SARs At Fiscal Value of Unexercised In-the-Money
Year End Options/SARs at Fiscal Year End
------------------------------- ----------------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------------------ ---------------- -------------- --------------- --------------- ----------- -------------
Jeffrey H. Smulyan........ 600,000 $14,200,000 600,000 800,000 $5,725,000 $ --
Doyle L. Rose............. 104,800 2,846,050 9,600 187,500 190,200 1,195,781
Richard F. Cummings....... 154,800 4,180,425 9,600 187,500 190,200 1,195,781
Walter Z. Berger.......... -- -- 40,000 40,000 150,000 --
Gary L. Kaseff............ -- -- 85,000 40,000 365,438 --
Employment Agreements
During the fiscal year ended February 28, 1994, we entered into a
five-year employment agreement with Jeffrey H. Smulyan pursuant to which Mr.
Smulyan was employed as chairman of the board of directors and chief executive
officer. This employment agreement expired by its terms on February 28, 1999. We
and Mr. Smulyan entered into an amendment to the employment agreement effective
March 1, 1999 which extended the term to February 29, 2004. Mr. Smulyan's base
compensation during the last fiscal year was approximately $782,000. The amended
agreement basically limited future annual increases of his salary to the rate of
inflation. In addition, the agreement as amended provides for annual bonuses to
be set by our board of directors ranging from a minimum of $50,000 up to a
maximum of 100% of Mr. Smulyan's annual base salary (plus an adjustment for
inflation). Mr. Smulyan also received options to purchase 1,000,000 shares of
common stock (after adjustment for the stock split) at a price per share of
$28.25 pursuant to the agreement. Under the agreement, Mr. Smulyan retains the
right to participate in all our employee benefit plans for which he is otherwise
eligible. The agreement with Mr. Smulyan is subject to termination by our board
of directors or by Mr. Smulyan, either without cause or for cause, at any time
upon notice. In the event we terminate Mr. Smulyan's employment without cause
(as defined in the agreement) or in the event Mr. Smulyan terminates his
employment for good reason (as defined in the agreement), Mr. Smulyan is
entitled to receive the present value of the applicable base and incentive
compensation through a date five years after the date of termination. In
addition, the agreement entitles Mr. Smulyan to certain termination benefits
upon disability, death or a change in control (as defined in the agreement) of
our company. Following a termination of Mr. Smulyan's employment, other than a
termination by us without cause (as defined in the agreement) or a termination
by Mr. Smulyan with good reason (as defined in the agreement), Mr. Smulyan is
prohibited from engaging in a business in competition with us for a period of
two years after the date of termination.
Effective March 1, 1999, we entered into a three-year employment
agreement with Walter Z. Berger pursuant to which Mr. Berger is employed as
Executive Vice President and Chief Financial Officer of the Corporation. The
employment agreement provides for an annual base salary of $340,000 for each of
the three years covered by the agreements. In addition, the agreement provides
(i) for an annual cash bonus of up to $100,000, (ii) the award of 20,000 shares
of Class A common stock (after adjustment for the stock split) if Mr. Berger
remains employed by us through the expiration of the agreement (or dies or
becomes disabled, as defined in the agreement), and (iii) for the award of
options to purchase 40,000 shares of Class A common stock (after adjustment for
the stock split) at their fair market value on March 1, 1999 and options to
purchase 40,000 shares of Class A common stock (after adjustment for the stock
split) on the first day of each of the remaining contract years at the fair
market value of the shares on the date of the grant. Under the agreement, Mr.
Berger also retains the right to participate in all of our employee benefit
plans for which he is otherwise eligible.
Our employment agreements with Richard F. Cummings and Doyle L. Rose
expired on February 28, 2001. We are currently in discussions regarding new
employment agreements with these officers.
Performance Graph
The following line graph compares the yearly percentage change in
the cumulative total shareholder return on the Class A common stock with the
cumulative total return of the Nasdaq Stock Market Index and the cumulative
total return of the Nasdaq Telecommunications Stock Market Index (an index
containing performance data of radio, telephone, telegraph, television and cable
television companies) from February 29, 1996, to the fiscal year ended February
28, 2001. The performance graph assumes that an investment of $100 was made in
the Class A common stock and in each index on February 29, 1996 and that all
dividends were reinvested.
[Performance graph omitted]
Feb-96 Feb-97 Feb-98 Feb-99 Feb-00 Feb-01
Emmis......................... $100 $ 90 $129 $121 $191 $138
Nasdaq Stock Market........... $100 $119 $163 $212 $434 $198
Nasdaq Telecommunications..... $100 $ 97 $165 $269 $459 $179
Shareholder Proposals
Any of our shareholders wishing to have a proposal considered for
inclusion in our 2002 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 29, 2002. In addition, our by-laws provide that any
shareholder wishing to nominate a candidate for director or propose other
business at the Annual Meeting must give us written notice 60 days before the
meeting, and the notice must provide certain other information as described in
the by-laws. Copies of the by-laws are available to shareholders free of charge
upon request to our corporate secretary. Our board of directors will review any
shareholder proposals that are filed as required and will determine whether such
proposals meet applicable criteria for inclusion in our 2002 proxy solicitation
materials or consideration at the 2002 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 April 14,
2002, and also retain that authority under certain other circumstances.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our officers and directors, and persons who own more than 10% of
existing common stock, to file with the Securities and Exchange Commission
reports detailing their ownership of existing common stock and changes in such
ownership. Officers, directors and greater than 10% shareholders are required by
Commission regulations to furnish us with copies of all Section 16(a) forms they
file. Based solely on review of the copies of such forms furnished to us, we
believe that during the last fiscal year all officers, directors and greater
than 10% shareholders complied with the filing requirements of Section 16(a),
except that Mr. Cummings and Mr. Rose each failed to timely file one report in
connection with one transaction and Mr. Smulyan amended one report in connection
with a gift transaction.
Annual Report
A copy of our Annual Report for the year ended February 28, 2001 was
sent to all of our shareholders of record as of April 30, 2000. The Annual
Report is not to be considered as proxy solicitation material.
Other Matters
Our board of directors knows of no other matters to be brought
before this annual meeting. However, if other matters should come before the
meeting, it is the intention of each person named in the proxy to vote such
proxy in accordance with his or her judgment on such matters.
Expenses of Solicitation
The entire expense of soliciting proxies, including preparing,
assembling, printing and mailing the proxy form and the material used in the
solicitation of proxies, will be paid by us. Solicitations may be made in
person, or by mail, telephone, facsimile or other means of electronic
communication by our directors, officers and other employees and none of those
persons will receive any additional compensation in connection with the
solicitation. We also will request record holders of shares beneficially owned
by others to forward this proxy statement and related materials to the
beneficial owners of such shares, and will reimburse those record holders for
their reasonable expenses incurred in doing so.
(This page intentionally left blank)
Exhibit A
EMMIS COMMUNICATIONS CORPORATION
2001 EQUITY INCENTIVE PLAN
1. Purpose. The primary purposes of the Plan are to promote and align the
interests of employees, officers, directors and independent contractors of the
Company and its shareholders, to reward performance that enhances long term
shareholder values, to increase employee, officer, director and independent
contractor stock ownership and to improve the Company's ability to attract and
retain a team of outstanding employees, officers, directors and independent
contractors.
2. Definitions. As used in the Plan, terms defined parenthetically
immediately after their use have the respective meanings provided by such
definitions and the terms set forth below have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" means, with respect to a specified person, a person
that, directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified.
"Award" means Options, shares of Restricted Stock, Stock
Appreciation Rights or Performance Units granted under the Plan.
"Award Agreement" has the meaning specified in Section 4(b)(vi).
"Board" means the Board of Directors of the Company.
"Cause" means conviction of the Grantee of any felony or other crime
involving dishonesty, fraud or moral turpitude, or the Grantee's habitual
neglect of his duties; provided, however, that if a Grantee is subject to an
employment agreement with the Company or a Subsidiary, or has a Personal
Services Contract , "cause" shall mean any breach of such agreement or contract
by the Grantee giving the Company or a Subsidiary the right to terminate the
agreement or contract.
"Change in Control" means any of the following: (i) any person or
group (other than a Subsidiary or any employee benefit plan (or any related
trust) of the Company or a Subsidiary, and other than Jeffrey H. Smulyan or an
Affiliate of Mr. Smulyan) becomes after the Effective Date the beneficial owner
of 25% or more of either the then outstanding Stock or the combined voting power
of the then outstanding voting securities of the Company entitled to vote in the
election of directors, except that (A) no such person or group shall be deemed
to own beneficially any securities acquired directly from the Company pursuant
to a written agreement with the Company unless such person or group subsequently
becomes the beneficial owner of additional Stock or voting securities of the
Company other than pursuant to a written agreement with the Company, and (B) no
Change in Control shall be deemed to have occurred solely by reason of any such
acquisition by a corporation with respect to which, after such acquisition, more
than 60% of both the then outstanding common shares of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote in the election of directors are then beneficially
owned, directly or indirectly, by the persons who were the beneficial owners of
the Stock and voting securities of the Company immediately before such
acquisition in substantially the same proportion as their ownership, immediately
before such acquisition, of the outstanding Stock and the combined voting power
of the then outstanding voting securities of the Company entitled to vote in the
election of directors; (ii) individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Directors") cease for any reason to
constitute at least a majority of the Board; provided that any individual who
becomes a director after the Effective Date whose election, or nomination for
election by the Company's shareholders, was approved by a vote or written
consent of at least two-thirds of the directors then comprising the Incumbent
Directors shall be considered as though such individual were an Incumbent
Director, but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company (as such terms
are used in Rule 14a-11 under the Exchange Act); or (iii) approval by the
shareholders of the Company of (A) a merger, reorganization or consolidation
with respect to which the individuals and entities who were the respective
beneficial owners of the Stock and voting securities of the Company immediately
before such merger, reorganization or consolidation do not, after such merger,
reorganization or consolidation, beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding common shares and the combined
voting power of the then outstanding voting securities entitled to vote in the
election of directors of the corporation resulting from such merger,
reorganization or consolidation, (B) a liquidation or dissolution of the Company
or (C) the sale or other disposition of all or substantially all of the assets
of the Company. Notwithstanding the foregoing provisions of this definition, a
Change in Control of the Company shall be deemed not to have occurred with
respect to any Grantee, if such Grantee is, by written agreement executed prior
to such Change in Control, a participant on such Grantee's own behalf in a
transaction in which the persons (or their affiliates) with whom such Grantee
has the written agreement Acquire the Company (as defined below) and, pursuant
to the written agreement, the Grantee has an equity interest in the resulting
entity or a right to acquire such an equity interest.
For the purposes of this definition, "Acquire the Company" means the
acquisition of beneficial ownership by purchase, merger, or otherwise, of either
more than 50% of the Stock (such percentage to be computed in accordance with
Rule 13d-3(d)(1)(i) of the SEC under the Exchange Act) or substantially all of
the assets of the Company or its successors; "person" means such term as used in
Rule 13d-5 of the SEC under the Exchange Act; "beneficial owner" means such term
as defined in Rule 13d-3 of the SEC under the Exchange Act; and "group" means
such term as defined in Section 13(d) of the Exchange Act.
"Class A Common Stock" means the Class A Common Stock of the
Company, par value $.01 per share.
"Class B Common Stock" means the Class B Common Stock of the
Company, par value $.01 per share.
"Code" means the Internal Revenue Code of 1986, as amended, and
regulations and rulings thereunder. References to a particular section of the
Code shall include references to successor provisions.
"Committee" means the Compensation Committee of the Board or such
other committee or subcommittee appointed by the Board or the Compensation
Committee.
"Company" means Emmis Communications Corporation, an Indiana
corporation.
"Disability" means, with respect to the exercise of an incentive
stock option after Termination of Employment, a disability within the meaning of
Section 22(e)(3) of the Code, and for all other purposes, a mental or physical
condition which, in the opinion of the Committee, renders a Grantee unable or
incompetent to carry out the job responsibilities which such Grantee held or the
tasks to which such Grantee was assigned at the time disability was incurred,
and which is expected to be permanent or for an indefinite duration.
"Effective Date" means June 1, 2001.
"Eligible Transferee" has the meaning specified in Section 12(b).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended. References to a particular section of, or rule under, the Exchange Act
shall include references to successor provisions.
"Fair Market Value" of any security of the Company means, as of any
applicable date: (i) if the security is listed for trading on a national
securities exchange or on the NASDAQ Stock Market, the average of the highest
and lowest trading prices of the security as reported by such exchange or market
on such date, or if no reported sales occurred on such date, on the first
preceding date on which a reported sale of the security shall have occurred, or
(ii) if the security is not listed for trading on a national securities exchange
or on the NASDAQ Stock Market, or if the Committee determines that another
measurement method is more appropriate to implement one or more of the purposes
of the Plan, the fair market value of the security as determined in good faith
by the Committee.
"Grant Date" means the date of grant of an Award determined in
accordance with Section 6.
"Grantee" means an individual or Personal Service Corporation that
has been granted an Award.
"Immediate Family Member" or "Immediate Family Members" means the
spouse, the children or the grandchildren of a Grantee.
"Incentive Stock Option" means an Award under Section 7(b).
"including" means "including, without limitation."
"Measuring Period" has the meaning specified in Section 10(a)(i)(B).
"Option" means an Award under Section 7.
"Option Price" means the per share purchase price of (i) Stock
subject to an Option or (ii) Restricted Stock subject to an Option.
"Parent" means any corporation, partnership or limited liability
company (other than the Company) in an unbroken chain of corporations,
partnerships or limited liability companies ending with the Company, if at the
time of the granting of an Award under the Plan, each of such corporations,
partnerships or limited liability companies other than the Company owns stock,
general partnership interests or membership interests, as the case may be,
possessing a majority of the total combined voting power of all classes of
stock, general partnership interests or membership interests, as the case may be
(whether at all times or only so long as no senior class of securities has such
voting power by reason of any contingency), in one of the other corporations,
partnerships or limited liability companies in such chain.
"Performance Goals" has the meaning specified in Section 10(a)(i).
"Performance Percentage" has the meaning specified in Section
10(a)(i)(C).
"Performance Units" means units established by the Committee for
purposes of granting an Award under Section 10.
"Personal Services Contract" means any written contract or agreement
pursuant to which a corporation, partnership, limited liability company or other
entity is to provide to the Company or a Subsidiary the services of one or more
individuals.
"Personal Service Corporation" means a corporation, partnership,
limited liability company or other entity that has a Personal Services Contract
in effect.
"Plan" means the Emmis Communications Corporation 2001 Equity
Incentive Plan.
"Prior Plans" means the Emmis Broadcasting Corporation 1986 Stock
Incentive Plan, the Emmis Broadcasting Corporation 1992 Stock Option Plan, the
Emmis Broadcasting Corporation 1994 Equity Incentive Plan, the Emmis
Broadcasting Corporation 1997 Equity Incentive Plan and the Emmis Communications
Corporation 1999 Equity Incentive Plan.
"Reload Option" has the meaning specified in Section 7(c).
"Restricted Stock" means Stock awarded pursuant to Section 8.
"SEC" means the Securities and Exchange Commission.
"Stock" means the Class A Common Stock and the Class B Common Stock.
"Stock Appreciation Rights" means Awards under Section 9.
"Subsidiary" means any corporation, partnership or limited liability
company (other than the Company) in an unbroken chain of corporations beginning
with the Company if, at the time of the granting of an Award under the Plan,
each of the corporations, partnerships or limited liability companies other than
the last corporation, partnership or limited liability company in the unbroken
chain owns stock, general partnership interests or membership interests, as the
case may be, possessing a majority of the total combined voting power of all
classes of stock, general partnership interests or membership interests, as the
case may be (whether at all times or only so long as no senior class of
securities has such voting power by reason of any contingency), in one of the
other corporations, partnerships or limited liability companies in such chain.
"Termination of Employment" occurs (a) with respect to an employee
of the Company or a Subsidiary, the first day an individual is for any reason
entitled to severance payments under the Company's or any Subsidiary's personnel
policies or is no longer employed by the Company or any of its Subsidiaries, or,
with respect to an individual who is an employee of a corporation constituting a
Subsidiary, the first day such corporation is no longer a Subsidiary, (b) with
respect to a director of the Company, the first day he or she ceases to be a
director of the Company, (c) with respect to an independent contractor of the
Company or a Subsidiary, the first day the independent contractor is no longer
providing services to the Company or a subsidiary, or, (d) with respect to a
Personal Service Corporation, the first day after the Personal Service Contract
has expired or terminated. Notwithstanding the foregoing, a Termination of
Employment pursuant to any of clauses (a) through (d) shall not be deemed to
occur with respect to any Options that are vested on the date on which a
Termination of Employment would otherwise be deemed to have occurred so long as
a Grantee continues to provide services to the Company or a Subsidiary in one or
more of the capacities specified in clauses (a) through (d) above.
3. Scope of the Plan.
(a) Number of Shares. Subject to Section 3(c), an aggregate of three
million (3,000,000) shares of Stock is hereby made available and is reserved for
delivery on account of the exercise of Awards and payment of benefits in
connection with Awards. Subject to the foregoing limit, shares of Stock held as
treasury shares may be used for or in connection with Awards. No more than one
million (1,000,000) shares of Class B Common Stock shall be available for grant
and issuance under the Plan. Awards of or pertaining to shares of Class B Common
Stock may be granted only to Jeffrey H. Smulyan or an Affiliate of Smulyan (as
defined in the Company's Articles of Incorporation, as amended from time to
time). Issuance of either Class A Common Stock or Class B Common Stock as or
pursuant to an Award shall reduce the shares available for grant and issuance
under the Plan.
(b) Limit on Awards. Subject to Section 3(a) as to the maximum number of
shares of Stock available for delivery in connection with Awards and Sections
3(c) and 27, the maximum number of Awards that may be granted to each Grantee in
each calendar year during any part of which the Plan is in effect shall be as
follows:
(i) With respect to Stock subject to Options, 1,000,000 shares;
(ii) With respect to Stock subject to Stock Appreciation Rights,
1,000,000 shares;
(iii) With respect to Restricted Stock (not issued in payment of an
Award of Performance Units), that number of shares of Stock
whose value equals the lesser of (A) 700% of such Grantee's
base salary and bonus for such year or (B) $10,000,000 (based
on the Fair Market Value of Stock on the date the award is
granted, not the date the Award vests or is paid);
(iv) With respect to Awards of Performance Units, that number of
shares of Stock whose value equals the lesser of (A) 700% of
such Grantee's base salary and bonus for such year or (B)
$10,000,000 (based on the Fair Market Value of Stock on the
date the Award is granted, not the date the Award is earned or
paid).
(c) Re-Use of Shares. If and to the extent an Award shall expire or
terminate for any reason without having been exercised in full or shall be
forfeited, shares of Stock (including restricted stock) and stock appreciation
rights associated with such Award shall become available for other Awards. If a
Grantee pays all or part of the exercise price associated with an Award by the
transfer of Stock or the surrender (including by attestation) of all or part of
an Award (including the Award being exercised), such Stock will also be
available for grant under this Plan, without reducing the number of shares of
Stock available in any calendar year for grant of Awards.
4. Administration.
(a) General. The Plan shall be administered by the Committee, which shall
consist of persons who are appointed by the Board. Notwithstanding the
requirements contained in the immediately preceding sentence, the Board or the
Committee may, in its discretion, delegate to a committee or subcommittee of the
Board or the Committee any or all of the authority and responsibility of the
Committee. Such other committee or subcommittee may consist of two or more
directors who may, but need not, be officers or employees of the Company or of
any of its Subsidiaries. To the extent that the Board or the Committee has
delegated to such other committee or subcommittee the authority and
responsibility of the Committee pursuant to the foregoing, all references to the
Committee in the Plan shall be to such other committee or subcommittee.
Notwithstanding the foregoing, the Board shall at all times have the right to
make Awards, administer the Plan, and otherwise exercise the authority of the
Committee under the Plan, and to the extent the Board does so, references to the
Committee in the Plan shall be to the Board.
(b) Authority of the Committee. The Committee shall have full power and
final authority, in its discretion, but subject to the express provisions of the
Plan, as follows: (i) to select Grantees, (ii) to grant Awards, (iii) to
determine (A) when Awards may be granted, (B) whether or not specific Stock
Appreciation Rights shall be identified with a specific Option, specific shares
of Restricted Stock, or specific Performance Units and, if so, whether they
shall be exercisable cumulatively with, or alternatively to, such Option, shares
of Restricted Stock, or Performance Units, and (C) whether or not specific
Performance Units shall be identified with a specific Option, specific shares of
Restricted Stock, or specific Stock Appreciation Rights under the Plan or any
Prior Plan and, if so, whether they shall be exercisable cumulatively with, or
alternatively to, such Option, shares of Restricted Stock, or Stock Appreciation
Rights, (iv) to interpret the Plan and to make all determinations necessary or
advisable for the administration of the Plan, (v) to prescribe, amend, and
rescind rules relating to the Plan, including rules with respect to the
exercisability and nonforfeitability of Awards upon the Termination of
Employment of a Grantee, (vi) to determine the terms and provisions of the
written agreements by which all Awards shall be granted ("Award Agreements")
and, to modify any such Award Agreement at any time, with the consent of the
Grantee when required, (vii) to accelerate the exercisability of, and to
accelerate or waive any or all of the restrictions and conditions applicable to,
any Award, (viii) to make such adjustments or modifications to Awards to
Grantees working outside the United States as are necessary and advisable to
fulfill the purposes of the Plan, and (ix) to impose such additional conditions,
restrictions, and limitations upon the grant, exercise or retention of Awards as
the Committee may, before or concurrently with the grant thereof, deem
appropriate, including requiring simultaneous exercise of related identified
Options, Stock Appreciation Rights, and Performance Units and limiting the
percentage of Options, Stock Appreciation Rights, and Performance Units which
may from time to time be exercised by a Grantee.
(c) Determinations of the Committee; No Liability. The determination of
the Committee on all matters relating to the Plan or any Award Agreement shall
be conclusive and final. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Award.
5. Eligibility. Awards may be granted to any employee, officer, director,
Personal Service Corporation or independent contractor of the Company or any of
its Subsidiaries. In selecting the Grantees to whom Awards may be granted, as
well as in determining the number of shares of Stock subject to and the other
terms and conditions applicable to each Award, the Committee shall take into
consideration such factors as it deems relevant in promoting the purposes of the
Plan.
6. General Terms and Conditions of Grants.
(a) Grant Date. The Grant Date of an Award shall be the date on which
the Committee grants the Award or such other date as the Committee may
determine.
(b) Maximum Term. The term of each Award (subject to Section 7(b) and 7(c)
with respect to Incentive Stock Options and Reload Options, respectively) shall
be a period of not more than ten (10) years from the Grant Date, and shall be
subject to earlier termination as herein provided.
(c) Tandem Awards. A Grantee may, if otherwise eligible, be granted
additional Awards in any combination.
7. Options.
(a) Grant of Options and Option Price. The Committee may grant an Option
containing such terms, conditions and restrictions as the Committee deems
appropriate (including but not limited to a reload option); provided, however,
that the Option Price of any Option shall not be less than the Fair Market Value
of the Stock on the Grant Date.
(b) Grant of Incentive Stock Options. Without limiting the generality of
the foregoing, the Committee may designate that an Option shall be made subject
to restrictions that permit it to qualify as an "incentive stock option" under
the requirements of Section 422 of the Code. Notwithstanding the foregoing and
Section 4(b)(vi), the Committee may, without the consent of the Grantee, at any
time before the exercise of an Option (whether or not an Incentive Stock
Option), take any action necessary to prevent such option from being treated as
an Incentive Stock Option.
(c) Grant of Reload Options. The Committee may from time to time, in its
discretion, adopt a policy, which policy shall not remain in effect for longer
than 12 months at a time, but which may be adopted for successive 12-month
periods, under which each Grantee who exercises while the policy is in effect an
Option for shares of Stock which have a Fair Market Value on the date of
exercise equal to not less than 100% (or such greater percentage set forth in
the policy) of the Option Price for such Options ("Exercised Options") and pays
the Option Price with shares of Stock, shall be granted, subject to Section 3,
additional Options ("Reload Options") in an amount equal to the sum ("Reload
Number") of the number of shares of Stock tendered to exercise the Exercised
Options plus, if so provided by the Committee, the number of shares of Stock, if
any, retained by the Company in connection with the exercise of the Exercised
Options to satisfy any federal, state or local tax withholding requirements. The
Committee may, in its discretion, provide that the Reload Option policy shall
not apply to Options which would expire within such period as the Committee
determines, in its discretion, from the effective date of the policy.
(d) Terms and Conditions for Reload Options. Reload Options shall be
subject to the following terms and conditions: (i) the Grant Date for each
Reload Option shall be the date of exercise of the Exercised Option to which it
relates; (ii) the Reload Option may be exercised at any time during the
unexpired term of the Exercised Option (subject to earlier termination thereof
as provided in the Plan and in the applicable Award Agreement); and (iii) the
terms of the Reload Option shall be the same as the terms of the Exercised
Option to which it relates, except that the Option Price shall be the Fair
Market Value of the Stock on the Grant Date of the Reload Option;
(e) Exercise of Options. . Each Option shall be exercised, in whole or in
part, by delivery to the Company of written notice of intent to purchase a
specific number of shares of Stock subject to the Option. The Option Price of
any shares of Stock or shares of restricted stock as to which an Option shall be
exercised shall be paid in full at the time of the exercise. Payment may, at the
election of the Grantee, be made in any one or any combination of the following:
(i) cash; (ii) shares of Stock that have been held by the Grantee for at least
six months, each valued at the Fair Market Value on the date of exercise
(including through an attestation procedure); (iii) with the approval of the
Committee, shares of restricted stock that have been held by the Grantee for at
least six months, each valued at the Fair Market Value of a share of Stock on
the date of exercise; (iv) by waiver of compensation due or accrued to the
Grantee for services rendered; (v) with the consent of the Committee, by tender
of property; (vi) provided that a public market for the Stock exists: (A)
through a "same day sale" commitment from the Grantee and a broker-dealer that
is a member of the National Association of Securities Dealers (an "NASD Dealer")
whereby the Grantee irrevocably elects to exercise the Option and to sell a
portion of the Stock so purchased in order to pay for the Option, and whereby
the NASD Dealer irrevocably commits upon receipt of such Stock to forward the
Option Price directly to the Company; or (B) through a "margin" commitment from
the Grantee and an NASD Dealer whereby the Grantee irrevocably elects to
exercise the Option and to pledge the Stock so purchased to the NASD Dealer in a
margin account as security for a loan from the NASD Dealer in the amount of the
Option Price, and whereby the NASD Dealer irrevocably commits upon receipt of
such Stock to forward the Option Price directly to the Company; or (C) through
any other procedure pursuant to which the Grantee delivers to the Company a
properly executed exercise notice and instructions to deliver the resulting
Stock to a stock broker that are intended to satisfy the provisions of Section
220. 3(e)(4) of Regulation T issued by the Board of Governors of the Federal
Reserve System as in effect from time to time; (vii) in the discretion of the
Committee and to the extent permitted by law, in accordance with Section 14;
(viii) by the surrender of all or part of the Option being exercised, or (ix)
such other payment method or procedure as the Committee may approve.
(f) Use of Restricted Stock to Pay Option Price. If restricted stock
("Tendered Restricted Stock") is used to pay the Option Price for Stock subject
to an Option, then a number of shares of Stock acquired on exercise of the
Option equal to the number of shares of Tendered Restricted Stock shall, unless
the Committee provides otherwise, be subject to the same restrictions as the
Tendered Restricted Stock, determined as of the date of exercise of the Option.
If the Option Price for restricted stock subject to an Option is paid with
Tendered Restricted Stock, and if the Committee determines that the restricted
stock acquired on exercise of the Option is subject to restrictions that cause
it to have a greater risk of forfeiture than the Tendered Restricted Stock, then
notwithstanding the preceding sentence, all the restricted stock acquired on
exercise of the Option shall, unless the Committee provides otherwise, be
subject to such restrictions.
8. Restricted Stock.
(a) Grant of Shares of Restricted Stock. Before the grant of any shares of
Restricted Stock, the Committee shall determine, in its discretion: (i) the per
share purchase price of such shares (which may be zero), and (ii) the
restrictions applicable to such grant; provided, however, that if the per share
purchase price is zero, the consideration for the shares shall be deemed to be
prior service to the Company or its Subsidiaries unless the Committee specifies
other consideration.
(b) Exercise. Payment of the purchase price (if greater than zero) for
shares of Restricted Stock shall be made in full by the Grantee before the
delivery of such shares and, in any event, no later than 10 days after the Grant
Date for such shares. Such payment may, at the election of the Grantee and
unless the Committee otherwise provides in the Award Agreement, be made in any
one or any combination of the following: (i) cash, (ii) Stock valued at its Fair
Market Value on the date of payment, or (iii) shares of Restricted Stock, each
valued at the Fair Market Value of a share of Stock on the date of payment;
provided that: (A) in the discretion of the Committee and to the extent
permitted by law, payment may also be made in accordance with Section 14; and
(B) if the purchase price for Restricted Stock ("New Restricted Stock") is paid
with shares of restricted stock ("Old Restricted Stock"), the restrictions
applicable to the New Restricted Stock shall be the same as if the Grantee had
paid for the New Restricted Stock in cash unless, in the judgment of the
Committee, the Old Restricted Stock was subject to a greater risk of forfeiture,
in which case a number of shares of New Restricted Stock equal to the number of
shares of Old Restricted Stock tendered in payment for New Restricted Stock
shall, unless the Committee provides otherwise, be subject to the same
restrictions as the Old Restricted Stock, determined immediately before such
payment.
(c) Forfeiture. The Committee may, but need not, provide that all or any
portion of a Grantee's Award of Restricted Stock shall be forfeited: (i) upon
the Grantee's Termination of Employment within a specified time period after the
Grant Date, or (ii) if the Company or the Grantee does not achieve specified
performance goals within a specified time period after the Grant Date and before
the Grantee's Termination of Employment.
(d) Effect of Forfeiture. If a share of Restricted Stock is forfeited,
then: (i) the Grantee shall be deemed to have resold such share of restricted
stock to the Company at the lesser of (A) the purchase price paid by the Grantee
(such purchase price shall be deemed to be zero dollars ($0) if no purchase
price was paid) or (B) the Fair Market Value of a share of Stock on the date of
such forfeiture; (ii) the Company shall pay to the Grantee the amount determined
under clause (i) of this sentence as soon as is administratively practical; and
(iii) such share of Restricted Stock shall cease to be outstanding, and shall no
longer confer on the Grantee thereof any rights as a shareholder of the Company,
from and after the date of the Company's tender of the payment specified in
clause (ii) of this sentence, whether or not such tender is accepted by the
Grantee.
(e) Certificates. Any share of Restricted Stock which is subject to
forfeiture shall be held (together with a stock power executed in blank by the
Grantee) in escrow by the Secretary of the Company until such shares become
nonforfeitable or are forfeited and shall bear an appropriate legend specifying
that such share is non-transferable and subject to the restrictions set forth in
the Plan. If any shares of Restricted Stock become nonforfeitable, the Company
shall cause certificates for such shares to be issued or reissued without such
legend.
9. Stock Appreciation Rights.
(a) Grant of Stock Appreciation Rights. When granted, Stock Appreciation
Rights may, but need not, be identified with shares of Stock subject to a
specific Option, specific shares of Restricted Stock, or specific Performance
Units of the Grantee (including any Option, shares of Restricted Stock, or
Performance Units granted on or before the Grant Date of the Stock Appreciation
Rights) in a number equal to or different from the number of Stock Appreciation
Rights so granted. If Stock Appreciation Rights are identified with shares of
Stock subject to an Option, shares of Restricted Stock, or Performance Units,
then, unless otherwise provided in the applicable Award Agreement, the Grantee's
associated Stock Appreciation Rights shall terminate upon (i) the expiration,
termination, forfeiture, or cancellation of such Option, shares of Restricted
Stock, or Performance Units, (ii) the exercise of such Option or Performance
Units, or (iii) the nonforfeitability of such shares of Restricted Stock.
(b) Exercise of Stock Appreciation Rights. Each Stock Appreciation Right
shall be exercisable to the extent the Option with which it is identified, if
any, may be exercised, to the extent the Restricted Stock with which it is
identified, if any, is nonforfeitable, or to the extent the Performance Unit
with which it is identified, if any, may be exercised, unless otherwise provided
by the Committee. Stock Appreciation Rights shall be exercised by delivery to
the Company of written notice of intent to exercise a specific number of Stock
Appreciation Rights. Unless otherwise provided in the applicable Award
Agreement, the exercise of Stock Appreciation Rights which are identified with
shares subject to an Option, shares of Restricted Stock, or Performance Units
shall result in the cancellation or forfeiture of such Option, shares of
Restricted Stock, or Performance Units, as the case may be, to the extent of
such exercise.
(c) Benefit for Stock Appreciation Rights. The benefit for each Stock
Appreciation Right exercised shall be equal to the difference between: (i) the
Fair Market Value of a share of Stock on the date of such exercise and (ii) an
amount equal to: (A) for any Stock Appreciation Right identified with an Option,
the Option Price of such Option, unless the Committee in the grant of the Stock
Appreciation Right specified a higher amount, or (B) for any other Stock
Appreciation Right, the Fair Market Value of a share of Stock on the Grant Date
of such Stock Appreciation Right, unless the Committee in the grant of the Stock
Appreciation Right specified a higher amount; provided that the Committee, in
its discretion, may provide that the benefit for any Stock Appreciation Right
shall not exceed a stated percentage (which may exceed 100%) of the Fair Market
Value of a share of Stock on such Grant Date. The benefit upon the exercise of a
Stock Appreciation Right shall be payable in cash, except that the Committee,
with respect to any particular exercise, may, in its discretion, pay benefits
wholly or partly in Stock.
10. Performance Units.
(a) Grant of Performance Units.
(i) In connection with the grant of any Performance Unit, the
Committee shall: (A) determine performance goals ("Performance Goals")
applicable to such grant, (B) designate a period for the measurement of
the extent to which Performance Goals are attained, which period may begin
prior to the Grant Date (the "Measuring Period"), and (C) assign a
"Performance Percentage" to each level of attainment of Performance Goals
during the Measuring Period, with the percentage applicable to minimum
attainment being zero percent (0%) and the percentage applicable to
maximum attainment (which may exceed 100%) to be determined by the
Committee from time to time.
(ii) In establishing Performance Goals, the Committee may consider
such performance factor or factors as it deems appropriate, including
share price, revenue, net revenue, EBITDA, EBITDA before certain charges,
net income, cash flow (whether pre-tax or after tax), growth in net income
or cash flow, earnings per share, growth of earnings per share, market
share, market penetration, return on equity, return on assets, or return
on capital. The Performance Goals may include minimum and optimum
objectives, a single set of objectives or multiple sets of objectives. The
Committee may, at any time, in its discretion, modify Performance Goals in
order to facilitate their attainment for any reason, including recognition
of unusual or nonrecurring events affecting the Company or a Subsidiary or
changes in applicable laws, regulations or accounting principles. If a
Grantee is promoted, demoted or transferred to a different business unit
of the Company during a performance period, the Committee may adjust or
eliminate the Performance Goals as it deems appropriate.
(iii) When granted, Performance Units may, but need not, be
identified with shares of Stock subject to a specific Option, specific
shares of Restricted Stock, or specific Stock Appreciation Rights of the
Grantee granted under the Plan or any Prior Plan in a number equal to or
different from the number of the Performance Units so granted. If
Performance Units are identified with shares of Stock subject to an
Option, shares of Restricted Stock, or Stock Appreciation Rights, then,
unless otherwise provided in the applicable Award Agreement, the Grantee's
associated Performance Units shall terminate upon (A) the expiration,
termination, forfeiture, or cancellation of such Option, shares of
Restricted Stock, or Stock Appreciation Rights, (B) the exercise of such
Option or Stock Appreciation Rights, or (C) the nonforfeitability of such
shares of Restricted Stock.
(b) Exercise of Performance Units. Subject to Sections 13 and 18 and such
terms and conditions as the Committee may impose, if, with respect to any
Performance Unit, the minimum Performance Goals have been achieved during the
applicable Measuring Period, then such Performance Unit shall be exercisable
commencing on the first day after the end of the applicable Measuring Period or
such other date specified by the Committee. Performance Units shall be exercised
by delivery to the Company of written notice of intent to exercise a specific
number of Performance Units; provided, however, that Performance Units not
identified with an Option, shares of Restricted Stock, or Stock Appreciation
Rights shall be deemed exercised on the date on which they first become
exercisable unless another date is specified by the Committee in the grant of
the Performance Unit or in the determination of whether the Performance Goals
were met. After completion of the Measuring Period, the Committee shall certify
in writing the extent to which the Performance Goals and other material terms
applicable to such Award are attained. Unless and until the Committee so
certifies, the Award shall not be paid. Unless otherwise provided for in the
applicable Award Agreement, the exercise of Performance Units which are
identified with an Option, shares of Restricted Stock, or Stock Appreciation
Rights shall result in the cancellation or forfeiture of such Option, shares of
Restricted Stock, or Stock Appreciation Rights, as the case may be, to the
extent of such exercise.
(c) Benefit of Performance Unit. The benefit for each Performance Unit
exercised shall be an amount equal to the product of: (i) the Fair Market Value
of a share of Stock on the Grant Date of the Performance Unit multiplied by (ii)
the Performance Percentage attained during the Measuring Period for such
Performance Unit.
(d) Payment. The benefit upon the exercise of a Performance Unit shall be
payable as soon as is administratively practicable after the later of (i) the
date the Grantee exercises or is deemed to exercise such Performance Unit, or
(ii) the date (or dates in the event of installment payments) as provided in the
applicable Award Agreement. Such benefit shall be payable in cash, except that
the Committee, with respect to any particular exercise, may, in its discretion,
pay benefits wholly or partly in Stock. The number of shares of Stock payable in
lieu of cash shall be determined by valuing the Stock at its Fair Market Value
on the business day next preceding the date such benefit is to be paid.
11. No Employment Rights. Neither the establishment of the Plan, nor the
granting of any Award shall be construed to (i) give any Grantee the right to
remain employed by or affiliated with the Company or any of its Subsidiaries or
to any benefits not specifically provided by the Award Agreement, or (ii) in any
manner modify the right of the Company or any of its Subsidiaries to modify,
amend, or terminate this Plan or any of its employee benefit plans.No obligation
of the Company or any of its Subsidiaries as to the length of any Grantee's
employment by or affiliation with the Company or any Subsidiary shall be implied
by the terms of the Plan, any grant of an Award hereunder or any Award
Agreement. The Company and its Subsidiaries reserve the same rights to terminate
employment of or sever its relationship with any Grantee as existed before the
Grant Date.
12. Non-Transferability.
(a) Except as permitted by the Committee in writing, each Award (other
than Restricted Stock) granted hereunder shall by its terms not be assignable or
transferable other than by will or the laws of descent and distribution and may
be exercised, during the Grantee's lifetime, only by the Grantee. Each share of
Restricted Stock shall be non-transferable until such share becomes
nonforfeitable.
(b) Notwithstanding the provisions of subsection (a), a Grantee may
transfer an Award to (i) Immediate Family Members; (ii) a trust or trusts for
the exclusive benefit of Immediate Family Members; or (iii) a partnership or
limited liability company in which the Grantee and/or the Immediate Family
Members of the Grantee are the only equity owners (collectively, "Eligible
Transferees"). An Award that is transferred to an Immediate Family Member shall
not be transferable by such Immediate Family Member, except for any transfer by
such Immediate Family Member's will or by the laws of descent and distribution
upon the death of the Immediate Family Member.
(c) In the event that a Grantee transfers an Award to an Eligible
Transferee under this Section 12, the Award transferred to the Eligible
Transferee must be exercised by such Eligible Transferee and, in the event of
the death of such Eligible Transferee, by such Eligible Transferee's executor or
administrator only in the same manner, to the same extent and under the same
circumstances (including, without limitation, the time period within which the
Award must be exercised) as the Grantee or, in the event of the Grantee's death,
the executor or administrator of the Grantee's estate, could have exercised such
Award. The Grantee, or in the event of the Grantee's death, the Grantee's
estate, shall remain liable for all federal, state, city and local taxes
applicable upon the exercise of an Award by an Eligible Transferee.
13. Effects of a Change in Control. The terms and provisions of this
Section 13 shall apply upon the occurrence of a Change in Control only if, prior
to the Change in Control, the Committee shall have determined that this Section
13 shall be applicable. The Committee shall give written notice to the Grantees
of such a determination and the date on which such determination is made. After
the occurrence of a Change in Control following the date on which such
determination is made, then:
(a) General. Subject to Section 18 but notwithstanding Section 11 or any
other provisions of the Plan: (i) all Options, Stock Appreciation Rights, and
Performance Units granted under the Plan shall immediately be fully exercisable;
and (ii) all shares of Restricted Stock shall immediately be nonforfeitable and
freely transferable.
(b) Benefit. The benefit, if any, payable with respect to any Performance
Unit for which the Measuring Period has not ended shall be equal to the product
of: (i) the Fair Market Value of a share of Stock on the Grant Date of the
Performance Unit multiplied successively by each of the following; (ii) a
fraction, the numerator of which is the number of months (including as a whole
month any partial month) that have elapsed since the beginning of such Measuring
Period until the date of such Change in Control, and the denominator of which is
the number of months (including as a whole month any partial month) in the
Measuring Period; and (iii) a percentage equal to the greater of (A) the target
percentage, if any, specified in the applicable Award Agreement, or (B) the
maximum percentage, if any, that would be earned under the terms of the
applicable Award Agreement assuming that such rate at which the performance
goals have been achieved as of the date of the Change in Control would continue
until the end of the Measuring Period.
14. Loans and Guarantees. The Committee may, in its discretion:
(i) allow a Grantee to defer payment to the Company of all or any
portion of (i) the Option Price of an Option, (ii) the purchase price of a
share of Restricted Stock, or (iii) any taxes associated with a benefit
hereunder which is not a cash benefit at the time such benefit is so
taxable, or
(ii) cause the Company to guarantee a loan from a third party to the
Grantee, in an amount equal to all or any portion of such Option Price,
purchase price, or any related taxes. Any such payment deferral or
guarantee by the Company pursuant to this Section 14 shall be on a secured
or unsecured basis for such periods, at such interest rates, and on such
other terms and conditions as the Committee may determine. Notwithstanding
the foregoing, a Grantee shall not be entitled to defer the payment of
such Option Price, purchase price, or any related taxes unless the Grantee
(i) enters into a binding obligation to pay the deferred amount and (ii)
pays upon exercise of an Option or grant of shares of Restricted Stock, as
the case may be, an amount equal to or greater than the aggregate par
value of all shares of Stock or Restricted Stock (other than treasury
shares) to be then delivered. If the Committee has permitted a payment
deferral or caused the Company to guarantee a loan pursuant to this
Section 14, then the Committee may, in its discretion, require the
immediate payment of such deferred amount or the immediate release of such
guarantee upon the Grantee's Termination of Employment or upon the
Grantee's sale or other transfer of the Grantee's shares of Stock
purchased pursuant to such deferral or guarantee.
15. Notification under Section 83(b). If the Committee has not, on the
Grant Date or any later date, prohibited such Grantee from making the following
election, and a Grantee shall, in connection with the exercise of any Option, or
the grant of any share of Restricted Stock, make the election permitted under
Section 83(b) of the Code (i.e., an election to include in such Grantee's gross
income in the year of transfer the amounts specified in Section 83(b) of the
Code), such Grantee shall notify the Company of such election within 10 days of
filing notice of the election with the Internal Revenue Service, in addition to
any filing and notification required pursuant to regulations issued under the
authority of Section 83(b) of the Code.
16. Mandatory Withholding Taxes. Whenever under the Plan, cash or shares
of Stock are to be delivered upon exercise or payment of an Award or upon a
share of Restricted Stock becoming nonforfeitable, or any other event with
respect to rights and benefits hereunder, the Company shall be entitled to
require as a condition of delivery (i) that the Grantee remit an amount
sufficient to satisfy all federal, state and local withholding tax requirements
related thereto, (ii) the withholding of such sums from compensation otherwise
due to the Grantee or from any shares of Stock due to the Grantee under the
Plan, or (iii) any combination of the foregoing.
17. Elective Share Withholding.
(a) Election by Grantee. Subject to Section 17(b) and unless prohibited by
the Award Agreement, a Grantee may elect the withholding ("Share Withholding")
by the Company of a portion of the shares of Stock otherwise deliverable to such
Grantee upon the exercise or payment of an Award or upon a share of Restricted
Stock's becoming nonforfeitable (each a "Taxable Event") having a Fair Market
Value equal to: (i) the minimum amount necessary to satisfy required federal,
state, or local withholding tax liability attributable to the Taxable Event; or
(ii) with the Committee's prior approval, a greater amount, not to exceed the
estimated total amount of such Grantee's tax liability with respect to the
Taxable Event.
(b) Restrictions. Each Share Withholding election by a Grantee shall be
made in writing in a form acceptable to the Committee and shall be subject to
the following restrictions: (i) a Grantee's right to make such an election shall
be subject to the Committee's right to revoke such right at any time before the
Grantee's election if the Committee has reserved the right to do so in the Award
Agreement; (ii) the Grantee's election must be made before the date (the "Tax
Date") on which the amount of tax to be withheld is determined; (iii) the
Grantee's election shall be irrevocable by the Grantee; and (iv) in the event
that the Tax Date is deferred until six months after the delivery of Stock under
Section 83(b) of the Code, the Grantee shall receive the full amount of Stock
with respect to which the exercise occurs, but such Grantee shall be
unconditionally obligated to tender back to the Company the proper number of
shares of Stock on the Tax Date.
18. Termination of Employment.
(a) Restricted Stock. Except as otherwise provided by the Committee on or
after the Grant Date, a Grantee's shares of Restricted Stock that are
forfeitable shall be forfeited upon the Grantee's Termination of Employment.
(b) Other Awards. If the Grantee has a Termination of Employment for
Cause, any unexercised Option, Stock Appreciation Right, or Performance Unit
shall terminate upon the Grantee's Termination of Employment. If the Grantee has
a Termination of Employment for any reason other than Cause, then any
unexercised Option, Stock Appreciation Right, or Performance Unit, to the extent
exercisable on the date of the Grantee's Termination of Employment, may be
exercised in whole or in part, not later than the later of (A) the 180th day
following the Grantee's Termination of Employment or (B) the 30th day following
the last day for which the Grantee is entitled to severance payments under the
Company's or any Subsidiary's personnel policies, except that: (i) if the
Grantee's Termination of Employment is caused by the death of the Grantee, then
any unexercised Option, Stock Appreciation Right, or Performance Unit, shall
vest on the date of the Grantee's death, and may be exercised, in whole or in
part, at any time within one year after the Grantee's death by the Grantee's
personal representative or by the person to whom the Option, Stock Appreciation
Right, or Performance Unit is transferred by will or the applicable laws of
descent and distribution; (ii) if the Grantee's Termination of Employment is on
account of the Disability of the Grantee, then any unexercised Option, Stock
Appreciation Right, or Performance Unit shall vest on the date of the
Termination of Employment and may be exercised, in whole or in part, as if such
Termination of Employment had not occurred; provided that, if the Grantee dies
after such Termination of Employment, such Option, Stock Appreciation Right, or
Performance Unit may be exercised, to the extent exercisable on the date of the
Grantee's death, by the deceased Grantee's personal representative or by the
person to whom the Option, Stock Appreciation Right, or Performance Unit is
transferred by will or the applicable laws of descent and distribution within
one year after the Grantee's death, and (iii) if the Grantee's Termination of
Employment results from a sale of the station, magazine or other property at
which Grantee is employed or to which Grantee provides services, then any
unvested Option that was scheduled to vest within one year after the Termination
of Employment shall vest on the date of such Termination of Employment.
(c) Exceptions at the Discretion of the Committee. If the Grantee has a
Termination of Employment for any reason other than Cause, the Committee may
provide on or after the Grant Date (including after a Grantee's Termination of
Employment, but before the expiration of the term specified in the applicable
Award Agreement) for one or more of the following: (i) that any unexercised
Option, Stock Appreciation Right, or Performance Unit, to the extent exercisable
on the date of such Termination of Employment, may be exercised, in whole or in
part, at any time within a period specified by the Committee after the date of
such Termination of Employment; (ii) that any Option, Stock Appreciation Right,
or Performance Unit which is not exercisable on or before the date of such
Termination of Employment (A) will continue to become exercisable, as if such
Termination of Employment had not occurred, after such date for a period
specified by the Committee and (B) to the extent such Option, Stock Appreciation
Right, or Performance Unit has become exercisable during such period, may be
exercised, in whole or in part, at or before the end of such period; (iii) that
any share of Restricted Stock that has not become nonforfeitable on or before
the date of such Termination of Employment may become nonforfeitable as if such
Termination of Employment had not occurred after such date for a period
specified by the Committee; or (iv) that if the Grantee dies after such
Termination of Employment and before the expiration of the period specified
under clause (i) or (ii) of this Section 18(c), such Option, Stock Appreciation
Right, or Performance Unit may be exercised by the deceased Grantee's personal
representative or by the person to whom the Option, Stock Appreciation Right, or
Performance Unit is transferred by will or the applicable laws of descent and
distribution within the specified period after the Grantee's Termination of
Employment, or, if later, within 180 days after the Grantee's death; provided
that if such rights are granted, the Committee may thereafter take actions to
limit such rights but only if such limitation is consented to by the Grantee.
(d) Maximum Extension. Notwithstanding the foregoing, no Award shall be
exercisable beyond the maximum term permitted under the original Award Agreement
unless the Committee explicitly extends such original term, in which case such
term shall not be extended beyond the maximum term permitted by the Plan.
19. Substituted Awards. If the Committee cancels any Award (granted under
this Plan, the Prior Plans, or any plan of any entity acquired by the Company or
any of its Subsidiaries), and a new Award is substituted therefor, then the
Committee may, in its discretion, determine the terms and conditions of such new
Award and may, in its discretion, provide that the grant date of the canceled
Award shall be the date used to determine the earliest date or dates for
exercising the new substituted Award so that the Grantee may exercise the
substituted Award at the same time as if the Grantee had held the substituted
Award since the grant date of the canceled Award; provided that no award shall
be canceled without the consent of the Grantee if the terms and conditions of
the new Award to be substituted are not at least as favorable as the terms and
conditions of the award to be canceled.
20. Securities Law Matters.
(a) Legend and Investment Representation. If the Committee deems necessary
to comply with the Securities Act of 1933, or any rules, regulations or other
requirements of the SEC or any stock exchange or automated quotation system, the
Committee may require a written investment intent representation by the Grantee
and may require that a restrictive legend be affixed to certificates for shares
of Stock, or that the Stock be subject to such stock transfer orders and other
restrictions as the Committee may deem necessary or advisable.
(b) Postponement by Committee. If based upon the opinion of counsel for
the Company, the Committee determines that the exercise or nonforfeitability of,
or delivery of benefits pursuant to, any Award would violate any applicable
provision of (i) federal or state securities law or (ii) the listing
requirements of any national securities exchange or the requirements of any
automated quotation system on which are listed or quoted any of the Company's
equity securities, then the Committee may postpone any such exercise,
nonforfeitability or delivery, as the case may be, but the Company shall use
reasonable and good faith efforts to cause such exercise, nonforfeitability or
delivery to comply with all such provisions at the earliest practicable date.
The Committee's authority under this Section 20(b) shall expire on the date of
the first Change in Control to which Section 13 applies.
(c) No Obligation to Register or List. The Company shall be under no
obligation to register the Stock with the SEC or to effect compliance with the
registration, qualification or listing requirements of any state securities
laws, stock exchange or automated quotation system, and the Company shall have
no liability for any inability or failure to do so.
21. Funding. Benefits payable under the Plan to any person shall be paid
directly by the Company. The Company shall not be required to fund, or otherwise
segregate assets to be used for payment of, benefits under the Plan.
22. Rights as a Shareholder. A Grantee shall not, by reason of any Award
(other than Restricted Stock) have any right as a shareholder of the Company
with respect to the shares of Stock which may be deliverable upon exercise or
payment of such Award until such shares have been delivered to such Grantee.
Shares of Restricted Stock held by a Grantee or held in escrow by the Company or
by an agent of the Company shall confer on the Grantee all rights of a
shareholder of the Company, except as otherwise provided in the Plan. The
Committee, in its discretion, at the time of grant of Restricted Stock, may
permit or require the payment of cash dividends thereon to be deferred and, if
the Committee so determines, reinvested in additional Restricted Stock to the
extent shares are available under Section 3, or otherwise reinvested. Stock
dividends and deferred cash dividends issued with respect to Restricted Stock
shall be treated as additional shares of Restricted Stock that are subject to
the same restrictions and other terms as apply to the shares with respect to
which such dividends are issued. The Committee may, in its discretion, provide
for crediting to and payment of interest on deferred cash dividends.
23. Escrow; Pledge of Shares. To enforce any restrictions on a Grantee's
Stock, the Committee may require the Grantee to deposit all certificates
representing such Stock, together with stock powers or other instruments of
transfer approved by the Committee, appropriately endorsed in blank, with the
Company or an agent designated by the Company to hold in escrow until such
restrictions have lapsed or terminated, and the Committee may cause a legend or
legends referencing such restrictions to be placed on the certificates. Any
Grantee who is permitted to execute a promissory note as partial or full
consideration for the purchase of Stock under the Plan shall be required to
pledge and deposit with the Company all or part of the Stock so purchased as
collateral to secure the payment of the Grantee's obligation to the Company
under the promissory note; provided, however, that the Committee may require or
accept other or additional forms of collateral to secure the payment of such
obligation and, in any event, the Company shall have full recourse against the
Grantee under the promissory note notwithstanding any pledge of the Grantee's
Stock or other collateral. In connection with any pledge of the Stock, the
Grantee shall be required to execute and deliver a written pledge agreement in
such form as the Committee shall from time to time approve. The Stock purchased
with the promissory note may be released from the pledge on a pro rata basis as
the promissory note is paid.
24. Nature of Payments. Any and all grants, payments of cash, or
deliveries of shares of Stock hereunder shall constitute special incentive
payments to the Grantee and shall not be taken into account in computing the
amount of salary or compensation of the Grantee for the purposes of determining
any pension, retirement, death or other benefits under (i) any pension,
retirement, profit-sharing, bonus, life insurance or other employee benefit plan
of the Company or any of its Subsidiaries, or (ii) any agreement between the
Company or any Subsidiary, on the one hand, and the Grantee, on the other hand,
except as such plan or agreement shall otherwise expressly provide.
25. Non-Uniform Determinations. The Committee's determinations under the
Plan need not be uniform and may be made by the Committee selectively among
persons who receive, or are eligible to receive, Awards (whether or not such
persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations and to enter into non-uniform and
selective Award Agreements as to (i) the identity of the Grantees, (ii) the
terms and provisions of Awards, and (iii) the treatment, under Section 18, of
Terminations of Employment. Notwithstanding the foregoing, the Committee's
interpretation of Plan provisions shall be uniform as to similarly situated
Grantees.
26. Adjustments. The Committee shall make equitable adjustment of: (i) the
aggregate numbers of shares of Stock, shares of Restricted Stock and Stock
Appreciation Rights, available under Sections 3(a) and 3(b), (ii) the number of
shares of Stock or shares of Restricted Stock covered by an Award, (iii) the
Option Price, (iv) the Fair Market Value of Stock to be used to determine the
amount of the benefit payable upon exercise of Stock Appreciation Rights or
Performance Units, and (v) all other matters relating to the Plan and any
Awards, including the type of securities or property, if any, to be paid in
connection with any Award, all in such manner as may be determined by the
Committee in its discretion in order to prevent dilution or enlargement of the
rights of any Grantee pursuant to any Award under the Plan, to reflect a stock
dividend, stock split, reverse stock split, share combination, recapitalization,
reclassification, merger, consolidation, asset spin-off, reorganization, or
similar event of or by the Company.
27. Adoption And Shareholder Approval. The Plan shall be approved by the
shareholders of the Company (excluding holders of Stock issued pursuant to this
Plan), consistent with applicable laws, including but not limited to Section
162(m)(4)(C) (ii) of the Code, within 12 months before or after the Effective
Date. Upon the Effective Date, Awards may be granted pursuant to the Plan;
provided, however, that: (i) no Option may be exercised prior to initial
shareholder approval of the Plan; (ii) no Option granted pursuant to an increase
in the number of shares of Stock approved by the Board shall be exercised prior
to the time such increase has been approved by the shareholders of the Company;
and (iii) in the event that shareholder approval is not obtained within the time
period provided herein, all Awards granted hereunder shall be canceled, any
Stock issued pursuant to any Award shall be canceled and any purchase of Stock
hereunder shall be rescinded.
28. Nonexclusivity Of The Plan. Neither the adoption of the Plan by the
Board, the submission of the Plan to the shareholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board or the Committee to adopt such additional
compensation arrangements as it may deem desirable, including the granting of
stock options and bonuses otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
29. Amendment and Termination of the Plan. Subject to any applicable
shareholder approval requirements of applicable law or the rules of any national
securities exchange, stock market or automated quotation service on which the
Stock is listed or quoted, the Plan may be amended by the Board at any time and
in any respect. The Plan may also be terminated at any time by the Board and
shall terminate automatically on the tenth anniversary of the Effective Date
unless earlier terminated by the Board. No amendment or termination of this Plan
shall adversely affect any Award granted prior to the date of such amendment or
termination without the written consent of the Grantee.
30. Weekends and Holidays. Unless this Section prevents an Option designed
to qualify as an Incentive Stock Option under Section 422 of the Code from
qualifying as an Incentive Stock Option under Section 422 of the Code or
prevents an Award designed to qualify as performance-based compensation under
Section 162(m) of the Code from qualifying as performance-based compensation
under Section 162(m) of the Code, if any day on which action under the Plan must
be taken falls on a Saturday, Sunday or holiday recognized as an official
holiday of the Company, such action may be taken on the next succeeding day not
a Saturday, Sunday or holiday.
31. Foreign Grantees. Without amending the Plan, Awards may be granted to
Grantees who are foreign nationals or employed outside the United States or
both, on such terms and conditions different from those specified in the Plan as
may, in the judgment of the Committee, be necessary or desirable to further the
purposes of the Plan.
32. Interpretation Under Section 162(m). Notwithstanding any provision of
the Plan to the contrary, the Plan is intended to give the Committee the
authority to grant Awards hereunder that qualify as performance-based
compensation under Code Section 162(m)(4)(C) and that do not so qualify. Every
provision of the Plan shall be administered, interpreted and construed to carry
out such intention and any provision that cannot be so administered, interpreted
and construed shall to that extent be disregarded; and any provision of the Plan
that would prevent an Award that the Committee intends to qualify as
performance-based pay under Code Section 162(m)(4)(C) from so qualifying shall
be administered, interpreted and construed to carry out such intent and any
provision that cannot be so administered, interpreted and construed shall to
that extent be disregarded.
33. Applicable Law. The validity, construction, interpretation and
administration of the Plan and of any determinations or decisions made
thereunder, and the rights of all persons having or claiming to have any
interest therein or thereunder, shall be governed by, and determined exclusively
in accordance with, the laws of the State of Indiana, but without giving effect
to the principles of conflicts of laws thereof. Without limiting the generality
of the foregoing, the period within which any action arising under or in
connection with the Plan must be commenced shall be governed by the laws of the
State of Indiana, without giving effect to the principles of conflicts of laws
thereof, irrespective of the place where the act or omission complained of took
place and of the residence of any party to such action and irrespective of the
place where the action may be brought.
34. Construction. The use of the masculine gender shall also include within
its meaning the feminine. The use of the singular shall include within its
meaning the plural and vice versa.