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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by Registrant
Filed by Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
EMMIS COMMUNICATIONS CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
[Emmis Logo]
May 23, 2003
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 Wednesday, June 25, 2003 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(s) to ensure that your votes on the business
matters of the meeting will be recorded.
We hope that you will attend this meeting. Whether or not you attend, we
urge you to return your proxy promptly in the postage paid envelope provided.
After returning the proxy, you may, of course, vote in person on all matters
brought before the meeting.
We look forward to seeing you on June 25.
Sincerely,
Jeffrey H. Smulyan
Chief Executive Officer, President
and Chairman of the Board
(This page intentionally left blank)
EMMIS COMMUNICATIONS CORPORATION
INDIANAPOLIS, INDIANA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of the shareholders of Emmis Communications Corporation
will be held on Wednesday, June 25, 2003, 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 and one director for a term of two years;
(2) ratification of the selection of Ernst & Young LLP as Emmis'
independent auditors for the fiscal year ending February 29,
2004; and
(3) 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 25, 2003 are
entitled to notice of and to vote at this meeting and any adjournments or
postponements of this meeting. The proxy statement and proxy card(s) are
enclosed.
By order of the Board of Directors,
J. Scott Enright
Secretary
Indianapolis, Indiana
May 23, 2003
TABLE OF CONTENTS
Page
Questions and Answers About This Annual Meeting....................1
Proposal 1: Election of Directors.................................4
Proposal 2: Ratification of Selection of Auditors.................6
Security Ownership of Beneficial Owners and Management.............7
Board of Directors' Meetings and Committees........................8
Certain Transactions...............................................8
Report of the Audit Committee......................................8
Matters Relating to Independent Auditors..........................10
Report of the Compensation Committee..............................11
Compensation Tables...............................................13
Employment Agreements.............................................14
Performance Graph.................................................16
Shareholder Proposals.............................................16
Section 16(a) Beneficial Ownership Reporting Compliance...........16
Annual Report.....................................................17
Other Matters.....................................................17
Expenses of Solicitation..........................................17
Householding of Proxy Materials...................................17
Exhibit A - Audit Committee Charter..............................A-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 Wednesday, June 25, 2003, 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 23, 2003 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 and one director to our board of directors for two years; and
o ratification of the selection of Ernst & Young LLP as our
independent auditors for the fiscal year ending February 29, 2004.
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 25, 2003, the record
date, are entitled to vote at the annual meeting. As of April 25, 2003,
49,134,869 shares of Class A common stock and 5,030,002 shares of Class B common
stock were issued and outstanding. As of April 25, 2003, 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 on your behalf FOR each of the nominees and FOR
the ratification of Ernst & Young LLP as our independent auditors. If you mark
"abstain" on your proxy card, your shares will be counted as present for
purposes of determining the presence of a quorum. You have the right to revoke
your proxy at any time before the meeting by either notifying our corporate
secretary or returning a later-dated proxy. You may also revoke your proxy by
voting in person at the annual meeting.
If you hold your shares through a broker, you should contact your broker to
determine the procedure by which you can vote on these proposals. If your shares
are held in the name of a bank, broker or other holder of record, you must
obtain a proxy, executed in your favor, from the holder of record to be able to
vote in person at the meeting.
17
Q: What does it mean if I get more than one proxy card?
If you receive more than one proxy card, it means you hold shares
registered in more than one account. Sign and return ALL proxy cards to ensure
that all your shares are voted.
Q: What are the voting rights of the Class A common stock and the Class B
common stock?
On each matter submitted to a vote of our shareholders, each share of Class
A common stock is entitled to one vote and each share of Class B common stock is
entitled to ten votes. Generally, the Class A and Class B common stock vote
together as a single group. However, the two classes vote separately in
connection with the election of certain directors, certain "going private"
transactions and other matters as provided by law.
At this annual meeting, the Class A and Class B common stock will vote
together on the election of directors (other than the two directors designated
as "Class A directors" as to which only the Class A common stock is entitled to
vote) and the ratification of Ernst & Young LLP as our independent auditors.
Q: Who will count the vote?
Representatives of Wachovia 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 two Class A director
nominees receiving the most votes of holders of Class A common stock will be
elected Class A directors and the other nominees receiving the most votes of the
holders of Class A and Class B common stock, voting together, will be elected to
fill the remaining director positions. Only votes cast for a nominee will be
counted. The accompanying proxy card will be voted for all nominees listed on
the proxy unless the proxy contains instructions to the contrary. Instructions
on the accompanying proxy card to withhold authority to vote for one or more of
the nominees will result in those nominees receiving fewer votes.
The ratification of Ernst & Young LLP as our independent auditors for the
fiscal year ending February 29, 2004 requires 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? What about all officers and directors?
Jeffrey H. Smulyan, the Chief Executive Officer, President and Chairman of
our board of directors, is our largest single shareholder, beneficially owning
1.0% of our Class A common stock and 100% of our Class B common stock as of
April 25, 2003. Mr. Smulyan has informed us that he intends to vote for all of
the nominees for director for which he is entitled to vote and in favor of the
proposal regarding the ratification of the selection of Ernst & Young LLP. 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 53.7% of the
combined voting power of our existing common stock.
All directors and executive officers together beneficially own
approximately 3.3% of our Class A common stock and 100% of our Class B common
stock, which together represents approximately 54.4% of the combined voting
power of our existing common stock.
Q: Does Emmis offer an opportunity to receive future proxy materials
electronically?
Yes. If you are a shareholder of record, you may, if you wish, receive
future proxy statements and annual reports online. If you elect this feature,
you will receive either a proxy card or an e-mail message notifying you when the
materials are available, along with a web address for viewing the materials. You
may sign up for electronic delivery by marking and signing the appropriate
spaces on your proxy card or by contacting our Investor Relations Department by
e-mail at ir@emmis.com or toll-free by phone at (866) 366-4703. If you received
these materials electronically, you do not need to do anything to continue
receiving materials electronically in the future.
If you hold your shares in a brokerage account, you may also have the
opportunity to receive proxy materials electronically. Please follow the
instructions of your broker.
If you are an Emmis employee or a shareholder who has previously consented
to electronic delivery of shareholder communications, you may view this proxy
statement and our annual report at the "Investors" section of www.emmis.com.
Q: What are the benefits of electronic delivery?
Electronic delivery saves Emmis money by reducing printing and mailing
costs. It will also make it convenient for you to receive your proxy materials
online.
Q: What are the costs of electronic delivery?
Emmis charges nothing for electronic delivery. You may, of course, incur
the usual expenses associated with Internet access, such as telephone charges or
charges from your Internet service provider.
Q: May I change my mind later?
Yes. You may discontinue electronic delivery at any time. For more
information, contact our Investor Relations Department by e-mail at ir@emmis.com
or toll-free by phone at (866) 366-4703.
Q: Who can attend the Annual Meeting?
All shareholders as of April 25, 2003 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 toll-free at (866) 366-4703.
Proposal 1: Election of Directors
Four directors are to be elected. Susan B. Bayh and Peter A. Lund have been
nominated to serve as the independent directors elected separately by the
holders of our Class A common stock. In order to have an equal number of
directors in each class, Mrs. Bayh and Mr. Lund have been nominated for
different director classes as required by our articles of incorporation. Mrs.
Bayh has been nominated for a term of three years and until her successor has
been elected and qualified, and Mr. Lund has been nominated for a term of two
years and until his successor has been elected and qualified. Gary L. Kaseff and
Frank V. Sica have been nominated to serve as directors elected by the Class A
and Class B common stock voting together as a single class. Both Mr. Kaseff and
Mr. Sica have been nominated for a term of three years and until their
successors have been elected and qualified.
Mrs. Bayh, Mr. Lund, Mr. Kaseff and Mr. Sica 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 2006:
Susan B. Bayh,* Age 43 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 (a distributor and food processor),
Corvas (a biopharmaceutical company), Cubist, Inc. (a pharmaceutical company),
Curis Inc. (a therapeutic drug development company), Esperion Therapeutics, Inc.
(a biopharmaceutical company) and E-Bank (a software and services technology
company).
Gary L. Kaseff, Age 55 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 52 1998
Mr. Sica is a Managing Partner of Soros Private Equity Partners, LLC. He is director
of CSG Systems International, Inc. (a computer software company), Kohl's Corporation (a
retail company), and JetBlue Airways (an airline company). Prior to joining Soros in 1998,
Mr. Sica had been a Managing Director of Morgan Stanley Dean Witter & Co. Incorporated.
Nominated for a term expiring in 2005:
Peter A. Lund,* Age 62 2002
Mr. Lund is a private investor and media consultant. From October 1995
through June 1997, he served as President and CEO of CBS Inc. and President and
CEO of CBS Television and Cable. Prior to that, he had been President of the CBS
Broadcast Group and held various other executive positions with CBS. He is
Chairman of the Board of Eos International, Inc. (a holding company for consumer
product direct sales marketing companies) and serves as a director of Hughes
Electronics Corp. (a provider of digital television entertainment, broadband
satellite networks and services and global video and data broadcasting) and
Crown Media Holdings, Inc. (an owner and operator of pay television channels).
Directors whose terms expire in 2005:
Richard A. Leventhal, Age 56 1992
Mr. Leventhal co-owned and operated Top Value Fabrics, Inc. (a wholesale fabric and
textile company) in Carmel, Indiana, for 27 years. Mr. Leventhal is currently President and
majority owner of LMCS, LLC (an investment management and consulting company).
Lawrence B. Sorrel, Age 44 1993
Mr. Sorrel is a Managing Partner of Thomas Weisel Capital Partners, as well as Partner
and Director of Private Equity at Thomas Weisel Partners. He is also a board
member of several private companies. He was a general partner of Welsh, Carson,
Anderson & Stowe (a private equity investment firm) from 1998 to 2002. 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 2004:
Jeffrey H. Smulyan, Age 56 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 chairman of the Radio Advertising Bureau, a director of The Finish Line (a
sports apparel retailer) and serves as a Trustee of Ball State University and of
the University of Southern California. 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 56 1998
Mr. Nathanson joined Emmis in 1998 as Television Division President. Mr. Nathanson has
over 30 years of television broadcasting experience, having served as President
of Programming and Development for Twentieth Television from 1996 to 1998, as
General Manager of KTLA-TV in Los Angeles, California from 1992 to 1996 and as
President of Fox Television Stations from 1990 to 1992. Mr. Nathanson resigned
as Television Division President effective October 1, 2000, but continues as a
Director of the company.
Walter Z. Berger, Age 47 2001
Mr. Berger became Executive Vice President, Treasurer and Chief Financial Officer of
Emmis on March 1, 1999. Most recently, Mr. Berger served as Group President of
the $3.3 billion Energy Marketing Division for LG&E Energy Corporation, where he
had previously served as Executive Vice President and Chief Financial Officer.
Prior to that, Mr. Berger, who began his career in public accounting, held a
number of senior financial and operating management positions in the
manufacturing, service and energy fields and spent seven years in financial
management roles at Baker Hughes, Inc.
- ----------------
*Independent director elected by the holders of the Class A Common Stock
voting as a single class.
Proposal 2: RATIFICATION OF SELECTION OF AUDITORS
The Audit Committee, a committee of the board of directors, has appointed
Ernst & Young LLP to serve as our independent auditors for the fiscal year
ending February 29, 2004, subject to ratification by the holders of our common
stock. Our financial statements for the fiscal year ended February 28, 2003 were
certified by Ernst & Young LLP. Representatives of Ernst & Young LLP are
expected to attend the annual meeting with the opportunity to make a statement
if they desire to do so, and will be available to respond to appropriate
questions.
If shareholders do not ratify the selection of Ernst & Young LLP as our
independent auditors, or if prior to the 2004 annual meeting of shareholders
Ernst & Young LLP ceases to act as our independent auditors, then the Audit
Committee will reconsider the selection of independent auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITORS.
Security Ownership of Beneficial Owners and Management
As of April 25, 2003, there were 49,134,869 shares of our Class A common
stock and 5,030,002 shares of our Class B common stock issued and outstanding.
The Class A common stock is entitled to an aggregate of 49,134,869 votes and the
Class B common stock is entitled to an aggregate of 50,300,020 votes. The
following table shows, as of April 25, 2003, the number and percentage of shares
of our common stock held by each person known to us to own beneficially more
than five percent of the issued and outstanding common stock, by the executive
officers named in the Summary Compensation Table below and our directors and
nominees, and by our executive officers and directors as a group:
Class A Class B
Common Common
Stock Stock
----- -----
Five Percent Shareholders, Amount and Percent of
Directors and Certain Amount and Nature Percent Nature of Percent Total
Executive of Beneficial of Beneficial of Voting
Officers Ownership Class Ownership Class Power
-------- --------- ----- --------- ----- -----
Jeffrey H. Smulyan............... 491,262 (1) 1.0% 5,590,002 (15) 100.0% 53.7%
Susan B. Bayh.................... 43,701 (2) * -- -- *
Walter Z. Berger................. 122,402 (3) * -- -- *
Randall D. Bongarten............. 92,244 (4) * -- -- *
Richard F. Cummings.............. 370,527 (5) * -- -- *
Gary L. Kaseff................... 156,079 (6) * -- -- *
Richard A. Leventhal............. 69,566 (7) * -- -- *
Peter A. Lund.................... -- * -- -- *
Greg A. Nathanson................ 209,860 (8) * -- -- *
Frank V. Sica.................... 30,000 (9) * -- -- *
Lawrence B. Sorrel............... 38,787 (10) * -- -- *
FMR Corp......................... 2,850,911 (11) 5.8 -- -- 2.9
Mellon Financial Corporation..... 3,116,521 (12) 6.3 -- -- 3.1
Westport Asset Management, Inc... 6,040,925 (13) 12.3 -- -- 6.1
All Executive Officers and Directors
as a Group (13 persons)........ 1,644,965 (14) 3.3 5,590,002 (15) 100.0% 54.4
- ---------------------------
* Less than 1%.
(1) Consists of 327,672 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 3,537 held for his benefit, 259 shares held in the 401(k) Plan,
111,097 shares owned individually, 5,734 shares held by Mr. Smulyan's
as trustee for his children over which Mr. Smulyan exercises or shares
voting control and 46,500 shares held by The Smulyan Family Foundation,
as to which Mr. Smulyan shares voting control.
(2) Consists of 3,701 shares owned individually and 40,000 shares
represented by stock options exercisable currently or within 60 days of
April 25, 2003.
(3) Consists of 31 shares held in the 401(k) Plan, 305 shares held in the
Stock Purchase Plan, 65 shares held in the Profit Sharing Trust and
122,001 shares represented by stock options exercisable currently or
within 60 days of April 25, 2003.
(4) Consists of 7,712 shares owned individually, 331 shares held in the
Profit Sharing Trust and 84,201 shares represented by stock options
exercisable currently or within 60 days of April 25, 2003.
(5) Consists of 120,983 shares owned individually, 8,260 shares owned for
the benefit of Mr. Cummings' children, 3,537 shares held in the Profit
Sharing Trust, 246 shares held in the 401(k) Plan and 237,501 shares
represented by stock options exercisable currently or within 60 days of
April 25, 2003.
(6) 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, 814 shares held in the Profit
Sharing Trust, and 138,742 shares represented by stock options
exercisable currently or within 60 days of April 25, 2003.
(7) Consists of 8,966 shares owned individually, 3,000 shares owned by Mr.
Leventhal's spouse, 17,600 shares owned by a corporation of which Mr.
Leventhal is a 50% shareholder and 40,000 shares represented by stock
options exercisable currently or within 60 days of April 25, 2003.
(8) Consists of 112,402 shares owned individually or jointly with his
spouse, 44,000 shares owned by trusts for the benefit of Mr.
Nathanson's children, 124 shares held in the Profit Sharing Trust and
53,334 shares represented by stock options exercisable currently or
within 60 days of April 25, 2003.
(9) Consists entirely of shares represented by stock options exercisable
currently or within 60 days of April 25, 2003.
(10) Consists of 8,787 shares owned individually and 30,000 shares
represented by stock options exercisable currently or within 60 days of
April 25, 2003.
(11) Information concerning these shares was obtained from a Schedule 13G
filed on February 13, 2003 by FMR Corp. on behalf of itself and various
affiliates, each of which has a mailing address of 82 Devonshire
Street, Boston, Massachusetts 02109.
(12) Information concerning these shares was obtained from an Amendment to
Schedule 13G filed on January 21, 2003 by Mellon Financial Corporation,
which has a mailing address of One Mellon Center, Pittsburgh,
Pennsylvania 15258.
(13) Information concerning these shares was obtained from an Amendment to a
Schedule 13G filed February 14, 2003 by Westport Asset Management, Inc.
and Westport Advisers LLC, each of which has a mailing address of 253
Riverside Avenue, Westport, Connecticut 06880.
(14) Includes 795,780 shares represented by stock options exercisable
currently or within 60 days of April 25, 2003 and 327,672 shares held
in the Profit Sharing Trust as to which beneficial ownership is
disclaimed as to all but 8,532 shares held for the benefit of officers.
(15) Consists of 5,030,002 shares owned individually and 560,000 shares
represented by stock options exercisable currently or within 60 days of
April 25, 2003.
Board of Directors' Meetings And Committees
During our last fiscal year, our board of directors held four 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 $1,000 per
committee meeting attended whether in person or by phone. These fees are paid in
the form of Class A common stock at the end of each calendar year in accordance
with our stock compensation program. In addition, directors who are not officers
or employees of our company 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 fair market value of the underlying
shares on that date. Directors who are not officers or employees of our company
are also eligible to participate in our health insurance program by paying
premiums equal to the "COBRA" rate charged to former employees of the company.
Our board of directors currently has an Audit Committee, a Nominating
Committee and a Compensation Committee. The members of the Audit Committee are
Susan B. Bayh, Frank V. Sica and Lawrence B. Sorrel. The members of the
Corporate Governance and Nominating Committee are Susan B. Bayh and Frank V.
Sica. The members of the Compensation Committee are Richard A. Leventhal, Frank
V. Sica and Lawrence B. Sorrel. Each of these committees is composed entirely of
independent directors, except the Compensation Committee which includes one
non-employee director who does not meet the NASD's definition of an "independent
director." Nominees for election as a director are selected by our Corporate
Governance and Nominating Committee. The Corporate Governance and Nominating
Committee will consider potential nominees submitted by holders of our Class A
common stock to our corporate secretary on or before the date for shareholder
nominations specified in the "Shareholder Proposals" section of this proxy
statement.
Certain Transactions
We currently have a loan outstanding to Jeffrey H. Smulyan, our Chairman,
Chief Executive Officer and President. The largest aggregate amount outstanding
on this loan at any month-end during the last fiscal year and at February 28,
2003 was $1,158,332. This loan bears interest at our cost of senior debt, which
at February 28, 2003 was approximately 4.73% per annum. During the last fiscal
year, we made payments of approximately $162,000 to a company owned by Jeffrey
H. Smulyan for our use of an airplane owned by that company. During the last
fiscal year we also purchased approximately $135,000 in corporate service awards
and specialty items from a company owned by the sister of one of our directors,
Richard A. Leventhal. Both transactions were approved by the Audit Committee
after the Audit Committee satisfied itself that the transactions were on terms
no less favorable to the company than the company could have obtained from third
parties.
Report of the Audit Committee
The following Report of the Audit Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any of our filings under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the we specifically incorporate this information by reference, and
shall not otherwise be deemed filed under such Acts.
The Audit Committee is composed of three directors whom the board of
directors has determined are "independent" as defined by the rules of the
National Association of Securities Dealers, Inc. The Audit Committee's
responsibilities are set forth in its written charter approved by the board of
directors. The charter is reviewed annually by the Audit Committee and was
recently amended. A copy of the Audit Committee charter as amended is attached
to this Proxy Statement as Exhibit A. As required by NASD rules, the Audit
Committee has determined that its charter, as so amended, is adequate. The Audit
Committee has also determined that its members meet the financial literacy
requirements of NASD rules.
Management is responsible for the company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and to issue a report on them. The Audit Committee's
responsibility is to engage the independent auditor and otherwise to monitor and
oversee these processes. For the fiscal year ended February 28, 2003, the Audit
Committee engaged Ernst & Young LLP to serve as the company's independent
auditor.
The Audit Committee has met and held discussions with management and Ernst
& Young LLP. Management represented to the Audit Committee that the company's
consolidated financial statements as of and for the fiscal year ended February
28, 2003 were prepared in accordance with accounting principles generally
accepted in the United States of America, and the Audit Committee has reviewed
and discussed these consolidated financial statements with management. The Audit
Committee discussed with the independent auditors matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
In June 2002, the board of directors, upon the recommendation of the Audit
Committee, adopted an Auditor Independence Policy that, among other things,
prohibited the company's independent auditor from performing certain non-audit
services for the company, required prior approval of the Audit Committee for any
services provided by the company's independent auditor, limited the hiring by
the company of former employees of the company's independent auditor and
required enhanced disclosure both to the Audit Committee and to shareholders of
matters related to auditor independence.
Ernst & Young LLP also provided to the Audit Committee the written
disclosures required by Independence Standards Board No. 1 (Independence
Discussions with Audit Committees), and the Audit Committee discussed with the
independent auditors that firm's independence. In addition, the Audit Committee
(or the chairman of the Audit Committee with respect to engagements of less than
$100,000) approves in advance all engagements of the company's independent
auditor. The Audit Committee determined that Ernst & Young's provision of
non-audit services to the company as described in "Matters Relating to
Independent Auditors" is compatible with maintaining that firm's independence.
Based on these discussions and reviews, the Audit Committee members agreed
that the audited financial statements for the company's last fiscal year should
be included in our company's Form 10-K, and made a formal recommendation to the
board of directors to that effect.
The Audit Committee's reviews and discussions with management and the
independent auditors do not assure that the company's financial statements are
presented in accordance with generally accepted accounting principles, that the
audit of the company's financial statements has been carried out in accordance
with generally accepted auditing standards or that the company's independent
auditors are in fact "independent." The Audit Committee has relied, without
independent verification, on management's representations that the financial
statements have been prepared with integrity and objectivity and are presented
in conformity with generally accepted accounting principles and on the
representations of the independent auditors included in that firm's report on
the company's financial statements.
Audit Committee Members
-----------------------
Frank V. Sica, Chair
Susan B. Bayh
Lawrence B. Sorrel
MATTERS RELATING TO INDEPENDENT AUDITORS
Fees Paid to Independent Auditors
The following table sets forth the amount of fees (including cost
reimbursements) we paid to Ernst & Young LLP for the fiscal year ended February
28, 2003, and to Arthur Andersen LLP (our former independent auditor) for the
fiscal year ended February 28, 2002, for various categories of professional
services they performed as our independent auditors.
Year ended February 28,
-----------------------
2003 2002
---- ----
udit Fees......................... $ 471,000 (1) $ 646,000 (1)
Audit Related Fees................. 45,000 (2) 372,000 (3)
Tax Fees........................... 24,000 (4) 56,000 (4)
All Other Fees..................... -- 135,000 (5)
-------------- ------------
Total Fees........................ $ 540,000 $1,209,000
========== ==========
-------------
(1) Includes annual financial statement audit and limited quarterly
review services, statutory audits of foreign subsidiaries, review
of registration statements and providing consents for SEC filings
and other services that are normally provided by the independent
auditors in connection with statutory and regulatory filings or
engagements.
(2) Includes benefit plan audits.
(3) Includes audit-related consultation services for potential
corporate transactions and other audit-related services.
(4) Includes tax consultation and return preparation.
(5) Includes financial information systems design and implementation
services.
Change in Independent Auditors
On June 13, 2002, the Audit Committee dismissed Arthur Andersen LLP as the
company's independent auditors and engaged Ernst & Young LLP to serve as the
company's independent auditors for the fiscal year ending February 28, 2003.
Arthur Andersen subsequently ceased operations.
Arthur Andersen's reports on our financial statements for each of the years
ended February 28, 2002 and February 28, 2001 did not contain an adverse opinion
or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles, except that Arthur Andersen's report dated
May 2, 2002 included an explanatory paragraph that disclosed the adoption of
SFAS No. 133 as discussed in Note 1 to our financial statements.
During the fiscal years ended February 28, 2002 and February 28, 2001, and
through June 13, 2002, there were no disagreements with Arthur Andersen LLP on
any matter of accounting principle or practice, financial statement disclosure
or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Arthur Andersen LLP, would have caused them to make reference
thereto in their report on the financial statements for such years.
During the fiscal years ended February 28, 2002 and February 28, 2001, and
through May 31, 2002, there were no reportable events (as defined in Regulation
S-K Item 304(a)(1)(v)).
We provided Arthur Andersen with a copy of the foregoing disclosures. A
copy of Arthur Andersen's letter, dated June 18, 2002, stating its agreement
with such statements, was filed as Exhibit 16.1 to our Current Report on Form
8-K filed June 19, 2002, and is incorporated by reference in this proxy
statement.
During the fiscal years ended February 28, 2002 and February 28, 2001, and
through June 13, 2002, we did not consult with Ernst & Young LLP on any
accounting, auditing, or reporting matters.
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 stock option and incentive plans. With respect to
compensation decisions affecting executive officers other than Mr. Smulyan, the
committee receives input from Mr. Smulyan in the course of making its decisions.
With respect to compensation decisions affecting non-executive officers and
employees, the committee has delegated this authority to Mr. Smulyan and the
other executive officers, provided such authority is exercised in accordance
with any general parameters established by the committee. During the last fiscal
year, Richard A. Leventhal, Frank V. Sica and Lawrence B. Sorrel were members of
the Compensation Committee.
Policy and Performance Measures
We have historically entered into multi-year employment agreements with
certain of our executive officers. These agreements generally provide for a base
salary, annual performance bonuses, and restricted stock and stock option
awards. 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, changes in duties and peer
group benchmarking surveys. In order to attract and retain highly qualified
employees, we believe overall compensation to our executive officers should be
targeted at the top third of our peer group, with exceptions made in appropriate
circumstances.
The committee established a bonus plan for the fiscal year that set for
each executive officer a target bonus and a performance goal so that 70-90% of
an executive officer's target bonus would be based on specified annual operating
income 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 applicable division of the company met or exceeded the specified
operating income targets and depending upon the committee's assessment of the
performance of the executive during the year. At the end of the fiscal year, the
company achieved approximately 98% of its domestic radio station operating
income target, approximately 123% of its television station operating income
target, approximately 99% of its publishing operating income target and more
than 107% of its total Emmis operating income target. Based on these results,
the committee approved the bonus awards shown in the Summary Compensation Table.
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 15,000 to 50,000 shares each, were all granted at the
fair market value of our Class A common stock on the date of grant.
During the last fiscal year, we administered a stock compensation program
under our 2001 Equity Incentive Plan and 2002 Equity Compensation Plan. The
program operates on a calendar year basis and was continued in effect for 2003.
The program is designed to replace cash compensation with non-cash compensation
in order to improve the leverage ratios under the indentures for our senior
discount notes and senior subordinated notes, and to further focus our
employees' efforts and attention on delivering shareholder value. Each
participant in the program can elect to receive stock compensation under the
program in the form of payroll stock every two weeks or in the form of
restricted stock in the January following the end of the applicable calendar
year. The payroll stock is awarded based on the fair market value of our Class A
common stock on the date it is issued and is only subject to a de minimis
transfer restriction. Our executive officers are prohibited from receiving
payroll stock. The restricted stock is subject to forfeiture in the event the
employee voluntarily terminates employment or is terminated for cause prior to
the date the stock vests in the succeeding January, and is awarded based on a
discount from the value of our Class A common stock on a date prior to the start
of the calendar year (November 15, 2001 for the 2002 program and November 1,
2002 for the 2003 program). Thus, participants electing restricted stock
received up to 10% of their compensation in restricted stock at $13.98 per share
for the 2002 program ($18.72 per share for the 2003 program) and could receive
amounts in excess of 10% of their compensation in restricted stock at $12.43 per
share for the 2002 program ($16.64 per share for the 2003 program). All our
executive officers elected to receive restricted stock, most electing amounts in
excess of 10% of their compensation.
The Internal Revenue Code generally limits to $1 million the amount of
compensation that we may deduct in any year with respect to certain of our
officers. The compensation committee endeavors to structure executive
compensation so that most of that compensation will be deductible. At the same
time, the compensation committee has the authority to award compensation in
excess of the $1 million limit, regardless of whether such additional
compensation will be deductible, in cases where the compensation committee
determines that such compensation is appropriate. Compensation awards in excess
of the $1 million limit, if any, are most likely to occur in connection with
awards earned upon the completion of an executive officer's multi-year
employment or similar agreement.
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. The employment agreement as amended limits increases in Mr.
Smulyan's base salary to the rate of inflation but provides for a target bonus
equal to his annual salary. Based on the company's performance in achieving the
operating income targets discussed above, the committee approved the bonus award
to Mr. Smulyan shown in the Summary Compensation Table. Mr. Smulyan is donating
his bonus to the University of Southern California's Center for Communication
Law and Policy and to support Emmis employees by matching their charitable
contributions and providing educational opportunities for those in need.
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 Class B 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 station operating income
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 favorable to the company because
it creates an incentive for Mr. Smulyan to cause the company to meet certain
performance targets but does not require the company to take a charge to
earnings as was the case when options were granted under Mr. Smulyan's prior
employment arrangement. Because the company exceeded 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 accelerated.
Compensation Analyses and Reviews
The committee periodically retains an outside compensation consultant to
compare base salary and incentive compensation programs for the company's
executive officers with those of other media companies and other companies to
ensure that they are appropriate to the company's objectives. The committee
exercises its judgment and discretion in reviewing and considering these
analyses. In addition, the committee periodically obtains advice from outside
consultants, including the consultant retained by the company, on compensation
objectives and policies and the setting of executive officer compensation.
Compensation Committee Members
------------------------------
Lawrence B. Sorrel, Chair
Richard A. Leventhal
Frank V. Sica
COMPENSATION TABLES
The following table sets forth the compensation awarded to, earned by, or
paid to the chief executive officer and the four most highly compensated
executive officers other than the chief executive officer and an additional
former officer (collectively, the "Named Executive Officers") during each of the
last three fiscal years.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
------------------- ------
Securities
Name and Fiscal Restricted Underlying All
Principal Year Ended Stock Options/ Other
Position February 28 Salary (1 Bonus (2) Awards (3) SARs Compensation
----------------- -------------------------------------- --------------------------------------
JEFFREY H. SMULYAN............ 2003 $624,800 $820,749 $285,632 -- $ --
Chief Executive Officer, 2002 750,947 -- -- -- 117,600 (5)
President 2001 782,324 -- -- -- 119,400 (5)
And Chairman of the Board
WALTER Z. BERGER.............. 2003 $351,625 $420,416 $ 50,000 $ --
Executive Vice President, 2002 327,895 -- 151,443 50,000 --
Chief 2001 340,972 87,519 536,400 (4) 40,000 65,109 (6)
Financial Officer and
Treasurer --
RANDALL D. BONGARTEN.......... 2003 $382,800 $264,949 $ 91,690 50,000 $ --
Television Division President 2002 431,602 -- -- 50,000 --
2001 371,113 52,012 -- 15,000 --
RICHARD F. CUMMINGS........... 2003 $355,250 $600,002 $ 50,000 $ --
Radio Division President 2002 417,163 -- 158,299 50,000 124,467 (7)
2001 434,655 38,594 277,453 (4) -- --
814,275
GARY L. KASEFF 2003 $323,333 $236,936 $ 50,000 $ --
Executive Vice President and 2002 327,895 -- 124,300 . 40,000 --
General Counsel 2001 340,972 87,519 40,000 --
536,400 (4)
--
- ---------------------------
(1) Pursuant to our equity compensation program, our executive officers elected
to forego payment of 10-20% of their cash salaries during the fiscal years
ended February 28, 2003 and February 28, 2002 and received instead shares
of restricted stock at a discount as described in the "Report of the
Compensation Committee." These amounts are listed under "Restricted Stock
Awards" in the year in which the restricted stock vests.
(2) Includes both cash and stock bonuses. With respect to Mr. Berger, the 2003
bonus includes a $100,000 annual contract bonus. With respect to Mr.
Cummings, the 2003 bonus includes a $300,000 signing bonus upon his
execution of a new employment agreement during the fiscal year.
(3) Amounts listed for the fiscal year ended February 28, 2003 represent the
value of restricted stock that vested in January 2003 under the 2002 stock
compensation program. Additionally, an aggregate of 76,728 shares of
restricted stock were outstanding as of February 28, 2003, with a value of
$1,518,447 based on the $19.79 closing price of the Class A Common Stock as
of that date. All of such shares were issued under the 2003 stock
compensation program discussed in the "Report of the Compensation
Committee." The only such shares held by a Named Executive Officer were
8,888 shares held by Mr. Smulyan, with a value of $175,894. To the extent
we pay any dividends on our common stock, outstanding shares of restricted
stock would be entitled to such dividends.
(4) Includes 10,345 shares of restricted stock for Mr. Cummings and 20,000
shares of restricted stock for each of Mr. Berger and Mr. Kaseff, as to
which all restrictions have lapsed.
(5) Represents the value of premiums accrued by us on a split-dollar life
insurance policy.
(6) Reimbursement of relocation expenses and taxes.
(7) Represents forgiveness of a loan.
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
----------------- ----------------------------------
% of Total
Number of Options/SARs
Securities Granted to Exercise or
Underlying Employees in Base
Options/SARs Fiscal Price
Name Granted (#) Year ($/Share) Expiration Date 5% 10%
---- ----------- ---- --------- --------------- -- ---
Jeffrey H. Smulyan. -- -- $ -- -- $ -- $
Walter Z. Berger... 50,000 5.0% 29.12 3/5/12 915,671 2,320,489
Randall D.Bongarten 50,000 5.0% 29.12 3/5/12 915,671 2,320,489
Richard F. Cummings 50,000 5.0% 29.12 3/5/12 915,671 2,320,489
Gary L. Kaseff..... 50,000 5.0% 29.12 3/5/12 915,671 2,320,489
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option /SAR Values
Number Of Securities Underlying
Unexercised Options/SARs At Value of Unexercised In-the-Money
Fiscal Year End Options/SARs at Fiscal Year End
--------------- -------------------------------
Shares
Acquired on Value
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------- ----------- ------------- ----------- -------------
Jeffrey H. Smulyan. 40,000 $ 102,800 760,000 600,000 $2,934,400 $ --
Walter Z. Berger... 4,000 4,250 75,335 96,665 -- --
Randall D. Bongarten -- -- 45,868 88,332 -- --
Richard F. Cummings -- -- 204,168 83,332 -- --
Gary L. Kaseff..... 6,002 36,025 95,409 89,999 16,871 --
- ---------------------------
(1) Based on the sale price if the shares were sold or on the closing price on
the date of exercise if the shares were retained.
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. Mr. Smulyan
entered into an amendment to the employment agreement with us 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, among other things, 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 the Compensation Committee of 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 of 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, 2002, we entered into a three-year employment agreement
with Richard F. Cummings, who currently serves as our President - Radio
Division. Mr. Cummings' base compensation under the employment agreement is
$435,000 per year, of which we may pay up to 10% in the form of shares of our
common stock. In addition, the agreement provides for annual incentive
compensation in a target amount of $300,000 (payable in cash or shares of common
stock, at our option) based upon achievement of certain performance goals to be
determined each year by our Compensation Committee. Mr. Cummings also received a
cash signing bonus in the amount of $300,000, is entitled to a completion bonus
of 22,500 shares of common stock upon the expiration of the agreement and is
entitled during the term of the agreement to an annual grant of an option to
acquire 50,000 shares of our common stock. Under the agreement, Mr. Cummings is
to be paid an automobile allowance and to be reimbursed for up to $5,000 per
year in premiums for life and disability insurance and retains the right to
participate in all of our employee benefit plans for which he is otherwise
eligible. The agreement with Mr. Cummings is subject to termination by our board
of directors for cause (as defined in the agreement) and by Mr. Cummings for
good reason (as defined in the agreement) upon written notice. The agreement
entitles Mr. Cummings to certain termination benefits upon disability or death.
Effective March 1, 2002, we entered into a four-year employment agreement
with Walter Z. Berger, who currently serves as our Executive Vice President,
Chief Financial Officer and Treasurer. Mr. Berger's base compensation under the
employment agreement is $435,000 per year, of which we may pay up to 10% in the
form of shares of our common stock. In addition, the agreement provides for
annual incentive compensation in a target amount of $300,000 (payable in cash or
shares of common stock, at our option) based upon achievement of certain
performance goals to be determined each year by our Compensation Committee. Mr.
Berger also receives an equity bonus at the end of each year in the following
amounts: $100,000; $102,908; $106,584; and $110,380, respectively, is entitled
to a completion bonus of 30,000 shares of common stock upon the expiration of
the agreement and is entitled during the term of the agreement to an annual
grant of an option to acquire 50,000 shares of our common stock. Under the
agreement, Mr. Berger is to be paid an automobile allowance and to be reimbursed
for up to $5,000 per year in premiums for life and disability insurance and
retains the right to participate in all of our employee benefit plans for which
he is otherwise eligible. The agreement with Mr. Berger is subject to
termination by our board of directors for cause (as defined in the agreement)
and by Mr. Berger for good reason (as defined in the agreement) upon written
notice. The agreement entitles Mr. Berger to certain termination benefits upon
disability or death, and certain severance benefits.
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 28, 1998, to the fiscal year ended February
28, 2003. The performance graph assumes that an investment of $100 was made in
the Class A common stock and in each index on February 28, 1998 and that all
dividends were reinvested.
[OBJECT OMITTED]
Feb-98 Feb-99 Feb-00 Feb-01 Feb-02 Feb-03
Emmis........................... $100 $ 94 $147 $107 $108 $80
Nasdaq Stock Market............. $100 $130 $266 $121 $ 99 $77
Nasdaq Telecommunications....... $100 $163 $278 $108 $ 52 $38
Shareholder Proposals
Any of our shareholders wishing to have a proposal considered for inclusion
in our 2004 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 24, 2004. In addition, under our by-laws any shareholder wishing to
nominate a candidate for director or propose other business at the Annual
Meeting must generally give us written notice on or before April 8, 2004, and
the notice must provide certain specific information as described in the
by-laws. Copies of the by-laws are available to shareholders free of charge upon
request to our corporate secretary. Our board of directors will review any
shareholder proposals that are filed as required and will determine whether such
proposals meet applicable criteria for inclusion in our 2004 proxy solicitation
materials or consideration at the 2004 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 8,
2004, 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
(i) Doyle Rose filed a Form 4 late with respect to one transaction, (ii) Walter
Z. Berger, Randall D. Bongarten, Richard F. Cummings, Norman H. Gurwitz and Gary
L. Kaseff filed Form 4s late with respect to the deemed purchase date of their
accrued phantom stock under our stock compensation program and (iii) Gary Thoe
did not timely report on his Form 3 his accrued phantom stock under the stock
compensation program.
Annual Report
A copy of our Annual Report for the year ended February 28, 2003 was sent
to all of our shareholders of record as of April 25, 2003. 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.
Householding of Proxy Materials
We have adopted a procedure permitted by Securities and Exchange Commission
rules that is commonly referred to as "householding." Under this procedure, a
single proxy statement and annual report are delivered to multiple shareholders
sharing an address unless we receive contrary instructions from any shareholder
at that address. We will continue to send a separate proxy card to each
shareholder of record. We have adopted this procedure because we believe it
reduces the volume of duplicate information shareholders receive and helps to
reduce our printing and postage costs. A number of brokers with accountholders
who are Emmis shareholders will be "householding" our proxy materials and annual
reports as well.
If, at any time, you no longer wish to participate in "householding" and
would prefer to receive a separate proxy statement and annual report, please
notify your broker if you hold your Emmis shares through a broker, or notify us
directly if you are a shareholder of record by sending us an e-mail at
ir@emmis.com, calling us toll-free at 1-866-Emmis-03 (1-866-366-4703) or writing
to us at Emmis Communications Corporation, Investor Relations, One Emmis Plaza,
40 Monument Circle, Indianapolis, Indiana 46204.
If you currently receive multiple copies of our proxy statement and annual
report at your address and would like to request "householding" of your
communications, you should contact your broker or, if you are a record holder of
Emmis shares, you should submit a written request to Wachovia Bank, N.A., our
transfer agent, at Wachovia Bank, N.A., Shareholder Services, 3C3, 1525 West
W.T. Harris Boulevard, Charlotte, North Carolina 28288-1153.
(This page intentionally left blank)
Exhibit A
EMMIS COMMUNICATIONS CORPORATION
AUDIT COMMITTEE CHARTER
I. Purpose
The primary objective of the Audit Committee is to assist the Board in
fulfilling its oversight responsibilities with respect to (a) the financial
statements and other financial information provided by the Company to its
stockholders, the public and others, (b) the Company's compliance with legal and
regulatory requirements, (c) the independent auditors' qualifications and
independence and (d) the performance of the Company's internal audit function
and independent auditors.
Although the Audit Committee has the powers and responsibilities set forth
in this Charter, the role of the Audit Committee is oversight. The members of
the Audit Committee are not full-time employees of the Company and may or may
not be accountants or auditors by profession or experts in the fields of
accounting or auditing and, in any event, do not serve in such capacity.
Consequently, it is not the duty of the Audit Committee to conduct audits or to
determine that the Company's financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting principles
and applicable rules and regulations. These are the responsibilities of
management and the independent auditors.
II. Organization
The Audit Committee shall consist of three or more directors, each of whom
shall satisfy the independence, financial literacy and experience requirements
of Section 10A of the Securities Exchange Act, Nasdaq and any other regulatory
requirements.
The members of the Audit Committee shall be appointed by the Board on the
recommendation of the Nominating & Governance Committee.
The Audit Committee may form and delegate authority to subcommittees when
appropriate.
III. Meetings
The Audit Committee shall meet at least four times per year on a quarterly
basis, or more frequently as circumstances require. As part of its job to foster
open communication, the Audit Committee shall meet at least quarterly with
management, the persons performing the internal audit function and the
independent auditors in separate executive sessions to discuss any matters that
the Audit Committee or each of these groups believe should be discussed
privately.
The members of the Audit Committee shall select a chair who will preside at
each meeting of the Audit Committee, and in consultation with the other members
of the Audit Committee, shall set the frequency and length of each meeting and
the agenda of items to be addressed at each upcoming meeting. In addition, at
the first meeting of the Audit Committee to be held upon its formation and at
each first meeting held following the annual meeting of shareholders, the chair,
in consultation with the other members of the Audit Committee, shall determine
the list of items to be addressed by the Audit Committee during the coming year
(the "Annual Agenda").
The chair shall ensure that the agenda for each upcoming meeting of the
Audit Committee is circulated to each member of the Audit Committee in advance
of the meeting, and that the Annual Agenda is circulated to each member of the
Audit Committee as well as each other director promptly after it is finalized.
IV. Authority and Responsibilities
In recognition of the fact that the independent auditors are ultimately
accountable to the Audit Committee, the Audit Committee shall have the sole
authority and responsibility to select, evaluate and, where appropriate, replace
the independent auditors (or to nominate the independent auditors for
shareholder approval), and shall approve all audit engagement fees and terms and
all non-audit engagements with the independent auditors. The Audit Committee may
consult with management and the persons performing the internal audit function
but shall not delegate these responsibilities.
To fulfill its responsibilities, the Audit Committee shall:
With respect to the independent auditors:
1. Be directly responsible for the appointment, compensation and oversight
of the work of the independent auditors (including resolution of
disagreements between management and the independent auditors regarding
financial reporting) for the purpose of preparing the audit report or
related work.
2. Have the sole authority to review in advance, and grant any appropriate
pre-approvals, of (a) all auditing services to be provided by the
independent auditors and (b) all non-audit services to be provided by
the independent auditors as permitted by Section 10A of the Securities
Exchange Act, and in connection therewith to approve all fees and other
terms of engagement. The Audit Committee shall also review and approve
disclosures required to be included in Securities and Exchange
Commission periodic reports filed under Section 13(a) of the Securities
Exchange Act with respect to non-audit services.
3. Review on an annual basis the performance of the independent auditors,
including the lead audit partner.
4. Ensure that the independent auditors submit to the Audit Committee on
an annual basis a written statement consistent with Independent
Standards Board Standard No. 1, discuss with the independent auditors
any disclosed relationships or services that may impact the objectivity
and independence of the independent auditors and satisfy itself as to
the independent auditors' independence.
5. At least annually, obtain and review an annual report from the
independent auditors describing (a) the independent auditors' internal
quality control procedures and (b) any material issues raised by the
most recent internal quality control review, or peer review, of the
independent auditors, or by any inquiry or investigation by
governmental or professional authorities, within the preceding five
years, respecting one or more independent audits carried out by the
independent auditors, and any steps taken to deal with any such issues.
6. Confirm that the lead audit partner and the audit partner responsible
for reviewing the audit, has not performed audit services for the
Company for each of the five previous fiscal years. Consider whether,
in order to assure continuing auditor independence, it is appropriate
to adopt a policy of rotating the independent auditors on a regular
basis.
7. Review all reports required to be submitted by the independent auditors
to the Audit Committee under Section 10A of the Securities Exchange
Act.
8. Review, based upon the recommendation of the independent auditors and
the persons performing the internal audit function, the scope and plan
of the work to be done by the independent auditors.
With respect to the annual financial statements:
9. Review and discuss with management, the persons performing the internal
audit function and the independent auditors the Company's annual
audited financial statements, including disclosures made in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
10. Discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended,
relating to the conduct of the audit.
11. Recommend to the Board, if appropriate, that the Company's annual
audited financial statements be included in the Company's annual report
on Form 10-K for filing with the Securities and Exchange Commission.
12. Prepare the report required by the Securities and Exchange Commission
to be included in the Company's annual proxy statement and any other
reports of the Audit Committee required by applicable securities laws
or stock exchange listing requirements or rules.
With respect to quarterly financial statements:
13. Review and discuss with management, the persons performing the internal
audit function and the independent auditors the Company's quarterly
financial statements, including disclosures made in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the independent auditors' review of the quarterly
financial statements, prior to submission to stockholders, any
governmental body, any stock exchange or the public.
Annual reviews:
14. Discuss with management and the independent auditors major issues
regarding accounting principles used in the preparation of the
Company's financial statements, including any significant changes in
the Company's selection or application of accounting principles. Review
and discuss analyses prepared by management and/or the independent
auditors setting forth significant financial reporting issues and
judgments made in connection with the preparation of the financial
statements, including analyses of the effects of alternative approaches
under GAAP.
Periodic reviews:
15. Periodically review separately with each of management, the independent
auditors and the persons performing the internal audit function (a) any
significant disagreement between management and the independent
auditors or the persons performing the internal audit function in
connection with the preparation of the financial statements, (b) any
difficulties encountered during the course of the audit, including any
restrictions on the scope of work or access to required information and
(c) management's response to each.
16. Periodically discuss with the independent auditors, without management
being present, (a) their judgments about the quality and
appropriateness of the Company's accounting principles and financial
disclosure practices as applied in its financial reporting and (b) the
completeness and accuracy of the Company's financial statements.
17. Consider and approve, if appropriate, significant changes to the
Company's accounting principles and financial disclosure practices as
suggested by the independent auditors, management or the persons
performing the internal audit function. Review with the independent
auditors, management and the persons performing the internal audit
function, at appropriate intervals, the extent to which any changes or
improvements in accounting or financial practices, as approved by the
Audit Committee, have been implemented.
18. Review and discuss with management, the persons performing the internal
audit function, the independent auditors and the Company's in-house and
independent counsel, as appropriate, any legal, regulatory or
compliance matters that could have a significant impact on the
Company's financial statements, including applicable changes in
accounting standards or rules.
Discussions with management:
19. Review and discuss with management the Company's earnings press
releases, including the use of non-GAAP financial information (as
defined in Regulation G), as well as financial information and earnings
guidance provided to analysts and rating agencies.
20. Review and discuss with management all material off-balance sheet
transactions, arrangements, obligations (including contingent
obligations) and other relationships of the Company with unconsolidated
entities or other persons, that may have a material current or future
effect on financial condition, changes in financial condition, results
of operations, liquidity, capital resources, capital reserves or
significant components of revenues or expenses.
21. Review and discuss with management the Company's major risk exposures
and the steps management has taken to monitor, control and manage such
exposures, including the Company's risk assessment and risk management
guidelines and policies.
With respect to the internal audit function and internal controls:
22. Review, based upon the recommendation of the independent auditors and
the persons performing the internal audit function, the scope and plan
of the work to be done by the persons performing the internal audit
function and the responsibilities, budget and staffing needs of the
persons performing the internal audit function.
23. Review and approve the appointment and replacement of the person
overseeing the persons performing the internal audit function.
24. Review on an annual basis the performance of the persons performing the
internal audit function.
25. In consultation with the independent auditors and the persons
performing the internal audit function, review the adequacy of the
Company's internal control structure and procedures designed to insure
compliance with laws and regulations, and any special audit steps
adopted in light of material deficiencies and controls.
26. Establish procedures for (a) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and (b) the confidential,
anonymous submission by employees of the Company of concerns regarding
the questionable accounting or auditing matters.
27. Review (i) the internal control report prepared by management,
including management's assessment of the effectiveness of the Company's
internal control structure and procedures for financial reporting and
(ii) the independent auditors' attestation, and report, on the
assessment made by management.
Other:
28. Review and approve all related-party transactions.
29. Review and approve (a) any change or waiver in the Company's Code of
Business Conduct and Ethics applicable to the Chief Executive Officer
or any senior financial officers and (b) any public disclosure
regarding such change or waiver.
30. Establish a policy addressing the Company's hiring of employees or
former employees of the independent auditors who were engaged on the
Company's account.
31. Review and reassess the adequacy of this Charter annually and adopt any
changes deemed appropriate.
32. Review its own performance annually.
33. Report regularly to the Board. Review with the Board when appropriate
any issues that have arisen with respect to the quality or integrity of
the Company's financial statements, the Company's compliance with legal
or regulatory requirements, the performance and independence of the
Company's independent auditors or the performance of the persons
performing the internal audit function.
34. Perform any other activities consistent with this Charter, the
Company's by-laws and governing law, as the Audit Committee or the
Board deems necessary or appropriate.
V. Resources
The Audit Committee shall have the authority to retain independent legal,
accounting and other consultants to advise the Audit Committee. The Audit
Committee may request any officer or employee of the Company or the Company's
outside counsel or independent auditors to attend a meeting of the Audit
Committee or to meet with any members of, or consultants to, the Audit
Committee.
The Audit Committee shall determine the extent of funding necessary for
payment of compensation to the independent auditors for the purpose of rendering
or issuing the annual audit report and to any independent legal, accounting and
other consultants retained to advise the Audit Committee.
[LOGO]
ELECTRONIC ACCESS TO FUTURE DOCUMENTS
We are pleased to offer our shareholders the option to access shareholder
communications (for example, annual reports and proxy statements) from us or on
our behalf over the Internet, instead of receiving those documents in printed
form. Your participation is completely voluntary. If you give your consent, we
will notify you when material is available over the Internet and provide you
with the Internet location where the material is available. Once you give your
consent, it will remain in effect until you inform us otherwise.
To give your consent, check the box located at the bottom of the attached proxy
card. You may also give your consent by telephone or e-mail as described in the
proxy statement.
To enable us to send you notification of shareholder communications by e-mail,
please provide your e-mail address in the space at the bottom of the attached
proxy card. There is no cost to you for this service other than any charges you
may incur from your Internet provider, telephone company and/or cable company.
If you are an Emmis employee or a shareholder who has previously consented to
electronic delivery of shareholder communications and have received this proxy
card without an accompanying proxy statement and annual report, you may view
those documents at the "Investors" section of www.emmis.com.
?FOLD AND DETACH HERE?
EMMIS COMMUNICATIONS CORPORATION
40 Monument Circle
Indianapolis, Indiana 46204
This Proxy is Solicited on Behalf of the Emmis Communications Corporation
Board of Directors
The undersigned hereby appoints Jeffrey H. Smulyan, Walter Z. Berger and J.
Scott Enright, and each of them, attorneys-in-fact and proxies, with full power
of substitution, to vote as designated below all shares of Class A Common Stock
of Emmis Communications Corporation which the undersigned would be entitled to
vote if personally present at the annual meeting of Shareholders to be held on
June 25, 2003, at 10:00 a.m., and at any adjournment thereof.
1. ELECTION OF DIRECTORS FOR A TERM OF THREE YEARS (EXCEPT AS SPECIFIED
BELOW).
_FOR all nominees listed below (except as written below)
_WITHHOLD AUTHORITY to vote for all nominees
Nominees: Susan B. Bayh*, Gary L. Kaseff, Peter A. Lund* (two-year term)
and Frank V. Sica *Class A Director
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space below.)
2. PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS. _ FOR _ AGAINST _ ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
_ I consent to access future shareholder communications released after
June 30, 2003 over the Internet as described above and in the proxy
statement. My e-mail address is:
------------------------------
(continued on other side)
?FOLD AND DETACH HERE?
This proxy is solicited on behalf of the Emmis Communications Corporation Board
of Directors. This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholders. If no direction is made, this
proxy will be voted FOR Proposals 1 and 2.
The undersigned acknowledges receipt, prior to the execution of this proxy, of
notice of the meeting, a proxy statement, and an annual report to shareholders.
Dated:________________________________________________, 2003
- -----------------------------------------------------------
(Signature)
- -----------------------------------------------------------
(Signature if held jointly)
Please sign exactly as name appears below. When shares are held as joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title. If a corporation, please sign in
full corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
IMPORTANT: Please mark, sign, date and return the proxy card promptly using
the enclosed envelope.
REVOCABLE PROXY