EMMS Emmis Corporation (CE)

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation awarded to, earned by, or paid to the principal executive officer and the two most highly compensated executive officers during the last fiscal year other than the principal executive officer (collectively, the “Named Executive Officers”) during the fiscal years ended February 28, 2019 and February 29, 2020.

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(A) Represents amounts paid as an automobile allowance.

(C) Represents reimbursements for premiums for life, disability or long-term care insurance, as well as the value of certain insurance provided to all our full-time employees.

Employment Agreements

All share amounts have been adjusted to reflect the company’s one-for-four reverse stock split effective July 7, 2016.

On December 26, 2012, we entered into an employment agreement with Jeffrey H. Smulyan with an initial term expiring on February 29, 2016, that continued his position as our Chairman and Chief Executive Officer. Mr. Smulyan’s base salary was $900,000 for the first year, $925,000 for the second year, and $950,000 for the third year. Following the initial three-year term, Mr. Smulyan’s employment agreement automatically renewed for additional one-year terms, unless either the company or Mr. Smulyan elected not to renew on or before December 31 of the renewal term. Mr. Smulyan’s base salary increased by $25,000 during each renewal term. Mr. Smulyan received a $700,000 signing bonus in connection with execution of the agreement, and the company forgave the balance of a loan payable from Mr. Smulyan which had a balance on November 30, 2012 of $1,151,966. Mr. Smulyan’s annual incentive compensation target was 125% of his base salary and was to be paid, if at all, based upon achievement of certain performance goals determined by our Compensation Committee. The company retained the right to pay any annual incentive compensation in cash or shares of our Class A common stock. Each year the agreement remained in effect, Mr. Smulyan was entitled to receive an option to acquire 37,500 shares of Class A common stock. On or about March 1, 2013, Mr. Smulyan received a grant of 100,000 restricted shares of Class A common stock, 43,750 of which vested on March 1, 2014, 28,125 of which vested on March 1, 2015 and 28,125 of which vested on March 1, 2016. Mr. Smulyan received a $2,000 monthly automobile allowance, was reimbursed for up to $10,000 per year in premiums for life and disability insurance, and retained the right to participate in all company employee benefit plans for which he is otherwise eligible. The agreement was subject to termination by our board of directors for cause (as defined in the agreement), and by Mr. Smulyan for good reason (as defined in the agreement). Mr. Smulyan was entitled to certain termination benefits upon disability or death, and certain severance benefits.

Effective June 29, 2018, we entered into a new employment agreement with Mr. Smulyan, who continues to serve as our Chairman of the board of directors and Chief Executive Officer. Consistent with Mr. Smulyan’s prior employment agreement, his base salary was $1,025,000 through February 28, 2019, and is to increase $25,000 for each succeeding fiscal year. The initial term of the employment agreement runs through February 28, 2022, and will automatically renew thereafter for additional one-year terms unless either the company or Mr. Smulyan provides the other with written notice of non-renewal prior to December 31 of the initial or subsequent term, as applicable. Mr. Smulyan’s annual incentive compensation target is 125% of his base salary and will be paid, if at all, based upon achievement of certain performance goals to be determined by our Compensation Committee. The company retains the right to pay any annual incentive compensation in cash or shares of our Class A common stock. In connection with execution of the

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agreement, the company paid Mr. Smulyan a $1,000,000 signing bonus. Each year the agreement remains in effect, Mr. Smulyan is entitled to receive an option to acquire 37,500 shares of our Class A common stock. Mr. Smulyan will continue to receive a $2,000 monthly automobile allowance and will continue to be reimbursed for up to $10,000 per year in premiums for life and disability insurance and retains the right to participate in all of our employee benefit plans for which he is otherwise eligible.

Effective August 1, 2017, we signed an employment agreement with Mr. Walsh to serve as our President and Chief Operating Officer through July 31, 2019. Mr. Walsh’s annual base compensation for the term of the employment agreement was $625,000, with annual increases of up to 2.5% as set forth in the employment agreement. The company retained the right to pay up to ten percent of Mr. Walsh’s base salary in shares of our common stock, and had the right to pay any incentive compensation in cash or shares of our common stock. Mr. Walsh’s annual incentive compensation targets for fiscal years 2018, 2019 and 2020 were 100% of his base compensation. In the event that Mr. Walsh’s employment terminated upon expiration of the employment agreement, Mr. Walsh’s annual incentive compensation for fiscal year 2020 would have been pro-rated. Additionally, the award of any annual incentive compensation was to be based upon achievement of certain performance goals to be determined each year by our Compensation Committee. On August 1, 2017, Mr. Walsh received an option, which vested at the end of the two year term, to acquire 62,500 shares of our common stock, as well as a restricted stock award of 176,679 shares of our common stock, half of which vested upon the first anniversary of the grant and the other half of which vested upon the completion of the two year term. Mr. Walsh was also eligible to earn performance-based awards at the end of the two year term with a fair market value of $300,000, $500,000 or $700,000 based on certain increases in share price set forth in the employment agreement.  Mr. Walsh continued to receive an automobile allowance of $1,000 per month and was eligible to be reimbursed for up to $5,000 per year in premiums for life and disability insurance and professional fees related to estate planning. Mr. Walsh retained the right to participate in all of our employee benefit plans for which he was otherwise eligible. The agreement remained subject to termination by our board of directors for cause (as defined in the agreement), by Mr. Walsh for good reason (as defined in the agreement) or by Mr. Walsh upon the acceptance of a chief executive officer position at a non-competitive company as set forth in the employment agreement. Mr. Walsh was entitled to certain termination benefits upon disability or death, and certain severance benefits.

Effective August 1, 2019, we entered into a new employment agreement with Patrick M. Walsh to continue to serve as the Company’s President and Chief Operating Officer. Under the agreement, Mr. Walsh’s annual base salary rate was $637,500 for the fiscal year ended February 29, 2020, and will increase, if at all, each fiscal year thereafter by an amount equal to the percentage increase for the Company’s corporate merit pool. Up to ten percent of his base salary may be paid in shares of our Class A common stock. His annual incentive bonus target is 100% of his base salary. The annual incentive bonus will be paid, if at all, based upon achievement of certain performance goals to be determined by the Company. The Company retains the right to pay such annual incentive bonus in cash or shares of our Class A common stock. Mr. Walsh will receive a monthly automobile allowance of $1,000, and will be reimbursed for up to $5,000 per year in premiums for insurance and estate planning. He also retains the right to participate in all of our employee benefit plans for which he is otherwise eligible. On August 1, 2019, Mr. Walsh was granted an option to purchase 30,000 shares of our Class A common stock. The option has an exercise price equal to the fair market value of our Class A common stock on the date of grant and is scheduled to vest on July 31, 2020. In addition, the agreement provides for the grant to Mr. Walsh of 30,000 restricted shares of the Company’s Class A common stock, which is scheduled to vest on July 31, 2020. The agreement is terminable by either party on sixty (60) days’ notice, by the Company for “Cause” (as defined in the agreement) or by Mr. Walsh for “Good Reason” (as defined in the agreement). Upon a termination by the Company (other than for Cause or due to Mr. Walsh’s death or disability) or by Mr. Walsh for Good Reason, Mr. Walsh will be entitled to severance equal to one year’s base salary and the vesting of his equity grants will accelerate. 

Effective August 1, 2015, we entered into an employment agreement with Mr. Hornaday to serve as our Executive Vice President, Chief Financial Officer and Treasurer through February 28, 2019.  Under the agreement, Mr. Hornaday’s annual base salary rate was $350,000 for the remainder of our fiscal year ended February 29, 2016, increased to $410,000 for the fiscal year ended February 28, 2017, and further increased, if at all, each fiscal year thereafter by an amount equal to the percentage increase for the company’s corporate merit pool.  His annual incentive bonus target was 50% of his base salary.  The annual incentive bonus was to be paid, if at all, based upon achievement of certain performance goals to be determined by the company. The company retained the right to pay such annual incentive bonus in cash or shares of our Class A common stock.  Mr. Hornaday was entitled to receive a $1,000 monthly automobile allowance and to be reimbursed for up to $5,000 per year in premiums for insurance and estate planning.  He also retained the right to participate in all of our employee benefit plans for which he was otherwise eligible and was entitled to severance equal to one year of his then-current base salary in the event he was not offered substantially similar employment upon the expiration of the term and his employment terminates.  On August 1, 2015, Mr. Hornaday was granted an option to purchase 25,000 shares of our Class A common stock.  The option has an exercise price equal to the fair market value of our Class A common stock on the date of grant and vested on February 28, 2019.  In addition, the agreement provided for the grant to Mr. Hornaday of 25,000 restricted shares of the company’s Class A common stock, which vested on February 28, 2019, as well as the grant on March 1, 2016 of unrestricted shares of our Class A common stock having a fair market value of $29,167 on the date of grant.

Effective March 1, 2019, we entered into a new employment agreement with Ryan A. Hornaday to continue to serve as the Company’s Executive Vice President, Chief Financial Officer and Treasurer. Under the agreement, Mr. Hornaday’s annual base salary rate was $425,000 for the fiscal year ended February 29, 2020, and will increase, if at all, each fiscal year thereafter by an

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amount equal to the percentage increase for the Company’s corporate merit pool. Up to ten percent of his base salary may be paid in shares of our Class A common stock. His annual incentive bonus target is 75% of his base salary. The annual incentive bonus will be paid, if at all, based upon achievement of certain performance goals to be determined by the Company. The Company retains the right to pay such annual incentive bonus in cash or shares of our Class A common stock. Mr. Hornaday will receive a monthly automobile allowance of $1,000, and will be reimbursed for up to $5,000 per year in premiums for insurance and estate planning. He also retains the right to participate in all of our employee benefit plans for which he is otherwise eligible. On March 1, 2019, Mr. Hornaday was granted an option to purchase fifty thousand shares of our Class A common stock. The option has an exercise price equal to the fair market value of our Class A common stock on the date of grant and is scheduled to vest on February 28, 2022. In addition, the agreement provides for the grant to Mr. Hornaday of twenty-five thousand restricted shares of the Company’s Class A common stock, which is scheduled to vest on February 28, 2022. The agreement is terminable by either party on sixty (60) days’ notice, by the Company for “Cause” (as defined in the agreement) or by Mr. Hornaday for “Good Reason” (as defined in the agreement). Upon a termination by the Company (other than for Cause or due to Mr. Hornaday’s death or disability) or by Mr. Hornaday for Good Reason, Mr. Hornaday will be entitled to severance equal to one year’s base salary and the vesting of his equity grants will accelerate. 

Retirement Plan

Emmis sponsors a Section 401(k) retirement savings plan that is available to substantially all employees age 18 years and older who have at least 30 days of service. Employees may make pretax contributions to the plan of up to 50% of their compensation, not to exceed the annual limit prescribed by the Internal Revenue Service (“IRS”). Emmis may make discretionary matching contributions to the plans in the form of cash or shares of our Class A common stock. Employee contributions had been matched at 33% up to a maximum of 6% of eligible compensation. However, Emmis suspended its matching contributions in calendar 2016 and has not re-instituted them.

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Potential Payments upon Termination or Change in Control

The employment agreements we entered into with Messrs. Smulyan, Walsh, and Hornaday provide for certain payments and benefits to the named executive officer in the event that executive officer is terminated by the company without “cause,” or terminates his own employment with “good reason.”  

We also have change in control severance agreements with Messrs. Smulyan, Walsh and Hornaday.  Each change in control severance agreement currently in effect provides that if the executive’s employment is terminated by the company within two years after a change in control of the company (or, in certain instances, in anticipation of a change in control), other than for cause, or is terminated by the executive for good reason, the executive is entitled to (1) a payment equal to the executive’s base salary through the termination date, plus a pro-rata portion of the executive’s target bonus for the year and any accrued vacation pay; (2) a severance payment equal to one times the sum of executive’s base salary plus target annual bonus (two times in the case of Mr. Smulyan); (3) continued accident and life insurance benefits for two years; (4) reimbursement of premiums for continuation of medical and dental benefits for 24 months; and (5) accelerated vesting of all stock options and restricted shares and, depending on the terms of the executive’s employment agreement, contract completion bonuses.  Messrs. Smulyan, Walsh and Hornaday are responsible for the payment of any excise tax under Section 4999 of the Internal Revenue Code (i.e., the parachute tax), subject to a so-called ‘valley provision.’ Under the valley provision, if the aggregate amount of the payments to Mr. Smulyan, Mr. Walsh or Mr. Hornaday would trigger the payment of the parachute tax, the payments under the change in control severance agreements will be reduced to an amount that does not trigger the parachute tax unless payment of the full amount due, after deducting the parachute tax to be paid by Mr. Smulyan, Mr. Walsh or Mr. Hornaday, is 102% or more of the reduced amount.  In each case, the executive is obligated not to voluntarily leave employment with Emmis during the pendency of (and prior to the consummation or abandonment of) a change in control other than as a result of disability, retirement or an event that would constitute good reason if the change-of-control had occurred.

Under each Change in Control Severance Agreement, change in control, cause and good reason are defined as follows:

Change in Control. A “change in control” of the company occurs if:

Cause. “Cause” generally means:

Good Reason. “Good Reason” generally means:

In addition to the occurrence of one or more of the events constituting “Good Reason” set forth above, in order to resign his employment, each of the executives named above is also required to give the company notice of the occurrence of any such event within 90 days of such occurrence; and the company has the right to cure such occurrence within 30 days of such notice.

When the company’s board of directors determines that it is in the best interest of the company, the company may negotiate severance arrangements with a departing executive in addition to or in place of the arrangements described above. Circumstances under which the board may negotiate additional or different severance arrangements include but are not limited to:

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Compensation of Directors

During the last fiscal year, each director who is not an officer of Emmis received a $30,000 annual retainer. In addition, the chair of our Audit Committee received a $10,000 annual retainer, the chair of our Compensation Committee received a $5,000 annual retainer, the chair of our Corporate Governance and Nominating Committee received a $3,000 annual retainer, the Lead Director received a $3,000 annual retainer, and each director received an annual retainer of $10,000 for each committee on which the director served. Further, each director who is not an officer of Emmis received an additional payment of $200,000 due to non-payment of compensation in various prior fiscal years, except that Mr. Kaseff only received an additional $30,000.  Finally, each director who is not an officer of Emmis received an option to purchase 25,000 shares of Class A common stock. These options were granted at fair market value on the grant date and vest in thirds on each of the first three anniversaries of the grant date. Our directors are also eligible to participate in our health insurance plan by paying the same rate charged for Continuation Coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986.

In the table below, we have set forth information regarding compensation for the fiscal year ended February 29, 2020, received by each of our directors who is not an officer of Emmis. The dollar amounts in the table below for stock and option awards are the grant date fair market values associated with such awards.

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