Roughly 75% of Emmis’ full-time employees were told 3/10 that they’re eligible to receive what the company says is a sizeable stock award, based on their salary level, thanks to the company’s 2012 Employee Retention Plan. Most of the press around the plan has surrounded their preferred stock litigation, which Emmis recently won.
However, says the company, the plan was also based on the idea that, when possible, you should reward employee loyalty through a difficult period. “That idea is about to come to fruition. Eligible employees will receive a pro-rata share of approximately 976,000 shares of Emmis Communications common stock.
Judge Sarah Evans Barker of the United States District Court, Southern District of Indiana, recently ruled in favor of Emmis in a suit filed by dissident preferred shareholders.
They were also sued by Emmis in an Indiana state court, where the company sought a declaratory ruling that it is legal under Indiana securities law for Emmis to exercise the voting rights of preferred shares not quite retired in full value swaps and of 400,000 new preferred shares allocated to an employee bonus program. In 2012, an injunction against Emmis by the shareholder group was turned down in court.
Using Friday’s closing price, the 976,000 shares in the Retention Plan will deliver $3,240,000 in value to the 598 employees who qualify for the plan. To ensure a broad-based distribution, the Plan excluded executive officers and capped the level of salary credit at $50,000.
As an example of the award size, a full-time employee of Emmis who has been with the company since April 2, 2012, with a salary of $40,000/year will get approximately 1,480 shares. That equates to a market value of $4913.60, using the closing price last Friday, March 7th of $3.32. The awards will vest on April 2, 2014 and will be distributed to employees shortly thereafter. It will be their choice whether to hold or sell the stock.
Said Emmis CEO Jeff Smulyan and CFO Pat Walsh in an email to employees:
For some of you, this will be wonderful, long-awaited email; for others, it will be like the holiday package you forgot to open and find, still wrapped, months after.
Two years ago, Emmis announced the creation of the 2012 Employee Retention Plan and Trust. We funded the Plan with 400,000 shares of preferred stock that are convertible into about 976,000 share of Emmis common stock, and said that each full-time Emmis employee on April 2, 2012 who stayed with the company through April 2, 2014, would receive a portion of the stock in the Plan based on their annual salary. To ensure a broad-based distribution, the Plan excluded executive officers and capped the level of salary credit at $50,000. Last week, our Board of Directors authorized the conversion of the preferred stock into common stock. This means participants will receive common stock instead of preferred, as we said might happen when we first announced the plan.
Why was the Plan created?
It is no secret that the Plan helped Emmis to address issues with the preferred stock. You’ve probably read about that in the Trades. However, our Board also created the Plan to recognize your contributions and sacrifices since the recession, and to reward those of you who continued to stay with the company as the economy got better.
Here is the important news promised in the subject line: it is almost time to open your package!
The end of that two-year waiting period is quickly approaching, and you are one of the roughly 75% of full-time Emmis employees who have remained with the company and will receive your piece of the Emmis pie in the form of a stock award. You can choose to keep the stock, or sell it – the choice is yours.
How much stock will you receive? Your manager has information to share with you on the approximate number of shares you’ll be awarded and the current market value of your reward. The final share allocation to all remaining Plan participants won’t be done until right after April 1st (no fooling!) and will be deposited into your Merrill Lynch account within a few business days thereafter.
To give you a sense for the number of shares being awarded through the Plan, below are a few examples, using the current number of eligible Plan participants and the closing price of our common stock last Wednesday, March 5th ($3.33):
• Employee with $30,000/yr salary gets 1,105 shares; current market value of $3,679
• $40,000/yr salary gets 1,480 shares; market value of $4,927
• $50,000+/yr salary gets 1,841 shares; market value of $6,132
These are estimates, subject to stock market fluctuations and share withholding for taxes.
Within the next couple of weeks you will receive an email from HR Help that includes additional details, including information about how to access your Merrill Lynch account and how to sell your shares if you choose.
We hope you are pleased with this long-awaited award. Emmis prides itself on valuing its employees’ dedication and commitment – – and our stellar performance over the past few years shows the difference that extraordinarily talented and dedicated employees can make. This is a token of our appreciation and reward for your efforts over the last several years.
Best, Jeff & Pat”
RBR-TVBR observation: The third of Emmis’ Eleven Commandments states: Be good to your people – get them into the game and give them a piece of the pie. In a time where radio companies are laying off people left and right and creating a culture of fear and loathing, it’s nice to see Emmis rewarding staffers for loyalty and hard work.