Emmis Communications Chairman/CEO Jeff Smulyan on July 10, 2012, agreed to a “Change in Control Severance Agreement” with the company he founded.
On Thursday (3/1), the agreement was replaced with a newly drafted pact that sees him receive 100,000 restricted shares of Class B common stock.
These shares will vest on the third anniversary of the grant, Emmis noted in an SEC filing made late Friday (3/2).
The stock award is the result of new agreement terms that would allow Smulyan to receive the following should he be terminated by Emmis 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 Smulyan himself:
- A payment equal to his base salary through the termination date, plus a pro-rata portion of his target bonus for the year and accrued vacation pay
- A severance payment equal to two times Smulyan’s base salary and target bonus
- Continued accident and life insurance benefits for two years
- Reimbursement of COBRA premiums for continuation of medical and dental benefits for 18 months and reimbursement for private medical and dental benefits of an equivalent level for six months following the termination of the COBRA reimbursement
- Accelerated vesting of all stock options and restricted shares.
The agreement also stipulates Smulyan’s tax burden, and states that Smulyan is obligated to not voluntarily leave 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.”
As the benefits payable to Smulyan under the New CIC Agreement are less than those payable to him under the Old CIC Agreement, the stock awardance was granted.
Smulyan as of January 28 holds 129,246 publicly traded Emmis shares, its Class A issue.
But, as stated in the company’s 10-Q filing with the SEC, he holds all 1,142,366 Class B shares. Holders of Class B shares — in this case, Smulyan and no other individual — are entitled to 10 votes per share, whereas Class B shareholders get one vote per share owned.
As of May 5, 2017, Smulyan beneficially owned shares representing approximately 51.6% of the outstanding combined voting power of all classes of Emmis common stock.
Interestingly, this was noted as a “risk” related to Emmis common stock in the company’s fiscal 2017 annual report. Why? He is in a position “to exercise substantial influence over the outcome of most matters submitted to a vote of our shareholders, including the election of directors.” Additionally, Smulyan “has substantial influence over the decision as to whether a change in control will occur for our company.”