EMMIS COMMUNICATIONS
CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS
AGREEMENT is entered into, effective January 1, 2008 (the
“Effective Date”), by and between EMMIS COMMUNICATIONS
CORPORATION, an Indiana corporation (the “Company”),
and Patrick Walsh (“Executive”).
WHEREAS,
the Company considers the establishment and maintenance of a sound
and vital management to be essential to protecting and enhancing
the best interests of the Company and its stockholders;
and
WHEREAS,
the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may arise and
that such possibility may result in the departure or distraction of
management personnel to the detriment of the Company and its
stockholders; and
WHEREAS,
the Compensation Committee of the “Board” (as defined
in Section 1) has determined that it is in the best interests
of the Company and its stockholders to secure Executive’s
continued services and to ensure Executive’s continued and
undivided dedication to his duties in the event of any threat or
occurrence of a “Change in Control” (as defined in
Section 1) of the Company; and
WHEREAS,
the Compensation Committee, at a meeting held on December 19,
2008, has authorized the Company to enter into this
Agreement.
NOW,
THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, the Company and Executive hereby agree
as follows:
1.
Definitions . As used in this Agreement, the following terms
shall have the respective meanings set forth below:
(a) “Affiliate”
means, with respect to a specified person, a person that, directly
or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the person
specified.
(b) “Base
Salary” means Executive’s gross base salary, regardless
of whether payable directly by the Company in cash or through the
television quarterly bonus plan, the stock compensation program, or
a similar program.
(c) “Board”
means the Board of Directors of the Company.
(d) “Bonus
Amount” means the greater of (i) the highest annual
incentive bonus earned by Executive from the Company (and/or its
Affiliates) during the last three (3) completed fiscal years
of the Company immediately preceding Executive’s Date of
Termination (annualized in the event Executive was not employed by
the Company (or its Affiliates) for the whole of any such fiscal
year), or (ii) if the Date of
Termination
occurs before Executive has been employed for a full fiscal year
and before the date on which the Company generally pays bonuses to
its executives for the fiscal year in which Executive’s
employment commenced, 25% of Executive’s Base Salary for the
fiscal year of the Company which includes the Executive’s
Date of Termination.
(e) “Cause”
means (i) the willful and continued failure of Executive to
perform substantially his duties with the Company (other than any
such failure resulting from Executive’s incapacity due to
physical or mental illness or any such failure subsequent to
Executive being delivered a notice of Termination without Cause by
the Company or delivering a notice of Termination for Good Reason
to the Company) after a written demand for substantial performance
is delivered to Executive by the Board which specifically
identifies the manner in which the Board believes that Executive
has not substantially performed Executive’s duties; provided
that Executive has not cured such failure or commenced such
performance within 30 days after such demand is given to
Executive, or (ii) the willful engaging by Executive in
illegal conduct or gross misconduct which is demonstrably and
materially injurious to the Company or its Affiliates. For purpose
of the preceding sentence, no act or failure to act by Executive
shall be considered “willful” unless done or omitted to
be done by Executive in bad faith and without reasonable belief
that Executive’s action or omission was in the best interests
of the Company. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board, based
upon the advice of counsel for the Company (or upon the
instructions of the Company’s chief executive officer or
another senior officer of the Company) shall be conclusively
presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. Cause shall not
exist unless and until the Company has delivered to Executive a
copy of a resolution duly adopted by three-quarters (3/4) of the
entire Board (excluding Executive if Executive is a Board member)
at a meeting of the Board called and held for such purpose (after
reasonable notice to Executive and an opportunity for Executive,
together with counsel, to be heard before the Board), finding that
in the good faith opinion of the Board an event set forth in clause
(i) or (ii) has occurred and specifying the particulars
thereof in detail. The Company must notify Executive of any event
constituting Cause within ninety (90) days following the
Company’s knowledge of its existence or such event shall not
constitute Cause under this Agreement.
(f) “Change
in Control” means any of the following: (i) any
individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) (other than an
Affiliate or any employee benefit plan (or any related trust) of
the Company or an Affiliate, and other than Jeffrey H. Smulyan or
an Affiliate of Mr. Smulyan) (a “Person”) becomes after
the date hereof the beneficial owner of 35% or more of either the
then outstanding Stock or the combined voting power of the then
outstanding voting securities of the Company entitled to vote in
the election of directors, except that no Change in Control shall
be deemed to have occurred solely by reason of any such acquisition
by a corporation with respect to which, after such acquisition,
more than 60% of both the then outstanding common shares of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote in the
election of directors are then beneficially owned, directly or
indirectly, by the persons who were the
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beneficial
owners of the Stock and voting securities of the Company
immediately before such acquisition in substantially the same
proportion as their ownership, immediately before such acquisition,
of the outstanding Stock and the combined voting power of the then
outstanding voting securities of the Company entitled to vote in
the election of directors; (ii) individuals who, as of the
Effective Date, constitute the Board (the “Incumbent
Directors”) cease for any reason to constitute at least a
majority of the Board; provided that any individual who becomes a
director after the Effective Date whose election, or nomination for
election by the Company’s shareholders, was approved by a
vote or written consent of at least two-thirds of the directors
then comprising the Incumbent Directors shall be considered as
though such individual were an Incumbent Director, but excluding,
for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company
(as such terms are used in Rule 14a-11 under the Exchange
Act); (iii) the consummation of (A) a merger,
reorganization or consolidation with respect to which the
individuals and entities who were the respective beneficial owners
of the Stock and voting securities of the Company immediately
before such merger, reorganization or consolidation do not, after
such merger, reorganization or consolidation, beneficially own,
directly or indirectly, more than 60% of, respectively, the then
outstanding common shares and the combined voting power of the then
outstanding voting securities entitled to vote in the election of
directors of the corporation resulting from such merger,
reorganization or consolidation, or (B) the sale or other
disposition (or series of sales and/or other dispositions over time
resulting in a sale and/or other disposition) of all or
substantially all of the assets of the Company to any Person or
Persons as part of the Company’s plan to sell or otherwise
dispose of all or substantially all of such assets ; (iv) the
approval by the shareholders of the Company of a liquidation or
dissolution of the Company; or (v) such other event(s) or
circumstance(s) as are determined by the Board to constitute a
Change in Control. Notwithstanding the foregoing provisions of this
definition, a Change in Control shall be deemed not to have
occurred with respect to Executive, if he is, by written agreement
executed prior to such Change in Control, a participant on his own
behalf in a transaction in which the persons with whom he has the
written agreement (and/or their Affiliates) Acquire the Company (as
defined below) and, pursuant to the written agreement, Executive
has (or has the right to acquire) an equity interest in the
resulting entity.
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur
solely because any Person acquires beneficial ownership of more
than 35% of the then outstanding Stock as a result of the
acquisition of the Stock by the Company which reduces the number of
shares of Stock outstanding; provided , that if after
such acquisition by the Company such person becomes the beneficial
owner of additional Stock that increases the percentage of
outstanding Stock beneficially owned by such person, a Change in
Control shall then occur.
For
the purposes of this definition, “Acquire the Company”
means the acquisition of beneficial ownership by purchase, merger,
or otherwise, of either more than 50% of the Stock (such percentage
to be computed in accordance with Rule 13d-3(d)(1)(i) of the
SEC under the Exchange Act) or substantially all of the assets of
the Company or its successors; “person” means such term
as used in Rule 13d-5 of the SEC
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under the
Exchange Act; “beneficial owner” means such term as
defined in Rule 13d-3 of the SEC under the Exchange Act; and
“group” means such term as defined in Section 13(d) of
the Exchange Act.
(g) “Code”
means the Internal Revenue Code of 1986, as amended, and
regulations and rulings thereunder. References to a particular
section of the Code shall include references to successor
provisions.
(h) “Date
of Termination” means the effective date of the Termination
of Executive’s Employment.
(i) “Disability”
means Termination of Executive’s Employment by the Company
(A) on account of Executive’s disability or incapacity
in accordance with Executive’s written employment agreement
with the Company, if such agreement contains provisions relating to
Termination of Employment for disability or incapacity, or
(B) except as provided in clause (A), on account of
Executive’s disability or incapacity in accordance with the
Company’s policies applicable to salaried employees without a
written employment agreement, as in effect immediately before the
Change in Control.
(j) “Effective
Date” means January 1, 2008.
(k) “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
References to a particular section of, or rule under, the Exchange
Act shall include references to successor provisions.
(l) “Good
Reason” means, without Executive’s express written
consent, the occurrence of any of the following events after a
Change in Control:
(i)
a material diminution in Executive’s authority, duties, or
responsibilities; provided, however, Good Reason shall not be
deemed to occur upon a change in duties or responsibilities (other
than reporting responsibilities) that is solely and directly a
result of the Company no longer being a publicly traded entity that
does not involve another event described in this Subsection
(l);
(ii)
a material breach by the Company or an Affiliate of the Company of
this Agreement or an employment agreement to which the Executive
and the Company or an Affiliate of the Company are
parties;
(iii)
a material reduction by the Company in Executive’s rate of
annual Base Salary, as in effect immediately prior to such Change
in Control or as the same may be increased from time to time
thereafter (with a reduction or series of reductions exceeding 5%
of Base Salary being deemed material);
(iv)
any requirement of the Company that Executive (A) be based
anywhere more than thirty-five (35) miles from the office
where
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Executive is
based at the time of the Change in Control, if such relocation
increases Executive’s commute by more than twenty
(20) miles, or (B) travel on Company business to an
extent materially greater than the travel obligations of Executive
immediately prior to such Change in Control;
(v)
the failure of the Company to obtain the assumption and, if
applicable, guarantee, agreement from any successor (and parent
corporation) as contemplated in Section 9(b).
Notwithstanding
the preceding, an event described above shall not be considered an
event of Good Reason, unless the Executive provides notice to the
Company of the existence of such event of Good Reason within ninety
(90) days after its first occurrence and the Company fails to
cure such event within thirty (30) days after receiving
Executive’s notice. Executive’s right to Terminate
Employment for Good Reason shall not be affected by
Executive’s incapacity due to mental or physical illness, and
Executive’s continued employment shall not constitute consent
to, or a waiver of rights with respect to, any event or condition
constituting Good Reason; provided , however , that
Executive must Terminate Employment within ninety (90) days
following the end of the thirty (30) day cure period specified
above, or such event shall not constitute a termination for Good
Reason under this Agreement. Notwithstanding any other provision of
this Agreement to the contrary, Termination of Employment by
Executive for any reason during the thirty (30)-day period
beginning one (1) year after the date of a Change in Control
shall constitute a Termination of Employment for Good
Reason.
(m) “Qualifying
Termination” means a Termination of Executive’s
Employment (i) by the Company other than for Cause or
(ii) by Executive for Good Reason. Termination of
Executive’s employment on account of death, Disability, or
Retirement shall not be treated as a Qualifying
Termination.
(n) “Retirement”
means Executive’s Termination of Employment by reason of
retirement (not including any mandatory early retirement) in
accordance with the Company’s retirement policy generally
applicable to its salaried employees, as in effect immediately
prior to the Change in Control, or in accordance with any
retirement arrangement established with respect to Executive with
Executive’s written consent; provided , however
, that under no circumstances shall a resignation with Good Reason
be deemed a Retirement.
(o) “SEC”
means the Securities and Exchange Commission.
(p) “Stock”
means the Class A Common Stock and the Class B Common
Stock of the Company, par value $.01 per share.
(q) “Termination
of Employment”, “Terminates Employment,”, or any
variation thereof means Executive’s separation from service
within the meaning of Code
Section 409A(a)(2)(A)(i).
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(r) “Termination
Period” means the period of time beginning with a Change in
Control and ending two (2) years following such Change in
Control. Notwithstanding anything in this Agreement to the
contrary, if (i) Executive’s Employment is Terminated
prior to a Change in Control for reasons that would have
constituted a Qualifying Termination if they had occurred following
a Change in Control; (ii) Executive reasonably demonstrates
that such termination (or Good Reason event) was at the request of
a Person who had indicated an intention or taken steps reasonably
calculated to effect a Change in Control, or was otherwise made in
connection with a Change in Control; and (iii) a Change in
Control involving such third party or an Affiliate of such third
party (or a party competing with such third party to effectuate a
Change in Control) does occur, then for purposes of this Agreement,
the date immediately prior to the date of such Termination of
Employment or event constituting Good Reason shall be treated as a
Change in Control. For purposes of determining the timing of
payments and benefits to Executive under Section 4, the date
of the actual Change in Control shall be treated as
Executive’s Date of Termination under Section
l(h).
2.
Obligation of Executive . In the event of a tender or
exchange offer, proxy contest, or the execution of any agreement
which, if consummated, would constitute a Change in Control,
Executive agrees not to voluntarily leave the employ of the
Company, other than as a result of Disability, Retirement or an
event which would constitute Good Reason if a Change in Control had
occurred, until the Change in Control occurs or, if earlier, such
tender or exchange offer, proxy contest, or agreement is terminated
or abandoned.
3.
Term of Agreement . This Agreement shall be effective on the
date hereof and shall continue in effect until the Company shall
have given three (3) years’ written notice of
cancellation; provided , that , notwithstanding the
delivery of any such notice, this Agreement shall continue in
effect for a period of two (2) years after a Change in
Control, if such Change in Control shall have occurred during the
term of this Agreement. Moreover, if Executive is party to a
written employment agreement with the Company at the time of a
Change in Control, and such agreement would otherwise expire during
the Termination Period, the term of such agreement shall
automatically be extended to the end of the Termination Period or,
if earlier, Executive’s Retirement. Notwithstanding anything
in this Section to the contrary, except as provided in the second
sentence of Section 1(r), this Agreement shall terminate if
Executive or the Company Terminates Executive’s Employment
prior to a Change in Control.
4.
Payments Upon Termination of Employment .
(a)
Qualifying Termination — Severance . If during the
Termination Period, the Employment of Executive shall Terminate
pursuant to a Qualifying Termination, the Company shall provide to
Executive:
(i)
within ten (10) days following the Date of Termination a
lump-sum cash amount equal to the sum of (A) Executive’s
Base Salary through the Date of Termination and any bonus amounts
which have become payable, to the extent not theretofore paid or
deferred, (B) an amount
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equal to
(I) one hundred percent (100%) of Executive’s Base
Salary at the rate in effect on the Change in Control (or, if
higher, the rate in effect on Termination of Employment),
multiplied by (II) a fraction, the numerator of which is the
number of days in the fiscal year in which the Date of Termination
occurs throug
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