ITEM 5.02. Departure of Directors of Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
On December 31, 2008 (effective as of January 1, 2008), we entered into
amendments to the employment agreements of Jeffrey H. Smulyan, Richard F.
Cummings, Gary L. Kaseff, Paul W. Fiddick, Michael Levitan and Gary A. Thoe. The
following summaries are qualified by reference to the full text of the
amendments which are attached to this Form 8-K and incorporated by reference.
The amendments were primarily intended to comply with the requirements of
Internal Revenue Code Section 409A and the regulations adopted pursuant thereto.
In addition to changes made to comply with Section 409A, certain clarifying
changes were made. The previous employment agreements provided for a gross-up
payment to the executives in the event that amounts payable under the employment
agreement were subject to taxation under Section 409A. The amendments remove
such gross-up obligation. The amendments also clarify that a decision by the
company not to allow an employment agreement to automatically extend pursuant to
its terms for an additional one-year term at any time coupled with a failure by
the company to offer employment pursuant to a new written employment agreement
on substantially the same terms as the expiring agreement and a resignation by
the executive would be treated the same as a decision not to allow an employment
agreement to extend coupled with a formal termination by the company.
In addition to the amendments to the employment agreements discussed above,
on December 31, 2008 (effective as of January 1, 2008), we entered into new
change in control severance agreements (replacing existing change in control
severance agreements) with Jeffrey H. Smulyan, Patrick Walsh, Richard F.
Cummings, Gary L. Kaseff, Paul W. Fiddick, Michael Levitan and Gary A. Thoe. The
following summaries are qualified by reference to the full text of the
agreements which are attached to this Form 8-K and incorporated by reference.
The new change in control severance agreements are virtually identical to the
prior change in control severance agreements, with the changes primarily
intended to comply with the requirements of Section 409A and the regulations
adopted pursuant thereto, as well as certain other changes. The definition of a
"Change in Control" has been revised to provide that any person (other than
Mr. Smulyan or an affiliate of Mr. Smulyan) becoming the beneficial owner of 35%
or more of the outstanding stock of the company constitutes a "Change in
Control", which is an increase from the previous 25% threshold. In the previous
definition of "Change in Control," the separation of the company's radio and
television divisions was not deemed a change in control. Given that the
television division has been sold, this provision has been deleted. The new
change in control severance agreements also now give the company the right to
reduce the total payments thereunder by up to 10% if doing so will avoid
triggering the excise tax under Internal Revenue Code Section 4999. The
definition of "Good Reason" has been revised to comply with the final
regulations under Section 409A. In addition to eliminating certain events that
would previously have constituted "Good Reason", the new definition requires the
executive to notify the company within 90 days of the occurrence of an event
constituting "Good Reason"; and the company is provided 30 days in which to cure
such event. "Termination of Employment" has been defined to reflect the
requirements of Section 409A and, if a change in control occurs during the term
of a written employment agreement, the executive's employment agreement will now
automatically extend to the second anniversary of the change in control. The
provisions relating to the payment of post-termination disability benefits has
been eliminated and the provisions relating to payment of post-term medical
benefits have been changed to comply with Section 409A. The provision relating
to vesting of stock options has been changed to include acceleration of vesting
of certain other forms of equity which may be granted by the company in addition
to stock options. Finally, the change in control severance agreements now
clarify that any retention or completion bonus contained in any other agreement
is not considered severance pay and shall be paid pursuant to the terms of the
agreement under which it arises without regard to any payment under change in
control severance agreements.
Finally, on December 31, 2008 (effective as of January 1, 2008) the company
amended the 2004 Equity Compensation Plan to comply with the requirements of
Section 409A. The following summary is qualified by reference to the full text
of the amended and restated plan which is attached to this Form 8-K and
incorporated by reference. The amendment changed the definition of "Fair Market
Value," restricted the persons eligible to receive grants, clarified the grant
date, tightened up the provisions on performance units, limited the ability to
grant substituted awards, and made other changes.
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