We now know how Emmis will come up with the two-thirds vote needed to change the terms of its preferred stock so it will no longer have to pay dividends. That will be voted on at the second shareholders meeting. But first, a meeting to set the stage for that change.
A special meeting set for April 2nd will have shareholders vote on whether to award retention bonuses to qualified Emmis employees from a bonus pool of 400,000 preferred shares. The trustee of the preferred shares, however, will enter into an agreement turning the voting rights over to Emmis management. With the voting rights it already holds, that will boost the company’s votes to 66.8% of the preferred shares. Thus, when the second meeting, yet to be scheduled, is held, the approval of the amendment to the terms of the preferred issue is guaranteed.
Likewise, the outcome of the vote April 2nd on whether to put the 400,000 preferred shares into a pool for employee bonuses is guaranteed. CEO Jeff Smulyan, by virtue of his super-voting Class B shares, holds 64% of the common shares voting power and only majority approval is required.
The preferred shareholders do not get to vote on the employee bonus pool. Their single representative on the Emmis board of directors, David Gale, voted against the proposal, saying it was using corporate resources to subvert the rights of the preferred shareholders.
The preferred shareholders will vote at the April 2nd meeting to elect a director to fill the second seat to which they are entitled. Emmis will abstain from casting the votes it holds. That virtually guarantees the election of the nominee proposed by Zazove Associates, a major holder of the preferred shares: attorney Michelle Bergman of NYC-based Bergman Law LLC.
RBR-TVBR observation: Emmis had pretty much wrapped up all of the litigation over its aborted going private transaction and other disputes with former investor Alden Global Capital. Might a new round of court battles be in the offing? You bet! Click here to read about the new lawsuit.