<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Saga Communications, Inc.
(Name of Registrant as Specified In Its Charter)
Saga Communications, Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
SAGA COMMUNICATIONS, INC.
73 KERCHEVAL AVENUE
GROSSE POINTE FARMS, MICHIGAN 48236
NOTICE OF ANNUAL MEETING
MAY 12, 1997
To the Stockholders of
Saga Communications, Inc.
Notice is hereby given that the Annual Meeting of the Stockholders of Saga
Communications, Inc. (the "Corporation"), will be held at the Georgian Inn,
31327 Gratiot, Roseville, Michigan, on Monday, May 12, 1997 at 10:00 A.M.,
Eastern Daylight Time, for the following purposes:
(1) To elect directors of the Corporation for the ensuing year, and
until their successors are elected and qualified.
(2) To ratify the adoption of the Saga Communications, Inc. 1997
Non-Employee Directors Stock Option Plan.
(3) To ratify the selection by the Board of Directors of Ernst & Young
LLP as independent auditors to audit the Corporation's books and accounts
for the fiscal year ending December 31, 1997.
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Directors,
MARCIA LOBAITO
Secretary
April 8, 1997
Mailed at Boston, Massachusetts
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT AS PROMPTLY
AS POSSIBLE. IF YOU ATTEND THE MEETING AND VOTE IN PERSON, THE PROXY WILL NOT BE
USED.
<PAGE> 3
SAGA COMMUNICATIONS, INC.
73 KERCHEVAL AVENUE
GROSSE POINTE FARMS, MICHIGAN 48236
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1997
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies to be used at the Annual Meeting of Stockholders of Saga Communications,
Inc. (the "Corporation") to be held on May 12, 1997 and at any adjournment
thereof, for the purposes set forth in the accompanying notice of such meeting.
All stockholders of record of the Corporation's Common Stock at the close of
business on March 31, 1997 will be entitled to vote. The stock transfer books
will not be closed.
Proxies in the form enclosed are solicited on behalf of the Board of
Directors. Any stockholder giving a proxy in such form has the power to revoke
it at any time before it is exercised by filing a later proxy with the
Corporation, by attending the meeting and voting in person, or by notifying the
Corporation of the revocation in writing to its President at 73 Kercheval
Avenue, Grosse Pointe Farms, Michigan 48236. Any such proxy, if received in time
for the voting and not revoked, will be voted at the Annual Meeting in
accordance with the directions of the stockholder. Any proxy which fails to
specify a choice with respect to any matter to be acted upon will be voted for
the election of each nominee for director and in favor of each proposal to be
acted upon.
As of March 31, 1997, the Corporation had outstanding and entitled to vote
7,088,426 shares of Class A Common Stock and 966,808 shares of Class B Common
Stock (the Class A and Class B Common Stock collectively, the "Common Stock").
Each share of Class A Common Stock entitles the holder thereof to one vote on
the matters to be voted upon at the Annual Meeting and each share of Class B
Common Stock entitles the holder thereof to one vote in the election of
directors and ten votes on the other matters to be voted upon at the Annual
Meeting. All holders of Common Stock vote together as one class, except that in
the election of directors the holders of Class A Common Stock vote as a separate
class to elect two directors. Abstentions and broker non-votes will be counted
in determining if a quorum is present. With regard to the election of directors,
votes that are withheld will be excluded entirely from the vote and will have no
effect. Abstentions may be specified on all proposals other than the election of
directors and will be counted as present for purposes of the item on which the
abstention is noted. Abstentions on the ratification of accountants and the
adoption of the non-employee directors stock option plan will have the same
legal effect as a vote against such matter. Under the rules of the American
Stock Exchange, brokers holding shares in street name have the authority to vote
on certain matters when they have not received instructions from the beneficial
owners. Brokers that do not receive instructions are permitted to vote on the
outcome of the election of directors, the ratification of accountants and the
adoption of the non-employee directors stock option plan. As a result, broker
non-votes will have no effect on the outcome of the election of directors, the
ratification of accountants and the adoption of the non-employee directors stock
option plan.
The holders of a majority of the issued and outstanding shares of Common
Stock entitled to vote, present in person or represented by proxy, shall
constitute a quorum for the transaction of business. In the absence of a quorum,
the Annual Meeting may be postponed from time to time until stockholders holding
the requisite amount are present or represented by proxy.
The approximate date on which the Proxy Statement and accompanying proxy
card will first be mailed to the stockholders of the Corporation is April 8,
1997.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1997, certain information
concerning the ownership of shares of Common Stock by (i) each person or group
who is known by the Corporation to own beneficially more than five percent of
the issued and outstanding Common Stock, (ii) each director and nominee for
director of the Corporation, (iii) each named executive officer described in
"Executive Compensation" below, and (iv) all directors and executive officers as
a group. Except as otherwise indicated, each person named has sole investment
and voting power with respect to the securities shown.
<TABLE>
<CAPTION>
NUMBER OF SHARES(1) PERCENT OF CLASS
------------------------- -----------------------
NAME CLASS A CLASS B CLASS A CLASS B
- -------------------------------------------------- --------- ------- ----------- -------
<S> <C> <C> <C> <C>
Wellington Management Company..................... 451,686(2) -- 6.4% --
75 State Street
Boston, MA 02109
T. Rowe Price Associates, Inc..................... 688,000(3) -- 9.7% --
T. Rowe Price Small Cap Value Fund, Inc........... 656,250(3) -- 9.2% --
100 E. Pratt Street
Baltimore, MD 21202
Ronald Baron...................................... 2,666,224(4) -- 37.6% --
767 Fifth Avenue
New York, NY 10153
Edward K. Christian............................... 35,000(5) 996,808(6) * 100%
Jonathan Firestone................................ 8,125 -- * --
Joseph P. Misiewicz............................... 409(7) -- * --
William P. Collatos............................... 13,045(8) -- * --
Gary Stevens...................................... -0- -- * --
Steven J. Goldstein............................... 155,274(5) -- 2.2% --
Norman L. McKee................................... 78,758(5) -- 1.1% --
All directors and executive officers as a group... 295,163(5) 966,808(6) 4.2% 100%
</TABLE>
- ---------------
(1) Does not reflect the five-for-four stock split effective April 1, 1997.
(2) According to its Form 13G on file with the Securities and Exchange
Commission ("SEC"), Wellington Management Company has sole and shared voting
power with respect to 0 and 232,561 shares, respectively, and shared
dispositive power as to 451,686 shares.
(3) According to their joint Schedule 13G on file with the SEC, T. Rowe Price
Associates, Inc. and T. Rowe Price Small Cap Value Fund, Inc. have sole
voting power with respect to 31,750 and 656,250 shares, respectively, no
shared voting power, have sole dispositive power with respect to 688,000 and
0 shares, respectively, and have no shared dispositive power.
(4) According to his Form 13D on file with the SEC, Mr. Baron has sole voting
and dispositive power with respect to 382,000 shares in his capacity as
general partner of two investment partnerships, Baron Capital Partners, L.P.
and Baron Investment Partners, L.P., and shared voting and dispositive power
with respect to 2,284,224 shares in his capacity as a controlling person of
two registered investment advisers, BAMCO, Inc. and Baron Capital
Management, Inc.
(5) Includes the following shares of Class A Common Stock reserved for issuance
upon exercise of stock options outstanding pursuant to the Corporation's
1992 Stock Option Plan: Mr. Christian, 35,000 shares, Mr. Goldstein, 112,156
shares; Mr. McKee, 78,562 shares; and all directors and executive officers
as a group, 229,888 shares.
(6) Includes 966,808 shares of Class B Common Stock pledged to the Corporation
to secure a note to the Corporation. See "Certain Transactions -- Loan to
Principal Stockholder".
(7) Mr. Misiewicz has shared voting power with his son as to 99 of these shares.
(8) Mr. Collatos disclaims beneficial ownership of 1,952 of these shares which
are held in trust for his children.
* Less than 1%.
2
<PAGE> 5
ELECTION OF DIRECTORS
The persons named below have been nominated for election at the Annual
Meeting as directors of the Corporation. The directors who are elected shall
hold office until their respective successors shall have been duly elected and
qualified. It is intended that the two persons named in the first part of the
following list will be elected by the holders of the Class A Common Stock and
that the four persons named in the second part of the list will be elected by
the holders of the Class A Common Stock and Class B Common Stock, voting
together as a single class, with each share entitling the holder thereof to one
vote. In accordance with Delaware General Corporation Law, directors are elected
by a plurality of the votes of the shares present in person or represented by
proxy at the Annual Meeting.
All nominees are members of the present Board. Each of the nominees for
director has consented to being named a nominee in this Proxy Statement and has
agreed to serve as a director, if elected at the Annual Meeting. It is the
intention of the persons named in the proxy to vote for the following nominees.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS SINCE
- ---------------------------------------- ---------------------------------------- --------
<S> <C> <C>
DIRECTORS TO BE ELECTED BY HOLDERS OF CLASS A COMMON STOCK:
Jonathan Firestone, 52.................. President and Chief Executive Officer of 12/92
BBDO Minneapolis and director of BBDO,
North America (advertising agency)
since 1989
Joseph P. Misiewicz, 50................. Professor, Telecommunications Department 12/92
since 1996; Chairperson,
Telecommunications Department at Ball
State University from 1990 to 1996
DIRECTORS TO BE ELECTED BY HOLDERS OF COMMON STOCK:
Edward K. Christian, 52................. President, Chief Executive Officer and 3/92
Chairman of the Corporation and its
predecessor since 1986
William P. Collatos, 42................. General Partner, Spectrum Equity 12/92
Investors (venture capital firm) since
1993; Investor and Consultant to media
industry from 1990 to 1993
Norman L. McKee, 41..................... Senior Vice President since 1994; Chief 3/92
Financial Officer and Treasurer of the
Corporation and its predecessor since
1988
Gary Stevens, 57........................ Managing Director, Gary Stevens & Co. 7/95
(media broker) since 1986
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee, currently comprised of
Messrs. Collatos, Firestone, Misiewicz and Stevens (Chair), which is charged
with the responsibility of reviewing certain of the Corporation's compensation
programs and making recommendations to the Board of Directors with respect to
compensation. The Compensation Committee met twice during the Corporation's last
fiscal year. The Compensation Committee also administers the Corporation's 1992
Stock Option Plan.
3
<PAGE> 6
The Board of Directors has a Finance and Audit Committee, currently
comprised of Messrs. Collatos, Firestone (Chair), and Misiewicz, which is
charged with the responsibility of reviewing the Corporation's internal auditing
procedures and accounting controls and considers the selection and independence
of the Corporation's outside auditors. The Finance and Audit Committee met twice
during the Corporation's last fiscal year.
The Board of Directors does not have a nominating committee as the Board as
a whole considers the qualifications and recommends to the stockholders the
election of directors of the Corporation. Stockholders may recommend nominees
for election as directors by writing to the President of the Corporation.
The Board of Directors held a total of five meetings during 1996. Each
member of the Board of Directors attended at least 75% of the aggregate number
of meetings of the Board and all committees on which he served.
COMPENSATION OF DIRECTORS AND OFFICERS
DIRECTORS COMPENSATION
Each director of the Corporation who is not an employee receives fees of
$4,000 per year, plus $1,000 for each Board or committee meeting attended in
person and $200 for each telephonic meeting attended. In addition, the Chairs of
the Committees receive $2,000 per year. Upon adoption of the Corporation's 1997
Non-Employee Directors Stock Option Plan, options will be granted to the
directors in lieu of these fees retroactive to January 1, 1997. See "Approval of
Directors Stock Option Plan". Directors may elect to receive life insurance
premiums in lieu of their compensation. Mr. Firestone is the only director to
make such election and, as a result, the Corporation paid life insurance
premiums on his behalf in the amount of $16,992 in 1996. Directors who are
employees receive no additional compensation for serving as directors or
attending Board or Committee meetings.
EXECUTIVE COMPENSATION
The following table summarizes the compensation for the years ended
December 31, 1996, 1995, and 1994 of the Corporation's chief executive officer
and the other most highly compensated executive officers whose salary and bonus
exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
ANNUAL UNDERLYING
COMPENSATION OPTIONS/
-------------------- SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (SHARES)(1) COMPENSATION(2)
- --------------------------------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Edward K. Christian.......................... 1996 $335,000 $250,000 6,250 $3,427
President, CEO 1995 $311,000 $250,000 11,719 $3,160
1994 $300,000 $250,000 46,875 $2,087
Steven J. Goldstein.......................... 1996 $240,000 $ 56,000 2,500 $2,181
Executive Vice President and Group 1995 $223,000 $ 50,000 4,882 $2,046
Program Director 1994 $215,000 $ 50,000 23,437 $1,472
Norman L. McKee.............................. 1996 $200,000 $ 56,000 2,500 $1,708
Senior Vice President, Chief Financial 1995 $181,000 $ 50,000 -0- $1,563
Officer and Treasurer 1994 $175,000 $ 50,000 52,734 $1,182
</TABLE>
- ---------------
(1) Restated to reflect five-for-four stock splits effective July 31, 1995,
April 30, 1996 and April 1, 1997.
(2) Consists of life insurance premiums or payments in lieu thereof in 1996,
1995, and 1994.
4
<PAGE> 7
The following table sets forth certain information relating to option
grants pursuant to the Corporation's 1992 Stock Option Plan (the "Option Plan")
in the year ended December 31, 1996 to the individuals named in the Summary
Compensation Table above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------- POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS/SARS EXERCISE STOCK PRICE
UNDERLYING GRANTED TO OR GRANT- APPRECIATION FOR
OPTIONS/ EMPLOYEES BASE DATE MARKET OPTION TERM(4)
SARS IN FISCAL PRICE PRICE EXPIRATION ----------------------
NAME GRANTED(1) YEAR ($/SH) PER SHARE DATE 5% 10%
- --------------------------------- ------------- ------------ ------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Edward K. Christian.............. 6,250(2) 13.4% $11.39 $17.30 7/1/06 $104,924(3) $209,248(3)
Steven J. Goldstein.............. 2,500(2) 5.3% $11.39 $17.30 7/1/06 $ 41,970(3) $ 83,699(3)
Norman L. McKee.................. 2,500(2) 5.3% $11.39 $17.30 7/1/06 $ 41,970(3) $ 83,699(3)
</TABLE>
- ---------------
(1) None of the options granted were options with tandem SARs and no
free-standing SARs were granted. Reflects five-for-four stock split
effective April 1, 1997.
(2) Granted to the named executive officers on July 1, 1996 pursuant to the
Option Plan. The options become exercisable in 20% increments on March 1,
1997, 1998, 1999, 2000 and 2001, respectively. If a Change of Control (as
defined in the Option Plan) occurs, these options would become immediately
exercisable.
(3) Potential Realizable Value is based on the assumed growth rates for the
ten-year option term. 5% annual growth results in a stock price per share of
$28.18 and 10% results in a stock price per share of $44.87.
(4) The actual value, if any, an executive may realize will depend on the excess
of the stock price over the exercise price on the date the option is
exercised, so that there is no assurance the value realized by an executive
will be at or near the amounts reflected in this table.
The following table sets forth certain information with respect to
unexercised options to purchase the Corporation's Common Stock granted under the
Option Plan to the individuals named in the Summary Compensation Table above.
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
FY-END(1) SARS AT FY-END(2)
SHARES ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward K. Christian............. 21,094 $154,858 -- 43,749 -- $394,771
Steven J. Goldstein............. -- -- 97,852 42,344 $996,287 $409,855
Norman L. McKee................. 11,718 $158,740 70,703 27,501 $807,198 $246,856
</TABLE>
- ---------------
(1) Reflects five-for-four stock splits effective July 31, 1995, April 30, 1996
and April 1, 1997.
(2) Based on the closing price on the American Stock Exchange of the
Corporation's Common Stock on December 31, 1996, as adjusted to reflect the
five-for-four stock split effective April 1, 1997 ($15.60).
5
<PAGE> 8
COMPENSATION COMMITTEE REPORT
OVERVIEW
The Compensation Committee of the Board of Directors (the "Committee") is
comprised of four independent non-employee members of the Board of Directors.
The responsibilities of the Committee include reviewing the Corporation's
management compensation programs and making recommendations to the Board of
Directors with respect to compensation.
The Committee believes that in order to maximize shareholder value the
Corporation must have a compensation program designed to attract and retain
superior management at all levels in the organization. The objective of the
management compensation program is to both reward short-term performance and
motivate long-term performance in such a way that management's incentives are
aligned with the interests of the stockholders. The Committee believes that
management at all levels should have a meaningful equity participation in the
ownership of the Corporation, although no specific target level of equity
holdings has been established by the Committee.
EXECUTIVE COMPENSATION PROGRAM
In order to meet these objectives, the Corporation's executive compensation
program consists of three primary components: salary, bonuses, and stock
options. The Committee has established guidelines for the annual cash
compensation for the three senior executives named in the Summary Compensation
Table and the station managers (the "executives"). Under these guidelines, the
executives' aggregate budgeted cash compensation should not exceed a targeted
percentage of budgeted operating profits (i.e., earnings before taxes, interest,
depreciation, amortization and extraordinary items) before deduction of the
executives' budgeted cash compensation. In addition, the salary portion of the
annual cash compensation is targeted to be no more than 75% of the total and the
bonus portion no less than 25% of the total. Salaries are established for each
executive officer on the basis of the scope of responsibility and accountability
within the Corporation, and take into account publicly available compensation
levels for comparable positions in the entities which comprise the Peer Group
used for the Performance Graph set forth on page 8 hereof. The Committee
attempts to set compensation at levels approximating the median compensation
rates of comparable positions in the Peer Group. Bonuses for the executives are
determined based on the Committee's judgment of the Corporation's operating
profitability, growth in revenues and profits and overall financial condition,
and the individual executive's contribution to these results.
Grants of stock options are a major part of the Corporation's long-term
incentive strategy. The Committee believes that options provide executives with
an economic stake in the Corporation's future parallel to that of the
stockholders. The Committee has established a guideline that the aggregate
annual option grants to the executive officers named in the Summary Compensation
Table not exceed 1% of the Corporation's outstanding common stock on a
fully-diluted basis, after giving appropriate consideration to previously
granted options and the aggregate size of the current award. In addition, in
order to motivate the executives to take a long-term perspective, the Committee
has adopted a policy to set the exercise price of options granted based on an
inverse relationship to annual cash flow growth. Finally, in addition to the
stock options to be granted to the executive officers named in the Summary
Compensation Table, the Committee has recommended that a further 1% of
outstanding stock be made available annually in the form of options to be
granted to the station managers based upon individual results of the stations
under their management.
On the basis of the factors described above and the Committee's subjective
judgment of each officer's performance, none of which factors are given specific
numerical weighting, the Committee set the salaries, bonuses and stock option
grants of the executives, including the President and Chief Executive Officer.
The compensation of the senior executives was determined based on the Company's
overall performance. Comparison of the Company's stock performance to its Peer
Group was not a significant consideration in the
6
<PAGE> 9
determination of bonus amounts and stock option awards since the Committee
believes the Company's operating performance is not directly reflected in the
Company's stock valuation, owing in part to its relatively small capitalization
and consequent lack of broad-based institutional ownership. The Committee
intends to reevaluate its compensation policies on an annual basis.
CEO COMPENSATION
In 1996, the Corporation's most highly compensated executive officer was
Edward K. Christian, President and Chief Executive Officer. Options to purchase
6,250 shares of Class A Common Stock (after giving effect to the five-for-four
stock split effective April 1, 1997) at a price of $11.39 per share were granted
to Mr. Christian in 1996. In addition, his salary was increased by $15,000 or
4.4% effective January 1, 1997.
In determining the 1996 bonus paid to Mr. Christian and the salary increase
for 1997, the Committee took into account the Corporation's financial
performance in 1996 and the criteria discussed above. During the year ended
December 31, 1996, the Corporation's net revenue increased by 13% over the year
ended December 31, 1995 to $56,240,000. Broadcast cash flow (defined as station
operating income excluding depreciation, amortization and corporate general and
administrative expenses) increased by 13% and net income for the year ended
December 31, 1996 was $3,935,000 compared to $2,678,000 for the year ended
December 31, 1995. After-tax cash flow (defined as net income plus depreciation,
amortization [excluding film rights], loss on the sale of assets, and deferred
taxes) increased by 6% over the year ended December 31, 1995. Set forth below is
a chart summarizing the Corporation's operating results over the past three
fiscal years.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net Operating Revenue.................................... $56,240 $49,699 $44,380
Broadcast Cash Flow...................................... $19,611 $17,263 $15,502
Net Income............................................... $ 3,935 $ 2,678 $ 2,306
After-tax Cash Flow...................................... $10,143 $ 9,564 $ 8,052
</TABLE>
IRS MATTERS
Under section 162(m) of the Internal Revenue Code and the regulations
promulgated thereunder, deductions for employee remuneration in excess of $1
million which is not performance-based are disallowed for publicly-traded
companies. Given that levels of compensation paid by the Corporation are
expected to be significantly below $1 million, the Committee has determined that
it is unnecessary at this time to seek to qualify the components of its
compensation program as performance-based compensation within the meaning of
Section 162(m).
EXECUTIVE COMPENSATION COMMITTEE
William P. Collatos
Jonathan Firestone
Joseph P. Misiewicz
Gary Stevens (Chair)
7
<PAGE> 10
CORPORATE PERFORMANCE
Set forth below is a line graph comparing the cumulative total stockholder
return for the years ended December 31, 1992, 1993, 1994, 1995 and 1996 of the
Corporation's Class A Common Stock against the cumulative total return of the
AMEX Market Value Index, and of a peer group consisting of the following radio
broadcast companies: EZ Communications Inc., Clear Channel Communications Inc.,
Evergreen Media Corp., Infinity Broadcasting Corp., Jacor Communications Inc.,
American Radio Systems Corp., Children's Broadcasting Corp., SFX Broadcasting,
Inc., Emmis Broadcasting Corp., Heftel Broadcasting Corp. and Paxson
Communications Corp. (the "Peer Group"). The graph and table assume that $100
was invested on December 11, 1992 (the effective date of the Corporation's
initial public offering) in each of the Corporation's Class A Common Stock, the
AMEX Market Value Index and the Peer Group and that all dividends were
reinvested.
<TABLE>
<CAPTION>
Measurement Period Saga Communica- AMEX Market Value
(Fiscal Year Covered) tions Index Peer Group
<S> <C> <C> <C>
12/31/92 102.20 101.80 97.70
12/31/93 151.60 119.70 240.90
12/30/94 127.30 111.70 261.80
12/29/95 179.80 144.20 437.70
12/31/96 269.80 147.00 577.00
</TABLE>
EMPLOYMENT CONTRACTS
Mr. Christian has a five-year employment agreement with the Corporation
which expires in 1997. The agreement provides for certain compensation, death,
disability and termination benefits, as well as the use of an automobile. The
1996 base annual salary under the agreement was $335,000, subject to annual cost
of living adjustments. The Board of Directors has increased Mr. Christian's
salary under the agreement to $350,000 effective January 1, 1997. The agreement
also provides that he is eligible for annual bonuses and stock options to be
awarded at the discretion of the Board of Directors. The agreement may be
terminated by either party in the event of Mr. Christian's disability for a
continuous period of six months or an aggregate period of nine months within any
18 month period. In addition, the Corporation may terminate the agreement for
cause and Mr. Christian may terminate the agreement at any time after the sale
of all or substantially all of the Corporation's assets or the merger of the
Corporation if the Corporation is not the surviving entity.
8
<PAGE> 11
The employment agreement also contains a covenant not to compete
restricting Mr. Christian from competing with the Corporation in any of its
markets during the term of the agreement and for a three year period thereafter.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and directors, and persons who own more than 10% of a
registered class of the Corporation's equity securities ("insiders"), to file
reports of ownership and changes in ownership with the SEC. Insiders are
required by SEC regulation to furnish the Corporation with copies of all Section
16(a) forms they file. Based solely on review of the copies of such forms
furnished to the Corporation, the Corporation believes that during 1996 all
Section 16(a) filing requirements applicable to its insiders were complied with.
CERTAIN TRANSACTIONS
LOAN TO PRINCIPAL STOCKHOLDER
In 1990, Boston Ventures Limited Partnership made a loan to Mr. Christian
in the amount of $690,700 to finance his capital contribution to Saga
Communications Limited Partnership. Pursuant to the reorganization of the
Corporation in December 1992, the original note evidencing such loan was
cancelled and a new note in such amount was issued to the Corporation by Mr.
Christian. The loan from the Corporation is on a non-recourse basis and bears
interest at a rate per annum equal to the lowest rate necessary to avoid the
imputation of income for federal income tax purposes, with principal and
interest due and payable in a single payment on December 31, 2002. The loan is
secured by the Class B Common Stock currently owned by Mr. Christian.
APPROVAL OF DIRECTORS STOCK OPTION PLAN
BACKGROUND
The 1997 Non-Employee Directors Stock Option Plan (the "Directors Plan") is
intended to provide a means to attract and retain highly-qualified persons to
serve as non-employee directors of the Corporation and to promote ownership by
non-employee Directors of a greater proprietary interest in the Corporation,
thereby aligning their interests more closely with the interests of the
stockholders.
Pursuant to the terms of the Directors Plan, 100,000 shares of the
Corporation's Common Stock are reserved for grant to non-employee directors. The
Directors Plan was adopted by the Board of Directors, including the non-employee
directors who are eligible to participate in the Directors Plan, on February 24,
1997. On that date, four directors were eligible to participate in the Directors
Plan.
Approval of the Directors Plan requires the affirmative vote of a majority
of the shares entitled to vote thereon present in person or represented by proxy
at the Annual Meeting when a quorum is present. The Board of Directors
recommends that you vote FOR the approval of the Directors Plan.
THE DIRECTORS PLAN
The principal features of the Directors Plan are summarized below, but such
summary is qualified in its entirety by reference to the terms of the Directors
Plan, copies of which are available without charge upon written request to the
Secretary of the Corporation.
Participation. Directors of the Corporation who are not employees of the
Corporation are eligible to receive options under the Directors Plan.
Administration. The Directors Plan is administered by the Board of
Directors of the Corporation, which interprets and construes the terms of the
Directors Plan. After being granted an option, each optionee must
9
<PAGE> 12
enter into an option agreement with the Corporation setting forth the terms of
the option. Upon exercise of options, optionees are required to pay the option
price in full prior to receipt of certificates representing shares of Common
Stock.
Terms of Options. On the last business day of January of each year during
the term of the Directors Plan, in lieu of their directors' retainer for the
previous year, each eligible director shall automatically be granted an option
to purchase that number of shares of the Corporation's Class A Common Stock
equal to the amount of the retainer divided by the fair market value of the
Corporation's Common Stock on the last trading day of the December immediately
preceding the date of grant less $.01 per share. The option exercise price shall
be $.01 per share.
The options granted pursuant to the Directors Plan are non-qualified stock
options. See "Federal Income Tax Consequences" below.
Options granted under the Directors Plan shall be immediately vested and
exercisable on the date of grant. The options may be exercised for a period of
10 years from the date of grant of the option.
Stock Dividends or Splits. Appropriate adjustments will be made in the
number of shares covered by each option and to the option exercise price in the
event of any change in the Class A Common Stock of the Corporation by reason of
any reorganization, recapitalization, reclassification, split or reverse stock
split, or of any similar change affecting the Corporation's voting stock.
Duration and Amendment of Directors Plan. The Directors Plan shall remain
in effect until all shares subject to, or which may become subject to, the
Directors Plan shall have been issued pursuant to the Directors Plan; provided
that no grants shall be made under the Directors Plan after May 12, 2007, and
the Board may terminate the Directors Plan prior to that date. Amendments may be
made by the Board of Directors, provided, however, that no action of the Board
may deprive existing optionees of any rights under the Directors Plan without
the consent of the optionee.
Federal Income Tax Consequences. Options issued under the Directors Plan
are intended to be treated as non-qualified stock options under the Internal
Revenue Code of 1986, as amended. The grant of a non-qualified option does not
result in recognition of income to the optionee. Upon the exercise of a
non-qualified option, the amount by which the fair market value of the
Corporation's Common Stock on the date of exercise exceeds the option exercise
price is taxed to the optionee as ordinary income. The Corporation is entitled
to a deduction in the amount of the ordinary income realized by the optionee. At
such time as the optionee sells shares issued to him upon exercise of his
non-qualified option, he will realize gain or loss in an amount equal to the
difference between the selling price and the fair market value of the shares on
the date the option was exercised.
The preceding discussion is based upon federal tax laws and regulations in
effect on the date of this proxy statement, which are subject to change, and
does not purport to be a complete description of the federal income tax aspects
of the Directors Plan. Optionees may also be subject to state and local taxes in
connection with the grant or exercise of options granted under the Directors
Plan and the sale or other disposition of shares acquired upon exercise of
options.
RATIFICATION OF SELECTION OF AUDITORS
The selection, by a majority of the members of the Board who are not
officers or employees of the Corporation, of Ernst & Young LLP as independent
auditors to audit the books and accounts of the Corporation for the fiscal year
ending December 31, 1997 shall be submitted to the Annual Meeting for
ratification. Such ratification requires the affirmative vote of a majority of
the shares entitled to vote thereon present in person or represented by proxy at
the Annual Meeting when a quorum is present. Representatives of
10
<PAGE> 13
Ernst & Young LLP will be present at the Annual Meeting and will be given an
opportunity to make a statement if they desire to do so and will respond to
appropriate questions of stockholders.
The firm of Ernst & Young LLP has advised the Corporation that neither it
nor any of its members has any direct financial interest in the Corporation as a
promoter, underwriter, voting trustee, director, officer or employee.
All professional services rendered by Ernst & Young LLP during the year
ended December 31, 1996 were furnished at customary rates.
The Board recommends a vote FOR ratification of Ernst & Young LLP as
independent auditors for the fiscal year ending December 31, 1997.
OTHER MATTERS
Management does not know of any matters which will be brought before the
Annual Meeting other than those specified in the notice thereof. However, if any
other matters properly come before the Annual Meeting, it is intended that the
persons named in the form of proxy, or their substitutes acting thereunder, will
vote therein in accordance with their best judgment.
FINANCIAL STATEMENTS
The financial statements of the Corporation are contained in the 1996
Annual Report to Stockholders, which has been provided to the stockholders
concurrently herewith. Such report and the financial statements contained
therein are not to be considered as a part of this soliciting material.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Under the regulations of the SEC, a record or beneficial owner of shares of
the Corporation's Common Stock may submit proposals on proper subjects for
action at the 1998 Annual Meeting of Stockholders of the Corporation. All such
proposals must be mailed to the Corporation at 73 Kercheval Avenue, Grosse
Pointe Farms, Michigan 48236 and must be received at that address on or before
December 9, 1997, in order to be included in the Corporation's proxy relating to
the 1998 Annual Meeting.
EXPENSE OF SOLICITATION OF PROXIES
All the expenses of preparing, assembling, printing and mailing the
material used in the solicitation of proxies by the Board will be paid by the
Corporation. In addition to the solicitation of proxies by use of the mails,
officers and regular employees of the Corporation may solicit proxies on behalf
of the Board by telephone, telegram or personal interview, the expenses of which
will be borne by the Corporation. Arrangements may also be made with brokerage
houses and other custodians, nominees and fiduciaries to forward soliciting
materials to the beneficial owners of stock held of record by such persons at
the expense of the Corporation.
By order of the Board of Directors,
MARCIA LOBAITO
Secretary
Grosse Pointe Farms, Michigan
April 8, 1997
11
<PAGE> 14
1161-PS-97
<PAGE> 15
DETACH HERE SAG 2
SAGA COMMUNICATIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
The undersigned hereby appoints Edward K. Christian, Norman L. McKee
R and Marcia K. Lobaito, or any one or more of them, attorneys with full
power of substitution to each for and in the name of the undersigned, with
O all powers the undersigned would possess if personally present to vote the
Class A Common Stock, $.01 par value, of the undersigned in Saga
X Communications, Inc. at the Annual Meeting of its Stockholders to be held
May 12, 1997 or any adjournment thereof. THIS PROXY WHEN PROPERLY EXECUTED
Y WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
-------------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-------------
<PAGE> 16
[SAGA LOGO] THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Regardless of whether you plan to attend the Annual Meeting of Stockholders,
you can be sure your shares are represented at the meeting by returning your
proxy card in the enclosed envelope.
COMPANY'S RECENT DEVELOPMENTS
On February 25, 1997, the Company reported a 47% increase in net income for the
year ended December 31, 1996.
On February 25, 1997, the Company announced a 5 for 4 stock split for
stockholders of record March 17, 1997, effective April 1, 1997.
On March 4, 1997, the Company announced the acquisition of radio stations WFMR
FM and WFMI FM, serving Milwaukee, Wisconsin for $5,000,000.
DETACH HERE SAG 2
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
<TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU INSTRUCT THE PROXIES TO VOTE FOR ALL PROPOSALS.
<S> <C>
1. ELECTION OF DIRECTORS:
NOMINEES: Jonathan Firestone, Joseph P. Misiewicz, Edward K. 2. To ratify the adoption of the 1997 FOR AGAINST ABSTAIN
Christian, William P. Collatos, Norman L. McKee and Gary Non-Employee Directors Stock [ ] [ ] [ ]
Stevens. Option Plan.
FOR WITHHELD
[ ] [ ] 3. To ratify the selection of Ernst &
Young LLP as independent auditors [ ] [ ] [ ]
of the Corporation for the fiscal year
[ ]_________________________________________________ ending December 31, 1997.
INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name above. 4. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting
or any adjournment thereof.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon. When shares are held
in more than one name, including joint tenants, each party should
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
Signature: Date: Signature: Date:
-------------------------------------- ------------ -------------------------------------- ------------
</TABLE>
