<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
[ ] 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 10, 1999
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 10, 1999 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 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, 1999.
(3) To approve the adoption of the Saga Communications, Inc. Employee
Stock Purchase Plan.
(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 6, 1999
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 10, 1999
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 10, 1999 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, 1999 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, 1999, the Corporation had outstanding and entitled to vote
11,393,087 shares of Class A Common Stock and 1,510,637 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 or approval
of the Employee Stock Purchase 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 and the ratification of accountants. However, brokers that do not
receive instructions are not entitled to vote on the approval of the Employee
Stock Purchase Plan. As a result, broker non-votes will have no effect on the
outcome of the election of directors, the ratification of accountants or the
approval of the Employee Stock Purchase 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 6,
1999.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, 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 of the Corporation,
(iii) the Corporation's Chief Executive Officer and the other most highly
compensated executive officers whose salary and bonus exceeded $100,000 for the
Corporation's last fiscal year, 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 PERCENT OF CLASS
---------------------------- ---------------------
NAME CLASS A CLASS B CLASS A CLASS B
---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
T. Rowe Price Associates, Inc..................... 1,079,890(1) -- 9.5% --
100 E. Pratt Street
Baltimore, MD 21202
Ronald Baron...................................... 4,878,260(2) -- 42.8% --
767 Fifth Avenue
New York, NY 10153
Goldman, Sachs & Co............................... 578,353(3) -- 5.1% --
The Goldman Sachs Group, L.P...................... 578,353(3) -- 5.1% --
85 Broad Street
New York, NY 1004
Edward K. Christian............................... -- 1,825,660(4) * 100%
Jonathan Firestone................................ 12,695 -- * --
Joseph P. Misiewicz............................... 1,802(5)(6) -- * --
Gary Stevens...................................... 1,378(5) -- * --
Donald Alt........................................ 1,014(5) -- -- --
Kristin Allen..................................... 844(5) -- -- --
Samuel D. Bush.................................... 93,054(7) -- * --
Steven J. Goldstein............................... 232,123(7) -- 2.0% --
Catherine A. Bobinski............................. 18,703 -- * --
All directors and executive officers as a group... 515,366(5)(7) 1,825,660(4) 4.4% 100%
</TABLE>
- ---------------
(1) These securities are owned by various individual and institutional
investors, including T. Rowe Price Small Cap Value Fund, Inc. (which owns
1,025,390 shares, representing 9.0% of the shares outstanding), which T.
Rowe Price Associates, Inc. ("Price Associates") serves as investment
adviser with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the Securities
Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of
such securities; however, Price Associates expressly disclaims that it is,
in fact, the beneficial owner of such securities. According to their joint
Schedule 13G on file with the Securities and Exchange Commission ("SEC"),
Price Associates, Inc. and T. Rowe Price Small Cap Value Fund, Inc. have
sole voting power with respect to 52,000 and 1,025,390 shares, respectively,
have sole dispositive power with respect to 1,079,890 and 0 shares,
respectively, and have no shared voting or dispositive power.
(2) According to their joint Form 13D on file with the SEC, Mr. Baron, Baron
Capital Group, Inc., ("BCG"), Baron Capital, Inc. ("BCI"), and Baron Capital
Management, Inc. ("BCM") have sole voting and dispositive power with respect
to 596,875 shares, and Mr. Baron, BCG, BCI, BAMCO, Inc., BCM and Baron Asset
Fund have shared voting and dispositive power with respect to 3,971,433
shares, 3,971,433 shares, 737,183 shares, 3,234,250 shares, 737,183 shares,
and 2,890,500 shares, respectively.
(3) According to their joint Schedule 13G on file with the SEC, Goldman, Sachs &
Co. and the Goldman Sachs Group, L.P. each have shared voting power as to
378,753 shares and have shared dispositive power as to 578,353 shares and
have no sole voting or dispositive power.
(4) Includes 315,023 shares of Class B Common Stock reserved for issuance upon
exercise of stock options outstanding pursuant to the Corporation's 1992
Stock Option Plan.
2
<PAGE> 5
(5) Includes the following shares of Class A Common Stock reserved for issuance
upon exercise of stock options outstanding pursuant to the Corporation's
1997 Non-Employee Directors Stock Option Plan: Mr. Misiewicz, 1,162 shares;
Mr. Stevens, 1,378 shares; Mr. Alt, 1,014 shares; Ms. Allen, 844 shares; and
all executive officers and directors as a group, 4,398 shares.
(6) Mr. Misiewicz has shared voting power with his son as to 191 of these
shares.
(7) 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. Bush, 93,054 shares; Mr. Goldstein, 141,188
shares; Ms. Bobinski, 18,107 shares; and all directors and executive
officers as a group, 406,423 shares.
* Less than 1%.
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, 54.................. President and Chief Executive Officer of 12/92
BBDO Minneapolis and director of BBDO,
North America (advertising agency)
since 1989
Joseph P. Misiewicz, 52................. Chairperson, Telecommunications 12/92
Department since 1998; Professor,
Telecommunications Department at Ball
State University from 1996 to 1998 and
Chairperson from 1990 to 1996
DIRECTORS TO BE ELECTED BY HOLDERS OF COMMON STOCK:
Edward K. Christian, 54................. President, Chief Executive Officer and 3/92
Chairman of the Corporation and its
predecessor since 1986
Kristin Allen, 39....................... Managing Director, Credit Suisse First 7/97
Boston Corporation since 1997 and in
various other positions since 1992
Donald Alt, 53.......................... Broadcasting investor; Chairman of 7/97
Forever Broadcasting since 1996; Chief
Financial Officer of Keymarket Radio
Companies from 1984 to 1996
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS SINCE
------------ --------------------------- --------
<S> <C> <C>
Gary Stevens, 59........................ 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
Ms. Allen and Messrs. Alt, 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 four times during the
Corporation's last fiscal year. The Compensation Committee also administers the
Corporation's 1992 Stock Option Plan.
The Board of Directors has a Finance and Audit Committee, currently
comprised of Ms. Allen and Messrs. Alt (Chair), Firestone, Misiewicz and
Stevens, 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 four meetings during 1998. 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 or she 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. Under the Corporation's 1997
Non-Employee Directors Stock Option Plan, options are granted to the directors
in lieu of these fees. On the last business day of January of each year each
eligible director is automatically 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 Class A Common Stock on the
last trading day of the December immediately preceding the date of grant less
$.01 per share. The options are immediately vested and exercisable at an
exercise price of $.01 per share and may be exercised for a period of 10 years
from the date of grant. 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 1998. 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, 1998, 1997, and 1996 of the Corporation's chief executive officer
and the other most highly compensated executive officers whose salary and bonus
exceeded $100,000.
4
<PAGE> 7
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.......................... 1998 $360,516 $606,502(3) 250,965 $2,878
President, CEO 1997 $350,012 $275,000 9,375 $3,247
1996 $335,000 $250,000 7,812 $3,427
Steven J. Goldstein.......................... 1998 $279,996 $ 70,000 25,594 $2,048
Executive Vice President and Group 1997 $247,000 $ 60,000 6,250 $1,914
Program Director 1996 $240,000 $ 56,000 3,125 $2,181
Samuel D. Bush(4)............................ 1998 $176,057 $ 17,500 88,054 $ 854
Vice President, Chief 1997 $ 72,868 $ 5,500 5,000 $ 256
Financial Officer
Catherine A. Bobinski........................ 1998 $ 90,000 $ 12,500 10,969 $ 495
Vice President, Controller
</TABLE>
- ---------------
(1) Restated to reflect five-for-four stock splits effective July 31, 1995,
April 30, 1996, April 1, 1997 and May 29, 1998.
(2) Consists of life insurance premiums or payments in lieu thereof in 1998,
1997, and 1996.
(3) Includes bonus of $331,502 to forgive 20% of a loan from the Corporation and
federal and state income tax liabilities related to such loan. See
"Employment Contracts" below and "Certain Transactions."
(4) Mr. Bush commenced employment with the Corporation on September 8, 1997.
The following table sets forth certain information relating to option
grants pursuant to the Corporation's 1992 Stock Option Plan (the "Option Plan")
in the year ended December 31, 1998 to the individuals named in the Summary
Compensation Table above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------ POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS/SARS EXERCISE STOCK PRICE
UNDERLYING GRANTED TO OR GRANT- APPRECIATION FOR
OPTIONS/ EMPLOYEES BASE DATE MARKET OPTION TERM(4)(5)
SARS IN FISCAL PRICE PRICE EXPIRATION ------------------------
NAME GRANTED(1) YEAR ($/SH) PER SHARE DATE 5% 10%
---- ---------- ------------ -------- ----------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Edward K. Christian............ 250,965(2) 46% $16.50 $16.50 7/23/08 $2,604,204 $6,599,564
Steven J. Goldstein............ 25,594(3) 5% $16.50 $16.50 7/23/08 $ 265,583 $ 673,039
Samuel D. Bush................. 98,054(2) 16% $16.50 $16.50 7/23/08 $ 913,715 $2,315,534
Catherine A. Bobinski.......... 10,969(3) 2% $16.50 $16.50 7/23/08 $ 113,823 $ 288,449
</TABLE>
- ---------------
(1) None of the options granted were options with tandem SARs and no
free-standing SARs were granted.
(2) Granted to the named executive officers on July 23, 1998 pursuant to the
Option Plan. The options become exercisable in 20% increments on March 1,
1999, 2000, 2001, 2002 and 2003, respectively, provided that the fair market
value of Class A Common Stock attains $29.08 per share at any time within
the five-year period commencing on the date of grant and the average fair
market value remains at or above such price for a period of at least 40
consecutive trading days. If such price is not attained and
5
<PAGE> 8
maintained as set forth, the options will not vest or be exercisable to any
extent. If a Change of Control (as defined in the Option Plan) occurs, these
options would become immediately exercisable.
(3) Granted to the named executive officers on July 23, 1998 pursuant to the
Option Plan. The options become exercisable in 20% increments on March 1,
1999, 2000, 2001, 2002 and 2003, respectively. If a Change of Control (as
defined in the Option Plan) occurs, these options would become immediately
exercisable.
(4) 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
$26.88 and 10% results in a stock price per share of $42.80.
(5) 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 options
exercised during the year ended December 31, 1998 by the individuals named in
the Summary Compensation Table and unexercised options to purchase the
Corporation's Common Stock granted under the Option Plan to the individuals
named in the Summary Compensation Table above.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS/SARS AT VALUE OF UNEXERCISED
FY-END(1) IN-THE-MONEY OPTIONS/
--------------------------- 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........... -- -- 40,154 274,869 $ 823,157 $5,634,815
Steven J. Goldstein........... 65,896 $840,475 100,419 40,769 $2,058,590 $ 835,765
Samuel D. Bush................ -- -- 1,000 92,054 $ 20,500 $1,887,107
Catherine A. Bobinski......... -- -- 4,852 13,255 $ 99,466 $ 271,728
</TABLE>
- ---------------
(1) Reflects five-for-four stock splits effective July 31, 1995, April 30, 1996,
April 1, 1997 and May 29, 1998.
(2) Based on the closing price on the American Stock Exchange of the
Corporation's Common Stock on December 31, 1998 ($20.50).
COMPENSATION COMMITTEE REPORT
OVERVIEW
The Compensation Committee of the Board of Directors (the "Committee") is
comprised of five 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
6
<PAGE> 9
annual cash compensation for the four senior executives named in the Summary
Compensation Table, the other executive officers 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. 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 9 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. In 1998, the options that were granted to Mr. Christian, as well
as those granted to Mr. Bush and Mr. Warren Lada, the Vice President of
Operations, were based on a five year plan whereby the total number of options
that would normally have been granted over the period 1998 to 2003 were granted
in 1998. However, in addition to the historic five year vesting period that
would be normal for past grants, the options granted Mr. Christian, Mr. Bush and
Mr. Lada require that a target stock price representing minimally accepted
annual stock price growth be obtained and maintained for a period of 40
consecutive days. It is believed that this structure assures that these three
members of the management team are directly tied to shareholder interests,
mainly growing the stock price.
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 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 1998, the Corporation's most highly compensated executive officer was
Edward K. Christian, President and Chief Executive Officer. Options to purchase
250,965 shares of Class B Common Stock at a price of $16.50 per share were
granted to Mr. Christian in 1998. In addition to the options granted to Mr.
Christian, his salary was increased by $10,815 or 3% effective January 1, 1999.
In determining the 1998 bonus paid to Mr. Christian and the salary increase
for 1999, the Committee took into account the Corporation's financial
performance in 1998 and the criteria discussed above. During the year ended
December 31, 1998, the Corporation's net revenue increased by 14.5% over the
year ended December 31, 1997 to $75.9 million. Broadcast cash flow (defined as
station operating income excluding depreciation, amortization and corporate
general and administrative expenses) increased by 21.7% and net income for the
year ended December 31, 1998 was $6.4 million compared to $4.5 million for the
year ended December 31, 1997. 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 29.3% over the year ended December 31, 1997.
Set forth below is a chart summarizing the Corporation's operating results over
the past three fiscal years.
7
<PAGE> 10
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Net Operating Revenue.................................. $75,871 $66,258 $56,240
Broadcast Cash Flow.................................... $27,327 $22,462 $19,611
Net Income............................................. $ 6,351 $ 4,492 $ 3,935
After-tax Cash Flow.................................... $14,328 $11,083 $10,143
</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. 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
Kristin Allen
Donald Alt
Jonathan Firestone
Joseph P. Misiewicz
Gary Stevens (Chair)
8
<PAGE> 11
CORPORATE PERFORMANCE
Set forth below is a line graph comparing the cumulative total stockholder
return for the years ended December 31, 1994, 1995, 1996, 1997 and 1998 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: Sinclair Broadcast Group Inc., Chancellor Media Corp.,
Triathlon Broadcasting Co., Clear Channel Communications Inc., Jacor
Communications Inc., Children's Broadcasting Corp., Emmis Broadcasting Corp.,
Heftel Broadcasting Corp. and Cox Radio, Inc. (the "Peer Group"). The graph and
table assume that $100 was invested on December 31, 1993 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>
SAGA COMMUNICATIONS AMEX MARKET VALUE INDEX PEER GROUP
------------------- ----------------------- ----------
<S> <C> <C> <C>
'12/31/93' 100.00 100.00 100.00
'12/31/94' 83.90 93.30 115.90
'12/31/95' 118.60 120.00 190.70
'12/31/96' 177.90 121.90 280.20
'12/31/97' 242.40 152.40 636.50
'12/31/98' 292.30 162.80 805.40
</TABLE>
EMPLOYMENT CONTRACTS
Mr. Christian has an employment agreement with the Corporation which
expires in 2002. The agreement provides for certain compensation, death,
disability and termination benefits, as well as the use of an automobile. The
1998 base annual salary under the agreement was $360,516, subject to annual cost
of living adjustments. The Board of Directors has increased Mr. Christian's
salary under the agreement to $371,331 effective January 1, 1999. 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 provides that
Mr. Christian's aggregate compensation in any year may not be less than his
average aggregate annual compensation for 1994, 1995 and 1996 unless his or the
Corporation's performance shall have declined substantially. 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.
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<PAGE> 12
The employment agreement also provides that upon the sale or transfer of
control of the Corporation, Mr. Christian's employment will be terminated and he
will be paid an amount equal to five times the average of his total compensation
for the preceding three years plus an additional amount as is necessary for
applicable income taxes related to the payment.
The employment agreement was amended effective December 8, 1998 to provide
that the unpaid balance of his note to the Corporation in the amount of $690,700
(see "Certain Transactions -- Loan to Principal Stockholder") will be ratably
forgiven 20% per year in each of the years 1998, 1999, 2000, 2001 and 2002.
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; OTHER INFORMATION
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 1997 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 bears interest at a rate per annum
equal to the lowest rate necessary to avoid the imputation of income for federal
income tax purposes. Although the loan had been secured by the Class B Common
Stock owned by Mr. Christian, in December 1998 the Board of Directors authorized
the termination of the pledge agreement. As described above, the loan is being
ratably forgiven 20% per year in each of the years 1998, 1999, 2000, 2001 and
2002. See "Compensation of Directors and Officers -- Employment Contracts."
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, 1999 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 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, 1998 were furnished at customary rates.
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<PAGE> 13
The Board recommends a vote FOR ratification of Ernst & Young LLP as
independent auditors for the fiscal year ending December 31, 1999.
APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan (the "Plan") was adopted by the Board of
Directors on August 31, 1998 to provide a means to attract and retain
highly-qualified employees and to promote ownership by employees of a
proprietary interest in the Corporation, thereby aligning their interests more
closely with the interests of the stockholders. Approval of the 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
Plan.
DESCRIPTION OF THE PLAN
The principal features of the Plan are summarized below. However, such
summary is qualified in its entirety by reference to the terms of the Plan,
copies of which are available without charge upon written request to the
Secretary of the Corporation.
Participation. Employees who have completed six consecutive months of
service and who are customarily employed by the Corporation or any of its
subsidiaries for a minimum of 20 hours per week will be eligible to participate
in the Plan. However, any employee possessing 5% or more of the total combined
voting power or value of all classes of stock of the Corporation or any
subsidiary or any employee having rights under all employee stock purchase plans
of the Corporation and its subsidiaries to purchase more than $25,000 of the
Corporation's Common Stock will not be eligible to participate.
Administration. The Plan will be administered by the Plan Administrator,
Equiserve, the Corporation's stock transfer agent. The Plan Administrator will
be responsible for the general operation, administration and interpretation of
the Plan and for carrying out its provisions.
Terms. The Plan is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code. Pursuant to the terms of the
Plan, participants will be permitted to elect to defer between 1% and 10% of
their compensation and to apply such amount towards the purchase of the
Corporation's Class A Common Stock. The number of shares of Class A Common Stock
to be purchased will be equal to the cash value of the amount deferred in any
calendar quarter divided by 85% of the closing price of the Class A Common Stock
on the American Stock Exchange on the last day of such quarter. Shares will be
purchased on a quarterly basis and allocated in full and fractional amounts to
each participant as soon as practicable after the end of each quarter. The
maximum number of shares available for sale under the Plan is 1,000,000.
A participant in the Plan is not permitted to dispose of any shares
purchased under the Plan until two years after the later of the beginning of the
quarter in which the compensation was deferred (the "commencement of an
offering") or the expiration of one year from the date the shares were
transferred to the participant.
Stock Dividends and Splits. Appropriate adjustments will be made to fairly
preserve the intended benefits of the Plan in the event of any change in the
Corporation's stock by reason of any stock dividend, stock split, combination
and exchange of shares, recapitalization, merger, or consolidation.
Duration and Amendment of Plan. Unless extended with the approval of the
stockholders, the Plan will terminate on the earlier of the issuance of
1,000,000 shares pursuant to the Plan or December 31, 2008. The Plan may be
amended or terminated by the Board at any time. No amendment that would
materially increase the benefits accruing to participants under the Plan,
materially increase the number of shares issuable under
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<PAGE> 14
the Plan or materially modify the requirements as to eligibility for
participation may be made without the approval of a majority of the
stockholders.
Federal Income Tax Consequences. Participants do not realize taxable
income at the commencement of an offering or at the time shares are purchased
under the Plan.
If no disposition of shares purchased under the Plan is made by the
participant within two years from the date of the commencement of an offering or
within one year from the purchase date, then (a) upon sale of such shares, 15%
of the fair market value of the stock at the commencement of the offering period
(or, if less, the amount realized on sale of such shares in excess of the
purchase price) is taxed to the participant as ordinary income with any
additional gain taxed as a long-term capital gain and any loss sustained is
treated as a long-term capital loss and (b) no deduction is allowed to the
Corporation for Federal income tax purposes.
If the participant dies at any time while owning shares purchased under the
Plan, then (a) 15% of the fair market value of the stock at the commencement of
the offering period (or, if less, the fair market value of such shares on the
date of death in excess of the purchase price) is taxed to the participant as
ordinary income in the year of death and (b) no deduction is allowed to the
Corporation for Federal income tax purposes.
If shares of Class A Common Stock purchased under the Plan are disposed of
prior to the expiration of the two-year and one-year holding periods described
above, then (a) the participant realizes ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of the shares on the date of purchase (or, if less, the amount realized on sale
of such shares) over the purchase price thereof, and (b) the Corporation is
entitled to deduct such amount. Any further gain realized is taxed as a
short-term or long-term capital gain and will not result in any deduction by the
Corporation.
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 1998
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 2000 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 2000 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 7, 1999, in order to be included in the Corporation's proxy statement
relating to the 2000 Annual Meeting. All such proposals which are not to be
included in the Corporation's proxy statement relating to the 2000 Annual
Meeting must be received at the above address on or before February 20, 2000.
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<PAGE> 15
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 6, 1999
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<PAGE> 16
1161-PS-99
<PAGE> 17
SAGA COMMUNICATIONS, INC. 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 in the enclosed envelope.
COMPANY'S RECENT DEVELOPMENTS
On February 23, 1999, the Company reported a 41% increase in net income for the
year ended December 31, 1998.
On February 22, 1999, the Company announced that it had entered into an
agreement to acquire the assets of WXVT-TV, Greenville, Mississippi for
$5,200,000. WXVT-TV is a CBS affiliate on Channel 15.
[1161-SAGA COMMUNICATIONS, INC.] [FILE NAME: SGA76A.ELX] [VERSION - 1] [3/30/99]
DETACH HERE
- --------------------------------------------------------------------------------
[X] Please mark
votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU INSTRUCT THE PROXIES TO VOTE FOR ALL
PROPOSALS.
1. ELECTION OF DIRECTORS:
Nominees: Jonathan Firestone, Joseph P. Misiewicz,
Edward K. Christian, Kristin M. Allen,
Donald J. Alt and Gary Stevens
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ]
__________________________________________________
INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name above.
2. To ratify the selection of Ernst & FOR AGAINST ABSTAIN
Young LLP as independent auditors [ ] [ ] [ ]
of the Corporation for the fiscal
year ending December 31, 1999.
3. To ratify the adoption of the Saga [ ] [ ] [ ]
Communications, Inc. Employee
Stock Purchase Plan.
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: _______
<PAGE> 18
PROXY
SAGA COMMUNICATIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward K. Christian, Samuel D. Bush 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 all powers the
undersigned would possess if personally present to vote the Class A Common
Stock, $.01 par value, of the undersigned in Saga Communications, Inc. at the
Annual Meeting of its Stockholders to be held May 10, 1999 or any adjournment
thereof. This proxy when properly executed will be voted in the manner directed
herein by the stockholder. If no direction is made, this proxy will be voted FOR
Proposals 1,2,3 and 4.
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SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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