<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CAPSTAR BROADCASTING CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[CAPSTAR LOGO] July 2, 1999
To our Stockholders:
As you know, we are currently soliciting proxies for a special meeting of
stockholders of Capstar Broadcasting Corporation to be held on July 13, 1999, at
which you will be asked to consider and vote upon a proposal to approve and
adopt the merger agreement relating to the proposed merger of a wholly-owned
subsidiary of Chancellor Media with and into Capstar, with Capstar surviving the
merger as a wholly-owned subsidiary of Chancellor Media. We are enclosing a
supplement to the joint proxy statement/prospectus to provide you with
information concerning an amendment, executed on June 30, 1999, to the merger
agreement.
Under the terms of the original merger agreement, in connection with the merger
affiliates of Hicks, Muse, Tate & Furst Incorporated were to receive
approximately $31.7 million in fees at the closing of the merger in satisfaction
of contractual arrangements that they had with Capstar. The amendment of the
merger agreement provides that in lieu of those fees, affiliates of Hicks Muse
will receive $10.0 million in cash at the closing of the merger, together with
5-year options to purchase 969,616 shares of Chancellor Media common stock at an
exercise price of $52.00 per share, with the exercisability of the options
generally conditioned upon the average fair market value of Chancellor Media
common stock, calculated on a daily basis, being equal to or exceeding $100.00
per share for a period of 30 consecutive trading days during the five year
period following the merger.
THE BOARD OF DIRECTORS OF CAPSTAR HAS APPROVED THE AMENDMENT TO THE MERGER
AGREEMENT AND REAFFIRMS ITS VIEW THAT THE MERGER IS FAIR TO, ADVISABLE AND IN
THE BEST INTEREST OF CAPSTAR'S STOCKHOLDERS AND RECOMMENDS THAT YOU VOTE "FOR"
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT, AS AMENDED BY THE FIRST
AMENDMENT.
All references to the merger agreement in the joint proxy statement/prospectus
and related proxies are deemed to refer to the merger agreement, as amended by
the first amendment. If you have already delivered a properly executed proxy,
you need not reexecute a proxy unless you wish to change your vote. If you wish
to change or revoke your vote, please contact Harris Trust & Savings Bank, our
transfer agent, at the address set forth in the accompanying supplement to
receive a new proxy card.
It is important that your shares be represented at the annual meeting either in
person or by proxy. Your prompt attention to this matter is greatly appreciated.
Sincerely,
/s/ Steven Hicks
R. Steven Hicks
President and Chief Executive Officer
<PAGE> 3
SUPPLEMENT TO JOINT PROXY STATEMENT/PROSPECTUS
[CHANCELLOR MEDIA CORP. LOGO][CAPSTAR LOGO]
<TABLE>
<S> <C>
CHANCELLOR MEDIA CORPORATION CAPSTAR BROADCASTING CORPORATION SPECIAL
ANNUAL MEETING OF STOCKHOLDERS MEETING OF STOCKHOLDERS TO BE HELD JULY
TO BE HELD JULY 13, 1999 13, 1999
</TABLE>
This supplement dated July 1, 1999 is being furnished to stockholders of
Chancellor Media Corporation and Capstar Broadcasting Corporation as a
supplement to the joint proxy statement/prospectus dated June 9, 1999 previously
sent to the Chancellor Media and Capstar stockholders on or about June 11, 1999
in connection with the solicitation of proxies by the Board of Directors of
Chancellor Media for use at the annual meeting of stockholders of Chancellor
Media to be held on July 13, 1999 and by the Board of Directors of Capstar for
use at the special meeting of stockholders of Capstar to be held on July 13,
1999.
This supplement relates to an amendment of the merger agreement under which
Chancellor Media has agreed to acquire Capstar. This supplement is a supplement
to and should be read in conjunction with the joint proxy statement/prospectus
dated June 9, 1999. Any statement contained in the joint proxy
statement/prospectus will be deemed to be modified and superseded to the extent
that a statement set forth in this supplement, including the annexes hereto,
modifies or supersedes such statement.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This supplement to the joint proxy statement/prospectus is dated July 1, 1999
and it was first mailed to stockholders on or about July 2, 1999.
<PAGE> 4
FIRST AMENDMENT TO MERGER AGREEMENT; BACKGROUND AND REASONS
Under the merger agreement, at the effective time of the merger, affiliates of
Hicks, Muse, Tate & Furst Incorporated, some of the largest stockholders of both
Chancellor Media and Capstar, were to receive fees from Capstar of $31.7 million
in the aggregate in satisfaction of the termination of monitoring and oversight
and financial advisory agreements they had with Capstar. After the mailing of
the joint proxy statement/prospectus to stockholders of Chancellor Media and
Capstar, while soliciting proxies on behalf of the Board of Directors of
Chancellor Media, members of management had numerous conversations with various
stockholders of Chancellor Media. In connection with these conversations, some
of Chancellor Media's stockholders expressed concern regarding the amount of the
termination fees for the monitoring and oversight and financial advisory
agreements that Hicks Muse would have contractually received at the closing of
the merger. Accordingly, management of Chancellor Media approached
representatives of Hicks Muse relating to the potential for renegotiation or
restructuring of these fees.
Following various conversations held among members of management of Chancellor
Media and Capstar and representatives of Hicks Muse beginning during the week of
June 21, 1999, Chancellor Media, Capstar and Hicks Muse agreed to modify the
terms of the merger agreement to provide for such fees to be paid as follows:
(1) for termination of the Monitoring and Oversight Agreement, the
grant to Hicks, Muse & Co. Partners, L.P. ("Hicks Muse Partners") of a
5-year option to purchase 634,517 shares of Chancellor Media common stock
at an exercise price of $52.00 per share, subject to the exercisability of
the option being conditioned upon the average fair market value of
Chancellor Media common stock, calculated on a daily basis, being equal to
or exceeding $100.00 per share for a period of 30 consecutive trading days
during the five year period following the merger; provided that such option
will no longer be subject to such exercisability threshold following a
change in control; and
(2) for termination of the Financial Advisory Agreement, (A) a
one-time cash payment, payable at the closing of the merger, of $10.0
million and (B) the grant to Hicks Muse Partners of an additional option
with the same terms as the option described in clause (1) above for 335,099
shares of Chancellor Media common stock.
The options are designed to have a present value equal to $21.7 million, the
amount by which the cash payment to Hicks Muse has been reduced. The present
value of such option was calculated using the Black-Scholes option pricing
model, which takes into account a number of variables. The following four
variables were relevant to the calculation of the present value of the Hicks
Muse option: (i) the risk-free rate of interest -- 5.92%, based on five-year
U.S. Treasury Strip data; (ii) the exercise price -- $52.00 per share, which
represents the closing price of Chancellor Media's common stock on June 25,
1999, the last trading day prior to the date on which the agreement regarding
the option was reached with Hicks Muse, (iii) the term of the option -- five
years; and (iv) a volatility factor -- 37.9%, which reflects the average
volatility for the broadcasting industry over a five-year period. Such present
value was calculated without taking into account the fact that the option may
have no value if the $100.00 stock price threshold is not met. If such fact had
been taken into account, additional options would have been granted to achieve
such present value. The $100.00 per
2
<PAGE> 5
share exercisability threshold was intended to further align the interests of
Hicks Muse with Chancellor Media's other stockholders.
On June 30, 1999, the first amendment to the merger agreement was submitted to
and approved by each of the Boards of Directors of Chancellor Media and Capstar,
with Messrs. Thomas O. Hicks, Michael J. Levitt and Lawrence D. Stuart, Jr.,
affiliates of Hicks Muse, abstaining from the vote in each case.
The first amendment to the merger agreement is attached as Annex S-1 to this
supplement and is hereby incorporated by reference. All references to the merger
agreement in the joint proxy statement/prospectus and related proxies are deemed
to refer to the merger agreement as amended by the first amendment.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Three directors of each of Chancellor Media and Capstar, Messrs. Thomas O.
Hicks, Michael J. Levitt and Lawrence D. Stuart, Jr., also serve as officers,
directors and partners of various entities affiliated with Hicks Muse.
Following the first amendment to the merger agreement, the following table sets
forth the approximate pro rata share attributable to each of Messrs. Thomas O.
Hicks, Stuart and Levitt of the fee income to be received by affiliates of Hicks
Muse at the completion of the merger.
PRO RATA SHARE OF HICKS MUSE FEES
<TABLE>
<CAPTION>
FEE PAID FEE PAID IN
NAME IN CASH OPTIONS
- ---- -------------- -----------
(NUMBER OF
(IN THOUSANDS) SHARES)
<S> <C> <C>
Thomas O. Hicks................................... $2,769 268,487
Lawrence D. Stuart, Jr............................ 541 52,456
Michael J. Levitt................................. 1,027 99,580
</TABLE>
The following table sets forth certain information regarding the options to be
received by Hicks Muse at the closing of the merger.
HICKS MUSE OPTIONS
<TABLE>
<CAPTION>
NUMBER OF
SHARES GRANT DATE
UNDERLYING EXERCISE PRICE EXPIRATION PRESENT VALUE
NAME OPTIONS(#) ($/SHARE) DATE $(1)
- ---- ----------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
Hicks, Muse & Co. Partners, L.P. ..... 969,616 52.00 7/13/04 21,700,000
</TABLE>
- ---------------
(1) The present value of each grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: exercise
price of $52.00 per share; expected volatility of 37.9%; risk-free interest
rate of 5.92%; and expected life of 5 years. No discount was made for the
fact that the option may have no value if the $100.00 stock price threshold
is not met.
3
<PAGE> 6
REVOCATION OF PROXIES
CHANCELLOR MEDIA STOCKHOLDERS
Any Chancellor Media stockholder that has previously delivered a properly
executed proxy need NOT reexecute a proxy. A proxy, previously delivered, may,
however, be revoked by either
(1) filing with The Bank of New York in its capacity as transfer agent for the
Chancellor Media common stock, at or before the Chancellor Media annual meeting,
a written notice of revocation bearing a later date than the proxy;
(2) duly executing a subsequent proxy relating to the same shares of Chancellor
Media common stock and delivering it to the Chancellor Media transfer agent at
or before the meeting; or
(3) attending the Chancellor Media annual meeting and voting in person, although
attendance at the meeting will not in and of itself constitute a revocation of
proxy.
Any written notice revoking a proxy or request for an additional proxy should be
sent to:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Proxy Department
CAPSTAR STOCKHOLDERS
Any Capstar stockholder that has previously delivered a properly executed proxy
need NOT reexecute a proxy. A proxy, previously delivered, may, however, be
revoked by either
(1) filing with Harris Trust & Savings Bank in its capacity as transfer agent
for the Capstar common stock, at or before the Capstar special meeting, a
written notice of revocation bearing a later date than the proxy;
(2) duly executing a subsequent proxy relating to the same shares of Capstar
common stock and delivering it to the Capstar transfer agent at or before the
meeting; or
(3) attending the Capstar special meeting and voting in person, although
attendance at the meeting will not in and of itself constitute a revocation of
proxy.
Any written notice revoking a proxy or request for an additional proxy should be
sent to:
Harris Trust & Savings Bank
311 W. Monroe Street, 144th Floor
Chicago, Illinois 60606
Attn: Proxy Department
4
<PAGE> 7
ANNEX S-1
FIRST AMENDMENT TO
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER,
dated as of June 30, 1999 (the "First Amendment"), is being entered into by and
among CHANCELLOR MEDIA CORPORATION, a Delaware corporation ("Chancellor"),
CAPSTAR BROADCASTING CORPORATION, a Delaware corporation ("Capstar"), and CMC
MERGER SUB, INC., a Delaware corporation and wholly-owned subsidiary of
Chancellor ("Merger Sub").
RECITALS
WHEREAS, Chancellor, Capstar and Merger Sub are parties to that certain
Amended and Restated Agreement and Plan of Merger, dated as of April 29, 1999
(the "Merger Agreement");
WHEREAS, Chancellor, Capstar and Merger Sub desire by this First Amendment
to amend certain provisions of the Merger Agreement; and
WHEREAS, the respective Boards of Directors of Chancellor, Capstar and
Merger Sub have approved this First Amendment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this First Amendment and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Amendments. Section 7.3(e) of the Merger Agreement is hereby
amended and restated in its entirety to read as follows:
"(e) Financial Services Agreement. Capstar and certain of its
subsidiaries and Hicks Muse shall have entered into an amendment to each
of the Monitoring and Oversight Agreement (the "Capstar M&O Agreement")
between Hicks Muse and Capstar, the Monitoring and Oversight Agreement
(the "Partners M&O Agreement") between Hicks Muse and Capstar Partners,
the Financial Advisory Agreement (the "Capstar Financial Advisory
Agreement") between Hicks Muse and Capstar, and the Financial Advisory
Agreement (the "Partners Financial Advisory Agreement") between Hicks
Muse and Capstar Partners, that provide (i) the Partners M&O Agreement
will be terminated at the Effective Time with no further obligation of
any party thereto, (ii) the Partners Financial Advisory Agreement will
be terminated at the Effective Time with no further obligation of any
party thereto, and (iii) the Capstar M&O Agreement will be terminated at
the Effective Time and, in consideration therefor, Chancellor Media
shall grant Hicks Muse an option (a "Hicks Muse Option") at the Closing
Date to purchase up to 634,517 shares of Chancellor Common Stock. The
Hicks Muse Option shall have an exercise price of $52.00 per share and
shall expire on the fifth anniversary of the Closing Date; provided,
that the Hicks Muse Option shall only become exercisable after the date
on which the average fair market value of a share of Chancellor Common
Stock, calculated on a daily basis, equals or exceeds $100.00 per share
for a period of 30 consecutive trading
S-1
<PAGE> 8
days during the period from (and including) the Closing Date through
(and including) the fifth anniversary of the Closing Date; provided
further that the Hicks Muse Option will not be subject to such
exercisability threshold following a change in control, and (iv) the
Capstar Financial Advisory Agreement will be terminated at the Effective
Time and in consideration therefor, Hicks Muse will receive a fee from
Capstar of $10 million in cash, payable at the Closing, and Chancellor
shall grant to Hicks Muse a Hicks Muse Option on the Closing Date to
purchase up to 335,099 shares of Chancellor Common Stock. Prior to the
Closing, Chancellor shall use its reasonable best efforts to enter into
a joinder to the Chancellor Stockholders Agreement with each proposed
holder of the Hicks Muse Options (or otherwise enter into a new
agreement with any such holder and the existing parties to the
Chancellor Stockholders Agreement) providing for rights of registration
under the Securities Act of all shares of Chancellor Common Stock
issuable upon exercise of the Hicks Muse Options on substantially
similar terms as are provided in the Chancellor Stockholders Agreement,
with such changes as are described in the supplement to the Chancellor
Disclosure Letter dated April 29, 1999."
2. Merger Agreement Otherwise Unchanged. Except as set forth in this
First Amendment, the Merger Agreement shall remain in full force and effect
in accordance with its terms. In the event of any conflict between the
provisions of this First Amendment and the Merger Agreement, the provisions
of this First Amendment shall control.
3. Rules of Construction; Governing Law. Capitalized terms used herein
but not otherwise defined shall have the meanings assigned to such terms in
the Merger Agreement. This First Amendment shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless
of the laws that may otherwise govern under applicable principles of
conflicts of laws thereof.
4. Counterparts. This First Amendment may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
will constitute one and the same instrument and shall be effective when one
or more counterparts have been signed by each of the parties and delivered
to the other parties.
[The remainder of this page is intentionally left blank.]
S-2
<PAGE> 9
IN WITNESS WHEREOF, this First Amendment has been duly executed and delivered by
the duly authorized officers of Chancellor, Capstar and Merger Sub effective as
of the date first written above.
CHANCELLOR MEDIA CORPORATION
By: /s/ THOMAS O. HICKS
----------------------------------------
Name: Thomas O. Hicks
Title: Chairman and Chief Executive Officer
CAPSTAR BROADCASTING CORPORATION
By: /s/ R. STEVEN HICKS
----------------------------------------
Name: R. Steven Hicks
Title: President and Chief Executive
Officer
CMC MERGER SUB, INC.
By: /s/ THOMAS O. HICKS
----------------------------------------
Name: Thomas O. Hicks
Title: Chairman
S-3
