<PAGE>
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use
[X] Definitive Proxy Statement* of the Commission
[ ] Definitive Additional Materials Only (as permitted)
by Rule 14a-6(c)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
SFX ENTERTAINMENT, INC.
-----------------------
(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)(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:
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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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* Amendment to Definitive Proxy Statement filed April 30, 1999.
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<PAGE>
SFX LOGO
May 5, 1999
Dear Stockholder:
On behalf of the Board of Directors, you are cordially invited to attend
our first annual meeting of stockholders on Tuesday, June 8, 1999, in New York,
New York. At the meeting, you will hear a report on our operations and have a
chance to meet your directors and executive officers.
The formal notice of the meeting and the proxy statement are attached to
this letter. To have your vote recorded, you should sign, date and return your
proxy card in the enclosed envelope as soon as possible, even if you currently
plan to attend the annual meeting. By doing so, you will ensure that your
shares are represented and voted at the meeting. If you decide to attend, you
may still vote your shares in person, if you wish. Thank you for your continued
support of SFX.
Sincerely,
/s/ Robert F.X. Sillerman
- ---------------------------------
Robert F.X. Sillerman
Executive Chairman and Member of the
Office of the Chairman
<PAGE>
SFX LOGO
NOTICE OF 1999 ANNUAL MEETING OF
THE STOCKHOLDERS OF SFX ENTERTAINMENT, INC.
TIME:
9:00 a.m., Eastern Standard Time
DATE:
June 8, 1999
PLACE:
Winston & Strawn
200 Park Avenue, 41st Floor
New York, New York 10166-4193
PURPOSE:
o Elect directors
o Consider and act upon a board proposal to approve
SFX's 1999 Stock Option and Restricted Stock Plan
o Ratify appointment of independent accountants
o Conduct other business if properly raised
Only stockholders of record as of May 5, 1999 may vote at
the meeting.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND
RETURN YOUR PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
/s/ Howard J. Tytel
--------------------------------
Howard J. Tytel
Executive Vice President, Member
Of the Office of the Chairman, General
Counsel and Secretary
May 5, 1999
<PAGE>
SFX ENTERTAINMENT, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
TABLE OF CONTENTS PAGE
- ------------------------------------------------------------------------ -----
General Information .................................................... 1
ITEM 1 -- ELECTION OF DIRECTORS ........................................ 2
Director Compensation ............................................... 5
Board Committees .................................................... 5
Ownership of Securities by Directors, Officers
and Certain Beneficial Owners ....................................... 6
Stock Performance Graph ................................................ 8
ITEM 2 -- RATIFICATION OF INDEPENDENT ACCOUNTANTS ...................... 9
ITEM 3 -- APPROVAL OF SFX'S 1999 STOCK OPTION AND RESTRICTED STOCK PLAN 9
Executive Compensation ................................................. 12
Certain Relationships and Related Party Transactions ................... 17
Section 16(a) Beneficial Ownership Reporting Compliance ................ 21
Additional Information ................................................. 21
<PAGE>
GENERAL INFORMATION
WHO MAY VOTE
Stockholders of SFX as of the close of business on May 5, 1999 are entitled to
vote at the meeting or any adjournment or postponement. You are entitled to one
vote for each share you held on such date. This proxy statement and the
accompanying form of proxy are being mailed on or about May 7, 1999.
HOW TO VOTE
You may vote in person at the meeting or by proxy. We recommend that you vote
by proxy even if you plan to attend the meeting. You can always change your
vote at the meeting.
To vote by proxy, complete the enclosed proxy card, sign it and return it in
the enclosed postage-paid envelope. Your shares will be voted in accordance
with your instruction.
HOW PROXIES WORK
SFX's Board of Directors is asking for your proxy. Giving us your proxy means
you authorize the persons named in the proxy card to vote your shares at the
meeting in the manner you direct. The persons named as proxies in the proxy
card are our executive officers. You may vote for all, some, or none of our
director candidates. You may also vote for or against the other proposals or
abstain from voting.
REVOKING A PROXY
You may revoke your proxy before it is voted by submitting a new proxy with a
later date, by notifying the Secretary of SFX in writing at the address
specified on page 21 or by voting in person at the meeting. Attendance at the
meeting will not by itself revoke your proxy.
QUORUM
In order to carry on the business of the meeting, we must have a quorum. This
means that at least a majority of the outstanding shares eligible to vote must
be represented at the meeting, either in person or by proxy. As of the record
date, 35,827,545 shares of Class A common stock and 1,697,037 shares of Class B
common stock were outstanding. For the election of the four Directors to be
elected by the Class A common stock voting as a separate class, a quorum will
require at least a majority of the outstanding shares of Class A common stock.
VOTES NEEDED
The director candidates receiving the most votes will be elected to fill the
seats on the Board. If you hold shares of Class A common stock you will be
entitled to elect four members of the Board by a separate class vote, without
the participation of the holders of Class B common stock. In the election of
the other eight members of the Board, and all other proposals submitted for a
vote, the Class A common stock and the Class B common stock will vote together
as a single class, with each share of Class A common stock entitled to one vote
and each share of Class B common stock entitled to ten votes.
Approval of the other proposals requires the favorable vote of a majority of
the votes cast.
A properly executed proxy marked "Withhold Authority" with respect to the
election of one or more directors will not be voted with respect to the
directors or directors indicated, although it will be counted for purposes of
determining whether there is a quorum.
A properly executed proxy marked "Abstain" with respect to any matter will not
be voted, although it will be counted for purposes of determining whether there
is quorum. Accordingly, an abstention will have the effect of a negative vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to the approval of the 1999 Plan. Thus, if you
1
<PAGE>
do not give your broker or nominee specific instructions, your shares will not
be voted on this matter and will not be counted in determining the number of
shares necessary for approval. Shares represented by such "broker non-votes"
will, however, be counted in determining whether there is a quorum.
BOARD RECOMMENDATIONS
We recommend a vote:
o for the election of the nominated slate of directors appearing on pages
2 and 3;
o for ratification of the appointment of Ernst & Young LLP as SFX's
independent auditors; and
o for approval of SFX's 1999 Stock Option and Restricted Stock Plan.
If you sign and return the proxy card but do not specify how to vote, the
persons named as proxy holders on your proxy card will vote your shares in
accordance with our recommendations. Otherwise, your shares will be voted in
accordance with your instructions. If any other matters are properly presented
at the meeting, the persons named in your proxy card will have the discretion
to vote on those matters for you.
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
The Board of Directors manages the business of SFX. The Board conducts its
business through meetings of the Board and its committees. The standing
committees of the Board are described below.
The Board met four times in 1998. Each of SFX's directors attended all of the
meetings of the Board and the committees on which he served.
Our Bylaws authorize the Board to fix the number of directors from time to
time. The number of directors of SFX is currently eleven. In addition, Mr. John
J. Boyle and Mr. Robert Gutkowski are non-voting observers to the Board. The
non-voting observers have no authority to exercise the powers of a director in
the management of SFX and, accordingly, your vote is not being sought with
respect to these individuals. Personal information on each of the nominees is
given below.
All of our nominees currently serve as directors, except for Mr. John D.
Miller. All directors hold office until the next annual meeting of stockholders
following their election or until their successors are elected and qualified.
Holders of shares of Class A common stock are entitled to elect the four
members of the Board indicated in the second table below by a separate class
vote, without the participation of the holders of Class B common stock. In the
election of the other eight members of the Board the Class A common stock and
the Class B common stock will vote together as a single class, with each share
of Class A common stock entitled to one vote and each share of Class B common
stock entitled to ten votes.
If a director nominee becomes unavailable before the election, your proxy card
authorizes the persons named on the proxy card to vote for a replacement
nominee if the Board names one.
The Board recommends you vote FOR each of the following candidates:
DIRECTORS TO BE ELECTED BY THE HOLDERS OF CLASS A COMMON STOCK AND CLASS B
COMMON STOCK:
NOMINEE AGE DIRECTOR SINCE
- -------------------------------- ----- ---------------
Robert F.X. Sillerman .......... 51 1997
Michael G. Ferrel .............. 50 1997
Brian E. Becker ................ 42 1998
David Falk ..................... 48 1998
Howard J. Tytel ................ 52 1997
Thomas P. Benson ............... 36 1997
Richard A. Liese ............... 48 1997
D. Geoffrey Armstrong .......... 41 1997
2
<PAGE>
DIRECTORS TO BE ELECTED BY THE HOLDERS OF CLASS A COMMON STOCK ONLY:
NOMINEE AGE DIRECTOR SINCE
- ------------------------------- ----- ---------------
James F. O'Grady, J. .......... 71 1997
Paul Kramer ................... 67 1997
Edward F. Dugan ............... 64 1997
John D. Miller ................ 54
- ----------
ROBERT F.X. SILLERMAN has served as the Executive Chairman, a Member of
the Office of the Chairman and a director of SFX since its formation in
December 1997. Mr. Sillerman also served as the Executive Chairman of SFX
Broadcasting, Inc., SFX's former parent prior to its spin-off in April 1998
("Broadcasting"), from July 1, 1995 until Broadcasting was merged into another
company in May 1998. From 1992 through June 30, 1995, Mr. Sillerman served as
Chairman of the board of directors and Chief Executive Officer of Broadcasting.
Mr. Sillerman is Chairman of the board of directors and Chief Executive Officer
of Sillerman Communications Management Company, Inc. ("SCMC"), a private
company that makes investments in and provides financial consulting services to
companies engaged in the media business. Mr. Sillerman was also the Chairman of
the board of directors and a founding stockholder of The Marquee Group, Inc., a
company organized in 1995 which is engaged in various aspects of the sports,
news and other entertainment industries, and which was publicly traded until it
was merged with a subsidiary of SFX in March 1999. Mr. Sillerman is also a
founder of Triathlon Broadcasting Company, a company that owns and operates
radio stations in medium and small-sized markets in the mid-western and western
United States and which was publicly-traded until it was merged with a third
party in April 1999 ("Triathlon"). For the last twenty years, Mr. Sillerman has
been a senior executive of and principal investor in numerous entities in the
broadcasting business. In 1993, Mr. Sillerman became the Chancellor of the
Southampton College of Long Island University.
MICHAEL G. FERREL has served as the President, Chief Executive Officer, a
Member of the Office of the Chairman and a director of SFX since its formation
in December 1997. Mr. Ferrel also served as the President, Chief Executive
Officer and a director of Broadcasting from November 1996 until May 1998. Mr.
Ferrel served as President and Chief Operating Officer of Multi-Market Radio,
Inc., a wholly-owned subsidiary of Broadcasting ("MMR"), and a member of MMR's
board of directors from MMR's inception in August 1992 until November 1996 when
MMR was merged into a subsidiary of Broadcasting. Mr. Ferrel also served as
Co-Chief Executive Officer of MMR from January 1994 to January 1996 and Chief
Executive Officer of MMR from January 1996 until November 1996. From 1990 to
1993, Mr. Ferrel served as Vice President of Goldenberg Broadcasting, Inc., the
former owner of radio station WPKX-FM, Springfield, Massachusetts, which was
acquired by MMR in July 1993.
BRIAN E. BECKER has served as an Executive Vice President, a Member of the
Office of the Chairman and a director of SFX since the consummation of SFX's
acquisition of PACE Entertainment, Inc., one of the largest diversified
promoters and producers of live-entertainment in the United States ("PACE"), in
February 1998. Mr. Becker has served as Chief Executive Officer of PACE since
1994 and as President of PACE in 1996. He first joined PACE as the Vice
President and General Manager of PACE's theatrical division at the time of that
division's formation in 1982, and subsequently directed PACE's amphitheater
development efforts. He served as Vice Chairman of PACE from 1992 until he was
named its Chief Executive Officer in 1994.
DAVID FALK has served as a Member of the Office of the Chairman and a
director of SFX since the consummation of SFX's acquisition of Falk Associates
Management Enterprises, Inc. ("FAME"). Mr. Falk serves as a director and as
Chairman of SFX's sports group and several subsidiaries within SFX's sports
group, which includes FAME. Mr. Falk, who has represented professional athletes
for over twenty years, is presently a Director, Chairman and Chief Executive
Officer of FAME, positions he has held since he founded FAME in 1992. Mr. Falk
also serves as Chairman of the HTS Sports-a-Thon to benefit the Leukemia
Society of America, is a member of the Executive Committee of the College Fund
and is on the Board of Directors of the Juvenile Diabetes Foundation and Share
the Care for Children.
3
<PAGE>
HOWARD J. TYTEL has served as an Executive Vice President, General
Counsel, Secretary and a director of SFX since its formation in December 1997.
In January 1999, Mr. Tytel was elected as a Member of the Office of the
Chairman. Mr. Tytel also served as a director, General Counsel, Executive Vice
President and Secretary of Broadcasting from 1992 until the consummation of the
Broadcasting merger. Mr. Tytel is Executive Vice President, General Counsel and
a director of SCMC. Mr. Tytel is a director and a founder of Marquee and a
founder of Triathlon. From March 1995 until March 1997, Mr. Tytel was a
director of Interactive Flight Technologies, Inc., a publicly-traded company
providing computer-based in-flight entertainment. For the last twenty years,
Mr. Tytel has been associated with Mr. Sillerman in various capacities with
entities operating in the broadcasting business. From 1993 to 1998, Mr. Tytel
was Of Counsel to the law firm of Baker & McKenzie, which represents SFX on
certain matters.
THOMAS P. BENSON has served as a Senior Vice President since March 1999,
and as the Vice President, Chief Financial Officer and a director of SFX since
its formation in December 1997. Mr. Benson also served as the Chief Financial
Officer and a director of Broadcasting, having served in such capacity from
November 1996 until the consummation of the Broadcasting merger. Mr. Benson
became the Vice President of Financial Affairs of Broadcasting in June 1996. He
was the Vice President--External and International Reporting for American
Express Travel Related Services Company from September 1995 to June 1996. From
1984 through September 1995, Mr. Benson worked at Ernst & Young LLP.
RICHARD A. LIESE has served as a Senior Vice President since September
1998, and as a Vice President, Associate General Counsel and a director of SFX
since its formation in December 1997. Mr. Liese also served as a director, Vice
President and Associate General Counsel of Broadcasting, having served in such
capacity from 1995 until the consummation of the Broadcasting merger. Mr. Liese
has also been the Assistant General Counsel and Assistant Secretary of SCMC
since 1988. In addition, from 1993 until April 1995, he served as Secretary of
MMR.
D. GEOFFREY ARMSTRONG has served as a director of SFX since its formation
in December 1997. He served as an Executive Vice President of SFX from its
formation until September 1998. Mr. Armstrong currently serves as a director of
Capstar Broadcasting Corporation, a publicly-traded radio broadcasting company,
and as Executive Vice President and Chief Financial Officer of Chancellor
Media. Mr. Armstrong also served as the Chief Operating Officer and an
Executive Vice President of Broadcasting, having served in such capacity from
November 1996 until the consummation of the Broadcasting merger. Mr. Armstrong
served as a director of Broadcasting from 1993 until the consummation of the
Broadcasting merger. Mr. Armstrong became the Chief Operating Officer of
Broadcasting in June 1996 and the Chief Financial Officer, Executive Vice
President and Treasurer of Broadcasting in April 1995. Mr. Armstrong was Vice
President, Chief Financial Officer and Treasurer of Broadcasting from 1992
until March 1995. He had been Executive Vice President and Chief Financial
Officer of Capstar, a predecessor of Broadcasting, since 1989.
JAMES F. O'GRADY, JR. has served as a director of SFX since its formation
in December 1997. Mr. O'Grady also served as a director of Broadcasting from
1993 until the consummation of the Broadcasting merger. Mr. O'Grady has been
President of O'Grady and Associates, a media brokerage and consulting company,
since 1979. Mr. O'Grady has been a director of Orange and Rockland Utilities,
Inc. and of Video for Broadcast, Inc. since 1991. Mr. O'Grady has been the
co-owner of Allcom Marketing Corp., a corporation that provides marketing and
public relations services for a variety of clients, since 1985, and was Of
Counsel to Cahill and Cahill, a law firm located in Brooklyn, New York, from
1986 until 1998. He also served on the Board of Trustees of St. John's
University from 1984 to 1996, and has served as a director of The Insurance
Broadcast System, Inc. since 1994.
PAUL KRAMER has served as a director of SFX since its formation in
December 1997, served as a director of Broadcasting from 1993 until the
consummation of the Broadcasting merger and currently serves as a director of
Nations Flooring, Inc. Mr. Kramer has been a partner in Kramer & Love,
financial consultants specializing in acquisitions, reorganizations and dispute
resolution, since 1994. From 1992 to 1994, Mr. Kramer was an independent
financial consultant. Mr. Kramer was a partner in the New York office of Ernst
& Young LLP from 1968 to 1992.
4
<PAGE>
EDWARD F. DUGAN has served as a director of SFX since its formation in
December 1997. Mr. Dugan also served as a director of Broadcasting from
November 1996 until the consummation of the Broadcasting merger. Mr. Dugan is
President of Dugan Associates Inc., a financial advisory firm to media and
entertainment companies, which he founded in 1991. Mr. Dugan was an investment
banker with Paine Webber Inc., as a Managing Director, from 1978 to 1990, with
Warburg Paribas Becker Inc., as President, from 1975 to 1978 and with Smith
Barney Harris Upham & Co., as a Managing Director, from 1961 to 1975.
JOHN D. MILLER served as Chairman of the Board of Triathlon from June 1995
until April 1999 when Triathlon was merged with a third party. He is founder
and President of StarVest Management, Inc., a private investment group, and is
currently on the board of directors of International Keystone Entertainment,
Inc. Mr. Miller served as the President of Rothschild Ventures, Inc., a private
investment group, from July 1995 to April 1998. Prior to that he was affiliated
with Starplough, Inc. and the Clipper Group, private equity investment groups.
Mr. Miller spent 24 years with various investment arms of The Equitable Life
Assurance Society of the U.S., his last position being Chief Executive Officer
and President of Equitable Capital Management Corp.
DIRECTOR COMPENSATION
Directors employed by SFX receive no compensation for attending meetings. Each
non-employee director receives a fee of $1,500 for each Board meeting which he
attends and is reimbursed for travel expenses. Each non-employee director who
is also a member of a committee receives an additional $1,500 for each
committee meeting he attends that is not held in conjunction with a Board
meeting. If the committee meeting occurs in conjunction with a Board meeting,
each committee member receives $500 for attending the committee meeting.
In addition, SFX adopted a deferred compensation plan for the non-employee
directors effective January 1, 1998. Pursuant to the plan, SFX pays each
non-employee director a quarterly retainer of $7,500, at least one-half of
which must be paid in shares of Class A common stock which are credited to a
book-entry account maintained by SFX for each participant. Each non-employee
director's account was initially credited with 5,455 shares of Class A common
stock representing one year's annual retainer fee based upon $5.50 per share.
The Board, other than Messrs. Kramer, O'Grady and Dugan, also approved the
issuance of stock options to purchase 2,500 shares of Class A common stock to
each of Messrs. Kramer, O'Grady and Dugan. These options have fully vested and
have an exercise price of $5.50 per share.
BOARD COMMITTEES
AUDIT COMMITTEE. The Audit Committee reviews and reports to the Board on
various auditing and accounting matters, including the selection, quality and
performance of SFX's internal and external accountants and auditors, the
adequacy of its financial controls and the reliability of financial information
reported to the public. The Audit Committee also reviews certain related-party
transactions and potential conflict-of-interest situations involving officers,
directors or stockholders of SFX. The members of the Audit Committee are
Messrs. Kramer, O'Grady and Dugan. The Audit Committee met three times in 1998.
COMPENSATION COMMITTEE. The Compensation Committee reviews and makes
recommendations with respect to certain SFX compensation programs and
compensation arrangements with respect to certain officers, including Messrs.
Sillerman, Ferrel, Becker, Falk, Tytel, Benson and Liese. The members of the
Compensation Committee are Messrs. Kramer, O'Grady and Dugan, none of whom is a
current or former employee or officer of Broadcasting or SFX. The Compensation
Committee met eight times in 1998.
STOCK OPTION COMMITTEE. The Stock Option Committee grants options, determines
which employees and other individuals performing substantial services to SFX
may be granted options and determines the rights and limitations of options
granted under SFX's plans. The members of the Stock Option Committee are
Messrs. Kramer, O'Grady and Dugan. The Stock Option Committee met five times in
1998.
5
<PAGE>
OWNERSHIP OF SECURITIES BY DIRECTORS, OFFICERS
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding ownership of SFX's
common stock as of April 27, 1999, by each Named Executive Officer, each
director nominee, the directors and executive officers of SFX as a group and
each person known by SFX to own beneficially more than 5% of any class of SFX's
common stock.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
------------------------------------- -------------------------------
NAME AND ADDRESS OF NUMBER OF PERCENT OF PERCENT OF TOTAL
BENEFICIAL OWNER (1) NUMBER OF SHARES PERCENT OF CLASS SHARES CLASS VOTING POWER
- ------------------------------- ------------------ ------------------ ------------------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
Directors, Nominees and
Named Executive Officers:
Robert F.X. Sillerman ......... 2,875,703(2) 8.0% 1,524,168(2) 89.8% 34.3%
Michael G. Ferrel ............. 180,303(3) * 172,169(3) 10.2 3.6
Brian E. Becker ............... 44,402(4) * -- -- *
David Falk .................... 425,000(5) 1.2 -- -- *
Howard J. Tytel ............... 486,339(6) 1.4 -- -- *
Thomas P. Benson .............. 29,833(7) * -- -- *
Richard A. Liese .............. 4,800(8) * -- -- *
D. Geoffrey Armstrong ......... 192,133(9) * -- -- *
John D. Miller ................ -- -- -- -- --
James F. O'Grady, Jr. ......... 22,727(10) * -- -- *
Paul Kramer ................... 23,877(11) * -- -- *
Edward F. Dugan ............... 8,422(12) * -- -- *
All directors and executive
officers as a group (12
persons) ...................... 3,807,200 10.5% 1,697,037 100.0% 39.1%
5% Stockholders:
Ark Asset Management
Co. Inc.(13)
125 Broad Street
New York, New York
10004 ........................ 2,230,000 6.2% -- -- 4.2%
</TABLE>
- ------------
* Less than 1%
(1) Unless otherwise set forth above, the address of each stockholder is the
address of SFX, which is 650 Madison Avenue, 16th Floor, New York, New
York 10022. Pursuant to Rule 13d-3 of the Securities Exchange Act of 1934,
as used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the disposition of, a security, and a person
is deemed to have "beneficial ownership" of any security that the person
has the right to acquire within 60 days of April 27, 1999. Unless noted
otherwise, information as to beneficial ownership is based on statements
furnished to SFX by the beneficial owners, and stockholders possess sole
voting and dispositive power with respect to shares listed on this table.
As of April 27, 1999, there were issued and outstanding 35,827,545 shares
of Class A common stock and 1,697,037 shares of Class B common stock.
(2) Includes 39,343 shares of Class A common stock held by SCMC, warrants to
purchase an aggregate of 5,329 shares of Class A common stock and options
to purchase an aggregate of 157,957 shares of Class A common stock held by
Mr. Sillerman which are, or will become, exercisable within 60 days of
April 27, 1999. Also includes 458,213 shares of Class A common stock,
warrants to purchase 941 shares of Class A common stock and options to
purchase 27,185 shares of Class A common stock held by Mr. Tytel that Mr.
Sillerman has the right to vote. Excludes options to purchase an aggregate
of 489,060 shares of Class A common stock held by Mr. Sillerman which are
not exercisable within 60 days of April 27, 1999. If the 1,524,168 shares
of Class B common stock held by Mr. Sillerman were included in calculating
his ownership of the Class A common stock, Mr. Sillerman would
beneficially own 4,399,871 shares of Class A common stock, representing
approximately 11.7% of the class. See "Executive Compensation--Employment
Agreements and Arrangements with Certain Officers and Directors."
(3) Includes options to purchase an aggregate of 51,566 shares of Class A
common stock held by Mr. Ferrel which are, or will become, exercisable
within 60 days of April 27, 1999. Excludes options to purchase an
aggregate of 173,334 shares of Class A
6
<PAGE>
common stock held by Mr. Ferrel which are not exercisable within 60 days of
April 27, 1999. If the 172,869 shares of Class B common stock held by Mr.
Ferrel were included in calculating his ownership of Class A common stock,
then Mr. Ferrel would beneficially own 353,172 shares of Class A common
stock, representing less than 1% of the class. See "Executive
Compensation--Employment Agreements and Arrangements with Certain Officers
and Directors."
(4) Includes options to purchase an aggregate of 15,000 shares of Class A
common stock held by Mr. Becker which will become exercisable within 60
days of April 27, 1999. Excludes options to purchase an aggregate of
65,000 shares of Class A common stock held by Mr. Becker which are not
exercisable within 60 days of April 27, 1999.
(5) Includes options to purchase an aggregate of 100,000 shares of Class A
common stock held by Mr. Falk which will become exercisable within 60 days
of April 27, 1999.
(6) Includes warrants to purchase an aggregate of 941 shares of Class A common
stock and options to purchase an aggregate of 27,185 shares of Class A
common stock held by Mr. Tytel which are, or will become, exercisable
within 60 days of April 27, 1999. Excludes options to purchase an
aggregate of 109,049 shares of Class A common stock held by Mr. Tytel
which are not exercisable within 60 days of April 27, 1999. Mr. Tytel also
has an economic interest in SCMC, which beneficially owns 39,343 shares of
Class A common stock, although he lacks voting or dispositive power with
respect to the shares beneficially held by SCMC. Mr. Sillerman has the
right to vote all of the shares of Class A common stock beneficially owned
by Mr. Tytel. See "Executive Compensation--Employment Agreements and
Arrangements with Certain Officers and Directors."
(7) Includes options to purchase an aggregate of 10,833 shares of Class A
common stock held by Mr. Benson which are, or will become, exercisable
within 60 days of April 27, 1999. Excludes options to purchase an
aggregate of 39,167 shares of Class A common stock held by Mr. Benson
which are not exercisable within 60 days of April 27, 1999.
(8) Includes options to purchase an aggregate of 2,000 shares of Class A common
stock held by Mr. Liese which will become exercisable within 60 days of
April 27, 1999. Excludes options to purchase an aggregate of 8,000 shares
of Class A common stock held by Mr. Liese which are not exercisable within
60 days of April 27, 1999.
(9) Includes options to purchase an aggregate of 30,333 shares of Class A
common stock held by Mr. Armstrong which are, or will become, exercisable
within 60 days of April 27, 1999. Excludes options to purchase an
aggregate of 94,667 shares of Class A common stock held by Mr. Armstrong
which are not exercisable within 60 days of April 27, 1999.
(10) Includes options to purchase an aggregate of 2,500 shares of Class A
common stock held by Mr. O'Grady which are currently exercisable. Also
includes 5,455 shares credited to Mr. O'Grady's account in the deferred
compensation plan for non-employee directors which shares will be
delivered to Mr. within 60 days of April 27, 1999.
(11) Includes 5,455 shares credited to Mr. Kramer's account in the deferred
compensation plan for non-employee directors which shares will be
delivered to Mr. Kramer within 60 days of April 27, 1999.
(12) Includes options to purchase an aggregate of 2,500 shares of Class A
common stock held by Mr. Dugan which are currently exercisable. Excludes
5,455 shares credited to Mr. Dugan's account in the deferred compensation
plan for non-employee directors which shares will are not deliverable to
Mr. within 60 days of April 27, 1999.
(13) Based on information contained on a Schedule 13G filed with the Securities
and Exchange Commission on February 4, 1999.
7
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the performance of SFX's Class A common stock with
the performance of the Standard & Poor's 500 Composite Stock Price Index and
the Standard & Poor's Entertainment Index over the period beginning on February
18, 1998, the date on which the Class A common stock began trading regular-way,
and ending on December 31, 1998. The graph assumes that $100 was invested on
February 18, 1998 in each of SFX's Class A common stock, the Standard & Poor's
500 Composite Index and the Standard & Poor's Entertainment Index and that all
dividends were reinvested. The companies comprising the Standard & Poor's
Entertainment Index are: Walt Disney Co., Seagram Co. Ltd., Time Warner Inc.,
Viacom Inc. and King World Productions.
CUMULATIVE TOTAL RETURN
BEGINNING FEBRUARY 18, 1998*
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
[GRAPHIC OMITTED]
<TABLE>
2/18/98 3/31/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C> <C>
SFX ENTERTAINMENT, INC. $100 $122 $234 $159 $280
S&P 500 $100 $107 $110 $ 99 $121
S&P ENTERTAINMENT $100 $101 $107 $ 93 $121
</TABLE>
* THE STOCK PERFORMANCE SHOWN IS HISTORICAL AND NOT NECESSARILY INDICATIVE OF
FUTURE PERFORMANCE.
8
<PAGE>
RATIFICATION OF INDEPENDENT ACCOUNTANTS
(ITEM 2 ON THE PROXY CARD)
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed Ernst & Young LLP to serve as SFX's independent auditors for 1999. We
are asking you to ratify that appointment.
Representatives of Ernst & Young will be present an the annual meeting to
answer any questions you may have. They will also have the opportunity to make
a statement if they desire to do so.
THE BOARD RECOMMENDS YOU VOTE FOR THIS PROPOSAL.
APPROVAL OF SFX'S 1999 STOCK OPTION AND RESTRICTED STOCK PLAN
(ITEM 3 ON THE PROXY CARD)
In November 1998, the Board of Directors, upon the recommendation of the Stock
Option Committee, adopted, subject to stockholder approval, the 1999 Stock
Option and Restricted Stock Plan (the "1999 Plan"). The purpose of the 1999
Plan is to:
o offer selected directors, officers, employees and consultants an equity
interest in the financial success of SFX;
o provide SFX an opportunity to attract and retain the best available
personnel for positions of substantial responsibility; and
o encourage equity participation in SFX.
SUMMARY OF THE 1999 PLAN
While we have summarized certain provisions of the 1999 Plan below, attached as
Exhibit A to this Proxy Statement is a full copy of the 1999 Plan, and our
summary is qualified by reference to the 1999 Plan. We encourage you to read
the 1999 Plan.
NUMBER OF SHARES. Up to 3.0 million shares of Class A common stock may be
issued under the 1999 Plan. The Stock Option Committee will adjust this number
for stock dividends, stock splits, or any other increase or decrease in the
number of shares of Class A common stock issued without receipt of
consideration by SFX. Shares to be issued under the 1999 Plan may be drawn from
either authorized but previously unissued shares of Class A common stock or
from treasury shares.
ADMINISTRATION. The Stock Option Committee will administer the 1999 Plan.
The Stock Option Committee will consist of at least two persons, each of whom
meet the definition of "non-employee director" under Section 16 of the Exchange
Act and the definition of "Outside Director" under Section 162(m) of the
Internal Revenue Code of 1986 and the rules and regulations promulgated
thereunder, as amended (the "Code"). The members of the Stock Option Committee
will be appointed by the Board of Directors. The Board may from time to time
remove members from, or add members to, the Stock Option Committee. The current
members of the Stock Option Committee are Messrs. O'Grady, Kramer and Dugan.
ELIGIBILITY, OPTIONS AND RESTRICTED STOCK. The Stock Option Committee has
the authority to grant stock options or shares of restricted stock to
directors, officers, employees or consultants of SFX. As of the date of this
proxy statement, SFX had approximately 1,650 full-time employees. Options
granted under the 1999 Plan may include incentive stock options intended to
qualify under Section 422 of the Code as well as non-statutory options.
Incentive stock options will only be granted to persons who are employed by SFX
at the time of the grant. Subject to the limits of the 1999 Plan, the Stock
Option Committee may determine the number of shares to be issued upon exercise,
the exercise price, vesting period and other terms of the stock options.
However, incentive stock options will not be granted with an exercise price
below the fair market value of the Class A common stock on the date of the
grant. The Stock Option Committee may also determine the number of shares,
terms, conditions and restrictions of the restricted stock. However, each grant
of restricted stock will require that the recipient remain an
9
<PAGE>
employee or otherwise provide services to SFX for at least six months after the
date of grant. Subject to adjustment, the Stock Option Committee will not grant
stock options for shares of Class A common stock or make grants of restricted
stock to any "covered employee" as defined in Section 162(m) in excess of
1,200,000 shares.
CHANGE IN CONTROL. Upon a change in control, as defined in the 1999 Plan,
all outstanding options under the 1999 Plan will become immediately exercisable
and all restrictions on any shares of restricted stock granted under the 1999
Plan will lapse and such stock will immediately vest in the holder
notwithstanding that such options were not fully exercisable or that such
restricted stock had not fully vested. In the event of a reorganization in
which SFX is not the surviving or acquiring company the outstanding options and
restricted stock may be changed, converted, exchanged or cancelled as provided
the reorganization agreement.
AMENDMENT AND TERMINATION. The Board may amend or terminate the 1999 Plan
at any time, but may not do so without shareholder approval if the amendment
changes the aggregate number of shares that may be issued under the Plan, other
than in connection with certain adjustments or a reorganization of SFX as
discussed above.
1999 PLAN BENEFITS. On October 8, 1998, the Stock Option Committee
recommended the grant of options covering 2,300,220 shares of Class A common
stock to be issued under the 1999 Plan to employees, directors and consultants
of SFX. On November 4, 1998, the Board approved the committee's recommendation
and adopted the 1999 Plan, subject to stockholder approval. The following table
sets forth the benefits that will be received by the individuals listed below if
the 1999 Plan is approved by the stockholders:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION UNDERLYING OPTIONS (1)
------------------- ----------------------
<S> <C>
Robert F.X. Sillerman
Executive Chairman and Member of the Office of the
Chairman ..................................................... 1,050,000
150,000 (2)
Michael G. Ferrel
President, Chief Executive Officer and Member of the Office of
the Chairman ................................................. 100,000
Brian E. Becker
Executive Vice President and Member of the Office of the
Chairman ..................................................... 50,000
David Falk
Member of the Office of the Chairman ......................... 35,000 (3)
Howard J. Tytel
Executive Vice President, General Counsel, Secretary and
Member of the Office of the Chairman ......................... 75,000
75,000 (4)
Executive Officer Group ....................................... 1,575,000
Non-Executive Officer Director Group .......................... 20,000
Non-Executive Officer Employee Group .......................... 705,220 (5)
</TABLE>
- ----------
(1) Except as otherwise indicated, each of the options shown in this table
has an exercise price of $24 1/8 per share, will vest at different rates over
the five year period from the date of grant and will expire on October 8, 2008.
On April 28, 1999, the closing price of the Class A common stock underlying
these options was $62 1/2.
(2) These options were granted to Mr. Sillerman subject to the Stock Option
Committee's review and evaluation of SFX's 1999 financial performance.
(3) These options will have an exercise price equal to the market price of the
Class A common stock on the date the 1999 Plan is approved by the stockholders
and will expire on the tenth anniversary from such date.
(4) These options were granted to Mr. Tytel in consideration of his agreement
to waive certain rights under his employment agreement. See "Employment
Agreements and Arrangements with Certain Officers and Directors."
(5) These options will have exercise prices ranging from $24 1/8 per share
to the market price of the Class A common stock on the date the 1999 Plain is
approved by the stockholders and will expire on the tenth anniversary from the
date of grant.
10
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES.
INCENTIVE STOCK OPTIONS. Some of the options granted under the 1999 Plan
may be incentive stock options as described in section 422 of the Code
("ISOs"). Under current federal tax laws, there are no federal income tax
consequences to either SFX or an optionee upon the grant of an ISO, nor will an
optionee's exercise of an ISO result in federal tax consequences to SFX.
Although the optionee will not realize ordinary income at the time an ISO is
exercised, the excess of the fair market value of the shares acquired at the
time of exercise over the option price may constitute an item of adjustment
used to compute alternative minimum taxable income under section 56 of the
Code, and may, therefore, result in the imposition of the alternative minimum
tax under section 55 of the Code on the optionee. If the optionee does not
dispose of the shares received upon exercise of an ISO within one year from the
ISO's date of exercise and within two years of the date that the ISO was
granted, any gain or loss realized from the subsequent sale or disposition of
such shares will be treated as long-term capital gain or loss to the optionee.
If the optionee disposes of the shares before the end of the holding periods
described above, the optionee has made a disqualifying disposition and will
recognize ordinary income equal to the lesser of (i) the excess of the fair
market value of the shares on the date of exercise over the option price or
(ii) the actual gain realized upon such disposition. Any additional gain upon
such disposition will be taxed as short-term capital gain. In the event of a
disqualifying disposition, SFX receives a tax deduction, subject to Section
162(m) of the Code, in an amount equal to the ordinary income recognized by the
optionee.
NON-STATUTORY OPTIONS. Under current federal income tax laws, neither SFX
nor an optionee will recognize income on the grant of a non-statutory stock
option. However, on the date of exercise of a non-statutory stock option, the
optionee recognizes ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise, and SFX receives a tax deduction for the same amount, subject to
Section 162(m) of the Code. The gain, if any, realized upon a subsequent
disposition of the shares will constitute short-term or long-term capital gain,
depending on the optionee's holding period.
RESTRICTED STOCK. Under current federal income tax laws, neither SFX nor a
recipient of restricted stock will recognize income upon the grant of
restricted stock. However, at the time the restrictions lapse, the recipient
recognizes ordinary income equal to the fair market value of the shares at the
time, and SFX receives a tax deduction for the same amount, subject to the
provisions of Section 162(m) of the Code. Upon disposition of the shares
acquired, an optionee will generally recognize the appreciation or depreciation
on the shares after the date the restrictions lapse as either short-term or
long-term capital gain or loss depending on the recipient's holding period.
THE BOARD RECOMMENDS YOU VOTE FOR THIS PROPOSAL.
11
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for administering SFX's executive
compensation policies, and it approves all aspects of compensation for members
of SFX's senior management team. The committee consists entirely of independent
directors who are not officers or employees of SFX.
The committee is charged with ensuring that the individuals in executive
positions are highly qualified and that they are compensated in a manner that
furthers SFX's business goals and aligns their interests with stockholders'
interests. Towards those ends, SFX's executive compensation program is designed
to:
o motivate, reward and retain the management talent SFX needs to achieve
its business strategies and to further develop and maintain its
leadership position in the entertainment industry;
o link a substantial portion of each executive officer's compensation to
the performance of SFX; and
o encourage significant ownership of SFX's common stock by executive
officers.
The compensation program for executive officers consists of the following
principal components:
BASE SALARY. Base salaries are established for each executive officer based on
job responsibilities, level of experience, individual contribution to SFX and
industry practice. The compensation committee does not give specific weights to
these factors, although job responsibility and individual contribution to SFX
are the most important factors.
ANNUAL INCENTIVE AWARDS. Annual incentive awards can consist of cash bonuses,
stock options or restricted stock awards. In determining annual incentive
awards, the Compensation Committee and the Stock Option Committee will assess
both SFX's and the individual executive's performance during the previous year.
Stock option and restricted stock are awarded to executives both as a reward
for past contributions and to closely align executives' interests with the
long-term interests of stockholders by encouraging equity participation. These
awards represent a significant portion of each executive's total compensation.
In general, stock options are granted with an exercise price equal to the
market value of SFX's common stock on the date of grant and generally have a
vesting period of one to five years. The options only have value to the
executive if the value of SFX's common stock increases after the date of grant.
The compensation committee only makes awards of restricted stock to a limited
number of key executives whose skills and contributions the committee believes
are essential to the long-term success of SFX. The restriction period of the
stock is generally one year from the date of the award.
COMPENSATION OF THE EXECUTIVE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Sillerman has been the Executive Chairman, Chief Executive Officer and a
Member of the Office of the Chairman since SFX's formation in December 1997.
Mr. Sillerman's employment agreement provides for an initial term of five years
and an annual base salary of $500,000. In connection with entering into his
employment agreement, SFX sold 500,000 shares of Class B common stock to Mr.
Sillerman at a purchase price of $2.00 per share. In setting Mr. Sillerman's
base salary, the compensation committee considered the factors set forth above
under "--Base Salary." See "Employment Agreements and Arrangements with Certain
Officers and Directors--Agreements with Messrs. Sillerman, Ferrel, Tytel and
Benson."
The Stock Option Committee approved grants of stock options to Mr. Sillerman on
each of January 15, 1998, April 27, 1998, May 27, 1998 and, subject to
stockholder approval, on October 8, 1998. See "Executive Compensation--Option
Grants in Last Fiscal Year" and "Approval of SFX's 1999 Stock Option and
Restricted Stock Plan." These awards reflect the committee's recognition of the
pivotal role Mr. Sillerman has played throughout SFX's rapid development into
the world's largest diversified, promoter, producer and venue operator for live
entertainment events. During 1998, SFX's revenue grew from $96.1 million to
$884.3 million and, between February 18, 1998, the first day that the Class A
12
<PAGE>
common stock began trading, and December 31, 1998, the stock price increased
117%. The committee did not use any specific criteria in determining Mr.
Sillerman's incentive awards, but rather considered his significant overall
contributions to the success of SFX.
All of the options granted to Mr. Sillerman had an exercise price equal to the
market value of SFX's common stock on the date of grant and vest over a period
ranging from one to five years from the date of grant. The vesting period is
designed to retain Mr. Sillerman's leadership of SFX over the long-term for the
benefit of the stockholders.
For a description of the terms of Mr. Sillerman's employment contract, see
"Employment Agreements and Arrangements with Certain Officers and
Directors--Agreements with Messrs. Sillerman, Ferrel, Tytel and Benson."
POLICY REGARDING SECTION 162(M)
Under Section 162(m) of the Code, SFX has a limit of $1,000,000 on the
deductibility of non-performance related compensation paid to our five highest
paid executive officers. Certain performance-based compensation approved by SFX
stockholders is not subject to the deduction limitation. The compensation
committee uses stock options and performance awards that may qualify for the
performance-based exception to the Section 162(m) limitations. The committee
intends to do so as long as it considers such use to be in the best interest of
SFX and its stockholders. To maintain flexibility in attracting, retaining and
compensating executives in a manner to promote various corporate goals, the
compensation committee has not adopted a policy that all compensation must be
deductible.
THE COMPENSATION COMMITTEE:
Paul Kramer
James F. O'Grady, Jr.
Edward F. Dugan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board approved the issuance of shares of Class A common stock to holders,
as of the record date for SFX's spin-off from Broadcasting, of stock options or
SARs of Broadcasting, whether or not vested. These holders included the members
of the Compensation Committee. The issuance was approved to allow the holders
of these options and SARs to participate in the SFX spin-off in a similar
manner as holders of Broadcasting's Class A common stock and as consideration
for past services to SFX. In connection with this issuance, Mr. Kramer received
13,000 shares of Class A common stock, Mr. O'Grady received 13,000 shares of
Class A common stock and Mr. Dugan received 3,000 shares of Class A common
stock.
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation earned by
the Executive Chairman and SFX's four other most highly compensated executive
officers (the "Named Executive Officers") during 1998. SFX did not pay any
compensation to its executive officers in 1997 or 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------- ---------------------------------------
SECURITIES
RESTRICTED STOCK UNDERLYING OPTION
NAME AND POSITION SALARY(1) BONUS AWARDS($)(2) AWARDS (#)
- ---------------------------------------- ----------- ------- ------------------ ------------------
<S> <C> <C> <C> <C>
Robert F.X. Sillerman
Executive Chairman and Member of
the Office of the Chairman ............ $291,667 -- $14,250,000 620,000
Michael G. Ferrel
President, Chief Executive Officer and
Member of the Office of the Chairman $204,167 -- $ 4,275,000 225,000
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------- ---------------------------------------
SECURITIES
RESTRICTED STOCK UNDERLYING OPTION
NAME AND POSITION SALARY(1) BONUS AWARDS($)(2) AWARDS (#)
- ------------------------------------- ----------- ------- ------------------ ------------------
<S> <C> <C> <C> <C>
Brian E. Becker
Executive Vice President and Member
of the Office of the Chairman ......... $245,000 -- -- 75,000
David Falk
Member of the Office of the Chairman $183,750 -- -- 100,000
Howard J. Tytel
Executive Vice President, General
Counsel, Secretary and Member of the
Office of the Chairman ............. $175,000 -- $2,280,000 105,000
</TABLE>
- ----------
(1) SFX began compensating Messrs. Sillerman and Ferrel following
Broadcasting's merger into another company on May 29, 1998. SFX began
compensating Mr. Falk on June 4, 1998, upon SFX's acquisition of FAME.
SFX began compensating Mr. Tytel on June 1, 1998. SFX began compensating
Mr. Becker upon the consummation of the PACE acquisition, which occurred
on February 25, 1998. See "Certain Relationships and Related Party
Transactions" for additional transactions between SFX and the Named
Executive Officers.
(2) In connection with their entering into new employment agreements, SFX
awarded Mr. Sillerman 500,000 and Mr. Ferrel 150,000 restricted shares of
Class B common stock and Mr. Tytel was awarded 80,000 restricted shares
of Class A common stock. Each such individual paid $2.00 per share for
such restricted stock. The price of Class A common stock, as reported on
April 21, 1998, its first day of trading on the Nasdaq National Market,
was $30.50 and the value of the purchased shares of restricted stock is
reported in the table above. On December 31, 1998, the closing price of
Class A common stock, as reported on the Nasdaq National Market, was
$54.875. On December 31, 1998, the value of the shares of restricted
stock held by Messrs. Sillerman, Ferrel and Tytel was $26,437,500,
$7,931,250 and $4,230,000, respectively. All calculations of the value of
the restricted stock assumes that the shares of Class B common stock are
equal in value to the shares of Class A common stock. See "Employment
Agreements and Arrangements with Certain Officers and
Directors--Agreements with Messrs. Sillerman, Ferrel, Tytel and Benson."
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth, for each of the Named Executive Officers,
certain information concerning the exercise of stock options during 1998,
including the year-end value of unexercised options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-THE-
UNEXERCISED OPTIONS MONEY OPTIONS AT
AT FY-END (#) FY-END ($)(1)
SHARES ACQUIRED ON VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------- -------------------- ---------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Robert F.X. Sillerman ......... 0 0 0/620,000 0/15,268,750
Michael G. Ferrel ............. 0 0 0/225,000 0/5,562,500
Brian E. Becker ............... 0 0 0/75,000 0/1,225,000
David Falk .................... 0 0 0/100,000 0/1,325,500
Howard J. Tytel ............... 0 0 0/105,000 0/2,588,125
</TABLE>
- ----------
(1) Calculated by determining the difference between the closing price of
Class A common stock as reported on the Nasdaq National Market on
December 31, 1998 ($54.875) and the exercise price of the options.
14
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to each grant of stock
options during 1998 to the Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR GRANT DATE
UNDERLYING TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME OPTIONS/ GRANTED (#) FISCAL YEAR ($/SHARE) (1) DATE(2) VALUE (3)
- --------------------------- ---------------------- ----------------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Robert F.X. Sillerman ..... 250,000 12.9% $ 43.25 5/27/08 $7,285,000
250,000 12.9 29.125 4/27/08 4,907,500
120,000 6.2 5.50 1/15/08 445,000
Michael G. Ferrel ......... 100,000 5.2 43.25 5/27/08 2,914,000
75,000 3.9 29.125 4/27/08 1,472,250
50,000 2.6 5.50 1/15/08 185,500
Brian E. Becker ........... 50,000 2.6 43.25 5/27/08 1,457,000
25,000 1.3 29.125 4/27/08 490,750
David Falk ................ 100,000 5.2 41.62 6/4/08 2,805,000
Howard J. Tytel ........... 50,000 2.6 43.25 5/27/08 1,457,000
30,000 1.6 29.125 4/27/08 588,900
25,000 1.3 5.50 1/15/08 92,750
</TABLE>
- ----------
(1) The $43.25 and $29.125 exercise prices represent the fair market value of
a share of Class A common stock on the date of grant. On January 15, 1998
the shares of Class A common stock had not yet commenced trading on the
Nasdaq National Market System. The Board of Directors of SFX determined
that $5.50 was the fair market value of a share of Class A common stock
on January 15, 1998.
(2) The stock options which expire on April 27, 2008 and May 27, 2008 vest
over five years, starting one year from their date of grant. The stock
options which expire on January 15, 2008 and June 4, 2008 vest entirely
on the first anniversary of their date of grant.
(3) The Black-Scholes option pricing model was chosen to estimate the grant
date present value of the options set forth in this table. The following
assumptions were made for purposes of calculating the Grant Date Present
Value: volatility at 63.7%; expected option life of seven years; and
risk-free interest rate at 5.6%. Our use of this model should not be
construed as an endorsement of its accuracy at valuing options. The
figures given are not intended to forecast future price appreciation of
the shares. The real value of the options in this table depends solely
upon the actual performance of SFX stock during the applicable period.
In addition to the foregoing, SFX has approved the issuance of stock options to
the Named Executive Officers under the newly adopted incentive stock option
plan, which is subject to stockholder approval. See "--Approval of SFX's 1999
Stock Option and Restricted Stock Plan."
STOCK OPTION AND RESTRICTED STOCK PLAN
SFX's 1998 Stock Option and Restricted Stock Plan provides for the issuance of
options to purchase up to 2,000,000 shares of Class A common stock. The purpose
of the plan is to provide additional incentive to officers and employees of
SFX. Each option granted under the plan will be designated at the time of grant
as either an "incentive stock option" or a "non-qualified stock option." The
plan is administered by the Stock Option Committee. The Board has approved the
issuance of stock options exercisable for an aggregate of 1,982,166 shares
under the plan.
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS WITH CERTAIN OFFICERS AND DIRECTORS
SFX has entered into employment agreements with each of its executive officers.
The employment agreements became effective upon the Broadcasting merger in May
1999 or shortly thereafter, except for Mr. Becker's employment agreement, which
is described below. Each of the agreements described below has been publicly
filed with the Securities and Exchange Commission and the following summaries
are qualified by reference to the actual agreements.
15
<PAGE>
AGREEMENTS WITH MESSRS. SILLERMAN, FERREL, TYTEL AND BENSON
The respective employment agreements provide for annual base salaries of
$500,000 for Mr. Sillerman, $350,000 for Mr. Ferrel, $300,000 for Mr. Tytel and
$235,000 for Mr. Benson, increased annually by the greater of five percent or
the rate of inflation. Each executive officer will receive a bonus to be
determined annually in the discretion of the Board, on the recommendation of its
Compensation Committee. Each employment agreement is for a term of five years,
and unless terminated or not renewed by either party, the term will continue
thereafter on a year-to-year basis on terms identical to those at the time of
renewal.
If an executive officer is terminated by SFX without Cause or if there is a
Constructive Termination Without Cause as such terms are defined in the
respective employment agreements then such executive officer will be entitled
to receive the following payments:
o base salary for a period of three years following his termination or
until the end of the term of the employment agreement, whichever is
longer;
o a bonus for the unexpired term of the agreement, based on the bonus
received for the year before termination, multiplied by the unexpired
term; and
o options to purchase shares of Class A common stock.
If the executive officer is terminated for any reason other than Cause, or if
there is a Constructive Termination Without Cause as such terms are defined in
the respective employment agreements following a change in control of SFX, then
the executive officer will be entitled to receive, in addition to the
foregoing, additional options to purchase shares of Class A common stock. SFX
has also agreed to indemnify the executive officers for taxes incurred if any
of the change of control payments are deemed "parachute payments" under the
Internal Revenue Code. Mr. Tytel's agreement previously permitted him to end
his employment after one year, in which case he was entitled to receive certain
option grants and cash payments. Mr. Tytel and SFX have agreed to eliminate
these provisions from Mr. Tytel's employment agreement. In connection with this
modification to his employment agreement, Mr. Tytel received immediately vested
options to purchase 75,000 shares of Class A common stock at $241/8 per share.
In connection with entering into the employment agreements, SFX sold shares of
restricted stock at a purchase price of $2.00 per share to Messrs. Sillerman,
Ferrel, Tytel and Benson. In addition, the Board, on the review and
recommendation of the Compensation Committee, also approved the issuance of
stock options exercisable for shares of Class A common stock to such executive
officers. See "--Executive Compensation" and "--Option Grants in Last Fiscal
Year."
In connection with SFX's spin-off from Broadcasting, SFX assumed Broadcasting's
obligations arising under the employment agreements or arrangements between
Broadcasting and SFX's executive officers, with certain exceptions. See
"Certain Relationships and Related Transactions--Assumption of Employment
Agreements; Certain Change of Control Payments."
BECKER EMPLOYMENT AGREEMENT
As a condition to execution of the PACE agreement, SFX entered into an
employment agreement with Brian Becker, the Chief Executive Officer and
President of PACE. The agreement has a term of five years that commenced on
February 25, 1998. Mr. Becker continues to be President and Chief Executive
Officer of PACE. In addition, for the term of his employment, Mr. Becker will
serve as a member of SFX's Office of the Chairman, an Executive Vice President
of SFX and a director of each of PACE and SFX, subject to shareholder approval.
During the term of his employment, Mr. Becker will receive a base salary of
$294,000 for the first year, $313,760 for each of the second and third years
and $334,310 for each of the fourth and fifth years and an annual bonus at the
discretion of the Board.
Mr. Becker's employment agreement gives him a right of first refusal, subject
to certain limitations, if SFX receives a bona fide offer from a third party to
purchase all or substantially all of either the theatrical or motor sports
lines of business. If SFX sells either of PACE's theatrical or motor sports
line of business, it has agreed not to sell the other line of business before
March 11, 2000. The Fifth Year Put Option, as defined in the PACE acquisition
agreement, will also be immediately exercisable as of the closing of any such
sale.
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Beginning on December 12, 1999, Mr. Becker will have the option (the "Becker
Second Year Option"), exercisable within 15 days thereafter, to do one or more
of the following: (i) sell to SFX any stock or options and/or any compensation
to be paid to Mr. Becker by SFX; (ii) become a consultant to SFX for no more
than an average of 20 hours per week for the remainder of the term at the same
level of compensation set forth in his employment agreement; or (iii) acquire
PACE's motor sports line of business--or, if that line of business was
previously sold, PACE's theatrical line of business--at its fair market value as
determined in his employment agreement. Exercise of the Becker Second Year
Option would result in the termination of Mr. Becker's employment agreement.
Mr. Becker's employment may be terminated by SFX at any time in SFX's sole
discretion. Mr. Becker may terminate his employment agreement if, among other
things, SFX sells either the motor sports or theatrical line of business to any
person other than Mr. Becker prior to March 7, 2000, unless Mr. Becker elected
not to exercise his right of first refusal. Mr. Becker may also terminate his
agreement if SFX fails to contribute any acquired business, which derives a
majority of its revenues from either a theatrical or motor sports line of
business, to PACE.
Mr. Becker's employment is terminated, then, among other things, SFX must pay
Mr. Becker an amount equal to his base salary and any bonuses to which he may
be entitled during the remaining term of his agreement. In addition, if the
termination occurs before March 11, 2000, Mr. Becker will retain the Becker
Second Year Option and Becker's right of first refusal.
Subject to certain exceptions, throughout the term of his employment and for a
period of 18 months thereafter, Mr. Becker has agreed not to compete with SFX
or its affiliates or to solicit any employees to leave SFX or its affiliates.
FALK EMPLOYMENT AGREEMENT
In connection with the acquisition of FAME, on April 29, 1998, SFX entered into
an employment agreement with David Falk. The agreement has a term of five years
commencing June 4, 1998. Mr. Falk is the Chairman of FAME and SFX's Sports
Group and is a Member of the Office of Chairman of SFX and a director of SFX.
The agreement provides for an annual base salary of $315,000, reviewed annually
and increased by a minimum of 4.0% per year. In addition, Mr. Falk will be
considered for an annual bonus consistent with the bonuses given to other
senior executives of SFX. Mr. Falk received an option to purchase 100,000
shares of Class A common stock at an exercise price of $41.62 per share. The
option will fully vest on June 4, 1999. SFX has agreed to make annual stock
option grants to Mr. Falk to purchase at least 30,000 shares of Class A common
stock in the first four years of his employment agreement.
SFX may terminate Mr. Falk's employment at any time With or Without Cause, as
defined in the agreement. If the agreement is terminated for any reason other
than a voluntary termination or termination for cause, then all stock options
granted or to be granted pursuant to the agreement will immediately be granted,
vest and become exercisable and SFX will be obligated to pay Mr. Falk his base
salary and annual bonuses at a rate equal to 50% of his base salary through the
original term of the agreement, as well as certain additional benefits.
For one year following the termination of the employment agreement by Mr. Falk
or termination by SFX for Cause, as defined in the agreement, except in certain
events, Mr. Falk has agreed that he will not compete with the business of FAME
as conducted as of the closing date of the FAME acquisition or solicit any
employees to leave SFX or its affiliates.
In the past, SFX has also entered into certain additional agreements and
arrangements with its officers and directors. See "Certain Relationships and
Related Party Transactions."
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
POTENTIAL CONFLICTS OF INTEREST
Pursuant to the employment agreement entered into between Brian Becker and SFX
in connection with the acquisition of PACE, Mr. Becker has the option,
exercisable within 15 days after February 25, 2000,
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to purchase SFX's motor sports line of business or, if that line of business has
been sold, SFX's theatrical line of business--at its then fair market value.
Exercise of such option would result in the termination of Mr. Becker's
employment agreement. Mr. Becker's option may present a conflict of interest in
his role as a director of SFX. See "--Becker Employment Agreement."
AGREEMENTS PRIOR TO THE SPIN-OFF
In January 1998, to retain the services of certain officers and directors of
SFX and, if necessary, to facilitate Broadcasting's ability to pursue an
alternative transaction to the SFX spin-off, as contemplated in the
Broadcasting merger agreement, SFX reached an agreement with such individuals
to waive the individuals' right to receive shares of SFX in the spin-off in
return for the right to receive one share of Class A common stock regardless of
the number of shares that were otherwise distributable in the spin-off or, in
an alternative transaction, receive $4.20 in value of stock of the acquiring
company or $4.20 in cash depending on the circumstances for each share of
Broadcasting common stock held by them or were entitled to receive. The amount
of $4.20 was based on the value attributed to the Class A common stock in the
fairness opinion obtained by Broadcasting in connection with the Broadcasting
merger. If the spin-off was consummated, SFX was permitted to satisfy its
obligations by delivering shares in connection with the spin-off. The following
table sets forth the executive officers and directors who entered into such an
agreement, along with the number of shares of Broadcasting common stock that
they held or were entitled to receive:
<TABLE>
<CAPTION>
NAME SHARES OF SFX BROADCASTING
- ------------------------------------------ ----------------------------------
<S> <C>
Robert F.X. Sillerman .................. 1,326,248 of Class A common stock
1,024,168 of Class B common stock
Michael G. Ferrel ...................... 98,637 of Class A common stock
22,869 of Class B common stock
Howard J. Tytel ........................ 248,615 of Class A common stock
Thomas P. Benson ....................... 9,000 of Class A common stock
Richard A. Liese ....................... 2,800 of Class A common stock
D. Geoffrey Armstrong .................. 161,800 of Class A common stock
James F. O'Grady, Jr. .................. 14,772 of Class A common stock
Paul Kramer ............................ 15,922 of Class A common stock
Edward F. Dugan ........................ 5,922 of Class A common stock
</TABLE>
In accordance with this agreement, SFX's obligations were deemed satisfied upon
delivery of the shares in connection with the SFX spin-off. No cash payment was
made.
ASSUMPTION OF EMPLOYMENT AGREEMENTS; CERTAIN CHANGE OF CONTROL PAYMENTS
At the time of the consummation of the Broadcasting merger, SFX assumed all
obligations under any employment agreement or arrangement between Broadcasting,
or any of its subsidiaries, and any employee of SFX, including Messrs.
Sillerman and Ferrel, other than obligations relating to Messrs. Sillerman's
and Ferrel's change of control options and existing rights to indemnification.
These assumed obligations included the obligation to make cash payments
aggregating approximately $3.3 million to Mr. Sillerman, $1.5 million to Mr.
Ferrel and $200,000 to Mr. Benson after the termination of their employment
with Broadcasting following the Broadcasting merger. SFX has paid these
amounts. In addition, SFX's assumed obligations include the duty to indemnify
Messrs. Sillerman and Ferrel to the extent permitted by law for one-half of the
cost of any excise tax that may be assessed against them for any
change-of-control payments made to them by Broadcasting in connection with the
Broadcasting merger.
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INDEMNIFICATION OF MR. SILLERMAN
On August 24, 1997, Mr. Sillerman entered into an agreement with Broadcasting
and the Broadcasting buyer to waive his right to receive indemnification,
except to the extent covered by directors' and officers' insurance, from
Broadcasting, its subsidiaries, the Broadcasting buyer and its subsidiaries for
claims and damages arising out of the Broadcasting merger and related
transactions. Mr. Sillerman's employment agreement with SFX provides that SFX
will indemnify Mr. Sillerman for these claims and damages to the fullest extent
permitted by applicable law.
RELATIONSHIP BETWEEN HOWARD J. TYTEL AND BAKER & MCKENZIE
Howard J. Tytel, who is the Executive Vice President, General Counsel,
Secretary, Member of the Office of the Chairman and a director of SFX, was "Of
Counsel" to the law firm of Baker & McKenzie from 1993 to May 31, 1998. During
the time Mr. Tytel was associated with Baker & McKenzie he was compensated, in
part, based on the legal fees which he generated, including the legal fees paid
by SFX, Broadcasting, Marquee and other affiliates of Mr. Tytel and Mr.
Sillerman. Baker & McKenzie has agreed to a severance arrangement with Mr.
Tytel, which is not based on fees received by Baker & McKenzie. From April 27,
1998, the date of the spin-off, until May 31, 1998, the date that Mr. Tytel
terminated his fee-based arrangement with Baker & McKenzie, SFX incurred and
paid Baker & McKenzie approximately $1.5 million for legal services. SFX
believes that this arrangement was as fair to SFX as any that could have been
obtained from an unrelated party on an arms-length basis.
ARRANGEMENT BETWEEN ROBERT F.X. SILLERMAN AND HOWARD J. TYTEL
Since 1978, Messrs. Sillerman and Tytel have been jointly involved in numerous
business ventures, including SCMC, TSC, MMR, Triathlon, Marquee, Broadcasting
and SFX. In consideration for certain services provided by Mr. Tytel in
connection with those ventures, Mr. Tytel has generally received from Mr.
Sillerman either a minority equity interest in the businesses, with Mr.
Sillerman retaining the right to control the voting and disposition of Mr.
Tytel's interest, or cash fees in an amount mutually agreed upon. Although
Broadcasting did not compensate Mr. Tytel directly, except for ordinary fees
paid to him in his capacity as a director, he receives compensation from TSC
and SCMC, companies controlled by Mr. Sillerman, as well as from Mr. Sillerman
personally, with respect to the services he provides to various entities
affiliated with Mr. Sillerman, including Broadcasting. In 1997, these cash fees
aggregated approximately $5.0 million. In connection with the consummation of
the Broadcasting merger and certain related transactions, Mr. Tytel received
308,374 shares of SFX's Class A common stock, with Mr. Sillerman retaining the
right to vote these shares, and cash fees from TSC, SCMC and Mr. Sillerman
personally. Mr. Tytel has also granted Mr. Sillerman the right to vote all
other shares of SFX Class A common stock beneficially owned by him. See
"--Assumption of Employment Agreements; Certain Change of Control Payments" and
"--Employment Agreements."
TRIATHLON FEES
SCMC, a corporation controlled by Mr. Sillerman and in which Mr. Tytel has an
equity interest, has an agreement to provide consulting and marketing services
to Triathlon, a publicly-traded company in which Mr. Sillerman is a significant
stockholder. Under the terms of the agreement, SCMC has agreed to provide
consulting and marketing services to Triathlon until June 1, 2005 for an annual
fee of $500,000, together with a refundable advance of $500,000 per year
against fees earned in respect of transactional investment banking services.
Triathlon paid fees of $3,000,000 for the year ended December 31, 1996, fees of
$1,794,000 for the year ended December 31, 1997 and fees of $530,000 for the
year ended December 31, 1998. These fees vary above the minimum annual fee of
$500,000 depending on the level of acquisition and financing activities of
Triathlon. SCMC previously assigned its rights to receive fees payable under
this agreement to Broadcasting. Pursuant to the terms of the distribution
agreement, Broadcasting assigned its rights to receive these fees to SFX. All
services provided by SCMC are provided by employees of SFX. On April 30, 1999,
Triathlon was acquired by a third party and such party paid SFX $2.0 million in
consideration for SFX's agreement to terminate the consulting and marketing
agreement.
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COMMON STOCK RECEIVED IN THE SPIN-OFF
In the SFX spin-off, the holders of Broadcasting's Class A common stock, Series
D preferred stock and warrants, upon exercise, received shares of SFX's Class A
common stock, whereas Messrs. Sillerman and Ferrel, as the holders of
Broadcasting's Class B common stock, which is entitled to ten votes per share on
most matters, received shares of SFX's Class B common stock. Class A common
stock and Class B common stock have similar rights and privileges, except that
the Class B common stock has greater voting rights. The issuance of the Class B
common stock in the spin-off was intended to preserve Messrs. Sillerman's and
Ferrel's relative voting power after the spin-off. Mr. Sillerman currently holds
approximately 33.9% of the combined voting power of SFX, and Messrs. Sillerman
and Ferrel control approximately 37.9% of the combined voting power of SFX.
Accordingly, Mr. Sillerman, alone and together with SFX's current directors and
executive officers, will generally be able to control the outcome of the votes
of the stockholders on most matters. See "Ownership of Securities by Directors,
Officers and Certain Beneficial Owners."
In addition, in August 1997, the board of directors of Broadcasting approved
amendments to certain warrants to purchase an aggregate of 600,000 shares of
Broadcasting's Class A common stock. The warrants were held by SCMC, an entity
controlled by Mr. Sillerman. The amendments memorialized the original intent of
the directors of Broadcasting that SCMC receive the aggregate number of shares
of Class A common stock that it would have received if it had exercised the
warrants immediately before the spin-off. Because of these amendments, SCMC
received 600,000 shares of Class A common stock in the spin-off.
ISSUANCE OF STOCK TO HOLDERS OF SFX BROADCASTING'S OPTIONS AND SARS
On April 27, 1998, SFX issued 522,941 shares of its Class A common stock to
holders as of the spin-off record date of the stock options or SARs of
Broadcasting, whether or not vested. SFX also issued 325,000 shares of Class A
common stock to Mr. Sillerman and 70,000 shares of Class A common stock to Mr.
Ferrel with respect to options issuable under their employment agreements with
Broadcasting. In addition, SFX issued 325,000 shares of its Class A common
stock to Mr. Sillerman and 30,000 shares of SFX Class A common stock to Mr.
Ferrel, which corresponded to change-of-control options of Broadcasting that
they waived in connection with the Broadcasting merger. The issuances were made
in consideration for past services to SFX and to allow holders of such options
and SARs to participate in the spin-off in a manner similar to holders of
Broadcasting's Class A common stock. Additionally, many of the option and SAR
holders are officers, directors or employees of SFX. The members of the Board,
other than Messrs. Becker and Falk, received an aggregate of 850,479 shares
pursuant to such issuances.
MEADOWS REPURCHASE
In connection with the acquisition of Meadows Music Theater, Broadcasting
obtained an option, as subsequently amended, to repurchase 247,177 shares of
its Class A common stock (the "Meadows Shares") for an aggregate purchase price
of $8.2 million. However, Broadcasting was restricted from exercising the
Meadows Repurchase by certain loan covenants and other restrictions. Pursuant
to the terms of the Broadcasting merger agreement, if the Meadows Shares were
outstanding at the effective time of the Broadcasting merger, the amount of
working capital which SFX would receive in connection with its spin-off from
Broadcasting would be decreased by approximately $10.3 million.
In January 1998, Mr. Sillerman committed to finance the $8.2 million exercise
price of the Meadows Repurchase in a transaction structured to offset the $10.3
million reduction to SFX's working capital. In consideration for his
commitment, the board of directors of Broadcasting agreed that Mr. Sillerman
would receive approximately the number of shares of Class A common stock to be
issued in the spin-off with respect to the Meadows Shares. Broadcasting
received a fairness opinion with respect to the transaction and the transaction
was approved by Broadcasting's board of directors, including the independent
directors.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, SFX's directors, executive officers and ten
percent stockholders are required to report to the Securities and Exchange
Commission and NASDAQ Stock Market, by specific dates, transactions and
holdings in SFX's common stock. Based solely on its review of the copies of
such forms received by it or written representations from certain reporting
persons that no annual corrective filings were required for those persons, SFX
believes that during fiscal year 1998 all these filing requirements were timely
satisfied.
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS FOR NEXT YEAR
The deadline for SFX's receipt of stockholder proposals for inclusion in SFX's
2000 proxy statement for next year's annual meeting is February 8, 2000. On
request, the Secretary will provide detailed instructions for submitting
proposals. Proposals should be sent via certified mail, return receipt
requested, to:
Secretary
SFX Entertainment, Inc.
650 Madison Avenue, 16th Floor
New York, New York 10022
COSTS OF SOLICITING PROXIES
This proxy is being solicited by the Board of Directors. SFX pays the costs of
soliciting this proxy. SFX has retained Georgeson & Co., Wall Street Plaza,
30th Floor, New York, New York, 10005, to assist in the solicitation for a fee
of approximately $7,500, plus reimbursement for certain out-of-pocket expenses.
QUESTIONS
If you have questions or need more information about the annual meeting,
write to:
SFX Entertainment, Inc.
650 Madison Avenue, 16th Floor
New York, New York 10022
Attn: Tim Klahs
Director of Investor Relations
or call us at (212) 407-9126.
Upon written request, we will provide without charge to each stockholder a copy
of our Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended December 31, 1998. Requests should be
direct to the address above. The Annual Report is also available via the
Securities and Exchange Commission's EDGAR website at www.sec.gov/edgarhp.htm
21
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EXHIBIT A
SFX ENTERTAINMENT, INC.
1999 STOCK OPTION AND RESTRICTED STOCK PLAN
EFFECTIVE OCTOBER 8, 1998
SECTION 1
ESTABLISHMENT AND PURPOSE
This Plan is established to (i) offer selected, directors, officers,
Employees and Consultants of the Company or its Subsidiaries an equity
ownership interest in the financial success of the Company, (ii) provide the
Company an opportunity to attract, retain and motivate the best available
personnel for positions of substantial responsibility and (iii) to encourage
equity participation in the Company by eligible Participants. This Plan
provides for the grant by the Company of (i) Options to purchase Shares, and
(ii) shares of Restricted Stock. Options granted under this Plan may include
Nonstatutory Options as well as ISOs intended to qualify under section 422 of
the Code.
SECTION 2
DEFINITIONS
"BOARD OF DIRECTORS" shall mean the board of directors of the Company, as
duly elected from time to time.
"CHANGE IN CONTROL" shall mean such time as either (i) any "person", as
such term is used in section 14(d) of the Exchange Act (other than the Company,
a wholly-owned subsidiary of the Company, any employee benefit plan of the
Company or its Subsidiaries or Mr. Sillerman together with his affiliates (as
such term is defined in Rule 12b-2 of the Exchange Act)) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act (or any
successor rule), directly or indirectly, of fifty percent (50%) or more of the
combined voting power of the Company's common stock or (ii) individuals who
constitute the Board of the Directors on the effective date of this Plan (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election or nomination for election by the Company's shareholders
was approved by a vote of at least three quarters of the directors comprising
the Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for the
director without objection to such nomination) shall be, for purposes of this
clause (ii) considered as though such person was a member of the Incumbent
Board.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and as
interpreted by the regulations thereunder.
"COMMITTEE" shall mean the Stock Option Committee of the Company, or such
other Committee as may be appointed by the Board of Directors from time to
time.
"COMPANY" shall mean SFX Entertainment, Inc., a Delaware corporation.
"CONSULTANT" shall mean any individual that is expressly designated as a
consultant of the Company or its Subsidiaries by the Committee in its sole
discretion.
"COVERED EMPLOYEE" shall mean an individual who, on the last day of the
taxable year, is the chief executive officer of the Company or any one of the
four most highly compensated officers of the Company other than the chief
executive, as described in Section 162(m)(e) of the Code.
"DATE OF GRANT" shall mean the date on which the Committee resolves to
grant an Option to an Optionee or grant Restricted Stock to a Participant, as
the case may be.
"DISINTERESTED DIRECTOR" shall mean a member of the Board of Directors who
is both (i) a Non-Employee Director, within the meaning of Rule 16b-3
promulgated under the Exchange Act, as
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amended from time to time and (ii) an Outside Director, within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder, as
amended from time to time.
"EMPLOYEE" shall include every individual performing Services to the
Company or its Subsidiaries other than as a Consultant and only if the
relationship between such individual and the Company or its Subsidiaries is the
legal relationship of employer and employee. This definition of "Employee" is
qualified in its entirety and is subject to the definition set forth in section
3401(c) of the Code and the regulations thereunder.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and as interpreted by the rules and regulations promulgated thereunder.
"EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement, but in no event less than the par value per
Share.
"FAIR MARKET VALUE" shall mean the closing price of the shares on the
national securities exchange on which the Shares are listed (if the shares are
so listed) as reported in the Wall Street Journal on the applicable date (or,
if not so reported, as otherwise reported by the National Association of
Securities Dealers Automated Quotation System) or on the NASDAQ National Market
System (if the Shares are regularly quoted thereon), or, if not so listed or
regularly quoted, the mean of the closing bid and asked prices of the
securities in the over-the-counter market, on the applicable date or, if such
bid and asked prices shall not be available, as reported by any nationally
recognized quotation service selected by the Company, or as determined by the
Committee in a manner consistent with the provisions of the Code.
"ISO" shall mean a stock option which is granted to an individual and
which meets the requirements of section 422 of the Code.
"NONSTATUTORY OPTION" shall mean any Option granted by the Committee that
is not an ISO.
"OPTION" shall mean either an ISO or Nonstatutory Option, as the context
requires, granted under this Plan.
"OPTIONEE" shall mean a Participant who holds an Option.
"PARTICIPANTS" shall mean those individuals described in Section 1 of this
Plan selected by the Committee who are eligible under Section 4 of this Plan
for grants of either Options or Restricted Stock under this Plan.
"PERMANENT AND TOTAL DISABILITY" shall mean that an individual is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
more than twelve (12) months. An individual shall not be considered to suffer
from Permanent and Total Disability unless such individual furnishes proof of
the existence thereof in such form and manner, and at such times, as the
Committee may reasonably require. The scope of this definition shall
automatically be reduced or expanded to the extent that section 22(e)(3) of the
Code is amended to reduce or expand the scope of the definition of Permanent
and Total Disability thereunder.
"PLAN" shall mean this SFX Entertainment, Inc. 1999 Stock Option and
Restricted Stock Plan, as amended from time to time.
"PLAN AWARD" shall mean the grant of either an Option or Restricted Stock,
as the context requires.
"RESTRICTED STOCK" shall have that meaning set forth in Section 7(a) of
this Plan.
"RESTRICTED STOCK ACCOUNT" shall have that meaning set forth in Section
7(a)(ii) of this Plan.
"RESTRICTED STOCK CRITERIA" shall have that meaning in Section 7(a)(iv) of
this Plan.
"RESTRICTION PERIOD" shall have that meaning in Section 7(a)(iii) of this
Plan.
"SERVICES" shall mean services rendered to the Company or any of its
Subsidiaries by a Participant.
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"SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 9 of this Plan (if applicable).
"STOCK" shall mean the Class A Common Stock of the Company, par value $.01
per share.
"STOCK OPTION AGREEMENT" shall mean the agreement executed between the
Company and an Optionee that contains the terms, conditions and restrictions
pertaining to the granting of an Option.
"SUBSIDIARY" shall mean any corporation as to which more than fifty (50%)
percent of the outstanding voting stock or shares shall now or hereafter be
owned or controlled, directly by a person, any Subsidiary of such person, or
any Subsidiary of such Subsidiary.
"TEN-PERCENT SHAREHOLDER" shall mean a person that owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company or any Subsidiary, taking into account the attribution
rules set forth in section 424 of the Code, as amended. For purposes of this
definition of "Ten Percent Shareholder" the term "outstanding stock" shall
include all stock actually issued and outstanding immediately after the grant
of an Option to an Optionee. "Outstanding stock" shall not include reacquired
shares or shares authorized for issuance under outstanding Options held by the
Optionee or by any other person.
"VEST DATE" shall have that meaning in Section 7(a)(v) of this Plan.
SECTION 3
ADMINISTRATION
(a) GENERAL ADMINISTRATION. This Plan shall be administered by the
Committee, which shall consist of at least two persons, each of whom shall be
Disinterested Directors. The members of the Committee shall be appointed by the
Board of Directors for such terms as the Board of Directors may determine. The
Board of Directors may from time to time remove members from, or add members
to, the Committee. Vacancies on the Committee, however caused, may be filled by
the Board of Directors.
(b) COMMITTEE PROCEDURES. The Board of Directors shall designate one of
the members of the Committee as chairman. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to or approved in writing by a majority of all Committee members, shall be
valid acts of the Committee. A majority of the Committee shall constitute a
quorum.
(c) AUTHORITY OF COMMITTEE. This Plan shall be administered by, or under
the direction of, the Committee constituted in such a manner as to comply at
all times with Rule 16b-3 (or any successor rule) under the Exchange Act. The
Committee shall administer this Plan so as to comply at all times with the
Exchange Act and the Code and shall have absolute and final authority, subject
to the provisions of the Plan, to interpret this Plan and to make all
determinations specified in or permitted by this Plan or deemed necessary or
desirable for its administration or for the conduct of the Committee's business
including without limitation the authority to take the following actions:
(i) To interpret this Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms relating to
this Plan;
(iii) To authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of this Plan;
(iv) To determine when Plan Awards are to be granted under this Plan;
(v) To select the Optionees and Participants;
(vi) To determine the number of Shares to be made subject to each Plan
Award;
(vii) To prescribe the terms, conditions and restrictions of each Plan
Award, including without limitation, the Exercise Price, the vesting schedule
and the determination whether an Option is to be classified as an ISO or a
Nonstatutory Option;
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(viii) To amend or cancel any outstanding Stock Option Agreement (other
than the Exercise Price) or the terms, conditions and restrictions
of a grant of Restricted Stock, subject to applicable legal
restrictions and the consent of the Optionee or Participant, as the
case may be, who entered into such agreement, or accelerate the
vesting of any Plan Award;
(ix) To establish procedures so that an Optionee may obtain a loan
through a registered broker-dealer under the rules and regulations of the
Federal Reserve Board, for the purpose of exercising an Option;
(x) To establish procedures for an Optionee (1) to have withheld from
the total number of Shares to be acquired upon the exercise of an Option that
number of Shares having a Fair Market Value, which, together with such cash as
shall be paid in respect of fractional shares, shall equal the Exercise Price,
and (2) to exercise a portion of an Option by delivering that number of Shares
already owned by an Optionee having a Fair Market Value which shall equal the
partial Exercise Price and to deliver the Shares thus acquired by such Optionee
in payment of Shares to be received pursuant to the exercise of additional
portions of the Option, the effect of which shall be that an Optionee can in
sequence utilize such newly acquired shares in payment of the Exercise Price of
the entire Option, together with such cash as shall be paid in respect of
fractional shares;
(xi) To establish procedures whereby a number of Shares may be withheld
from the total number of Shares to be issued upon exercise of an Option, to
meet the obligation of withholding for federal and state income and other
taxes, if any, incurred by the Optionee upon such exercise; and
(xii) To take any other actions deemed necessary or advisable for the
administration of this Plan.
All interpretations and determinations of the Committee made with respect
to the administration and interpretation of the Plan and the granting of Plan
Awards shall be final, conclusive, and binding on all interested parties. The
Committee may make grants of Plan Awards on an individual or group basis. The
provisions and conditions of the Plan Awards need not be the same with respect
to each Optionee or Participant or with respect to each Plan Award. No member
of the Committee shall be liable for any action that is taken or is omitted to
be taken if such action or omission is taken in good faith with respect to this
Plan or grant of any Plan Award.
(d) HOLDING PERIOD. The Committee may in its sole discretion require as a
condition to the granting of any Plan Award, that a Participant hold the Plan
Awards for a period of six months following the date of such acquisition. This
condition shall be satisfied with respect to an Option if at least six months
elapse from the date of acquisition of the Option to the date of disposition of
the Option (other than upon exercise or conversion) or its underlying equity
security.
SECTION 4
ELIGIBILITY
(a) GENERAL RULE. Subject to the limitations set forth in subsection b
below or elsewhere in this Plan, Participants shall be eligible to participate
in this Plan.
(b) NON-EMPLOYEE INELIGIBLE FOR ISOS. In no event shall an ISO be granted
to any individual who is not an Employee on the Date of Grant.
SECTION 5
SHARES SUBJECT TO PLAN
BASIC LIMITATION. Shares offered under this Plan may be authorized but
unissued Shares or Shares that have been reacquired by the Company. The
aggregate number of Shares that are available for issuance under this Plan
shall not exceed three million (3,000,000) Shares, subject to adjustment
pursuant to Section 9 of this Plan. The Committee shall not issue more Shares
than are available for issuance under this Plan. The number of Shares that are
subject to unexercised Options at any time under this Plan shall
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not exceed the number of Shares that remain available for issuance under this
Plan. The Company, during the term of this Plan, shall at all times reserve and
keep available sufficient Shares to satisfy the requirements of this Plan.
ADDITIONAL SHARES. In the event any outstanding Option for any reason
expires, is canceled or otherwise terminates, the Shares allocable to the
unexercised portion of such Option shall again be available for issuance under
this Plan. In the event that Shares issued under this Plan revert to the
Company prior to the Vest Date under a grant of Restricted Stock, such Shares
shall again be available for issuance under this Plan.
SECTION 6
TERMS AND CONDITIONS OF OPTIONS
(a) TERM OF OPTION. The term of each Option shall be ten (10) years from
the Date of Grant or such shorter term as may be determined by the Committee;
provided, however, in the case of an ISO granted to a Ten-Percent Shareholder,
the term of such ISO shall be five (5) years from the Date of Grant or such
shorter time as may be determined by the Committee.
(b) EXERCISE PRICE AND METHOD OF PAYMENT.
(i) EXERCISE PRICE. The Exercise Price shall be such price as is
determined by the Committee in its sole discretion and set forth in the Stock
Option Agreement; provided, however, in the case of an ISO granted to any
Optionee and a Nonstatutory Option to an Optionee who is also a Covered
Employee, the Exercise Price shall not be less than 100% of the Fair Market
Value of the Shares subject to such Option on the Date of Grant (or 110% in the
case of an ISO granted to a Participant who is a Ten-Percent Shareholder on the
Date of Grant).
(ii) PAYMENT OF SHARES. Payment for the Shares upon exercise of an
Option shall be made in cash, by certified check, or if authorized by the
Committee, by delivery of other Shares having a Fair Market Value on the date
of delivery equal to the aggregate exercise price of the Shares as to which
said Option is being exercised, or by any combination of such methods of
payment or by any other method of payment as may be permitted under applicable
law and this Plan and authorized by the Committee under Section 3(c) of this
Plan.
(c) EXERCISE OF OPTION.
(1) PROCEDURE FOR EXERCISE; RIGHTS OF SHAREHOLDER. Any Option granted
hereunder shall be exercisable at such times under such conditions as shall be
determined by the Committee including, without limitation performance criteria
with respect to the Company and/or the Optionee and in accordance with the
terms of this Plan. To the extent that Options granted hereunder are ISOs, the
Committee shall designate such Options as ISOs in the written instrument
evidencing such Option. If the written instrument does not designate the
Options as ISOs, then the Option shall be a Nonstatutory Option.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Stock Option Agreement by the Optionee entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Committee,
consist of any form of consideration and method of payment allowable under
Section 6(b)(ii) of this Plan. Upon the receipt of notice of exercise and full
payment for the Shares, the Shares shall be deemed to have been issued and the
Optionee shall be entitled to receive such Shares and shall be a shareholder
with respect to such Shares, and the Shares shall be considered fully paid and
nonassessable. No adjustment will be made for a dividend or other right for
which the record date is prior to the date on which the stock certificate is
issued, except as provided in Section 9 of this Plan.
Each exercise of an Option shall reduce, by an equal number, the total
number of Shares that may thereafter be purchased under such Option.
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(ii) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. Except as
provided in Subsections 6(c)(iii) and 6(c)(iv) below, an Optionee holding an
Option who ceases to be an Employee, a Consultant or a director of the Company
may, but only until the earlier of the date (x) the Option held by the Optionee
expires, or (y) thirty (30) days after the date such Optionee ceases to be an
Employee, a Consultant or a director, exercise the Option to the extent that
the Optionee was entitled to exercise it on such date; provided, however, that
in the event the Optionee is an Employee and is terminated without cause (as
determined in the sole discretion of the Committee) then the thirty (30) day
period described in this sentence shall be automatically extended to ninety
(90) days (and in the case of a Nonstatutory Option, such period shall be
automatically extended to six (6) months), unless the Committee further extends
such period in its sole discretion. To the extent that the Optionee was not
entitled to exercise an Option on such date, or if the Optionee does not
exercise it within the time specified herein, such Option shall terminate. The
Committee shall have the authority to determine the date an Optionee ceases to
be an Employee, a Consultant or a director.
(iiiI) PERMANENT AND TOTAL DISABILITY. Notwithstanding the provisions of
Section 6(c)(ii) above, in the event an Optionee is unable to continue to
perform Services for the Company or any of its Subsidiaries as a result of such
Optionee's Permanent and Total Disability (and, for ISOs, at the time such
Permanent and Total Disability begins, the Optionee was an Employee and had
been an Employee since the Date of Grant), such Optionee may exercise an Option
in whole or in part notwithstanding that such Option may not be fully
exercisable, but only until the earlier of the date (x) the Option held by the
Optionee expires, or (y) twelve (12) months from the date of termination of
Services due to such Permanent and Total Disability. To the extent the Optionee
is not entitled to exercise an Option on such date or if the Optionee does not
exercise it within the time specified herein, such Option shall terminate.
(iv) DEATH OF AN OPTIONEE. Upon the death of an Optionee, any Option held
by an Optionee shall terminate and be of no further effect; provided, however,
notwithstanding the provisions of Section 6(c)(ii) above, in the event an
Optionee's death occurs during the term of an Option held by such Optionee and,
at the time of death, the Optionee was an Employee, Consultant or, director
(and, for ISOs, the Optionee had been an Employee since the Date of Grant), the
Option may be exercised in whole or in part notwithstanding that such Option
may not have been fully exercisable on the date of the Optionee's death, but
only until the earlier of the date (x) the Option held by the Optionee expires,
or (y) twelve (12) months from the date of the Optionee's death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance. To the extent the Option is not entitled to be
exercised on such date or if the Option is not exercised within the time
specified herein, such Option shall terminate.
(d) NON-TRANSFERABILITY OF OPTIONS. Except as may be permitted by the
Committee in its sole discretion, any Option granted under this Plan may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder, and is not
assignable by operation of law or subject to execution, attachment or similar
process. During the Optionee's lifetime, any Option granted under this Plan can
only be exercised by such Optionee. Any attempted sale, pledge, assignment,
hypothecation or other transfer of the Option contrary to the provisions hereof
and the levy of any execution, attachment or similar process upon the Option
shall be null and void and without force or effect. No transfer of the Option
by will or by the laws of descent and distribution shall be effective to bind
the Company unless the Company shall have been furnished written notice thereof
and an authenticated copy of the will and/or such other evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions of the
Option. The terms of any Option transferred by will or by the laws of descent
and distribution shall be binding upon the executors, administrators, heirs and
successors of Optionee.
(e) TIME OF GRANTING OPTIONS. Any Option granted hereunder shall be deemed
to be granted on the Date of Grant. Written notice of the Committee's
determination to grant an Option to a Participant, evidenced by a Stock Option
Agreement, dated as of the Date of Grant, shall be given to such Participant
within a reasonable time after the Date of Grant.
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(f) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Within the limitations
of this Plan, the Committee may modify, extend or renew outstanding Options or
may accept the cancellation of outstanding Options (to the extent not
previously exercised) for the granting of new Options in substitution therefor.
The foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair the Optionee's rights or obligations
under such Option; provided that the Committee may, in its sole discretion, and
without the consent of the Optionee or any other person, reduce the exercise
price of all or any part of any Option or accelerate the vesting of all or part
of any Option.
(g) RESTRICTIONS ON TRANSFER OF SHARES. Any Shares issued upon exercise of
an Option shall be subject to such rights of repurchase and other transfer
restrictions as the Committee may determine in its sole discretion. Such
restrictions shall be set forth in the applicable Stock Option Agreement.
(h) SPECIAL LIMITATION ON ISOS. To the extent that the aggregate Fair
Market Value (determined on the Date of Grant) of the Shares with respect to
which ISOs are exercisable for the first time by an individual during any
calendar year under this Plan, and under all other plans maintained by the
Company, exceeds $100,000, such Options shall be treated as Nonstatutory
Options.
(i) LEAVES OF ABSENCE. Leaves of absence approved by the Committee which
conform to the policies of the Company shall not be considered termination of
employment until the employer-employee relationship, as defined under the Code
or the regulations promulgated thereunder, ends or, if earlier, the leave of
absence period expires and the individual fails to return to active employment
with the Company.
(j) LIMITATION ON GRANTS OF OPTIONS TO COVERED EMPLOYEES. The total number
of Shares for which Options may be granted and which may be awarded as
Restricted Stock to any Covered Employee during any one-year period shall not
exceed 1,200,000 in the aggregate.
(k) DISQUALIFYING DISPOSITIONS. The Stock Option Agreement evidencing any
ISO granted under this Plan shall provide that if the Optionee makes a
disposition, within the meaning of Section 425(c) of the Code and the
regulations promulgated thereunder, of any share or shares issued to him
pursuant to the exercise of the ISO within the two-year period commencing on
the day after the Date of Grant of such Option or within a one-year period
commencing on the day after the date of transfer of the share or shares to him
pursuant to the exercise of such Option, he shall, within ten days of such
disposition, notify the Company thereof and immediately deliver to the Company
any amount of federal income tax withholding required by law.
(l) WITHHOLDING TAXES. The Committee shall require an Optionee to pay to
the Company at the time of exercise of an Option the amount that the Company
deems necessary to satisfy its obligation to withhold federal, state or local
income or other taxes incurred by reason of the exercise. Upon the exercise of
an Option requiring tax withholding, an Optionee may either pay such taxes in
cash or make a written election to have Shares withheld by the Company from the
shares otherwise to be received by the Optionee. The acceptance of any such
election by an Optionee shall be at the sole discretion of the Committee. In
addition, the Committee may require the Company to withhold Shares from the
Shares otherwise to be received by an Optionee upon exercise of an option. The
number of Shares withheld pursuant to this paragraph shall have an aggregate
Fair Market Value on the date of exercise sufficient to satisfy the applicable
withholding taxes.
SECTION 7
RESTRICTED STOCK
(a) AUTHORITY TO GRANT RESTRICTED STOCK. The Committee shall have the
authority to grant to Participants Shares that are subject to certain terms,
conditions and restrictions (the "Restricted Stock"). The Restricted Stock may
be granted by the Committee either separately or in combination with Options.
The terms, conditions and restrictions of the Restricted Stock shall be
determined from time to time by the Committee without limitation, except as
otherwise provided in this Plan; provided, however, that each
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grant of Restricted Stock shall require the Participant to remain an Employee
of (or otherwise provide Services to) the Company or any of its Subsidiaries
for at least six (6) months from the Date of Grant. The granting, vesting and
issuing of the Restricted Stock shall also be subject to the following
provisions:
(i) NATURE OF GRANT. Restricted Stock shall be granted to Participants
for Services rendered and at no additional cost to Participant; provided,
however, that the value of the Services performed must, in the opinion of the
Committee, equal or exceed the par value of the Restricted Stock to be granted
to the Participant.
(ii) RESTRICTED STOCK ACCOUNT. The Company shall establish a restricted
stock account (the "Restricted Stock Account") for each Participant to whom
Restricted Stock is granted, and such Restricted Stock shall be credited to
such account. No certificates will be issued to the Participant with respect to
the Restricted Stock until the Vest Date as provided herein. Every credit of
Restricted Stock under this Plan to a Restricted Stock Account shall be
considered "contingent" and unfunded until the Vest Date. Such contingent
credits shall be considered bookkeeping entries only, notwithstanding the
"crediting" of "dividends" as provided herein. Such accounts shall be subject
to the general claims of the Company's creditors. The Participant's rights to
the Restricted Stock Account shall be no greater than that of a general
creditor of the Company. Nothing contained herein shall be construed as
creating a trust or fiduciary relationship between the Participants and the
Company, the Board of Directors or the Committee.
(iii) RESTRICTIONS. The terms, conditions and restrictions of the
Restricted Stock shall be determined by the Committee on the Date of Grant. The
Restricted Stock may not be sold, assigned, transferred, redeemed, pledged or
otherwise encumbered during the period in which the terms, conditions and
restrictions apply (the "Restriction Period"). More than one grant of
Restricted Stock may be outstanding at any one time, and the Restriction
Periods may be of different lengths. Receipt of the Restricted Stock is
conditioned upon satisfactory compliance with the terms, conditions and
restrictions of this Plan and those imposed by the Committee.
(iv) RESTRICTED STOCK CRITERIA. At the time of each grant of Restricted
Stock, the Committee in its sole discretion may establish certain criteria to
determine the times at which restrictions placed on Restricted Stock shall
lapse (i.e., the termination of the Restriction Period), which criteria may
include without limitation performance measures and targets and/or holding
period requirements (the "Restricted Stock Criteria"). The Committee may
establish a corresponding relationship between the Restricted Stock Criteria
and (x) the number of Shares of Restricted Stock that may be earned, and (y)
the extent to which the terms, conditions and restrictions on the Restricted
Stock shall lapse. Restricted Stock Criteria may vary among grants of
Restricted Stock; provided, however, that once the Restricted Stock Criteria
are established for a grant of Restricted Stock, the Restricted Stock Criteria
shall not be modified with respect to such grant.
(v) PERFORMANCE BASED GRANTS TO COVERED EMPLOYEES. Grants of Restricted
Stock to Covered Employees shall be designed to be performance-based in order to
qualify as performance-based compensation under Section 162(m) of the Code. The
performance period will be determined by the Committee, but no performance
period will be less than one year. Within 90 days after the beginning of a
performance period, the Committee will establish in writing one or more
objective criteria for the performance period. Each Covered Employee who is
granted Restricted Stock will begin to vest in the number of Shares of
Restricted Stock at the close of the performance period based on the attainment
of the objective criteria during the performance period as determined by the
Committee within the first 90 days of that period.
Prior to the vesting of Restricted Stock by the Covered Employees, the
Committee shall certify in writing the actual performance of the criteria. No
vesting of Restricted Stock under the Plan shall occur until the Stockholders
have approved this Plan.
(vi) VESTING. On the date the Restriction Period terminates, the
Restricted Stock shall vest in the Participant (the "Vest Date"), who may then
require the Company to issue certificates evidencing the Restricted Stock
credited to the Restricted Stock Account of such Participant.
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(vii) DIVIDENDS. The Committee may provide from time to time that
amounts equivalent to dividends shall be payable with respect to the Restricted
Stock held in the Restricted Stock Account of a Participant. Such amounts shall
be credited to the Restricted Stock Account and shall be payable to the
Participant on the Vest Date.
(viii) TERMINATION OF SERVICES. If a Participant (x) with the consent of
the Committee, ceases to be an Employee of, or otherwise ceases to provide
Services to, the Company or any of its Subsidiaries, or (y) dies or suffers
from Permanent and Total Disability, the vesting or forfeiture (including
without limitation the terms, conditions and restrictions) of any grant under
this Section 7 shall be determined by the Committee in its sole discretion,
subject to any limitations or terms of this Plan. If the Participant ceases to
be an Employee of, or otherwise ceases to provide Services to, the Company or
any of its Subsidiaries for any other reason, all grants of Restricted Stock
under this Plan shall be forfeited (subject to the terms of this Plan).
(b) DEFERRAL OF PAYMENTS.
The Committee may establish procedures by which a Participant may elect
to defer the transfer of Restricted Stock to the Participant. The Committee
shall determine the terms and conditions of such deferral in its sole
discretion.
SECTION 8
ISSUANCE OF SHARES
As a condition to the transfer of any Shares issued under this Plan, the
Company may require an opinion of counsel, satisfactory to the Company, to the
effect that such transfer will not be in violation of the Securities Act of
1933, as amended (the "Securities Act"), or any other applicable securities
laws, rules or regulations, or that such transfer has been registered under
federal and all applicable state securities laws. The Company may refrain from
delivering or transferring Shares issued under this Plan until the Committee
has determined that the Participant has tendered to the Company any and all
applicable federal, state or local tax owed by the Participant as the result of
the receipt of a Plan Award, the exercise of an Option or the disposition of
any Shares issued under this Plan, in the event that the Company reasonably
determines that it might have a legal liability to satisfy such tax. The
Company shall not be liable to any person or entity for damages due to any
delay in the delivery or issuance of any stock certificate evidencing any
Shares for any reason whatsoever.
SECTION 9
CAPITALIZATION ADJUSTMENTS; MERGER; CHANGE IN CONTROL
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Option, the aggregate number of Shares that have been authorized
for issuance under this Plan and the number of Shares of Restricted Stock
credited to any Restricted Stock Account of a Participant (as well as the
Exercise Price covered by any outstanding Option), shall be proportionately
adjusted for any increase or decrease in the number of issued Shares resulting
from a stock split, payment of a stock dividend with respect to the Stock or
any other increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company. Such adjustment shall be made by the
Committee in its sole discretion, which adjustment shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of Shares subject to an
Option.
(b) DISSOLUTION, LIQUIDATION, SALE OF ASSETS OR MERGER. In the event of
the dissolution or liquidation of the Company, other than pursuant to a
Reorganization (hereinafter defined), any Option granted under the Plan shall
terminate as of a date to be fixed by the Committee, provided that not less
than 30 days written notice of the date so fixed shall be given to each
Optionee and each such Optionee shall have the right during such period to
exercise his Options as to all or any part of the Shares covered thereby
including Shares as to which such Options would not otherwise be exercisable by
reason of an insufficient lapse of time.
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In the event of a Reorganization in which the Company is not the surviving
or acquiring company, or in which the Company is or becomes a wholly-owned
subsidiary of another company after the effective date of the Reorganization,
then
(i) if there is no plan or agreement respecting the Reorganization
("Reorganization Agreement") or if the Reorganization Agreement does
not specifically provide for the change, conversion or exchange of
the Shares under outstanding unexercised Options for securities of
another corporation, then the Committee shall take such action, and
the Options shall terminate, as provided above; or
(ii) if there is a Reorganization Agreement and if the Reorganization
Agreement specifically provides for the change, conversion or
exchange of the shares under outstanding or unexercised options for
securities of another corporation, then the Committee shall adjust
the shares under such outstanding unexercised Options (and shall
adjust the Shares which are then available to be optioned, if the
Reorganization Agreement makes specific provisions therefore) in a
manner not inconsistent with the provisions of the Reorganization
Agreement for the adjustment, change, conversion or exchange of such
stock and such options.
The term "Reorganization" as used in this Subsection 9(b) shall mean any
statutory merger, statutory consolidation, sale of all or substantially all of
the assets of the Company, or sale, pursuant to an agreement with the Company,
of securities of the Company pursuant to which the Company is or becomes a
wholly-owned subsidiary of another company after the effective date of the
Reorganization.
Except as provided above in this Section 9(b) and except as otherwise
provided by the Committee in its sole discretion, any Options shall terminate
immediately prior to the consummation of such proposed action.
Fractional shares resulting from any adjustments pursuant to this Section
may be settled in cash or otherwise as the Committee shall determine. Notice of
any adjustment shall be given by the Company to each holder of an Option or
share of Restricted Stock which shall have been so adjusted and such adjustment
(whether or not such notice is given) shall be effective and binding for all
purposes of the Plan.
(c) CHANGE IN CONTROL. Subject to Section 9(b), in the event there occurs
a Change of Control, (i) the Optionees shall have the right to exercise from
and after the date of the Change in Control the Option held by such Optionee in
whole or in part notwithstanding that such Option may not be fully exercisable,
and (ii) any and all restrictions on any Restricted Stock credited to a
Restricted Stock Account shall lapse and such stock shall immediately vest in
the Participants notwithstanding that the Restricted Stock held in such account
was unvested.
SECTION 10
NO EMPLOYMENT RIGHTS
No provision of this Plan, under any Stock Option Agreement or under any
grant of Restricted Stock shall be construed to give any Participant any right
to remain an Employee of, or provide Services to, the Company or any of its
Subsidiaries or to affect the right of the Company to terminate any
Participant's service at any time, with or without cause.
SECTION 11
TERM OF PLAN; EFFECT OF AMENDMENT OR TERMINATION
(a) EFFECTIVE DATE; TERM OF PLAN. This Plan shall become effective as
determined by the Board of Directors, but no Options granted under this Plan
shall be exercised and no grants of Restricted Stock shall have their
restrictions lapse unless and until this Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months
before or after the date this Plan is adopted by the Board of Directors. This
Plan shall continue in effect for a term of ten (10) years unless sooner
terminated under this Section 11.
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(b) AMENDMENT AND TERMINATION. The Board of Directors in its sole
discretion may terminate this Plan at any time. The Board of Directors may
amend this Plan at any time in such respects as the Board of Directors may deem
advisable; provided, that any change in the aggregate number of Shares that may
be issued under this Plan, other than in connection with an adjustment under
Section 9 of this Plan, shall require approval of the holders of a majority of
the outstanding Shares entitled to vote.
(c) EFFECT OF TERMINATION. In the event this Plan is terminated, no Shares
shall be issued under this Plan, except upon exercise of an Option granted
prior to such termination or issuance of Shares of Restricted Stock previously
credited to a Restricted Stock Account. The termination of this Plan, or any
amendment thereof, shall not affect any Shares previously issued to a
Participant, any Option previously granted under this Plan or any Restricted
Stock previously credited to a Restricted Stock Account.
SECTION 12
GOVERNING LAW
THIS PLAN AND ANY AND ALL STOCK OPTION AGREEMENTS AND AGREEMENTS RELATING
TO THE GRANT OF RESTRICTED STOCK EXECUTED IN CONNECTION WITH THIS PLAN SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
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PROXY
SFX ENTERTAINMENT, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert F.X. Sillerman and Howard J. Tytel,
and each of them (with full power to designate substitutes), proxies for the
undersigned to represent, vote and act with respect to all shares of common
stock of SFX Entertainment, Inc. held of record by the undersigned at the close
of business on May 5, 1999 at SFX's annual meeting of shareholders to be held
on June 8, 1999 and any adjournments or postponements thereof, upon the matters
designated below and upon such other matters as may properly come before the
meeting, according to the number of votes the undersigned might cast and with
all powers the undersigned would possess if personally present.
1. ELECTION OF DIRECTORS: Election of twelve directors of SFX to serve until
the 2000 annual meeting of shareholders or until their successors are elected
and qualified. Nominees: Robert F. X. Sillerman, Michael G. Ferrel, Brian E.
Becker, David Falk, Howard J. Tytel, Thomas P. Benson, Richard A. Liese, D.
Geoffrey Armstrong, James F. O'Grady, Jr., Paul Kramer, Edward F. Dugan and
John D. Miller.
2. RATIFY APPOINTMENT OF INDEPENDENT ACCOUNTANTS.
3. APPROVAL OF SFX'S 1999 STOCK OPTION AND RESTRICTED STOCK PLAN.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
[X] Please mark your votes as in this example.
WHEN PROPERLY EXECUTED THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE THIS PROXY WILL BE
VOTED FOR ELECTION OF EACH NOMINEE FOR DIRECTOR AND FOR ITEMS 2 AND 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
SEE REVERSE SIDE
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1. Election of Directors. (see reverse) For, except vote withheld from the
following nominee(s):
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FOR [ ] WITHHELD [ ]
2. Ratify appointment of independent accountants.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of SFX's 1999 Stock Option and Restricted Stock Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In their discretion the proxies are authorized to vote upon such other business
as may properly come before the meeting.
NOTE: PLEASE MARK THE PROXY, SIGN EXACTLY AS
YOUR NAME APPEARS BELOW, AND RETURN IT PROMPTLY
IN THE ENCLOSED ADDRESSED ENVELOPE. WHEN SHARES
ARE HELD BY JOINT TENANTS, BOTH PARTIES SHOULD
SIGN. WHEN SIGNING AS AN ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY THE PRESIDENT OR
OTHER AUTHORIZED PERSON. IF A PARTNERSHIP,
PLEASE SIGN IN FULL PARTNERSHIP NAME BY AN
AUTHORIZED PERSON.
Signature -----------------------------------
Date ----------------------------------------
Signature -----------------------------------
Date ----------------------------------------
