SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934(Amendment No.)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Clear Channel Communications, 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)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
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[ ] 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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<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC.
P.O. Box 659512
San Antonio, Texas 78265-9512
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 5, 1998
As a shareholder of Clear Channel Communications, Inc. ("the Company"),
you are hereby given notice of and invited to attend, in person or by proxy, the
Annual Meeting of Shareholders of the Company to be held at 200 Concord Plaza
(Paine Webber Conference Room-3rd Floor), San Antonio, Texas on May 5, 1998, at
11:00 a.m., for the following purposes:
1. To elect seven directors to serve for the coming year.
2. To approve the Clear Channel Communications, Inc. 1998 Stock Incentive
Plan.
3. To amend the Articles of Incorporation to increase the number of
authorized shares of Preferred Stock from 2 million shares to 10
million shares and the number of authorized shares of Common Stock of
the Company from 150 million shares to 600 million shares.
4. To ratify the selection of Ernst & Young LLP as independent auditors
for the year ending December 31, 1998.
5. To transact any other business which may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 6, 1998
are entitled to notice of and to vote at the meeting.
Your attention is invited to the accompanying Proxy Statement. In
addition, although mere attendance at the meeting will not revoke the proxy, a
shareholder present at the meeting may revoke his or her proxy and vote in
person. To assure that your shares are represented at the meeting, please
complete, date, sign and mail the enclosed Proxy card in the return envelope
provided for that purpose.
By Order of the Board of Directors
/S/ Kenneth E. Wyker
Kenneth E. Wyker
Secretary
San Antonio, Texas
March 24, 1998
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC.
PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1998
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy card is furnished in
connection with the solicitation by the Board of the Directors (the "Board") of
Clear Channel Communications, Inc. (the "Company") of proxies for use at the
Annual Meeting of Shareholders (the "Meeting") to be held on May 5, 1998, or at
any adjournment thereof, as set forth in the accompanying Notice of Annual
Meeting of Shareholders. Proxies are solicited to give all shareholders of
record at the close of business on March 6, 1998, an opportunity to vote on
matters that come before the meeting. Shares can be voted only if the
shareholder is present in person or is represented by proxy.
When your proxy card is returned properly signed, the shares
represented will be voted in accordance with your directions. You can specify
your choices by marking the appropriate boxes on the enclosed proxy card. If
your proxy card is signed and returned without specifying choices, the shares
will be voted as recommended by the directors. You may revoke your proxy at any
time before it is exercised by so notifying the Secretary of the Company in
writing or in person. Any proxy which is not revoked will be voted at the
meeting. This Proxy Statement and the accompanying proxy card are being sent to
the shareholders of the Company on or about March 24, 1998.
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of the Company's Common Stock is necessary to constitute
a quorum at the Meeting. Only votes cast "for" a matter constitute affirmative
votes. Votes "withheld" or abstaining from voting are counted for quorum
purposes, but since they are not cast "for" a particular matter, they will have
the same effect as negative votes or vote "against" a particular matter. The
votes required with respect to the Items set forth in the accompanying Notice of
Annual Meeting of Shareholders are set forth in the discussion of each Item
herein. In deciding all questions, a holder of Common Stock is entitled to one
vote, in person or by proxy, for each share held in his name on the record date.
Proxies in the form enclosed will be voted at the Meeting, if properly signed,
returned to the Company prior to the Meeting and not revoked. A proxy may be
revoked at any time before it is voted by giving written notice to the Secretary
of the Company prior to the convening of the Meeting, or by presenting another
proxy card with a later date. If you attend the Meeting and desire to vote in
person, you may request that your previously submitted proxy card not be used.
Your vote is important. Accordingly, you are urged to sign and return the
accompanying proxy card whether or not you plan to attend the meeting.
On March 6, 1998, the record date for determination of shareholders
entitled to notice of and to vote at the meeting, there were [98,387,626] shares
of Common Stock issued and outstanding and entitled to vote at the Meeting.
<PAGE>
THE BOARD OF DIRECTORS
The Board is responsible for the management and direction of the
Company and for establishing broad corporate policies. However, in accordance
with corporate legal principles, it is not involved in day-to-day operating
details. Members of the Board are kept informed of the Company's business
through discussions with the Chairman and other officers, by reviewing analyses
and reports sent to them, and by participating in board and committee meetings.
Compensation of Directors
Outside directors are paid $20,000 annual retainer with an additional
$2,500 for each meeting of the Board they attend. In addition, members of the
Compensation Committee are paid $500 for each meeting of the Compensation
Committee they attend. In addition, in February 1993, February 1994 and April
1997 each outside director was granted options to purchase 31,250, 25,000 and
5,000 shares of Common Stock, respectively. These options vest 20% per year
beginning one year from the date of grant.
Board Meetings
During 1997, the Board held nine meetings. Each of the nominees named
above attended at least 75% of the aggregate of the total number of meetings of
the Board and the total number of meetings held by committees of the Board on
which that director served.
Committees of the Board
The Board has two committees: the Audit Committee and the Compensation
Committee. The Audit Committee, composed of Mssrs. Strauss and Williams, is
responsible for reviewing the Company's accounting practices and audit
procedures. The Company's Compensation Committee, currently composed of Mssrs.
Strauss and Williams, administers the Company's stock option plans and
performance-based compensation plans and makes recommendations to the Board
concerning compensation arrangements for all officers and directors of the
Company and its subsidiaries. The Compensation Committee annually evaluates the
Company's performance and the actual compensation and share ownership of the
executive officers compared with both the Company's own industry and a broader
group of companies such as the S&P 500. See the attached Board Compensation
Committee Report which details the basis on which the Compensation Committee
determines executive compensation. Each of the Audit Committee and the
Compensation Committee met once in 1997.
Compensation Committee Interlocks and Insider Participation
During 1997, members of the Compensation Committee included B. J.
McCombs, Alan D. Feld, Theodore H. Strauss and John H. Williams. In 1997, the
Company paid fees to the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Alan D. Feld, a director of the Company, is the sole shareholder of a
professional corporation which is a partner of such firm. In 1997, the Company
purchased various forms of insurance from Primera. B. J. McCombs, a director of
the Company, owns 75% of Primera. As part of its operations, the Company leases
certain office space in San Antonio, Texas from the trusts of the children of L.
Lowry Mays and B. J. McCombs. This lease expired on December 31, 1997, however
the office space is being rented on a month to month basis with current monthly
rentals of $16,724. The Company believes all of the transactions described
above are no less favorable to the Company than could be obtained with
nonaffiliated parties.
Also during 1997, L. Lowry Mays, the Company's Chairman and Chief
Executive Officer, served as a member of the Compensation Committee and
participated in deliberations concerning executive officer compensation other
than his own.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board intends to nominate at the Meeting the seven persons listed
as nominees below. Each of the directors elected at the Meeting will serve until
the next annual meeting of shareholders or until his successor shall have been
elected and qualified, subject to earlier resignation and removal. The directors
are to be elected by a plurality of the votes cast by the holders of the shares
of Common Stock represented and entitled to be voted at the Meeting. Unless
authority to vote for directors is "withheld" in the proxy, the persons named
therein intend to vote "for" the election of the seven nominees listed. Each
nominee has indicated a willingness to serve as director if elected. Should any
nominee become unavailable for election, discretionary authority is conferred to
vote for a substitute. Management of the Company has no reason to believe that
any of the nominees will be unable or unwilling to serve if elected.
The Company has entered into an Agreement and Plan of Merger with
Universal Outdoor Holdings, Inc. ("Universal"), dated as of October 23, 1997
(the "Merger Agreement"), whereby a subsidiary of the Company would be merged
with and into Universal (the "Merger"), with Universal continuing as the
surviving corporation and a wholly owned subsidiary of the Company. Subject to
the terms and conditions of the Merger Agreement, each share of Universal common
stock outstanding immediately prior to the consummation of the merger will be
converted into 0.67 shares of the Common Stock of the Company. The Company has
reserved approximately 19,287,858 shares of Common Stock for issuance in
connection with the merger. The Merger Agreement was approved by the
shareholders of Universal on February 6, 1998. Consummation of the Merger
Agreement is subject to obtaining applicable regulatory approvals, among other
conditions.
The Company has agreed that upon closing of the Merger, the Company
will cause Daniel L. Simon, the President and Chief Executive Officer of
Universal, to be appointed to the Board. If the Merger is consummated and Mr.
Simon is appointed to the Board before the Meeting, then the Board presently
intends to nominate Mr. Simon for election to the Board at the Meeting.
Biographical information about the Board's nominees for director, including Mr.
Simon is provided below. Except as otherwise noted, nominees who are shown as
officers or partners of other corporations, institutions or firms have held the
positions indicated, or have been officers of the organizations indicated, for
more than the last five years.
<PAGE>
Nominees for Director
The nominees for director are L. Lowry Mays, Karl Eller, Mark P. Mays,
Alan D. Feld, B. J. McCombs, Theodore H. Strauss and John H. Williams. In
addition, if the Merger Agreement closes and Daniel L. Simon is appointed to
the Board before the Meeting, Daniel L. Simon will be a nominee for director.
L. Lowry Mays, age 62, is the founder of the Company and currently
serves as Chairman of the Board and Chief Executive Officer. He has served as a
director of the Company since its inception.
Karl Eller, age 69, was the founder of Eller Media Company, a
subsidiary of the Company, and has served as its Chairman and Chief Executive
Officer since 1995. Mr. Eller has over 40 years of experience in the outdoor
advertising industry. He was appointed as a director of the Company in April
1997 in connection with the Company's acquisition of Eller Media Company.
Mark P. Mays, age 34, serves as the President and Chief Operating
Officer of the. Mr. Mays is the son of L. Lowry Mays, the Company's Chairman and
Chief Executive Officer and the brother of Randall T. Mays, the Company's Senior
Vice President and Chief Financial Officer.
Alan D. Feld, age 61, is the sole shareholder of a professional
corporation which is partner in the law firm of Akin, Gump, Strauss, Hauer &
Feld, L.L.P. He has served as a director of the Company since 1984. Mr. Feld
also serves on the board of directors of Centerpoint Properties, Inc.
B. J. McCombs, age 70, is a private investor with interests in
automobile dealerships and other investments. He has served as a director of the
Company since its inception.
Theodore H. Strauss, age 73, is the Senior Managing Director of Bear,
Stearns & Co., Inc. He has served as a director of the Company since 1984. Mr.
Strauss also serves on the boards of directors of Sizeler Properties, Inc. and
Hollywood Casinos, Inc.
John H. Williams, age 64, is the Senior Vice President of Everen
Securities, Inc. He has served as a director of the Company since 1984. Mr.
Williams also serves of the board of directors of GAINSCO, Inc.
Daniel L. Simon, age 46, is the President and Chief Executive Officer
of Universal. Upon the consummation of the Merger, Universal will become a
subsidiary of the Company. If the Merger is consummated before the Meeting, Mr.
Simon will be appointed as a director of the Company and will be a nominee for
director for election at the Meeting.
Management recommends that the shareholders vote "FOR" the director
nominees named above.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The table below sets forth information concerning the beneficial
ownership of the Company's Common Stock as of February 15, 1998, for each
director serving on the Board in 1997 and each of the nominees for director;
each of the named executive officers not listed as a director; the directors and
executive officers as a group; and each person known to the Company to own
beneficially more than 5% of the Company's outstanding Common Stock. Except as
otherwise noted, each shareholder has sole voting and investment power with
respect to the shares beneficially owned.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership of Class
<S> <C> <C>
L. Lowry Mays................................................... 15,225,668 (1) 15%
Karl Eller...................................................... 2,205,525 (2) 2%
Mark P. Mays.................................................... 480,756 (3) *
Alan D. Feld.................................................... 59,250 (4) *
B. J. McCombs................................................... 11,189,186 (5) 11%
Theodore H. Strauss............................................. 133,037 (6) *
John H. Williams................................................ 34,400 (7) *
Daniel L. Simon(8).............................................. - *
Randall T. Mays................................................. 323,037 (9) *
W. Ripperton Riordan............................................ 17,132 (10) *
Putnam Investments(11).......................................... 10,790,769 11%
All Directors and Executive Officers as a Group (20 persons).... 30,071,969 (12) 30%
</TABLE>
(1) Includes 810,000 shares subject to options held by Mr. Mays and 50,456
shares held by trusts of which Mr. Mays is trustee, but not beneficiary.
(2) Includes 1,124,056 shares subject to options held by Mr. Eller. In
addition, pursuant to that certain Stockholders Agreement between the
Company and EM Holdings LLC dated as of April 10, 1998, Mr. Eller is
deemed to beneficially own 1,081,469 shares subject to a put right.
(3) Includes 19,788 shares subject to options held by Mr. Mays and 62,316
shares held by trusts of which Mr. Mays is trustee, but not beneficiary.
(4) Includes 51,250 shares subject to options held by Mr. Feld. Excludes
31,180 shares owned by Mr. Feld's wife, as to which Mr. Feld disclaims
beneficial ownership.
(5) Includes 3,076,726 shares held by trusts of which Mr. McCombs is trustee,
but not beneficiary.
(6) Includes 51,250 shares subject to options held by Mr. Strauss.
(7) Includes 32,500 shares subject to options held by Mr. Williams.
(8) Mr. Simon has beneficial ownership of 7,319,755 shares of common stock of
Universal. Pursuant to the Merger Agreement each share of Universal Common
Stock will be converted into 0.67 shares of Common Stock of the Company
upon consummation of the Merger. For a further description of the Merger,
see "Election of Directors."
(9) Includes 19,788 shares subject to options held by Mr. Mays and 3,516
shares held by trusts of which Mr. Mays is trustee, but not beneficiary.
(10) Includes 5,000 shares subject to options held by Mr. Riordan.
(11) Address: One Post Office Square, Boston, Massachusetts 02109
(12) Includes 3,424,116 shares subject to options held by such persons and
3,304,899 shares held by trusts of which such persons are trustees, but
not beneficiaries.
EXECUTIVE COMPENSATION
The Company believes that compensation of its executive officers and
others should be directly and materially linked to operating performance. For
Fiscal Year 1997, the executive compensation program consisted of the base
salary, a bonus plan based on Company profitability and individual performance
and stock options that generally become exercisable over a five year period.
Employment Agreements
The Company entered into a five-year employment agreement with L. Lowry
Mays, to serve as Chairman and Chief Executive Officer of the Company effective
February 10, 1997. The employment agreement provides for a minimum annual base
salary of $750,000. The salary amount is subject to review by the Compensation
Committee of the Board and may be increased on an annual basis at the beginning
of each fiscal year. The term of the employment agreement is automatically
extended at the end of each year by one additional year, in the absence of a
notice of non-extension from L. Lowry Mays. The employment agreement
contemplates that L. Lowry Mays will be awarded bonus compensation as determined
by the Compensation Committee of the Board. The employment agreement also
provides for severance compensation payable as a lump sum in an amount equal to
the amount annual salary that would have been paid over the remaining term of
the agreement, if termination occurs for any reason other than for cause or
resignation for other than "Good Reason," as defined in the agreement.
Prior to its acquisition by the Company, Eller Media Corporation, a
subsidiary of the Company ("Eller Media") entered into an employment agreement
with Karl Eller dated August 18, 1995 which is still in full force and effect.
The agreement provides that Mr. Eller will serve as the Chairman and Chief
Executive Officer of Eller Media for a term of four years. Pursuant to the terms
of the agreement, Mr. Eller is paid an initial base salary of $400,000 per year.
Mr. Eller's initial base salary is increased annually by the percentage increase
in the Consumer Price Index, if any. In addition, Mr. Eller may be granted bonus
compensation at the discretion of the Compensation Committee. Pursuant to the
terms of the agreement, Mr. Eller's employment is terminable by the Company at
any time for "Cause," as defined in the agreement. Pursuant to the terms of the
agreement, Mr. Eller may terminate his employment for "Good Reason," as defined
in the agreement, by giving thirty days' written notice. If Mr. Eller terminates
his employment for Good Reason or if the Company terminates Mr. Eller's
employment without Cause, Mr. Eller is entitled to receive all compensation and
benefits owed for the remainder of the term of the agreement. The employment
agreement obligates Mr. Eller for one year following termination of his
employment with the Company, to refrain from engaging in competition with the
Company and from influencing any person to give up an employment or business
relationship with the Company.
Summary Compensation Table
The Summary Compensation Table shows certain compensation information
for the years ended December 31, 1997, 1996 and 1995, for the Chief Executive
Officer and each of the other four most highly compensated executive officers
whose total cash compensation exceeded $100,000 for services rendered in all
capacities for the years ended December 31, 1997 (hereinafter referred to as the
"named executive officers").
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------ ---------------------------------
Awards Payouts
----------------------- ---------
Other Restricted
Annual Stock LTIP All Other
Name And Principal Salary Compen-satAwards Options Payout Compen-sation
--- ------
Position Year ($) Bonus ($) ($) ($) (#) ($) ($)
-------- ---- --- --------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
L. Lowry Mays 1997 726,014 2,000,000 - - 50,000 - 236,148(1)
Chairman and CEO 1996 601,553 2,000,000 - - 60,000 - 237,577(1)
of the Company 1995 598,217 1,500,000 - - - - 154,890(1)
Mark P. Mays 1997 231,910 500,000 - - 17,300 - 3,325(2)
President and COO of 1996 170,697 175,000 - - 13,704 - 2,625(2)
the Company 1995 145,921 25,000 - - 27,408 - 2,592(2)
Randall T. Mays 1997 160,773 500,000 - - 17,300 - 2,994(2)
Senior Vice President 1996 157,956 66,111 - - 13,704 - 2,265(2)
and CFO of the Company 1995 159,558 35,000 - - 27,408 - 1,549(2)
Karl Eller 1997(3) 300,342 250,000 - - 1,199,056(4) - -
CEO of Eller Media
Company
W. Ripperton Riordan 1997 189,762 100,000 - - 2,000 - 3,325(2)
Exec. VP and COO of 1996 199,278 25,000 - - - - 2,625(2)
Clear Channel 1995 171,541 123,523 - - 10,000 - 2,844(2)
Television, Inc.
</TABLE>
<PAGE>
(1) Represents $232,823, $234,952 and $151,656 paid by the Company in 1997,
1996 and 1995 respectively, on a split-dollar life insurance policy for L.
Lowry Mays. Such amounts include the entire dollar amount of the term life
portion and the present value to L. Lowry Mays of the interest-free use of
the non-term portion of each premium payment. The remainder represents the
amount of matching contributions paid by the Company under the 401(k) Plan.
(2) Represents the amount of matching contributions paid by the Company under
the 401(k) Plan.
(3) Represents partial year compensation.
(4) In connection with the completion of the Company's acquisition of Eller
Media, the Company issued these options to Mr. Eller upon the assumption
of Mr. Eller's existing options to acquire shares of Eller Media common
stock.
Stock Option Grant Table
The following table sets forth certain information concerning options
granted to the named executive officers during the year ended December 31, 1997.
<TABLE>
<CAPTION>
Potential Realizable Value At
Assumed Annual Rates of Stock
Individual Grants Price Appreciation For Option
Term
------------------------------------------------ --------------------------------
Percent
of Total
Number of Options
Securities Granted Exercise
Underlying to or Base
Options Employees Price Expiration
Name Granted (#) in Fiscal ($/share) Date 5% ($) 10% ($)
---- ----------- --------- ---- ------ -------
Year
----
<S> <C> <C> <C> <C> <C> <C>
L. Lowry Mays 50,000 3% 39.50 2/10/04 804,023 1,873,716
Mark P. Mays 15,000 1% 39.50 2/10/04 241,207 562,115
2,300 - 43.45 2/10/02 27,610 61,011
Randall T. Mays 15,000 1% 39.50 2/10/04 241,207 562,115
2,300 - 43.45 2/10/02 27,610 61,011
Karl Eller 1,199,056 66% 12.99 3/31/02 57,497,666 76,633,890
W. Ripperton Riordan 2,000 - 39.50 2/10/04 32,161 74,949
</TABLE>
<PAGE>
Stock Option Exercises and Holding Table
The following table set forth certain information regarding stock
options exercised by the named executive officers during the year ended December
31, 1997, including the aggregate value of gains on the date of exercise. In
addition, the table sets forth the number of shares covered by both exercisable
and nonexercisable stock options as of December 31, 1997. Also reported are the
values of "in the money" options which represent the positive spread between the
exercise price of any existing stock options and the Common Stock price as of
December 31, 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying In-the-Money Options
Acquired on Unexercised Options at Fiscal Year-End
Exercise Value at Fiscal Year End ($)
Name (#) Realized ($) (#) Exercisable/Unexercisable
---- --- --- -------------------------
Exercisable/Unexercisable
<S> <C> <C> <C> <C>
L. Lowry Mays 117,187 4,481,817 610,000 / 0 42,010,274 / 0
Mark P. Mays 100,002 4,615,941 12,380 / 58,412 883,468 / 3,255,614
Randall T. Mays - - 43,055 / 58,412 3,220,213 / 3,255,614
Karl Eller 40,000 2,165,400 1,159,056 / 0 77,016,374 / 0
W. Ripperton Riordan - - 5,000 / 12,000 356,813 / 676,120
</TABLE>
BOARD COMPENSATION COMMITTEE REPORT
The Compensation Committee currently consists of two outside Board
members.
Overall Policy
The financial success of the Company is linked to the ability of its
executive officers and managers to direct the Company's current operations and
to assess the advantages of potential acquisitions and realign the operations of
the acquired entities with the operating policies of the Company. A major
objective of the Company's compensation strategy is to attract and retain top
quality executives and operating managers. Another objective of the Company's
compensation strategy is to reward managers based on the financial performance
of operations under their control. Financial incentives are used to motivate
those responsible to achieve the Company's financial goals and to align the
interests of the Company's managers with the interests of the Company's
shareholders.
In order to achieve the foregoing objectives, the Company's
compensation includes both a base salary component and incentive compensation.
Incentive compensation includes both annual bonuses and stock options.
Compensation
Base salaries of executive officers are set with respect to comparable
salaries paid by the radio and television broadcast and outdoor industries in
those markets in which the Company operates. The salaries of all executive
officers except the Chief Executive Officer are determined through mutual
negotiations between the executive and the Chief Executive Officer and are based
on both past performance and expected future performance. However, under certain
circumstances, the Company may enter into employment agreements with executive
officers.
The performance bonuses for 1997 for the executive officers were based
upon the executives achieving certain budgeted goals, including an increase in
cash flow over the prior year, other selected performance criteria or other
subjective measures of performance. Budgeted goals are set for each such
executive officer pursuant to an extensive annual operating plan established by
the Company and the Chief Executive Officer. Past and expected future
performance was considered on a subjective basis in determining these budgeted
goals, based on the varied circumstances impacting each operating division.
Similarly, in determining option grants, the sole factor weighed was success in
achieving budgeted goals as determined on a subjective basis after consideration
of the varied circumstances impacting each operating division. The Chief
Executive Officer reports to the Compensation Committee as to the compensation
levels and performance goals which he sets for the Company's executive officers.
Chief Executive Officer Compensation
During 1997, two members of the Compensation Committee, John H.
Williams and Theodore H. Strauss, served on the Performance-Based Compensation
Committee, a subcommittee of the Compensation Committee (the "Subcommittee").
John H. Williams and Theodore H. Strauss are both outside directors within the
meaning of Section 162(m) of the Internal Revenue Code. The Subcommittee
established the Chief Executive Officer's performance goals and determines the
amount of incentive bonus.
The Company entered into a five-year employment agreement with L. Lowry
Mays, to serve as Chairman and Chief Executive Officer effective February 10,
1997. The employment agreement provides for a minimum annual base salary of
$750,000. The salary amount is subject to review by the Compensation Committee
of the Board and may be increased on an annual basis at the beginning of each
fiscal year. The term of the employment agreement is automatically extended at
the end of each year by one additional year, in the absence of a notice of
non-extension from L. Lowry Mays. The employment agreement contemplates that L.
Lowry Mays will be awarded bonus compensation as determined by the
Performance-Based Compensation Committee of the Board. The employment agreement
also provides for severance compensation payable as a lump sum in an amount
equal to the amount of annual salary that would have been paid over the
remaining term of the agreement, if termination occurs for any reason other than
for cause or resignation for other than "Good Reason," as defined in the
agreement.
In 1997, the Chief Executive Officer's annual salary was $750,000
pursuant to his employment contract with the Company. He was paid a cash bonus
of $2,000,000 in February of 1998 that, while paid in 1998, rewarded the Chief
Executive Officer for performance in 1997. Options were granted to the Chief
Executive Officer in 1997 for the purchase of 50,000 shares of the Company's
Common Stock.
The Subcommittee utilized information gathered from its review of
compensation packages of ten comparable companies in the radio and television
broadcasting industry in determining the Chief Executive Officer's base salary
and overall compensation package. The amount of salary paid and bonus awarded
was judged to be deserving and balanced for the value received by the
shareholders from the Chief Executive Officer's efforts, based on the overall
increase in the Company's after-tax cash flow and the increase in market value
of the Company's Common Stock from year to year.
In evaluating the incentive bonus compensation to be awarded to the
Company's Chief Executive Officer, the Subcommittee reviewed the financial
performance of the Company over the 1997 fiscal year. Based on the performance
goals established by the Subcommittee under the Performance-Based Compensation
Plan adopted by the shareholders at the 1995 Annual Meeting, the Chief Executive
Officer was entitled to an incentive bonus of up to 20% of the increase in the
after-tax cash flow from the 1996 fiscal year to the 1997 fiscal year. In 1997,
after-tax cash flow increased from $107 million to $213 million, or 99%. The
Subcommittee determined that it was in the best interest of the Company to award
the Chief Executive Officer an incentive bonus of $2,000,000 for 1997 under the
Performance-Based Compensation Plan.
The Subcommittee also noted that the market value of the Company's
outstanding Common Stock at December 31, 1997 was $7.8 billion, an 181% increase
over the market value at December 31, 1996, while the number of shares
outstanding increased by less than 28 percent. Total assets grew by 161% to $3.5
billion in 1997 mainly through acquisitions, while total shareholders' equity at
December 31, 1997 to support that asset base grew to $1.7 billion, a 240%
increase. Many factors contributed to this exceptional performance, but
paramount was the financial and management skills employed by the Chief
Executive Officer and the management group he put in place.
As mentioned above, the Subcommittee gathered competitive compensation
data on ten radio and television broadcasting companies. The companies were
selected by the Subcommittee as the most comparable to the Company in terms of
the properties operated and the markets served. The Subcommittee determined that
these ten companies provided more accurate compensation information relative to
the radio and television broadcasting industry than the entire range of
companies covered in the Paul Kagan Associates, Inc. Broadcast Index used in the
Stock Performance Chart included in this Proxy Statement. Although the companies
covered in this index own radio and/or television properties, many of these
companies also own and/or operate businesses in such industries as radio and
television networks, newspaper and magazine publishing, film production,
financial services and manufacturing. In the Subcommittee's opinion, the Chief
Executive Officer's 1997 compensation corresponded to the median to high end of
the range paid by the ten companies surveyed.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the tax deduction for compensation paid to the named executive
officers to $1 million. However, performance-based compensation that has been
approved by shareholders is excluded from the $1 million limit if, among other
requirements, the compensation is payable only upon attainment of
pre-established, objective performance goals and the board committee that
establishes such goals consists only of outside directors (as defined for
purposes of Section 162 (m)).
At the 1995 Annual Meeting, the shareholders approved the
Performance-Based Compensation Plan, which meets the requirements of Section
162(m) with respect to the performance-based compensation paid to the Chief
Executive Officer, as discussed above. The Committee's present intention is to
continue to comply with the requirements of Section 162(m).
Respectfully submitted,
THE COMPENSATION COMMITTEE
John Williams and
Theodore H. Strauss
STOCK PERFORMANCE TABLE/CHART
The following table demonstrates a five year comparison of the cumulative total
returns, adjusted for stock splits and dividends, for the Company, the Paul
Kagan Associates, Inc. Broadcasting Average, and the S&P 500 Composite Index
INDEXED YEARLY STOCK PRICE CLOSE
(Prices Adjusted for Stock Splits and Dividends)
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
Clear Channel 1.0 2.822 3.892 6.768 11.081 24.367
Paul Kagan
Broadcasting Index 1.0 1.341 1.484 2.059 2.452 3.817
S&P 500 Index 1.0 1.070 1.054 1.414 1.700 2.227
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and beneficial owners of
more than 10% of any class of securities of the Company to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Directors, executive officers and greater than
10% shareholders are required to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no such forms
were required to be filed by those persons, the Company believes that, during
the year ended December 31, 1997, all of its directors and executive officers
were in compliance with the applicable filing requirement, except that one
report covering one transaction was filed late by each of L. Lowry Mays, Mark P.
Mays, Randall T. Mays, Herbert W. Hill, Jr., and Kenneth E. Wyker, one report
covering three transactions was filed late by Karl Eller, one report covering
eleven transactions was filed late by Timothy J. Donmoyer, and one report
covering eight transactions was filed late by Paul J. Meyer.
CERTAIN TRANSACTIONS
The Company paid fees in 1997 to the law firm of Akin, Gump, Strauss,
Hauer & Feld, L.L.P. Alan Feld, a director of the Company, is the sole
shareholder of a professional corporation which is a partner of such firm. The
Company purchased in 1997 various forms of insurance from Primera. B. J.
McCombs, a director of the Company, owns 75% of Primera. As part of its
operations, the Company leases certain office space in San Antonio, Texas from
the trusts of the children of L. Lowry Mays and B. J. McCombs. This lease
expired on December 31, 1997, however the office space is being rented on a
month to month basis with current monthly rentals of $16,724. The Company
believes all of the transactions described above are no less favorable to the
Company than could be obtained with nonaffiliated parties.
The Company's wholly-owned subsidiary, Clear Channel Television, Inc.
("CCTV"), adopted its 1991 Non-Qualified Stock Option Plan (the "CCTV
Non-Qualified Stock Option Plan"), providing for the grant to eligible CCTV
employees of options to purchase up to 50,000 shares of CCTV Common Stock. The
CCTV Non-Qualified Stock Option Plan is currently administered by the Stock
Option Committee of the Board of Directors of CCTV. In February 1993, CCTV
elected to discontinue the granting of options pursuant to this plan. Under the
terms of the CCTV Non-Qualified Stock Option Plan, the CCTV Stock Option
Committee is authorized to determine the date upon which options granted
thereunder become exercisable, the exercise price of such options and other
terms and conditions thereof. At December 31, 1997, options to purchase 9,500
shares of CCTV Common Stock had been granted and were outstanding under the CCTV
Non-Qualified Stock Option Plan. The exercise price of such options is $1.00 per
share. Pursuant to the CCTV Non-Qualified Stock Option Plan, each participant
therein will be required to enter into a Buy-Sell Agreement with CCTV with
respect to the shares of CCTV Common Stock acquired by such participant upon the
exercise of any options granted thereunder. Executive officers Mark P. Mays,
Randall T. Mays, W. Ripperton Riordan and Herbert W. Hill Jr. hold 4,000, 1,000,
2,500 and 2,000 options respectively. All such options vest in January 1999.
In May 1977, the Company and its shareholders, including L. Lowry Mays
and B.J. McCombs, entered into a Buy-Sell Agreement ("the Repurchase Agreement")
restricting the disposition of the outstanding shares of Common Stock owned by
L. Lowry Mays and B.J. McCombs and their heirs, legal representatives,
successors and assigns (collectively, "the Restricted Parties"). The Repurchase
Agreement provides that in the event that a Restricted Party desires to dispose
of his shares, other than by disposition by will or intestacy or through gifts
to such Restricted Party's spouse or children, such shares must by offered for a
period of 30 days to the Company. Any shares not purchased by the Company must
then be offered for a period of 30 days to the other Restricted Parties. If all
of the offered shares are not purchased by the Company or the other Restricted
Parties, the Restricted Party offering his or her shares may sell them to a
third party during a period of 90 days thereafter at a price and on terms not
more favorable than those offered to the Company and the other Restricted
Parties. In addition, a Restricted Party may not individually, or in concert
with others, sell any shares so as to deliver voting control to a third party
without providing in any such sale that all Restricted Parties will be offered
the same price and terms for their shares.
Karl Eller, a director and executive officer of the Company, and Scott
Eller, the son of Karl Eller and also an executive officer of the Company,
beneficially own a minority interest of approximately 7% of the outstanding
capital stock of Eller Media. Pursuant to a Stockholders Agreement between the
Company and EM Holdings LLC, dated April 10, 1997, Karl Eller and Scott Eller
have the right, until April 10, 2002, to require the Company to acquire such
stock for 1,081,469 shares of the Company's Common Stock. From and after April
10, 2004 (or before such date upon the occurrence of certain events), the
Company will have the right to acquire the minority interest stake in Eller
Media for 1,081,469 shares of its Common Stock.
In connection with the Merger Agreement, Daniel L. Simon entered into
an employment agreement with the Company dated October 23, 1997 which will
become effective at the time the merger is consummated for Mr. Simon to serve as
the Vice Chairman and Chief Operating Officer of Universal and Eller Media until
August 18, 1999. The agreement provides for an annual base salary of $350,000
and an annual bonus to be determined by the Board. Pursuant to the terms of the
agreement, if Mr. Simon's employment is terminated by him for "Good Reason," as
defined in the agreement, he will continue to receive his base salary and
employee benefits for the remainder of the term of the agreement. Mr. Simon may
terminate his employment pursuant to the employment agreement without Good
Reason upon providing four weeks' notice of such termination, and, in such
event, he will be bound by a noncompetition covenant for a period equal to the
longer of one year or the remainder of the term of the agreement.
In connection with the Merger Agreement, Daniel L. Simon has entered
into a Resale Agreement with the Company dated October 23, 1997. Pursuant to
this agreement, after the consummation of the merger and continuing until the
earlier of (i) the date Mr. Simon is no longer an officer or director of the
Company or any of its subsidiaries, or (ii) two years following the consummation
of the merger, Mr. Simon will not, directly or indirectly, offer, sell, sell
short or otherwise dispose of any shares of the Company's Common Stock, or any
securities convertible into, exchangeable or exercisable for the Company's
Common Stock owned by Mr. Simon, or request the registration for the offer or
sale of any of the foregoing, provided that during such period Mr. Simon (a) may
sell up to $75,000,000 of the Company's Common Stock in accordance with
applicable law and (b) may make "Permitted Transfers," as defined in the
agreement, provided that the transferee agrees to be bound by the agreement. In
addition, pursuant to the agreement, Mr. Simon will not, directly or indirectly,
purchase, offer to purchase, sell, offer to sell, sell short or otherwise
acquire or dispose of any Company securities until the consummation of the
merger. These restrictions terminate if the Merger Agreement is terminated prior
to the consummation of the merger.
PROPOSAL 2: APPROVAL OF THE
CLEAR CHANNEL COMMUNICATIONS, INC.
1998 STOCK INCENTIVE PLAN
On February 10, 1998, the Board adopted the Clear Channel
Communications, Inc. 1998 Stock Incentive Plan (the "Plan") for the purpose of
providing the Company an effective means to attract, retain and encourage
qualified individuals to serve the Company with a high degree of commitment. A
brief description of the major provisions of the Plan is set forth below to
facilitate an informed decision by the Shareholders entitled to vote on the
approval of the Plan. However, the summary description is qualified in its
entirety by the full text of the Plan, a copy of which is attached hereto as
Appendix A.
Overview of Awards
The following types of awards may be granted under the Plan: (i)
incentive stock options ("Incentive Options"), (ii) nonqualified stock options
("Nonqualified Options"), (iii) rights to receive all or some portion of the
increase in value of the Common Stock ("Stock Appreciation Rights"), (iv) the
right to receive all or some portion of cash dividends with respect to the
Common Stock ("Dividend Equivalent Rights"), (v) rights to receive cash and/or
Common Stock contingent upon the attainment of defined performance goals
("Performance Awards"), and (vi) shares of Common Stock subject to temporary
restrictions on transfer ("Restricted Stock") (collectively, "Awards"). Eligible
individuals under the Plan include employees, officers and directors of the
Company or a subsidiary of the Company or consultants or advisors receiving cash
compensation from the Company or a subsidiary of the Company. In addition, the
Plan provides that directors of the Company may receive some or all of their
annual director compensation in the form of shares of Common Stock.
Administration
Except for Awards of Nonqualified Options to nonemployee directors
("Director Options"), the Plan will be administered by a committee which shall
consist of at least two directors and may consist of the entire Board (the "Plan
Committee"). The Board will grant Director Options. The Plan Committee will have
broad discretion, subject to the terms of the Plan, to designate the recipients
of Awards, prescribe the terms and conditions of Awards and establish rules and
regulations for administration of the Plan.
Under the Plan, members of the Plan Committee are not liable for their
actions taken in a good faith attempt to administer the Plan and are entitled to
indemnification from the Company to the extent permitted by law in connection
with claims asserted in regard to administration of the Plan.
Stock Subject to the Plan
The maximum number of shares of Common Stock which may be the subject
of Awards under the Plan is 7,500,000. Furthermore, within the period of one
year no individual may receive with respect to Awards more than 1,000,000 shares
or $5,000,000 in cash or shares with an equivalent fair market value. However,
the ceilings may be adjusted by the Plan Committee upon the occurrence of
certain events affecting the capitalization of the Company. See "Adjustments"
below. Upon the expiration, cancellation or termination of an Award (other than
by reason of exercise), the shares previously subject to such Award may again be
the subject of Awards granted under the Plan.
Summary of Incentive Options and Nonqualified Options
The exercise price for Incentive Options and Nonqualified Options will
be determined by the Plan Committee, other than for Director Options, which will
be determined by the Board; provided, however, the exercise price for each
Incentive Option may not be less than 100% of the fair market value of the
Common Stock on the date the option is granted (110% in the case of an Incentive
Option granted to an individual owning more than 10% of the voting stock of the
Company or a parent or subsidiary of the Company (a "10% Shareholder")). The
aggregate fair market value (determined at the time an Incentive Stove Option is
granted) of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by an employee during any calendar year (under
all stock option plans of the Company) will not exceed $100,000, or such other
amount as may be prescribed under the Code or applicable regulations and rulings
from time to time. Incentive Stock Options may not be granted under the Plan
subsequent to February 10, 2008.
Each Option granted under the Plan other than Director Options will be
exercisable according to the terms established by the Plan Committee. In the
case of Directors Options, the Board will grant the options and such Director
Options will be exercised according to the terms established by the Board. In no
event, however, will an Option, including a Directors Option, be exercisable
after the expiration of ten years from the date of grant (five years for a 10%
Shareholder).
Options are not transferable except by will or the laws of descent and
distribution or pursuant to a domestic relations order (within the meaning of
Rule 16a-12 under the Exchange Act), and are exercisable only by the optionee or
his or her legal guardian or legal representative.
The purchase price payable upon the exercise of an Option is payable in
cash, by delivery of an equivalent fair market value of Common Stock, by
cashless exercise procedures or by a combination of the foregoing, as determined
by the Plan Committee. No fractional shares will be issuable upon exercise of an
Option, and the number of shares issuable will be rounded to the nearest whole
number.
<PAGE>
Summary of Stock Appreciation Rights
A Stock Appreciation Right is the right to receive an amount equal to
the excess of the fair market value of a share of the Company's Common Stock on
the date of exercise over the fair market value of a share of Common Stock on
the date of grant (in the case of Stock Appreciation Rights granted independent
of a Stock Option) or the exercise price of the related Stock Option (in the
case of a Stock Appreciation Right granted in tandem with a Stock Option). Stock
Appreciation Rights may be granted in connection with Stock Options or as a
separate award unrelated to Stock Options. The exercisability of Stock
Appreciation Rights granted in connection with Stock Options will be governed by
the exercisability of the related Options. The amount payable to the holder upon
the exercise of a Stock Appreciation Right is based on the difference between
the fair market value of the Company's Common Stock on the date preceding
exercise and the exercise price of the Option in connection with which the Stock
Appreciation Right was granted (or the fair market value of Common Stock on the
date the Stock Appreciation Right was granted if it was not granted in
connection with an Option). However, the Plan Committee may establish a maximum
amount payable upon the exercise of a Stock Appreciation Right. The amount
payable to a holder upon the exercise of a Stock Appreciation Right may be paid
in the form of Common Stock or cash or a combination thereof, as determined by
the Plan Committee.
Summary of Dividend Equivalent Rights
Dividend Equivalent Rights may be granted in conjunction with other
Awards or as a separate Award. The Plan Committee will determine the terms and
conditions of the Dividend Equivalent Rights and, specifically, will determine
whether amounts payable will be paid on a current or deferred basis and whether
they will be settled in cash or stock in single or multiple installments.
Summary of Restricted Stock
Restricted Stock is the grant of shares of Common Stock or the right to
purchase Common Stock at a price determined by the Plan Committee, which is
nontransferable and subject to substantial risk of forfeiture until specific
conditions are met. Restricted Stock granted under the Plan will be subject to
restrictions on transfer and such other restrictions imposed by the Plan
Committee. No stock certificate representing Restricted Stock may be issued in
the name of the grantee until the grantee executes a written agreement, blank
stock powers and an escrow agreement or other documents required by the Plan
Committee. Restricted Stock may not be delivered to the grantee or sold,
transferred or pledged until the restrictions imposed by the Plan Committee have
lapsed according to the terms established by the Plan Committee. The Plan
Committee will determine whether dividend payments in respect of Restricted
Stock will be made currently or deferred until the lapsing of restrictions. Upon
lapse of the restrictions, the certificates representing the Restricted Stock
will be delivered to the grantee, in addition to any deferred dividends with
interest accrued thereon. All restrictions lapse upon a change in control of the
Company unless the Plan Committee specifies otherwise in the written agreement.
Summary of Performance Awards
Awards contingent upon the attainment of certain financial or other
objectives within a designated period of time may be granted by the Plan
Committee in the form of shares of Common Stock ("Performance Shares") or other
Awards ("Performance Units"). The performance objectives to be established in
writing by the Plan Committee may be expressed in terms of earnings per share,
share price, pre-tax profits, net earnings, return on equity or assets,
revenues, EBITDA, market share, or a combination of the foregoing with regard to
the Company or a subsidiary. The Plan Committee may establish a ceiling on the
amount payable under a Performance Award.
A grantee becomes vested in Performance Awards to the extent that the
established objectives are achieved during the designated measurement period,
and immediately following the end of such period the Company must pay any
amounts due in cash or Common Stock or a combination thereof.
Issuance of certificates representing Performance Shares may not occur
until the grantee executes a written agreement, blank stock powers and an escrow
agreement or such other documents required by the Plan Committee. Certificates
representing Performance Shares may not be delivered to the grantee or sold,
transferred or pledged prior to the attainment of the designated objectives and
fulfillment of other conditions established by the Plan Committee. The Plan
Committee may determine whether dividends in respect of issued but undelivered
Performance Shares will be paid currently or deferred and paid with interest
upon lapsing of the restrictions.
Adjustments
Upon the termination or change in status of employment of a grantee,
adjustments to the terms and conditions of Awards held by such grantee will be
made according to the terms established by the Plan Committee in the written
agreement respecting such Award.
Each Award granted by the Plan Committee must be evidenced by a written
agreement. Although the Plan Committee has the discretion to amend the terms of
an Award subsequent to the date of grant, it may not do so in a way that
adversely affects rights previously granted under the Plan.
The Plan Committee will also determine the appropriate adjustments to
be made to the terms of the Plan and Awards previously granted thereunder upon
the occurrence of certain events affecting the capitalization of the Company
including, but not limited to, an increase or decrease in the number of issued
and outstanding shares of Common Stock or other changes in capitalization
resulting from a reclassification, recapitalization, merger, consolidation,
stock dividend, stock split or otherwise. Appropriate adjustments may be made to
the maximum number of shares and the class of shares or other securities with
respect to which Awards may be made, the maximum number of shares with respect
to which an individual may be granted Awards, the number and class of shares
subject to outstanding Awards, the exercise price of such outstanding Awards,
and the performance objectives upon which Performance Awards are based.
Upon a Change of Control (as defined in the Plan), (i) with respect to
all Stock Option Awards and Stock Appreciation Rights Awards, all of such Awards
shall become immediately exercisable, (ii) with respect to Restricted Stock
Awards, all restrictions upon such shares shall lapse, and (iii) with respect to
Performance Awards, such Awards will be treated in the manner determined by the
Plan Committee at the time such Performance Awards were granted. In addition, to
the extent set forth in the applicable agreement relating to a Stock Option
Award or Stock Appreciation Right Award, upon a Change of Control, (i) the
holder of a Stock Option Award will have the right to a cash payment within
sixty (60) days after such Change of Control equal to the excess of fair market
value of the shares subject to such Stock Option on the date preceding the date
of surrender over the aggregate purchase price of the shares subject to such
Stock Option, and (ii) the holder of a Stock Appreciation Right Award will be
entitled to receive a cash or stock payment from the Company with a value equal
to the fair market value on the date preceding the date of exercise over the
fair market value of the shares subject to such Stock Appreciation Award.
Following any liquidation, dissolution, merger or consolidation of the
Company, each holder of an Award is entitled to receive the same consideration
received in such transaction by each holder of Common Stock, subject to the
restrictions and other terms and conditions applicable to the Award.
Termination and Amendment of the Plan
The Plan has no automatic termination date. However, Incentive Stock
Options may not be granted under the Plan subsequent to February 10, 2008. In
addition, the Plan Committee may terminate, amend or suspend the Plan at any
time provided that such action does not adversely affect rights previously
granted under the Plan.
Federal Income Tax Consequences
An individual receiving Nonqualified Stock Options or Stock
Appreciation Rights will not recognize taxable income at the time the
Nonqualified Stock Options or Stock Appreciation Rights are granted. At the time
the Nonqualified Stock Options or Stock Appreciation Rights are exercised, the
individual will recognize ordinary taxable income in an amount equal to the
difference between the exercise price (or in the case of Stock Appreciation
Rights granted independent of Stock Options, the fair market value of the Common
Stock at the time of grant) and the fair market value of Common Stock on the
date of exercise. The Company will be entitled to a concurrent deduction equal
to the ordinary income recognized by the individual, provided that the Company
withholds taxes.
An individual granted an Incentive Stock Option will not recognize
taxable income at the time of grant or, subject to certain conditions, at the
time of exercise. The excess of the fair market value of the Common Stock
received over the exercise price is an item of tax preference income potentially
subject to the alternative minimum tax. If stock acquired upon exercise of an
Incentive Stock Option is held for a minimum of two years from the date of grant
and one year from the date of exercise, the gain or loss (in an amount equal to
the difference between the sales price and the exercise price) upon disposition
of the stock will be treated as long-term capital gain or loss, and the Company
will not be entitled to any deduction.
If the holding period requirement is not met, the Incentive Stock
Option will be treated as one which does not meet the requirements of the Code
for Incentive Stock Options and the individual will recognize ordinary income in
an amount equal to the lesser of (i) the excess of the fair market value of
Common Stock on the date of exercise over the exercise price or (ii) the amount
realized on the sale of such stock over the exercise price.
An individual receiving Restricted Stock will not recognize taxable
income at the time of grant. At the time the restrictions lapse, the individual
will recognize ordinary taxable income equal to the difference between the fair
market value of the Common Stock at the time the restrictions lapse and the
price, if any, paid for such Common Stock. Any dividends received before the
termination of restrictions will be taxed as ordinary income. The Company will
be entitled to a deduction equal to the ordinary income reported by the
individual, provided the Company withholds taxes. Upon the disposition of the
Common Stock, the individual will recognize taxable gain or loss equal to the
difference between the fair market value of the Common Stock at the time the
restrictions lapse and the amount realized upon the disposition of the Common
Stock. The gain or loss will be taxable as a capital asset.
An individual may elect to report and recognize income at the time of
grant or purchase of Restricted Stock by filing an election under Section 83(b)
of the Code (a "Section 83(b) election"). If the individual makes a Section
83(b) election, the Company will be entitled to a deduction equal to the
ordinary income reported by the individual in the year of the election, provided
the Company withholds taxes. However, dividends received before the restrictions
lapse will not be deductible by the Company. Upon the disposition of the Common
Stock, the individual will recognize gain or loss equal to the difference
between the amount realized and the sum of the income recognized by the
individual as a result of the Section 83(b) election and any amounts paid by the
individual for the Restricted Stock.
Special rules may apply with respect to individuals subject to Section
16(b) of the Securities Exchange Act of 1934. Other than in the case of an
Incentive Stock Option held in accordance with the specified holding period
requirements, the amount and timing of the recognition of income by an
individual subject to Section 16(b) (and the concurrent deduction by the
Company) on the exercise of a Stock Option or Stock Appreciation Right generally
will be based on the fair market value of the shares received when the
restrictions of Section 16(b) lapse, unless the individual elects otherwise by
making a Section 83(b) election.
Vote Required
The affirmative vote of a majority of the outstanding shares present
and entitled to vote at the Meeting is required to approve the Plan.
The Board recommends that the shareholders vote "FOR" the approval of the Plan.
Each of the directors may have an interest and may benefit from the adoption of
the Plan, since they are eligible to receive Awards under the terms of the Plan.
<PAGE>
PROPOSAL 3: AMENDMENT OF THE
COMPANY'S ARTICLES OF INCORPORATION
The current authorized capital stock of the Company consists of
2,000,000 shares of preferred stock, $1.00 par value (the "Preferred Stock"),
and 150,000,000 shares of Common Stock, $.10 par value, of which no shares of
Preferred Stock and 98,387,626 shares of Common Stock were issued and
outstanding at March 6, 1998. On February 10, 1998, the Board adopted a proposed
amendment to Article IV of the Company's Articles of Incorporation increasing
the authorized number of shares of Preferred Stock from 2,000,000 shares to
10,000,000 and the authorized number of shares of Common Stock from 150,000,000
shares to 600,000,000 shares for submission to the shareholders at the Meeting.
The Board is authorized to issue shares of Preferred Stock, in one or
more series, and to fix the rights, preferences, privileges and qualifications
thereof without any further vote or action by the shareholders. The issuance of
Preferred Stock could decrease the amount of earnings and assets available for
distribution to holders of Common Stock, and adversely affect the rights and
powers, including voting rights, of such holders and may have the effect of
delaying, deferring or preventing a change in control of the Company. No shares
of Preferred Stock have ever been issued.
Holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders of the Company and ratably to
receive dividends, if any, as may be declared from time to time by the Board
from funds legally available therefore, subject to the payment of any
outstanding preferential dividends declared with respect to any Preferred Stock
that from time to time may be outstanding. Upon liquidation, dissolution or
winding up of the Company, holders of Common Stock are entitled to share ratably
in any assets available for distribution to shareholders after payment of all
obligations of the Company, subject to the rights to receive preferential
distributions of the holders of any Preferred Stock then outstanding.
If the proposed amendment is approved, all or any part of the
authorized but unissued shares of Preferred Stock or Common Stock may thereafter
be issued without further approval from the shareholders, except as may be
required by law or the policies of any stock exchange on which the shares of
stock of the Company may be listed, for such purposes and on such terms as the
Board may determine. Holders of the capital stock of the Company do not have any
preemptive rights to subscribe for the purchase of any shares of Common Stock,
which means that current shareholders do not have a prior right to purchase any
new issue of Common Stock in order to maintain their proportionate ownership.
The proposed amendment will not affect the rights of existing holders
of Common Stock except to the extent that future issuances of Common Stock will
reduce each existing shareholders' proportionate ownership.
If the proposed amendment is adopted, Section 1 of Article IV of the
Articles of Incorporation would be amended to read as follows:
<PAGE>
"Authorized Shares. The aggregate number of shares which the
Corporation shall have the authority to issue is 610,000,000
shares, 600,000,000 of which shall be Common Stock ("Common
Stock"), par value of $.10 each, and 10,000,000 of which shall be
Preferred Stock ("Preferred Stock"), par value of $1.00 each."
The proposed amendment to Article IV will not change any other aspect
of Article IV.
The Board has determined that it would be appropriate for the Company
to increase the number of its authorized shares of Preferred Stock and Common
Stock in order to have additional shares available for possible future
acquisition or financing transactions, stock splits, stock dividends and other
issuances, or to satisfy requirements for additional reservations of shares by
reason of future transactions which might require increased reservations. The
Company plans to issue or reserve for issuance approximately twenty million
shares of Common Stock upon the consummation of the merger between the Company
and Universal. Consummation of the Merger is subject to the terms and conditions
set forth in the Merger Agreement between the parties and to various regulatory
approvals. There can be no assurance that such Merger will ultimately be
consummated. The Company currently has enough shares of Common Stock authorized
for issuance to consummate the Merger without amending its Articles of
Incorporation.
The affirmative vote of holders of at least two-thirds of the
outstanding shares of Common Stock entitled to vote at the Meeting is required
in order to adopt the proposed amendment. Unless indicated to the contrary, the
enclosed proxy will be voted for the proposed amendment. Votes "withheld" or
abstaining from voting will have the same effect as a negative vote or a vote
"against" the proposed amendment.
The Board recommends that the shareholders vote "FOR" the proposed
amendment.
PROPOSAL 4: SELECTION OF INDEPENDENT AUDITORS
The Company's financial statements for the year ended December 31, 1997
have been audited by Ernst & Young LLP, independent certified public
accountants. Representatives of Ernst & Young LLP are expected to be present at
the Meeting to respond to appropriate questions and will have an opportunity to
make an appropriate statement if they so desire.
The Board has appointed Ernst & Young LLP as independent auditors to
audit the financial statements of the Company for the year ending December 31,
1998. Unless otherwise directed, the persons named in the accompanying proxy
will vote in favor of the ratification of the appointment of Ernst & Young LLP.
The Board recommends that the shareholders vote "FOR" the ratification
of Ernst & Young LLP as auditors for the year ending December 31, 1998.
SHAREHOLDER PROPOSALS
A proper proposal submitted by a Company shareholder for consideration
at the Company's 1999 Annual Meeting of Shareholders and received at the
Company's executive offices no later than December 30, 1998 will be included in
the Company's Proxy Statement and form of proxy relating to such Annual Meeting.
If the proposal is adopted, it will be included in the information statements
distributed to shareholders.
GENERAL
Neither management nor the Board knows of any matter to be acted upon
at the meeting other than the matters described above. If any other matter
properly comes before the meeting, however, the proxy holders will vote thereon
in accordance with their best judgment.
The cost of soliciting proxies will be borne by the Company. Following
the original mailing of the proxy soliciting material, regular employees of the
Company may solicit proxies by mail, telephone, telegraph and personal
interview. Proxy cards and materials will also be distributed to beneficial
owners of stock, through brokers, custodians, nominees and other like parties,
and the Company expects to reimburse such parties for their charges and expenses
connected therewith.
A copy of the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission will be available when filed without charge
to shareholders upon written request to Clear Channel Communications, P.O. Box
659512, San Antonio, Texas 78265-9512.
Kenneth E. Wyker
Secretary
<PAGE>
Appendix A
CLEAR CHANNEL COMMUNICATIONS, INC.
1998 STOCK INCENTIVE PLAN
1. Purpose.
The purpose of this Plan is to strengthen Clear Channel
Communications, Inc., a Texas corporation (the "Company"), by providing an
incentive to its employees, officers, consultants and directors and thereby
encouraging them to devote their abilities and industry to the success of the
Company's business enterprise. It is intended that this purpose be achieved by
extending to employees, officers, consultants and directors of the Company and
its Subsidiaries an added long-term incentive for high levels of performance and
unusual efforts through the grant of Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Dividend Equivalent Rights, Performance
Awards and Restricted Stock (as each term is herein defined).
2. Definitions.
For purposes of the Plan:
2.1 "Adjusted Fair Market Value" means, in the event of a
Change in Control, the greater of (i) the highest price per Share paid to
holders of the Shares in any transaction (or series of transactions)
constituting or resulting in a Change in Control or (ii) the highest Fair Market
Value of a Share during the ninety (90) day period ending on the date of a
Change in Control.
2.2 "Affiliate" means any entity, directly or indirectly,
controlled by, controlling or under common control with the Company or any
corporation or other entity acquiring, directly or indirectly, all or
substantially all the assets and business of the Company, whether by operation
of law or otherwise.
2.3 "Agreement" means the written agreement between the
Company and an Optionee or Grantee evidencing the grant of an Option or Award
and setting forth the terms and conditions thereof.
2.4 "Award" means a grant of Restricted Stock, a Stock
Appreciation Right, a Performance Award, a Dividend Equivalent Right or any or
all of them.
2.5 "Board" means the Board of Directors of the Company.
2.6 "Cause" means (i) intentional failure to perform
reasonably assigned duties, (ii) dishonesty or willful misconduct in the
performance of duties, (iii) involvement in a transaction in connection with the
performance of duties to the Company or any of its Subsidiaries which
transaction is adverse to the interests of the Company or any of its
Subsidiaries and which is engaged in for personal profit or (iv) willful
violation of any law, rule or regulation in connection with the performance of
duties (other than traffic violations or similar offenses).
2.7 "Change in Capitalization" means any increase or reduction
in the number of Shares, or any change (including, but not limited to, a change
in value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company or another corporation, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.
2.8 A "Change in Control" shall mean the occurrence during the
term of the Plan of:
(a) An acquisition (other than directly from the Company)
of any voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), excluding
L. Lowry Mays, B.J. McCombs or any of their affiliates), immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of thirty percent (30%)or more of the then
outstanding Shares or the combined voting power of the Company's then
outstanding Voting Securities; provided, however, in determining whether a
Change in Control has occurred, Shares or Voting Securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (i) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the Company (for
purposes of this definition, a "Subsidiary"), (ii) the Company or its
Subsidiaries, or (iii) any Person in connection with a "Non-Control Transaction"
(as hereinafter defined);
(b) The individuals who, as of February 10, 1998 are
members of the Board (the "Incumbent Board"), cease for any reason to constitute
at least a majority of the members of the Board; provided, however, that if
the election, or nomination for election by the Company's common stockholders,
of any new director was approved by a vote of at least a majority of the
Incumbent Board, such new director shall, for purposes of this Plan, be
considered as a member of the Incumbent Board; provided further, however, that
no individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board (a "Proxy Contest") including
by reason of any agreement intended to avoid or settle any Election Contest or
Proxy Contest; or
(c) The consummation of:
(i) A merger, consolidation or
reorganization with or into the Company or in which
securities of the Company are issued, unless such
merger, consolidation or reorganization is a
"Non-Control Transaction." A "Non-Control
Transaction" shall mean a merger, consolidation or
reorganization with or into the Company or in which
securities of the Company are issued where:
(A) the stockholders of the Company,
immediately before such merger,
consolidation or reorganization, own
directly or indirectly immediately following
such merger, consolidation or
reorganization, at least fifty percent (50%)
of the combined voting power of the
outstanding voting securities of the
corporation resulting from such merger or
consolidation or reorganization (the
"Surviving Corporation") in substantially
the same proportion as their ownership of
the Voting Securities immediately before
such merger, consolidation or
reorganization,
(B) the individuals who were members
of the Incumbent Board immediately prior to
the execution of the agreement providing for
such merger, consolidation or reorganization
constitute at least a majority of the
members of the board of directors of the
Surviving Corporation, or a corporation
beneficially directly or indirectly owning a
majority of the Voting Securities of the
Surviving Corporation, and
(C) no Person other than (i) the
Company, (ii) any Subsidiary, (iii) any
employee benefit plan (or any trust forming
a part thereof) that, immediately prior to
such merger, consolidation or
reorganization, was maintained by the
Company or any Subsidiary, or (iv) any
Person who, immediately prior to such
merger, consolidation or reorganization had
Beneficial Ownership of thirty percent (30%)
or more of the then outstanding Voting
Securities or Shares, has Beneficial
Ownership of thirty percent (30%) or more of
the combined voting power of the Surviving
Corporation's then outstanding voting
securities or its common stock.
(ii) A complete liquidation or dissolution
of the Company; or
(iii) The sale or other disposition of all
or substantially all of the assets of the Company to
any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the then outstanding
Shares or Voting Securities as a result of the acquisition of Shares or Voting
Securities by the Company which, by reducing the number of Shares or Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Persons, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of Shares or Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner of
any additional Shares or Voting Securities which increases the percentage of the
then outstanding Shares or Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
If an Eligible Individual's employment is terminated by the
Company without Cause prior to the date of a Change in Control but the Eligible
Individual reasonably demonstrates that the termination (A) was at the request
of a third party who has indicated or intention or taken steps reasonably
calculated to effect a change in control or (B) otherwise arose in connection
with, or in anticipation of, a Change in Control which has been threatened or
proposed, such termination shall be deemed to have occurred after a Change in
Control for purposes of this Plan provided a Change in Control shall actually
have occurred.
2.9 "Code" means the Internal Revenue Code of 1986, as amended.
2.10 "Committee" means a committee, as described in Section 3.1,
appointed by the Board from time to time to administer the Plan and to
perform the functions set forth herein.
2.11 "Company" means Clear Channel Communications, Inc.
2.12 "Director" means a director of the Company.
2.13 "Director Option" means an Option granted pursuant to
Section 6.1.
2.14 "Director Stock" has the meaning set forth in Section 6.2.
2.15 "Disability" means:
(a) in the case of an Optionee or Grantee whose employment
with the Company or a Subsidiary is subject to the terms of an employment
agreement between such Optionee or Grantee and the Company or Subsidiary, which
employment agreement includes a definition of "Disability", the term
"Disability" as used in this Plan or any Agreement shall have the meaning set
forth in such employment agreement during the period that such employment
agreement remains in effect; and
(b) in all other cases, the term "Disability" as used in this
Plan or any Agreement shall mean a physical or mental infirmity which impairs
the Optionee's or Grantee's ability to perform substantially his or her duties
for a period of one hundred eighty (180) consecutive days.
2.16 "Division" means any of the operating units or divisions
of the Company designated as a Division by the Committee.
2.17 "Dividend Equivalent Right" means a right to receive all
or some portion of the cash dividends that are or would be payable with respect
to Shares.
2.18 "Eligible Director" means a director of the Company who
is not an employee of the Company or any Affiliate of the Company.
2.19 "Eligible Individual" means any director (other than an
Eligible Director), officer or employee of the Company or a Subsidiary, or any
consultant or advisor who is receiving cash compensation from the Company or a
Subsidiary, designated by the Committee as eligible to receive Options or Awards
subject to the conditions set forth herein.
2.20 "Employee Option" means an Option granted pursuant to Section 5.
2.21 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.22 "Fair Market Value" on any date means the closing sales
prices of the Shares on such date on the principal national securities exchange
on which such Shares are listed or admitted to trading, or, if such Shares are
not so listed or admitted to trading, the average of the per Share closing bid
price and per Share closing asked price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System or such other
market in which such prices are regularly quoted, or, if there have been no
published bid or asked quotations with respect to Shares on such date, the Fair
Market Value shall be the value established by the Board in good faith and, in
the case of an Incentive Stock Option, in accordance with Section 422 of the
Code.
2.23 "Grantee" means a person to whom an Award has been
granted under the Plan.
2.24 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code as it may exist from time to time and
designated by the Committee as an Incentive Stock Option. Each Incentive Stock
Option granted hereunder shall comply with Section 422 of the Code as it may
exist from time to time.
2.25 "Nonemployee Director" means a director of the Company
who is a "nonemployee director" within the meaning of Rule 16b-3 promulgated
under the Exchange Act.
2.26 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock
Option.
2.27 "Option" means a Nonqualified Stock Option, an Incentive Stock
Option, a Director Option, or any or all of them.
2.28 "Optionee" means a person to whom an Option has been
granted under the Plan.
2.29 "Outside Director" means a director of the Company who is
an "outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
2.30 "Parent" means any corporation which is a parent
corporation (within the meaning of Section 424(e) of the Code) with respect to
the Company.
2.31 "Performance Awards" means Performance Units, Performance
Shares or either or both of them.
2.32 "Performance Cycle" means the time period specified by
the Committee at the time Performance Awards are granted during which the
performance of the Company, a Subsidiary or a Division will be measured.
2.33 "Performance Objectives" has the meaning set forth in Section 11.
2.34 "Performance Shares" means Shares issued or transferred to an
Eligible Individual under Section 11.
2.35 "Performance Units" means Performance Units granted to an
Eligible Individual under Section 11.
2.36 "Plan" means the Clear Channel Communications, Inc. 1998
Stock Incentive Plan, as amended and restated from time to time.
2.37 "Pooling Transaction" means an acquisition of the Company
in a transaction which is intended to be treated as a "pooling of interests"
under generally accepted accounting principles.
2.38 "Restricted Stock" means Shares issued or transferred to
an Eligible Individual pursuant to Section 10.
2.39 "Retained" has the meaning set forth in Section 6.2.
2.40 "Shares" means the common stock, par value $0.10 per share, of
the Company.
2.41 "Stock Appreciation Right" means a right to receive all
or some portion of the increase in the value of the Shares as provided in
Section 8 hereof.
2.42 "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect to
the Company.
2.43 "Successor Corporation" means a corporation, or a parent
or subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.
2.44 "Ten-Percent Stockholder" means an Eligible Individual,
who, at the time an Incentive Stock Option is to be granted to him or her, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company, or of a Parent or a Subsidiary.
3. Administration.
3.1 Except for a grant of Director Options, the Plan shall be
administered by the Committee, which shall hold meetings at such times as may be
necessary for the proper administration of the Plan. With respect to a grant of
Director Options, Awards shall be determined by the Board. The Committee shall
keep minutes of its meetings. A quorum shall consist of not fewer than two
members of the Committee and a majority of a quorum may authorize any action.
Any decision or determination reduced to writing and signed by a majority of all
of the members of the Committee shall be as fully effective as if made by a
majority vote at a meeting duly called and held. The Committee shall consist of
at least two (2) directors of the Company and may consist of the entire Board;
provided, however, that (A) if the Committee consists of less than the entire
Board, each member shall be a Nonemployee Director and (B) to the extent
necessary for any Option or Award intended to qualify as performance-based
compensation under Section 162(m) of the Code to so qualify, each member of the
Committee, whether or not it consists of the entire Board, shall be an Outside
Director. No member of the Committee shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to this
Plan or any transaction hereunder, except for liability arising from his or her
own willful misfeasance, gross negligence or reckless disregard of his or her
duties. The Company hereby agrees to indemnify each member of the Committee for
all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiating for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing or denying authorization to any
transaction hereunder.
3.2 Subject to the express terms and conditions set forth
herein, the Committee shall have the power from time to time to:
(a) determine those Eligible Individuals to whom Employee
Options shall be granted under the Plan and the number of such Employee Options
to be granted and to prescribe the terms and conditions (which need not be
identical) of each such Employee Option, including the purchase price per Share
subject to each Employee Option, and make any amendment or modification to any
Option Agreement consistent with the terms of the Plan;
(b) select those Eligible Individuals to whom Awards
shall be granted under the Plan and to determine the number of Stock
Appreciation Rights, Performance Awards, Shares of Restricted Stock and/or
Dividend Equivalent Rights to be granted pursuant to each Award, the terms and
conditions of each Award, including the restrictions or Performance Objectives
relating to Shares, the maximum value of each Performance Share and make any
amendment or modification to any Award Agreement consistent with the terms of
the Plan;
(c) to construe and interpret the Plan and the Options
and Awards granted hereunder and to establish, amend and revoke rules and
regulations for the administration of the Plan, including, but not limited to,
correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the extent
it shall deem necessary or advisable so that the Plan complies with applicable
law including Rule 16b-3 under the Exchange Act and the Code to the extent
applicable, and otherwise to make the Plan fully effective. All decisions and
determinations by the Committee in the exercise of this power shall be final,
binding and conclusive upon the Company, its Subsidiaries, the Optionees and
Grantees, and all other persons having any interest therein;
(d) to determine the duration and purposes for leaves
of absence which may be granted to an Optionee or Grantee on an individual
basis without constituting a termination of employment or service for purposes
of the Plan;
(e) to exercise its discretion with respect to the powers
and rights granted to it as set forth in the Plan; and
(f) generally, to exercise such powers and to perform
such acts as are deemed necessary or advisable to promote the best interests of
the Company with respect to the Plan.
4. Stock Subject to the Plan.
4.1 The maximum number of Shares that may be made the subject
of Options and Awards granted under the Plan is 7,500,000; provided, however,
that in the aggregate, not more than one-third of the number of allotted Shares
may be made the subject of Restricted Stock Awards under Section 10 of the Plan
(other than shares of Restricted Stock made in settlement of Performance Units
pursuant to Section 11.2(b)). The maximum number of Shares that an Eligible
Individual may receive in any calendar year period in respect of Options and
Awards may not exceed 1,000,000 Shares. The maximum dollar amount of cash or the
Fair Market Value of Shares that any Eligible Individual may receive in any
calendar year during the term of the Plan in respect of Performance Units
denominated in dollars may not exceed $5,000,000. Upon a Change in
Capitalization, the maximum number of Shares referred to in the first two
sentences of this Section 4.1 shall be adjusted in number and kind pursuant to
Section 13. The Company shall reserve for the purposes of the Plan, out of its
authorized but unissued Shares or out of Shares held in the Company's treasury,
or partly out of each, such number of Shares as shall be determined by the
Board.
4.2 Upon the granting of an Option or an Award, the number of
Shares available under Section 4.1 for the granting of further Options and
Awards shall be reduced as follows:
(a) In connection with the granting of an Option or an
Award (other than the granting of a Performance Unit denominated in dollars),
the number of Shares shall be reduced by the number of Shares in respect of
which the Option or Award is granted or denominated.
(b) In connection with the granting of a Performance Unit
denominated in dollars, the number of Shares shall be reduced by an amount equal
to the quotient of (i) the dollar amount in which the Performance Unit is
denominated, divided by (ii) the Fair Market Value of a Share on the date the
Performance Unit is granted.
4.3 Whenever any outstanding Option or Award or portion
thereof expires, is canceled or is otherwise terminated for any reason without
having been exercised or payment having been made in respect of the entire
Option or Award, the Shares allocable to the expired, canceled or otherwise
terminated portion of the Option or Award may again be the subject of Options or
Awards granted hereunder.
5. Option Grants for Eligible Individuals.
5.1 Authority of Committee. Subject to the provisions of the
Plan, the Committee shall have full and final authority to select those Eligible
Individuals who will receive Employee Options, and the terms and conditions of
the grant to such Eligible Individuals shall be set forth in an Agreement.
5.2 Purchase Price. The purchase price or the manner in which
the purchase price is to be determined for Shares under each Employee Option
shall be determined by the Committee and set forth in the Agreement; provided,
however, that the purchase price per Share under each Incentive Stock Option
shall not be less than 100% of the Fair Market Value of a Share on the date the
Employee Option is granted (110% in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder).
5.3 Maximum Duration. Employee Options granted hereunder shall
be for such term as the Committee shall determine, provided that an Incentive
Stock Option shall not be exercisable after the expiration of ten (10) years
from the date it is granted (five (5) years in the case of an Incentive Stock
Option granted to a Ten-Percent Stockholder) and a Nonqualified Stock Option
shall not be exercisable after the expiration of ten (10) years from the date it
is granted. The Committee may, subsequent to the granting of any Employee
Option, extend the term thereof, but in no event shall the term as so extended
exceed the maximum term provided for in the preceding sentence.
5.4 Vesting. Subject to Section 7.4, each Employee Option
shall become exercisable in such installments (which need not be equal) and at
such times as may be designated by the Committee and set forth in the Agreement.
To the extent not exercised, installments shall accumulate and be exercisable,
in whole or in part, at any time after becoming exercisable, but not later than
the date the Employee Option expires. The Committee may accelerate the
exercisability of any Employee Option or portion thereof at any time.
5.5 Modification. No modification of an Employee Option shall
adversely alter or impair any rights or obligations under the Employee Option
without the Optionee's consent.
5.6 Limitation on Aggregate Value of Shares that May Become
First Exercisable During any Calendar Year Under an Incentive Stock Option.
Except as is otherwise provided in this Plan, with respect to any Incentive
Stock Option granted under this Plan, the aggregate Fair Market Value of Shares
subject to an Incentive Stock Option and the aggregate Fair market Value of
Shares or shares of stock of any Subsidiary (or a predecessor of the Company or
a Subsidiary) subject to any other incentive stock option (within the meaning of
Section 422 of the Code) of the Company or its Subsidiaries (or a predecessor
corporation of any such corporation) that first become purchasable by a holder
in any calendar year may not (with respect to that holder) exceed $100,000, or
such other amount as may be prescribed under Section 422 of the Code or
applicable regulations or rulings from time to time. As used in the previous
sentence, Fair Market Value shall be determined as of the date the Incentive
Stock Option is granted. For purposes of this Section 5.6 "predecessor
corporation" means (a) a corporation that was a party to a transaction described
in Section 424(a) of the Code (or which would be so described if a substitution
or assumption under that Section had been effected) with the Company, (b) a
corporation which, at the time the new incentive stock option (within the
meaning of Section 422 of the Code) is granted, is a Subsidiary of the Company
or a predecessor corporation of any such corporations, or (c) a predecessor
corporation of any such corporations. Failure to comply with this provision
shall not impair the enforceability or exercisability of any Option, but shall
cause the excess amount of Shares to be reclassified in accordance with the
Code.
6. Option Grants for Nonemployee Directors.
6.1 Discretionary Awards. From time to time the Board may
elect to grant Director Options to Eligible Directors. In making such grants the
Board shall take into consideration the contribution such Eligible Directors
have made or may make to the success of the Company and such other
considerations as the Board may from time to time specify. The Board shall
determine the number of shares subject to such Director Options, and, subject to
provisions of the Plan, the exercise price, vesting schedule and terms of such
Director Options.
6.2 Director Stock.
(a) The Company intends to pay each Eligible Director
(and at the discretion of the Board certain employee directors) an annual
retainer in the amount set from time to time by the Board (the "Retainer"). Each
Director shall be entitled to receive his or her Retainer exclusively in cash,
exclusively in shares of Stock ("Director Stock") or any portion in cash and
any portion in Director Stock. Each Director shall be given the opportunity,
during the month the Director first becomes a Director and during the last month
of each quarter thereafter, to elect among these choices for the remainder of
the quarter (in the case of the election made when the Director first becomes a
Director) and for the following quarter (in the case of any subsequent
election). If the Director chooses to receive at least some of his or her
Retainer in Director Stock, the election shall also indicate the percentage of
the Retainer to be paid in Director Stock. If a Director makes no election
during his or her first opportunity to make an election, the Director shall be
assumed to have elected to receive his or her entire Retainer in cash. If a
Director makes no election during any succeeding election month, the Director
shall be assumed to have remade the election then currently in effect for that
Director. An election by a Director to receive a portion of his or her retainer
in Director Stock shall either (i) be approved by (A) the Committee or (B) the
Board or (ii) provide that Director Stock received by the Director pursuant to
such election shall be held by the Director for a period of at least six months.
(b) The Company shall make the first issuance of shares
of Director Stock on the first trading day of the first full calendar quarter
after February 10, 1998. Subsequent issuances of Director Stock shall be made
on the first trading day of each subsequent calendar quarter and shall be made
to all Persons who are Directors on that trading day except any Director whose
Retainer is to be paid entirely in cash. The number of shares of Stock is
issuable to those Directors on the relevant trading date indicated above shall
equal:
[ % multiplied by (R/4) ] divided by P
WHERE:
% = the percentage of the Director's Retainer that the
Director elected or is deemed to have elected to
receive in the form of Director Stock, expressed as a
decimal;
R = the Director's Retainer for the year during which the
issuance occurs; and
P = the closing price, as quoted on the principal
exchange on which Shares are traded, on the date of
issuance.
Director Stock shall not include any fractional shares. Fractions shall
be rounded to the nearest whole share.
7. Terms and Conditions Applicable to All Options.
7.1 Non-Transferability. Unless set forth in the Agreement
evidencing the Option (other than an Incentive Stock Option) at the time of
grant or at any time thereafter, an Option granted hereunder shall not be
transferable by the Optionee to whom granted except by will or the laws of
descent and distribution or pursuant to a domestic relations order (within the
meaning of Rule 16a-12 promulgated under the Exchange Act), and an Option may be
exercised during the lifetime of such Optionee only by the Optionee or his or
her guardian or legal representative. The terms of such Option shall be final,
binding and conclusive upon the beneficiaries, executors, administrators, heirs
and successors of the Optionee.
7.2 Method of Exercise. The exercise of an Option shall be
made only by a written notice delivered in person or by mail to the Secretary of
the Company at the Company's principal executive office, specifying the number
of Shares to be purchased and accompanied by payment therefor and otherwise in
accordance with the Agreement pursuant to which the Option was granted. The
purchase price for any Shares purchased pursuant to the exercise of an Option
shall be paid, as determined by the Committee in its discretion, in either of
the following forms (or any combination thereof): (i) cash or (ii) the transfer
of Shares to the Company upon such terms and conditions as determined by the
Committee. In addition, both Employee Options and Director Options may be
exercised through a registered broker-dealer pursuant to such cashless exercise
procedures (other than Share withholding) which are, from time to time, deemed
acceptable by the Committee, and the Committee may authorize that the purchase
price payable upon exercise of an Employee Option may be paid by having Shares
withheld that otherwise would be acquired upon such exercise. Any Shares
transferred to the Company (or withheld upon exercise) as payment of the
purchase price under an Option shall be valued at their Fair Market Value on the
day preceding the date of exercise of such Option. The Optionee shall deliver
the Agreement evidencing the Option to the Secretary of the Company who shall
endorse thereon a notation of such exercise and return such Agreement to the
Optionee. No fractional Shares (or cash in lieu thereof) shall be issued upon
exercise of an Option and the number of Shares that may be purchased upon
exercise shall be rounded to the nearest number of whole Shares.
7.3 Rights of Optionees. Optionee shall be deemed for any
purpose to be the owner of any Shares subject to any Option unless and until (i)
the Option shall have been exercised pursuant to the terms thereof, (ii) the
Company shall have issued and delivered Shares to the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such Shares, subject to such terms and
conditions as may be set forth in the applicable Agreement.
7.4 Effect of Change in Control. In the event of a Change in
Control, all Options outstanding on the date of such Change in Control shall
become immediately and fully exercisable. In addition, to the extent set forth
in an Agreement evidencing the grant of an Employee Option, an Optionee will be
permitted to surrender to the Company for cancellation within sixty (60) days
after such Change in Control any Employee Option or portion of an Employee
Option to the extent not yet exercised and the Optionee will be entitled to
receive a cash payment in an amount equal to the excess, if any, of (x) (A) in
the case of a Nonqualified Stock Option, the greater of (1) the Fair Market
Value, on the date preceding the date of surrender, of the Shares subject to the
Employee Option or portion thereof surrendered or (2) the Adjusted Fair Market
Value of the Shares subject to the Employee Option or portion thereof
surrendered or (B) in the case of an Incentive Stock Option, the Fair Market
Value, on the date preceding the date of surrender, of the Shares subject to the
Employee Option or portion thereof surrendered, over (y) the aggregate purchase
price for such Shares under the Employee Option or portion thereof surrendered.
In the event an Optionee's employment with, or service as a Director of, the
Company terminates following a Change in Control, each Option held by the
Optionee that was exercisable as of the date of termination of the Optionee's
employment or service shall remain exercisable for a period ending not before
the earlier of (A) the first anniversary of the termination of the Optionee's
employment or service or (B) the expiration of the stated term of the Option.
8. Stock Appreciation Rights.
The Committee may in its discretion, either alone or in
connection with the grant of an Employee Option, grant Stock Appreciation Rights
in accordance with the Plan, the terms and conditions of which shall be set
forth in an Agreement. If granted in connection with an Option, a Stock
Appreciation Right shall cover the same Shares covered by the Option (or such
lesser number of Shares as the Committee may determine) and shall, except as
provided in this Section 8, be subject to the same terms and conditions as the
related Option.
8.1 Time of Grant. A Stock Appreciation Right may be granted
(i) at any time if unrelated to an Option, or (ii) if related to an Option,
either at the time of grant, or at any time thereafter during the term of the
Option.
8.2 Stock Appreciation Right Related to an Option.
(a) Exercise. A Stock Appreciation Right granted in
connection with an Option shall be exercisable at such time or times and only to
the extent that the related Options are exercisable, and will not be
transferable except to the extent the related Option may be transferable. A
Stock Appreciation Right granted in connection with an Incentive Stock Option
shall be exercisable only if the Fair Market Value of a Share on the date of
exercise exceeds the purchase price specified in the related Incentive Stock
Option Agreement.
(b) Amount Payable. Upon the exercise of a Stock
Appreciation Right related to an Option, the Grantee shall be entitled to
receive an amount determined by multiplying (A) the excess of the Fair Market
Value of a Share on the date preceding the date of exercise of such Stock
Appreciation Right over the per Share purchase price under the related Option,
by (B) the number of Shares as to which such Stock Appreciation Right is being
exercised. Notwithstanding the foregoing, the Committee may limit in any manner
the amount payable with respect to any Stock Appreciation Right by including
such a limit in the Agreement evidencing the Stock Appreciation Right at the
time it is granted.
(c) Treatment of Related Options and Stock Appreciation
Rights Upon Exercise. Upon the exercise of a Stock Appreciation Right granted
in connection with an Option, the Option shall be canceled to the extent of the
number of Shares as to which the Stock Appreciation Right is exercised, and upon
the exercise of an Option granted in connection with a Stock Appreciation Right,
the Stock Appreciation Right shall be canceled to the extent of the number of
Shares as to which the Option is exercised or surrendered.
8.3 Stock Appreciation Right Unrelated to an Option. The
Committee may grant to Eligible Individuals Stock Appreciation Rights unrelated
to Options. Stock Appreciation Rights unrelated to Options shall contain such
terms and conditions as to exercisability (subject to Section 8.7), vesting and
duration as the Committee shall determine, but in no event shall they have a
term of greater than ten (10) years. Upon exercise of a Stock Appreciation Right
unrelated to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the Fair Market Value of a Share on the date the Stock Appreciation Right was
granted, by (B) number of Shares as to which the Stock Appreciation Right is
being exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Agreement evidencing the Stock Appreciation Right
at the time it is granted.
8.4 Method of Exercise. Stock Appreciation Rights shall be
exercised by a Grantee only by a written notice delivered in person or by mail
to the Secretary of the Company at the Company's principal executive office,
specifying the number of Shares with respect to which the Stock Appreciation
Right is being exercised. If requested by the Committee, the Grantee shall
deliver the Agreement evidencing the Stock Appreciation Right being exercised
and the Agreement evidencing any related Option to the Secretary of the Company
who shall endorse thereon a notation of such exercise and return such Agreement
to the Grantee.
8.5 Form of Payment. Payment of the amount determined under
Sections 8.2(b) or 8.3 may be made in the discretion of the Committee solely in
whole Shares in a number determined at their Fair Market Value on the date
preceding the date of exercise of the Stock Appreciation Right, or solely in
cash, or in a combination of cash and Shares. If the Committee decides to make
full payment in Shares and the amount payable results in a fractional Share,
payment for the fractional Share will be made in cash.
8.6 Modification or Substitution. Subject to the terms of the
Plan, the Committee may modify outstanding Awards of Stock Appreciation Rights
or accept the surrender of outstanding Awards of Stock Appreciation Rights (to
the extent not exercised) and grant new Awards in substitution for them.
Notwithstanding the foregoing, no modification of an Award shall adversely alter
or impair any rights or obligations under the Agreement without the Grantee's
consent.
8.7 Effect of Change in Control. In the event of a Change in
Control, all Stock Appreciation Rights shall become immediately and fully
exercisable. In addition, to the extent set forth in an Agreement evidencing the
grant of a Stock Appreciation Right unrelated to an Option, a Grantee will be
entitled to receive a payment from the Company in cash or stock, in either case,
with a value equal to the excess, if any, of (A) the greater of (x) the Fair
Market Value, on the date preceding the date of exercise, of the underlying
Shares subject to the Stock Appreciation Right or portion thereof exercised and
(y) the Adjusted Fair Market Value, on the date preceding the date of exercise,
of the Shares over (B) the aggregate Fair Market Value, on the date the Stock
Appreciation Right was granted, of the Shares subject to the Stock Appreciation
Right or portion thereof exercised. In the event a Grantee's employment with the
Company terminates following a Change in Control, each Stock Appreciation Right
held by the Grantee that was exercisable as of the date of termination of the
Grantee's employment shall remain exercisable for a period ending not before the
earlier of the first anniversary of (A) the termination of the Grantee's
employment or (B) the expiration of the stated term of the Stock Appreciation
Right.
9. Dividend Equivalent Rights.
Dividend Equivalent Rights may be granted to Eligible
Individuals and Eligible Directors in tandem with an Option or Award or as a
separate award. The terms and conditions applicable to each Dividend Equivalent
Right shall be specified in the Agreement under which the Dividend Equivalent
Right is granted. Amounts payable in respect of Dividend Equivalent Rights may
be payable currently or deferred until the lapsing of restrictions on such
Dividend Equivalent Rights or until the vesting, exercise, payment, settlement
or other lapse of restrictions on the Option or Award to which the Dividend
Equivalent Rights relate. In the event that the amount payable in respect of
Dividend Equivalent Rights are to be deferred, the Committee shall determine
whether such amounts are to be held in cash or reinvested in Shares or deemed
(notionally) to be reinvested in Shares. If amounts payable in respect of
Dividend Equivalent Rights are to be held in cash, there may be credited at the
end of each year (or portion thereof) interest on the amount of the account at
the beginning of the year at a rate per annum as the Committee, in its
discretion, may determine. Dividend Equivalent Rights may be settled in cash or
Shares or a combination thereof, in a single installment or multiple
installments.
10. Restricted Stock.
10.1 Grant. The Committee may grant Awards to Eligible
Individuals of Restricted Stock, which shall be evidenced by an Agreement
between the Company and the Grantee. Each Agreement shall contain such
restrictions, terms and conditions as the Committee may, in its discretion,
determine and (without limiting the generality of the foregoing) such Agreements
may require that an appropriate legend be placed on Share certificates. Awards
of Restricted Stock shall be subject to the terms and provisions set forth below
in this Section 10.
10.2 Rights of Grantee. Shares of Restricted Stock granted
pursuant to an Award hereunder shall be issued in the name of the Grantee as
soon as reasonably practicable after the Award is granted provided that the
Grantee has executed an Agreement evidencing the Award, the appropriate blank
stock powers and, in the discretion of the Committee, an escrow agreement and
any other documents which the Committee may require as a condition to the
issuance of such Shares. If a Grantee shall fail to execute the Agreement
evidencing a Restricted Stock Award, the appropriate blank stock powers and, in
the discretion of the Committee, an escrow agreement and any other documents
which the Committee may require within the time period prescribed by the
Committee at the time the Award is granted, the Award shall be null and void. At
the discretion of the Committee, Shares issued in connection with a Restricted
Stock Award shall be deposited together with the stock powers with an escrow
agent (which may be the Company) designated by the Committee. Unless the
Committee determines otherwise and as set forth in the Agreement, upon delivery
of the Shares to the escrow agent, the Grantee shall have all of the rights of a
stockholder with respect to such Shares, including the right to vote the Shares
and to receive all dividends or other distributions paid or made with respect to
the Shares.
10.3 Non-transferability. Until all restrictions upon the
Shares of Restricted Stock awarded to a Grantee shall have lapsed in the manner
set forth in Section 10.4, such Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated, nor
shall they be delivered to the Grantee.
10.4 Lapse of Restrictions.
(a) Generally. Restrictions upon Shares of Restricted
Stock awarded hereunder shall lapse at such time or times and on such terms and
conditions as the Committee may determine. The Agreement evidencing the Award
shall set forth any such restrictions.
(b) Effect of Change in Control. Unless the Committee
shall determine otherwise at the time of the grant of an Award of Restricted
Stock, the restrictions upon Shares of Restricted Stock shall lapse upon a
Change in Control. The Agreement evidencing the Award shall set forth any such
provisions.
10.5 Modification or Substitution. Subject to the terms of the
Plan, the Committee may modify outstanding Awards of Restricted Stock or accept
the surrender of outstanding Shares of Restricted Stock (to the extent the
restrictions on such Shares have not yet lapsed) and grant new Awards in
substitution for them. Notwithstanding the foregoing, no modification of an
Award shall adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent.
10.6 Treatment of Dividends. At the time an Award of Shares of
Restricted Stock is granted, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on such Shares by the Company shall be (i) deferred until the
lapsing of the restrictions imposed upon such Shares and (ii) held by the
Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in shares of Stock (which shall be held as
additional Shares of Restricted Stock) or held in cash. If deferred dividends
are to be held in cash, there may be credited at the end of each year (or
portion thereof) interest on the amount of the account at the beginning of the
year at a rate per annum as the Committee, in its discretion, may determine.
Payment of deferred dividends in respect of Shares of Restricted Stock (whether
held in cash or as additional Shares of Restricted Stock), together with
interest accrued thereon, if any, shall be made upon the lapsing of restrictions
imposed on the Shares in respect of which the deferred dividends were paid, and
any dividends deferred (together with any interest accrued thereon) in respect
of any Shares of Restricted Stock shall be forfeited upon the forfeiture of such
Shares.
10.7 Delivery of Shares. Upon the lapse of the restrictions on
Shares of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all restrictions
hereunder.
11. Performance Awards.
11.1 (a) Performance Objectives. Performance Objectives for
Performance Awards may be expressed in terms of (i) earnings per Share, (ii)
Share price, (iii) pre-tax profits, (iv) net earnings, (v) return on equity or
assets, (vi) revenues, (vii) EBITDA, (viii) market share or market penetration
or (ix) any combination of the foregoing. Performance Objectives may be in
respect of the performance of the Company and its Subsidiaries (which may be on
a consolidated basis), a Subsidiary or a Division. Performance Objectives may be
absolute or relative and may be expressed in terms of a progression within a
specified range. The Performance Objectives with respect to a Performance Cycle
shall be established in writing by the Committee by the earlier of (i) the date
on which a quarter of the Performance Cycle has elapsed or (ii) the date which
is ninety (90) days after the commencement of the Performance Cycle, and in any
event while the performance relating to the Performance Objectives remain
substantially uncertain. At the time of the granting of a Performance Award and
to the extent permitted under Section 162(m) of the Code and the regulations
thereunder, the Committee may provide for the manner in which the Performance
Objectives will be measured to reflect the impact of specified corporate
transactions, extraordinary events, accounting changes and other similar events.
(b) Determination of Performance. Prior to the vesting,
payment, settlement or lapsing of any restrictions with respect to any
Performance Award made to a Grantee who is subject to Section 162(m) of the
Code, the Committee shall certify in writing that the applicable Performance
Objectives have been satisfied.
11.2 Performance Units. The Committee, in its discretion, may
grant Awards of Performance Units to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company and
the Grantee. Performance Units may be denominated in Shares or a specified
dollar amount and, contingent upon the attainment of specified Performance
Objectives within the Performance Cycle, represent the right to receive payment
as provided in Section 11.2(b) of (i) in the case of Share-denominated
Performance Units, the Fair Market Value of a Share on the date the Performance
Unit was granted, the date the Performance Unit became vested or any other date
specified by the Committee, (ii) in the case of dollar-denominated Performance
Units, the specified dollar amount or (iii) a percentage (which may be more than
100%) of the amount described in clause (i) or (ii) depending on the level of
Performance Objective attainment; provided, however, that, the Committee may at
the time a Performance Unit is granted specify a maximum amount payable in
respect of a vested Performance Unit. Each Agreement shall specify the number of
Performance Units to which it relates, the Performance Objectives which must be
satisfied in order for the Performance Units to vest and the Performance Cycle
within which such Performance Objectives must be satisfied.
(a) Vesting and Forfeiture. Subject to Sections 11.1(b)
and 11.4, a Grantee shall become vested with respect to the Performance Units to
the extent that the Performance Objectives set forth in the Agreement are
satisfied for the Performance Cycle.
(b) Payment of Awards. Subject to Section 11.1(b),
payment to Grantees in respect of vested Performance Units shall be made as soon
as practicable after the last day of the Performance Cycle to which such Award
relates unless the Agreement evidencing the Award provides for the deferral of
payment, in which event the terms and conditions of the deferral shall be set
forth in the Agreement. Subject to Section 11.4, such payments may be made
entirely in Shares valued at their Fair Market Value as of the day preceding the
date of payment or such other date specified by the Committee, entirely in cash,
or in such combination of Shares and cash as the Committee in its discretion
shall determine at any time prior to such payment; provided, however, that if
the Committee in its discretion determines to make such payment entirely or
partially in Shares of Restricted Stock, the Committee must determine the extent
to which such payment will be in Shares of Restricted Stock and the terms of
such Restricted Stock at the time the Award is granted.
11.3 Performance Shares. The Committee, in its discretion, may
grant Awards of Performance Shares to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company and
the Grantee. Each Agreement may require that an appropriate legend be placed on
Share certificates. Awards of Performance Shares shall be subject to the
following terms and provisions:
(a) Rights of Grantee. The Committee shall provide at
the time an Award of Performance Shares is made the time or times at which the
actual Shares represented by such Award shall be issued in the name of the
Grantee; provided, however, that no Performance Shares shall be issued until the
Grantee has executed an Agreement evidencing the Award, the appropriate blank
stock powers and, in the discretion of the Committee, an escrow agreement and
any other documents which the Committee may require as a condition to the
issuance of such Performance Shares. If a Grantee shall fail to execute the
Agreement evidencing an Award of Performance Shares, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement and any
other documents which the Committee may require within the time period
prescribed by the Committee at the time the Award is granted, the Award shall be
null and void. At the discretion of the Committee, Shares issued in
connection with an Award of Performance Shares shall be deposited together
with the stock powers with an escrow agent (which may be the Company) designated
by the Committee. Except as restricted by the terms of the Agreement, upon
delivery of the Shares to the escrow agent, the Grantee shall have, in the
discretion of the Committee, all of the rights of a stockholder with respect to
such Shares, including the right to vote the Shares and to receive all dividends
or other distributions paid or made with respect to the Shares.
(b) Non-transferability. Until any restrictions upon
the Performance Shares awarded to a Grantee shall have lapsed in the manner set
forth in Sections 11.3(c) or 11.4, such Performance Shares shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be delivered to the Grantee. The Committee may also
impose such other restrictions and conditions on the Performance Shares, if any,
as it deems appropriate.
(c) Lapse of Restrictions. Subject to Sections
11.1(b) and 11.4, restrictions upon Performance Shares awarded hereunder
shall lapse and such Performance Shares shall become vested at such time or
times and on such terms, conditions and satisfaction of Performance Objectives
as the Committee may, in its discretion, determine at the time an Award is
granted.
(d) Treatment of Dividends. At the time the Award of
Performance Shares is granted, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on actual Shares represented by such Award which have been
issued by the Company to the Grantee shall be (i) deferred until the lapsing of
the restrictions imposed upon such Performance Shares and (ii) held by the
Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in shares of Stock (which shall be held as
additional Performance Shares) or held in cash. If deferred dividends are to
be held in cash, there may be credited at the end of each year (or portion
thereof) interest on the amount of the account at the beginning of the year at a
rate per annum as the Committee, in its discretion, may determine. Payment of
deferred dividends in respect of Performance Shares (whether held in cash or
in additional Performance Shares), together with interest accrued thereon, if
any, shall be made upon the lapsing of restrictions imposed on the Performance
Shares in respect of which the deferred dividends were paid, and any dividends
deferred (together with any interest accrued thereon) in respect of any
Performance Shares shall be forfeited upon the forfeiture of such Performance
Shares.
(e) Delivery of Shares. Upon the lapse of the
restrictions on Performance Shares awarded hereunder, the Committee shall cause
a stock certificate to be delivered to the Grantee with respect to such Shares,
free of all restrictions hereunder.
11.4 Effect of Change in Control. In the event of a Change
in Control:
(a) With respect to Performance Units, the Grantee shall
(i) become vested in a percentage of Performance Units as determined by the
Committee at the time of the Award of such Performance Units and as set forth in
the Agreement and (ii) be entitled to receive in respect of all Performance
Units which become vested as a result of a Change in Control a cash payment
within ten (10) days after such Change in Control in an amount as determined by
the Committee at the time of the Award of such Performance Unit and as set forth
in the Agreement.
(b) With respect to Performance Shares, restrictions
shall lapse immediately on all or a portion of the Performance Shares as
determined by the Committee at the time of the Award of such Performance Shares
and as set forth in the Agreement.
(c) The Agreements evidencing Performance Shares and
Performance Units shall provide for the treatment of such Awards (or portions
thereof) which do not become vested as the result of a Change in Control,
including, but not limited to, provisions for the adjustment of applicable
Performance Objectives.
11.5 Modification or Substitution. Subject to the terms of the
Plan, the Committee may modify outstanding Performance Awards or accept the
surrender of outstanding Performance Awards and grant new Performance Awards in
substitution for them. Notwithstanding the foregoing, no modification of a
Performance Award shall adversely alter or impair any rights or obligations
under the Agreement without the Grantee's consent.
<PAGE>
12. Effect of a Termination of Employment.
The Agreement evidencing the grant of each Option and each
Award shall set forth the terms and conditions applicable to such Option or
Award upon a termination or change in the status of the employment of the
Optionee or Grantee by the Company, a Subsidiary or a Division (including a
termination or change by reason of the sale of a Subsidiary or a Division),
which, except for Director Options, shall be as the Committee may, in its
discretion, determine at the time the Option or Award is granted or thereafter.
13. Adjustment Upon Changes in Capitalization.
(a) In the event of a Change in Capitalization, the
Committee shall conclusively determine the appropriate adjustments, if any, to
(i) the maximum number and class of Shares or other stock or securities with
respect to which Options or Awards may be granted under the Plan, (ii) the
maximum number and class of Shares or other stock or securities with respect to
which Options or Awards may be granted to any Eligible Individual during the
term of the Plan, (iii) the number and class of Shares or other stock or
securities which are subject to outstanding Options or Awards granted under the
Plan and the purchase price therefor, if applicable, (iv) the number and class
of Shares or other securities in respect of which Director Options are to be
granted under Section 6 and (v) the Performance Objectives.
(b) Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a
Grantee of an Award shall be entitled to, or an Optionee shall be entitled to
exercise an Option with respect to, new, additional or different shares of stock
or securities, such new, additional or different shares shall thereupon be
subject to all of the conditions, restrictions and performance criteria which
were applicable to the Shares subject to the Award or Option, as the case may
be, prior to such Change in Capitalization.
14. Effect of Certain Transactions.
Subject to Sections 7.4, 8.7, 10.4(b) and 11.4 or as otherwise
provided in an Agreement, in the event of (i) the liquidation or dissolution of
the Company or (ii) a merger or consolidation of the Company (a "Transaction"),
the Plan and the Options and Awards issued hereunder shall continue in effect in
accordance with their respective terms, except that following a Transaction each
Optionee and Grantee shall be entitled to receive in respect of each Share
subject to any outstanding Options or Awards, as the case may be, upon exercise
of any Option or payment or transfer in respect of any Award, the same number
and kind of stock, securities, cash, property or other consideration that each
holder of a Share was entitled to receive in the Transaction in respect of a
Share; provided, however, that such stock, securities, cash, property, or other
consideration shall remain subject to all of the conditions, restrictions and
performance criteria which were applicable to the Options and Awards prior to
such Transaction.
<PAGE>
15. Interpretation.
Following the required registration of any equity security of
the Company pursuant to Section 12 of the Exchange Act:
(a) The Plan is intended to comply with Rule 16b-3
promulgated under the Exchange Act and the Committee shall interpret and
administer the provisions of the Plan or any Agreement in a manner consistent
therewith. Any provisions inconsistent with such Rule shall be inoperative and
shall not affect the validity of the Plan.
(b) Unless otherwise expressly stated in the relevant
Agreement, each Option, Stock Appreciation Right and Performance Award granted
under the Plan is intended to be performance-based compensation within the
meaning of Section 162(m)(4)(C) of the Code. The Committee shall not be
entitled to exercise any discretion otherwise authorized hereunder with respect
to such Options or Awards if the ability to exercise such discretion or the
exercise of such discretion itself would cause the compensation attributable to
such Options or Awards to fail to qualify as performance-based compensation.
16. Pooling Transactions.
Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event of a Change in Control which is also
intended to constitute a Pooling Transaction, the Committee may take such
actions, if any, as are specifically recommended by an independent accounting
firm retained by the Company to the extent reasonably necessary in order to
assure that the Pooling Transaction will qualify as such, including but not
limited to (i) deferring the vesting, exercise, payment, settlement or lapsing
of restrictions with respect to any Option or Award, (ii) providing that the
payment or settlement in respect of any Option or Award be made in the form of
cash, Shares or securities of a successor or acquirer of the Company, or a
combination of the foregoing, and (iii) providing for the extension of the term
of any Option or Award to the extent necessary to accommodate the foregoing, but
not beyond the maximum term permitted for any Option or Award.
17. Termination and Amendment of the Plan.
The Plan does not have a fixed termination date, provided that
no Incentive Stock Option shall be granted hereunder subsequent to February 10,
2008. The Board may terminate the Plan and the Board may at any time and from
time to time amend, modify or suspend the Plan; provided, however, that:
(a) no such amendment, modification, suspension or
termination shall impair or adversely alter any Options or Awards theretofore
granted under the Plan, except with the consent of the Optionee or Grantee, nor
shall any amendment, modification, suspension or termination deprive any
Optionee or Grantee of any Shares which he or she may have acquired through or
as a result of the Plan; and
(b) to the extent necessary under applicable law, no
amendment shall be effective unless approved by the stockholders of the Company
in accordance with applicable law.
18. Non-Exclusivity of the Plan.
The adoption of the Plan by the Board shall not be construed
as amending, modifying or rescinding any previously approved incentive
arrangement or as creating any limitations on the power of the Board to adopt
such other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
19. Limitation of Liability.
As illustrative of the limitations of liability of the
Company, but not intended to be exhaustive thereof, nothing in the Plan shall be
construed to:
(i) give any person any right to be granted an
Option or Award other than at the sole discretion of the
Committee;
(ii) give any person any rights whatsoever
with respect to Shares except as specifically
provided in the Plan;
(iii) limit in any way the right of the Company or any
Subsidiary to terminate the employment of any person at any
time; or
(iv) be evidence of any agreement or understanding,
expressed or implied, that the Company will employ any
person at any particular rate of compensation or for any
particular period of time.
20. Regulations and Other Approvals; Governing Law.
20.1 Except as to matters of federal law, the Plan and the
rights of all persons claiming hereunder shall be construed and determined in
accordance with the laws of the State of Texas without giving effect to
conflicts of laws principles thereof.
20.2 The obligation of the Company to sell or deliver Shares
with respect to Options and Awards granted under the Plan shall be subject to
all applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
20.3 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock Options
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder.
20.4 Each Option and Award is subject to the requirement that,
if at any time the Committee determines, in its discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or
payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions as acceptable to the Committee.
20.5 Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), and is not
otherwise exempt from such registration, such Shares shall be restricted against
transfer to the extent required by the Securities Act and Rule 144 or other
regulations thereunder. The Committee may require any individual receiving
Shares pursuant to an Option or Award granted under the Plan, as a condition
precedent to receipt of such Shares, to represent and warrant to the Company in
writing that the Shares acquired by such individual are acquired without a view
to any distribution thereof and will not be sold or transferred other than
pursuant to an effective registration thereof under said Act or pursuant to an
exemption applicable under the Securities Act or the rules and regulations
promulgated thereunder. The certificates evidencing any of such Shares shall be
appropriately amended to reflect their status as restricted securities as
aforesaid.
21. Miscellaneous.
21.1 Multiple Agreements. The terms of each Option or Award
may differ from other Options or Awards granted under the Plan at the same time,
or at some other time. The Committee may also grant more than one Option or
Award to a given Eligible Individual during the term of the Plan, either in
addition to, or in substitution for, one or more Options or Awards previously
granted to that Eligible Individual.
21.2 Withholding of Taxes.
(a) At such times as an Optionee or Grantee recognizes
taxable income in connection with the receipt of Shares or cash hereunder (a
"Taxable Event"), the Optionee or Grantee shall pay to the Company an amount
equal to the federal, state and local income taxes and other amounts as may be
required by law to be withheld by the Company in connection with the Taxable
Event (the "Withholding Taxes") prior to the issuance, or release from escrow,
of such Shares or the payment of such cash. The Company shall have the right to
deduct from any payment of cash to an Optionee or Grantee an amount equal to the
Withholding Taxes in satisfaction of the obligation to pay Withholding Taxes.
In satisfaction of the obligation to pay Withholding Taxes to the Company, the
Optionee or Grantee may make a written election (the "Tax Election"), which may
be accepted or rejected in the discretion of the Committee, to have withheld a
portion of the Shares then issuable to him or her having an aggregate Fair
Market Value equal to the Withholding Taxes.
(b) If an Optionee makes a disposition, within the
meaning of Section 424(c) of the Code and regulations promulgated thereunder, of
any Share or Shares issued to such Optionee pursuant to the exercise of an
Incentive Stock Option within the two-year period commencing on the day after
the date of the grant or within the one-year period commencing on the day after
the date of transfer of such Share or Shares to the Optionee pursuant to such
exercise, the Optionee shall, within ten (10) days of such disposition, notify
the Company thereof, by delivery of written notice to the Company at its
principal executive office.
21.3. Effective Date. The effective date of this Plan shall be
as determined by the Board, subject only to the approval by the affirmative vote
of the holders of a majority of the securities of the Company present, or
represented, and entitled to vote at a meeting of stockholders duly held in
accordance with the applicable laws of the State of Texas within twelve (12)
months of the adoption of the Plan by the Board.
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC.
Proxy Solicited on Behalf of the Board of Directors for the Annual
Meeting of Shareholders to be held May 5, 1998
The undersigned hereby appoints L. Lowry Mays and Alan D. Feld, and
each of them, proxies of the undersigned with full power of substitution for and
in the name, place and stead of the undersigned to appear and act for and to
vote all shares of CLEAR CHANNEL COMMUNICATIONS, INC. standing in the name of
the undersigned or with respect to which the undersigned is entitled to vote and
act at the Annual Meeting of Shareholders of said Company to be held in San
Antonio, Texas on May 5, 1998 at 11:00 A.M., central time, or at any
adjournments or postponements thereof, with all powers the undersigned would
possess of then personally present, as indicated on the reverse side.
This undersigned acknowledges receipt of notice of said meeting and
accompanying Proxy Statement and of the 1997 Annual Report and ratifies and
confirms all acts that any of the said proxy holders or their substitutes may
lawfully do or cause to be done by virtue hereof.
(Continued and to be dated and signed on the reverse side.)
CLEAR CHANNEL COMMUNICATIONS, INC.
P.O. BOX 11181
NEW YORK, N.Y. 10203-0181
<PAGE>
1. Election of Directors FOR all eight nominees listed below [ ]
WITHHOLD AUTHORITY to vote for all eight
nominees below [ ] EXCEPTIONS* [ ]
Nominees: L. Lowry Mays Karl Eller Mark P. Mays Alan D. Feld B.J. McCombs
Theodore H. Strauss John H. Williams Daniel L. Simon
(INSTRUCTIONS: To withhold authority to vote for any individual nominee
mark the "EXCEPTIONS" box and write that nominee's name in the space
provided below.)
*Exceptions: __________________________________________________________
2. Approval of the Clear Channel Communications, Inc. 1998 Stock Incentive
Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Amendment of the Company's Articles of Incorporation to increase the
number of authorized shares of Preferred Stock and Common Stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Ratification of the selection of Ernst & Young LLP as independent
auditors for the year ending December 31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment(s)
thereof.
Change of Address and/or Comments: [ ]
Please sign your name exactly as it appears hereon. Joint owners should
sign personally. Attorney, Executor, Administrator, Trustee or Guardian should
indicate full title.
Dated:____________________________________, 1998
- -----------------------------------------------
Shareholder's signature
- -----------------------------------------------
Shareholder's signature if stock held jointly
Sign, Date, and Return the Proxy Card Promptly Using the Enclosed Envelope.
Votes MUST be indicated (X) in Black or Blue Ink.
