<PAGE> 1
SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CHANCELLOR MEDIA CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
CHANCELLOR MEDIA CORPORATION
433 EAST LAS COLINAS BOULEVARD
IRVING, TEXAS 75039
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 19, 1998
---------------------
The 1998 Annual Meeting of Stockholders (the "Annual Meeting") of
Chancellor Media Corporation (the "Company") will be held at The Hotel Crescent
Court, 400 Crescent Court, Dallas, TX 75201, on May 19, 1998 at 10:00 a.m.
(c.d.t.), for the following purposes, as further described in the accompanying
Proxy Statement:
1. To elect three directors to the Board of Directors;
2. To consider and act upon a proposal to adopt the 1998 Chancellor Media
Corporation Stock Option Plan;
3. To consider and act upon a proposal to amend and restate the Company's
existing Non-Employee Director Stock Option Plan; and
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only holders of record of the Company's Common Stock as of the close of
business on April 15, 1998 will be entitled to notice of and to vote at the
Annual Meeting and any adjournments thereof. Management welcomes your attendance
at the Annual Meeting. Whether or not you plan to attend the Annual Meeting in
person, however, you are requested to complete, date, sign and promptly return
the enclosed proxy card in the return envelope furnished for your convenience.
No postage is required if mailed within the United States. Your proxy is
revocable and will not affect your right to vote in person in the event you
attend the Annual Meeting. For an explanation of the procedure for revoking your
proxy, see the enclosed Proxy Statement.
A complete list of the stockholders of record entitled to vote at the
Annual Meeting will be open and available for examination by any stockholder,
for any purpose germane to the Annual Meeting, between 9:00 a.m. and 5:00 p.m.
(c.d.t.) at the Company's offices at 433 East Las Colinas Boulevard, Irving,
Texas 75039, from May 9, 1998 through May 18, 1998 and at the time and place of
the Annual Meeting noted above.
A copy of the Company's 1997 Annual Report, which contains consolidated
financial statements and other information of interest with respect to the
Company and its stockholders, is enclosed.
By the Order of the Board of Directors
/s/MATTHEW E. DEVINE
Matthew E. Devine
Secretary
Irving, Texas
April 23, 1998
<PAGE> 3
CHANCELLOR MEDIA CORPORATION
433 EAST LAS COLINAS BOULEVARD
IRVING, TEXAS 75039
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Chancellor Media Corporation (the
"Company") for use at the 1998 Annual Meeting of Stockholders (the "Annual
Meeting") of the Company to be held at The Hotel Crescent Court, 400 Crescent
Court, Dallas, TX 75201, on May 19, 1998 at 10:00 a.m. (c.d.t.) and any
adjournment thereof. This Proxy Statement, the accompanying form of proxy and
the other enclosed documents are scheduled to be mailed to stockholders of the
Company commencing on April 23, 1998.
Holders of record of shares of the Company's Common Stock, par value $0.01
per share (the "Common Stock"), at the close of business on April 15, 1998 are
entitled to notice of and to vote at the Annual Meeting. The presence in person
or by proxy of the holders of a majority of the shares of Common Stock
outstanding and entitled to vote at the Annual Meeting shall constitute a
quorum. A quorum, once established, will not be broken by the withdrawal from
the Annual Meeting of enough votes to leave less than a quorum, and the votes
present at the Annual Meeting after the establishment of a quorum will be
sufficient to transact all business at the Annual Meeting. As of the close of
business on April 15, 1998, 142,184,642 shares of Common Stock were outstanding
and entitled to notice of and to vote at the Annual Meeting.
Assuming the presence of a quorum, under the Company's amended and restated
bylaws (the "Bylaws"), directors will be elected by a favorable vote of a
plurality of the votes cast in respect of the shares of Common Stock present and
entitled to vote, in person or by proxy, at the Annual Meeting. Assuming the
presence of a quorum, under rules applicable to companies whose securities are
traded on the Nasdaq Stock Market, the adoption of the 1998 Chancellor Media
Corporation Stock Option Plan and the adoption of the proposed amendments to the
Non-Employee Director Stock Option Plan require the approval of a majority of
the votes cast in respect of the shares of Common Stock present and entitled to
vote, in person or by proxy, at the Annual Meeting. Under the Bylaws and
Delaware law, shares represented by proxies that reflect abstentions or "broker
non-votes" (i.e., shares held by a broker or nominee which are represented at
the meeting, but with respect to which such broker or nominee is not empowered
to vote on a particular proposal) will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum. Except
with respect to the election of directors, abstentions as to a particular
proposal will have the same effect as votes against such proposal. Broker
non-votes, however, will be treated as unvoted for purposes of determining
approval of such proposals and will not be counted as votes for or against such
proposals.
All shares of Common Stock that are represented at the Annual Meeting by
properly executed proxies received prior to or at the Annual Meeting and not
revoked will be voted at the Annual Meeting in accordance with the instructions
indicated in such proxies. Where specific choices are not indicated, the shares
of Common Stock represented by all valid proxies received shall be voted (1) for
the nominees for director named in this Proxy Statement, (2) for approval of the
proposed 1998 Chancellor Media Corporation Stock Option Plan and (3) for
approval of the proposed amendments to the Company's Non-Employee Director Stock
Option Plan.
If any other matter should be presented at the Annual Meeting upon which a
vote properly may be taken other than matters set forth in this Proxy Statement,
it is intended that shares represented by proxies in the accompanying form will
be voted with respect thereto in accordance with the judgment of the person or
persons voting such shares.
In the event that a quorum is not present at the time the Annual Meeting is
convened, a majority of the Common Stock represented in person or by proxy may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum is determined to be present or represented.
<PAGE> 4
Thomas O. Hicks and Matthew E. Devine, or either of them, each with full
power of substitution, have been designated on the enclosed proxy card as
proxies to vote the shares solicited hereby.
A stockholder who gives a proxy may revoke it at any time before it is
exercised by (i) filing with the Bank of New York in its capacity as transfer
agent for the Company's Common Stock (the "Transfer Agent"), at or before the
Annual Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a subsequent proxy relating to the same shares of
Common Stock and delivering it to the Transfer Agent at or before the Annual
Meeting or (iii) attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute a
revocation of a proxy). Any written notice revoking a proxy should be sent to
the Bank of New York, 101 Barclay Street, New York, New York 10286, Attn: Proxy
Department.
PROPOSAL I
ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") and Bylaws of the Company provide for the election of a maximum
of thirteen directors to constitute the Board. Under the terms of the Company's
Certificate of Incorporation, the Board has been divided into three classes of
directors, each of which is elected to serve a term of three years. The Board of
Directors has fixed the size of the Board at eleven members. Of these members,
three are designated Class I directors, four are designated Class II directors
and four are designated Class III directors. The term of office of the Class I
directors expires at the Company's 1998 annual meeting of stockholders, the term
of office of the Class II directors expires at the Company's 1999 annual meeting
of stockholders and the term of office of the Class III directors expires at the
Company's 2000 annual meeting of stockholders. At each annual meeting of
stockholders commencing with the 1998 annual meeting, directors elected to
succeed those directors whose terms then expire shall be elected for a term of
office to expire at the third annual meeting of stockholders after their
election.
The Board of Directors has nominated for re-election, and it is the
intention of the persons named in the enclosed proxy to vote for the election
of, the three incumbent directors named below, each of whom has consented to
serve as a director for a term expiring at the Company's 2001 annual meeting of
stockholders and until their respective successors are elected and qualified.
The terms of the remaining directors expire as indicated in the following table.
If any of the nominees should not be available for election, shares
represented by proxies in the accompanying form will be voted for such other
person as the management of the Company may select. The Board of Directors has
no reason to believe that any nominee named below will be unavailable for
election.
The information set forth below is submitted with respect to the persons
nominated for re-election to the Board and the remaining members of the Board of
Directors.
NOMINEES TO THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
TERM TO EXPIRE AT
NAME AGE ANNUAL MEETING IN
---- --- -----------------
<S> <C> <C>
Vernon E. Jordan, Jr........................ 62 2001
Perry J. Lewis.............................. 59 2001
Eric C. Neuman.............................. 52 2001
</TABLE>
Vernon E. Jordan, Jr.
Mr. Jordan became a director of the Company and two of the Company's
wholly-owned subsidiaries, Chancellor Mezzanine Holdings Corporation ("CMHC")
and Chancellor Media Corporation of Los Angeles ("CMCLA"), on October 14, 1997.
Mr. Jordan currently serves as a senior partner in the Washington, D.C. office
of the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P. Mr. Jordan serves
as a director of American Express Company, Bankers Trust Company, Bankers Trust
New York Corporation, Dow Jones & Company, Inc.,
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<PAGE> 5
the Ford Foundation, Howard University, J.C. Penney Company, Inc., Revlon Group,
Revlon, Inc., Ryder System, Inc., Sara Lee Corporation, Union Carbide
Corporation, Xerox Corporation, LBJ Foundation, National Academy Foundation and
the Roy Wilkins Foundation.
Perry J. Lewis
Mr. Lewis became a director of the Company, CMHC and CMCLA upon
consummation of the merger of Evergreen Media Corporation ("Evergreen") and
Chancellor Broadcasting Company ("Chancellor") on September 5, 1997 (the
"Chancellor Merger"). Mr. Lewis had previously served as a director of Evergreen
since Evergreen acquired Broadcasting Partners, Inc. ("BPI") in 1995. Mr. Lewis
was the Chairman of BPI from its inception in 1988 until its merger with
Evergreen, and was Chief Executive Officer of BPI from 1993 to 1995. Mr. Lewis
is a founder of Morgan, Lewis, Githens & Ahn, an investment banking and
leveraged buyout firm which was established in 1982. Mr. Lewis serves as
director of Aon Corporation, ITI Technologies, Inc., Gradall Industries, Inc.
and Stuart Entertainment, Inc.
Eric C. Neuman
Mr. Neuman became a director of the Company, CMHC and CMCLA upon
consummation of the Chancellor Merger. Mr. Neuman previously served as a
director of Chancellor and its wholly-owned subsidiary, Chancellor Radio
Broadcasting Company ("CRBC"), since April 1996. Since May 1993, Mr. Neuman has
been an officer of Hicks, Muse. Tate & Furst, Incorporated ("Hicks Muse"), a
private investment firm located in Dallas, St. Louis, New York and Mexico City
specializing in strategic investments, leveraged acquisitions and
recapitalizations, and is currently serving as Senior Vice President. From 1985
to 1993, Mr. Neuman was a Managing General Partner of Communications Partners,
Ltd., a private investment firm specializing in media and communications
businesses. Mr. Neuman serves as a director of Capstar Broadcasting Corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL OF THE
NOMINEES NAMED HEREIN.
INCUMBENT MEMBERS OF THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
TERM TO EXPIRE AT
NAME AGE ANNUAL MEETING IN
---- --- -----------------
<S> <C> <C>
Thomas O. Hicks............................. 52 2000
James E. de Castro.......................... 45 1999
Steven Dinetz............................... 51 1999
Thomas J. Hodson............................ 54 2000
Jeffrey A. Marcus........................... 51 1999
John H. Massey.............................. 57 2000
Lawrence D. Stuart, Jr...................... 52 1999
Vernon E. Jordan, Jr........................ 62 1998*
Perry J. Lewis.............................. 59 1998*
Eric C. Neuman.............................. 52 1998*
</TABLE>
- ---------------
* Director has been nominated for re-election to the Board of Directors at the
Annual Meeting.
In addition to the foregoing, one seat on the Company's Board of Directors,
with a term to expire at the Company's 2000 annual meeting of stockholders, is
currently vacant as a result of the resignation of Scott K. Ginsburg from the
Board of Directors on April 20, 1998. Under the Company's Bylaws, the Board of
Directors has the authority to fill this vacancy. As of the date of this Proxy
Statement, the vacant seat has not yet been filled.
Thomas O. Hicks
Mr. Hicks was elected Chairman of the Board and a director of the Company,
CMHC and CMCLA upon the consummation of the Chancellor Merger. Mr. Hicks has
also served as interim Chief Executive Officer of the Company, CMHC and CMCLA
since April 14, 1998. He had been Chairman of the Board and a director of
3
<PAGE> 6
Chancellor and CRBC prior to the Chancellor Merger, since April 1996. Mr. Hicks
is Chairman of the Board and Chief Executive Officer of Hicks Muse. From 1984 to
May 1989, Mr. Hicks was Co-Chairman of the Board and Co-Chief Executive Officer
of Hicks & Haas, Incorporated, a Dallas based private investment firm. Mr. Hicks
serves as a director of Capstar Broadcasting Corporation, Sybron International
Corporation, Inc., Berg Electronics Corp., Neodata Corporation, D.A.C. Vision
Inc. and Olympus Real Estate Corporation.
James E. de Castro
Mr. de Castro has been Chief Operating Officer of the Company, CMHC and
CMCLA since September 22, 1997. From September 5, 1997 to September 22, 1997,
Mr. de Castro served as Co-Chief Operating Officer of the Company, CMHC and
CMCLA. Mr. de Castro was elected Co-Chief Operating Officer and a director of
the Company, CMHC and CMCLA upon the consummation of the Chancellor Merger. Mr.
de Castro was previously President of Evergreen since 1993 and Chief Operating
Officer and a director of Evergreen since 1989. From 1987 to 1988, Mr. de Castro
held various positions with H&G Communications, Inc. and predecessor entities.
From 1981 to 1989, Mr. de Castro was general manager of radio stations WLUP-FM
and WLUP-AM (now known as WMVP-AM) in Chicago, and from 1989 to 1992 Mr. de
Castro was general manager of radio station KKBT-FM in Los Angeles.
Steven Dinetz
Mr. Dinetz was elected Co-Chief Operating Officer and a director of the
Company, CMHC and CMCLA upon the consummation of the Chancellor Merger. As of
September 22, 1997, Mr. Dinetz no longer serves as Co-Chief Operating Officer of
the Company, CMHC and CMCLA, but continues to serve as a director for each such
entity. Prior to consummation of the Chancellor Merger, Mr. Dinetz served as
President, Chief Executive Officer and a director of Chancellor and CRBC since
their formation and prior thereto was the President and Chief Executive Officer
and a director of Chancellor Communications, a predecessor entity of Chancellor.
Thomas J. Hodson
Mr. Hodson became a director of the Company, CMHC and CMCLA upon
consummation of the Chancellor Merger. Mr. Hodson had previously served as a
director of Evergreen since 1992. Mr. Hodson is President of TJH Capital, Inc.,
a private investment company. He had been the President and a director of
Columbia Falls Aluminum Company from January 1994 to March 1998, and a Vice
President of Stephens, Inc. from 1986 through 1993.
Jeffrey A. Marcus
Mr. Marcus became a director of the Company, CMHC and CMCLA upon
consummation of the Chancellor Merger. Prior to the Chancellor Merger, Mr.
Marcus served as a director of Chancellor and CRBC. Mr. Marcus currently serves
as the Chairman and Chief Executive Officer of Marcus Cable Company, the ninth
largest cable television multiple system operator (MSO) in the United States
which serves over 1.2 million customers and which Mr. Marcus formed in 1990.
Until November 1988, Mr. Marcus served as Chairman and Chief Executive Officer
of WestMarc Communications, Inc., an MSO formed through the merger in 1987 of
Marcus Communications, Inc. and Western TeleCommunications, Inc. Mr. Marcus has
more than 29 years experience in the cable television business. Mr. Marcus is a
co-owner of the Texas Rangers Baseball Club and serves as a director of Brinker
International, Inc. and a director or trustee of several charitable and civic
organizations.
John H. Massey
Mr. Massey became a director of the Company, CMHC and CMCLA upon
consummation of the Chancellor Merger. Prior to the Chancellor Merger, Mr.
Massey served as a director of Chancellor and CRBC. Until August 2, 1996, Mr.
Massey served as the Chairman of the Board and Chief Executive Officer of Life
Partners Group, Inc., an insurance holding company, having assumed those offices
in October 1994. Prior to joining Life Partners, he served, since 1992, as the
Chairman of the Board of, and currently serves as a director of, FSW Holdings,
Inc., a regional investment banking firm. Since 1986, Mr. Massey has served as a
director of Gulf-
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<PAGE> 7
California Broadcast Company, a private holding company that was sold in May
1996. From 1986 to 1992, he also was President of Gulf-California Broadcast
Company. From 1976 to 1986, Mr. Massey was President of Gulf Broadcast Company,
which owned and operated 6 television stations and 11 radio stations in major
markets in the United States. Mr. Massey currently serves as a director of
Central Texas Bankshare Holdings, Inc., Colorado Investment Holdings, Inc., Hill
Bancshares Holdings, Inc., Bank of The Southwest of Dallas, Texas, Columbus
State Bank, Columbine JDS Systems, Inc., The Paragon Group, Inc., the Brazos
Fund Group Inc. and Sunrise Television Group, Inc.
Lawrence D. Stuart, Jr.
Mr. Stuart became a director of the Company, CMHC and CMCLA upon
consummation of the Chancellor Merger. Mr. Stuart previously served as a
director of Chancellor and CRBC since January 1997. Since October 1995, Mr.
Stuart has served as a Managing Director and Principal of Hicks Muse. Prior to
joining Hicks Muse, from 1990 to 1995 he served as the managing partner of the
Dallas office of the law firm Weil, Gotshal & Manges LLP. Mr. Stuart serves as a
director of Capstar Broadcasting Corporation.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors currently consists of ten directors, eight of whom
are not officers or employees of the Company. The Board of Directors met 12
times in 1997. Each of the incumbent directors who was then in office attended
at least 75% of the total number of meetings of the Board of Directors and the
total number of meetings held by all committees of the board on which such
director served in 1997.
The Board of Directors of the Company has standing a Compensation
Committee, an Audit Committee, an Executive Committee and a Nominating
Committee. Additionally, from time to time, the Board of Directors establishes
special committees for specific purposes, such as reviewing specific
transactions and pricing securities for sale in public or private issuances.
The Compensation Committee currently consists of five directors, Messrs.
Hicks (Chairman), Massey, Jordan, Marcus and Lewis. The Compensation Committee
is charged with reviewing certain of the Company's compensation programs, making
recommendations to the Board of Directors with respect to compensation, and
administering the Company's stock option plans. The Compensation Committee met
four times in 1997.
The Audit Committee currently consists of four directors, Messrs. Hodson
(Chairman), Massey, Stuart and Neuman, and is charged with reviewing the
Company's internal auditing procedures and accounting controls, and considering
the selection and independence of the Company's outside auditors. The Audit
Committee met one time in 1997.
The Executive Committee currently consists of four directors, Messrs.
Marcus (Chairman), Hicks, de Castro and Dinetz, and is charged with oversight of
the Company's day-to-day operations, approval of certain transactions,
establishment of record dates and declaration of dividends on the Company's
securities, pricing of and setting terms for the sale of certain securities of
the Company, and making appropriate recommendations to the Board of Directors.
The Executive Committee did not meet formally in 1997.
The Nominating Committee currently consists of four directors, Messrs.
Hicks (Chairman), Jordan, Marcus and Massey, and is charged with making
recommendations to the Board of Directors with respect to the nomination of
directors. The Nominating Committee did not meet in 1997.
COMPENSATION OF DIRECTORS
Directors who are also officers of the Company, CMHC and CMCLA receive no
additional compensation for their services as directors. Effective following the
Chancellor Merger, directors of the Company, CMHC and CMCLA who are not officers
will receive (i) a fee of $36,000 per annum, (ii) a $1,000 fee for attendance at
meetings or, if applicable, a $500 fee for attendance at meetings by telephone
and (iii) a $2,000 fee for service as chairman of a board committee, a $1,000
fee for attendance at committee meetings or, if applicable, a $500 fee for
attendance at committee meetings by telephone. Directors of the Company, CMHC
and CMCLA are also reimbursed for travel expenses and other out-of-pocket costs
incurred in connection with such meetings.
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<PAGE> 8
Additionally, under the terms of the Company's Non-Employee Director Stock
Option Plan as currently in effect, all non-employee directors of the Company,
CMHC and CMCLA in office on the date of the Company's annual stockholders
meeting are entitled to an award of options to purchase 15,000 shares of Common
Stock at an exercise price equal to the fair market value of such shares on the
date of grant.
COMPENSATION OF EXECUTIVE OFFICERS
All share and per share data regarding compensation of executive officers
contained in this Proxy Statement give effect to the Company's two-for-one
common stock split effected in the form of a stock dividend paid on January 12,
1998, and to the Company's three-for-two common stock split effected in the form
of a stock dividend paid on August 26, 1996.
Summary Compensation. The following table sets forth all compensation,
including bonuses, stock option awards and other payments, paid or accrued by
the Company for the three fiscal years ended December 31, 1997, to the Company's
Chief Executive Officer and each of the Company's other executive officers
serving in such capacity at the end of the last completed fiscal year whose
total annual salary and bonus exceeded $100,000 during the fiscal year ended
December 31, 1997.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------- ------------------------------------------------
AWARDS PAYOUTS
----------------------- -------
SECURITIES
RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND OTHER ANNUAL STOCK OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION(2) AWARDS (#) ($) (3)($)
------------------- ---- -------- ---------- --------------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott K. Ginsburg 1997 $850,000 $3,615,000 -- -- 500,000 -- $9,101
Former President and 1996 750,000 956,000 -- -- 375,000 -- 9,776
Chief Executive Officer 1995 650,000 -- -- -- -- -- 7,663
James E. de Castro 1997 $825,000 $2,581,000 -- -- 425,000 -- $2,630
Chief Operating 1996 750,000 704,000 -- -- 75,000 -- 2,455
Officer 1995 650,000 125,000 -- -- 300,000 -- 2,455
Matthew E. Devine 1997 $375,000 $1,205,000 -- -- 262,500 -- --
Senior Vice President, 1996 300,000 352,000 -- -- 37,500 -- --
Chief Financial Officer
and 1995 275,000 63,000 -- -- 150,000 -- --
Secretary
Kenneth J. O'Keefe 1997 $320,000 $1,205,000 -- -- -- -- --
Executive Vice President 1996 210,000(4) 210,000 -- -- 300,000 -- --
-- Operations 1995 -- -- -- -- -- -- --
</TABLE>
- ---------------
(1) No information is set forth herein regarding Steven Dinetz, who served as
the Company's Co-Chief Operating Officer from September 5, 1997 through
September 22, 1997, as amounts paid by the Company to Mr. Dinetz during 1997
for total annual salary and bonus did not exceed $100,000. On September 22,
1997, as part of the Chancellor Merger, Mr. Dinetz resigned from his
position as Co-Chief Operating Officer of the Company, but retained his
position as a director of the Company. Upon Mr. Dinetz' resignation, the
Company accelerated the exercisability of all of Mr. Dinetz' stock options
previously granted by Chancellor Broadcasting Company. In February 1998, the
Company made certain additional cash payments to Mr. Dinetz. Both the
acceleration of the exercisability of the stock options and the cash payment
were part of Mr. Dinetz' severance package which he elected to receive after
a change in job responsibilities directly related to the Chancellor Merger.
(2) The aggregate annual amount of perquisites and other personal benefits,
securities or property does not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus for the named officer.
(3) Represents payments of term life insurance policies.
(4) Represents compensation for the period beginning March 1, 1996, when Mr.
O'Keefe joined the Company.
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<PAGE> 9
Option Grants in Last Fiscal Year. The following table sets forth
information regarding options to purchase Common Stock granted by the Company to
its Chief Executive Officer and the other executive officers named in the
Summary Compensation Table during the 1997 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF
SECURITIES TOTAL STOCK
UNDERLYING OPTIONS GRANTED EXERCISE OR GRANT DATE
OPTIONS GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR ($/SHARE)(2) DATE ($)(3)
- ---- --------------- --------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Scott K. Ginsburg........ 500,000 8.0% $23.25 9/5/07 $6,155,000
James E. de Castro....... 425,000 6.8% 23.25 9/5/07 5,231,750
Matthew E. Devine........ 262,500 4.2% 23.25 9/5/07 3,231,375
Kenneth J. O'Keefe....... -- -- -- -- --
</TABLE>
- ---------------
(1) Represents options to purchase shares of Common Stock granted under the
Company's 1995 Stock Option Plan for Executive Officers and Key Employees
(the "1995 Stock Option Plan"), as adjusted for the two-for-one stock split
of the Company's Common Stock, effected in the form of a stock dividend,
paid on January 12, 1998. The options awarded to Mr. Ginsburg, Mr. de Castro
and Mr. Devine during the last fiscal year are exercisable in whole or in
part beginning on September 5, 1997, and expire on September 5, 2007. The
options may expire earlier upon the occurrence of certain merger or
consolidation transactions involving the Company. The Company is not
required to issue and deliver any certificate for shares of Common Stock
purchased upon exercise of the option or any portion thereof prior to
fulfillment of certain conditions, including the completion of registration
or qualification of such shares of Common Stock under federal or state
securities laws and the payment to the Company of all amounts required to be
withheld upon exercise of the options under any federal, state or local tax
law. The holder of an option has no rights or privileges of a stockholder in
respect of any shares of Common Stock purchasable upon exercise of the
options unless and until certificates representing such shares shall have
been issued by the Company to such holder. Once exercisable, the options are
exercisable by the holder or, upon the death of such holder, by his personal
representatives or by any person empowered to do so under such holder's will
or under the applicable laws of descent and distribution. The options are
not transferable except by will or by the applicable laws of descent and
distribution.
(2) Represents the estimated fair value of shares of Common Stock on September
5, 1997, the date of grant, as adjusted for the two-for-one stock split of
the Company's Common Stock, effected in the form of a stock dividend, paid
on January 12, 1998.
(3) The present value of each grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: dividend yield of 0% for all years; expected volatility of
41.88%; risk-free interest rate of 5.38%; and expected life of seven years.
Aggregated Option Exercises and Year-End Value. The following table sets
forth information concerning option exercises in the year ended December 31,
1997 by the Company's Chief Executive Officer and the other executive officers
named in the Summary Compensation Table, and the value of each such executive
officer's unexercised options at December 31, 1997.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED STOCK STOCK OPTIONS AT
OPTIONS AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
SHARES ACQUIRED VALUE ------------------------------ ----------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott K. Ginsburg........ -- -- 500,000 375,000 7,034,000 9,873,000
James E. de Castro....... 300,000 6,979,000 1,220,000 375,000 34,830,250 9,873,000
Matthew E. Devine........ -- -- 562,500 187,500 14,082,000 4,936,500
Kenneth J. O'Keefe....... -- -- -- 300,000 -- 7,992,000
</TABLE>
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<PAGE> 10
- ---------------
(1) Based upon a per share price for Common Stock of $37.31. This price
represents the closing price for the Common Stock on the Nasdaq National
Market System on December 31, 1997, as adjusted for the two-for-one stock
split of the Company's Common Stock, effected in the form of a stock
dividend, paid on January 12, 1998.
EMPLOYMENT AGREEMENTS
Ginsburg Employment Agreement
Prior to April 14, 1998, Scott K. Ginsburg served as the President and
Chief Executive Officer of the Company, CMHC and CMCLA. On September 4, 1997,
the Company entered into a new employment agreement (the "Ginsburg Employment
Agreement") with Mr. Ginsburg, to be effective on the closing date of the
Chancellor Merger. The Ginsburg Employment Agreement, which had a term that
extends through September 5, 2002, provided for an initial annual base salary of
$1,000,000 for the first year of the employment agreement, to be increased each
year by a percentage equal to the percentage change in the consumer price index
during the preceding year. In addition, the Ginsburg Employment Agreement
provided for an annual bonus based upon the financial performance of the Company
in relation to certain annual performance targets which are defined in the
Ginsburg Employment Agreement. The Ginsburg Employment Agreement provided that,
on the closing date of the Chancellor Merger and on each of the first four
anniversaries thereof on which Mr. Ginsburg remained employed by the Company,
Mr. Ginsburg would be granted options to purchase 200,000 shares of Common
Stock. If Mr. Ginsburg's employment was terminated without "cause" (as defined
in the Ginsburg Employment Agreement) or if Mr. Ginsburg terminated his
employment for "good reason" (as defined in the Ginsburg Employment Agreement)
prior to the fifth annual anniversary of the consummation of the Chancellor
Merger, Mr. Ginsburg would receive on such termination date a number of options
equal to 1,000,000 minus the number of options previously granted to Mr.
Ginsburg pursuant to the preceding sentence prior to such date. In addition, in
recognition of Mr. Ginsburg's rights under his prior employment agreement, the
Company granted Mr. Ginsburg an option to acquire an additional 300,000 shares
of Common Stock on the closing date of the Chancellor Merger. The Ginsburg
Employment Agreement provided that all options granted pursuant to the Ginsburg
Employment Agreement would be exercisable for ten years from the date of grant
of the option (notwithstanding any termination of employment), at a price per
share equal to the market price for Common Stock at the close of trading on the
day immediately preceding the date of the grant. The Ginsburg Employment
Agreement provided that, in the event of termination of Mr. Ginsburg's
employment by the Company without "cause" or by Mr. Ginsburg with "good reason,"
the Company would make a one-time cash payment to Mr. Ginsburg in a gross amount
such that the net payments retained by Mr. Ginsburg shall equal $20,000,000 less
applicable employee withholding taxes. The Ginsburg Employment Agreement further
provided that, in the event of termination of Mr. Ginsburg's employment by
reason of expiration or non-renewal of the Ginsburg Employment Agreement, the
Company would make a one-time cash payment to Mr. Ginsburg equal to two times
the amount of his annual base salary for the contract year in which his
employment terminates. The Ginsburg Employment Agreement provided that Mr.
Ginsburg would have registration rights with respect to all Common Stock
acquired by Mr. Ginsburg at any time which rights were no less favorable to Mr.
Ginsburg as the registration rights held by Hicks Muse and its affiliates with
respect to the common stock of Chancellor immediately prior to the consummation
of the Chancellor Merger. Under the Ginsburg Employment Agreement, the Company
also agreed to make to Mr. Ginsburg a ten-year unsecured loan in the amount of
$3,500,000 bearing interest at a fixed rate equal to the applicable Federal
long-term rate in effect on the date on which the loan is made. The terms of the
loan require Mr. Ginsburg to repay principal of the loan in five equal annual
installments, commencing on the sixth anniversary of the date on which the loan
is made. As of April 15, 1998, Mr. Ginsburg has borrowed $3,500,000 under the
loan.
On April 14, 1998, Mr. Ginsburg resigned as President and Chief Executive
Officer of the Company, CMHC and CMCLA, and on April 20, 1998, Mr. Ginsburg
resigned as a director of the Company, CMHC and CMCLA and from all appointments
and positions with their respective subsidiaries. On April 20, 1998 (the
"Agreement Date"), the Company entered into a separation and consulting
agreement (the "Ginsburg Separation and Consulting Agreement") with Mr.
Ginsburg. The Ginsburg Separation and Consulting Agreement provides for (a) a
lump sum severance payment of $20,000,000 less applicable employee withholding
taxes, which is the
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<PAGE> 11
same amount Mr. Ginsburg would have been entitled to under the Ginsburg
Employment Agreement based upon a termination of his employment by him for "good
reason" or by the Company "without cause," and (b) a grant to Mr. Ginsburg of
stock options to acquire 800,000 shares of Common Stock of the Company, subject
to the approval of the Company's stockholders (at the Annual Meeting) of the
1998 Chancellor Media Corporation Stock Option Plan, which is the same number of
stock options to which Mr. Ginsburg would have been entitled based upon a
termination of his employment by him for "good reason" or by the Company
"without cause," except that the Ginsburg Separation and Consulting Agreement
provides that the exercise price for such stock options is $23.25 per share and
shall become exercisable as follows: (i) options for 266,666 shares shall be
exercisable beginning on the Agreement Date for a period of seven years
thereafter, (ii) options for 266,667 shares shall be exercisable beginning one
year from the Agreement Date for a period of six years thereafter, and (iii)
options for 266,667 shares shall be exercisable beginning two years from the
Agreement Date for a period of five years thereafter. Should the stockholders of
the Company fail to approve the 1998 Chancellor Media Corporation Stock Option
Plan, the Ginsburg Separation and Consulting Agreement provides that Mr.
Ginsburg shall receive equivalent rights through stock appreciation rights.
Previously granted stock options were unaffected by the Ginsburg Separation and
Consulting Agreement. The Ginsburg Separation and Consulting Agreement also
provides that the Company, CMHC and CMCLA shall retain Mr. Ginsburg as a
consultant through April 13, 2003, Mr. Ginsburg to be compensated for such
consulting services in an amount equal to $2,500,000 for each full year of
consulting services. The Ginsburg Separation and Consulting Agreement further
provides for three-year non-solicitation and non-hire covenants from Mr.
Ginsburg, as well as other mutual releases and other provisions typically found
in an employment termination agreement, but does not provide for a
noncompetition agreement from Mr. Ginsburg.
de Castro Employment Agreement
On September 4, 1997, Evergreen and the Company entered into a new
employment agreement (the "de Castro Employment Agreement") with Mr. de Castro,
Chief Operating Officer of the Company, CMHC and CMCLA, to be effective on the
closing date of the Chancellor Merger. The de Castro Employment Agreement, which
has a term that extends through September 5, 2002, provides for an initial
annual base salary of $900,000 for the first year of the employment agreement,
to be increased each year by a percentage equal to the percentage change in the
consumer price index during the preceding year. In addition, the de Castro
Employment Agreement provides for an annual bonus based upon a percentage of the
amount by which the Company exceeds an annual performance target which is
defined in the de Castro Employment Agreement. The de Castro Employment
Agreement provides that, on the closing date of the Chancellor Merger and on
each of the first four anniversaries thereof on which Mr. de Castro remains
employed by the Company, Mr. de Castro shall be granted options to purchase
200,000 shares of Common Stock. If Mr. de Castro's employment is terminated
without "cause" (as defined in the de Castro Employment Agreement) or if Mr. de
Castro terminates his employment for "good reason" (as defined in the de Castro
Employment Agreement) prior to the fifth annual anniversary of the consummation
of the Chancellor Merger, Mr. de Castro will receive on such termination date a
number of options equal to 1,000,000 minus the number of options previously
granted to Mr. de Castro pursuant to the preceding sentence prior to such date.
In addition, in recognition of Mr. de Castro's rights under his prior employment
agreement, the Company granted Mr. de Castro an option to acquire an additional
225,000 shares of Common Stock on the closing date of the Chancellor Merger. The
de Castro Employment Agreement provides that all options granted pursuant to the
de Castro Employment Agreement will be exercisable for ten years from the date
of grant of the option (notwithstanding any termination of employment), at a
price per share equal to the market price for Common Stock at the close of
trading on the day immediately preceding the date of the grant. The de Castro
Employment Agreement provides that, in the event of termination of Mr. de
Castro's employment by the Company without "cause" or by Mr. de Castro with
"good reason," the Company shall make a one-time cash payment to Mr. de Castro
in a gross amount such that the net payments retained by Mr. de Castro shall
equal $5,000,000 less applicable employee withholding taxes. The de Castro
Employment Agreement further provides that, in the event of termination of Mr.
de Castro's employment by Mr. de Castro for other than "good reason," in
exchange for Mr. de Castro's agreement not to induce any employee of any radio
station owned by the Company to terminate such employment or to become employed
by any other radio station, the Company shall continue to pay Mr. de Castro his
applicable base salary through the fifth anniversary of the closing date of the
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<PAGE> 12
Chancellor Merger. In such event, the Company also has the right, in exchange
for the payment at the end of each calendar year through December 31, 2002, of
an annual amount equal to the product of Mr. de Castro's average bonus
multiplied by the fraction of each such calendar year which precedes the fifth
anniversary of the consummation of the Chancellor Merger, to require that Mr. de
Castro not be employed by or perform activities on behalf of or have ownership
interest in any radio broadcasting station serving the same market as any radio
station owned by the Company. The de Castro Employment Agreement further
provides that if Mr. de Castro's employment is terminated by reason of
expiration or non-renewal of the de Castro Employment Agreement, the Company
shall make a one- time cash payment to Mr. de Castro equal to two times the
amount of his annual base salary for the contract year in which such employment
terminates.
Following Mr. Ginsburg's resignation, on April 19, 1998, the Board of
Directors of the Company, CMHC and CMCLA approved the principal terms of a new
employment agreement to be entered with Mr. de Castro (the "New de Castro
Employment Agreement"), under which Mr. de Castro would remain in his position
as Chief Operating Officer of the Company, CMHC and CMCLA. It is expected that
the terms of the New de Castro Employment Agreement will be identical to the
terms of the de Castro Employment Agreement, except in the following respects:
(i) the New de Castro Employment Agreement will have a term that extends through
April 17, 2003, (ii) the New de Castro Employment Agreement will provide for a
$1,000,000 signing bonus less applicable employee withholding taxes, (iii) the
Company shall make a one-time cash payment of $5,000,000 less applicable
employee withholding taxes and the Company shall grant to Mr. de Castro stock
options to purchase 800,000 shares of Common Stock of the Company at an exercise
price per share equal to the closing price for the Common Stock of the Company
on the Nasdaq Stock Market on April 16, 1998 (subject to stockholder approval of
the 1998 Chancellor Media Corporation Stock Option Plan at the Annual Meeting),
(iv) certain portions of the formula used to calculate Mr. de Castro's annual
bonus would be adjusted based upon mutual agreement, (v) the Company will grant
to Mr. de Castro 80% of the number of stock options that the Company grants
annually to its new Chief Executive Officer (without taking into account any
initial lump-sum of stock options granted to such Chief Executive Officer), on
the same terms and conditions as set forth in the grant to such new Chief
Executive Officer and (vi) certain provisions related to termination benefits
and other language adjustments would be made upon mutual agreement. Definitive
documentation regarding the New de Castro Employment Agreement is currently in
progress.
Devine Employment Agreement
On September 4, 1997, Evergreen and the Company entered into a new
employment agreement (the "Devine Employment Agreement") with Mr. Devine, Senior
Vice President and Chief Financial Officer of the Company, CMHC and CMCLA, to be
effective on the closing date of the Chancellor Merger. The Devine Employment
Agreement, which has a term that extends through September 5, 2002, provides for
an initial annual base salary of $500,000 for the first year of the employment
agreement, to be increased each year by $25,000. In addition, the Devine
Employment Agreement provides for an annual bonus based upon a percentage of the
amount by which the Company exceeds an annual performance target which is
defined in the Devine Employment Agreement. The Devine Employment Agreement
provides that, on the closing date of the Chancellor Merger and on each of the
first four anniversaries thereof on which Mr. Devine remains employed by the
Company, Mr. Devine shall be granted options to purchase 150,000 shares of
Common Stock. If Mr. Devine's employment is terminated without "cause" (as
defined in the Devine Employment Agreement) or if Mr. Devine terminates his
employment for "good reason" (as defined in the Devine Employment Agreement)
prior to the fifth annual anniversary of the consummation of the Chancellor
Merger, Mr. Devine will receive on such termination date a number of options
equal to 750,000 minus the number of options previously granted to Mr. Devine
pursuant to the preceding sentence prior to such date. In addition, in
recognition of Mr. Devine's rights under his prior employment agreement, the
Company granted Mr. Devine an option to acquire an additional 112,500 shares of
Common Stock on the closing date of the Chancellor Merger. The Devine Employment
Agreement provides that all options granted pursuant to the Devine Employment
Agreement will be exercisable for ten years from the date of grant of the option
(notwithstanding any termination of employment), at a price per share equal to
the market price for Common Stock at the close of trading on the day immediately
preceding the date of the grant. The Devine Employment Agreement provides that,
in the event of termination of Mr. Devine's employment by the Company without
"cause" or by Mr. Devine with "good reason," the Company shall make a one-time
cash payment to
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<PAGE> 13
Mr. Devine in a gross amount such that the net payments retained by Mr. Devine
shall equal $2,000,000 less applicable employee withholding taxes. The Devine
Employment Agreement further provides that, in the event of termination of Mr.
Devine's employment by Mr. Devine for other than "good reason," in exchange for
Mr. Devine's agreement not to induce any employee of any radio station owned by
the Company to terminate such employment or to become employed by any other
radio station, the Company shall continue to pay Mr. Devine his applicable base
salary through the earlier of the fifth anniversary of the closing date of the
Chancellor Merger or the second anniversary of the termination of employment
(the "Cessation Date"). In such event, the Company also has the right, in
exchange for the payment at the end of each calendar year through the year which
includes the Cessation Date of an annual amount equal to the product of Mr.
Devine's average bonus multiplied by the fraction of each such calendar year
which precedes the Cessation Date, to require that Mr. Devine not be employed by
or perform activities on behalf of or have an ownership interest in any radio
broadcasting station serving the same market as any radio station owned by the
Company. The Devine Employment Agreement further provides that if Mr. Devine's
employment is terminated by reason of expiration or non-renewal of the Devine
Employment Agreement, the Company shall make a one-time cash payment to Mr.
Devine equal to two times the amount of his annual base salary for the contract
year in which such employment terminates.
Following Mr. Ginsburg's resignation, on April 19, 1998, the Board of
Directors of the Company, CMHC and CMCLA approved the principal terms of a new
employment agreement to be entered with Mr. Devine (the "New Devine Employment
Agreement"), under which Mr. Devine would remain in his position as Chief
Financial Officer of the Company, CMHC and CMCLA or any new multi-media company
formed with Chancellor Media. It is expected that the terms of the New Devine
Employment Agreement will be identical to the terms of the Devine Employment
Agreement, except in the following respects: (i) the New Devine Employment
Agreement will have a term that extends through April 17, 2003, (ii) the New
Devine Employment Agreement will provide for a $1,000,000 signing bonus less
applicable employee withholding taxes, (iii) the Company shall make a one-time
cash payment to Mr. Devine of $2,000,000 less applicable employee withholding
taxes and the Company shall grant to Mr. Devine stock options to purchase
600,000 shares of Common Stock of the Company at an exercise price per share
equal to the closing price for the Common Stock of the Company on the Nasdaq
Stock Market on April 16, 1998 (subject to stockholder approval of the 1998
Chancellor Media Corporation Stock Option Plan at the Annual Meeting), (iv) Mr.
Devine's maximum annual bonus would be increased and certain portions of the
formula used to calculate Mr. Devine's annual bonus would be adjusted based upon
mutual agreement, (v) certain provisions related to termination by Mr. Devine
for other than "good reason" would be modified to make them comparable to
certain provisions related to termination by Mr. de Castro for other than "good
reason" contained in the de Castro Employment Agreement, (vi) the Company will
grant to Mr. Devine 60% of the number of stock options that the Company grants
annually to its new Chief Executive Officer (without taking into account any
initial lump-sum of stock options granted to such Chief Executive Officer), on
the same terms and conditions as set forth in the grant to such new Chief
Executive Officer and (vii) certain provisions related to termination benefits
and other language adjustments would be made upon mutual agreement. Definitive
documentation regarding the New Devine Employment Agreement is currently in
progress.
O'Keefe Employment Agreement
In February of 1996, the Company entered into an employment agreement (the
"O'Keefe Employment Agreement") with Mr. O'Keefe that has a term through
February 28, 1999 and provides for an annual base salary beginning at $300,000
in 1996 and increasing incrementally to $350,000 in 1998. The O'Keefe Employment
Agreement provides for Mr. O'Keefe to receive an annual incentive bonus based
upon a percentage of the amount by which the Company exceeds certain annual
performance targets as defined in the agreement. The agreement also provides
that Mr. O'Keefe is eligible for certain options to purchase Common Stock.
Pursuant to the agreement, Mr. O'Keefe was awarded options to purchase 300,000
shares of Common Stock. The stock options vest and become exercisable subject to
Mr. O'Keefe's continued employment by the Company through February 28, 1999.
However, Mr. O'Keefe may be eligible to exercise the options on a pro rata basis
in the event he is terminated prior to February 28, 1999 upon certain events
specified in his employment agreement, including Mr. O'Keefe's death or
disability, a change in control of the Company, termination without cause and a
material
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<PAGE> 14
breach of the employment agreement by the Company leading to the resignation of
Mr. O'Keefe. The agreement terminates upon the death of Mr. O'Keefe and may be
terminated by the Company upon the disability of Mr. O'Keefe or for or without
"cause" (as defined in the O'Keefe Employment Agreement). During the term of the
agreement, Mr. O'Keefe is prohibited from engaging in certain activities
competitive with the business of the Company. However, with the approval of the
Company, Mr. O'Keefe may engage in activities not directly competitive with the
business of the Company as long as such activities do not materially interfere
with Mr. O'Keefe's employment obligations. On March 1, 1997, Evergreen and Mr.
O'Keefe amended the O'Keefe Employment Agreement in order to make certain
provisions of the O'Keefe Employment Agreement comparable to those contained in
Mr. de Castro's and Mr. Devine's former employment agreements.
On September 4, 1997, the Company amended its employment agreement (the
"O'Keefe Amendment") with Mr. O'Keefe. As a result of the O'Keefe Amendment, the
O'Keefe Employment Agreement is to expire as of December 31, 1997, and the
O'Keefe Amendment is effective on January 1, 1998. The O'Keefe Amendment, which
has a term through December 31, 2000, provides for an initial annual base salary
of $500,000 for the first year of the employment agreement, to be increased each
year by $25,000. In addition, the O'Keefe Amendment provides for an annual bonus
based upon the financial performance of the Company in relation to certain
annual performance targets which are defined in the O'Keefe Amendment. The
O'Keefe Amendment provides that, on January 1, 1998 and 1999, assuming that Mr.
O'Keefe remains employed by the Company on such dates, Mr. O'Keefe shall be
granted options to purchase 100,000 shares of Common Stock. Furthermore, with
respect to the option to purchase 300,000 shares of Common Stock granted under
the O'Keefe Employment Agreement, (i) all such options will become exercisable
on February 28, 1999 if Mr. O'Keefe remains employed by the Company on such
date, (ii) if Mr. O'Keefe's employment is terminated as a result of Mr.
O'Keefe's death or disability or resignation by Mr. O'Keefe following a material
breach of the O'Keefe Amendment by the Company, a prorated portion of such
options will become exercisable and (iii) if Mr. O'Keefe's employment is
terminated without "cause" (as defined in the O'Keefe Amendment) or there is a
"change of control" (as defined in the O'Keefe Amendment), all such options
shall become exercisable. The O'Keefe Amendment provides that all options
described in the O'Keefe Amendment will be exercisable for seven years from the
date of grant of the option, and that all options granted pursuant to the
O'Keefe Amendment will be granted at a price per share equal to the market price
for Common Stock on the date of the grant. The O'Keefe Amendment provides that,
in the event of termination of Mr. O'Keefe's employment by the Company without
"cause," the Company shall pay Mr. O'Keefe his base salary and a prorated annual
bonus and provide health and life insurance coverage until the earlier of the
expiration of the term of the O'Keefe Amendment or the date on which Mr. O'Keefe
becomes employed in a position providing similar compensation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of the
Company's Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of any equity
securities of the Company. To the Company's knowledge, for the period from
January 1, 1997 through March 1, 1998, all Section 16(a) filing requirements
applicable to its executive officers, directors and holders of more than 10% of
the Company's Common Stock were satisfied, except that (i) Putnam Investments,
Inc. has not filed a Form 3 in connection with its ownership of the Company's
Common Stock, (ii) directors Jeffrey A. Marcus and John H. Massey each filed a
late Form 5 for the year ended December 31, 1997 in connection with the grant of
stock options under the Company's Non-Employee Director Stock Option Plan in
September 1997 and (iii) director Steven Dinetz has not filed a Form 4 in
connection with certain stock option exercises effected by Mr. Dinetz in
November and December 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The members of the compensation committee of the Company are Messrs. Hicks,
Massey, Jordan, Marcus and Lewis. Mr. Hicks serves as chairman of the
compensation committee, and also serves as the Chairman of the Board of the
Company, CMHC and CMCLA. Messrs. Massey and Marcus previously served on the
compensation committee of Chancellor, and Mr. Lewis previously served on the
compensation committee of Evergreen.
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<PAGE> 15
THE FOLLOWING COMPENSATION COMMITTEE REPORT AND THE PERFORMANCE GRAPH THAT
APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE SOLICITING
MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY
REFERENCE IN ANY DOCUMENT SO FILED.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee is responsible for reviewing the compensation
paid to the Company's executive officers and making recommendations to the
Company's Board of Directors with respect to such compensation. The Board of
Directors approves all compensation paid to executive officers, with the
exception of grants of stock options which are made by the Compensation
Committee discharging the functions of the Stock Option Committee as provided in
the Company's 1993 Stock Option Plan for Executive Officers and Key Employees
and the 1995 Stock Option Plan for Executive Officers and Key Employees.
OVERALL COMPENSATION OBJECTIVES
The Company is one of the largest owners and operators of radio stations in
the United States. The Company's overall strategy is to acquire and operate
radio stations in the nation's largest radio markets. In furtherance of this
strategy, the Company's compensation strategies are designed to attract and to
retain the best possible executive talent. Compensation packages to executive
officers include a base salary that recognizes individual performance and cash
and equity-based incentives designed to align the financial interests of
executives with those of the stockholders. In the past year, in connection with
the Chancellor Merger, the Company entered into new long-term employment
agreements with Messrs. Ginsburg, de Castro and Devine, and entered into an
amendment to the employment agreement with Mr. O'Keefe. Each agreement provides
for a base salary, annual cash incentive bonus and the award of options to
purchase Common Stock. In entering these employment agreements, the Compensation
Committee and the Board of Directors considered such factors as each executive's
role in identifying and completing the acquisition of strategic broadcast
properties, including the Chancellor Merger and the acquisition of radio
stations from Viacom International, Inc., the Company's strong operating
performance, and the increase in shareholder value to the Company's shareholders
during 1997. Each of these employment agreements was recommended by the
Company's Compensation Committee and approved by the Board of Directors, in each
case, as constituted prior to the Chancellor Merger.
PRINCIPAL COMPONENTS OF EXECUTIVE COMPENSATION
The principal elements of compensation to the Company's executive officers
include a base salary and annual cash bonuses and, at appropriate intervals,
grants of stock options. The Company also provides to its executive officers
medical, pension and other fringe benefits generally available to the Company
employees. Base salary for the Company's executive officers under their
respective agreements was determined by evaluating the responsibilities of the
position held by, and the personal experience level of, the specific individual.
In determining levels of base salary, the Compensation Committee also decided to
set an appropriate level of base compensation to motivate and retain the
Company's executive officers in light of the Company's relative position to its
competition in the radio broadcast industry and the performance standards
established for such individuals. Under the terms of their employment agreements
in effect for 1997, the Company's executive officers were each eligible for, and
received, an annual cash incentive bonus based on the Company's performance
during the year as measured by broadcast cash flow targets being met or
exceeded. Additionally, each of the Company's executive officers are eligible
for annual awards of stock options pursuant to the terms of their employment
agreements. The objective in setting the terms of stock option awards was to
incentivize the continued employment of those executive officers deemed
essential to the Company and its long-term objectives.
Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal
Revenue Code limits deductions for certain executive compensation in excess of
$1 million. Certain types of compensation in excess of $1 million are deductible
only if performance goals are specified in detail by a compensation committee
comprised solely of two or more outside directors, payments are approved by a
majority vote of the stockholders prior to payment of such compensation and
after the material terms of the compensation are disclosed to the
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<PAGE> 16
stockholders, and the compensation committee certifies that the performance
goals were in fact satisfied. During 1997, the Compensation Committee considered
the compensation arrangements of the Company's executive officers in light of
the requirements of Section 162(m).
While the Compensation Committee will continue to give due consideration to
the deductibility of compensation payments on future compensation arrangements
with the Company's executive officers, the Compensation Committee will make its
compensation decision based upon an overall determination of what it believes to
be in the best interests of the Company and its stockholders, and deductibility
will be only one among a number of factors used by the Compensation Committee in
making its compensation decisions. Accordingly, the Company may enter into
compensation arrangements in the future under which payments are not deductible
under Section 162(m).
COMPENSATION COMMITTEE MEMBERS
Thomas O. Hicks
John H. Massey
Vernon E. Jordan, Jr.
Jeffrey A. Marcus
Perry J. Lewis
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PERFORMANCE GRAPH
The following graph shows a comparison, since the Company's initial public
offering on May 10, 1993, of the cumulative total stockholder return on (i) the
Company's Common Stock, (ii) an index including all securities listed on The
Nasdaq Stock Market and (iii) a self-determined peer group of companies,
measuring the changes in common stock prices from May 11, 1993 through December
31, 1997. The graph assumes an investment of $100 on May 11, 1993 and, as
required by the Securities and Exchange Commission (the "Commission"), all
values shown assume the reinvestment of all dividends, if any, and, in the case
of the peer group, are weighed to reflect the market capitalization of the
component companies. The peer group consists of CBS Corporation, Clear Channel
Communications, Inc., Emmis Broadcasting Corporation, Heftel Broadcasting
Corporation, Jacor Communications, Inc., Lamar Advertising Company and Saga
Communications, Inc.
<TABLE>
<CAPTION>
CHANCELLOR Nasdaq Stock Self-
Measurement Period MEDIA Market (US & Determined
(Fiscal Year Covered) CORPORATION Foreign) Peer Group
<S> <C> <C> <C>
05/11/93 100.0 100.0 100.0
12/31/93 102.2 114.2 97.4
12/30/94 100.7 110.7 91.0
12/29/95 184.2 155.5 130.3
12/31/96 215.8 190.5 170.4
12/31/97 644.2 233.0 289.1
</TABLE>
15
<PAGE> 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table lists information concerning the beneficial ownership
of the Company's Common Stock on March 1, 1998 by (i) each director and
executive officer of the Company on March 1, 1998, (ii) all directors and
executive officers as a group and (iii) each person known to the Company to own
beneficially more than 5% of the Common Stock.
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER SHARES PERCENT(1)
------------------- ------ ----------
<S> <C> <C>
Scott K. Ginsburg........................................... 4,718,132(2) 3.9%
James E. de Castro.......................................... 1,170,000(3) *
Matthew E. Devine........................................... 562,500(4) *
Kenneth J. O'Keefe.......................................... 104,000(5) *
Thomas O. Hicks............................................. 16,444,371(6) 13.7%
Perry J. Lewis.............................................. 118,548(7) *
Thomas J. Hodson............................................ 15,000(8) *
Eric C. Neuman.............................................. 6,356 *
Lawrence D. Stuart, Jr...................................... 9,910 *
Jeffrey A. Marcus........................................... 87,878(9) *
John H. Massey.............................................. 41,024(10) *
Steven Dinetz............................................... 1,681,226(11) 1.4%
Vernon E. Jordan, Jr........................................ -- *
All directors and executive officers as a group............. 24,958,945(12) 20.8%
Hicks Muse and affiliates................................... 16,444,371(13) 13.7%
Putnam Investments, Inc..................................... 15,703,966(14) 13.1%
Janus Capital Corp.......................................... 6,517,600(15) 5.4%
</TABLE>
- ---------------
* Less than one percent.
(1) Assumes that 120,145,483 primary shares of Company Common Stock were issued
and outstanding as of March 1, 1998. On March 13, 1998, the Company issued
21,850,000 shares of Common Stock in a registered public offering. The
shares of Common Stock issued by the Company on March 13, 1998 are not
taken into consideration in the above table in the calculation of
percentages of shares outstanding.
(2) Includes options to purchase 500,000 shares and 14,400 shares held by Mr.
Ginsburg as custodian for his children.
(3) Consists of options to purchase 1,170,000 shares.
(4) Consists of options to purchase 562,500 shares.
(5) Includes options to purchase 100,000 shares.
(6) Consists of 778,969 shares owned of record by Mr. Hicks, 346,736 shares
owned of record by Mr. Hicks as trustee for certain trusts of which his
children are beneficiaries and 20,816 shares owned of record by Mr. Hicks
as co-trustee of a trust for the benefit of unrelated parties. Also
includes 15,297,850 shares owned of record by three limited partnerships of
which the ultimate general partners are entities controlled by Mr. Hicks
and Hicks Muse. Mr. Hicks is the controlling stockholder of Hicks Muse and
serves as Chairman of the Board, Chief Executive Officer and Secretary of
Hicks Muse. Accordingly, Mr. Hicks may be deemed to be the beneficial owner
of all or a portion of the stock owned of record by such limited
partnerships. Mr. Hicks disclaims beneficial ownership of shares not owned
of record by him.
(7) Includes options to purchase 15,000 shares.
(8) Consists of options to purchase 15,000 shares.
(9) Includes options to purchase 24,242 shares.
(10) Consists of options to purchase 24,242 shares and 16,782 shares held by Mr.
Massey's wife as her separate property.
16
<PAGE> 19
(11) Includes (i) options to purchase 1,549,138 shares, (ii) 1,090 shares held
by an individual retirement account for the benefit of Mr. Dinetz and (iii)
1,000 shares held by Mr. Dinetz' daughter. Mr. Dinetz disclaims beneficial
ownership of the shares of Common Stock that are not owned by him of
record.
(12) Includes options to purchase 3.960,122 shares.
(13) Consists of 778,969 shares owned of record by Mr. Hicks, 346,736 shares
owned of record by Mr. Hicks as trustee for certain trusts of which his
children are beneficiaries and 20,816 shares owned of record by Mr. Hicks
as co-trustee of a trust for the benefit of unrelated parties. Also
includes 15,297,850 shares owned of record by three limited partnerships of
which the ultimate general partners are entities controlled by Mr. Hicks
and Hicks Muse. Mr. Hicks is the controlling stockholder of Hicks Muse and
serves as Chairman of the Board, Chief Executive Officer and Secretary of
Hicks Muse. Accordingly, Mr. Hicks may be deemed to be the beneficial owner
of all or a portion of the stock owned of record by such limited
partnerships. John R. Muse, Charles W. Tate, Jack D. Furst, Lawrence D.
Stuart, Jr., Michael J. Levitt and Alan B. Menkes are officers, directors
and minority stockholders of Hicks Muse and as such may be deemed to share
with Mr. Hicks the power to vote or dispose of shares held by such
partnerships. Messrs. Hicks, Muse, Tate, Furst, Stuart, Levitt and Menkes
disclaim the existence of a group and each of them disclaims beneficial
ownership of shares not owned of record by him. The address of Hicks Muse
is 200 Crescent Court, Suite 1600, Dallas, TX 75201.
(14) The address of Putnam Investments, Inc. is One Post Office Square, Boston,
MA 02109.
(15) The address of Janus Capital Corp. is 100 Fillmore Street, Denver, CO
80206-4923.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 31, 1997, Thomas O. Hicks and affiliates of Hicks Muse
beneficially owned an aggregate of 18,727,028 shares of Common Stock of the
Company. Mr. Hicks was elected Chairman of the Board and a director of the
Company, CMHC and CMCLA upon consummation of the Chancellor Merger.
The Company is subject to a financial monitoring and oversight agreement,
dated April 1, 1996, as amended on September 4, 1997 (the "Financial Monitoring
and Oversight Agreement"), with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse
Partners"), an affiliate of Hicks Muse. Pursuant to the Financial Monitoring and
Oversight Agreement, the Company pays to Hicks Muse Partners an annual fee of
not less than $1.0 million, subject to increase or decrease (but not below $1.0
million), based upon changes in the Consumer Price Index. Hicks Muse Partners is
also entitled to reimbursement for any out-of-pocket expenses incurred in
connection with rendering services under the Financial Monitoring and Oversight
Agreement. The Financial Monitoring and Oversight Agreement provides that the
agreement will terminate at such time as Thomas O. Hicks and his affiliates
collectively cease to beneficially own at least two-thirds of the number of
shares of Common Stock beneficially owned by them, collectively, immediately
following the effective time of the Chancellor Merger. The Company and
Chancellor paid Hicks Muse Partners a total of $0.7 million in 1997 pursuant to
the Financial Monitoring and Oversight Agreement, of which $0.3 million was paid
by the Company following the Chancellor Merger.
In connection with the consummation of the Chancellor Merger, a Financial
Advisory Agreement among Chancellor, CRBC and HM2/Management Partners, L.P.
("HM2/Management"), an affiliate of Hicks Muse, was terminated. In consideration
thereof, in lieu of any payments required to be made under the Financial
Advisory Agreement in respect of the transactions contemplated by the Chancellor
Merger, HM2/Management was paid a fee of $10.0 million in cash upon consummation
of the Chancellor Merger which was accounted for as a direct acquisition cost.
As part of the termination of the Financial Advisory Agreement, the Company paid
Hicks Muse Partners $1.5 million for financial advisory services in connection
with the Company's acquisition in October 1997 of Katz Media Group, Inc.
Vernon E. Jordan, Jr., a director of the Company, also serves on the board
of directors of Bankers Trust Company and Bankers Trust New York Corporation.
Affiliates of Bankers Trust Company and Bankers Trust New York Corporation have
provided a variety of commercial banking, investment banking and financial
advisory services to the Company, and expect to continue to provide such
services to the Company in the future.
17
<PAGE> 20
The Company is subject to that certain Amended and Restated Stockholders
Agreement, dated as of February 14, 1996, as amended on September 4, 1997 (the
"Chancellor Stockholders Agreement"), among Chancellor and certain holders of
Chancellor Broadcasting Company's Common Stock, which provides for certain
registration rights for the shares of Common Stock held by such holders. In
addition, the Company is subject to an additional registration rights agreement
relating to the Common Stock held by former stockholders of Chancellor
(collectively with the Chancellor Stockholders Agreement, the "Registration
Rights Agreements"). Each of the Registration Rights Agreements relates to
shares of Common Stock held by certain affiliates of Hicks Muse, and in one
instance, shares of Common Stock held by an unaffiliated third party.
As part of the Chancellor Merger, the Company has made certain cash
payments and accelerated the vesting of certain stock options previously granted
by Chancellor to Steven Dinetz, a director of the Company. For a description of
these transactions, see "Executive Compensation -- Compensation of Executive
Officers."
The Company has entered into a transaction (the "Capstar Transaction") with
Capstar Broadcasting Corporation ("Capstar") under which the Company would
acquire eleven radio stations from Capstar for an aggregate purchase price of
approximately $637.5 million. These stations would be acquired by the Company in
a series of purchases and exchanges over a period of three years, and would be
operated by the Company under time brokerage agreements until acquired by the
Company. As part of the Capstar Transaction, the Company would also provide a
subordinated loan to Capstar in the principal amount of $250.0 million (the
"Capstar Loan"). The Capstar Loan would bear interest at the rate of 12% per
annum (subject to increase in certain circumstances), and would be secured by a
senior pledge of common stock of Capstar's direct subsidiaries and an indirect
subsidiary and a senior guarantee by one of Capstar's direct subsidiaries. Hicks
Muse, which is a substantial shareholder of the Company, controls Capstar, and
certain directors of the Company are directors and/or executive officers of
Capstar and/or Hicks Muse. The Capstar Transaction has been approved by the
disinterested members of the Board of Directors.
Certain radio stations owned by Capstar have engaged Katz Media Group, Inc.
("Katz"), a wholly-owned subsidiary of the Company which the Company acquired in
October 1997, to sell national spot advertising air time, and such stations pay
customary commissions to Katz for such services. Additionally, Capstar's radio
stations are affiliated with The AMFM Radio Networks, a new national radio
network created by the Company in 1997, and in accordance therewith receive a
portion of advertising revenues generated by the network.
PROPOSAL II
APPROVAL OF THE 1998 CHANCELLOR MEDIA CORPORATION
STOCK OPTION PLAN
GENERAL
The Board of Directors has adopted the 1998 Chancellor Media Corporation
Stock Option Plan (the "1998 Stock Option Plan"), subject to the approval of the
Company's stockholders at the Company's Annual Meeting. The purpose of the 1998
Stock Option Plan is to (i) further the growth, development and financial
success of the Company by providing additional incentives to its executive
officers and other key employees who have a major share of the responsibility
for the management of the Company's business by assisting them to become owners
of Common Stock and then to benefit directly from its growth, development and
financial success, and (ii) enable the Company to obtain and retain the services
of the type of executive officers and other key employees considered essential
to the Company's long-range success by providing and offering them an
opportunity to become owners of Common Stock. The Board of Directors believes
that the 1998 Stock Option Plan is in the best interest of the Company and
recommends its approval by the stockholders.
DESCRIPTION OF MATERIAL TERMS
The 1998 Stock Option Plan provides for the issuance to executive officers
or other key employees of the Company or its affiliates of options to purchase
up to 7,890,000 shares of Common Stock. The Compensation Committee (or another
committee or subcommittee of the Board that is composed of "non-employee
directors,"
18
<PAGE> 21
as defined under the Commission's rules) of the Board of Directors has the
absolute discretion to determine the level of and terms and conditions of stock
option awards under the plan, and references herein to the Compensation
Committee shall be deemed to mean the Compensation Committee or such other
committee or subcommittee that shall be charged with administration of the 1998
Stock Option Plan. The 1998 Stock Option Plan allows for the grant of
"incentive" and "non-qualified" options which are exercisable at not less than
100% of the "fair market value" of the Common Stock at the date of grant as
established by the Compensation Committee of the Board of Directors, provided,
that the Compensation Committee may, in its discretion, grant "non-qualified"
options exercisable at less than 100% of the "fair market value" of the Common
Stock at the date of grant.
The 1998 Stock Option Plan provides that the Compensation Committee shall,
as to each individual option award, determine when such option becomes
exercisable and expires, although, in any event, all incentive stock options
shall expire ten years from the date of grant (or a shorter period in certain
circumstances). Notwithstanding such provisions, all options to be granted under
the 1998 Stock Option Plan pursuant to written employment contracts in effect on
the effective date of the 1998 Stock Option Plan shall be fully vested and
immediately exercisable on the date of grant and be exercisable for ten years
from the date of grant notwithstanding any termination of the employee's
employment by the Company other than for "cause" (as such term may be defined in
the applicable employment contract) or resignation by the employee for "good
reason" (as such term may be defined in the applicable employment contract). The
number of shares of Common Stock subject to options granted to any single
executive officer or other key employee under the 1998 Stock Option Plan shall
not exceed 2,000,000 shares in any given calendar year.
The Company is not required to issue and deliver any certificate for shares
of Common Stock purchased upon exercise of the option or any portion thereof
prior to the fulfillment of certain conditions including the completion of
registration or qualification of such shares of Common Stock under federal or
state securities laws and the payments to the Company of all amounts required to
be withheld upon exercise of the options under any federal, state or local tax
law. The holder of an option has no rights or privileges of a stockholder in
respect of any shares of Common Stock purchasable upon exercise of the option
unless and until certificates representing such shares shall have been issued by
the Company to such holder. The options are not transferable except by will or
by the applicable laws of descent and distribution.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material federal
income tax consequences of the 1998 Stock Option Plan, and is intended for
general information only. The discussion is based on the Internal Revenue Code
of 1986, as amended (the "Code"), regulations thereunder and rulings and
decisions now in effect, all of which are subject to change.
Non-Qualified Options. Holders of "non-qualified" options generally do not
recognize income as a result of the grant of "non-qualified" options, but
normally recognize compensation income taxable at ordinary income rates upon the
exercise of the "non-qualified" options, to the extent that the fair market
value of the shares on the date of the exercise exceeds the exercise price paid.
The Company will generally be entitled to a tax deduction in an amount equal to
the amount that the optionee is required to include in ordinary income at the
time of such inclusion and may be required to withhold taxes on such ordinary
income. The optionee's initial tax basis for shares acquired upon the exercise
of a "non-qualified" stock option will be the option exercise price paid plus
the amount recognized as ordinary income. Any subsequent appreciation in the
value of such shares may qualify for capital gains treatment depending upon the
applicable holding period.
The tax consequences resulting from the exercise of "non-qualified" stock
options through delivery of already-owned shares of Common Stock are not
completely certain. In published rulings, the Internal Revenue Service has taken
the position that, to the extent an equivalent value of shares is acquired, the
employee will recognize no gain on the already-owned shares and the employee's
basis in the shares acquired upon such exercise will be equal to the employee's
basis in the surrendered shares; that any additional shares acquired upon such
exercise are compensation to the employee taxable under the rules described
above and that the employee's basis in any such additional shares is their then
fair market value.
19
<PAGE> 22
Incentive Stock Options. Holders of "incentive" stock options generally do
not recognize income upon either the grant of an "incentive" stock option or its
exercise. Upon the sale or other taxable disposition of the shares of the Common
Stock acquired by exercise of the "incentive" stock option, the optionee will
generally recognize income taxable at capital gains rates (depending on the
applicable holding period) equal to the difference between the amount realized
upon such disposition and the option exercise price, provided no disposition of
the shares has taken place within either (a) two years from the date of grant of
the "incentive" stock option or (b) one year from the date of transfer of the
shares of Common Stock to the optionee upon exercise. If the shares of the
Common Stock are sold or otherwise disposed of before the end of the one-year or
two-year periods, the difference between the "incentive" stock option exercise
price and the fair market value of the shares on the date of exercise of the
option will be taxable as ordinary income; the balance of the gain, if any, will
be taxed as capital gain. If the shares of the Common Stock are disposed of
before the expiration of the one-year or two-year periods in a sale or exchange
on which a loss would be permitted to be recognized and the amount realized is
less than the fair market value of the shares at the date of exercise, the
optionee's ordinary income would be limited to the amount realized less the
option exercise price paid. The Company will generally be entitled to a tax
deduction with respect to an "incentive" stock option only to the extent the
optionee recognizes ordinary income upon sale or other disposition of the shares
of the Common Stock. The difference between the fair market value of the Common
Stock on the exercise date and the exercise price of an "incentive" stock option
is deemed to be a "tax preference" under the alternative minimum tax rules of
the Code.
The tax consequences resulting from the exercise of an "incentive" stock
option through delivery of already-owned shares of the Common Stock are not
completely certain. In published rulings and proposed regulations, the Internal
Revenue Service has taken the position that generally the optionee will
recognize no income upon such share-for-share exercise (subject to the
discussion above), that, to the extent an equivalent number of shares of the
Common Stock is acquired, the optionee's basis in the shares of the Common Stock
acquired upon such exercise is equal to the optionee's basis in the surrendered
shares increased by any compensation income recognized by the optionee, that the
optionee's basis in any additional shares of the Common Stock acquired upon such
exercise is zero and that any sale or other disposition of the acquired shares
within the one-year or two-year periods described above will be viewed as a
disposition of the shares with the lowest basis first.
NEW PLAN BENEFITS
Since awards under the 1998 Stock Option Plan are discretionary, total
awards that may be granted for the current fiscal year are not determinable.
Under the terms of employment and consulting agreements that are in effect on
the date of this Proxy Statement, subject to stockholder approval of the 1998
Stock Option Plan, the Company has agreed to grant options under the 1998 Stock
Option Plan to acquire 3,258,000 shares of Common Stock over the remaining life
of these agreements. Assuming that all such option grants are made pursuant to
such agreements, options to acquire 4,632,000 shares of Common Stock will be
available for discretionary grants by the Compensation Committee in the future
under the 1998 Stock Option Plan. If option grants are not made pursuant to such
agreements (i.e., because an agreement provides that no options will be granted
if the employee is terminated for cause and such employee is terminated for
cause), any options that are not granted pursuant to such agreements will be
available for discretionary grants by the Compensation Committee in the future
under the 1998 Stock Option Plan. In addition to the foregoing options to be
granted under the terms of employment and consulting agreements that are in
effect on the date of this Proxy Statement, on April 10, 1998, the Compensation
Committee of the Board of Directors awarded options to acquire 1,394,500 shares
of common stock to a number of non-executive employees of the Company, subject
to stockholder approval of the 1998 Stock Option Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL NO. II.
20
<PAGE> 23
PROPOSAL III
AMENDMENTS TO THE COMPANY'S
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
BACKGROUND
In 1995, the Company adopted the Non-Employee Director Stock Option Plan,
with the expressed purposes of (i) furthering the growth, development and
financial success of the Company by providing additional incentives to its
non-employee directors who have a major share of the responsibility for the
management of the Company's business by assisting them to become owners of the
Company's Common Stock and then to benefit directly from its growth, development
and financial success and (ii) enabling the Company to obtain and retain the
services of the type of non-employee directors considered essential to the
Company's long-range success by providing and offering them an opportunity to
become owners of the Company's Common Stock.
REASONS FOR AND CERTAIN EFFECTS OF THE AMENDMENTS
The Board of Directors has adopted certain amendments to the Non-Employee
Director Stock Option Plan, subject to approval of the Company's stockholders at
the Company's annual meeting. The Board of Directors believes that the stated
purposes of the Non-Employee Director Stock Option Plan have been attained to
date. The Company presently has five non-employee directors -- Messrs. Lewis,
Hodson, Marcus, Massey and Jordan -- who have made significant contributions to
the growth, development and financial success of the Company. However, the Board
of Directors believes that the proposed amendments to the Non-Employee Director
Stock Option Plan, which would provide the Board of Directors with substantially
greater flexibility in considering and making grants of stock options to its
non-employee directors, are necessary to enable the Company to continue to
obtain and retain the services of qualified non-employee directors in the
future.
The principal amendments to the Non-Employee Director Stock Option Plan are
described below. This description is qualified in its entirety by reference to
the text of the Non-Employee Director Stock Option Plan, as proposed to be
amended and restated giving effect to the proposed amendments, a copy of which
is attached as Annex B to this Proxy Statement.
The maximum number of shares of Common Stock available for issuance under
the Non-Employee Director Stock Option Plan would be increased from 450,000
shares (after giving effect to the Company's three-for-two common stock split in
August 1996 and its two-for-one common stock split in January 1998) to 900,000
shares. As of the date of this Proxy Statement, 335,000 shares have been granted
under the Non-Employee Director Stock Option Plan, and the increase in shares
available for grant will be necessary to enable the Board of Directors to
continue to make stock option grants to its non-employee directors.
The Non-Employee Director Stock Option Plan would be amended to provide
authority to the Board of Directors to make stock option grants to its
non-employee directors at any time, or from time to time, in the Board's
discretion. Under the current terms of the Non-Employee Director Stock Option
Plan, stock option grants to non-employee directors may only be made on the date
of the Company's annual stockholders meeting to those non-employee directors in
office at the close of business on the date of the adjournment of the Company's
annual stockholders meeting.
The Non-Employee Director Stock Option Plan would be amended to provide
authority to the Board of Directors to make stock option grants to its
non-employee directors to acquire a number of shares of Common Stock to be
determined in the Board's discretion at the time of grant. Under the current
terms of the Non-Employee Director Stock Option Plan, stock option grants to
non-employee directors may only be made to acquire 15,000 shares of Common
Stock.
The Non-Employee Director Stock Option Plan would be amended to provide
authority to the Board of Directors to determine, in its discretion at the time
of grant, exercisability and vesting periods for stock option grants to its
non-employee directors. Under the current terms of the Non-Employee Director
Stock Option Plan, stock option grants to non-employee directors become
exercisable at the rate of one-third per year commencing on the first
anniversary of the date of grant.
21
<PAGE> 24
The Non-Employee Director Stock Option Plan would be amended to provide
authority to the Board of Directors to accelerate, in its discretion,
exercisability of stock options previously granted to its non-employee
directors. Under the current terms of the Non-Employee Director Stock Option
Plan, stock option grants to non-employee directors would only accelerate upon
certain circumstances, and the Board of Directors had no discretion to
accelerate stock option grants to its non-employee directors except in such
circumstances.
The Non-Employee Director Stock Option Plan would be amended to provide
authority to the Board of Directors to determine the impact of a non-employee
director's termination or resignation, in the Board's discretion at the time of
grant. Under the current terms of the Non-Employee Director Stock Option Plan,
(i) if a non-employee director's service as a director terminates as the result
of such director's death, permanent disability or failure to be elected, removal
or retirement on or after reaching age 65 or such director ceases to be eligible
to participate in the Non-Employee Director Stock Option Plan by reason of
becoming an employee of the Company or one of its subsidiaries, then all
otherwise unexercisable options become immediately exercisable and (ii) no
option may be exercised to any extent by any non-employee director after the
first to occur of (a) the expiration of ten years from the date the option was
granted, (b) the expiration of eighteen months from the date of termination of
directorship as a result of the reasons specified in (i) above and (c) the
expiration of three months from the date of termination of directorship as a
result of any other reason.
NEW PLAN BENEFITS
The Board of Directors expects that, assuming stockholder approval of the
amendments proposed to the Non-Employee Director Stock Option Plan, such
amendments would apply to options previously granted to non-employee directors,
except when such amendments alter or impair any rights or obligations under any
option previously granted, in which event the consent of the optionee would be
required before such amendments would apply. To date, in addition to options
granted to the Company's non-employee directors pursuant to the terms of the
Non-Employee Director Stock Option Plan as currently in effect, the Board of
Directors has granted a total of 150,000 additional options to its non-employee
directors, subject to stockholder approval of the amendments proposed to the
Non-Employee Director Stock Option Plan. Such options, which were granted to the
following non-employee directors, would become exercisable at the rate of
one-fourth per year commencing on the first anniversary of the date of grant.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING
DOLLAR VALUE(1) EACH GRANT OF OPTIONS(2)
--------------- ---------------------------
<S> <C> <C>
Perry J. Lewis................ $202,425 30,000
Thomas J. Hodson.............. $202,425 30,000
John H. Massey................ $202,425 30,000
Jeffrey A. Marcus............. $202,425 30,000
Vernon E. Jordan, Jr.......... $202,425 30,000
</TABLE>
- ---------------
(1) Based upon (a) an exercise price per share of $30.5625, the estimated fair
value of shares of Common Stock on November 21, 1997, the last trading day
prior to the date of grant, and (b) a per share price for Common Stock of
$37.31, the closing price for the Common Stock on the Nasdaq Stock Market on
December 31, 1997, in each case, as adjusted for the Company's two-for-one
common stock split effected in the form of a stock dividend paid on January
12, 1998.
(2) After giving effect to the Company's two-for-one common stock split effected
in the form of a stock dividend paid on January 12, 1998.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL NO.
III.
22
<PAGE> 25
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. served as the Company's independent public
accountants for the year ended December 31, 1997. Coopers & Lybrand became the
Company's independent public accountants as of September 23, 1997. Prior to such
date, KPMG Peat Marwick LLP served as the Company's independent public
accountants. Coopers & Lybrand, L.L.P. is a member of the SEC Practice Section
of the American Institute of Certified Public Accountants. Representatives of
Coopers & Lybrand L.L.P. will attend the Annual Meeting and will have an
opportunity to make a statement if such representatives so desire and to respond
to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS FOR 1999
Under the rules of the Commission, any stockholder proposal intended for
inclusion in the proxy material for the annual meeting of stockholders to be
held in 1999 must be received by the Company by December 15, 1998 to be eligible
for inclusion in such proxy material. Proposals should be addressed to
Chancellor Media Corporation, 433 East Las Colinas Boulevard, Suite 1130,
Irving, Texas 75039, Attention: Corporate Secretary. Proposals must comply with
the proxy rules of the Commission relating to stockholder proposals in order to
be included in the proxy materials.
Any stockholder who meets the requirements of the proxy rules under the
Securities Exchange Act of 1934 may nominate a candidate for director of the
Company. Any such nomination should be submitted in writing by notice delivered
or mailed by first-class United States mail, postage prepaid, to Chancellor
Media Corporation, 433 E. Las Colinas Boulevard, Suite 1130, Irving, Texas
75039, Attention: Corporate Secretary, and must be received by December 15,
1998. Any such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record of
Common Stock entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (d) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Commission, had the nominee been nominated,
or intended to be nominated, by the Board of Directors; and (e) the consent of
each nominee to serve as director of the Company if so elected. The chairman of
the meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
GENERAL
The Company's Annual Report for 1997, including consolidated financial
statements and other information (the "1997 Annual Report"), accompanies this
Proxy Statement but does not form a part of the proxy soliciting material. A
complete list of the stockholders of record entitled to vote at the Annual
Meeting will be open and available for examination by any stockholder, for any
purpose germane to the Annual Meeting, between 9:00 a.m. and 5:00 p.m. at the
Company's offices at 433 East Las Colinas Boulevard, Suite 1130, Irving, Texas
75039, from May 9, 1998 through May 18, 1998 and at the time and the place of
the Annual Meeting.
THE COMPANY WILL PROVIDE EACH OF ITS STOCKHOLDERS, WITHOUT CHARGE, UPON THE
WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 (THE "1997 FORM 10-K"),
INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES
REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE
RULES PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934. EXHIBITS TO THE
1997 FORM 10-K WILL NOT BE SUPPLIED UNLESS SPECIFICALLY REQUESTED, FOR WHICH
THERE MAY BE A REASONABLE CHARGE. THOSE STOCKHOLDERS WISHING TO OBTAIN A COPY OF
THE 1997 FORM 10-K SHOULD SUBMIT A WRITTEN REQUEST TO CHANCELLOR MEDIA
CORPORATION, 433 EAST LAS COLINAS BOULEVARD, SUITE 1130, IRVING, TEXAS 75039,
ATTENTION: CORPORATE SECRETARY.
23
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In addition to solicitation by mail, proxies may be solicited in person, or
by telephone or telegraph, by directors and by officers and other regular
employees of the Company. The Company has also retained Georgeson & Company,
Inc. to act as solicitation agent on behalf of the Company for a fee not to
exceed $8,500. All expenses in connection with the preparation of proxy material
and the solicitation of proxies will be borne by the Company.
By Order of the Board of Directors
/S/ MATTHEW E. DEVINE
Matthew E. Devine
Secretary
Irving, Texas
April 23, 1998
24
<PAGE> 27
ANNEX A
PROPOSED
1998
CHANCELLOR MEDIA CORPORATION
STOCK OPTION PLAN
<PAGE> 28
THE 1998 CHANCELLOR MEDIA CORPORATION
STOCK OPTION PLAN
Chancellor Media Corporation, a Delaware corporation, has adopted The 1998
Chancellor Media Corporation Stock Option Plan (the "Plan"), effective
, 1998, for the benefit of its eligible employees and consultants.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for key Employees and consultants to
further the growth, development and financial success of the Company by
personally benefiting through the ownership of Options with respect to Company
Stock.
(2) To enable the Company to obtain and retain the services of key
Employees and consultants considered essential to the long range success of the
Company by offering them an opportunity to own Options with respect to stock in
the Company which will reflect the growth, development and financial success of
the Company.
ARTICLE I
DEFINITIONS
1.1 General. Wherever the following terms are used in this Plan they shall
have the meanings specified below, unless the context clearly indicates
otherwise.
1.2 Award Limit. "Award Limit" shall mean 2,000,000 shares of Common
Stock, as adjusted pursuant to Section 7.3.
1.3 Board. "Board" shall mean the Board of Directors of the Company.
1.4 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.5 Committee. "Committee" shall mean the Compensation Committee of the
Board, or another committee or subcommittee of the Board, appointed as provided
in Section 6.1.
1.6 Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $.01 per share.
1.7 Company. "Company" shall mean Chancellor Media Corporation, a Delaware
corporation.
1.8 Contractual Option. "Contractual Option" shall mean any option with
respect to the Common Stock to the grant of which any Employee is or may become
entitled pursuant to any written contract in effect on the effective date of
this Plan.
1.9 Director. "Director" shall mean a member of the Board.
1.10 Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.11 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
1.12 Fair Market Value. The Fair Market Value of a share of Common Stock
as of a given date shall be: (a) the closing price of a share of the Common
Stock on the principal exchange on which shares of the Common Stock are then
trading, if any, on the day previous to such date, or, if shares were not traded
on the day previous to such date, then on the next preceding trading day during
which a sale occurred: or (b) if such Common Stock is not traded on an exchange
but is quoted on Nasdaq or a successor quotation system, (i) the last sales
price (if the Common Stock is then listed as a National Market Issue under the
Nasdaq National Market System) or (ii) the mean between the closing
representative bid and asked prices (in all other cases) for the Common Stock on
the day previous to such date as reported by Nasdaq or such successor quotation
system; or (iii) if such Common Stock is not publicly traded on an exchange and
not quoted on Nasdaq or a successor quotation system, the mean between the
closing bid and asked prices for the Common Stock, on the day previous to such
date, as determined
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in good faith by the Committee; or (iv) if the Common Stock is not publicly
traded, the fair market value established by the Committee acting in good faith.
1.13 Incentive Stock Option. "Incentive Stock Option" shall mean an Option
which conforms to the applicable provisions of Section 422 of the Code and which
is designated as an Incentive Stock Option by the Committee.
1.14 Independent Director. "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.
1.15 Independent Third Party. "Independent Third Party" shall mean any
entity other than the Company, Hicks, Muse, Tate & Furst, Incorporated or any
affiliate or subsidiary of either of them.
1.16 Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the Committee.
1.17 Option. "Option" shall mean a stock option granted under Article III
of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however, that Options granted to consultants shall be Non-Qualified
Stock Options.
1.18 Option Agreement. "Option Agreement" shall mean an agreement between
the Company and an Optionee that sets forth the terms, conditions and
limitations applicable to an Option.
1.19 Optionee. "Optionee" shall mean an Employee or consultant granted an
Option under this Plan.
1.20 Plan. "Plan" shall mean this 1998 Chancellor Media Corporation Stock
Option Plan.
1.21 QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
1.22 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
1.23 Sale of the Company. "Sale of the Company" shall mean the
consummation of one of the following events:
(a) any Independent Third Party is or becomes the Beneficial Owner (as
defined below), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities. For purposes of this Agreement, the term "Beneficial
Owner" shall have the meaning given to such term in Rule 13d-3 under the
Exchange Act;
(b) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation (or other entity), other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no person acquires more than 25% of the combined voting power of the
Company's then outstanding securities shall not constitute a Sale of the
Company; or
(c) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
1.24 Section 162(m) Participant. "Section 162(m) Participant" shall mean
any key Employee designated by the Committee as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.
1.25 Subsidiary. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns
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stock possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
1.26 Termination of Consultancy. "Termination of Consultancy" shall mean
the time when the engagement of an Optionee as a consultant to the Company or a
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death or retirement; but
excluding terminations where there is a simultaneous commencement of employment
with the Company or any Subsidiary. The Committee, in its sole discretion, shall
determine the effect of all matters and questions relating to Termination of
Consultancy, including, but not by way of limitation, the question of whether a
Termination of Consultancy resulted from a discharge for good cause, and all
questions of whether a particular leave of absence constitutes a Terminations of
Consultancy. Notwithstanding any other provision of this Plan, the Company or
any Subsidiary has an absolute and unrestricted right to terminate a
consultant's service at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.
1.27 Termination of Employment. "Termination of Employment" shall mean the
time when the employee-employer relationship between an Optionee and the Company
or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (a) terminations where
there is a simultaneous reemployment or continuing employment of an Optionee by
the Company or any Subsidiary, (b) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (c) at the discretion of the Committee, terminations which are
followed by the simultaneous establishment of a consulting relationship by the
Company or a Subsidiary with the former employee. The Committee, in its sole
discretion, shall determine the effect of all matters and questions relating to
Termination of Employment, including, but not by way of limitation, the question
of whether a Termination of Employment resulted from a discharge for good cause,
and all questions of whether a particular leave of absence constitutes a
Terminations of Employment; provided, however, that, with respect to Incentive
Stock Options unless otherwise determined by the Committee in its discretion, a
leave of absence, change in status from an employee to an independent contractor
or other change in the employee-employer relationship shall constitute a
Termination of Employment if, and to the extent that, such leave of absence,
change in status or other change interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section. Notwithstanding any other provision of this Plan,
the Company or any Subsidiary has an absolute and unrestricted right to
terminate an Employee's employment at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan.
(a) The shares of stock subject to Options shall be Common Stock. The
aggregate number of such shares which may be issued upon exercise of such
Options under the Plan shall not exceed Seven Million Eight Hundred Ninety
Thousand (7,890,000). The shares of Common Stock issuable upon exercise of such
Options may be either previously authorized but unissued shares or treasury
shares.
(b) The maximum number of shares which may be subject to Options granted
under the Plan to any individual in any calendar year shall not exceed the Award
Limit. To the extent required by Section 162(m) of the Code, shares subject to
Options which are canceled continue to be counted against the Award Limit and
if, after grant of an Option, the price of shares subject to such Option is
reduced, the transaction is treated as a cancellation of the Option and a grant
of a new Option and both the Option deemed to be canceled and the Option deemed
to be granted are counted against the Award Limit.
2.2 Add-back of Options and Other Rights. If any Option expires or is
canceled without having been fully exercised, the number of shares subject to
such Option but as to which such Option was not exercised prior to its
expiration, cancellation or exercise may again be optioned hereunder, subject to
the limitations of Section 2.1. Furthermore, any shares subject to Options which
are adjusted pursuant to Section 7.3 and become exercisable
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with respect to shares of stock of another corporation shall be considered
cancelled and may again be optioned hereunder, subject to the limitations of
Section 2.1. Shares of Common Stock which are delivered by the Optionee or
withheld by the Company upon the exercise of any Option under this Plan, in
payment of the exercise price thereof, may again be optioned hereunder, subject
to the limitations of Section 2.1. Notwithstanding the provisions of this
Section 2.2, no shares of Common Stock may again be optioned if such action
would cause an Incentive Stock Option to fail to qualify as an incentive stock
option under Section 422 of the Code.
ARTICLE III
GRANTING OF OPTIONS
3.1 Eligibility. Any Employee or consultant selected by the Committee
pursuant to Section 3.4(a)(i) shall be eligible to be granted an Option.
3.2 Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
3.3 Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted to any person who is not an Employee.
3.4 Granting of Options
(a) The Committee shall from time to time, in its sole discretion, and
subject to applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select from among
the key Employees or consultants (including Employees or consultants who
have previously received Options under this Plan) such of them as in its
opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of shares to be
subject to such Options granted to the selected key Employees or
consultants;
(iii) Subject to Section 3.3, determine whether such Options are to be
Incentive Stock Options or Non-Qualified Stock Options and whether such
Options are to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options, consistent
with this Plan; provided, however, that the terms and conditions of Options
intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m) of the Code.
(b) Upon the selection of a key Employee or consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue the
Option and may impose such conditions on the grant of the Option as it deems
appropriate. Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option that the Employee or consultant
surrender for cancellation some or all of the unexercised Options which have
been previously granted to him under this Plan or otherwise. An Option, the
grant of which is conditioned upon such surrender, may have an Option price
lower (or higher) than the exercise price of such surrendered Option, may cover
the same (or a lesser or greater) number of shares as such surrendered Option,
may contain such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or condition of such
surrendered Option.
(c) Any Incentive Stock Option granted under this Plan may be modified by
the Committee to disqualify such Option from treatment as an "incentive stock
option" under Section 422 of the Code.
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ARTICLE IV
TERMS OF OPTIONS
4.1 Option Agreement. Each Option shall be evidenced by a written Option
Agreement, which shall be executed by the Optionee and an authorized officer of
the Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with this Plan. Option Agreements evidencing Options
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code.
Option Agreements evidencing Incentive Stock Options shall contain such terms
and conditions as may be necessary to meet the applicable provisions of Section
422 of the Code.
4.2 Option Price. The price per share of the shares subject to each Option
shall be set by the Committee; provided, however, that such price shall be no
less than the par value of a share of Common Stock, unless otherwise permitted
by applicable state law, and (a) unless the Committee shall specifically
determine otherwise in its absolute discretion, such price shall not be less
than 100% of the Fair Market Value of a share of Common Stock on the date the
Option is granted; (b) in the case of Incentive Stock Options such price shall
not be less than 100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted (or the date the Option is modified, extended or
renewed for purposes of Section 424(h) of the Code); and (c) in the case of
Incentive Stock Options granted to an individual then owning (within the meaning
of Section 424(d) of the Code) more than 10% of the total combined voting power
of all classes of stock of the Company or any Subsidiary or parent corporation
thereof (within the meaning of Section 422 of the Code), such price shall not be
less than 110% of the Fair Market Value of a share of Common Stock on the date
the Option is granted (or the date the Option is modified, extended or renewed
for purposes of Section 424(h) of the Code).
4.3 Option Term. The term of an Option shall be set by the Committee in
its discretion; provided, however, that, in the case of Incentive Stock Options,
the term shall not be more than ten (10) years from the date the Incentive Stock
Option is granted, or five (5) years from such date if the Incentive Stock
Option is granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation thereof
(within the meaning of Section 422 of the Code). Except as limited by
requirements of Section 422 of the Code and regulations and rulings thereunder
applicable to Incentive Stock Options, the Committee may extend the term of any
outstanding Option in connection with any Termination of Employment or
Termination of Consultancy of the Optionee, or amend any other term or condition
of such Option relating to such a termination.
4.4 Option Vesting
(a) The period during which the right to exercise an Option in whole or in
part vests in the Optionee shall be set by the Committee and the Committee may
determine that an Option may not be exercised in whole or in part for a
specified period after it is granted. At any time after grant of an Option, the
Committee may, in its sole discretion and subject to whatever terms and
conditions it selects, accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment or Termination of Consultancy, as applicable, shall thereafter become
exercisable, except as may be otherwise provided by the Committee either in the
Option Agreement or by action of the Committee following the grant of the
Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any parent or subsidiary
corporation (within the meaning of Section 422 of the Code) of the Company)
exceeds $100,000, such Options shall be treated as Non-Qualified Options to the
extent required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.
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4.5 Consideration. In consideration of the granting of an Option, the
Optionee shall agree, in the written Option Agreement, to render faithful and
efficient services to the Company and its Subsidiaries.
4.6 Contractual Options. Notwithstanding any other provision of the Plan,
unless otherwise provided in the applicable Option Agreement to the contrary,
any Contractual Options shall (a) be fully vested and immediately exercisable on
the date of grant and (b) be exercisable for ten years from the date of grant
notwithstanding any termination of the Optionee's employment by the Company
other than for "Cause" (as defined in the applicable written contract) or
resignation by the Optionee for Good Reason (as defined in the applicable
written contract).
ARTICLE V
EXERCISE OF OPTIONS
5.1 Partial Exercise. An exercisable Option may be exercised in whole or
in part. However, an Option shall not be exercisable with respect to fractional
shares and the Committee may require that, by the terms of the Option Agreement,
a partial exercise be with respect to a minimum number of shares.
5.2 Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or his office:
(a) A written notice complying with the applicable rules established by the
Committee stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to exercise
the Option or such portion of the Option;
(b) Such representations and documents as the Committee in its sole
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee may, in its sole
discretion, also take whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to Section 7.1
by any person or persons other than the Optionee, appropriate proof of the right
of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares with
respect to which the Option, or portion thereof, is exercised. However, the
Committee may in its discretion (i) allow a delay in payment up to thirty (30)
days from the date the Option, or portion thereof, is exercised; (ii) allow
payment, in whole or in part, through the delivery of shares of Common Stock
owned by the Optionee, duly endorsed for transfer to the Company with a Fair
Market Value on the date of delivery equal to the aggregate exercise price of
the Option or exercised portion thereof; (iii) allow payment, in whole or in
part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee or the Board; (vi) allow payment, in whole
or in part, through the delivery of a notice that the Optionee has placed a
market sell order with a broker with respect to shares of Common Stock then
issuable upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the Committee may
also prescribe the form of such note and the security to be given for such note.
The Option may not be exercised, however, by delivery of a promissory note or by
a loan from the Company when or where such loan or other extension of credit is
prohibited by law.
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5.3 Conditions to Issuance of Stock Certificates. The Company shall not be
required to issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which
such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory body
which the Committee or Board shall, in its sole discretion, deem necessary or
advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its sole discretion,
determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise of
the Option as the Committee may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax.
5.4 Rights as Stockholders. The holders of Options shall not be, nor have
any of the rights or privileges of, stockholders of the Company in respect of
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
5.5 Ownership and Transfer Restrictions. The Committee, in its sole
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Option Agreement or
any other written agreement between the Company and the Optionee and may be
referred to on the certificates evidencing such shares. The Committee may
require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(a) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Employee or (b) one year after the transfer of such shares to
such Employee. The Committee may direct that the certificates evidencing shares
acquired by exercise of an Option refer to such requirement.
ARTICLE VI
ADMINISTRATION
6.1 Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under this Plan) shall consist solely of two or more Independent Directors
appointed by and holding office at the pleasure of the Board, each of whom is a
"non-employee director" (as defined by Rule 16b-3); provided, that the
Committee, with respect to any Options intended to qualify as performance-based
compensation, shall consist solely of two or more "outside directors" for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.
6.2 Duties and Powers of Committee. It shall be the duty of the Committee
to conduct the general administration of this Plan in accordance with its
provisions. The Committee shall have the power to interpret this Plan and the
agreements pursuant to which Options are granted, and to adopt such rules for
the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules. Any such
grant under this Plan need not be the same with respect to each Optionee. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its sole
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or
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Section 162(m) of the Code, or any regulations or rules issued thereunder, are
required to be determined in the sole discretion of the Committee.
6.3 Majority Rule; Unanimous Written Consent. The Committee shall act by a
majority of its members in attendance at a meeting at which a quorum is present
or by a memorandum or other written instrument signed by all members of the
Committee.
6.4 Compensation; Professional Assistance; Good Faith Actions. Members of
the Committee shall receive such compensation, if any, for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Optionees, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or the Options, and
all members of the Committee and the Board shall be fully protected by the
Company in respect of any such action, determination or interpretation.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Not Transferable. Options under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or pursuant to a QDRO, unless and until such Options have been
exercised, or the shares underlying such Options have been issued, and all
restrictions applicable to such shares have lapsed. No Option or interest or
right therein shall be liable for the debts, contracts or engagements of the
Optionee or his successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
During the lifetime of the Optionee only he may exercise an Option granted
to him under the Plan, unless it has been disposed of pursuant to a QDRO. After
the death of the Optionee, any exercisable portion of an Option may, prior to
the time when such portion becomes unexercisable under the Plan or the
applicable Option Agreement or other agreement, be exercised by his personal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
7.2 Amendment, Suspension or Termination of this Plan. Except as otherwise
provided in this Section 7.2, this Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Board or the Committee. However, without approval of the Company's
stockholders given within twelve months before or after the action by the Board
or the Committee, no action of the Board or the Committee may, except as
provided in Section 7.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan, and no action of
the Board or the Committee may be taken that would otherwise require stockholder
approval as a matter of applicable law, regulation or rule. Furthermore, no
modification of the Award Limit shall be effective prior to the approval of the
Company's stockholders. No amendment, suspension or termination of this Plan
shall, without the consent of the holder of Options, alter or impair any rights
or obligations under any Options theretofore granted or awarded, unless the
award itself otherwise expressly so provides. No Options may be granted or
awarded during any period of
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suspension or after termination of this Plan, and in no event may any Incentive
Stock Option be granted under this Plan after the first to occur of the
following events:
(a) The expiration of ten years from the date the Plan is adopted by the
Board; or
(b) The expiration of ten years from the date the Plan is approved by the
Company's stockholders under Section 7.4.
7.3 Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 7.3(d), in the event that the Committee determines
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale,
transfer, exchange or other disposition of all or substantially all of the
assets of the Company (including, but not limited to, a Sale of the Company), or
exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event, in the Committee's
sole discretion, affects the Common Stock such that an adjustment is determined
by the Committee to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan or with respect to an Option then the Committee shall, in such manner as it
may deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock (or other securities
or property) with respect to which Options may be granted under the Plan
(including, but not limited to, adjustments of the limitations in Section
2.1 on the maximum number and kind of shares which may be issued and
adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, and
(iii) the grant or exercise price with respect to any Option.
(b) Subject to Sections 7.3(b)(vi) and 7.3(d), in the event of any Sale of
the Company or other transaction or event described in Section 7.3(a) or any
unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee in its discretion is hereby authorized to take any one
or more of the following actions whenever the Committee determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any Option under this Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:
(i) In its sole discretion, and on such terms and conditions as it
deems appropriate, the Committee may provide, either by the terms of the
applicable Option Agreement or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the Optionee's
request, for either the purchase of any such Option for an amount of cash
equal to the amount that could have been attained upon the exercise of such
Option or realization of the Optionee's rights had such Option been
currently exercisable or fully vested or the replacement of such Option
with other rights or property selected by the Committee in its sole
discretion;
(ii) In its sole discretion, the Committee may provide, either by the
terms of such Option Agreement or by action taken prior to the occurrence
of such transaction or event that it cannot vest or be exercised after such
event;
(iii) In its sole discretion, and on such terms and conditions as it
deems appropriate, the Committee may provide, either by the terms of such
Option Agreement or by action taken prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such Option
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shall be exercisable as to all shares covered thereby, notwithstanding
anything to the contrary in (A) Section 4.4 or (B) the provisions of the
applicable Option Agreement;
(iv) In its sole discretion, and on such terms and conditions as it
deems appropriate, the Committee may provide, either by the terms of such
Option or by action taken prior to the occurrence of such transaction or
event, that upon such event, such Option be assumed by the successor or
survivor corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar Options covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; and
(v) In its sole discretion, and on such terms and conditions as it
deems appropriate, the Committee may make adjustments in the number and
type of shares of Common Stock (or other securities or property) subject to
outstanding Options and/or in the terms and conditions of (including the
grant or exercise price), and the criteria included in, outstanding Options
which may be granted in the future.
(vi) Notwithstanding Sections 7.3(b)(i) through (v), in the event of
any Sale of the Company, each outstanding Option shall, immediately prior
to the effective date of the Sale of the Company, automatically become
fully exercisable for all of the shares of Common Stock at the time subject
thereto. However, an outstanding Option shall not so accelerate if and to
the extent: (A) such Option is, in connection with the Sale of the Company,
to remain outstanding for securities of the Company following such
transaction, to be assumed by the successor or survivor corporation (or
parent thereof) or to be replaced with a comparable right with respect to
shares of the capital stock of the successor or survivor corporation (or
parent thereof) or (B) the acceleration of exercisability of such Option is
subject to other limitations imposed by the Committee at the time of grant.
The determination of comparability of rights under clause (A) above shall
be made by the Committee, and its determination shall be final, binding and
conclusive.
(c) Subject to Sections 7.3(d) and 7.7, the Committee may, in its
discretion, include such further provisions and limitations in any Option
Agreement as it may deem equitable and in the best interests of the Company.
(d) With respect to Options which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no adjustment or action described in this Section 10.3 or
in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of the
Code or would cause such Option to fail to so qualify under Section
162(m)(4)(C), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent such
adjustment or action would result in short-swing profits liability under Section
16 or violate the exemptive conditions of Rule 16b-3 unless the Committee
determines that the Option is not to comply with such exemptive conditions. The
number of shares of Common Stock subject to any Option shall always be rounded
to the next whole number.
7.4 Approval of Plan by Stockholders. This Plan will be submitted for the
approval of the Company's stockholders within twelve months after the date of
the Board's initial adoption of this Plan and in any event no later than the
first meeting of the Company's stockholders following such adoption. Options may
be granted prior to such stockholder approval, provided that such Options shall
not be exercisable prior to the time when this Plan is approved by the
stockholders, and provided further that if such approval has not been obtained
at the end of said twelve-month period, all Options previously granted shall
thereupon be canceled and become null and void.
7.5 Tax Withholding. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Optionee of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting, exercise or payment of any Option. The Committee may in its
discretion and in satisfaction of the foregoing requirement allow such Optionee
to elect to have the Company withhold shares of Common Stock otherwise issuable
under such Option (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld.
7.6 Loans. The Committee may, in its discretion, extend one or more loans
to key Employees in connection with the exercise or receipt of an Option granted
under this Plan. The terms and conditions of any such loan shall be set by the
Committee.
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7.7 Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, this Plan, and
any Option awarded, to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan and Options granted hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan, any Option which is granted to
a Section 162(m) Participant and is intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be subject
to any additional limitations set forth in Section 162(m) of the Code (including
any amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and this Plan
shall be deemed amended to the extent necessary to conform to such requirements.
7.8 Effect of Plan Upon Options and Compensation Plans. The adoption of
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (a) to establish any other forms of incentives or
compensation for Employees, or Consultants of the Company or any Subsidiary or
(b) to grant or assume options otherwise than under this Plan in connection with
any proper corporate purpose including but not by way of limitation, the grant
or assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or association.
7.9 Compliance with Laws. This Plan and the granting and vesting of
Options under this Plan are subject to compliance with all applicable federal
and state laws, rules and regulations (including but not limited to state and
federal securities law and federal margin requirements) and to such approvals by
any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Company, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restrictions, and
the person acquiring such securities shall, if requested by the Company, provide
such assurances and representations to the Company as the Company may deem
necessary or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the Plan and the
Options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
7.10 Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Plan.
7.11 Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
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ANNEX B
PROPOSED
AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN
OF
CHANCELLOR MEDIA CORPORATION
<PAGE> 40
AMENDED AND RESTATED
CHANCELLOR MEDIA CORPORATION
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Chancellor Media Corporation, a Delaware corporation (the "Company"),
hereby adopts The Amended and Restated Chancellor Media Corporation Stock Option
Plan for Non-Employee Directors. The purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the Company
by providing additional incentives to its independent Directors who have a major
share of the responsibility for the management of the Company's business by
assisting them to become owners of common stock of the Company and thus to
benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the type of
independent directors considered essential to the long-range success of the
Company by providing and offering them an opportunity to become owners of common
stock of the Company.
RECITAL
The Board of Directors deems it desirable and in the best interests of the
Company and its stockholders to provide for the granting of stock options under
the Plan, all upon the terms and conditions set forth herein.
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
The masculine pronoun shall include the feminine and neuter and the singular
shall include the plural, where the context so indicates.
SECTION 1.1. -- Board
"Board" shall mean the Board of Directors of the Company.
SECTION 1.2. -- Company
"Company" shall mean Chancellor Media Corporation. In addition, "Company"
shall mean any corporation assuming, or issuing new stock options in
substitution for, Options outstanding under the Plan.
SECTION 1.3. -- Director
"Director" shall mean a member of the Board who is not an employee of the
Company or the Parent Corporation or a subsidiary of the Company.
SECTION 1.4. -- Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
SECTION 1.5. -- Option
"Option" shall mean an option to purchase Common Stock, par value $.01 per
share, of the Company, granted under the Plan.
SECTION 1.6. -- Optionee
"Optionee" shall mean a Director to whom an Option is granted under the
Plan.
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SECTION 1.7. -- Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company of each of the corporations other than the
Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
SECTION 1.8. -- Plan
"Plan" shall mean The Amended and Restated Chancellor Media Corporation
Stock Option Plan for Non-Employee Directors.
SECTION 1.9. -- Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act,
including as such Rule may be amended in the future.
SECTION 1.10. -- Secretary
"Secretary" shall mean the Secretary of the Company.
SECTION 1.11. -- Securities Act
"Securities Act" shall mean the Securities Act of 1933, as amended.
SECTION 1.12. -- Termination of Directorship
"Termination of Directorship" shall mean the time when an Optionee ceases
to be a director of the Company or any Parent Corporation for any reason,
including, but not by way of limitation, a termination by resignation, failure
to be elected, removal, death or retirement. The Board, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Directorship.
ARTICLE II.
SHARES SUBJECT TO PLAN
SECTION 2.1. -- Shares Subject to Plan
The shares of stock subject to Options shall be shares of the Company's
Common Stock, par value $.01 per share (the "Common Stock"). The aggregate
number of such shares which may be issued upon exercise of Options shall not
exceed nine hundred thousand (900,000).
SECTION 2.2. -- Unexercised Options
If any Option expires or is cancelled without having been fully exercised,
the number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration or cancellation may again be optioned
hereunder, subject to the limitations of Section 2.1.
SECTION 2.3. -- Changes in Company's Shares
In the event that the outstanding shares of Common Stock of the Company are
hereafter changed into or exchanged for a different number or kind of shares or
other securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend or combination of shares, appropriate adjustments shall
be made by the Board in the number and kind of shares for the purchase of which
Options may be granted, including adjustments of the limitations in Section 2.1
on the maximum number and kind of shares which may be issued on exercise of
Options.
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ARTICLE III.
GRANTING OF OPTIONS
SECTION 3.1. -- Eligibility
Each Director of the Company or of any corporation which is then a Parent
Corporation who is not otherwise employed in any capacity with the Company or a
Parent Corporation or any subsidiary of the Company shall be eligible to receive
Options at the times and in the manner set forth in Section 3.3.
SECTION 3.2. -- Tax Status of Stock Options
Options granted under the Plan do not qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986.
SECTION 3.3. -- Granting of Options
(a) The Board shall from time to time, in its sole discretion, and subject
to applicable limitations of this Plan:
(i) Determine which Directors as in the Board's opinion should be
granted Options;
(ii) Determine the number of shares to be subject to such Options
granted to the selected Directors; and
(iii) Determine the terms and conditions of such Options, consistent
with this Plan.
(b) Upon the selection of Directors to be granted an Option, the Board
shall instruct the Secretary of the Company to issue the Option and may impose
such conditions on the grant of the Option as it deems appropriate.
ARTICLE IV.
TERMS OF OPTIONS
SECTION 4.1. -- Option Agreement
Each Option shall be evidenced by a written Stock Option Agreement, which
shall be executed by the Optionee and an authorized officer of the Company and
which shall contain such terms and conditions as the Board shall determine,
consistent with the Plan.
SECTION 4.2. -- Option Price
(a) The price of the shares of Common Stock subject to each Option shall be
equal to 100% of the fair market value of such shares on the date such Option is
granted.
(b) For purposes of the Plan, the fair market value of a share of the
Common Stock as of a given grant date shall be: (i) the closing price of a share
of the Common Stock on the principal exchange on which shares of the Common
Stock are then trading, if any, on such grant date, or, if shares were not
traded on such grant date, then on the next preceding trading day during which a
sale occurred; or (ii) if the Common Stock is not traded on an exchange but is
quoted on Nasdaq or a successor quotation system, (1) the last sales price (if
the Common Stock is then listed as a National Market Issue under the NASD
National Market System) or (2) the mean between the closing representative bid
and asked prices (in all other cases) for the Common Stock on such grant date as
reported by Nasdaq or such successor quotation system; or (iii) if the Common
Stock is not publicly traded on an exchange and not quoted on Nasdaq or a
successor quotation system, the mean between the closing bid and asked prices
for the Common Stock, on such grant date, as determined in good faith by the
Board; or (iv) if the Common Stock is not publicly traded, the fair market value
established by the Board acting in good faith.
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SECTION 4.3. -- Option Term
The term of an option shall be determined by the Board in its discretion.
Notwithstanding the foregoing, unless the Board expressly determines otherwise,
the term of each Option shall be ten years from the date the Option was granted.
The Board may extend the term of any outstanding Option in connection with any
Termination of Directorship of the Optionee, or amend any other term or
condition of such Option relating to such a termination.
SECTION 4.4. -- Commencement of Exercise
(a) The period during which the right to exercise an Option in whole or in
part vests in the Optionee shall be set by the Board and the Board may determine
that an Option may not be exercised in whole or in part for a specified period
after it is granted. At any time after the grant of an Option, the Board may, in
its sole discretion and subject to whatever terms and conditions it selects,
accelerate the period during which the right to exercise an Option vests.
(b) No portion of an Option which is unexercisable at Termination of
Directorship shall thereafter become exercisable, except as may be otherwise
provided by the Board either in the Option Agreement or by action of the Board
following grant of the Option.
SECTION 4.5. -- Consideration
In consideration of the granting of the Option, the Optionee shall agree,
in the written Stock Option Agreement, to serve as a Director of the Company
until the next annual meeting of the stockholders of the Company or a Parent
Corporation. Nothing in this Plan or in any Stock Option Agreement hereunder
shall confer upon any Optionee any right to continue as a Director of the
Company or any Parent Corporation.
SECTION 4.6. -- Adjustments in Outstanding Options
In the event that the outstanding shares of the stock subject to Options
are changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend or
combination of shares, the Board shall make an appropriate and equitable
adjustment in the number and kind of shares as to which all outstanding Options,
or portions thereof then unexercised, shall be exercisable, to the end that
after such event the Optionee's proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in an outstanding Option
shall be made without change in the total price applicable to the Option or the
unexercised portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in Option price per share. Any such
adjustment made by the Board shall be final and binding upon all Optionees, the
Company and all other interested persons.
SECTION 4.7. -- Merger, Consolidation, Acquisition, Liquidation or Dissolution
In its absolute discretion, and on such terms and conditions as it deems
appropriate, the Board may provide by the terms of any Option that such Option
cannot be exercised after the merger or consolidation of the Company with or
into another corporation, the acquisition by another corporation or person of
all or substantially all of the Company's assets or 80% or more of the Company's
then outstanding voting stock or the liquidation or dissolution of the Company;
and if the Board so provides, it may, in its absolute discretion and on such
terms and conditions as it deems appropriate, also provide, either by the terms
of such Option or by a resolution adopted prior to the occurrence of such
merger, consolidation, acquisition, liquidation or dissolution, that, for some
period of time prior to such event, such Option shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in Section
4.3(a).
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ARTICLE V.
EXERCISE OF OPTIONS
SECTION 5.1. -- Person Eligible to Exercise
During the lifetime of the Optionee, only he may exercise an Option granted
to him, or any portion thereof. After the death of the Optionee, any exercisable
portion of an Option may, prior to the time when such portion becomes
unexercisable under Section 4.4 or Section 4.7, be exercised by his personal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
SECTION 5.2. -- Partial Exercise
At any time and from time to time prior to the time when an exercisable
Option or exercisable portion thereof become unexercisable under Section 4.4 or
Section 4.7, such Option or portion thereof may be exercised in whole or in
part; provided, however, that the Company shall not be required to issue
fractional shares.
SECTION 5.3. -- Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or his office of all of the following prior
to the time when such Option or such portion becomes unexercisable under Section
4.4 or Section 4.7:
(a) Notice in writing signed by the Optionee or other person then entitled
to exercise such Option or portion, stating that such Option or portion is
exercised, such notice complying with any applicable rules established by the
Board; and
(b) Full payment for the shares with respect to which such Option or
portion is thereby exercised (i) in cash or by check, (ii) in shares of Common
Stock duly endorsed for transfer to the Company valued as provided in Section
4.2(b) on the date of Option exercise, (iii) subject to the timing requirements
of Section 5.4, through the surrender of shares of Common Stock then issuable
upon exercise of the Option, valued as provided in Section 4.2(b) on the date of
Option exercise equal to the aggregate exercise price of the Option or exercised
portion thereof, or (iv) any combination thereof;
(c) Such representations and documents as the Board, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Board may, in its absolute discretion, also
take whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars; and
(d) In the event that the Option or portion thereof shall be exercised
pursuant to Section 5.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the Option
or portion thereof.
SECTION 5.4. -- Certain Timing Requirements
Shares of Common Stock issuable to the Optionee upon exercise of the Option
may be used to satisfy the Option exercise price or the tax withholding
consequences of such exercise only (i) during the period beginning on the third
business day following the date of release of the quarterly or annual summary
statement of revenue and earnings of the Company and ending on the twelfth
business day following such date or (ii) pursuant to an irrevocable written
election by the Optionee to use shares of Common Stock issuable to the Optionee
upon exercise of the Option to pay all or part of the Option price or the
withholding taxes made at least six months prior to payment of such Option price
or withholding taxes.
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SECTION 5.5. -- Conditions to Issuance of Stock Certificates
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which
such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Board shall, in its absolute discretion, deem necessary or advisable;
and
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Board shall, in its absolute discretion,
determine to be necessary or advisable; and
(d) The payment to the Company of all amounts which it is required to
withhold, if any, under federal, state or local law in connection with the
exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise of
the Option as the Board may establish from time to time for reasons of
administrative convenience.
(f) A Director may elect in lieu of paying cash to deliver shares of Common
Stock or direct the Company that shares of Common Stock issuable upon exercise
of the Option (subject to the timing requirements of Section 5.4), be withheld
to satisfy required tax withholding and such shares shall be valued as provided
in Section 4.2(b) on the date of Option exercise.
SECTION 5.6. -- Rights as Stockholders
The holders of Options shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
ARTICLE VI.
ADMINISTRATION
SECTION 6.1. -- Duties and Powers of the Board
It shall be the duty of the Board to conduct the general administration of
the Plan in accordance with its provisions. The Board shall have the power to
interpret the Plan and the Options and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules.
SECTION 6.2. -- Majority Rule
The Board shall act by a majority of its members in office. The Board may
act either by vote at a meeting or by a memorandum or other written instrument
signed by a majority of the Board.
SECTION 6.3. -- Compensation; Professional Assistance; Good Faith Actions
Members of the Board shall receive no additional compensation for their
services under the Plan. All expenses and liabilities incurred by members of the
Board in connection with the administration of the Plan shall be borne by the
Company. The Board may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Board and the Company shall be entitled to rely
upon the advice, opinions or valuations of any such persons. All actions taken
and all interpretations and determinations made by the Board in good faith shall
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<PAGE> 46
be final and binding upon all Optionees, the Company and all other interested
persons. No member of the Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
the Options, and all members of the Board shall be fully protected by the
Company in respect to any such action, determination or interpretation.
ARTICLE VII.
OTHER PROVISIONS
SECTION 7.1. -- Options Not Transferable
No Option or interest or right therein or part thereof shall be liable for
the debts, contracts or engagements of the Optionee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section 7.1 shall
prevent transfers by will or by the applicable laws of descent and distribution.
SECTION 7.2. -- Amendment, Suspension or Termination of the Plan
(a) The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board. However,
without approval of the Company's stockholders given within 12 months before or
after the action by the Board, no action of the Board may, except as provided in
Section 2.3, increase the limit imposed in Section 2.1 on the maximum number of
shares which may be issued on exercise of Options, modify the eligibility
requirements of Section 3.1, reduce the Option price requirements of Section
4.2(a) or extend the limit imposed in Section 7.2(c) on the period during which
Options may be granted. Neither the amendment, suspension nor termination of the
Plan shall, without the consent of the holder of the Option, alter or impair any
rights or obligations under any Option theretofore granted. Notwithstanding the
foregoing, the Plan shall not be amended more than once every six months other
than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act or the rules thereunder.
(b) The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Notwithstanding anything
herein to the contrary, the Plan shall be administered, the Plan may be amended,
and Options shall be granted and may be exercised, only in such a manner as to
conform to such laws, rules and regulations. To the extent permitted by
applicable law, the Plan and Options granted hereunder shall be deemed amended
to the extent necessary to conform to such laws, rules and regulations.
(c) No Option may be granted during any period of suspension nor after
termination of the Plan, and in no event may any Option be granted under the
Plan after April 6, 2005.
SECTION 7.3. -- Intentionally Omitted.
SECTION 7.4. -- Effect of Plan Upon Other Option and Compensation Plans
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for Directors of the Company. Nothing in this Plan
shall be construed to limit the right of the Company to grant or assume options
otherwise than under this Plan in connection with any proper corporate purpose,
including, but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
B-7
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SECTION 7.5. -- Titles
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan.
B-8
<PAGE> 48
CHANCELLOR MEDIA CORPORATION
PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS ON MAY 19, 1998
The undersigned hereby appoint(s) Thomas O. Hicks and Matthew E. Devine,
or either of them, each with full power of substitution, as proxies to vote all
stock in Chancellor Media Corporation that the undersigned would be entitled to
vote on all matters that may come before the 1998 Annual Meeting of Stockholders
and any adjournments thereof. Returned proxy forms will be voted: (1) as
specified on the matters listed on the reverse side of this form; (2) in
accordance with the Directors' recommendations when a choice is not specified;
and (3) in accordance with the judgment of the proxies on any other matters that
properly come before the meeting.
Your shares will not be voted unless your signed Proxy Form is returned to
Chancellor Media Corporation or you otherwise vote at the meeting.
CHANCELLOR MEDIA CORPORATION
P.O. BOX 11263
NEW YORK, N.Y. 10203-0263
<PAGE> 49
<TABLE>
<S> <C> <C> <C>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL OF THE PROPOSALS.
(1) PROPOSAL ONE. FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
Election of Directors listed below [X] for all nominees listed below [X] [X]
Nominees: Vernon E. Jordan, Jr., Perry J. Lewis and Eric C. Neuman as directors for a term expiring at the 2001 Annual Meeting of
Stockholders. (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
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(2) PROPOSAL TWO. Approval of the adoption of the 1998 Chancellor Media (3) PROPOSAL THREE. Approval of the proposed
Corporation Stock Option Plan under which options to purchase shares amendments to the Company's Non-Employee
of Common Stock of the Company may be awarded from time to time to Director Stock Option Plan.
certain officers and key employees of the Company as designated by the
Compensation Committee of the Board of Directors. FOR [X] AGAINST [X] ABSTAIN [X]
FOR [X] AGAINST [X] ABSTAIN [X]
Change of Address and
or Comments Mark Here [X]
Please sign as requested and return promptly
in the enclosed envelope. Executors,
trustees and others signing in a
representative capacity should include
their names and the capacity in which they
sign.
Dated: ,1996
-----------------------------
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Signature(s)
------------------------------------------
Signature(s)
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY, USING THE VOTES MUST BE INDICATED
ENVELOPE PROVIDED. (X) IN BLACK OR IN BLUE INK. [ ]
</TABLE>
