<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
COMMISSION FILE NO. 333-32259
COMMISSION FILE NO. 0-21570 CHANCELLOR MEDIA CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
CORPORATION (Exact Name of Registrant as (Exact Name of Registrant as Specified in
Specified in its Charter) its Charter)
DELAWARE (State or other jurisdiction of DELAWARE (State or other jurisdiction of
incorporation or organization) incorporation or organization)
75-2247099 (I.R.S. Employer Identification 75-2451687 (I.R.S. Employer Identification
Number) Number)
</TABLE>
1845 WOODALL RODGERS FREEWAY, SUITE 1300, DALLAS, TEXAS 75201
(Address of principal executive office, including zip code)
(214) 922-8700
(Registrants' telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Chancellor Media Corporation: NONE
Chancellor Media Corporation of Los Angeles: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Chancellor Media Corporation: COMMON STOCK, $0.01 PAR VALUE
Chancellor Media Corporation of Los Angeles: NONE
---------------------
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting and non-voting common equity held
by non-affiliates of Chancellor Media Corporation as of March 26, 1999, was
approximately $5,518,217,961. Solely for purposes of the preceding calculation,
outstanding shares of Common Stock held by executive officers and directors of
Chancellor Media Corporation have been treated as held by affiliates of
Chancellor Media Corporation. The aggregate market value of the voting and
non-voting common equity held by non-affiliates of Chancellor Media Corporation
of Los Angeles as of March 26, 1999 was zero. As of March 26, 1999, 143,060,582
shares of Common Stock of Chancellor Media Corporation were outstanding and
1,040 shares of Common Stock of Chancellor Media Corporation of Los Angeles were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART III
Item 10. Directors and Executive Officers of the Registrants......... 3
Item 11. Executive Compensation...................................... 8
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 27
Item 13. Certain Relationships and Related Transactions.............. 29
SIGNATURES........... 31
</TABLE>
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This Amendment No. 1 to the Annual Report on Form 10-K of Chancellor Media
Corporation ("Chancellor Media") and Chancellor Media Corporation of Los Angeles
("CMCLA") amends and restates in its entirety Part III of the Annual Report on
Form 10-K of Chancellor Media and CMCLA filed with the Securities and Exchange
Commission on March 31, 1999 (the "Form 10-K"). Capitalized terms used herein
and not otherwise defined shall have the meaning assigned to such terms in the
Form 10-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
The directors and executive officers of Chancellor Media and CMCLA are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas O. Hicks........................... 53 Chairman of the Board and Chief Executive Officer
James E. de Castro........................ 46 Vice Chairman -- President and Chief Executive
Officer of Chancellor Radio and Outdoor Group and
Director
R. Steven Hicks........................... 49 Vice Chairman -- President and Chief Executive
Officer of Chancellor Media Services Group and
Director
D. Geoffrey Armstrong..................... 41 Executive Vice President and Chief Financial
Officer
Kenneth J. O'Keefe........................ 44 Executive Vice President and Chief Operating
Officer of Chancellor Radio Group
James A. McLaughlin....................... 49 President and Chief Operating Officer of Chancellor
Outdoor Group
William S. Banowsky, Jr................... 37 Executive Vice President and General Counsel
Steven Dinetz............................. 52 Director
Thomas J. Hodson.......................... 55 Director
Vernon E. Jordan, Jr...................... 63 Director
Michael J. Levitt......................... 40 Director
Perry J. Lewis............................ 61 Director
Jeffrey A. Marcus......................... 52 Director
John H. Massey............................ 59 Director
Lawrence D. Stuart, Jr.................... 54 Director
J. Otis Winters........................... 66 Director
</TABLE>
Thomas O. Hicks
Mr. Thomas O. Hicks was elected Chairman of the Board of Chancellor Media
and CMCLA in September 1997 and elected Chief Executive Officer in March 1999.
He had been Chairman of the Board of Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company prior to that time since April 1996. Mr.
Thomas O. Hicks is Chairman of the Board and Chief Executive Officer of Hicks,
Muse, Tate & Furst Incorporated ("Hicks Muse"), a private investment firm
located in Dallas, St. Louis, New York, Mexico City and London specializing in
strategic investments, leveraged acquisitions and recapitalizations. From 1984
to May 1989, Mr. Thomas O. Hicks was Co-Chairman of the Board and Co-Chief
Executive Officer of Hicks & Haas, Incorporated, a Dallas based private
investment firm. Mr. Thomas O. Hicks serves as a director of Capstar
Broadcasting Corporation ("Capstar"), LIN Holdings Corp., LIN Television
Corporation, Sybron International Corporation, Inc., Cooperative Computing,
Inc., International Home Foods, Regal Cinemas, Inc., Triton Energy Limited,
D.A.C. Vision Inc., Home Interiors & Gifts, Inc. and Olympus Real Estate
Corporation. Mr. Thomas O. Hicks is the brother of Mr. R. Steven Hicks.
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James E. de Castro
Mr. de Castro was elected Vice Chairman of Chancellor Media and CMCLA and
President and Chief Executive Officer of the Chancellor Radio and Outdoor Group
in March 1999. Prior thereto, Mr. de Castro served as Chief Operating Officer of
Chancellor Media and CMCLA from September 22, 1997 to August 19, 1998, and from
August 19, 1998 to March 15, 1999, Mr. de Castro served as President of the
Chancellor Radio Group. From September 5, 1997 to September 22, 1997, Mr. de
Castro served as Co-Chief Operating Officer of Chancellor Media and CMCLA. Mr.
de Castro was elected Co-Chief Operating Officer and a director of Chancellor
Media in September 1997. Mr. de Castro was previously President of Evergreen
Media Corporation since 1993 and Chief Operating Officer and a director of
Evergreen Media Corporation 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.
R. Steven Hicks
Mr. R. Steven Hicks was elected a director and Vice Chairman of Chancellor
Media and CMCLA and President and Chief Executive Officer of the Chancellor
Media Services Group in March 1999 and has served as President, Chief Executive
Officer and a director of Capstar since June 1997. Mr. R. Steven Hicks has also
served as Chairman of the Board of Capstar from June to September 1997. Mr. R.
Steven Hicks founded Capstar in October 1996. Prior to joining Capstar, Mr. R.
Steven Hicks acted as Chairman of the Board and Chief Executive Officer of
GulfStar Communications, Inc. from January 1987 to July 1997 and as President
and Chief Executive Officer of SFX Broadcasting, Inc. ("SFX") from November 1993
to May 1996. Mr. R. Steven Hicks is a 31-year veteran of the radio broadcasting
industry, including 18 years as a station owner. Mr. R. Steven Hicks is the
brother or Mr. Thomas O. Hicks.
D. Geoffrey Armstrong
Mr. Armstrong was elected Executive Vice President and Chief Financial
Officer of Chancellor Media and CMCLA in March 1999. Mr. Armstrong served as
Executive Vice President and Chief Operating Officer of Capstar from July 1998
to March 1999, and has served as a director of Capstar since July 1998. Mr.
Armstrong has also served as a director of SFX Entertainment, Inc. since
September 1998. Mr. Armstrong served as the Chief Operating Officer and an
Executive Vice President of SFX from November 1996 to May 1998 and served as a
director of SFX from 1993 to 1998. Mr. Armstrong became the Chief Operating
Officer of SFX in June 1996 and served as the Chief Financial Officer and
Treasurer of SFX from 1992 until March 1995. Prior thereto, Mr. Armstrong served
as Executive Vice President and Chief Financial Officer of Capstar, a
predecessor of SFX and unrelated to Capstar Broadcasting Corporation, since
1989. From 1988 to 1989, Mr. Armstrong was the Chief Executive Officer of
Sterling Communications Corporation.
Kenneth J. O'Keefe
Mr. O'Keefe was appointed Chief Operating Officer of the Chancellor Radio
Group in March 1999 and has served as Executive Vice President of Chancellor
Media and CMCLA since September 1997. Mr. O'Keefe had been an Executive Vice
President of Evergreen Media Corporation since February of 1996 and served as a
director of Evergreen from May of 1996 to September 1997. Prior to joining
Evergreen in 1996, Mr. O'Keefe was a director, Chief Financial Officer and
Executive Vice President of Pyramid Communications, Inc. from March 1994 until
Evergreen's acquisition of Pyramid Communications, Inc. on January 17, 1996. Mr.
O'Keefe served in various capacities with Pyramid Communications, Inc. or
predecessor entities during the five-year period prior to his joining Evergreen
in 1996.
James A. McLaughlin
Mr. McLaughlin was appointed Chief Operating Officer of the Chancellor
Outdoor Group in March 1999 and became the President of the Chancellor Outdoor
Group in August 1998. Mr. McLaughlin most recently
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served as Chief Executive Officer of privately-held Triumph Outdoor Holdings,
LLC ("Triumph"). Prior to forming Triumph, Mr. McLaughlin served as President
and Chief Executive Officer of POA Acquisition Corporation, the successor to
Peterson Outdoor Advertising. Prior to joining POA, Mr. McLaughlin was the
Managing Partner of Turner Outdoor Advertising, which was purchased from Ted
Turner in 1983. Mr. McLaughlin began his outdoor advertising career in 1974 with
Creative Displays, holding various management positions as the company grew to
become the fourth largest advertising company in the United States.
William S. Banowsky, Jr.
Mr. Banowsky was elected Executive Vice President and General Counsel of
Chancellor Media and CMCLA in March 1999 and has served as Executive Vice
President and General Counsel of Capstar since January 1997. Mr. Banowsky was an
attorney with Snell, Banowsky & Trent, P.C., Dallas, Texas, for six years before
joining Capstar. Prior to that time, he was an attorney for Johnson & Gibbs,
P.C., Dallas, Texas, for four years.
Steven Dinetz
Mr. Dinetz was elected Co-Chief Operating Officer and a director of
Chancellor Media and CMCLA in September 1997. As of September 22, 1997, Mr.
Dinetz no longer serves as Co-Chief Operating Officer of Chancellor Media and
CMCLA, but continues to serve as a director. Prior to September 1997, Mr. Dinetz
served as President, Chief Executive Officer and a director of Chancellor
Broadcasting Company and Chancellor Radio Broadcasting Company since their
formation and prior thereto was the President and Chief Executive Officer and a
director of Chancellor Communications, a predecessor entity of Chancellor
Broadcasting Company.
Thomas J. Hodson
Mr. Hodson became a director of Chancellor Media and CMCLA in September
1997. Mr. Hodson had previously served as a director of Evergreen Media
Corporation 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. He had been a Vice President
of Stephens, Inc. from 1986 through 1993.
Vernon E. Jordan, Jr.
Mr. Jordan became a director of Chancellor Media and 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 Corporation, Dow Jones & Company, Inc., 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.
Michael J. Levitt
Michael J. Levitt became a director of Chancellor Media and CMCLA on May
19, 1998. Mr. Levitt is a principal of Hicks Muse. Before joining Hicks Muse,
Mr. Levitt was a Managing Director and Deputy Head of Investment Banking with
Smith Barney Inc. from 1993 through 1995. From 1986 through 1993, Mr. Levitt was
with Morgan Stanley & Co. Incorporated, most recently as a Managing Director
responsible for the New York-based Financial Entrepreneurs Group. Mr. Levitt
also serves as a director of Capstar, LIN Holdings Corp., LIN Television
Corporation, Regal Cinemas, Inc., STC Broadcasting, Inc. and International Home
Foods, Inc.
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Perry J. Lewis
Mr. Lewis became a director of Chancellor Media and CMCLA in September
1997. Mr. Lewis had previously served as a director of Evergreen Media
Corporation since Evergreen Media Corporation 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.
Jeffrey A. Marcus
Mr. Marcus served as President and Chief Executive Officer of Chancellor
Media and CMCLA from June 1, 1998 to March 15, 1999. Mr. Marcus became a
director of Chancellor Media and CMCLA in September 1997. Prior to the merger
with Chancellor Broadcasting Company, Mr. Marcus served as a director of
Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company. Prior
to joining Chancellor Media on June 1, 1998, Mr. Marcus served as the Chairman
and Chief Executive Officer of Marcus Cable Properties, Inc. and Marcus Cable
Company, L.L.C. (collectively "Marcus Cable"), the ninth largest cable
television multiple system operator (MSO) in the United States, which Mr. Marcus
formed in 1990. Mr. Marcus continues to serve as Chairman of Marcus Cable and as
a director of Marcus Cable Properties, Inc. 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 Chancellor Media and CMCLA in September
1997. Prior to that time, Mr. Massey served as a director of Chancellor
Broadcasting Company and Chancellor Radio Broadcasting Company. 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. Since 1986, Mr. Massey has served as a director of Gulf-
California Broadcast Company. 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. 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 STC Broadcasting, Inc.
Lawrence D. Stuart, Jr.
Mr. Stuart became a director of Chancellor Media and CMCLA in September
1997. Mr. Stuart previously served as a director of Chancellor Broadcasting
Company and Chancellor Radio Broadcasting Company 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 also serves as a director of Capstar, Home Interiors & Gifts,
Inc. and Arena Brands, Inc.
J. Otis Winters
Mr. Winters became a director of Chancellor Media and CMCLA on May 19,
1998, Mr. Winters currently serves as the non-executive Chairman for The PWS
Group (formerly Pate, Winters & Stone, Inc.). Mr. Winters was Co-founder,
President and director of Avanti Energy Corporation. Mr. Winters also served as
Executive Vice President and a member of the board of directors of the First
National Bank and Trust
6
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Company of Tulsa. Mr. Winters was Executive Vice President and a member of the
board of directors of The Williams Companies, where he served as Chairman of two
major subsidiaries and was responsible for the corporate administrative
department. Mr. Winters also serves as a director and Chairman of the audit and
compensation committee of AMX Corporation, director and Chairman of the audit
committee for Arena Brands, Inc., director and Chairman of the finance and audit
committees for Dynegy, Inc. (formerly NGC Corporation), and director and
Chairman of the executive committee for Walden Residential Properties, Inc.
There are no family relationships between any of the directors and
executive officers of the Company, except that Thomas O. Hicks is the brother of
R. Steven Hicks.
Compensation of Directors
Directors who are also officers of Chancellor Media and CMCLA receive no
additional compensation for their services as directors. Directors of Chancellor
Media and CMCLA who are not officers will receive (i) a fee of $36,000 per
annum; (ii) a $1,000 fee for attendance at board meetings or, if applicable, a
$500 fee for attendance at board meetings by telephone; (iii) a fee of $24,000
per annum for service on the Special Committee or Negotiating Committee ($36,000
for chairman of Special Committee); and (iv) a $2,000 fee for attendance as
chairman of a board committee ($1,000 for attendance by telephone), a $1,000 fee
for attendance at committee meetings or, if applicable, a $500 fee for
attendance at committee meetings by telephone. Directors of Chancellor Media and
CMCLA are also reimbursed for travel expenses and other out-of-pocket costs
incurred in connection with such meetings. Additionally, all non-employee
directors of Chancellor Media and CMCLA in office on the day of Chancellor
Media's annual stockholders meeting are entitled to an award of options to
purchase 25,000 shares of Chancellor Media common stock at an exercise price
equal to the fair market value of such shares on the date of grant.
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ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth all compensation,
including bonuses, stock option awards and other payments, paid or accrued by
Chancellor Media and CMCLA for the three fiscal years ending December 31, 1998,
to Chancellor Media's and CMCLA's five most highly compensated 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, 1998, as well as Chancellor Media's and CMCLA's former Chief
Executive Officer.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION -----------------------------------
----------------------------------------- SECURITIES
OTHER UNDERLYING
NAME AND ANNUAL RESTRICTED OPTIONS LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) STOCK AWARDS (#) PAYOUTS COMPENSATION
- ------------------ ---- -------- ---------- --------------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey A. Marcus......... 1998 $656,250(3) $2,333,333(3) -- -- 1,450,000 -- $ 1,001,885(4)
President, Chief
Executive
Officer and Director
Scott K. Ginsburg......... 1998 $372,222(5) $ -- -- -- 800,000 -- $37,781,091(6)
Former President and 1997 850,000 3,615,000 -- -- 500,000 -- 9,101(6)
Chief Executive Officer 1996 750,000 956,000 -- -- 375,000 -- 9,776(6)
James E. de Castro........ 1998 $900,000 $3,000,000 -- -- 960,000 -- $ 6,003,903(7)
Vice Chairman, President
and 1997 825,000 2,581,000 -- -- 425,000 -- 2,630(7)
Chief Executive
Officer -- 1996 750,000 704,000 -- -- 75,000 -- 2,455(7)
Chancellor Radio and
Outdoor Group and
Director
Matthew E. Devine......... 1998 $500,000 $2,000,000 -- -- 720,000 -- $ 5,112,825(8)
Senior Vice President
and 1997 375,000 1,205,000 -- -- 262,500 -- --
Chief Financial Officer 1996 300,000 352,000 -- -- 37,500 -- --
Kenneth J. O'Keefe........ 1998 $500,000 $1,500,000 -- -- 100,000 -- $ --
Executive Vice 1997 320,000 1,205,000 -- -- -- -- --
President -- Operations 1996 210,000(9) 210,000 -- -- 300,000 -- --
James A. McLaughlin....... 1998 $181,944(10) $ 375,000 -- -- 360,000 -- $ 1,001,273(11)
President -- Chancellor
Outdoor Group
</TABLE>
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(1) No information is set forth in this section regarding Thomas O. Hicks, who
served as interim Chief Executive Officer of Chancellor Media and CMCLA
from April 14, 1998 through June 1, 1998. Mr. Thomas O. Hicks received fees
in conjunction with his service as Chairman of the Board of Chancellor
Media and CMCLA, but received no additional compensation in conjunction
with his service as interim Chief Executive Officer.
(2) The aggregate annual amount of perquisites and other personal benefits,
securities or property does not exceed $50,000 or 10% of the total of the
annual salary and bonus for the named officer.
(3) Represents compensation for the period beginning June 1, 1998, when Mr.
Marcus joined Chancellor Media and CMCLA.
(4) Represents a one-time execution bonus of $1,000,000 paid to Mr. Marcus in
connection with his employment agreement effective June 1, 1998 and
payments of $1,885 for a term life insurance policy for Mr. Marcus for
1998.
(5) Represents compensation for the period January 1, 1998 to the date of Mr.
Ginsburg's resignation effective April 14, 1998 and four weeks of accrued
and unpaid vacation.
(6) Other compensation for 1998 represents compensation related to Mr.
Ginsburg's resignation on April 14, 1998 of (a) a lump sum severance
payment of $20,000,000; (b) compensation expense of $16,000,000 related to
the grant of 800,000 options at an exercise price of $23.25 that are
exercisable one third at April 14, 1998, 1999 and 2000, respectively; and
(c) consulting fees of $1,770,833 earned by
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Mr. Ginsburg for the period April 14, 1998 to December 31, 1998 and
payments of $10,258 for term life insurance policies for Mr. Ginsburg
during 1998. Other compensation for 1997 and 1996 represents payments for
term life insurance policies for Mr. Ginsburg.
(7) Other compensation for 1998 represents a one-time cash payment of
$5,000,000 and a one-time execution bonus of $1,000,000 paid to Mr. de
Castro in connection with Mr. de Castro's employment agreement effective
April 17, 1998 and payments of $3,903 for a term life insurance policy for
Mr. de Castro for 1998. Other compensation for 1997 and 1996 represents
payments for a term life insurance policy for Mr. de Castro.
(8) Other compensation for 1998 represents (i) a one-time cash payment of
$2,000,000 and a one-time execution bonus of $1,000,000 paid to Mr. Devine
in connection with Mr. Devine's employment agreement effective April 17,
1998; (ii) a lump sum severance payment of $2,000,000 and other payments of
$111,552 paid to Mr. Devine in connection with Mr. Devine's resignation and
(iii) payments of $1,273 for a term life insurance policy.
(9) Represents compensation for the period beginning March 1, 1996, when Mr.
O'Keefe joined Chancellor Media and CMCLA.
(10) Represents compensation for the period beginning August 18, 1998, when Mr.
McLaughlin joined Chancellor Media and CMCLA.
(11) Represents a one-time execution bonus of $1,000,000 paid to Mr. McLaughlin
in connection with his employment agreement effective August 18, 1998 and
payments of $1,273 for a term life insurance policy.
Option Grants in Last Fiscal Year. The following table sets forth
information regarding options to purchase common stock granted by Chancellor
Media to its Chief Executive Officer at the end of the 1998 fiscal year and the
other executive officers named in the Summary Compensation Table during the 1998
fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL GRANT DATE VALUE
UNDERLYING OPTIONS MARKET PRICE --------------------------
OPTIONS GRANTED TO EXERCISE OR ON DATE OF GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE GRANT EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR ($/SHARE) ($/SHARE) DATE $(2)
- ---- ---------- ------------ ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey A. Marcus............... 1,250,000 16.9% $42.13 $42.13 4/29/08 $26,513,246
200,000 2.7% 41.50 41.50 10/1/08 4,179,180
Scott K. Ginsburg............... 800,000 10.8% 23.25 42.13 4/20/05 22,551,494
James E. de Castro.............. 800,000 10.8% 42.13 42.13 5/18/08 16,968,477
160,000 2.2% 41.50 41.50 10/1/08 3,343,344
Matthew E. Devine............... 720,000 9.7% 42.13 42.13 5/18/08 15,271,630
Kenneth J. O'Keefe.............. 100,000 1.4% 37.31 37.31 1/01/05 1,878,768
James A. McLaughlin............. 300,000 4.1% 48.38 48.38 8/18/08 7,307,271
60,000 0.8% 48.38 48.38 8/18/08 1,461,454
</TABLE>
- ---------------
(1) Represents options to purchase shares of common stock granted under the
Chancellor Media Corporation 1998 Stock Option Plan. The options awarded to
Mr. Marcus are exercisable in whole or part beginning on April 29, 1998. The
options awarded to Mr. Ginsburg are exercisable in whole or part beginning
on April 20, 1998. The options awarded to Mr. De Castro are exercisable in
whole or part beginning on April 17, 1998. The options awarded to Mr. Devine
are exercisable in whole or part beginning on April 17, 1998. The options
awarded to Mr. O'Keefe are exercisable in whole or part beginning on January
1, 1998. The 300,000 share grant of options awarded to Mr. McLaughlin are
exercisable in whole or part beginning on August 18, 1998. The 60,000 share
grant of options awarded to Mr. McLaughlin are
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<PAGE> 10
exercisable in whole or part beginning on August 18, 1999. The options may
expire earlier upon the occurrence of certain merger or consolidation
transactions involving Chancellor Media. Chancellor Media 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 Chancellor Media 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 Chancellor Media 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) 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
39.91%; risk-free interest rate of 4.80%, and expected life of seven years.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
The following table sets forth information concerning option exercises in
the year ended December 31, 1998 by Chancellor Media's and CMCLA's Chief
Executive Officer at the end of the 1998 fiscal year 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, 1998.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey A. Marcus......... -- -- 861,742 657,500 $6,183,838 $4,232,575
Scott K. Ginsburg......... -- -- 1,141,667 533,333 32,714,050 13,133,325
James E. de Castro........ 150,000 $6,099,500 2,405,000 -- 59,994,675 --
Matthew E. Devine......... -- -- 1,470,000 -- 31,082,250 --
Kenneth J. O'Keefe........ -- -- 100,000 300,000 1,056,500 11,163,000
James A. McLaughlin....... -- -- 75,000 285,000 -- --
</TABLE>
- ---------------
(1) Based upon a per share price for the Chancellor Media common stock of
$47.875. This price represents the closing price for the Chancellor Media
common stock on The Nasdaq National Market System on December 31, 1998.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
de Castro Employment Agreement
On October 1, 1998, Chancellor Media and CMCLA entered into an amended and
restated employment agreement with Mr. de Castro, effective as of April 17,
1998. The de Castro employment agreement, which has a term that extends through
April 17, 2003, provides for an initial annual base salary of $900,000 for the
first year of the employment agreement, to be subject to increase each year by a
percentage equal to the percentage change in the consumer price index during the
preceding year (provided that the base salary in any year cannot be less than
the base salary in the prior year). In addition, the de Castro employment
agreement provides for an annual bonus based upon a percentage of the amount by
which Chancellor Media exceeds an annual performance target which is defined in
the de Castro employment agreement. The de Castro employment agreement provides
that, on the effective date of the employment agreement and on each of the first
four anniversaries of the employment agreement on which Mr. de Castro remains
employed by Chancellor Media, Mr. de Castro shall be granted options to purchase
160,000 shares of common stock. If Mr.
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<PAGE> 11
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 effective date of the de Castro employment
agreement, Mr. de Castro will receive on the termination date a number of
options equal to 800,000 minus the number of options previously granted to Mr.
de Castro under the preceding sentence prior to that date. The de Castro
employment agreement provides (i) for a signing bonus in the gross amount of
$1,000,000; (ii) that Chancellor Media shall make a one-time cash payment to Mr.
de Castro of $5,000,000; and (iii) that Chancellor Media shall grant to Mr. de
Castro stock options to purchase 800,000 shares of common stock at a price of
$42.125.
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. The annual option grant shall be at a price per
share equal to the market price for the common stock at the close of trading on
the day immediately preceding the date of the grant; provided, however, that
with respect to any options the grant of which is accelerated because Mr. de
Castro's employment is terminated as the result of a "change of control," the
exercise price of such options will be the lower of (i) the exercise price equal
to the average last reported sale price of the common stock for the 30 trading
days prior to the ten trading days ending at the close of the trading day prior
to the day of any announcement of such "change of control," and (ii) the
exercise price equal to the market price of the common stock at the close of the
trading day immediately preceding the date of grant.
The de Castro employment agreement provides that, in the event of
termination of Mr. de Castro's employment by Chancellor Media without "cause" or
by Mr. de Castro with "good reason," Chancellor Media 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 Chancellor Media to terminate employment or to become
employed by any other radio station, Chancellor Media shall continue to pay Mr.
de Castro his applicable base salary through the fifth anniversary of the
effective date of the de Castro employment agreement. In the event of
termination by Mr. de Castro of his employment for other than "good reason,"
Chancellor Media also has the right, in exchange for the payment at the end of
each calendar year through December 31, 2002, of an amount equal Mr. de Castro's
average bonus (the greater of actual bonus and $1,600,000 in the applicable
year), and on the last day of the calendar year ended December 31, 2003, make a
payment to Mr. de Castro equal to the product of Mr. de Castro's average bonus
(the greater of actual bonus or $1,600,000 in the applicable year) multiplied by
the fraction of the calendar year which precedes the fifth anniversary of the
effective date of the de Castro employment agreement, to require that Mr. de
Castro not be employed by or perform activities on behalf of or have ownership
interest in any broadcasting or related businesses. 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,
Chancellor Media 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. The de Castro employment agreement provides that if
Chancellor Media provides employment related benefits in an aggregate amount
greater than or on more favorable terms as are granted to any other senior
executives, except for benefits and employment inducements provided to the Chief
Executive Officer, Mr. de Castro would be provided benefits in substantially
comparable amount and/or under substantially comparable terms, on an aggregate
basis.
Chancellor Media and CMCLA are currently negotiating an amendment to Mr. de
Castro's employment agreement that is expected to provide for the following: (i)
an increase in Mr. de Castro's base salary to $950,000; (ii) an amendment to the
bonus provisions contained in his agreement to provide only for discretionary
bonuses as determined by the Compensation Committee, based upon the
recommendation of the Chief Executive Officer; (iii) the acceleration of the
grant, subject to four year vesting in equal amounts on each of April 17, 1999,
2000, 2001 and 2002, of options to acquire 640,000 shares of Chancellor Media
common stock provided for in his employment agreement; (iv) a grant of
additional options to acquire
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<PAGE> 12
1,000,000 shares of Chancellor Media common stock with (A) an exercise price of
$46.63 per share, (B) 20% of the shares of Chancellor Media common stock
issuable pursuant to such options vesting annually over five years, and (C)
exercisability conditioned upon the average fair market value of the Chancellor
Media common stock, calculated on a daily basis, being equal to or exceeding
$100.00 per share for a period of 30 consecutive days during the five-year
period commencing on the date of grant; and (v) accelerated vesting of all
unvested options upon termination by Mr. de Castro for "good reason" or by
Chancellor Media without "cause."
R. Steven Hicks Employment Agreement
On April 29, 1999, Chancellor Media and CMCLA entered into an employment
agreement with Mr. R. Steven Hicks, effective as of March 15, 1999. The R.
Steven Hicks employment agreement provides for the following: (i) a five year
term; (ii) base salary of $950,000, subject to increase each year by a
percentage equal to the percentage change in the consumer price index during the
preceding year; (iii) a discretionary bonus as determined by Chancellor Media's
Compensation Committee, based upon the recommendation of the Chief Executive
Officer; (iv) a grant of options to purchase 1,000,000 shares of Chancellor
Media common stock not subject to stockholder approval of the proposed
Chancellor Media Corporation 1999 Stock Option Plan (the "1999 Plan") with (A)
an exercise price of $46.63 per share, (B) 20% of the shares of Chancellor Media
common stock issuable pursuant to such options vesting annually over five years,
and (C) exercisability conditioned upon the average fair market value of
Chancellor Media common stock, calculated on a daily basis, being equal to or
exceeding $100.00 per share for a period of 30 consecutive days during the
five-year period commencing on the date of grant; (v) accelerated vesting of all
unvested options upon termination by Mr. R. Steven Hicks for "good reason" or by
Chancellor Media without "cause"; (vi) in the event of termination of Mr. R.
Steven Hicks' employment by Chancellor Media without "cause" or by Mr. R. Steven
Hicks for "good reason," a one-time cash payment of $5,000,000 less applicable
employee withholding taxes will be paid to Mr. R. Steven Hicks; (vii) an
agreement by Mr. R. Steven Hicks to not induce any employee of Chancellor Media
to terminate employment or to become employed by any other competitive business
(the "Hicks Non-Solicitation Agreement") for the original five-year term of the
employment agreement; (viii) in the event of termination of Mr. R. Steven Hicks'
employment by Mr. R. Steven Hicks for other than "good reason," in exchange for
the Hicks Non-Solicitation Agreement, Chancellor Media will continue to pay Mr.
R. Steven Hicks his applicable base salary through the fifth anniversary of the
effective date of his employment agreement; (ix) in the event of termination by
Mr. R. Steven Hicks of his employment for other than "good reason," Chancellor
Media also has the right, in exchange for the payment at the end of each
calendar year through December 31, 2003, of an amount equal to Mr. R. Steven
Hicks' average bonus (the greater of actual bonus and $1,600,000 in the
applicable year), and on the last day of the calendar year ended December 31,
2004, make a payment to Mr. R. Steven Hicks equal to the product of Mr. R.
Steven Hicks' average bonus (the greater of actual bonus and $1,600,000 in the
applicable year) multiplied by the fraction of the calendar year which precedes
the fifth anniversary of the effective date of R. Steven Hicks' employment
agreement, to require that Mr. R. Steven Hicks not to be employed by or perform
activities on behalf of or have ownership interest in any broadcasting or
related businesses; (x) in the event of termination by reason of expiration or
non-renewal of his employment agreement, Chancellor Media will make a one-time
cash payment to Mr. R. Steven Hicks equal to two times the amount of his annual
base salary for the contract year in which such employment terminates; and (xi)
if Chancellor Media provides employment related benefits in an aggregate amount
greater than or on more favorable terms as are granted to any other senior
executives, Mr. R. Steven Hicks would be provided benefits in substantially
comparable amount and/or under substantially comparable terms, on an aggregate
basis.
Mr. R. Steven Hicks continues to serve as the President and Chief Executive
Officer of Capstar. As a result, his employment agreement provides that Mr. R.
Steven Hicks is obligated to use his good faith efforts to allocate his time
reasonably between Capstar and Chancellor Media. Additionally, Mr. R. Steven
Hicks' base salary of $950,000 consists of his base salary for his positions at
both Capstar and Chancellor Media. Capstar and Chancellor Media are obligated to
split the cost of Mr. R. Steven Hicks' base salary, with Chancellor Media being
obligated to pay $400,000, plus 50% of the remaining $550,000 in base salary.
Chancellor Media and Capstar are obligated to split evenly all other
compensation paid to Mr. R. Steven
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<PAGE> 13
Hicks and Chancellor Media reimburses Capstar for 50% of the cost of any and all
benefit plans of Capstar in which Mr. R. Steven Hicks participates.
Armstrong Employment Agreement
Chancellor Media and CMCLA expect to enter into an employment agreement
with Mr. Armstrong, effective as of March 15, 1999. The Armstrong employment
agreement is expected to provide for the following: (i) a five year term; (ii)
base salary of $550,000, subject to increase each year by a percentage equal to
the percentage change in the consumer price index during the preceding year;
(iii) a discretionary bonus as determined by Chancellor Media's Compensation
Committee, based upon the recommendation of the Chief Executive Officer; (iv) a
grant of options to purchase 500,000 shares of Chancellor Media common stock not
subject to stockholder approval of the 1999 Plan with (A) an exercise price of
$46.63 per share, (B) 20% of the shares of Chancellor Media common stock
issuable pursuant to such options vesting annually over five years, and (C)
exercisability conditioned upon the average fair market value of Chancellor
Media common stock, calculated on a daily basis, being equal to or exceeding
$100.00 per share for a period of 30 consecutive days during the five-year
period commencing on the date of grant; (v) accelerated vesting of all unvested
options upon termination by Mr. Armstrong for "good reason" or by Chancellor
Media without "cause"; (vi) in the event of termination of Mr. Armstrong's
employment by Chancellor Media without "cause" or by Mr. Armstrong for "good
reason," a one-time cash payment will be paid to Mr. Armstrong equal to two
times Mr. Armstrong's annual base salary for the contract year in which such
employment terminates; (vii) Mr. Armstrong will be subject to, at Chancellor
Media's option, a non-solicitation provision pursuant to which Mr. Armstrong
will not be permitted to induce any employee of Chancellor Media to terminate
employment or to become employed by any competitive business for up to the
original term of his employment agreement in exchange for the continued payment
of his base salary (net of any other severance payments made to Mr. Armstrong);
(viii) an agreement by Mr. Armstrong not to be employed by or perform activities
on behalf of or have ownership interest in any broadcasting or related
businesses for the ninety-day period following termination of his employment;
and (ix) if Chancellor Media provides employment related benefits in an
aggregate amount greater than or on more favorable terms as are granted to any
other executive vice presidents, Mr. Armstrong would be provided benefits in
substantially comparable amount and/or under substantially comparable terms, on
an aggregate basis.
Banowsky Employment Agreement
On April 29, 1999, Chancellor Media and CMCLA entered into an employment
agreement with Mr. Banowsky, effective as of March 15, 1999. The Banowsky
employment agreement provides for the following: (i) a five year term; (ii) base
salary of $400,000, subject to increase each year by a percentage equal to the
percentage change in the consumer price index during the preceding year; (iii) a
discretionary bonus as determined by Chancellor Media's Compensation Committee,
based upon the recommendation of the Chief Executive Officer; (iv) a grant of
options to purchase 400,000 shares of Chancellor Media common stock not subject
to stockholder approval of the 1999 Plan with (A) an exercise price of $46.63
per share, (B) 20% of the shares of Chancellor Media common stock issuable
pursuant to such options vesting annually over five years, and (C)
exercisability conditioned upon the average fair market value of Chancellor
Media common stock, calculated on a daily basis, being equal to or exceeding
$100.00 per share for a period of 30 consecutive days during the five-year
period commencing on the date of grant; (v) accelerated vesting of all unvested
options upon termination by Mr. Banowsky for "good reason" or by Chancellor
Media without "cause"; (vi) in the event of termination of Mr. Banowsky's
employment by Chancellor Media without "cause" or by Mr. Banowsky for "good
reason," a one-time cash payment will be paid to Mr. Banowsky equal to two times
Mr. Banowsky's annual base salary for the contract year in which such employment
terminates; (vii) Mr. Banowsky will be subject to, at Chancellor Media's option,
a non-solicitation provision pursuant to which Mr. Banowsky will not be
permitted to induce any employee of Chancellor Media to terminate employment or
to become employed by any competitive business for up to the original term of
his employment agreement in exchange for the continued payment of his base
salary (net of any other severance payments made to Mr. Banowsky); (viii) an
agreement by Mr. Banowsky not to be employed by or perform activities on behalf
of or have ownership interest in any broadcasting or related businesses for the
ninety-day period
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<PAGE> 14
following termination of his employment; and (ix) if Chancellor Media provides
employment related benefits in an aggregate amount greater than or on more
favorable terms as are granted to any other executive vice presidents, Mr.
Banowsky would be provided benefits in substantially comparable amount and/or
under substantially comparable terms, on an aggregate basis.
Mr. Banowsky continues to serve as the Executive Vice President and General
Counsel of Capstar. As a result, his employment agreement provides that Mr.
Banowsky is obligated to use his good faith efforts to allocate his time
reasonably between Capstar and Chancellor Media. Additionally, Mr. Banowsky's
base salary of $400,000 consists of his base salary for his positions at both
Capstar and Chancellor Media. Capstar and Chancellor Media are obligated to
split the cost of Mr. Banowsky's base salary, with Chancellor Media being
obligated to pay $75,000, plus 50% of the remaining $325,000 in base salary.
Chancellor Media and Capstar are obligated to split evenly all other
compensation paid to Mr. Banowsky and Chancellor Media reimburses Capstar for
50% of the cost of any and all benefit plans of Capstar in which Mr. Banowsky
participates.
McLaughlin Employment Agreement
On October 1, 1998, Chancellor Media and CMCLA entered into an amended and
restated employment agreement with Mr. McLaughlin, to be effective as of August
18, 1998, that has a term that extends through August 18, 2003 and provides for
an annual base salary of $500,000 for the first year of the employment
agreement, subject to increase each year by a percentage equal to the percentage
change in the consumer price index during the preceding year (provided that the
base salary in any year cannot be less than the base salary in the prior year).
The McLaughlin employment agreement provides for Mr. McLaughlin to receive an
annual bonus as determined by Chancellor Media's Compensation Committee, based
upon the recommendation of the Chief Executive Officer. The McLaughlin
employment agreement also provides that on the agreement date and on each of the
first four anniversaries of the employment agreement on which Mr. McLaughlin
remains employed by Chancellor Media, Mr. McLaughlin shall be granted options to
purchase 60,000 shares of the common stock. If Mr. McLaughlin's employment is
terminated without "cause," as defined in the McLaughlin employment agreement,
or if Mr. McLaughlin terminates his employment for "good reason," as defined in
the McLaughlin employment agreement, prior to the fifth anniversary of the
effective date of the McLaughlin employment agreement, Mr. McLaughlin will
receive on the termination date a number of options equal to 300,000 minus the
number of options previously granted to Mr. McLaughlin under the preceding
sentence prior to that date. In addition, as an execution bonus, Chancellor
Media granted to Mr. McLaughlin options to purchase 300,000 shares of common
stock at a price of $48.375 per share 25% of which vested on the effective date
of the employment agreement and 25% of which will vest on each of the three
anniversaries of the date of grant. Chancellor Media also paid to Mr. McLaughlin
a one-time execution bonus in the gross amount of $1,000,000. The McLaughlin
employment agreement provides that all options granted under the McLaughlin
employment agreement will be exercisable for ten years from the date of grant of
the option, notwithstanding any termination of employment. The annual option
grant shall be at a price per share equal to the market price for the common
stock at the close of trading on the day immediately preceding the date of the
grant; provided, however, that with respect to any options the grant of which is
accelerated because Mr. McLaughlin's employment is terminated as the result of a
"change of control," the exercise price of such options will be the lower of (i)
the exercise price equal to the average last reported sale price of the common
stock for the 30 trading days prior to the ten trading days ending at the close
of the trading day prior to the day of any announcement of such "change of
control," and (ii) the exercise price equal to the market price of the common
stock at the close of the trading day immediately preceding the date of grant.
The McLaughlin employment agreement provides that, in the event of
termination of Mr. McLaughlin's employment by Chancellor Media without "cause"
or by Mr. McLaughlin with "good reason," Chancellor Media shall make a one-time
cash payment to Mr. McLaughlin in a gross amount so that the net payments
retained by Mr. McLaughlin, after payment by the Company of any excise taxes
imposed by Section 4999 of the Code with respect to that payment, shall equal
$1,000,000.
The McLaughlin employment agreement further provides that, in the event of
termination of Mr. McLaughlin's employment by Mr. McLaughlin for other than
"good reason," in exchange for
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<PAGE> 15
Mr. McLaughlin's agreement not to induce any employee of any media company owned
by Chancellor Media to terminate employment or to become employed by any other
media company, Chancellor Media shall continue to pay Mr. McLaughlin one-half of
his applicable base salary through the earlier of the fifth anniversary of the
effective date of the employment agreement or the second anniversary of the
termination of employment. In the event of termination of Mr. McLaughlin's
employment other than for "good reason," Chancellor Media also has the right, in
exchange for the payment at the end of each calendar year preceding the earlier
of the fifth anniversary of the effective date or the second anniversary of
termination, an amount equal to one-half of Mr. McLaughlin's average bonus, and
on the last day of the calendar year which includes the earlier of the fifth
anniversary of the effective date or the second anniversary of termination, an
amount equal to the product of one-half Mr. McLaughlin's average bonus
multiplied by the fraction of such calendar year which precedes the earlier of
the fifth anniversary of the effective date or the second anniversary of
termination, to require that Mr. McLaughlin not be employed by or perform
activities on behalf of or have an ownership interest in any media company
serving the same market as any media company owned by Chancellor Media.
O'Keefe Employment Agreement
In February of 1996, Chancellor Media and CMCLA entered into an 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 Chancellor Media exceeds various annual performance targets as
defined in the agreement. The agreement also provides that Mr. O'Keefe is
eligible for options to purchase common stock. Under 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 Chancellor Media 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 selected events specified in his
employment agreement, including Mr. O'Keefe's death or disability, a change in
control of Chancellor Media, termination without cause and a material breach of
the employment agreement by Chancellor Media leading to the resignation of Mr.
O'Keefe. The agreement terminates upon the death of Mr. O'Keefe and may be
terminated by Chancellor Media upon the disability of Mr. O'Keefe or for or
without "cause," as defined in the agreement. During the term of the agreement,
Mr. O'Keefe is prohibited from engaging in certain activities competitive with
the business of Chancellor Media. However, with the approval of Chancellor
Media, Mr. O'Keefe may engage in activities not directly competitive with the
business of Chancellor Media as long as those activities do not materially
interfere with Mr. O'Keefe's employment obligations. On March 1, 1997, Evergreen
Media Corporation and Mr. O'Keefe amended the O'Keefe employment agreement in
order to make selected provisions of the O'Keefe employment agreement comparable
to those contained in Mr. de Castro's and Mr. Devine's former employment
agreement.
On September 4, 1997, Chancellor Media and CMCLA amended its employment
agreement with Mr. O'Keefe. As a result of the O'Keefe amendment, the O'Keefe
employment agreement expired as of December 31, 1997, and the O'Keefe amendment
was 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 various
annual performance targets which are defined in the O'Keefe amendment. The
O'Keefe amendment provides that, on January 1, 1998 and 1999, since Mr. O'Keefe
remained employed by Chancellor Media on those dates, Mr. O'Keefe was 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, all options became exercisable on February 28, 1999, since
Mr. O'Keefe remained employed by Chancellor Media on that date.
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 under the O'Keefe
15
<PAGE> 16
amendment will be granted at a price per share equal to the market price for the
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 Chancellor Media without
"cause," Chancellor Media 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.
Chancellor Media and CMCLA are currently negotiating a new employment
agreement with Mr. O'Keefe that is expected to provide for the following: (i) a
five year term; (ii) an increase in Mr. O'Keefe's base salary to $550,000,
subject to increases each year by a percentage equal to the percentage change in
the consumer price index during the preceding year; (iii) a discretionary bonus
as determined by Chancellor Media's Compensation Committee, based upon the
recommendation of the Chief Executive Officer; (iv) a grant of options to
acquire 500,000 shares of Chancellor Media common stock with (A) an exercise
price of $46.63 per share, (B) 20% of the shares of Chancellor Media common
stock issuable pursuant to such options vesting annually over five years, and
(C) exercisability conditioned upon the average fair market value of the
Chancellor Media common stock, calculated on a daily basis, being equal to or
exceeding $100.00 per share for a period of 30 consecutive days during the
five-year period commencing on the date of grant; (v) accelerated vesting of all
unvested options upon termination by Mr. O'Keefe for "good reason" or by
Chancellor Media without "cause"; (vi) in the event of termination of Mr.
O'Keefe's employment by Chancellor Media without "cause" or by Mr. O'Keefe for
"good reason," a one-time cash payment will be paid to Mr. O'Keefe equal to two
times Mr. O'Keefe's annual base salary for the contract year in which such
employment terminates; (vii) Mr. O'Keefe will be subject to, at Chancellor
Media's option, a non-solicitation provision pursuant to which Mr. O'Keefe will
not be permitted to induce any employee of Chancellor Media to terminate
employment or to become employed by any competitive business for up to the
original term of his employment agreement in exchange for continued payment of
his base salary (net of any other severance payments made to Mr. O'Keefe);
(viii) an agreement by Mr. O'Keefe not to be employed by or perform activities
on behalf of or have ownership interest in any broadcasting or related
businesses for the ninety-day period following termination of his employment;
and (ix) if Chancellor Media provides employment related benefits in an
aggregate amount greater than or on more favorable terms as are granted to any
other executive vice presidents, Mr. O'Keefe would be provided benefits in
substantially comparable amount and/or under substantially comparable terms, on
an aggregate basis.
Marcus Employment Agreement
Prior to March 15, 1999, Mr. Marcus served as President and Chief Executive
Officer of Chancellor Media and CMCLA. Chancellor Media and CMCLA entered into
an amended and restated employment agreement as of October 1, 1998 with Jeffrey
A. Marcus, which was effective as of June 1, 1998. The Marcus employment
agreement, which had a term that extended through June 1, 2003, provided for an
initial annual base salary of $1,125,000 for the first year of the employment
agreement, subject to increase each year by a percentage equal to the percentage
change in the consumer price index during the preceding year (provided that the
base salary in any year cannot be less than the base salary in the prior year).
The Marcus employment agreement provided for a one-time execution bonus in the
gross amount of $1,000,000. In addition, the Marcus employment agreement
provided for an annual bonus in an amount to be determined by Chancellor Media's
Compensation Committee in its reasonable discretion; provided, however, the
annual bonus would in no event to be less than $2,000,000 nor greater than
$4,000,000. The Marcus employment agreement provides that, on the effective date
of the employment agreement and on each of the four anniversaries of the
employment agreement on which Mr. Marcus remained employed by Chancellor Media,
Mr. Marcus would be granted options to purchase 200,000 shares of the common
stock. If Mr. Marcus' employment was terminated without "cause," as defined in
the Marcus employment agreement, or if Mr. Marcus terminated his employment for
"good reason," as defined in the Marcus employment agreement, prior to the
fourth annual anniversary of the effective date of the Marcus employment
agreement, Mr. Marcus would receive on such termination date a number of options
equal to 1,000,000 minus the number of options previously granted to Mr. Marcus
under the preceding sentence prior to that date. The Marcus employment agreement
provided that all options granted under the Marcus employment agreement would be
exercisable for ten years from the
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<PAGE> 17
date of grant of the options, notwithstanding any termination of employment, at
a price per share equal to the market price for the common stock at the close of
trading on the day immediately preceding the date of the grant; provided,
however, that with respect to any options the grant of which is accelerated
because Mr. Marcus' employment was terminated as the result of a "change of
control," the exercise price of such options would be the lower of (i) the
exercise price equal to the average last reported sale price of the common stock
for the 30 trading days prior to the ten trading days ending at the close of the
trading day prior to the day of any announcement of such "change of control,"
and (ii) the exercise price equal to the market price of the common stock at the
close of the trading day immediately preceding the date of grant.
Under the Marcus employment agreement, Mr. Marcus was also granted options
to purchase 1,250,000 shares of Common Stock, one-half of which would vest on
the date of the grant and one-half of which would vest on the 18th month
anniversary of the date of the grant if and to the extent that a termination of
employment had not occurred, provided that in the event of a termination of
employment by Chancellor Media without "cause" or by Mr. Marcus for "good
reason," all such options would vest and become exercisable on the date of such
termination of employment. Each such option would be exercisable for ten years
from the date of grant of those options, notwithstanding any termination of
employment, at a price of $42.125 per share. The Marcus employment agreement
also provided that, in the event of termination of Mr. Marcus's employment by
Chancellor Media without "cause" or by Mr. Marcus with "good reason," Chancellor
Media would make a one-time cash payment to Mr. Marcus in a gross amount such
that the net payments retained by Mr. Marcus, after payment by Chancellor Media
of excise taxes imposed by Section 4999 of the Code with respect to that
payment, to the extent applicable, shall equal $6,250,000.
The Marcus employment agreement further provided that, in the event of
termination of Mr. Marcus's employment by Mr. Marcus for other than "good
reason," in exchange for Mr. Marcus's agreement not to induce any employee of
any radio station owned by Chancellor Media to terminate employment or to become
employed by any other radio station, Chancellor Media would continue to pay Mr.
Marcus his applicable base salary through the fifth anniversary of the effective
date. In the event of termination of Mr. Marcus' employment for other than "good
reason," Chancellor Media also had the right, in exchange for the payment at the
end of each calendar year until through December 31, 2003, of an amount equal to
Mr. Marcus' average bonus, and on the last day of the calendar year which
included the fifth anniversary of the Marcus employment agreement, make a
payment equal to the product of Mr. Marcus's average bonus multiplied by the
fraction of each calendar year which precedes the fifth anniversary of the
effective date of the Marcus employment agreement, to require that Mr. Marcus
not be employed by or perform activities on behalf of or have ownership interest
in any radio or television broadcasting station serving the same market as any
radio station owned by Chancellor Media, or in connection with any business
enterprise that is directly or indirectly engaged in any of the business
activities in which any business owned by Chancellor Media has significant
involvement, subject to certain exceptions. The Marcus employment agreement
further provided that if Mr. Marcus's employment was terminated by reason of
expiration or non-renewal of the Marcus employment agreement, Chancellor Media
would make a one-time cash payment to Mr. Marcus equal to two times the amount
of his annual base salary for the contract year in which employment terminated.
The Marcus employment agreement also provided that Mr. Marcus would be entitled
to receive personal security services, to be paid for by Chancellor Media, and
certain other customary benefits and perquisites.
In connection with Mr. Marcus' resignation as President and Chief Executive
Officer of Chancellor Media and CMCLA in March 1999, Mr. Marcus, his spouse, and
Chancellor Media and CMCLA entered into a termination agreement dated as of
March 15, 1999. Pursuant to that agreement, Mr. Marcus resigned as President and
Chief Executive Officer and from any other appointments or positions which he
may have held with Chancellor Media or any of its subsidiaries; provided,
however, that Mr. Marcus did not resign has positions as a director of each of
Chancellor Media, Chancellor Mezzanine Holdings Corporation and CMCLA. In
addition, the agreement provides, among other things, that (i) Mr. Marcus
received a one-time cash severance payment of $6,250,000, a pro-rated bonus for
the fiscal year of Chancellor Media ended December 31, 1998 of $2,333,333, and
all accrued and unpaid base salary earned up to and including March 15, 1999, in
each case net of applicable employee withholding taxes, (ii) Mr. Marcus was
granted options to purchase 800,000 shares of common stock at an exercise price
of $47.0625 per share, and
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<PAGE> 18
(iii) unvested options to acquire 625,000 shares of common stock granted to Mr.
Marcus under his employment agreement automatically vested and became
immediately exercisable. The agreement further provides for mutual releases and
other provisions typically found in an employment termination agreement.
McMillin Employment Agreement
Prior to March 15, 1999, Mr. McMillin served as Senior Vice President and
Chief Financial Officer of Chancellor Media and CMCLA. On October 1, 1998,
Chancellor Media and CMCLA entered into an employment agreement with Mr.
McMillin, that had a term that extended through October 1, 2003, and provided
for an annual base salary of $500,000 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. The McMillin
employment agreement provided for Mr. McMillin to receive an annual bonus as
determined by Chancellor Media's Compensation Committee, based upon the
recommendation of the Chief Executive Officer. The McMillin employment agreement
also provided that on the agreement date and on each of the first four
anniversaries of the employment agreement on which Mr. McMillin remained
employed by Chancellor Media, Mr. McMillin would be granted options to purchase
40,000 shares of common stock. If Mr. McMillin's employment was terminated
without "cause," as defined in the McMillin employment agreement, or if Mr.
McMillin terminated his employment for "good reason," as defined in the McMillin
employment agreement, prior to the fifth anniversary of the effective date of
the McMillin employment agreement, Mr. McMillin would receive on the termination
date a number of options equal to 200,000 minus the number of options previously
granted to Mr. McMillin under to the preceding sentence prior to that date. In
addition, as an execution bonus, Chancellor Media granted to Mr. McMillin
options to purchase 200,000 shares of common stock at a price of $29.875 per
share, 25% of which would vest on the effective date of the employment agreement
and 25% of which would vest on each of the three anniversaries of the date of
grant. Chancellor Media also paid to Mr. McMillin a one-time execution bonus in
the gross amount of $1,000,000. The McMillin employment agreement provided that
all options granted under the McMillin employment agreement would be exercisable
for ten years from the date of grant of the option, notwithstanding any
termination of employment. The annual option grant would be at a price per share
equal to the market price for the common stock at the close of trading on the
day immediately preceding the date of the grant. The McMillin employment
agreement provided that, in the event of termination of Mr. McMillin's
employment by Chancellor Media without "cause" or by Mr. McMillin with "good
reason," Chancellor Media would make a one-time cash payment to Mr. McMillin in
a gross amount so that the net payments retained by Mr. McMillin, after payment
by Chancellor Media of any excise taxes imposed by Section 4999 of the Code with
respect to that payment, would equal two times Mr. McMillin's base salary then
in effect.
The McMillin employment agreement further provided that, in the event of
termination of Mr. McMillin's employment by Mr. McMillin for other than "good
reason," in exchange for Mr. McMillin's agreement not to induce any employee of
any media company owned by Chancellor Media to terminate employment or to become
employed by any other media company, Chancellor Media would continue to pay Mr.
McMillin one-half of his applicable base salary through the earlier of the fifth
anniversary of the effective date thereof or the second anniversary of the
termination of employment. In the event of termination of Mr. McMillin's
employment other than for "good reason," Chancellor Media also had the right, in
exchange for the payment at the end of each calendar year preceding the earlier
of the fifth anniversary of the effective date or the second anniversary of
termination, of one-half of Mr. McMillin's average bonus, and on the last day of
the calendar year that included the earlier of the fifth anniversary of the
effective date or the second anniversary of termination, of an amount equal to
the product of one-half of Mr. McMillin's average bonus multiplied by the
fraction of each calendar year which preceded the earlier of the fifth
anniversary of the effective date or the second anniversary of termination, to
require that Mr. McMillin not be employed by or perform activities on behalf of
or have an ownership interest in any media company serving the same market as
any media company owned by Chancellor Media.
In January 1999, Mr. McMillin's employment agreement was amended by
Chancellor Media and CMCLA. The amended agreement changed Mr. McMillin's title
and duties to Senior Vice President and Chief Financial Officer, increased his
annual option grants to 50,000 shares of common stock, and provided for
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<PAGE> 19
an additional option grant of 60,000 shares as of the effective date of the
amendment at an exercise price of $46.125 per share. In addition, as a result of
the increase in annual option grants, if Mr. McMillin's employment was
terminated without "cause" or if Mr. McMillin terminated his employment for
"good reason" prior to the fifth anniversary of the effective date of the
McMillin employment agreement, Mr. McMillin would receive on the termination
date a number of options equal to 240,000 minus the number of options previously
granted.
In connection with Mr. McMillin's resignation as Senior Vice President and
Chief Financial Officer of Chancellor Media and CMCLA in March 1999, Mr.
McMillin, his spouse, and Chancellor Media and CMCLA entered into a termination
agreement dated as of March 15, 1999. Pursuant to that agreement, Mr. McMillin
resigned as Senior Vice President and Chief Financial Officer and from any other
appointments or positions which he may have held with Chancellor Media or any of
its subsidiaries. In addition, the agreement provides, among other things, that
(i) Mr. McMillin received a one-time cash severance payment of $1,000,000, a
pro-rated bonus for the fiscal year of Chancellor Media ended December 31, 1998
of $125,000, and all accrued and unpaid base salary earned up to and including
March 15, 1999, in each case net of applicable employee withholding taxes, (ii)
Mr. McMillin was granted options to purchase 200,000 shares of common stock at
an exercise price of $47.0625 per share, and (iii) unvested options to acquire
237,500 shares of common stock granted to Mr. McMillin under his employment
agreement automatically vested and became immediately exercisable. The agreement
further provides for mutual releases and other provisions typically found in an
employment termination agreement.
Neuman Employment Agreement
Prior to March 15, 1999, Mr. Neuman served as Senior Vice
President -- Strategic Development of Chancellor Media and CMCLA. On October 1,
1998, Chancellor Media and CMCLA entered into an amended and restated employment
agreement with Mr. Neuman, which was effective as of July 1, 1998, that had a
term that extended through July 1, 2003, and provided for an annual base salary
of $500,000 for the first year of the employment agreement, to be increased each
year by $25,000. The Neuman employment agreement provided for Mr. Neuman to
receive an annual bonus as determined by Chancellor Media's Compensation
Committee, based upon the recommendation of the Chief Executive Officer;
provided, however, that the bonus would in no event be less than $500,000 nor
greater than $1,500,000. The Neuman employment agreement provided that on the
agreement date and on each of the first four anniversaries of the effective date
of the employment agreement on which Mr. Neuman remained employed by Chancellor
Media, Mr. Neuman would be granted options to purchase 100,000 shares of common
stock. If Mr. Neuman's employment was terminated without "cause," as defined in
the Neuman employment agreement, or if Mr. Neuman terminated his employment for
"good reason," as defined in the Neuman employment agreement, prior to the fifth
anniversary of the effective date of the Neuman employment agreement, Mr. Neuman
would receive on the termination date a number of options equal to 500,000 minus
the number of options previously granted to Mr. Neuman under the preceding
sentence prior to that date. In addition, as an execution bonus, Chancellor
Media granted to Mr. Neuman options to purchase 300,000 shares of common stock
at a price of $42.3125 per share. The Neuman employment agreement provided that
all options granted under the Neuman employment agreement would be exercisable
for ten years from the date of grant of the option, notwithstanding any
termination of employment. The annual option grant would be 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; provided, however, that with
respect to any options the grant of which was accelerated because Mr. Neuman's
employment was terminated as the result of a "change of control," the exercise
price of such options would be the lower of (i) the exercise price equal to the
average last reported sale price of the common stock for the 30 trading days
prior to the ten trading days ending at the close of the trading day prior to
the day of any announcement of such "change of control," and (ii) the exercise
price equal to the market price of the common stock at the close of the trading
day immediately preceding the date of grant.
The Neuman employment agreement provided that, in the event of termination
of Mr. Neuman's employment by Chancellor Media without "cause" or by Mr. Neuman
with "good reason," Chancellor Media would make a one-time cash payment to Mr.
Neuman in a gross amount so that the net payments retained by
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Mr. Neuman, after payment by Chancellor Media of any excise taxes imposed by
Section 4999 the Code with respect to that payment, shall equal $2,000,000.
The Neuman employment agreement further provided that, in the event of
termination of Mr. Neuman's employment by Mr. Neuman for other than "good
reason," in exchange for Mr. Neuman's agreement not to induce any employee of
any media company owned by Chancellor Media to terminate employment or to become
employed by any other media company, Chancellor Media would continue to pay Mr.
Neuman his applicable base salary through the earlier of the fifth anniversary
of the effective date of the employment agreement or the second anniversary of
the termination of employment. In the event of termination of Mr. Neuman's
employment other than for "good reason," Chancellor Media also had the right, in
exchange for the payment at the end of each calendar year preceding the earlier
of the fifth anniversary of the effective date or the second anniversary of
termination, an amount equal to Mr. Neuman's average bonus, and on the last day
of the calendar year which included the earlier of the fifth anniversary of the
effective date or the second anniversary of termination, an amount equal to the
product of Mr. Neuman's average bonus multiplied by the fraction of such
calendar year which precedes the earlier of the fifth anniversary of the
effective date or the second anniversary of termination, to require that Mr.
Neuman not be employed by or perform activities on behalf of or have an
ownership interest in any media company serving the same market as any media
company owned by Chancellor Media. The Neuman employment agreement further
provided that if Mr. Neuman's employment was terminated by reason of expiration
or non-renewal of the Neuman employment agreement, Chancellor Media would make a
one-time cash payment to Mr. Neuman equal to two times the amount of his annual
base salary for the contract year in which his employment terminated. The Neuman
employment agreement provided that if Chancellor Media provided employment
related benefits in an aggregate amount greater than or on more favorable terms
as were granted to any other senior executives, except for benefits and
employment inducements provided to the Chief Executive Officer or Chief
Financial Officer of Chancellor Media, the President of the Chancellor Radio
Group, or the Vice Chairman of the public company resulting from the merger with
Capstar, Mr. Neuman would be provided benefits in a substantially comparable
amount and/or under substantially comparable terms, on an aggregate basis.
In connection with Mr. Neuman's resignation as Senior Vice
President -- Strategic Development of Chancellor Media and CMCLA in March 1999,
Mr. Neuman, his spouse, and Chancellor Media and CMCLA entered into a
termination agreement dated as of March 15, 1999. Pursuant to that agreement,
Mr. Neuman resigned as Senior Vice President -- Strategic Development and from
any other appointments or positions which he may have held with Chancellor Media
or any of its subsidiaries. In addition, the agreement provides, among other
things, that (i) Mr. Neuman received a one-time cash severance payment of
$2,000,000, a pro-rated bonus for the fiscal year of Chancellor Media ended
December 31, 1998 of $750,000, and all accrued and unpaid base salary earned up
to and including March 15, 1999, in each case net of applicable employee
withholding taxes, and (ii) Mr. Neuman was granted options to purchase 400,000
shares of common stock at an exercise price of $47.0625 per share. The agreement
further provides for mutual releases and other provisions typically found in an
employment termination agreement.
Devine Employment Agreement
Prior to January 6, 1999, Matthew E. Devine served as Senior Vice President
and Chief Financial Officer of Chancellor Media and CMCLA. In May 1998,
Chancellor Media and CMCLA entered into a new employment agreement with Mr.
Devine. The Devine employment agreement, which had a term that extended through
April 17, 2003, provided 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 provided for an annual bonus based
upon a percentage of the amount by which Chancellor Media exceeded an annual
performance target which was defined in the Devine employment agreement. The
Devine employment agreement provided that, on the effective date of the
employment agreement and on each of the first four anniversaries of the
employment agreement on which Mr. Devine remained employed by Chancellor Media,
Mr. Devine would be granted options to purchase 120,000 shares of common stock.
If Mr. Devine's employment was terminated without "cause," as defined in the
Devine employment agreement, or if Mr. Devine terminated his employment for
"good reason," as defined in the Devine employment agreement,
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<PAGE> 21
prior to the fifth annual anniversary of the effective date of the Devine
employment agreement, Mr. Devine would receive on the termination date a number
of options equal to 600,000 minus the number of options previously granted to
Mr. Devine under the preceding sentence prior to that date. In addition, the
Devine employment agreement provided (i) for a signing bonus in the gross amount
of $1,000,000; (ii) that Chancellor Media would make a one-time cash payment to
Mr. Devine of $2,000,000 less applicable employee withholding taxes; and (iii)
that Chancellor Media would grant to Mr. Devine stock options to purchase
600,000 shares of common stock at a price of $42.125 per share.
The Devine employment agreement provided that all options granted pursuant
to the Devine employment agreement would be exercisable for ten years from the
date of grant of the option, notwithstanding any termination of employment. The
annual option grant was to be 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 provided that, in the event of
termination of Mr. Devine's employment by Chancellor Media without "cause" or by
Mr. Devine with "good reason," Chancellor Media was to make a one-time cash
payment to Mr. Devine in a gross amount so that the net payments retained by Mr.
Devine would equal $2,000,000 less applicable employee withholding taxes.
The Devine employment agreement further provided 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 Chancellor Media to terminate employment or to become
employed by any other radio station, Chancellor Media would continue to pay Mr.
Devine his applicable base salary through the earlier of the fifth anniversary
of the effective date of the Devine employment agreement or the second
anniversary of the termination of employment. In the event of termination of Mr.
Devine's employment for other than "good reason," Chancellor Media also had the
right, in exchange for the payment at the end of each calendar year through the
year which includes the earlier of the fifth anniversary of the effective date
or the second anniversary of termination of an annual amount equal to the
product of Mr. Devine's average bonus multiplied by the fraction of each
calendar year which precedes the earlier of the fifth anniversary of the
effective date or the second anniversary of termination, 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 Chancellor Media. The Devine employment agreement
further provided that if Mr. Devine's employment was terminated by reason of
expiration or non-renewal of the Devine employment agreement, Chancellor Media
would 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
terminated. The Devine employment agreement provided that if Chancellor Media
provided employment related benefits in an aggregate amount greater than or on
more favorable terms as are granted to any other senior executives, except for
benefits and employment inducements provided to the Chief Executive Officer or
Chief Operating Officer, Mr. Devine would be provided benefits in substantially
comparable amount and/or substantially comparable terms, on an aggregate basis.
In connection with Mr. Devine's resignation as Senior Vice President and
Chief Financial Officer, Mr. Devine, his spouse, and Chancellor Media and CMCLA
entered into a termination agreement dated as of January 6, 1999. Pursuant to
that agreement, Mr. Devine resigned as Senior Vice President and Chief Financial
Officer and from any other appointments or positions which he may have held with
Chancellor Media or any of its subsidiaries. In addition, the agreement provides
that (i) Mr. Devine shall receive a one-time cash payment of $2,000,000 net of
applicable employee withholding taxes; and (ii) Mr. Devine shall be granted
options to purchase 480,000 shares of common stock at an exercise price of
$46.125.
The agreement further provides for non-solicitation covenants by Mr. Devine
through April 17, 2000, 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. Devine.
Ginsburg Employment Agreement
Prior to April 14, 1998, Scott K. Ginsburg served as the President and
Chief Executive Officer of Chancellor Media and CMCLA. On September 4, 1997, the
Company entered into a new employment
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agreement with Mr. Ginsburg, which was effective as of the closing date of the
merger with Chancellor Broadcasting Company. The Ginsburg employment agreement,
which had a term that extended 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 Chancellor Media in relation to certain annual
performance targets which were defined in the Ginsburg employment agreement. The
Ginsburg employment agreement provided that, on the closing date of the merger
with Chancellor Broadcasting Company and on each of the first four anniversaries
of that closing on which Mr. Ginsburg remained employed by Chancellor Media, 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 merger with Chancellor
Broadcasting Company, Mr. Ginsburg would receive on the 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 that date.
In addition, in recognition of Mr. Ginsburg's rights under his prior employment
agreement, Chancellor Media granted Mr. Ginsburg an option to acquire an
additional 300,000 shares of common stock on the closing date of the merger with
Chancellor Broadcasting Company. 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 Chancellor Media without "cause"
or by Mr. Ginsburg with "good reason," Chancellor Media would make a one-time
cash payment to Mr. Ginsburg in a gross amount so that the net payments retained
by Mr. Ginsburg shall equal $20,000,000. 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,
Chancellor Media 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 Broadcasting Company immediately prior
to the consummation of the merger with Chancellor Broadcasting Company. Under
the Ginsburg employment agreement, Chancellor Media 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 March 31, 1999,
Mr. Ginsburg has borrowed $3,500,000 under the loan and has accrued interest
payable to Chancellor Media of $267,524.
On April 14, 1998, Mr. Ginsburg resigned as President and Chief Executive
Officer of Chancellor Media, and on April 20, 1998, Mr. Ginsburg resigned as
director of Chancellor Media and CMCLA and from all appointments and positions
with their respective subsidiaries. On April 20, 1998, Chancellor Media and
CMCLA entered into a separation and consulting agreement with Mr. Ginsburg. The
Ginsburg separation and consulting agreement provides for (i) a lump sum
severance payment of $20,000,000 net of applicable employee withholding taxes,
which is the 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 Chancellor Media "without cause," and (ii) a grant to
Mr. Ginsburg of stock options to acquire 800,000 shares of common stock, 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 Chancellor Media "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 one third at April 14, 1998, 1999
and 2000, respectively. Previously granted stock options were unaffected by the
Ginsburg
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separation and consulting agreement. The Ginsburg separation and consulting
agreement also provides that Chancellor Media shall retain Mr. Ginsburg as a
consultant through April 13, 2003, and Mr. Ginsburg will be compensated for such
consulting services in an amount equal to $2,500,000 for each full year of
consulting services. Mr. Ginsburg received $1,770,833 for such services between
April 14, 1998 and December 31, 1998. The Ginsburg separation and consulting
agreement further provides for three-year non-solicitation and non-hire
covenants by 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of Chancellor Media are Messrs.
Thomas O. Hicks, Hodson, Jordan, Winters and Lewis. Mr. Thomas O. Hicks serves
as Chairman of the Compensation Committee, and also serves as Chairman of the
Board and Chief Executive Officer of Chancellor Media, Chancellor Mezzanine
Holdings Corporation and CMCLA.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Chancellor Media's directors and
executive officers, and persons who own more than 10% of Chancellor Media common
stock, to file with the SEC initial reports of beneficial ownership and reports
of changes in beneficial ownership of Chancellor Media common stock and other
equity securities of Chancellor Media. To Chancellor Media's knowledge, for the
fiscal year ended December 31, 1998, all Section 16(a) filing requirements
applicable to its executive officers, directors and holders of more than 10% of
Chancellor Media common stock were satisfied, except that (i) Michael J. Levitt
failed to timely file a Form 3 in connection with his appointment to the Board
of Directors of Chancellor Media on May 19, 1998, (ii) James A. McLaughlin
failed to timely file a Form 3 in connection with his becoming an executive
officer of Chancellor Media on August 18, 1998, (iii) J. Otis Winters failed to
timely file a Form 3 in connection with his appointment to the Board of
Directors of Chancellor Media on May 19, 1998 and (iv) Steven Dinetz failed to
timely file a Form 4 in connection with certain stock option exercises and sales
effected by Mr. Dinetz in March 1998.
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PERFORMANCE GRAPH
The following graph shows a comparison, since Chancellor Media's initial
public offering on May 10, 1993, of the cumulative stockholder return on (i)
Chancellor Media'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, 1998. The graph assumes an investment of $100 on December 31, 1993 and, as
required by the SEC, 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 Clear
Channel Communications, Inc., Emmis Broadcasting Corporation, Heftel
Broadcasting Corporation, Infinity Broadcasting Corporation, Jacor
Communications, Inc., Lamar Advertising Company and Saga Communications, Inc.
[Performance Graph]
<TABLE>
<CAPTION>
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Chancellor Media Corporation........ $100.0 $ 98.6 $180.3 $211.3 $630.6 $809.2
Nasdaq Stock Market (U.S. &
Foreign).......................... 100.0 97.0 136.2 166.8 203.9 281.9
Peer Group.......................... 100.0 117.2 198.1 318.8 669.7 870.8
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for reviewing the compensation
paid to Chancellor Media's executive officers and making recommendations to
Chancellor Media'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 or the Independent Stock Option Committee discharging the functions of
the Stock Option Committee as provided in Chancellor Media's 1993 Stock Option
Plan for Executive Officers and Key Employees, the 1995 Stock Option Plan for
Executive Officers and Key Employees and the 1998 Chancellor Media Corporation
Stock Option Plan.
Overall Compensation Objectives
Chancellor Media is a large diversified media company with operations in
radio broadcasting, outdoor advertising and media representation. Chancellor
Media's overall strategy is to create a leading diversified media company with
significant overlapping presence in radio and outdoor advertising markets. In
furtherance of this strategy, Chancellor Media's compensation strategies are
designed to attract and to retain the best
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possible executive talent. Chancellor Media enters into long-term employment
agreements with its executive officers. These agreements generally contain base
salaries that recognize individual performance and cash and equity-based
incentives designed to align the financial interests of executives with those of
the stockholders, and prohibit the officer from competing with Chancellor Media.
The Compensation Committee believes that the structure of these agreements
should enable Chancellor Media to retain its key officers for a period of time
and focus the efforts and energies of these officers on further enhancing the
value of Chancellor Media to its stockholders.
In 1998, Chancellor Media entered into new employment agreements with
Messrs. Marcus, de Castro, Devine and McLaughlin. Each agreement provides for a
base salary, annual cash incentive bonus and the award of options to purchase
Chancellor Media common stock. In entering these employment agreements, the
Compensation Committee and the Board of Directors considered such factors as
each executive's responsibilities in identifying and completing the acquisition
of strategic broadcast properties, Chancellor Media's strong operating
performance, and the increase in stockholder value to Chancellor Media's
stockholders during 1998. Each of these employment agreements was approved by
Chancellor Media's Compensation Committee and the Board of Directors.
Principal Components of Executive Compensation
The principal elements of compensation to Chancellor Media's executive
officers include a base salary and annual cash bonuses and, at appropriate
intervals, grants of stock options. Chancellor Media also provides to its
executive officers medical, pension and other fringe benefits generally
available to Chancellor Media employees. Base salary for Chancellor Media'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 Chancellor Media's executive officers
in light of Chancellor Media'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 1998,
Chancellor Media's executive officers were each eligible for, and received, an
annual cash incentive bonus based on Chancellor Media's performance during the
year as measured by broadcast cash flow targets being met or exceeded.
Additionally, each of Chancellor Media'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 Chancellor Media and its long-term objectives.
Compensation of the Chief Executive Officer
Jeffrey A. Marcus. Total compensation for Mr. Marcus, the President and
Chief Executive Officer of Chancellor Media and CMCLA after June 1, 1998,
consisted of a base salary of $656,250 plus a cash bonus of $1,000,000 paid
under the terms of Mr. Marcus' employment agreement with Chancellor Media and
CMCLA. Additionally, in connection with Mr. Marcus' resignation as President and
Chief Executive Officer of Chancellor Media and CMCLA in March 1999, (i) Mr.
Marcus received a one-time cash severance payment of $6,250,000, a pro-rated
bonus for the fiscal year of Chancellor Media ended December 31, 1998 of
$2,333,333, and all accrued and unpaid base salary earned up to and including
March 15, 1999, in each case net of applicable employee withholding taxes, (ii)
Mr. Marcus was granted options to purchase 800,000 shares of Chancellor Media
common stock at an exercise price of $47.0625 per share, and (iii) unvested
options to acquire 625,000 shares of Chancellor Media common stock granted to
Mr. Marcus under his employment agreement automatically vested and became
immediately exercisable.
Scott K. Ginsburg. Total compensation for Mr. Ginsburg, the President and
Chief Executive Officer of Chancellor Media and CMCLA through April 14, 1998,
consisted of $372,222 base salary paid under the terms of Mr. Ginsburg's
employment agreement. Additionally, in connection with Mr. Ginsburg's
resignation as President and Chief Executive Officer of Chancellor Media and
CMCLA in April 1998, Chancellor Media and CMCLA entered into a separation and
consulting agreement with Mr. Ginsburg which provided for, (i) a lump sum
severance payment of $20,000,000 net of applicable employee withholding taxes,
which is the same
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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 Chancellor Media "without cause," and (ii) a grant to Mr. Ginsburg of stock
options to acquire 800,000 shares of Chancellor Media common stock 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
Chancellor Media "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 one third at April 14, 1998, 1999
and 2000, respectively. The Ginsburg separation and consulting agreement also
provides that Chancellor Media 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. Mr.
Ginsburg received $1,770,833 for such services between April 14, 1998 and
December 31, 1998.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code of 1986, as amended, 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 stockholders, and the compensation
committee certifies that the performance goals were in fact satisfied. During
1998, the Compensation Committee considered the compensation arrangements of
Chancellor Media'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 Chancellor Media'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 Chancellor Media 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,
Chancellor Media may enter into compensation arrangements in the future under
which payments are not deductible under Section 162(m).
COMPENSATION COMMITTEE MEMBERS
THOMAS O. HICKS
THOMAS J. HODSON
VERNON E. JORDAN, JR.
J. OTIS WINTERS
PERRY J. LEWIS
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the common stock of Chancellor Media as of April 14, 1999, by (i)
each person who is known by Chancellor Media to beneficially own more than 5% of
any class of Chancellor Media's common stock; (ii) the directors and certain
executive officers of Chancellor Media, individually; and (iii) the directors
and all executive officers of Chancellor Media as a group.
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER SHARES PERCENT(1)
- ------------------- ---------- ----------
<S> <C> <C>
Hicks Muse Parties(2)....................................... 25,387,371 17.7%
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Putnam Investments, Inc.(3)................................. 17,314,508 12.1%
One Post Office Square
Boston, Massachusetts 02109
Janus Capital Corporation(4)................................ 11,846,915 8.3%
100 Fillmore Street
Denver, Colorado 80206-4923
Thomas O. Hicks............................................. 25,387,371(5) 17.7%
James E. de Castro.......................................... 2,565,000(6) 1.8%
R. Steven Hicks............................................. -- --
James A. McLaughlin......................................... 75,000(7) *
Kenneth J. O'Keefe.......................................... 504,000(8) *
D. Geoffrey Armstrong....................................... -- --
William S. Banowsky, Jr. ................................... -- --
Steven Dinetz............................................... 1,561,379(9) 1.1%
Thomas J. Hodson............................................ 50,833(10) *
Vernon E. Jordan, Jr. ...................................... 20,833(11) *
Michael J. Levitt........................................... 8,333(12) *
Perry J. Lewis.............................................. 154,058(13) *
Jeffrey A. Marcus........................................... 2,455,902(14) 1.7%
John H. Massey.............................................. 61,857(15) *
Lawrence D. Stuart, Jr. .................................... 19,625(16) *
J. Otis Winters............................................. 8,333(17) *
All directors and executive officers as a group (16
persons).................................................. 32,872,524(18) 21.9%
</TABLE>
- ---------------
* Less than one percent (1%)
(1) Assumes that 143,063,179 shares of common stock of Chancellor Media were
issued and outstanding as of March 31, 1999.
(2) Consists of 1,278,969 shares owned of record by Mr. Thomas O. Hicks,
346,736 shares owned of record by Mr. Thomas O. Hicks as trustee for
certain trusts of which his children are beneficiaries and 20,816 shares
owned of record by Mr. Thomas O. Hicks as co-trustee of a trust for the
benefit of unrelated parties. Also includes 23,740,850 shares owned by four
limited partnerships of which the ultimate general partners are entities
controlled by Mr. Thomas O. Hicks or Hicks Muse. Mr. Thomas O. 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.
Thomas O. 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, David B. Deniger and Dan H. Blanks are officers, directors and
minority stockholders of Hicks Muse and as such may be deemed to share with
Mr. Thomas O. Hicks the power to vote or dispose of shares held by such
partnerships. Messrs. Thomas O. Hicks, Muse, Tate, Furst, Stuart, Levitt,
Deniger and
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Blanks disclaim the existence of a group and each of them disclaims
beneficial ownership of shares not owned of record by him.
(3) Based solely upon information contained in such person's filing on February
4, 1999 of Schedule 13G under the Exchange Act.
(4) Includes 5,906,880 shares owned by Janus Fund, an investment company
registered under the Investment Company Act of 1940, as amended. Based
solely upon information contained in such person's filing on February 12,
1999 of Schedule 13G under the Exchange Act.
(5) Consists of 1,278,969 shares owned of record by Mr. Thomas O. Hicks,
346,736 shares owned of record by Mr. Thomas O. Hicks as trustee for
certain trusts of which his children are beneficiaries and 20,816 shares
owned of record by Mr. Thomas O. Hicks as co-trustee of a trust for the
benefit of unrelated parties. Also includes 23,740,850 shares owned by four
limited partnerships of which the ultimate general partners are entities
controlled by Mr. Thomas O. Hicks and Hicks Muse. Mr. Thomas O. 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. Thomas O. 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.
Thomas O. Hicks disclaims beneficial ownership of shares not owned of
record by him.
(6) Consists of options that are exercisable within 60 days of the date hereof
to purchase 2,565,000 shares.
(7) Consists of options that are exercisable within 60 days of the date hereof
to purchase 75,000 shares.
(8) Includes options that are exercisable within 60 days of the date hereof to
purchase 500,000 shares.
(9) Includes (i) 171,818 shares owned of record by Mr. Dinetz, (ii) options
that are exercisable within 60 days of the date hereof to purchase
1,387,471 shares, (iii) 1,090 shares held by an individual retirement
account for the benefit of Mr. Dinetz and (iv) 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.
(10) Consists of options that are exercisable within 60 days of the date hereof
to purchase 50,833 shares.
(11) Consists of options that are exercisable within 60 days of the date hereof
to purchase 20,833 shares.
(12) Includes options that are exercisable within 60 days of the date hereof to
purchase 8,333 shares.
(13) Includes options that are exercisable within 60 days of the date hereof to
purchase 50,833 shares.
(14) Includes options that are exercisable within 60 days of the date hereof to
purchase 2,286,742 shares.
(15) Consists of options that are exercisable within 60 days of the date hereof
to purchase 45,075 shares and 16,782 shares held by Mr. Massey's wife as
her separate property.
(16) Includes options that are exercisable within 60 days of the date hereof to
purchase 8,333 shares.
(17) Includes options that are exercisable within 60 days of the date hereof to
purchase 8,333 shares.
(18) Includes options to purchase 7,006,786 shares.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of April 14, 1999, Mr. Thomas O. Hicks and affiliates of Hicks Muse
beneficially owned an aggregate of 25,387,371 shares of Chancellor Media common
stock. Mr. Thomas O. Hicks is Chairman of the Board and Chief Executive Officer
of the Company.
Chancellor Media is subject to a financial monitoring and oversight
agreement, dated April 1, 1996, as amended on September 4, 1997 with Hicks, Muse
& Co. Partners, L.P. ("Hicks Muse Partners"), an affiliate of Hicks Muse. In
connection with the financial monitoring and oversight agreement, Chancellor
Media 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 the time Thomas O. Hicks and his affiliates collectively cease to
beneficially own at least two-thirds of the number of shares of the Chancellor
Media common stock beneficially owned by them, collectively, at the effective
time of the merger with Chancellor Broadcasting Company in September 1997.
Chancellor Media paid Hicks Muse Partners a total of $1.0 million in 1998 in
connection with the financial monitoring and oversight agreement. Effective
March 15, 1999, Hicks Muse Partners has agreed to waive the annual fee payment
under the financial monitoring and oversight agreement, although it will still
be entitled to the reimbursement of certain expenses incurred and the benefit of
certain indemnity obligations of Chancellor Media in connection with the
performance of its obligations thereunder.
In connection with the consummation of the merger with Chancellor
Broadcasting Company in September 1997, a financial advisory agreement among
Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company 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 such merger, HM2/Management was paid a fee of $10.0 million in
cash upon consummation of the transaction which was accounted for as a direct
acquisition cost. As part of the termination of the financial advisory
agreement, Chancellor Media paid Hicks Muse Partners $1.5 million for financial
advisory services in connection with the acquisition of Katz Media Group, Inc.
("Katz") in 1997 which was accounted for as a direct acquisition cost.
Upon consummation of the merger with Capstar, Capstar will make aggregate
payments to Hicks Muse Partners of $31.7 million in connection with the
termination of monitoring and oversight and financial advisory agreements with
Capstar and its subsidiaries and in satisfaction of the services performed by
Hicks Muse Partners in connection with the merger. In 1998, Capstar paid Hicks
Muse Partners approximately $819,000 of monitoring and oversight fees and $49.5
million of financial advisory fees.
Vernon E. Jordan, Jr., a director of Chancellor Media and CMCLA, also
serves on the board of directors of Bankers Trust Company and Bankers Trust
Corporation. BT Alex. Brown Incorporated, an affiliate of Bankers Trust Company
and Bankers Trust Corporation, was engaged by Chancellor Media in January 1999
as a financial advisor to explore strategic alternatives in an effort to
maximize shareholder value. In addition, affiliates of Bankers Trust Company and
Bankers Trust Corporation have in the past provided a variety of commercial
banking, investment banking and financial advisory services to Chancellor Media
and CMCLA, and expect to continue to provide services to Chancellor Media and
CMCLA in the future. Fees paid to BT Alex. Brown Incorporated in 1998 were
approximately $10.3 million.
Chancellor Media is subject to an Amended and Restated Stockholders
Agreement, dated as of February 14, 1996, as amended on September 4, 1997, among
Chancellor Media and certain holders of Chancellor Media's common stock held by
former stockholders of Chancellor Broadcasting Company, which provides for
registration rights for the shares of Chancellor Media's common stock held by
such holders. The stockholders agreement relates to shares of Chancellor Media's
common stock held by certain affiliates of Hicks Muse, and will apply to shares
of Chancellor Media's common stock received in the merger with Capstar.
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<PAGE> 30
As part of the merger with Chancellor Broadcasting Company in September
1997, Chancellor Media made selected cash payments and accelerated the vesting
of selected stock options previously granted by Chancellor Broadcasting Company
to Steven Dinetz, a director of Chancellor Media and CMCLA.
In connection with the Capstar/SFX Transaction, CMCLA (i) began programming
ten radio stations owned by Capstar under time brokerage agreements effective
May 29, 1998 and paid fees of $28.8 million to Capstar related to these
agreements during 1998 and (ii) provided a loan to Capstar in the principal
amount of $150.0 million. Interest income on this note receivable was $10.6
million during 1998. CMCLA also began operating Capstar's WKNR-AM in Cleveland
under a time brokerage agreement effective February 1, 1999.
Chancellor Media recorded revenue of $6.8 million for the year ended
December 31, 1998 for providing media representation services to Capstar.
Chancellor Media paid or accrued $11.2 million in 1998 in connection with
Capstar's participation in The AMFM Radio Networks and other transactions.
Chancellor Media had a net payable to Capstar of $162,000 at December 31, 1998.
Affiliates of Hicks Muse have a controlling interest in Capstar and a
substantial investment in Chancellor Media.
On July 7, 1998, Chancellor Media entered into a merger agreement with the
indirect parent of LIN Television Corporation ("LIN"), to acquire LIN in a
stock-for-stock transaction (the "LIN Merger"). Effective March 15, 1999, LIN
and Chancellor Media agreed to terminate the LIN Merger agreement. Affiliates of
Hicks Muse have a controlling interest in LIN and a substantial investment in
Chancellor Media.
Certain radio stations owned by Capstar have engaged Katz to sell national
spot advertising air time, and such stations pay customary commissions to Katz
for such services. In 1998, Capstar paid Katz approximately $4.4 million for
media representation services. Additionally, Capstar's radio stations are
affiliated with The AMFM Radio Networks and receive a portion of advertising
revenues generated by the network. In 1998, Capstar recorded approximately $8.3
million in revenue from The AMFM Radio Networks. In addition, certain television
stations owned by LIN have engaged Katz to sell national advertising time, and
such stations pay customary commissions to Katz for such services.
In October and November 1998, LIN purchased two airplanes and subsequently
entered into two lease agreements with respect to those airplanes with
Chancellor Media. The leases expire in October 1999 and 2003, respectively, and
in 1998, Chancellor Media paid to LIN approximately $415,000 under the leases.
In connection with CMCLA's acquisition of various billboard and outdoor
displays from Triumph in January 1999, CMCLA paid approximately $1.0 million to
an entity controlled by James A. McLaughlin, the President and Chief Operating
Officer of the Chancellor Outdoor Group. An additional $0.7 million that may be
paid to such entity is currently held in escrow, subject to satisfaction of
indemnity claims, if any. The aggregate purchase price for the assets acquired
by Chancellor Media from Triumph was approximately $37.0 million, and such
amount was negotiated on behalf of CMCLA by Eric C. Neuman, then Chancellor
Media's Senior Vice President -- Strategic Development.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 30TH DAY OF
APRIL, 1999.
CHANCELLOR MEDIA CORPORATION
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
By /s/ D. GEOFFREY ARMSTRONG
-----------------------------------
D. Geoffrey Armstrong
Executive Vice President
and Chief Financial Officer
31
