SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-K
AMENDMENT NO. 1
Annual Report Pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
Commission File No. 0-27726 Commission File No. 33-80534 Commission File No. 33-80534
CHANCELLOR BROADCASTING CHANCELLOR RADIO CHANCELLOR BROADCASTING
COMPANY BROADCASTING COMPANY LICENSEE COMPANY
(Exact Name of Registrant (Exact Name of Registrant (Exact Name of Registrant
as Specified in Its Charter) as Specified in Its Charter) as Specified in Its Charter)
DELAWARE DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization) incorporation or organization)
75-2538487 75-2544623 75-2544625
(I.R.S. Employer Identification (I.R.S. Employer Identification (I.R.S. Employer Identification
Number) Number) Number)
</TABLE>
12655 N. CENTRAL EXPRESSWAY, SUITE 405, DALLAS, TEXAS 75243
(Address of Principal Executive Offices, Including Zip Code)
AREA CODE (972) 239-6220
(Registrants' Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE,
OF CHANCELLOR BROADCASTING COMPANY
Indicate by check mark whether Chancellor Broadcasting Company, Chancellor
Radio Broadcasting Company and Chancellor Broadcasting Licensee Company (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 registrant was 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 voting stock held by non-affiliates of
Chancellor Broadcasting Company at March 25, 1997 was $225,223,070. As of March
25, 1997, 10,437,212 shares of the Class A Common Stock, par value $.01 per
share, 8,547,910 shares of the Class B Common Stock, par value $.01 per share,
and zero shares of the Class C Common Stock, par value $.01 per share, of
Chancellor Broadcasting Company were outstanding. There are no shares of voting
stock of Chancellor Radio Broadcasting Company or Chancellor Broadcasting
Licensee Company held by non-affiliates thereof. As of March 25, 1997, 1,000
shares of common stock, par value $.01 per share of Chancellor Radio
Broadcasting Company, and 1,000 shares of common stock, par value $.01 per share
of Chancellor Broadcasting Licensee Company were outstanding.
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This Amendment No. 1 to Form 10-K amends and restates Item 11 of the
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 of
Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and
Chancellor Broadcasting Licensee Company initially filed with the Securities and
Exchange Commission on March 28, 1997 (the "Form 10-K"). Unless otherwise
indicated, capitalized terms used herein shall have the respective meanings
given such terms in the Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION
The following table sets forth all compensation, including bonuses, stock
option awards and other payments, paid or accrued by the Company for the fiscal
years ended December 31, 1996, 1995 and 1994, to or for the Company's Chief
Executive officer and the Company's other four most highly compensated executive
officers (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Compensation
Annual Compensation Awards
Name and Principal Position Year Salary ($) Bonus ($) Other ($) Options (#)(1)
- ----------------------------------------------- ------------ ------------- ------------ ------------- -----------------
<S> <C> <C> <C> <C> <C>
Steven Dinetz.................................. 1996 470,283 500,000 4,235 75,000
President, Chief Executive Officer and 1995 250,000 90,000 3,785 --
Director 1994 218,117 90,000 -- 863,319(2)
George C. Toulas............................... 1996 360,070 187,500 5,718 50,000
Senior Executive Vice President and 1995 250,000 55,000 5,518 --
Regional Manager(3) 1994 54,167 15,109 -- --
Rick Eytcheson................................. 1996 337,736 162,500 5,207 30,000
Executive Vice President and Regional 1995 243,000 95,616 3,547 --
Manager 1994 195,000 64,739 -- --
Samuel L. Weller............................... 1996 294,003 320,320 64,732 30,000
Executive Vice President and Regional
Manager (4)
Jacques Kerrest................................ 1996 225,000 175,000 8,598 35,000
Senior Vice President and Chief Financial
Officer
<FN>
(1) Represents stock options to purchase shares of the Class A Common Stock of
the Company.
(2) Gives effect to the reclassification of Chancellor's Class A Common Stock
on a 1-for-6 basis immediately prior to the consummation of the Initial
Public Offering.
(3) For 1994, represents compensation for the period beginning October 12,
1994, when Mr. Toulas joined the Company, to December 31, 1994.
(4)Represents compensation for the period beginning February 1, 1996, when
Mr. Weller joined the Company.
</FN>
</TABLE>
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EMPLOYMENT AGREEMENTS
Dinetz Employment Agreement
Mr. Dinetz has entered into a new employment agreement with Chancellor and
Chancellor Radio Broadcasting pursuant to which he serves as President and Chief
Executive Officer of Chancellor and Chancellor Radio Broadcasting. The new
employment agreement is currently scheduled to expire on December 31, 2000,
unless earlier terminated, and provides for a base salary of $500,000 per year
plus an annual bonus of up to $200,000 based on performance criteria established
by Chancellor's Board of Directors at the beginning of each fiscal year. Each
December 31 during the term of the employment agreement, Mr. Dinetz's base
salary for the next succeeding year shall be adjusted based upon the Consumer
Price Index, provided that his annual base salary shall never be less than
$500,000. Unless either party gives written notice to the contrary prior to
December 31 of each year the employment agreement is in effect the employment
agreement will automatically be extended for an additional year so that, as of
each December 31, the remaining term of the employment agreement will be five
years. The employment agreement also provides for participation by Mr. Dinetz in
all benefit programs maintained by Chancellor or its subsidiaries and provides
for certain life, health and disability insurance coverage for Mr. Dinetz.
The employment agreement may be terminated by Chancellor and Chancellor
Radio Broadcasting at any time prior to the completion of the five year stated
term. If Chancellor and Chancellor Radio Broadcasting terminate Mr. Dinetz's
employment agreement other than for cause (as defined), or if Mr. Dinetz
voluntarily terminates the employment agreement for good reason (as defined),
Chancellor and Chancellor Radio Broadcasting must pay Mr. Dinetz severance
compensation equal to two years of Mr. Dinetz's base salary; provided, however,
that if the decision to terminate the employment agreement results from the
failure of Chancellor or Chancellor Radio Broadcasting to meet certain specified
financial performance criteria, Mr. Dinetz will be entitled to receive severance
compensation equal to one year of Mr. Dinetz's base salary.
In 1994, pursuant to his former employment agreement Mr. Dinetz was
granted options (the "Dinetz Options") to purchase 5,976,415 shares of Nonvoting
Stock, including (i) options vesting equally over five years (from January 10,
1994) to purchase up to 3,307,722 shares at an exercise price of $1.00 per share
and (ii) options vesting equally over five years (from October 12, 1994) to
purchase up to 2,668,582 shares at an exercise price of $1.25 per share, in each
case with such exercise price to increase at a compound rate of 9% per annum. Of
the options granted, options for 1,062,004 shares contained a feature which
conditioned their exercise upon the Company's attaining certain rates of return
("IRR Options"). In September 1995, the Company agreed with Mr. Dinetz to amend
the IRR Options to remove the rate of return feature. The Company further agreed
to amend the exercise price for the Dinetz Options to provide that all options
previously exercisable at $1.00 per share will be exercisable at $1.25 per share
and that all options previously exercisable at $1.25 per share will be
exercisable at $1.40 per share. The Dinetz Options were also amended to remove
the annual compounding of the exercise price. In accordance with their terms,
the Dinetz Options were adjusted in connection with the recapitalization of
Chancellor's common stock immediately prior to the consummation of the Initial
Public Offering. Accordingly, Mr. Dinetz owns, on an adjusted basis, options for
487,555 shares having an option exercise price of $7.50 per share and options
for 375,764 shares having an option exercise price of $8.40 per share. In
addition, on February 9, 1996, Mr. Dinetz was granted options to purchase 75,000
shares of Class A Common Stock pursuant to the Stock Award Plan (as defined).
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Toulas Employment Agreement
Mr. Toulas is a party to an employment agreement with Chancellor and
Chancellor Radio Broadcasting pursuant to which he serves as Regional Manager of
WUBE-AM, WUBE-FM, WYGY-FM and WKYN-AM in Cincinnati, KTCJ-FM, KTCZ-AM, KDWB-FM,
KEEY-FM, KFAN-AM, WBOB-FM and KQQL-FM in Minneapolis-St. Paul, WOCL-FM, WXXL-FM,
WOMX-FM and WJHM-FM in Orlando, WGMS-FM, WBIG- FM and WTEM-AM in Washington,
D.C., WHTZ-FM in New York and WFOX-FM in Atlanta. Mr. Toulas is also a Senior
Executive Vice President of Chancellor and Chancellor Radio Broadcasting. Mr.
Toulas's employment agreement is for a term commencing on February 14, 1996 and
ending upon December 31, 2000, unless otherwise terminated as allowed in the
agreement. The agreement provides for an initial base salary of $375,000, with
an annual increase of between three and five percent as determined by the board
of directors. Mr. Toulas is also entitled to receive an annual bonus of up to
50% of his then base salary for each fiscal year, beginning in fiscal year
ending December 31, 1996, based on achievement of broadcast cash flow
projections established by the board of directors. The broadcast cash flow
projections will be adjusted based upon acquisitions or disposition of stations
under the supervision of Mr. Toulas. Mr. Toulas is also entitled to the use and
paid expenses of an automobile, allowance for a fitness or similar club, and
participation in all employee benefit plans maintained by Chancellor or any of
its subsidiaries. Mr. Toulas's employment agreement also contains a
noncompetition provision pursuant to which Mr. Toulas has agreed that during the
term of his employment contract and for six months thereafter he will not engage
in the broadcasting business within any community or Arbitron MSA served by
those stations managed or overseen by him. On February 14, 1996, concurrently
with the consummation of the Initial Public Offering, the Company paid to Mr.
Toulas $100,000 in satisfaction of a provision of his former employment
agreement providing for a possible cash payment to Mr. Toulas based on the value
of the Company's Cincinnati stations at a specified future date.
Eytcheson Employment Agreement
Mr. Eytcheson is a party to an employment agreement with Chancellor and
Chancellor Radio Broadcasting pursuant to which he serves as Regional Manager of
KZLA-FM and KLAC-AM in Los Angeles, KSAN-FM, KNEW-AM, KBGG-FM and KABL-AM in San
Francisco, KGGI-FM and KMEN-AM in Riverside-San Bernardino, and KFBK-AM, KGBY-FM
and KHYL-FM in Sacramento. Mr. Eytcheson is also an Executive Vice President of
Chancellor and Chancellor Radio Broadcasting. Mr. Eytcheson's employment
agreement is for a two year term commencing on February 14, 1996, and is subject
to automatic successive one-year renewal terms that take effect unless notice of
non-renewal is given by the Company to Mr. Eytcheson within 30 days prior to the
expiration of the then-current term. Mr. Eytcheson's current base salary is
$325,000 per year. Mr. Eytcheson is also entitled to receive an annual bonus of
up to 50% of his then base salary for each fiscal year, beginning in fiscal year
ending December 31, 1996, based on achievement of broadcast cash flow
projections established by the board of directors. The broadcast cash flow
projections will be adjusted based upon acquisitions or disposition of stations
under the supervision of Mr. Eytcheson. Mr. Eytcheson is also entitled to the
use and paid expenses of an automobile, allowance for a fitness or similar club,
and participation in all employee benefit plans maintained by Chancellor or any
of its subsidiaries. Mr. Eytcheson's employment agreement also contains a
noncompetition provision pursuant to which Mr. Eytcheson has agreed that during
the term of his employment contract and for one year thereafter he will not
engage in the radio broadcasting business within a specified geographic location
surrounding the Company's stations under Mr. Eytcheson's supervision pursuant to
the employment agreement. On February 14, 1996, concurrently with the
consummation of the Initial Public Offering, the Company lent $200.000 to Mr.
Eytcheson to enable him to purchase shares of Chancellor's Class A Common Stock
in the Initial Public Offering. The loan will be an unsecured, noninterest
bearing loan, which will be forgiven during the next three years. The Company
made this loan to Mr. Eytcheson in satisfaction of a provision of his former
employment
4
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agreement providing for a possible cash payment to Mr. Eytcheson based on the
value of the Company's Sacramento stations at a specified future date.
Weller Employment Agreement
Mr. Weller is a party to an employment agreement with Chancellor and
Chancellor Radio Broadcasting pursuant to which he serves as Regional Manager of
KMLE-FM, KOOL-FM, KYOT-FM, KZON-FM, KISO- AM and KOY-AM in Phoenix, KXKL-FM,
KVOD-FM, KRRF-AM, KIMN-FM and KALC-FM in Denver, WWSW-AM and WWSW-FM in
Pittsburgh, and WALK-FM, WALK-AM, WBAB-FM, WBLI-FM, WHFM- FM and WGBB-AM in
Nassau-Suffolk (Long Island). Mr. Weller is also an Executive Vice President of
Chancellor and Chancellor Radio Broadcasting. The initial term of the employment
agreement commenced on February 1, 1996 and continues for twenty-three months.
The employment agreement provides for an annual base salary of $340,000 and
$360,000 in the fiscal years ended December 31, 1997 and 1998, respectively. Mr.
Weller is also entitled to receive a quarterly bonus based on the percentage of
the annual budgeted broadcast cash flow achieved by the stations for which Mr.
Weller has responsibility. The employment agreement also provides that the
Company will supply Mr. Weller with other customary benefits, including the use
of a car and insurance, disability and medical benefits. The employment
agreement also contains a noncompetition provision pursuant to which Mr. Weller
has agreed, subject to certain exceptions, that during the term of his
employment contract and for six months thereafter he will not engage in the
broadcasting business within any community or Arbitron MSA served by those
stations managed or overseen by him.
Kerrest Employment Agreement
Mr. Kerrest is a party to an employment agreement with Chancellor and
Chancellor Radio Broadcasting pursuant to which he serves as Senior Vice
President and Chief Financial Officer. Mr. Kerrest's employment agreement is for
a two year term commencing on February 14, 1996, and is subject to automatic
successive one-year renewal terms that take effect unless notice of non-renewal
is given by the Company to Mr. Kerrest within 30 days prior to the expiration of
the then-current term. The agreement provides for an initial base salary of
$225,000, with an annual increase of not less than five percent as determined by
the board of directors. Mr. Kerrest is also entitled to receive an annual bonus,
beginning in fiscal year ending December 31, 1996, based on achievement of
broadcast cash flow projections established by the board of directors. The
employment agreement also provides that the Company will supply Mr. Kerrest with
other customary benefits, including the use of a car and insurance, disability
and medical benefits.
5
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STOCK OPTIONS
The following table shows individual grants of stock options of Chancellor
issued to its Chief Executive Officer and other Named Executive Officers during
the fiscal year ended December 31, 1996.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------
Percent of
Number of Total Potential Realizable Value
Securities Options Exercise at Assumed Annual Rates of
Underlying Granted to or Stock Price Appreciation For
Options Employees in Base Price Expiration Option Term
Name Granted(#) Fiscal Year(%) ($/Sh) Date 5%($) 10%($)
- ---------------------- --------------- ------------------- -------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Steven Dinetz......... 75,000 10.6 $20.00 2/9/06 943,342 2,390,614
George C. Toulas...... 40,000 5.7 $20.00 2/9/06 503,116 1,274,994
10,000 1.4 $36.75 10/22/06 231,119 585,700
Rick Eytcheson........ 25,000 3.5 $20.00 2/9/06 314,447 796,871
5,000 0.7 $36.75 10/22/06 115,559 292,850
Samuel L. Weller...... 15,000 2.1 $20.00 2/9/06 188,668 478,123
7,500 1.1 $31.00 7/23/06 146,218 370,545
7,500 1.1 $36.75 10/22/06 173,339 439,275
Jacques Kerrest....... 25,000 3.5 $20.00 2/9/06 314,447 796,871
5,000 0.7 $31.00 7/23/06 97,479 247,030
5,000 0.7 $36.75 10/22/06 115,559 292,850
</TABLE>
The following table shows the value, as of December 31, 1996 of stock
options of Chancellor held by its Chief Executive Officer and other Named
Executive Officers. No stock options were exercised during the year ended
December 31, 1996.
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1996 FISCAL YEAR END OPTION VALUES (1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END AT FISCAL YEAR-END
# ($)
------------------------- -------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
Steven Dinetz........... 345,326/592,992 5,476,274/8,495,707
George C. Toulas........ 0/50,000 0/150,000
Rick Eytcheson.......... 0/30,000 0/93,750
Samuel L. Weller........ 0/30,000 0/56,250
Jacques Kerrest......... 0/35,000 0/93,750
<FN>
(1) Assuming a fair market value of $23.75 per share, which was the closing
price per share of the Class A Common Stock on December 31, 1996.
</FN>
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Messrs. Marcus and Massey served as members of the
Compensation Committee of the Board of Directors, of which Mr. Marcus acted as
chairman. Mr. Marcus is the President and Chief Executive Officer of Marcus
Cable Company, a cable television multiple system operator. An affiliate of
Hicks Muse has invested approximately $115.0 million in limited partnership
interests in Marcus Cable Company and is one of its largest limited partners.
COMPENSATION OF DIRECTORS
Beginning in 1997, the non-employee directors of Chancellor (other than
Messrs. Hicks, Stuart and Neuman) receive an annual retainer of $25,000 for
serving as directors of Chancellor and its subsidiaries. Non-employee directors
also receive attendance fees of $1,000 ($500 in the case of telephonic meetings)
for each meeting which they attend. Directors who are officers or employees of
Chancellor or the Company are not presently expected to receive compensation for
their services as directors. Directors of Chancellor are entitled to
reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the Board of Directors or
committees thereof.
Each of Messrs. Marcus and Massey has been granted fully vested options to
purchase up to 13,333 shares of Chancellor's Class A Common Stock at an exercise
price of $7.50 per share. These options will expire on October 12, 2004, unless
exercised prior to that date. Upon her appointment to the Board of Directors in
January 1996, Matrice Ellis-Kirk was granted a right, which she has exercised,
to purchase up to 2,500 shares of Class A Common Stock at a price per share
equal to the Initial Public Offering price per share. In addition, Ms.
Ellis-Kirk has been granted fully vested options to purchase up to 6,666 shares
of Class A Common Stock at an exercise price equal to $20.00 per share which
expire on January 10, 2006. Ms. Ellis-Kirk resigned as a director of Chancellor
and Chancellor Radio Broadcasting on February 21, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHANCELLOR BROADCASTING COMPANY
CHANCELLOR RADIO BROADCASTING COMPANY
CHANCELLOR BROADCASTING LICENSEE COMPANY
Date: May 14, 1997 By: /s/ JACQUES D. KERREST
----------------------------------
Jacques D. Kerrest
Senior Vice President and
Chief Financial Officer
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