SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The table below sets forth information concerning the beneficial
ownership of Clear Channel common stock as of March 8, 2002, for each director
currently serving on the Board and each of the nominees for director; each of
the named executive officers not listed as a director; the directors and
executive officers as a group; and each person known to Clear Channel to own
beneficially more than 5% of outstanding common stock. At the close of business
on March 8, 2002, there were 599,518,802 shares of Clear Channel common stock
outstanding. Except as otherwise noted, each shareholder has sole voting and
investment power with respect to the shares beneficially owned.
AMOUNT AND NATURE OF PERCENT
NAME BENEFICIAL OWNERSHIP OF CLASS
---- -------------------- --------
L. Lowry Mays................................................... 31,387,296(1) 5.2%
Mark P. Mays.................................................... 1,062,396(2) *
Randall T. Mays................................................. 682,093(3) *
Robert L. Crandall.............................................. 29,200(4) *
Alan D. Feld.................................................... 83,300(5) *
Thomas O. Hicks................................................. 40,265,194(6)(16) 6.7%
Vernon E. Jordan, Jr............................................ 90,300(7) *
Perry J. Lewis.................................................. 168,832(8) *
B. J. McCombs................................................... 14,456,986(9) 2.4%
Theodore H. Strauss............................................. 231,857(10) *
John H. Williams................................................ 25,620(11) *
Randy Michaels(12).............................................. 973,609(13) *
Roger Parry..................................................... 2,267(14) *
Hicks Muse Parties(15).......................................... 34,825,777(16) 5.8%
FMR Corp.(17)................................................... 60,683,099 10.1%
Capital Research and Management Company (18).................... 42,186,290 7.0%
Janus Capital Corporation (20).................................. 34,060,446(19) 5.7%
All Directors and Executive Officers as a Group (19 persons).... 89,972,689(21) 14.9%
* Percentage of shares beneficially owned by such person does not exceed
one percent of the class so owned.
(1) Includes 2,120,000 shares subject to options held by Mr. L. Mays and
98,456 shares held by trusts of which Mr. L. Mays is trustee, but not
beneficiary, 743,287 shares held by the Mays Family Foundation, 874,283
shares held by the Mays Family 2000 Charitable Lead Annuity Trust and
20,000,000 shares held by 4-M Partners, Ltd., over which Mr. L. Mays
has either sole or shared investment or voting authority.
6
(2) Includes 53,880 shares subject to options held by Mr. M. Mays, 139,196
shares held by trusts of which Mr. M. Mays is trustee, but not
beneficiary and 629,193 shares held by the MPM Partners, Ltd., over
which Mr. M. Mays has control of the sole general partner.
(3) Includes 53,880 shares subject to options held by Mr. R. Mays and
16,701 shares held by trusts of which Mr. R. Mays is trustee, but not
beneficiary.
(4) Includes 24,500 shares subject to options held by Mr. Crandall. Mr.
Crandall is not standing for re-election to the Board of Directors.
(5) Includes 67,000 shares subject to options held by Mr. Feld. Excludes
10,360 shares owned by Mr. Feld's wife, as to which Mr. Feld disclaims
beneficial ownership
(6) Consists of 5,323,768 shares for which Thomas O. Hicks has sole voting
and dispositive power and 34,941,426 shares (including vested stock
options to purchase 94,000 shares) for which Thomas O. Hicks has shared
voting and dispositive power. Of the 5,323,768 shares for which Thomas
O. Hicks has sole voting and dispositive power, 4,552,561 shares are
held of record by Thomas O. Hicks, 252,358 shares are subject to
options held of record by certain trusts for the benefit of certain of
Thomas O. Hicks' children that are currently vested, 318,756 shares are
held by Thomas O. Hicks as the trustee of certain trusts for the
benefit of Thomas O. Hicks' children, 1,000 shares held of record by
Thomas O. Hicks as nominee that are immediately exercisable pursuant to
a stock option, 102,366 shares are held of record by a private
foundation controlled by Thomas O. Hicks, and 96,727 shares are held of
record by two limited partnerships of which the general partner is a
limited liability company of which Thomas O. Hicks is the sole member.
Of the 34,941,426 shares of common stock for which Thomas O. Hicks has
shared voting and dispositive power, 115,649 shares are held by Thomas
O. Hicks as the co-trustee of a trust for the benefit of unrelated
parties, and 34,825,777 shares (including vested stock options to
purchase 94,000 shares) are held of record by the Hicks Muse Parties.
Mr. Thomas O. Hicks disclaims beneficial ownership of the shares of
common stock not owned of record by him.
(7) Includes 90,300 shares subject to options held by Mr. Jordan.
(8) Includes 118,500 shares subject to options held by Mr. Lewis.
(9) Includes 11,000 shares subject to options held by Mr. McCombs. Excludes
9,798,453 shares held by trusts of which Mr. McCombs' children are
trustees, as to which Mr. McCombs disclaims beneficial ownership.
(10) Includes 129,500 shares subject to options held by Mr. Strauss.
(11) Includes 11,000 shares subject to options held by Mr. Williams.
(12) Mr. Michaels is also known as Benjamin Homel and he files reports under
Section 16(a) of the Securities Exchange Act of 1934 under that name.
(13) Includes 532,135 shares subject to options held by Mr. Michaels.
(14) Excludes 20,000 shares owned by Mr. Parry's wife, as to which Mr. Parry
disclaims beneficial ownership
(16) Consists of (i) 127,027 shares held of record by Capstar Boston
Partners, L.L.C., a limited liability company of which the manager is a
limited partnership whose ultimate general partner is Hicks, Muse Fund
III Incorporated ("Fund III Inc."), (ii) 16,773,479 shares held of
record by two limited partnerships of which the ultimate general
partner is Fund III Inc., (iii) 17,831,012 shares held of record by six
limited partnerships of which the ultimate general partner is Hicks,
Muse Fund IV LLC ("Fund IV"), (iv) 259 shares held of record by HM
1-FOF Coinvestors, L.P. a limited partnership of which the ultimate
general partner is Hicks Muse Latin America Fund Incorporated ("LA
Fund"), (v) 94,000 shares issuable upon the exercise of stock options
that are already vested and held by Hicks, Muse & Co. Partners, L.P., a
limited partnership of which the ultimate general partner is HM
Partners Inc. ("HM Partners"). The entities affiliated with Hicks,
Muse, Tate & Furst Incorporated and described in this footnote as
holding shares of Clear Channel are collectively the "Hicks Muse
Parties". Thomas O. Hicks is a controlling stockholder and serves as
executive officer of Fund III Inc., LA Fund and HM Partners, and Thomas
O. Hicks is the sole member of Fund IV. Accordingly, Thomas O. Hicks
may be deemed to be the beneficial owner of the common stock
beneficially owned by the Hicks Muse Parties. Mr. Thomas O. Hicks
disclaims beneficial ownership of the shares of common stock not owned
of record by him.
(21) Includes 3,706,424 shares subject to options held by such persons,
1,001,330 shares held by trusts of which such persons are trustees, but not
beneficiaries, 874,283 shares held by the Mays Family 2000 Charitable Lead
Annuity Trust, 743,287 shares held by the Mays Family Foundation, 20,000,000
shares held by 4-M Partners, Ltd., 629,193 shares held by the MPM Partners, Ltd.
and 34,825,777 shares held by Hick Muse Parties as more fully described in note
(16) above.
EXECUTIVE COMPENSATION
Clear Channel believes that compensation of its executive and other
officers should be directly and materially linked to operating performance. For
fiscal year 2001, the executive compensation program consisted of a base salary,
a bonus plan and stock options based on Clear Channel's cash flow growth and
individual performance.
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation information
for the years ended December 31, 2001, 2000 and 1999, for the Chief Executive
Officer and each of the four most highly compensated executive officers whose
total cash compensation exceeded $100,000 for services rendered in all
capacities for the three years ended December 31, 2001 (hereinafter referred to
as the "named executive officers").
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Awards Payouts
------------------------ --------
Other Restricted
Annual Stock LTIP All Other
Name And Principal Compen- Awards Payout Compen-
Position Year Salary ($) Bonus ($) sation ($) ($) Options (#) ($) sation ($)
-------- ---- ---------- --------- ----------- ---------- ----------- ------- -----------
L. Lowry Mays 2001 1,010,626 -- -- -- 750,000 -- 160,115(1)
Chairman and CEO 2000 1,000,000 3,000,000 -- -- 375,000 -- 179,441(1)
1999 972,274 2,750,000 -- -- 375,000 -- 191,740(1)
Mark P. Mays 2001 692,915 -- -- -- 500,000 -- 2,975(2)
President and COO 2000 657,500 1,500,000 -- -- 76,500 -- 2,800(2)
1999 382,499 895,000 -- -- 76,500 -- 2,800(2)
Randall T. Mays 2001 691,649 -- -- -- 500,000 -- 2,975(2)
Executive Vice President 2000 655,000 1,500,000 -- -- 76,500 -- 2,800(2)
and CFO 1999 362,500 895,000 -- -- 76,500 -- 2,800(2)
Roger Parry (3) 2001 577,034 -- -- -- 35,000 -- 132,140(4)
CEO - Clear Channel 2000 551,651 1,099,155 -- -- 86,257 -- 95,677(4)
International 1999 570,932 398,635 -- -- -- 647,040 92,345(4)
Randy Michaels 2001 506,471 -- -- -- 160,000 -- 2,975(2)
CEO - Clear Channel 2000 504,412 1,300,000 -- -- 50,000 -- 1,002,800(5)
Radio 1999(6) 519,120 810,853 -- -- 50,000 -- --
(1) Represents $157,140, $176,641 and $188,940 paid by Clear Channel in
2001, 2000 and 1999 respectively, on a split-dollar life insurance
policy for L. Lowry Mays. Such amounts include the entire dollar amount
of the term life portion and the present value to L. Lowry Mays of the
interest-free use of the non-term portion of each premium payment. The
remainder represents the amount of matching contributions paid by Clear
Channel under its 401(k) Plan.
(2) Represents the amount of matching contributions paid by Clear Channel
under its 401(k) Plan.
(3) Mr. Parry is a citizen of the United Kingdom. The compensation amounts
reported in this table have been converted from Great British pounds to
U.S. dollars using the average exchange rate from each applicable year.
(4) Represents contracted payments to Mr. Parry in lieu of a company
automobile and in lieu of medical benefit. The remainder represents the
amount of contributions paid by Clear Channel to Mr. Parry's pension
plans.
(5) Represents $1 million paid by Clear Channel in 2000 as a one-time
contract buy-out payment. The remainder represents the amount of
matching contributions paid by Clear Channel under its 401(k) Plan.
(6) Represents partial year compensation.
8
STOCK OPTION GRANT TABLE
The following table sets forth certain information concerning stock
options granted to the named executive officers during the year ended December
31, 2001.
Percent of
Total
Number of Options
Securities Granted to
Underlying Employees Exercise or Grant Date
Options in Fiscal Base Price Expiration Present
Name Granted (#) Year ($/share) Date Value ($)(1)
---- ------------ ---------- ----------- ---------- ------------
L. Lowry Mays 375,000 3.53% 58.01 2/12/11 11,148,750
375,000(2) 3.53% 46.28 12/14/11 8,898,750
Mark P. Mays 250,000 2.35% 58.01 2/12/11 7,432,500
250,000(2) 2.35% 46.28 12/14/11 5,932,500
Randall T. Mays 250,000 2.35% 58.01 2/12/11 7,432,500
250,000(2) 2.35% 46.28 12/14/11 5,932,500
Roger Parry 35,000(2) .33% 46.28 12/14/08 719,250
Randy Michaels 75,000 .71% 58.01 2/12/11 2,229,750
85,000(2) .80% 46.28 12/14/11 2,017,050
(1) Present value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following
assumptions: Risk-free interest rate of 5.2%, a dividend yield of 0%,
the volatility factor of the expected market price of Clear Channel's
common stock used was 35.8% and the expected life was eight years,
except for Mr. Parry's grant, which was based on a risk-free interest
rate of 4.9%, a dividend yield of 0%, the volatility factor of the
expected market price of Clear Channel's common stock used was 36.9%
and the expected life was six years. The present value of stock options
granted is based on a theoretical option pricing mode. In actuality,
because the company's employee stock options are not traded on an
exchange, optionees can receive no value nor derive any benefit from
holding stock options under these plans without an increase in the
market price of Clear Channel stock. Such an increase in stock price
would benefit all shareholders commensurately.
(2) The Compensation Committee and the Executive Performance Subcommittee,
as applicable, authorized option grants to executive and other officers
of Clear Channel in both February and December of 2001. However, the
grants authorized in December 2001 were made in lieu of option grants
that would otherwise have been made in February of 2002.
STOCK OPTION EXERCISES AND HOLDING TABLE
The following table sets forth certain information regarding stock
options exercised by the named executive officers during the year ended December
31, 2001, including the aggregate value of gains on the date of exercise. In
addition, the table sets forth the number of shares covered by both exercisable
and unexercisable stock options as of December 31, 2001. Also reported are the
values of "in the money" options which represent the positive spread between the
exercise price of any existing stock options and the Clear Channel common stock
price as of December 31, 2001.
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options at
on Options at Fiscal Year End Fiscal Year End
Exercise Value (#) ($)
Name (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------- ------------ --------------------------- -------------------------
L. Lowry Mays -- -- 2,120,000 / 0 13,137,890 / 0
Mark P. Mays 12,008 430,259 93,880 / 691,500 2,567,060 / 2,448,700
Randall T. Mays -- -- 98,480 / 691,500 2,701,311 / 2,448,700
Roger Parry -- -- 0 /162,731 0 / 169,624
Randy Michaels -- -- 532,135 / 260,000 12,594,047 / 393,550
9
EMPLOYMENT AGREEMENTS
On October 1, 1999, Clear Channel entered into employment agreements
with its three senior executives, L. Lowry Mays (Chairman and Chief Executive
Officer), Mark P. Mays (President and Chief Operating Officer) and Randall T.
Mays (Executive Vice President and Chief Financial Officer). Each agreement has
a term of seven years with automatic daily extensions unless Clear Channel or
the executive elects not to extend the agreement. Each of these employment
agreements provides for a minimum initial base salary, subject to review and
annual increase by the Compensation Committee. In addition, each agreement
provides for an annual bonus pursuant to Clear Channel's Annual Incentive Plan
or as the Executive Performance Subcommittee determines. The employment
agreements with the Chief Executive Officer, President and Chief Financial
Officer initially provided for base salaries of $1,000,000, $350,000 and
$325,000, respectively, and for minimum option grants to acquire 100,000, 50,000
and 50,000 shares of Clear Channel common stock, respectively; provided,
however, that the annual option grant will not be smaller than the option grant
in the preceding year unless waived by the executive. Each option will be
exercisable at fair market value at the date of grant for a ten-year period even
if the executive is not employed by Clear Channel. The Compensation Committee or
the Executive Performance Subcommittee will determine the schedule upon which
the options will vest and become exercisable.
Each of these executive employment agreements provides for severance
and change-in-control payments in the event that Clear Channel terminates an
executive's employment "without cause" or if the executive terminates for "good
reason." "Cause" is narrowly defined, and any determination of cause is subject
to a supermajority vote of Clear Channel's board. "Good reason" includes defined
change-in-control transactions involving Clear Channel, Clear Channel's election
not to automatically extend the term of the employment agreement, a diminution
in the executive's pay, duties or title or, in the case of the President and
Chief Financial Officer, if neither L. Lowry Mays, Mark P. Mays nor Randall T.
Mays is the Chairman and Chief Executive Officer of Clear Channel. If an
executive is terminated by Clear Channel "without cause" or the executive
resigns for "good reason" then that executive will receive a lump-sum cash
payment equal to the base salary and bonus that otherwise would have been paid
for the remainder of the term of the agreement (using the highest bonus paid to
executive in the three years preceding the termination but not less than
$1,000,000 bonus for the President or Chief Financial Officer and $3,000,000
bonus for the Chief Executive Officer); continuation of benefits; an option to
acquire 1,000,000 shares of Clear Channel common stock at fair market value as
of the date of termination that is fully vested and exercisable for a period of
ten years; and immediate vesting on the date of termination of all stock options
held by the executive on the date of termination. Certain tax gross up payments
would also be due on such amounts. However, if either the President or Chief
Financial Officer terminates his employment agreement "for good reason" because
neither L. Lowry Mays, Mark P. Mays nor Randall T. Mays is the Chairman and
Chief Executive Officer of Clear Channel, then the lump-sum payment and option
grants described above essentially double. In the event the executive's
employment is terminated "without cause" or for "good reason," the employment
agreements also restrict the executive's business activities that compete with
the business of Clear Channel for a period of two years following such
termination.
REPORT OF THE COMPENSATION COMMITTEE AND THE EXECUTIVE PERFORMANCE SUBCOMMITTEE
The following Report of the Compensation Committee and the Executive
Performance Subcommittee and the performance graphs included elsewhere in this
proxy statement do not constitute soliciting material and should not be deemed
filed or incorporated by reference into any other company filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent Clear Channel specifically incorporates this Report or the performance
graphs by reference therein.
The Compensation Committee of the Board of Directors and the
Committee's Executive Performance Subcommittee have furnished the following
report on executive compensation for fiscal year 2001.
10
OVERALL POLICY
The financial success of Clear Channel is linked to the ability of its
executive and other officers to direct Clear Channel's current operations and to
assess the advantages of potential acquisitions and realign the operations of
the acquired entities with the operating policies of Clear Channel. A major
objective of Clear Channel's compensation strategy is to attract and retain top
quality executive and other officers. Another objective of Clear Channel's
compensation strategy is to reward officers based on the financial performance
of operations under their control. Financial incentives are used to motivate
those responsible to achieve Clear Channel's financial goals and to align the
interests of Clear Channel's officers with the interests of Clear Channel's
shareholders.
Clear Channel believes that compensation of its executive and other
officers should be directly and materially linked to operating performance. For
fiscal year 2001, the executive compensation program consisted of a base salary,
a bonus plan and stock options based on Clear Channel's cash flow growth and
individual performance.
The Compensation Committee and the Executive Performance Subcommittee
believe that this three-part approach best serves the interests of Clear Channel
and its shareholders. It enables Clear Channel to meet the requirements of the
highly competitive environment in which Clear Channel operates while ensuring
that all officers are compensated in a way that advances both the short and
long-term interests of shareholders. Under this approach, compensation for these
officers involves a high proportion of pay that is "at risk", namely, the annual
bonus and stock options. The annual bonus is also based, in significant part, on
Clear Channel's performance. Stock options relate a significant portion of
long-term remuneration directly to stock price appreciation realized by all of
Clear Channel's shareholders.
COMPENSATION
Base Salary
Base salaries of executive and other officers are set with respect to
comparable salaries paid by companies in similar industries in which Clear
Channel operates. The salaries of all executive officers except the Chief
Executive Officer are determined through mutual negotiations between the
executive and the Chief Executive Officer and are based on both past performance
and expected future performance. However, under certain circumstances, Clear
Channel may enter into employment agreements with executive officers and it
currently has employment agreements with its President and Chief Operating
Officer and its Executive Vice President and Chief Financial Officer.
Bonus Plans
In fiscal year 2001, executive officers of Clear Channel were eligible
for participation in Clear Channel's Annual Incentive Plan. This plan was
administered by the Executive Performance Subcommittee and provided for
performance-based bonuses for executives who were "covered employees" pursuant
to Section 162(m) of the Internal Revenue Code. Under the plan, the Subcommittee
establishes specific company "budgeted goals" applicable to each covered
executive officer for performance periods of one or more years. The budgeted
goals established for the fiscal year 2001 were based upon the executives
achieving certain goals, including an increase in cash flow over the prior year
and other subjective measures of performance. Budgeted goals for each executive
officer were set pursuant to an extensive annual operating plan developed by the
Chief Executive Officer in consultation with other senior executive officers,
including the principal executive officers of Clear Channel's various operating
divisions. Past and expected future performance was considered on a subjective
basis in determining these budgeted goals, based on the varied circumstances
impacting each operating division. The Chief Executive Officer made
recommendations as to the compensation levels and performance goals of Clear
Channel's executive officers to the Compensation Committee for their approval.
11
In addition, the Subcommittee established an objective formula for
calculating the maximum bonus payable to each participating executive officer.
These maximum bonus amounts were set above Clear Channel's historical bonus
levels for executives other than the Chief Executive Officer because the Section
162(m) regulations allow only "negative discretion" in respect of this type of
plan, and the Subcommittee desired flexibility to recognize exceptional
individual performance when warranted.
For fiscal year 2001, the Subcommittee established overall Company
performance targets based upon the achievement of specified levels of cash flow
growth. After the end of the fiscal year, the Subcommittee confirmed that the
2001 targets had not been achieved and therefore no bonuses were paid to
executive officers under the plan.
Stock Options
Stock option grants to executive and other officers of Clear Channel
were determined using the sole factor of achieving budgeted goals as determined
on a subjective basis after consideration of the varied circumstances impacting
each operating division. All decisions to grant stock options are in the sole
discretion of the Compensation Committee or the Executive Performance
Subcommittee, as applicable.
The employment agreements with the President and Chief Operating
Officer and the Executive Vice President and Chief Financial Officer contemplate
the award of annual option grants to acquire not less than 50,000 shares of
Clear Channel common stock.
The Compensation Committee and the Executive Performance Subcommittee,
as applicable, authorized option grants to executive and other officers of Clear
Channel in both February and December of 2001. However, the grants authorized in
December 2001 were made in lieu of option grants that would otherwise have been
made in February of 2002.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Clear Channel Compensation Committee and the Executive Performance
Subcommittee established the Chief Executive Officer's performance goals and
determined the amount of incentive bonus.
Clear Channel entered into a seven-year employment agreement with L.
Lowry Mays, to serve as Chairman and Chief Executive Officer effective October
1, 1999. The employment agreement provides for a minimum annual base salary of
$1 million. The salary amount is subject to review by the Clear Channel
Compensation Committee of the Board and may be increased on an annual basis at
the beginning of each fiscal year. The term of the employment agreement is
automatically extended at the end of each day by one additional day for each day
expired during the employment period, in the absence of a notice of
non-extension from L. Lowry Mays. The employment agreement contemplates that L.
Lowry Mays will be awarded bonus compensation as determined by the Clear Channel
Executive Performance Subcommittee of the Board and an annual option grant to
acquire not less than 100,000 shares of Clear Channel common stock. The
employment agreement provides for substantial severance and change-in-control
payments and option grants in the event that Clear Channel terminates L. Lowry
Mays' employment "without cause" or if the L. Lowry Mays terminates for "good
reason."
At the end of 2001, the Chief Executive Officer's annual salary was $1
million pursuant to his employment contract with Clear Channel. Two option
grants were made to the Chief Executive Officer, one in February 2001 and the
other in December 2001, each for the purchase of 375,000 shares of Clear Channel
common stock.
The Compensation Committee and Executive Performance Subcommittee
utilized information gathered from its review of compensation packages of
comparable companies in determining the Chief Executive Officer's overall
compensation package. The amount of salary paid to the Chief Executive Officer
in fiscal year 2001 was made in accordance with the terms of his employment
agreement as described above. No bonus was paid to the Chief Executive Officer
with respect to fiscal year 2001.
12
As mentioned above, the Compensation Committee and Executive
Performance Subcommittee gathered competitive compensation data on comparable
companies. The Committee and Subcommittee selected the companies as the most
comparable to Clear Channel in terms of the properties operated and the markets
served. The Compensation Committee and Executive Performance Subcommittee
determined that these companies provided more accurate compensation information
relative to Clear Channel's operations than the entire range of companies
covered in the S&P Broadcast/Media Index used in the Stock Performance Chart
included in this document. In the opinion of the Compensation Committee and the
Executive Performance Subcommittee, the Chief Executive Officer's 2001
compensation corresponded to the median to low-end of the range paid by the
companies surveyed.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits the tax deduction
for compensation paid to the named executive officers to $1 million. However,
performance-based compensation that has been approved by shareholders is
excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals and the board committee that establishes such goals consists
only of outside directors (as defined for purposes of Section 162(m)).
At the 2001 annual Clear Channel shareholder meeting, the shareholders
approved the Annual Incentive Plan, which meets the requirements of Section
162(m) with respect to the performance-based compensation paid to the Chief
Executive Officer, as discussed above. The present intention of the Clear
Channel Compensation Committee is to continue to comply with the requirements of
Section 162(m).
Respectfully submitted,
THE COMPENSATION COMMITTEE
John Williams, Alan Feld, Thomas Hicks,
Vernon Jordan, Jr. and B.J. McCombs
THE EXECUTIVE PERFORMANCE SUBCOMMITTEE
John Williams and B.J. McCombs
13
STOCK PERFORMANCE GRAPH
The following charts demonstrate a five-year and ten-year comparison of
the cumulative total returns, adjusted for stock splits and dividends, for Clear
Channel, the S&P Broadcast/Media Index, and the S&P 500 Composite Index.
Section 16(a) of the Securities Exchange Act of 1934 requires Clear
Channel's directors, executive officers and beneficial owners of more than 10%
of any class of securities of Clear Channel to file reports of ownership and
changes in ownership with the SEC and the NYSE. Directors, executive officers
and greater than 10% shareholders are required to furnish Clear Channel with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no such forms
were required to be filed by those persons, Clear Channel believes that, during
the year ended December 31, 2001, all of its directors and executive officers
were in compliance with the applicable filing requirements except that one
report covering one transaction was filed late in each case by Brian Becker,
Juliana Hill, Benjamin Homel (a.k.a. Randy Michaels) and William Moll.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Mssrs. Alan Feld, Vernon Jordan, Jr., B. J. McCombs and Thomas O. Hicks
serve on Clear Channel's Compensation Committee. Mr. L. Lowry Mays served on
Clear Channel's Compensation Committee until August 2001. Mr. Mays serves as
Clear Channel's Chairman and Chief Executive Officer. Clear Channel paid fees in
2001 to the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P. Alan Feld is
the sole shareholder of a professional corporation which is a partner of such
firm and Vernon Jordan, Jr. is Of Counsel to such firm. Clear Channel leases
certain office space in San Antonio, Texas, from the trusts of the children of
L. Lowry Mays and B. J. McCombs. This lease expires on December 31, 2005 with
current monthly rentals of $12,500. Mr. Mays and Mr. McCombs do not serve as a
trustee for any of the trusts nor are either of them beneficiaries of any of the
trusts. Mr. Mays and Mr. McCombs have no pecuniary or other retained interest in
any of the trusts. Clear Channel believes the transactions described above are
no less favorable to Clear Channel than could be obtained with nonaffiliated
parties.
In 2001, Clear Channel Entertainment, a division of Clear Channel,
entered into a contract which made Clear Channel Entertainment the exclusive
television representative for the international licensing of a US sporting
event. During 2001, Clear Channel Entertainment sold the rights to Pan-American
Sports Network International ("PSN"). During 2001, certain affiliates of Hicks,
Muse, Tate & Furst Incorporated controlled PSN. Thomas O. Hicks is a controlling
shareholder or member of the ultimate corporate general partner or owner of all
such affiliates. Under the contract, PSN was obligated to pay $3.5 million for
the television rights. Both parties agreed to a two-year cancellation option
that required payment from PSN of $2.0 million. PSN failed to make the required
payment for the use of those rights. As such, Clear Channel Entertainment was
obligated to pay the $3.5 million to the license holder. In addition to this
payment, if PSN fails to make the required future payments, Clear Channel
Entertainment is obligated to make the future payments to the license holder of
$4.5 million and the $2.0 million cancellation payment.
CERTAIN TRANSACTIONS
Clear Channel contracted services for consulting and transportation
under commercial terms from Radioactive, LLC. Randy Michaels, an executive
officer of Clear Channel, is the owner of Radioactive, LLC. Gross fees of
approximately $447,100 were paid during 2001. Clear Channel believes the
transaction described above is no less favorable to Clear Channel than could be
obtained with nonaffiliated parties. Clear Channel pays annual wages of $62,250
for personnel that provide accounting and tax services to L. Lowry Mays,
Chairman and Chief Executive Officer, Mark Mays, President and Chief Operating
Officer, Randall Mays, Executive Vice President and Chief Financial Officer and
their families.
15
In May 1977, Clear Channel and its shareholders, including L. Lowry
Mays and B.J. McCombs, entered into a Buy-Sell Agreement restricting the
disposition of the outstanding shares of Clear Channel common stock owned by L.
Lowry Mays and B.J. McCombs and their heirs, legal representatives, successors
and assigns. The Buy-Sell Agreement provides that in the event that a restricted
party desires to dispose of his shares, other than by disposition by will or
intestacy or through gifts to such restricted party's spouse or children, such
shares must be offered for a period of 30 days to Clear Channel. Any shares not
purchased by Clear Channel must then be offered for a period of 30 days to the
other restricted parties. If all of the offered shares are not purchased by
Clear Channel or the other restricted parties, the restricted party offering his
or her shares may sell them to a third party during a period of 90 days
thereafter at a price and on terms not more favorable than those offered to
Clear Channel and the other restricted parties. In addition, a restricted party
may not individually, or in concert with others, sell any shares so as to
deliver voting control to a third party without providing in any such sale that
all restricted parties will be offered the same price and terms for their
shares.
AUDIT COMMITTEE REPORT
The following Report of the Audit Committee does not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent Clear Channel specifically
incorporates this Report by reference therein.
During the year ended December 31, 2001, the Audit Committee of the
Board of Directors developed an updated charter for the Committee, which was
approved by the full Board on July 26, 2001. The complete text of the updated
charter, which reflects standards set forth in new SEC regulations and NYSE
rules, is reproduced in the appendix to this proxy statement.
As set forth in more detail in the charter, the Audit Committee's
primary responsibilities fall into three broad categories:
o first, the Committee is charged with monitoring the preparation of
quarterly and annual financial reports by Clear Channel's management,
including discussions with management and Clear Channel's outside auditors
about draft annual financial statements and key accounting and reporting
matters;
o second, the Committee is responsible for matters concerning the
relationship between Clear Channel and its outside auditors, including
recommending their appointment or removal; reviewing the scope of their
audit services and related fees, as well as any other services being
provided to Clear Channel; and determining whether the outside auditors are
independent (based in part on the annual letter provided to Clear Channel
pursuant to Independence Standards Board Standard No. 1); and
o third, the Committee oversees management's implementation of effective
systems of internal controls, including review of policies relating to
legal and regulatory compliance, ethics and conflicts of interests; and
review of the activities and recommendations of Clear Channel's internal
auditing program.
The Committee has implemented procedures to ensure that during the
course of each fiscal year it devotes the attention that it deems necessary or
appropriate to each of the matters assigned to it under the Committee's charter.
To carry out its responsibilities, the Committee met four times during the year
ended December 31, 2001.
In overseeing the preparation of Clear Channel's financial statements,
the Committee met with both management and Clear Channel's outside auditors to
review and discuss all financial statements prior to their issuance and to
discuss significant accounting issues. Management advised the Committee that all
financial statements were prepared in accordance with generally accepted
accounting principles, and the Committee discussed the statements with both
management and the outside auditors. The Committee's review included discussion
with the
16
outside auditors of matters required to be discussed pursuant to Statement on
Auditing Standards No. 61 (Communication With Audit Committees).
With respect to Clear Channel's outside auditors, the Committee, among
other things, discussed with Ernst & Young LLP matters relating to its
independence, including the disclosures made to the Committee as required by the
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees).
Finally, the Committee continued to monitor the scope and adequacy of
Clear Channel's internal auditing program, including proposals for adequate
staffing and to strengthen internal procedures and controls where appropriate.
On the basis of these reviews and discussions, the Committee
recommended to the Board of Directors that the Board approve the inclusion of
Clear Channel's audited financial statements in Clear Channel's Annual Report on
Form 10-K for the year ended December 31, 2001, for filing with the Securities
and Exchange Commission.
Respectfully submitted,
THE AUDIT COMMITTEE
Perry Lewis - Chairman,
Theodore Strauss and John Williams
AUDITOR FEES
Ernst & Young LLP billed Clear Channel the following fees for services provided
during fiscal year 2001:
o Fees for the last annual audit were $2.1 million.
o All other fees were $5.8 million, including audit-related
services of $3.4 million and non-audit services of $2.4
million. Audit related services generally include fees for
statutory audits, acquisition due diligence, accounting
consultation, SEC registration statements, and other
attestation reports.
Clear Channel's Audit Committee has considered whether Ernst & Young LLP's
provision of non-audit services to Clear Channel is compatible with maintaining
Ernst & Young LLP's independence.
PROPOSAL 2: SELECTION OF INDEPENDENT AUDITORS
Subject to ratification by the shareholders, the Board has reappointed
Ernst & Young LLP as independent auditors to audit the financial statements of
Clear Channel for the year ended December 31, 2002.
Representatives of the firm of Ernst & Young LLP are expected to be
present at the annual meeting of shareholders and will have an opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF ERNST &
YOUNG LLP AS INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2002.
17
PROPOSAL 3 APPROVAL OF AN AMENDMENT TO THE CLEAR CHANNEL
1998 STOCK INCENTIVE PLAN
GENERAL INFORMATION
On February 10, 1998, the Clear Channel Board adopted and the
shareholders subsequently approved the Clear Channel Communications, Inc. 1998
Stock Incentive Plan. The purpose of the plan is to provide Clear Channel an
effective means to attract, retain and encourage qualified individuals to serve
Clear Channel with a high degree of commitment. The plan authorizes the granting
of incentive stock options, nonqualified stock options, stock appreciation
rights, dividend equivalent rights, performance awards and restricted stock. As
a result of adjustments made to the plan in connection with a two-for-one stock
split declared by Clear Channel in July 1998, there are 15,000,000 shares of
Clear Channel's common stock authorized for issuance under the plan.
The Board and the Compensation Committee believe that the grant of
equity incentives is an essential component of compensation and is standard and
expected in Clear Channel's industry. As a result of Clear Channel's recent
growth, the size of Clear Channel's workforce has increased over 500% since the
shareholders approved the plan in 1998. The ability to continue to attract new
employees and to retain current employees is a critical element in Clear
Channel's strategy for future growth, and Clear Channel's ability to attract and
retain qualified employees could be impeded if sufficient equity incentives are
not available in the future for grant under the plan. Furthermore, the ability
to motivate and incentivize employees and senior management to take into account
the long-term interests of Clear Channel and its shareholders is also essential
to Clear Channel's future growth, and the ability to so motivate and incentivize
Clear Channel's employees and senior management could be impeded if sufficient
equity incentives are not available in the future.
With these matters in mind, the Board and the Compensation Committee
evaluated the plan and the adequacy of the number of shares available under the
plan. The Board believes that, while the number of shares available under the
plan and Clear Channel's other stock option and stock incentive plans will be
sufficient during the next twelve months, additional shares may be required
thereafter to enable Clear Channel to continue realizing the plan's intended
benefits.
AMENDMENT TO THE PLAN
On February 19, 2002, the Board approved an amendment to the plan which
increased the number of shares of Clear Channel common stock that can be issued
under the plan by 14,000,000 shares, so that after the amendment the total
number of authorized shares that can be issued under the plan would be
29,000,000. The amendment to the plan was effective on February 19, 2002,
subject to shareholder approval at the annual meeting.
The plan currently authorizes the issuance of shares of common stock
pursuant to awards granted under the plan. The Board has amended the plan,
subject to shareholder approval, to increase the total number of shares
available under the plan from 15,000,000 to 29,000,000 shares. There were
outstanding on March 8, 2002 options to purchase 9,665,571 shares under the plan
and 145,000 shares had been purchased through exercise of options granted under
the plan. No SARs, dividend equivalent rights, performance awards or shares of
restricted stock have been granted under the plan. The Board has deemed it
prudent to increase the shares available for grants under the plan to facilitate
future awards under the plan at levels determined appropriate by the Board and
Compensation Committee.
THE PLAN IS SUMMARIZED BELOW:
OVERVIEW OF AWARDS
The following types of awards may be granted under the plan: (i)
incentive stock options, (ii) nonqualified stock options, (iii) rights to
receive all or some portion of the increase in value of the common stock (also
known as stock appreciation rights or SARs), (iv) the right to receive all or
some portion of cash dividends with respect to the common stock (also known as
dividend equivalent rights), (v) rights to receive cash and/or common stock
18
contingent upon the attainment of defined performance goals (also known as
performance awards), and (vi) shares of common stock subject to temporary
restrictions on transfer (also known as restricted stock). Eligible individuals
under the plan include employees, officers and directors of Clear Channel or a
subsidiary of Clear Channel or consultants or advisors receiving cash
compensation from Clear Channel or a subsidiary of Clear Channel. In addition,
the plan provides that directors of Clear Channel may receive some or all of
their annual director compensation in the form of shares of common stock.
ADMINISTRATION
Except for awards of nonqualified stock options to nonemployee
directors ("Director Options"), the plan will be administered by a committee
which shall consist of at least two directors and may consist of the entire
Board. The Board will grant Director Options. The plan committee will have broad
discretion, subject to the terms of the plan, to designate the recipients of
awards, prescribe the terms and conditions of awards and establish rules and
regulations for administration of the plan.
Under the plan, members of the plan committee are not liable for their
actions taken in a good faith attempt to administer the plan and are entitled to
indemnification from Clear Channel to the extent permitted by law in connection
with claims asserted in regard to administration of the plan.
STOCK SUBJECT TO THE PLAN
The current maximum number of shares of common stock which may be the
subject of awards under the plan is 15,000,000. However, subject to shareholder
approval of the amendment to the plan to increase the number of shares reserved
for issuance under the plan, the maximum number of shares of common stock which
may be the subject of awards under the plan will be 29,000,000. Furthermore,
within the period of one year no individual may receive with respect to awards
more than 2,000,000 shares or $5,000,000 in cash or shares with an equivalent
fair market value. However, the ceilings may be adjusted by the plan committee
upon the occurrence of certain events affecting the capitalization of Clear
Channel. See "Adjustments" below. Upon the expiration, cancellation or
termination of an award (other than by reason of exercise), the shares
previously subject to such award may again be the subject of awards granted
under the plan.
SUMMARY OF INCENTIVE STOCK OPTIONS AND NONQUALIFIED STOCK OPTIONS
The exercise price for incentive stock options and nonqualified stock
options will be determined by the plan committee, other than for Director
Options, which will be determined by the Board; provided, however, the exercise
price for each incentive stock option may not be less than 100% of the fair
market value of the common stock on the date the option is granted (110% in the
case of an incentive stock option granted to an individual owning more than 10%
of the voting stock of Clear Channel or a parent or subsidiary of Clear
Channel). The aggregate fair market value (determined at the time an incentive
stock option is granted) of the common stock with respect to which incentive
stock options are exercisable for the first time by an employee during any
calendar year (under all stock option plans of Clear Channel) will not exceed
$100,000, or such other amount as may be prescribed under the Internal Revenue
Code (the "Code") or applicable regulations and rulings from time to time.
Incentive stock options may not be granted under the plan subsequent to February
10, 2008.
Each option granted under the plan other than Director Options will be
exercisable according to the terms established by the plan committee. In the
case of Directors Options, the Board will grant the options and such Director
Options will be exercised according to the terms established by the Board. In no
event, however, will an option, including a Directors Option, be exercisable
after the expiration of ten years from the date of grant (five years for a 10%
Shareholder).
Options are not transferable except by will or the laws of descent and
distribution or pursuant to a domestic relations order (within the meaning of
Rule 16a-12 under the Exchange Act), and are exercisable only by the optionee or
his or her legal guardian or legal representative.
19
The purchase price payable upon the exercise of an option is payable in
cash, by delivery of an equivalent fair market value of common stock, by
cashless exercise procedures or by a combination of the foregoing, as determined
by the plan committee. No fractional shares will be issuable upon exercise of an
option, and the number of shares issuable will be rounded to the nearest whole
number.
SUMMARY OF STOCK APPRECIATION RIGHTS
A stock appreciation right or SAR is the right to receive an amount
equal to the excess of the fair market value of a share of Clear Channel's
common stock on the date of exercise over the fair market value of a share of
common stock on the date of grant (in the case of SARs granted independent of a
stock option) or the exercise price of the related stock option (in the case of
an SAR granted in tandem with a stock option). SARs may be granted in connection
with stock options or as a separate award unrelated to stock options. The
exercisability of SARs granted in connection with stock options will be governed
by the exercisability of the related options. The amount payable to the holder
upon the exercise of an SAR is based on the difference between the fair market
value of Clear Channel's common stock on the date preceding exercise and the
exercise price of the option in connection with which the Stock Appreciation
Right was granted (or the fair market value of common stock on the date the
Stock Appreciation Right was granted if it was not granted in connection with an
option). However, the plan committee may establish a maximum amount payable upon
the exercise of an SAR. The amount payable to a holder upon the exercise of an
SAR may be paid in the form of common stock or cash or a combination thereof, as
determined by the plan committee.
SUMMARY OF DIVIDEND EQUIVALENT RIGHTS
Dividend equivalent rights may be granted in conjunction with other
awards or as a separate award. The plan committee will determine the terms and
conditions of the dividend equivalent rights and, specifically, will determine
whether amounts payable will be paid on a current or deferred basis and whether
they will be settled in cash or stock in single or multiple installments.
SUMMARY OF RESTRICTED STOCK
Restricted stock is the grant of shares of common stock or the right to
purchase common stock at a price determined by the plan committee, which is
nontransferable and subject to substantial risk of forfeiture until specific
conditions are met. Restricted stock granted under the plan will be subject to
restrictions on transfer and such other restrictions imposed by the plan
committee. No stock certificate representing restricted stock may be issued in
the name of the grantee until the grantee executes a written agreement, blank
stock powers and an escrow agreement or other documents required by the plan
committee. Restricted stock may not be delivered to the grantee or sold,
transferred or pledged until the restrictions imposed by the plan committee have
lapsed according to the terms established by the plan committee. The plan
committee will determine whether dividend payments in respect of restricted
stock will be made currently or deferred until the lapsing of restrictions. Upon
lapse of the restrictions, the certificates representing the restricted stock
will be delivered to the grantee, in addition to any deferred dividends with
interest accrued thereon. All restrictions lapse upon a change in control of
Clear Channel unless the plan committee specifies otherwise in the written
agreement.
SUMMARY OF PERFORMANCE AWARDS
Awards contingent upon the attainment of certain financial or other
objectives within a designated period of time may be granted by the plan
committee in the form of shares of common stock (known as performance shares) or
other awards (known as performance units). The performance objectives to be
established in writing by the plan committee may be expressed in terms of
earnings per share, share price, pre-tax profits, net earnings, return on equity
or assets, revenues, EBITDA, market share, or a combination of the foregoing
with regard to Clear Channel or a subsidiary. The plan committee may establish a
ceiling on the amount payable under a performance award.
A grantee becomes vested in performance awards to the extent that the
established objectives are achieved during the designated measurement period,
and immediately following the end of such period Clear Channel must pay any
amounts due in cash or common stock or a combination thereof.
20
Issuance of certificates representing performance shares may not occur
until the grantee executes a written agreement, blank stock powers and an escrow
agreement or such other documents required by the plan committee. Certificates
representing performance shares may not be delivered to the grantee or sold,
transferred or pledged prior to the attainment of the designated objectives and
fulfillment of other conditions established by the plan committee. The plan
committee may determine whether dividends in respect of issued but undelivered
performance shares will be paid currently or deferred and paid with interest
upon lapsing of the restrictions.
ADJUSTMENTS
Upon the termination or change in status of employment of a grantee,
adjustments to the terms and conditions of awards held by such grantee will be
made according to the terms established by the plan committee in the written
agreement respecting such award.
Each award granted by the plan committee must be evidenced by a written
agreement. Although the plan committee has the discretion to amend the terms of
an award subsequent to the date of grant, it may not do so in a way that
adversely affects rights previously granted under the plan.
The plan committee will also determine the appropriate adjustments to
be made to the terms of the plan and awards previously granted thereunder upon
the occurrence of certain events affecting the capitalization of Clear Channel
including, but not limited to, an increase or decrease in the number of issued
and outstanding shares of common stock or other changes in capitalization
resulting from a reclassification, recapitalization, merger, consolidation,
stock dividend, stock split or otherwise. Appropriate adjustments may be made to
the maximum number of shares and the class of shares or other securities with
respect to which awards may be made, the maximum number of shares with respect
to which an individual may be granted awards, the number and class of shares
subject to outstanding awards, the exercise price of such outstanding awards,
and the performance objectives upon which performance awards are based.
Upon a Change of Control (as defined in the plan), (i) with respect to
all stock option awards and SAR awards, all of such awards shall become
immediately exercisable, (ii) with respect to restricted stock awards, all
restrictions upon such shares shall lapse, and (iii) with respect to performance
awards, such awards will be treated in the manner determined by the plan
committee at the time such performance awards were granted. In addition, to the
extent set forth in the applicable agreement relating to a stock option award or
SAR award, upon a Change of Control, (i) the holder of a stock option award will
have the right to a cash payment within sixty days after such Change of Control
equal to the excess of fair market value of the shares subject to such stock
option on the date preceding the date of surrender over the aggregate purchase
price of the shares subject to such stock option, and (ii) the holder of a SAR
award will be entitled to receive a cash or stock payment from Clear Channel
with a value equal to the fair market value on the date preceding the date of
exercise over the fair market value of the shares subject to such SAR award.
Following any liquidation, dissolution, merger or consolidation of
Clear Channel, each holder of an award is entitled to receive the same
consideration received in such transaction by each holder of common stock,
subject to the restrictions and other terms and conditions applicable to the
award.
TERMINATION AND AMENDMENT OF THE PLAN
The plan has no automatic termination date. However, incentive stock
options may not be granted under the plan subsequent to February 10, 2008. In
addition, the plan committee may terminate, amend or suspend the plan at any
time provided that such action does not adversely affect rights previously
granted under the plan.
FEDERAL INCOME TAX CONSEQUENCES
An individual receiving nonqualified stock options or SARs will not
recognize taxable income at the time the nonqualified stock options or SARs are
granted. At the time the nonqualified stock options or SARs are exercised, the
individual will recognize ordinary taxable income in an amount equal to the
difference between the
21
exercise price (or in the case of SARs granted independent of stock options, the
fair market value of the common stock at the time of grant) and the fair market
value of common stock on the date of exercise. Clear Channel will be entitled to
a concurrent deduction equal to the ordinary income recognized by the
individual, provided that Clear Channel withholds taxes.
An individual granted an incentive stock option will not recognize
taxable income at the time of grant or, subject to certain conditions, at the
time of exercise. The excess of the fair market value of the common stock
received over the exercise price is an item of tax preference income potentially
subject to the alternative minimum tax. If stock acquired upon exercise of an
incentive stock option is held for a minimum of two years from the date of grant
and one year from the date of exercise, the gain or loss (in an amount equal to
the difference between the sales price and the exercise price) upon disposition
of the stock will be treated as long-term capital gain or loss, and Clear
Channel will not be entitled to any deduction.
If the holding period requirement is not met, the incentive stock
option will be treated as one which does not meet the requirements of the Code
for incentive stock options and the individual will recognize ordinary income in
an amount equal to the lesser of (i) the excess of the fair market value of
common stock on the date of exercise over the exercise price or (ii) the amount
realized on the sale of such stock over the exercise price.
An individual receiving restricted stock will not recognize taxable
income at the time of grant. At the time the restrictions lapse, the individual
will recognize ordinary taxable income equal to the difference between the fair
market value of the common stock at the time the restrictions lapse and the
price, if any, paid for such common stock. Any dividends received before the
termination of restrictions will be taxed as ordinary income. Clear Channel will
be entitled to a deduction equal to the ordinary income reported by the
individual, provided Clear Channel withholds taxes. Upon the disposition of the
common stock, the individual will recognize taxable gain or loss equal to the
difference between the fair market value of the common stock at the time the
restrictions lapse and the amount realized upon the disposition of the common
stock. The gain or loss will be taxable as a capital asset.
An individual may elect to report and recognize income at the time of
grant or purchase of restricted stock by filing an election under Section 83(b)
of the Code (a "Section 83(b) election"). If the individual makes a Section
83(b) election, Clear Channel will be entitled to a deduction equal to the
ordinary income reported by the individual in the year of the election, provided
Clear Channel withholds taxes. However, dividends received before the
restrictions lapse will not be deductible by Clear Channel. Upon the disposition
of the common stock, the individual will recognize gain or loss equal to the
difference between the amount realized and the sum of the income recognized by
the individual as a result of the Section 83(b) election and any amounts paid by
the individual for the restricted stock.
Special rules may apply with respect to individuals subject to Section
16(b) of the Securities Exchange Act of 1934. Other than in the case of an
incentive stock option held in accordance with the specified holding period
requirements, the amount and timing of the recognition of income by an
individual subject to Section 16(b) (and the concurrent deduction by Clear
Channel) on the exercise of a stock option or SAR generally will be based on the
fair market value of the shares received when the restrictions of Section 16(b)
lapse, unless the individual elects otherwise by making a Section 83(b)
election.
REGISTRATION WITH SEC
Clear Channel has filed a registration statement covering the offering
of the shares under the plan with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended. If Proposal 3 is adopted,
Clear Channel intends to file a similar registration statement covering the
14,000,000 additional shares available for issuance under the plan.
NEW PLAN BENEFITS
Since future awards under the plan are discretionary, it is impossible
to determine who will receive awards and in what amounts in the event the
amendment to the plan is approved.
22
VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares present
and entitled to vote at the annual shareholders meeting is required to approve
the Amendment to the plan.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE PLAN. EACH OF THE DIRECTORS MAY HAVE AN INTEREST AND MAY
BENEFIT FROM THE ADOPTION OF THE PLAN, SINCE THEY ARE ELIGIBLE TO RECEIVE
AWARDS UNDER THE TERMS OF THE PLAN.
SHAREHOLDER PROPOSALS
A proper proposal submitted by a Clear Channel shareholder for
consideration at Clear Channel's 2003 annual shareholder meeting and received at
Clear Channel's executive offices no later than November 22, 2002 will be
included in Clear Channel's proxy statement and form of proxy relating to such
annual shareholder meeting. If the proposal is adopted, it will be included in
the information statements distributed to Clear Channel shareholders.
GENERAL
Neither Clear Channel management nor the Board knows of any matter to
be acted upon at the Clear Channel shareholder meeting other than the matters
described above. If any other matter properly comes before the Clear Channel
shareholder meeting, however, the proxy holders will vote thereon in accordance
with their best judgment.
The cost of soliciting proxies will be borne by Clear Channel.
Following the original mailing of the proxy soliciting material, regular
employees of Clear Channel may solicit proxies by mail, telephone, telegraph and
personal interview. Clear Channel has also retained Georgeson Shareholder
Communications Inc. to aid in the solicitation of proxies, at an estimated cost
of $8,500 plus reimbursement of reasonable out-of pocket expenses. Proxy cards
and materials will also be distributed to beneficial owners of stock, through
brokers, custodians, nominees and other like parties, and Clear Channel expects
to reimburse such parties for their charges and expenses connected therewith.
A copy of Clear Channel's Annual Report on Form 10-K filed with the
Securities and Exchange Commission has been mailed to all shareholders along
with this document. Additional copies will be available without charge to
shareholders upon written request to Clear Channel Communications, Inc., P.O.
Box 659512, San Antonio, Texas 78265-9512.
This document is dated March 22, 2002 and is first being mailed to
shareholders on or about March 27, 2002.
Kenneth E. Wyker
Secretary
23
APPENDIX A
AUDIT COMMITTEE CHARTER
ORGANIZATION
This charter governs the operations of the audit committee. The committee shall
review and reassess the charter at least annually and obtain the approval of the
board of directors. The committee shall be appointed by the board of directors
and shall comprise at least three directors, each of whom are independent of
management and the Company. Members of the committee shall be considered
independent if they have no relationship that may interfere with the exercise of
their independence from management and the Company. All committee members shall
be financially literate, and at least one member shall have accounting or
related financial management expertise.
STATEMENT OF POLICY
The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the legal
compliance and ethics programs as established by management and the board. In so
doing, it is the responsibility of the committee to maintain free and open
communication between the committee, independent auditors, the internal auditors
and management of the Company. In discharging its oversight role, the committee
is empowered to investigate any matter brought to its attention with full access
to all books, records, facilities, and personnel of the Company and the power to
retain outside counsel, or other experts for this purpose.
RESPONSIBILITIES AND PROCESSES
The primary responsibility of the audit committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of
their activities to the board. While the audit committee has the
responsibilities and powers set forth in this Charter, it is not the duty of the
audit committee to plan or conduct audits or to determine that the Company's
financial statements are complete and accurate and are in accordance with
generally accepted accounting principles. Management is responsible for
preparing the Company's financial statements, and the independent auditors are
responsible for auditing those financial statements. It is not the duty of the
audit committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's Code of Conduct. The committee in carrying out
its responsibilities believes its policies and procedures should remain
flexible, in order to best react to changing conditions and circumstances. The
committee should take the appropriate actions to set the overall corporate
"tone" for quality financial reporting, sound business risk practices, and
ethical behavior.
The following shall be the principal recurring processes of the audit committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the committee may supplement them as
appropriate.
The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the board and the audit committee, as representatives of
the Company's shareholders. The committee shall have the ultimate
authority and responsibility to evaluate and, where appropriate,
recommend the replacement of the independent auditors. The committee
shall discuss with the auditors their independence from management and
the Company and the matters in the written disclosures required by the
Independence Standards Board, and shall consider the compatibility of
nonaudit services with the auditors' independence. Annually, the
committee shall review and
A-1
recommend to the board the selection of the Company's independent
auditors, subject to shareholders' approval.
The committee shall discuss with the internal auditors and the
independent auditors the overall scope and plans for their respective
audits including the adequacy of staffing and compensation. Also, the
committee shall discuss with management, the internal auditors, and the
independent auditors the adequacy and effectiveness of the accounting
and financial controls, including the Company's system to monitor and
manage business risk, and legal and ethical compliance programs.
Further, the committee shall meet separately with the internal auditors
and the independent auditors, with and without management present, to
discuss the results of their examinations.
The committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the committee by the independent
auditors under generally accepted auditing standards. The chair of the
committee may represent the entire committee for the purposes of this
review.
The committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report
on Form 10-K (or the annual report to shareholders if distributed prior
to the filing of Form 10-K), including their judgment about the
quality, not just acceptability, of accounting principles, the
reasonableness of significant judgments, and the clarity of the
disclosures in the financial statements. Also, the committee shall
discuss the results of the annual audit and any other matters required
to be communicated to the committee by the independent auditors under
generally accepted auditing standards.
A-2
CLEAR CHANNEL COMMUNICATIONS, INC.
ANNUAL MEETING OF SHAREHOLDERS April 30, 2002
8:30 a.m.
Plaza San Antonio - A Marriott Hotel
555 South Alamo Street
San Antonio, Texas 78205 ADMIT ONE
--------------------------------------------------------------------------------
CLEAR CHANNEL COMMUNICATIONS, INC.
ANNUAL MEETING OF SHAREHOLDERS April 30, 2002
8:30 a.m.
Plaza San Antonio - A Marriott Hotel
555 South Alamo Street
San Antonio, Texas 78205 ADMIT ONE
CLEAR CHANNEL COMMUNICATIONS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 30, 2002
The undersigned hereby appoints L. Lowry Mays and Alan D. Feld, and
each of them, proxies of the undersigned with full power of substitution for and
in the name, place and stead of the undersigned to appear and act for and to
vote all shares of CLEAR CHANNEL COMMUNICATIONS, INC. standing in the name of
the undersigned or with respect to which the undersigned is entitled to vote and
act at the Annual Meeting of Shareholders of said Company to be held in San
Antonio, Texas on April 30, 2002 at 8:30 A.M., local time, or at any
adjournments or postponements thereof, with all powers the undersigned would
possess of then personally present, as indicated on the reverse side.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF NOTICE OF SAID MEETING AND
ACCOMPANYING PROXY STATEMENT AND OF THE 2001 ANNUAL REPORT AND RATIFIES AND
CONFIRMS ALL ACTS THAT ANY OF THE SAID PROXY HOLDERS OR THEIR SUBSTITUTES MAY
LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
(Continued and to be dated and signed on the reverse side.)
1. ELECTION OF DIRECTORS FOR all ten nominees listed below [ ]
WITHHOLD AUTHORITY to vote for all ________ nominees
below [ ]
EXCEPTIONS* [ ]
Nominees: L. Lowry Mays Mark P. Mays Randall T. Mays
Alan D. Feld Thomas O. Hicks Vernon E. Jordan, Jr. Perry J. Lewis
B. J. McCombs Theodore H. Strauss John H. Williams
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED
BELOW.)
*Exceptions:
2. RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
FOR THE YEAR ENDING DECEMBER 31, 2002.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. APPROVE THE AMENDMENT TO THE CLEAR CHANNEL COMMUNICATIONS, INC. 1998 STOCK
INCENTIVE PLAN
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Change of Address and/or Comments: [ ]
Please sign your name exactly as it appears hereon. Joint owners should sign
personally. Attorney, Executor, Administrator, Trustee or Guardian should
indicate full title.
Dated: , 2002
Shareholder's signature
Shareholder's signature if stock held jointly
SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
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