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EXHIBIT 10.63
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and
entered into this 18th day of May, 1999 (the "Execution Date"), to be effective
as of March 15, 1999 (the "Effective Date"), between Chancellor Media
Corporation, a Delaware corporation (the "Company"), Chancellor Media
Corporation of Los Angeles, a Delaware corporation ("Los Angeles"), and D.
Xxxxxxxx Xxxxxxxxx (the "Executive"), residing at 0000 Xxxxxxxx Xxxx, Xxxxxx,
Xxxxx 00000.
W I T N E S S E T H:
WHEREAS, the Company has a need for executive management
services;
WHEREAS, the Executive is qualified and willing to render such
services to the Company;
WHEREAS, the parties hereto desire to enter into an employment
agreement for the services of the Executive on the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and obligations hereinafter set forth, the parties agree as
follows:
1. DEFINITIONS
The following terms used in this Agreement shall have the
meaning specified below unless the context clearly indicates the contrary:
"Annual Bonus" shall mean the annual incentive bonus payable
to the Executive described in Section 4.
"Base Salary" shall mean the annual base salary payable to the
Executive at the rate set forth in Section 4.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean the Executive's (a) habitual neglect of his
material duties or failure to perform his material obligations under this
Agreement, (b) refusal or failure to follow lawful directives of the Board, (c)
commission of an act of fraud, theft or embezzlement, or (d) conviction of a
felony or other crime involving moral turpitude; provided, however, that the
Company shall give the Executive written notice of any actions alleged to
constitute Cause under subsections (a) and (b) above, and the Executive shall
have a reasonable opportunity (as specified by the Compensation Committee) to
cure any such alleged Cause.
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"Change in Control" shall mean (a) the sale, lease or other
transfer of all or substantially all of the assets of the Company to any person
or group (as such term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended); (b) the adoption by the stockholders of the Company of
a plan relating to the liquidation or dissolution of the Company; (c) the merger
or consolidation of the Company with or into another entity or the merger of
another entity into the Company or any subsidiary thereof with the effect that
immediately after such transaction the stockholders of the Company immediately
prior to such transaction (or their Related Parties) directly and indirectly
hold less than fifty percent (50%) of the total voting power of all securities
generally entitled to vote in the election of directors, managers or trustees of
the entity surviving such merger or consolidation; (d) the acquisition by any
person or group of more than fifty percent (50%) of the direct and indirect
voting power of all securities of the Company generally entitled to vote in the
election of directors of the Company; or (e) the majority of the Board's being
composed of members who (i) have served less than twelve (12) months and (ii)
were not approved by a majority of the Board at the time of their election or
appointment.
"Change in Operations" shall mean a change in the business
operating strategies of the Company (e.g., material cost controls or other
material restrictions on the Company's ability to increase its gross revenues)
which are imposed upon the Executive without his consent, and, in his reasonable
judgment, are fundamentally different from the business operating strategies in
effect at the Company on the Effective Date; provided, however, any expansion of
the Company's business into other media businesses, including, without
limitation, radio stations in small- or medium-sized markets, television,
outdoor advertising, internet related activities and international media
opportunities, shall not constitute a Change in Operations. Any dispute as to
whether a Change of Operations has occurred shall be resolved pursuant to
Section 14.
"Common Stock" shall mean $0.01 par value common stock of the
Company.
"Compensation Committee" shall mean the Compensation Committee
of the Board.
"Consumer Price Index" shall mean the Consumer Price Index for
All Urban Consumers (1982-84=100) for all cities as reported by the United
States Bureau of Labor Statistics.
"Contract Payments" shall have the meaning ascribed to such
term in Section 17.
"Contract Year" shall mean each twelve (12) consecutive month
period during the Employment Term which begins on the Effective Date and each
annual anniversary thereof.
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"Employment Term" shall mean the period beginning on the
Effective Date and ending on the close of business on the effective date of the
Executive's termination of employment with the Company.
"Expiration Date" shall have the meaning ascribed to such term
in Section 2.
"Good Reason" shall mean (a) the Company's material breach of
any provision hereof; (b) the Executive's no longer directly reporting to the
Office of the Chairman; (c) any material adverse change in the Executive's job
responsibilities, duties, functions, status, offices, title, perquisites or
support staff; (d) relocation of the Executive's regular work address by more
than twenty (20) miles without his consent; (e) a Change in Operations; or (f) a
Change in Control; provided, however, that the Executive shall give the Company
written notice of any actions (other than those set out in subsections (e) or
(f) above) alleged to constitute Good Reason and the Company shall have a
reasonable opportunity to cure any such alleged Good Reason.
"Gross-Up Payment" shall have the meaning ascribed to such
term in Section 17.
"Indemnification Agreement" shall mean the Indemnification
Agreement between the Company, Los Angeles and the Executive, to be effective as
of the Effective Date.
"Non-Solicitation Period" shall have the meaning ascribed to
such term in Section 6(c).
"Option Agreement" shall mean the form of Non-Qualified Stock
Option Agreement attached hereto as Exhibit A to be entered into between the
Executive and the Company pursuant to which an Option is granted to the
Executive.
"Option Plan" shall mean the Chancellor Media Corporation 1999
Stock Option Plan, as amended from time to time, and any successor thereto.
"Options" shall mean the non-qualified stock options to be
granted to the Executive pursuant to Section 4(c) hereof.
"Other Payments" shall have the meaning ascribed to such term
in Section 17.
"Payments" shall have the meaning ascribed to such term in
Section 17.
"Permanent Disability" shall mean the Executive's inability to
perform the duties contemplated by this Agreement by reason of a physical or
mental disability or infirmity which has continued for more than ninety (90)
working days (excluding vacation) in any twelve (12) consecutive month period as
determined by the Board. The Executive agrees to submit such medical evidence
regarding such disability or infirmity as is reasonably requested by the Board.
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"Related Parties" shall mean with respect to any person (a)
the spouse and lineal ascendants and descendants of such person, and any sibling
of any of such persons and (b) any trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, owners or persons
beneficially holding an eighty percent (80%) or more controlling interest of
which consist of persons referred to in subsection (a) above.
"Termination of Employment" shall mean the first to occur of
the following events:
(a) the date of death of the Executive;
(b) the effective date specified in the Company's
written notice to the Executive of the termination of his
employment as a result of his Permanent Disability, which
effective date shall not be earlier than the ninety-first
(91st) working day (excluding vacation) following the
commencement of the Executive's inability to perform his
duties hereunder;
(c) the effective date specified in the Company's
written notice to the Executive of the Company's termination
of his employment without Cause;
(d) the effective date specified in the Company's
written notice to the Executive of the Company's termination
of his employment for Cause;
(e) the effective date specified in the Executive's
written notice to the Company of the Executive's termination
of his employment for Good Reason;
(f) the effective date specified in the Executive's
written notice to the Company of the Executive's termination
of his employment without Good Reason; and
(g) the date the Executive's employment terminates
pursuant to Section 2.
"Termination without Cause" shall mean a termination by the
Company of the Executive's employment without Cause.
2. EMPLOYMENT
The Company agrees to employ the Executive, and the Executive
agrees to provide services to the Company, from the date of this Agreement until
the close of business on the fifth anniversary of the Effective Date (the
"Expiration Date"), unless the Executive's employment is earlier terminated
pursuant to a Termination of Employment. The Executive will serve the Company
subject to the general supervision, advice and
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direction of the Board and the Office of the Chairman and upon the terms and
conditions set forth in this Agreement.
3. TITLE AND DUTIES
(a) The Executive shall hold the positions of Executive Vice
President and Chief Financial Officer of the Company. During the Employment
Term, the Executive shall have such authority and duties as are usual and
customary for such positions, and shall perform such additional services and
duties as the Board may from time to time designate consistent with such
positions.
(b) The Executive shall report solely to the Office of the
Chairman.
(c) The Executive shall devote his full business time and best
efforts to the business affairs of the Company; provided, however, that the
Executive may devote reasonable time and attention to:
(i) serving as a director, or member of a committee
of the directors, of any not-for-profit organization, or
engaging in other charitable or community activities; and
(ii) serving as a director of, or member of a
committee of the directors of, the corporations or
organizations for which the Executive presently serves in such
capacity, and such other corporations and organizations that
the Board may from time to time approve in the future.
4. COMPENSATION AND BENEFITS
(a) Base Compensation. During the Employment Term, the Company
shall pay the Executive, in installments according to the Company's regular
payroll practice, Base Salary at the annual rate of Five Hundred Fifty Thousand
Dollars ($550,000) for the first (1st) Contract Year; and subject to increase
for each subsequent Contract Year to an amount equal to the product of
(i) the Base Salary for the immediately preceding
Contract Year; and
(ii) the ratio of the Consumer Price Index for the
last complete calendar month in such preceding Contract Year
to the Consumer Price Index for the same month in the year
preceding such preceding Contract Year;
provided, however, that in no event shall the Base Salary for
any subsequent Contract Year be less than the Base Salary in
the immediately preceding Contract Year.
(b) Annual Incentive Bonus. The Executive may receive an
Annual Bonus for each calendar year during which he is employed hereunder, with
the amount of
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each such Annual Bonus, if any, to be determined by, and to be in the sole
discretion of, the Compensation Committee, as recommended by the Chief Executive
Officer. The Executive's Annual Bonus awarded by the Compensation Committee with
respect to each calendar year shall be paid at the same time as annual incentive
bonuses with respect to that calendar year are paid to other senior executives
of the Company generally, but in no event later than March 31 of the following
calendar year.
(c) Stock Options. The Executive has been granted Options, as
of April 9, 1999, to purchase 500,000 shares of Common Stock at an exercise
price of $46.63. Such Options shall have the terms set forth in, and shall be
subject to, the Option Agreement and the Option Plan; provided, however, that if
the Option Plan is not approved by the stockholders of the Company at the first
annual stockholders' meeting after the date of grant, stock options or other
equity incentives shall be provided to the Executive on mutually satisfactory
terms that are no less favorable than the provisions of the Option Agreement and
the Option Plan.
(d) Vacation. During each complete twelve (12) month period of
the Employment Term, the Executive shall be entitled to no fewer than four (4)
weeks of paid vacation (unless, based on his length of service with the Company
and his position with the Company, the Executive is entitled to a greater number
of weeks of paid vacation under the Company's generally applicable vacation
policy, as determined by the Compensation Committee).
(e) Employee Benefit Plans. During the Employment Term, the
Executive shall be entitled to participate in all pension, profit sharing and
other retirement plans, all incentive compensation plans and all group health,
hospitalization and disability insurance plans and other employee welfare
benefit plans in which other senior executives of the Company may participate,
on terms and conditions no less favorable than those which apply to such other
senior executives of the Company.
(f) Company Payment of Health Benefit Coverage. During the
Employment Term, the Company shall pay the amount of premiums or other cost
incurred for coverage of the Executive and his eligible spouse and dependent
family members under the applicable Company health benefits arrangement
(consistent with the terms of such arrangement).
(g) Life Insurance Policy. In addition to the insurance
coverage contemplated by Section 4(e), during the Employment Term, the Company
shall maintain in effect term life insurance coverage for the Executive with a
death benefit consistent with the death benefits generally provided to other
senior executives of the Company, subject to the Executive's insurability at
standard rates and with the beneficiary or beneficiaries thereof designated by
the Executive. Notwithstanding Section 9 of this Agreement, such life insurance
policy or policies may be assigned to a trust for the benefit of any beneficiary
designated by the Executive.
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(h) Automobile; Other Benefits.
(i) During the Employment Term, the Executive shall
be entitled to receive a monthly automobile allowance equal to
$1,200, which shall be paid monthly in accordance with the
customary practices of the Company; and
(ii) During the Employment Term, the Company shall
reimburse the Executive for the reasonable membership dues for
the Executive to belong to the athletic club and country club
of the Executive's choosing. Such reimbursement shall be in
accordance with the Company's expense reimbursement policy.
(i) Most Favored Benefits. If the Company shall provide
employment related benefits (including, without limitation, benefits of the type
referred to by clauses (a) through (h) of this Section 4) in an aggregate amount
greater than or on more favorable terms and conditions (on an aggregate basis)
as are granted to any other executive vice president of the Company, the
Executive shall be provided such benefits in substantially comparable amount
and/or under the substantially comparable terms and conditions, as applicable,
on an aggregate basis.
5. REIMBURSEMENT OF EXPENSES
In addition to the compensation provided for under Section 4
hereof, upon submission of proper vouchers, the Company will pay or reimburse
the Executive for all normal and reasonable travel and entertainment expenses
incurred by the Executive during the Employment Term in connection with the
Executive's responsibilities to the Company.
6. TERMINATION BENEFITS
(a) Upon the termination of the Executive's employment with
the Company for any reason, the Company shall provide to the Executive (or, in
the case of his death, his estate or other legal representative) (i) any Annual
Bonus awarded but not yet paid with respect to the preceding calendar year; (ii)
all benefits due him under the Company's benefits plans and policies for his
services rendered to the Company prior to the date of such termination
(according to the terms of such plans and policies); (iii) not later than ninety
(90) days after such termination, in a lump sum, all Base Salary earned through
the date of such termination; and (iv) not later than ninety (90) days after
such termination, in a lump sum, any Annual Bonus awarded by the Compensation
Committee with respect to that portion of the calendar year prior to such
termination.
(b) In the event that the Executive's employment hereunder is
terminated by the Company without Cause or by the Executive for Good Reason (but
not by reason of expiration or non-renewal of this Agreement), and subject to
the last sentence of this subsection (b), the Company shall make a one-time cash
payment to the Executive equal to two times the Executive's then current Base
Salary. Such payment shall be made at the time of any such termination without
Cause or within thirty (30) days
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of any such resignation for Good Reason. Such payment shall be in full
satisfaction of all obligations of the Company to the Executive hereunder (other
than those obligations set forth in Sections 4(c) and 6(a)) and shall be
conditioned on the Executive's giving a general release of the Company and
affiliates in the form used generally by the Company in the case of the
termination of employment of senior executives.
(c) The Company may, by written notice to the Executive given
no later than fifteen (15) days following his termination of employment, elect
to require the Executive to observe the provisions of Section 7(b) hereof for a
period of time not to extend beyond the fifth anniversary of the Effective Date
(such period of time to be set forth in the Company's notice to the Executive
and is referred to herein as the "Non-Solicitation Period"). In such event, the
Company shall continue to pay the Executive his Base Salary as set forth in
Section 4(a) through the Non-Solicitation Period (net of any other severance
payments made to the Executive pursuant to Section 6(b) hereof).
(d) In the event of any Termination of Employment, the
Executive shall not be required to seek other employment to mitigate damages,
and any income earned by the Executive from other employment or self-employment
shall not be offset against any obligations of the Company to the Executive
under this Agreement.
7. PROTECTED INFORMATION; PROHIBITED SOLICITATION
(a) The Executive hereby recognizes and acknowledges that
during the course of his employment by the Company, the Company will furnish,
disclose or make available to the Executive confidential or proprietary
information related to the Company's business, including, without limitation,
customer lists, ideas and formatting and programming concepts and plans; that
such confidential or proprietary information has been developed and will be
developed through the Company's expenditure of substantial time and money; and
that all such confidential information could be used by the Executive and others
to compete with the Company. The Executive hereby agrees that all such
confidential or proprietary information shall constitute trade secrets, and
further agrees to use such confidential or proprietary information only for the
purpose of carrying out his duties with the Company and not to disclose such
information unless required to do so by subpoena or other legal process. No
information otherwise in the public domain (other than by an act of the
Executive in violation hereof) shall be considered confidential.
The Executive further agrees that all memoranda, notices,
files, records and other documents concerning the business of the Company, made
or compiled by the Executive during the period of his employment or made
available to him, shall be the Company's property and shall be delivered to the
Company upon its request therefor, and in any event upon the termination of the
Executive's employment with the Company, provided, however, that the Executive
shall be permitted to retain copies of personal correspondence generated or
received by him during the Employment Term, subject to the use restrictions of
this Section 7(a).
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(b) Should the Company make the election set forth in Section
6(c) hereof, the Executive hereby agrees that after any Termination of
Employment, and through the Non-Solicitation Period, the Executive will not
directly or indirectly induce any employee of any of the Protected Companies (as
defined below) to terminate such employment or to become employed by any other
person, firm, corporation or other entity that is directly or indirectly engaged
in any of the radio, television, outdoor advertising, broadcasting or related
business activities in which the Company and its subsidiaries or the Protected
Companies have significant involvement (collectively, the "Competing Business
Areas"), in each case at the effective time of such termination of employment.
(c) During the Employment Term and for a period of ninety days
following his termination of employment (including, without limitation,
termination by reason of expiration or non-renewal of this Agreement), the
Executive agrees that he shall not be employed by or perform activities on
behalf of, or have an ownership interest in, (i) any radio or television
broadcasting station serving the same "Area of Dominant Influence" (as reported
by Arbitron) as any of the radio or television broadcasting stations owned by
the Company or its subsidiaries or affiliates, or the subsidiaries or affiliates
of any of the Company's direct or indirect stockholders owning more than twenty
percent (20%) of the Company (collectively, the "Protected Companies"), or (ii)
any person, firm, corporation or other entity, or in connection with any
business enterprise, that is directly or indirectly engaged in any Competing
Business Area, in each case at the effective time of such Termination of
Employment (other than beneficial ownership of up to five percent (5%) of the
outstanding voting stock of a publicly traded company that owns such a
competitor).
(d) The restrictions in this Section 7, to the extent
applicable, shall survive the termination of this Agreement and shall be in
addition to any restrictions imposed upon the Executive by statute or at common
law.
(e) The parties hereby acknowledge that the restrictions in
this Section 7 have been specifically negotiated and agreed to by the parties
hereto and are limited only to those restrictions necessary to protect the
Protected Companies from unfair competition. The parties hereby agree that if
the scope or enforceability of any provision, paragraph or subparagraph of this
Section 7 is in any way disputed at any time, and should a court find that such
restrictions are overly broad, the court may modify and enforce the covenant to
the extent that it believes to be reasonable under the circumstances. Each
provision, paragraph and subparagraph of this Section 7 is separable from every
other provision, paragraph, and subparagraph and constitutes a separate and
distinct covenant. The Executive acknowledges that the Protected Companies
operate throughout the United States and that the effect of Section 7(c) may be
to prevent him from working in the Competing Business Areas after his
termination of employment hereunder.
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8. INJUNCTIVE RELIEF
The Executive hereby expressly acknowledges that any breach or
threatened breach by the Executive of any of the terms set forth in Section 7 of
this Agreement may result in significant and continuing injury to the Company,
the monetary value of which would be impossible to establish. Therefore, the
Executive agrees that the Company shall be entitled to apply for injunctive
relief in a court of appropriate jurisdiction. The provisions of this Section 8
shall survive the Employment Term.
9. PARTIES BENEFITED; ASSIGNMENTS
This Agreement shall be binding upon the Executive, his heirs
and his personal representative or representatives, and upon the Company and Los
Angeles and their respective successors and assigns. Neither this Agreement nor
any rights or obligations hereunder may be assigned by the Executive, other than
by will or by the laws of descent and distribution.
10. NOTICES
Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested,
addressed to the Board and the Company at its then principal office, or to the
Executive at the address set forth in the preamble, as the case may be, or to
such other address or addresses as any party hereto may from time to time
specify in writing for the purpose in a notice given to the other parties in
accordance with this Section 10. Notices shall be deemed given when received.
11. GOVERNING LAW
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Texas, without regard to conflict of
law principles.
12. INDEMNIFICATION AND INSURANCE; LEGAL EXPENSES
The Company shall indemnify the Executive to the fullest
extent permitted by the laws of the State of Delaware, as in effect at the time
of the subject act or omission, and shall advance to the Executive reasonable
attorneys' fees and expenses as such fees and expenses are incurred (subject to
an undertaking from the Executive to repay such advances if it shall be finally
determined by a judicial decision which is not subject to further appeal that
the Executive was not entitled to the reimbursement of such fees and expenses),
and the Executive will be entitled to the protection of any insurance policies
that the Company may elect to maintain generally for the benefit of its
directors and officers ("Directors and Officers Insurance") against all costs,
charges and expenses incurred or sustained by him in connection with any action,
suit or proceeding to which he may be made a party by reason of his being or
having been a director, officer or employee of the Company or any of its
subsidiaries, or his serving or having served any other enterprise as a
director, officer or employee at the request of the Company (other than any
dispute, claim or controversy arising under or relating to this Agreement). The
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Company covenants to maintain during the Employment Term for the benefit of the
Executive (in his capacity as an officer and director of the Company) Directors
and Officers Insurance providing benefits to the Executive no less favorable,
taken as a whole, than the benefits provided to the other senior executives of
the Company by the Directors and Officers Insurance maintained by the Company on
the date hereof; provided, however, that the Board may elect to terminate
Directors and Officers Insurance for all officers and directors, including the
Executive, if the Board determines in good faith that such insurance is not
available or is available only at unreasonable expense.
13. REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE
The Executive represents and warrants to the Company that (a)
the Executive is under no contractual or other restriction which is inconsistent
with the execution of this Agreement, the performance of his duties hereunder or
the other rights of Company hereunder, and (b) the Executive is under no
physical or mental disability that would hinder the performance of his duties
under this Agreement.
14. DISPUTES
Any dispute or controversy arising under, out of, in
connection with or in relation to this Agreement shall, at the election and upon
written demand of either the Executive or the Company, be finally determined and
settled by arbitration in the city of the Company's headquarters in accordance
with the rules and procedures of the American Arbitration Association, and
judgment upon the award may be entered in any court having jurisdiction thereof.
The Company shall pay the costs and expenses of such arbitration and the fees of
the Executive's counsel and experts unless the finder of fact determines that
the Company is the prevailing party in such arbitration.
15. FACILITY OF PAYMENT
All cash payments to be made by the Company to or on behalf of
the Executive hereunder shall be an obligation of and made by Los Angeles.
16. MISCELLANEOUS
The provisions of this Agreement shall survive the termination
of the Executive's employment with the Company. This Agreement, the Option
Agreement and the Indemnification Agreement contain the entire agreement of the
parties relating to the subject matter hereof. This Agreement supersedes any
prior written or oral agreements or understandings between the parties relating
to the subject matter hereof. No modification or amendment of this Agreement
shall be valid unless in writing and signed by or on behalf of the parties
hereto. A waiver of the breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement, or the
application thereof to any person or circumstance, shall, for any reason and to
any extent, be held invalid or
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unenforceable, such invalidity and unenforceability shall not affect the
remaining provisions hereof or the application of such provisions to other
persons or circumstances, all of which shall be enforced to the greatest extent
permitted by law. The compensation provided to the Executive pursuant to this
Agreement shall be subject to any withholdings and deductions required by any
applicable tax laws. Any amounts payable under this Agreement to the Executive
after the death of the Executive shall be paid to the Executive's estate or
legal representative. The headings in this Agreement are inserted for
convenience of reference only and shall not be a part of or control or affect
the meaning of any provision hereof.
17. GROSS-UP FOR CERTAIN TAXES
(a) In the event that any part of any payment or benefit
received (including, without limitation, acceleration of vesting of stock
options) pursuant to the terms of this Agreement or the Option Agreement (the
"Contract Payments") or any part of any payment or benefit received or to be
received by the Executive or for the Executive's benefit pursuant to any other
plan, arrangement or agreement of the Company or any affiliate ("Other Payments"
and, together with the Contract Payments, the "Payments") would be subject to
the Excise Tax determined as provided below, the Company shall pay to the
Executive, at the time specified in Section 17(b) below, an additional amount
(the "Gross-Up Payment") such that the net amount retained by the Executive,
after deduction of the Excise Tax on the Payments and any federal, state and
local income tax and the Excise Tax on the Gross-Up Payment, and any interest,
penalties or additions to tax payable by the Executive with respect thereto,
shall be equal to the total present value (using the applicable federal rate as
defined in Section 1274(d) of the Code in such calculation) of the Payments at
the time such Payments are to be made. For purposes of determining whether any
of the Payments will be subject to the Excise Tax and the amounts of such Excise
Tax, (1) the total amount of the Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, except to the extent that, in the
opinion of independent counsel selected by the Company and reasonably acceptable
to the Executive ("Independent Counsel"), a Payment (in whole or in part) does
not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of
the Code, or such "excess parachute payments" (in whole or in part) are not
subject to the Excise Tax, (2) the amount of the Payments that shall be treated
as subject to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Payments or (B) the amount of "excess parachute payments" within
the meaning of Section 280G(b)(1) of the Code (after applying clause (1)
hereof), and (3) the value of any noncash benefits or any deferred payment or
benefit shall be determined by Independent Counsel in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal income taxes at the highest marginal rates of federal income
taxation applicable to individuals in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rates of taxation applicable to individuals as are in effect in the state and
locality of the Executive's residence in the calendar year in which the Gross-Up
Payment is to be made, net of the maximum reduction in federal income
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taxes that can be obtained from deduction of such state and local taxes, taking
into account any limitations applicable to individuals subject to federal income
tax at the highest marginal rates.
(b) The Gross-Up Payments provided for in Section 17(a) hereof
shall be made upon the earlier of (i) the payment to the Executive of any
Payment or (ii) the imposition upon the Executive or payment by the Executive of
any Excise Tax.
(c) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding or the opinion of Independent
Counsel that the Excise Tax is less than the amount taken into account under
Section 17(a) hereof, the Executive shall repay to the Company within thirty
(30) days of the Executive's receipt of notice of such final determination or
opinion the portion of the Gross-Up Payment attributable to such reduction (plus
the portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment being repaid by the
Executive if such repayment results in a reduction in Excise Tax or a federal,
state and local income tax deduction) plus any interest received by the
Executive on the amount of such repayment. If it is established pursuant to a
final determination of a court or an Internal Revenue Service proceeding or the
opinion of Independent Counsel that the Excise Tax exceeds the amount taken into
account hereunder (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess within
thirty (30) days of the Company's receipt of notice of such final determination
or opinion.
(d) In the event of any change in, or further interpretation
of, Sections 280G or 4999 of the Code and the regulations promulgated
thereunder, the Executive shall be entitled, by written notice to the Company,
to request an opinion of Independent Counsel regarding the application of such
change or interpretation to any of the foregoing, and the Company shall use its
best efforts to cause such opinion to be rendered as promptly as practicable.
All fees and expenses of Independent Counsel incurred in connection with this
agreement shall be borne by the Company.
13
14
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Agreement as of the date first written above.
CHANCELLOR MEDIA CORPORATION
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
By: /s/ XXXXXX X. XXXXX
------------------------------------------
Xxxxxx X. Xxxxx
Chairman and Chief Executive
Officer
/s/ D. XXXXXXXX XXXXXXXXX
------------------------------------------
D. Xxxxxxxx Xxxxxxxxx
