EXHIBIT 10.40
RANGER EQUITY HOLDINGS CORPORATION
LIN TELEVISION CORPORATION
NONQUALIFIED STOCK OPTION LETTER AGREEMENT
TO: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
We are pleased to inform you that you have been selected by LIN Television
Corporation ("LIN") to receive nonqualified options of Ranger Equity Holdings
Corporation (collectively, with LIN, the "Company") under the Company's 1998
Stock Option Plan (the "Plan") to purchase 1,594,292 shares of the Company's
common stock, $.01 par value per share (the "Common Stock"), at an exercise
price of $0.52688 per share. A copy of the Plan is attached to and incorporated
into this Letter Agreement by this reference. Capitalized terms not otherwise
defined herein shall have the meanings set forth in the Plan.
The terms of the options are as set forth in the Plan and in this Letter
Agreement. The most important of the terms set forth in the Plan are summarized
as follows:
TERM: The term of the options is ten years from date of grant, unless
sooner terminated.
EXERCISE: Only you can exercise the options during your lifetime. The Plan
also provides for exercise of the options by the personal representative of your
estate, by the beneficiary you have designated on forms prescribed by and filed
with the Company (a "Designated Beneficiary"), or by the beneficiary of your
estate following your death. You may use the Notice of Exercise of Nonqualified
Stock Option in the form attached to this Letter Agreement when you exercise the
options.
PAYMENT FOR SHARES: The options may be exercised by the delivery of:
(a) Cash, personal check (unless, at the time of exercise, the Committee
determines otherwise), bank-certified check or cashier's check;
(b) Unless the Committee, in its sole discretion, determines otherwise,
shares of the Company's capital stock held by you for a period of at least six
months having a fair market value at the time of exercise, as determined in good
faith by the Committee, equal to the exercise price; or
(c) After such time as the stock is publicly traded, unless the Committee
in its sole discretion determines otherwise, a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price.
WITHHOLDING TAXES: As a condition to the exercise of the options, you
shall make such arrangements as the Company may require for the satisfaction of
any federal, state or local withholding tax obligations that may arise in
connection with such exercise. The Company shall have the right to retain
without notice sufficient shares of Capital Stock to satisfy the withholding
obligation. To the extent permitted or required by the
Page 2
LIN Television Corporation
Nonqualified Stock Option Letter Agreement
Company, you may satisfy the withholding obligation by electing to have the
Company or a related corporation withhold from the shares to be issued upon
exercise that number of shares having a fair market value equal to the amount
required to be withheld. To the extent necessary to qualify such election for
exemption under Rule 16b-3 promulgated under Section 16(b) of the Exchange Act,
any individual who is subject to Section 16 under the Exchange Act must exercise
the option during the quarterly ten-day window period required under Section
16(b) of the Exchange Act for exercises of stock appreciation rights, and the
election relating to such option exercise must be (a) an irrevocable election
made six months prior to the date the option exercise becomes taxable: (b) an
election made during a window period; or (c) an election made prior to a window
period, provided the election becomes effective as of the next window period.
TERMINATION:
a) Termination for Cause: If the Company terminates your services for
Cause, all unexercised options as of the date of termination shall
be immediately forfeited.
b) Death: In the event of your death, your estate or beneficiary shall
have 180 days from the date of death to exercise your vested options
as of the date of death.
c) Disability: In the event of your disability, you shall have 180 days
from the date of disability to exercise your vested options as of
the date of disability.
d) Voluntary Termination: In the event you voluntary terminate your
employment with the Company, you have until the date of termination
to exercise your vested shares. Any vested shares not exercised by
your termination date will then be cancelled.
e) No Extension of the Ten-Year Expiration Date: The 180-day period
referred to in paragraphs (b) and (c) above shall not extend beyond
the ten-year expiration date of the options.
TRANSFER OF OPTIONS: The options are not transferable except by will, to a
Designated Beneficiary, or by the applicable laws of descent and distribution.
VESTING: Unless accelerated in accordance with the Plan, the options shall
vest and become exercisable according to the following schedule:
DATE ON AND AFTER WHICH PORTION OF TOTAL OPTION
OPTION IS EXERCISABLE THAT IS EXERCISABLE
----------------------- ------------------------
March 3, 1999 25%
March 3, 2000 50%
March 3, 2001 75%
March 3, 2002 100%
Page 3
LIN Television Corporation
Nonqualified Stock Option Letter Agreement
Notwithstanding the above vesting schedule, you will be immediately 100%
vested in that portion of the gain determined per share using a Fair Market
Value not in excess of $1.00 per share.
"MAKE WHOLE" ADJUSTMENT: In the event the fair market value per share
declines below $1.00, the Company shall pay to the Employee, upon exercise, an
amount equal to (i) the loss on the total numbers of shares granted less the
loss calculated on the substitute shares only as if the exercise price was zero,
multiplied by (ii) the percentage derived from dividing the number of options
exercised into the total number of options received.
For example, if ▇▇▇▇ receives 25,000 substitute options and 37,500 new
options in 1998 with an exercise price of $0.60, and the fair market value of
the Company's stock is $0.75 at the time of exercise of 40,000 shares, then the
make-whole payment due ▇▇▇▇ would be calculated as follows:
Loss on total 62,500 x 0.25 = 15,625
Loss on substitute 25,000 x 0.25 = 6,250
------
Difference 9,375
Percent Exercised (40/60) 66.67%
------
Payment Due to ▇▇▇▇ 6,250
HOLDING PERIOD: If an individual subject to Section 16 of the Exchange Act
sells shares of Common Stock obtained upon the exercise of a stock option within
six months after the date the option was granted, such sale may result in
short-swing profit recovery under Section 16(b) of the Exchange Act.
CHANGE OF CONTROL: In the event of a Change of Control, the Plan's
Committee may declare that any or all non-vested options to be immediately
exercisable or accelerated to a faster vesting schedule. An Initial Public
Offering or merger where Hicks, Muse, ▇▇▇▇ & ▇▇▇▇▇ Incorporated retained control
of the Company will not constitute a Change of Control.
PURCHASE OPTION: In the event of an optionee's termination of employment
for any reason or a Change of Control, the Company shall have the right to give
notice within one year of the termination or Change of Control of the Company's
election to purchase from the employee any or all shares of Common Stock held by
the employee. The purchase price shall be Fair Market Value per share. The
Company's Purchase Option shall cease to exist upon the consummation of a
Qualifying Public Offering.
DATE OF ACT: The option's date of grant is March 3, 1998.
ARBITRATION: As a condition of the Company's grant of options to you, you
agree that all disputes between you and the Company shall be resolved by final
and binding arbitration in accordance with the provisions of this section. This
agreement to arbitrate shall remain in effect after termination of this
Agreement with respect to any disputes arising out of events occurring during
the term hereof or arising out of or relating to this
Page 4
LIN Television Corporation
Nonqualified Stock Option Letter Agreement
Agreement, or disputes arising out of or relating to your employment or
termination thereof. A party intending to assert a claim must serve, by hand
delivery or a form of mail that requires a signed return receipt, a written
demand for arbitration on the other party. The demand, if against the Company,
must be served on a Vice President or higher-level officer of the Company. The
demand must describe the basis of the claim with reasonable specificity and the
remedy requested. The demand must be received by the person served within the
time limitation set forth below. The arbitration shall be conducted in
accordance with the then-prevailing Employment Dispute Resolution Rules of the
American Arbitration Association. Notwithstanding the foregoing, the following
discovery limitations shall apply to the arbitration proceeding: each party may
take the deposition of one individual only and any expert witness designated by
the other party; both parties shall have the right to subpoena witnesses and
documents, but additional discovery may be had only if the arbitrator so orders
after determining there is a substantial need for the information.
Notwithstanding any longer statutes of limitation provided by law, no claim of
any nature whatsoever may be brought by either party against the other, in
arbitration or otherwise, unless a written demand for arbitration is served on
the other party within thirty (30) days after the claim accrued; i.e., within
thirty (30) days from the date on which the act or event (or failure to act) on
which the claim is based occurred. The arbitrator shall be authorized to award
such relief as is available under the applicable state or federal law on which
the claim is based.
AT THE PRESENT TIME, THE COMPANY HAS NOT FILED AND HAS NO IMMEDIATE PLANS
TO FILE AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SHARES THAT WILL
BE ISSUED UPON THE EXERCISE OF THE OPTION. UNTIL A REGISTRATION STATEMENT IS
FILED AND BECOMES EFFECTIVE, YOU WILL NOT BE ABLE TO SELL THE COMPANY'S COMMON
STOCK UNLESS EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES
LAWS ARE AVAILABLE; SUCH EXEMPTIONS FROM REGISTRATION ARE VERY LIMITED AND MIGHT
BE UNAVAILABLE.
Please execute the Acceptance and Acknowledgment set forth below on the
enclosed copy of this Letter Agreement and return it to the undersigned.
Very truly yours,
LIN TELEVISION CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President & CEO
