SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
LIN Television Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement
if other than Registrant)
Payment of Filing Fee (Check appropriate box):
[ X ] No Fee Required
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LIN TELEVISION CORPORATION
4 RICHMOND SQUARE
PROVIDENCE, RHODE ISLAND 02906
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1997
As a stockholder of LIN Television Corporation (the "Company"), you are hereby
given notice of and invited to attend, in person or by proxy, the Annual Meeting
of Stockholders of the Company to be held at the Company's Headquarters located
at Four Richmond Square, Suite 200, Providence, Rhode Island, on May 14, 1997 at
10:00 a.m., local time, for the following purposes:
(1) To elect ten (10) directors to serve until the next Annual Meeting or
until their successors are duly elected and qualified;
(2) To approve an amendment increasing the number of shares of Common
Stock issuable under the Company's Amended and Restated 1994 Stock
Incentive Plan from 2,750,000 to 3,750,000;
(3) To transact any other business which may properly come before the
meeting.
The Board of Directors has fixed the close of business on April 8, 1997, as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting.
Your attention is invited to the accompanying Proxy Statement.
By Order of the Board of Directors
Gregory M. Schmidt
Secretary
April 14, 1997
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE FILL
IN, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD, FOR WHICH A RETURN
STAMPED ENVELOPE IS PROVIDED.
LIN TELEVISION CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1997
INTRODUCTION
GENERAL
The accompanying proxy is solicited on behalf of the Board of Directors of
LIN Television Corporation, a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held on May 14, 1997, at 10:00 a.m.,
local time (the "Annual Meeting"), notice of which is attached hereto, and any
adjournment or postponement thereof. The Annual Meeting is being held (1)
consider and vote upon the election of ten (10) directors; (2) to approve an
amendment increasing the number of shares of Common Stock issuable under the
Company's 1994 Amended and Restated Stock Incentive Plan from 2,750,000 to
3,750,000; and (3) to transact any other business which may properly come before
the meeting.
The principal executive offices of the Company are located at Four Richmond
Square, Providence, Rhode Island 02906. This Proxy Statement and the enclosed
form of proxy will be sent to stockholders commencing on or about April 14,
1997.
RECORD DATE, VOTING RIGHTS, AND REVOCABILITY OF PROXIES
The Board of Directors has fixed the close of business on April 8, 1997
(the "Record Date"), as the record date for the Annual Meeting or any
adjournment thereof. Only stockholders of record at the close of business on the
Record Date will be entitled to notice of and to vote at the Annual Meeting or
any adjournment or postponement thereof. At April 8, 1997, the Company had
29,770,812 shares of Common Stock issued and outstanding.
Holders of Common Stock outstanding on the Record Date are entitled to one
vote per share at the Annual Meeting. Shares represented by a properly executed
proxy in the accompanying form will be voted at the Annual Meeting and, when
instructions have been given by the stockholder, will be voted in accordance
with those instructions. If no instructions are given, the stockholder's shares
will be voted according to the recommendations of the Board of Directors of the
Company (the "Board of Directors"). A majority of shares entitled to vote at the
Annual Meeting present in person or represented by proxy represents a quorum.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Other than the
election of directors, which requires a plurality of the votes cast, each matter
to be submitted to the stockholders requires the affirmative vote of a majority
of the votes cast at the meeting. With regard to the election of directors,
votes may be cast in favor or withheld; votes that are withheld will be excluded
entirely from the vote and have no effect. Abstentions will count in the
tabulations of votes cast on all proposals other than the election of directors,
while broker non-votes are not counted in determining whether such proposals
have been adopted.
1
A stockholder may revoke his or her proxy at any time before its exercise
by sending written notice of revocation to the Secretary of the Company, by
signing and delivering a later dated proxy or, if the stockholder attends the
Annual Meeting in person, either by giving notice of revocation to the
inspectors of election at the Annual Meeting or by voting at the Annual Meeting.
SPIN-OFF FROM LIN BROADCASTING CORPORATION
The Company began operating as an independent publicly-held company on
December 28, 1994, as a result of its spin-off (the "Spin-off") from LIN
Broadcasting Corporation, a majority owned subsidiary of AT&T Corp. ("LIN
Broadcasting"). Prior to the Spin-off, the Company operated as an indirect
wholly-owned subsidiary of LIN Broadcasting. The Spin-off was effected by
distributing the Company's Common Stock to LIN Broadcasting stockholders (the
"Distribution").
PRINCIPAL STOCKHOLDERS
Based upon filings with the Securities and Exchange Commission (the "SEC"),
the following entities are known to the Company to beneficially own 5% or more
of the Common Stock:
NAME AND ADDRESS SHARES BENEFICIALLY
OF BENEFICIAL OWNER OWNED PERCENT
- ---------------------------------------- ----------------------- --------
AT&T Corp............................... 13,494,750 (1)(3) 45.4%
c/o AT&T Wireless Services, Inc.
5400 Carillon Point
Kirkland, Washington 98033
Massachusetts Financial Services Company 2,383,180 8.0%
500 Boylston Street
Boston, MA 02116
Cook Inlet Communications Corp.......... 1,673,975 (2)(3) 5.6%
2525 C Street, Suite 500
Anchorage, Alaska 99509
Putnam Investments, Inc................. 1,634,295 (4) 5.5%
One Post Office Square
Boston, Massachusetts 02109
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1. AT&T Corp. ("AT&T") holds its shares of Common Stock through its indirect
wholly-owned subsidiary, MMM Holdings, Inc.
2. Cook Inlet Communications Corp. ("CICC") is an indirect wholly-owned
subsidiary of Cook Inlet Region Inc.
3. As a result of the Stockholder's Agreement, each of AT&T and CICC may be
deemed to share beneficial ownership of the shares held by the other; both
AT&T and CICC, however, disclaim such beneficial ownership. See
"Stockholders Agreement".
2
4. Based upon information contained in a Schedule 13G filed with the SEC by
Putnam Investments, Inc. ("PI") on behalf of itself and Marsh McLennan
Companies, Inc., Putnam Investment Management, Inc. and The Putnam Advisory
Company, Inc. PI reports that it has sole voting power over 36,270 shares of
Common Stock and shared investment power over 1,634,295 shares of Common
Stock.
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTOR
The Board of Directors proposes that the ten nominees listed below be
elected to serve until the next Annual Meeting of Stockholders or until their
successors are duly elected and qualified. Unless contrary instructions are
received, it is intended that the shares represented by proxies solicited on
behalf of the Board of Directors will be voted in favor of the election as
directors of all such nominees. If, for any reason, any such nominee is not
available for election (which is not currently known or expected), the persons
named in the proxy card have advised that they will vote for such substitute
nominees as the Board of Directors may propose. The names and certain
information relating to the ten nominees are as follows:
FIRST
POSITIONS WITH THE COMPANY, IF ANY, AND BECAME
NOMINEE AGE PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS DIRECTOR
------- --- -------------------------------------------- --------
Gary R. Chapman 53 President of the Company since 1989 and Chief Executive 3/90
Director Officer since November 1994; past Joint Board Chairman of
(1) the National Association of Broadcasters and board member
of the Advanced Television Test Center.
Richard S. Bodman 58 Managing General Partner of AT&T Ventures since May 5/96
Director 1996; Senior Vice President Corporate Strategy &
(1) Development of AT&T from August 1990 to May 1996;
Director of TYCO International, Inc. and NHP, Inc.;
Director of Reed Elsevier, PLC.
Dennis J. Carey 50 Chairman of the Board of the Company since June 1996; 11/94
Director Vice President and General Manager of Corporate
(1) Productivity and Chief Financial Officer of Mergers and
Acquisitions of AT&T since December 1996; Director of
Alestra since October 1996; Vice President and Chief
Financial Officer of International Operations of AT&T from
January 1996 to December 1996; Vice President Finance
and Audit of AT&T from February 1994 to December 1995;
Vice President and General Manager of International
Operations for General Electric Corporation's Appliance
Division from February 1992 to February 1994; Senior Vice
President and General Manager of General Electric
Capital's Leveraged Buyout Business prior to February 1992;
Director of LIN Broadcasting from 1994 to October
1995.
3
James D. Daniell 33 Chief Operating Officer and Vice President-Strategy and 5/96
Director New Business Development, AT&T Networked Commerce
(1) Services since February 1997; Vice President-Electronic
Messaging and New Business Development, Easy
Commerce Services from November 1996 to February 1997
Vice President-Corporate and New Business Development,
AT&T, December 1995 to November 1996; Vice President-
Strategy and New Business Development, AT&T Business
Communications Services, April 1994 to December 1995;
Vice President-Business Development & Strategic Relations
of Bridge Builder Technologies, May 1993 to April 1994;
Strategic Planning Director and Vice President of UNIX
System Laboratories, March 1991 to May 1993.
Errol A. Harris 39 Assistant Treasurer-Global Cash and Risk Management for 9/96
Director AT&T since June 1996; Assistant Treasurer-Risk
(1) Management and Administration and Assistant Treasurer-
International Finance for AT&T from October 1994 to
February 1996, from February 1992 to October 1994 served
in various management positions with AT&T; Director of
American Ridge Insurance Company since June 1996;
Director of Affinity Credit Union since June 1988.
William G. Herbster 64 Financial consultant since 1987; Director of the Foundation 11/94
Director for Development of Polish Agriculture (Warsaw) and Small
(2) Enterprise Equity Funds of St. Petersburg and Nishny
Novograd, Russian and Bulgaria; Member of the Directors
Advisory Council, Manufacturers & Traders Trust
Company; Director of LIN Broadcasting from 1976 to
October 1995.
Roy M. Huhndorf 56 Chairman from 1995 to present, President from 1975 to 12/94
Director January 1996 and Chief Executive Officer from 1975 to
(3) (4) December 1995, of Cook Inlet Region, Inc., whose principal
lines of business consist of natural resources development,
real estate and communications; Director of National Bank
of Alaska, and Alaska Federation of Natives.
Wilma H. Jordan 48 Co-Chairman of The Jordan, Edmiston Group, Inc., an 11/94
Director investment banking and management consulting firm for
(2) publishing companies since 1992; President and CEO of
The Jordan Group, Inc. from 1987 to 1992; Director of
Guideposts Magazine,Inc. and Clayton Homes, Inc.;
Director of LIN Broadcasting from 1987 to October 1995.
Richard W. Kislik 69 Publishing consultant since 1985; Director and Vice 11/94
Director President of M. Evans & Co. Book Publisher, a publishing
(2) company; Director and Treasurer of Chelsea Green
Publishing Co., a publishing company; Director of LIN
Broadcasting from 1969 to October 1995.
Gary A. Swenson 53 General Attorney with AT&T since 1984; Attorney with 5/96
Director AT&T from 1977 to 1983; Director of American Ridge
(1) Insurance Company since March 1996.
4
- --------------
1. Nominated by AT&T Wireless Services, Inc. (formerly McCaw Cellular
Communications, Inc.) ("AT&T Wireless") as a "designee" pursuant to a
Stockholders Agreement. See "Stockholders Agreement."
2. Elected as an "Independent Director" under the terms of the Private Market
Value Guarantee. See "Transactions between the Company and LIN Broadcasting-
-Private Market Value Guarantee."
3. Elected as a Cook Inlet Communications Corp. ("CICC") designee pursuant to a
Stockholders Agreement. See "Stockholders Agreement".
4. In 1993, CICC, of which Mr. Huhndorf was President and CEO, completed a
reorganization under Chapter 11 of the U.S. Bankruptcy Code of 1978, as
amended. CICC is an indirectly held subsidiary of Cook Inlet Region, Inc.
BOARD OF DIRECTORS' COMMITTEES AND MEETINGS
During 1996 the Board of Directors held five meetings. Each incumbent
director attended at least 75% of the meetings of the Board of Directors and the
committees for which he or she served held during the period for which he or she
has been a director.
The Board of Directors has an Audit Committee, presently consisting of
Messrs. Carey, Huhndorf, and Kislik. The Audit Committee met one time in 1996.
The Audit Committee evaluates the services of the Company's independent auditors
and reviews with management and the independent auditors the Company's system of
internal controls.
The Board of Directors also has a Compensation Committee, presently
consisting of Ms. Jordan and Messrs. Huhndorf and Swenson, none of whom is
employed by the Company. The Compensation Committee met eight times in 1996.
The Compensation Committee determines the Company's compensation policies and
acts on remuneration with respect to all employees, including executive
officers.
The Board of Directors also has a Retirement Benefit Plans Committee,
presently consisting of Messrs. Harris, Herbster, and Huhndorf, which provides
oversight to the Company's pension, 401(k) and Employee Stock Purchase plans.
The Retirement Benefit Plans Committee met one time in 1996.
Additionally, pursuant to the Private Market Value Guarantee Agreement, the
Board of Directors has a Committee of Independent Directors currently consisting
of Ms. Jordan and Messrs. Herbster and Kislik. The Independent Directors met
sixteen times in 1996.
The Board of Directors has no standing Nominating Committee, rather, the
Board of Directors as a group serves as the Nominating Committee.
5
DIRECTOR COMPENSATION
Outside directors are paid an annual retainer of $15,000 and an attendance
fee of $1,000 for each meeting of the Board of Directors and $500 for each
meeting of a committee of the Board of Directors on which the director serves if
a committee meeting is not held in conjunction with a Board of Directors
meeting. Directors are also reimbursed for any travel expenses incurred in
connection with such meetings.
In addition, each Independent Director receives $1,500 for each meeting of
the Independent Directors attended by him or her if such meeting is not held in
conjunction with a full Board of Directors meeting or a Committee meeting of the
Board of Directors, and $175 per hour for time spent preparing for such meetings
and otherwise devoting attention to those matters requiring consideration by the
Independent Directors.
For services rendered in 1996 as a director of the Company, Ms. Jordan and
Messrs. Bodman, Herbster, Huhndorf and Kislik received $46,000, $13,397,
$42,538, $23,500 and $42,500 respectively.
The Company also has a deferred compensation plan whereby all directors may
defer all or a portion of the cash compensation received by them for their
service as directors.
The Company believes that it is important for directors to have a personal
interest in the Company's success and for their interests to be aligned with
those of stockholders. Pursuant to the Company's 1994 Nonemployee Director
Plan, each director who is not employed by the Company, AT&T, AT&T Wireless, or
LIN Broadcasting or any of their affiliates is automatically granted an option
to purchase 10,000 shares of the Company's Common Stock upon such director's
initial election. Commencing with the Company's 1995 Annual Meeting, each such
director will automatically be granted an option to purchase 2,500 shares
immediately following each Annual Meeting, unless such director was initially
elected or appointed within six months of that meeting. Options granted under
the 1994 Director Plan will be exercisable immediately on the date of grant and
will have exercise prices equal to the fair market value of the Common Stock on
the date of grant.
6
EXECUTIVE OFFICERS
The Executive Officers of the Company are:
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Gary R. Chapman 53 President & Chief Executive Officer
James G. Babb, Jr. 65 Vice President - Industry Relations
Deborah R. Jacobson 37 Vice President - Corporate Development &
Treasurer
Paul Karpowicz 43 Vice President - Television
Peter E. Maloney 42 Vice President - Finance
C. Robert Ogren, Jr. 53 Vice President - Engineering & Operations
Denise M. Parent 33 Vice President - Deputy General Counsel
Gregory M. Schmidt 47 Vice President - New Development, General
Counsel & Secretary
The following information describes the Executive Officers of the Company
who are not also nominees for the Board of Directors.
JAMES G. BABB, JR. has been Vice President - Industry Relations since April
1996. Prior to such date, Mr. Babb was Chairman, CEO and President of Outlet
Communications, Inc. (May 1991 to February 1996). Mr. Babb is the Chairman of
Television Board of the National Association of Broadcasters.
DEBORAH R. JACOBSON has been Vice President - Corporate Development and
Treasurer since February 13, 1995. Prior to such date, Ms. Jacobson was
employed by the Bank of New York, where she served as Senior Vice President and
Division Head (August 1992 to January 1995), Senior Vice President (September
1991 to July 1992), and Vice President and Group Head of the Western Division
(prior to September 1991) of the Communications, Entertainment and Publishing
Lending Division.
PAUL KARPOWICZ has been Vice President - Television of the Company since January
1994. Mr. Karpowicz served as General Manager of WISH-TV from July 1989 to July
1995.
PETER E. MALONEY has been Vice President - Finance of the Company since January
1995. Prior to such date, Mr. Maloney was employed by LIN Broadcasting as Vice
President - Tax (June 1990 to December 1994) and as Director of Taxation and
Financial Planning (January 1983 to June 1990). Mr. Maloney has been a Vice
President of the Company since 1990.
C. ROBERT OGREN, JR. has been Vice President - Engineering and Operations of the
Company since November 1990. Prior to such date, Mr. Ogren was Director of
Engineering at WBAL-TV (June 1989 to October 1990) and was Director of
Engineering for Freedom Newspapers, Inc. (June 1984 to May 1989).
7
DENISE M. PARENT has been Vice President - Deputy General Counsel since March 3,
1997. Prior to such date, Ms. Parent was employed by the Providence Journal
Company, where she served as Senior Corporate Counsel (April 1996 to February
1997) and Corporate Attorney (April 1993 to April 1996) and was Corporate
Associate at the law firm of Adler Pollock and Sheehan, Incorporated (August
1989 to April 1993).
GREGORY M. SCHMIDT has been Vice President - New Development, General Counsel,
and Secretary since March 1, 1995. Prior to such date, Mr. Schmidt was a
partner at the law firm of Covington & Burling (October 1984 to February 1995).
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding ownership of the
Company's outstanding stock on March 1, 1997 by each Director, each nominee for
Director and certain Executive Officers and by all nominees, Directors and
listed Executive Officers as a group.
NUMBERS OF SHARES SHARES UNDER
OF COMMON STOCK EXERCISABLE PERCENT OF
NAME BENEFICIALLY OWNED OPTIONS (1) CLASS
---- ------------------ ----------- ----------
Dennis J. Carey, Director, Chairman of the Board 0 0 *
Gary R. Chapman, Director, President & CEO (2)(3) 12,551 209,360 *
Richard S. Bodman, Director 0 10,000 *
James D. Daniell, Director 0 0 *
Errol A. Harris, Director 0 0 *
William G. Herbster, Director (4) 1,740 15,000 *
Roy M. Huhndorf, Director 0 15,000 *
Wilma H. Jordan, Director 289 15,000 *
Richard W. Kislik, Director 4,205 15,000 *
Gary A. Swenson, Director 0 0 *
Paul Karpowicz, Vice President - Television (5) 3,245 56,611 *
Deborah R. Jacobson, Vice President - Corporate 3,264 35,500 *
Development & Treasurer
Peter E. Maloney, Vice President - Finance 7,835 42,076 *
C. Robert Ogren, Jr.,Vice President - Engineering & 729 35,534 *
Operations
Gregory M. Schmidt, Vice President - New Development, 1,582 51,125 *
General Counsel & Secretary
All directors and officers as a group (15 individuals) 35,440 500,206 1.8%
- --------------
* Less than 1%
1. Includes shares issuable pursuant to options exercisable on March 1, 1997 or
which become exercisable within 60 days of such date.
2. Mr. Chapman shares with his wife voting and investment power with respect to
26 shares of Common Stock.
8
3. Includes 200 shares held by Mr. Chapman's children.
4. Includes 1,740 shares held by Mr. Herbster's wife.
5. Includes 200 shares held by Mr. Karpowicz's children.
6. Certain officers and directors own shares of AT&T, but none owns shares
representing more than 1% of AT&T.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned or paid, including
deferred compensation, by the Company to the Chief Executive Officer of the
Company (the "CEO") and the five other most highly compensated Executive
Officers of the Company for services rendered for the years ended December 31,
1996, 1995 and 1994.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
OTHER ANNUAL
COMPENSATION OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) (1) (#) (2)(3)
- --------------------------- ---- ---------- -------- ------- ----------
Gary R. Chapman 1996 $475,000 $146,250 $ 48,632 75,000
President & CEO 1995 475,000 134,000 24,978 0
1994 475,000 150,000 33,016 350,000
Gregory M. Schmidt (4) 1996 $310,000 $ 95,000 $ 21,764 39,500
Vice President - New Development, 1995 251,539 85,000 8,526 90,000
General Counsel & Secretary 1994 - - - -
Paul Karpowicz 1996 $237,000 $150,000 $237,840 39,500
Vice President - Television 1995 230,000 85,000 27,672 90,000
1994 155,000 109,000 5,304 0
Deborah R. Jacobson (4) 1996 $175,000 $ 78,000 $ 11,400 29,000
Vice President - Corporate Development 1995 150,385 75,000 34,228 70,000
& Treasurer 1994 - - - -
Peter E. Maloney (5) 1996 $145,000 $ 65,000 $ 5,763 29,000
Vice President - Finance 1995 140,000 45,000 118,457 55,000
1994 - - - -
C. Robert Ogren, Jr. 1996 $140,000 $ 65,000 $ 8,849 29,000
Vice President - Engineering 1995 122,000 40,000 6,636 55,000
& Operations 1994 116,000 27,000 5,616 0
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1. The amount set forth in Other Annual Compensation includes as to all
Executive Officers the value of executive life and disability insurance and
to most Executive Officers personal use of Company automobiles and non-
qualified pension contributions. In addition, such amount includes
relocation expenses of $16,669, $19,878 and $111,053 for Mr. Karpowicz, Ms.
Jacobson and Mr. Maloney respectively in 1995 and $209,265 for Mr. Karpowicz
in 1996. An additional $212,196 tax gross-up relocation payment is due to
Mr. Karpowicz on April 15, 1997.
9
2. Mr. Chapman's 350,000 option grant in 1994 includes 150,000 "special grant"
options which have a longer vesting period than normal options. The purpose
of these additional options is to recognize the additional responsibilities
assumed by Mr. Chapman as a result of the Spin-off of the Company and to
provide the Company's executive group with a strong incentive to maximize
stockholder value. Of the options granted to Messrs. Karpowicz, Maloney and
Ogren in January 1995, "special grant" options accounted for 15,000, 10,000
and 10,000, respectively, of their option grants. Of the options granted to
Ms. Jacobson in February 1995, "special grant" options accounted for 15,000
of her option grant. Of the options granted to Mr. Schmidt in March 1995,
"special grant" options accounted for 15,000 of his option grant. The
"special grant" options become exercisable in four equal annual installments
beginning December 31, 1996.
3. The table excludes options granted to executive officers on January 2, 1997
as follows: 100,000 to Mr. Chapman, 47,000 each to Messrs. Karpowicz and
Schmidt, and 35,000 each to Ms. Jacobson and Messrs. Maloney and Ogren.
4. Ms. Jacobson and Mr. Schmidt commenced employment with the Company on
February 13, 1995 and March 1, 1995, respectively.
5. The table excludes compensation received by Mr. Maloney from LIN Broadcasting
during 1994, as such compensation related to services rendered primarily to
LIN Broadcasting rather than the Company in such year.
OPTION GRANTS DURING THE 1996 FISCAL YEAR
The following table discloses for the CEO and the other named executives
information on options granted during the 1996 calendar year.
INDIVIDUAL GRANTS (2)(3)(4)
--------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS/SARS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM (1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
------ ------------ ------------ ----------- ---------- ------------------------------
Gary R. Chapman 75,000 13.4% $30.25 01/02/06 $1,426,805 $3,615,803
Gregory M. Schmidt 39,500 7.0% 30.25 01/02/06 751,450 1,904,323
Paul Karpowicz 39,500 7.0% 30.25 01/02/06 751,450 1,904,323
Deborah R. Jacobson 29,000 5.2% 30.25 01/02/06 551,698 1,398,111
Peter E. Maloney 29,000 5.2% 30.25 01/02/06 551,698 1,398,111
C. Robert Ogren, Jr. 29,000 5.2% 30.25 01/02/06 551,698 1,398,111
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1. The dollar amounts set forth under these columns are the result of
calculations at the 5% and 10% assumed rates set by the SEC and therefore are
not intended to forecast possible future appreciation, if any, of the
Company's Common Stock price. The assumed annual rates of appreciation of 5%
and 10% would result in the price of the Company's stock increasing to $49.27
and $78.46, respectively, from a base price of $30.25.
10
2. All options granted to the Named Executive Officers, become exercisable in
four equal annual installments beginning one year after the grant date and
have an option term of ten years. In the event of a change in control, the
Named Executive Officers may surrender their vested options to the Company in
exchange for a cash payment. See - "Employment Contracts and Termination and
Change in Control Arrangements."
AGGREGATE EXERCISES DURING FISCAL YEAR 1996
AND FISCAL YEAR-END OPTION VALUES
The following table discloses, for the CEO and other named executives,
individual exercises of options in the last fiscal year and the number and value
of options held by such named executive at December 31, 1996.
NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES OPTION PRICE AT VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON PRICE EXERCISE REALIZED OPTIONS AT OPTIONS AT
NAME EXERCISE (#) SHARE ($) ($) ($) FISCAL YEAR END (1) FISCAL YEAR END
----- ------------ --------- -------- --------- --------------------------- --------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Gary R. Chapman - - - - 190,610 280,500 $3,558,464 $4,147,282
Gregory M. Schmidt - - - - 41,250 88,250 $ 531,094 $1,101,656
Paul Karpowicz - - - - 46,736 89,221 $ 800,938 $1,257,307
Deborah R. Jacobson 3,000 $30.25 $42.31 $38,187 28,250 67,750 $ 399,000 $ 813,000
Peter E. Maloney 1,506 $ 4.05 $33.63 $44,547 35,827 61,062 $ 713,709 $ 862,594
C. Robert Ogren, Jr. - - - - 28,283 59,702 $ 485,492 $ 832,335
- --------------
1. Messrs. Chapman, Karpowicz, Maloney and Ogren hold options with respect to
shares of AT&T Corp. common stock received as compensation from LIN
Broadcasting prior to the Spin-off, which amounts are not reflected in the
above chart.
RETIREMENT PLANS
The Company maintains a defined benefit retirement plan (the "Pension
Plan") and a defined contribution plan (the "401(k) Plan"), each of which covers
certain employees of the Company and its subsidiaries. On December 31, 1992,
the Company amended the Pension Plan to provide, in part, that, effective
January 1, 1993, any employees treated by the Company as employed by a component
of the Company that maintains an Internal Revenue Code (the "Code") Section
401(k) plan providing for employer-matching contributions are no longer eligible
to participate in, or accrue benefits under the Pension Plan. Employees at
stations WTNH-TV and WIVB-TV participate in a matching 401(k) Plan. After
retirement from or other termination with the Company, however, any employee who
was participating in the Pension Plan as of December 31, 1992, will be entitled
to receive monthly payments under the Pension Plan based on his or her average
compensation and years of credited service as of December 31, 1992, provided
that he or she completes five years of vesting service with the Company after
attaining age 17. Such payments begin at age 65, subject to the employee's
election to terminate his or her employment and receive reduced monthly payments
beginning at any time between ages 55 and 65.
11
The following table shows the estimated annual retirement benefits payable
under the Pension Plan and the Company's Supplemental Benefit Retirement Plan as
an annuity for life upon normal retirement for specified compensation and years
of credited service classifications, assuming retirement at age 65 on December
31, 1995. Benefits are computed by multiplying (i) 1.25% of the employee's
average annual compensation (salary and bonus, excluding options gains and
benefits or payments received under any other benefit plan for the three
consecutive years producing the highest average) times (ii) the employee's
number of years of credited service, up to a maximum of 32 years. Sections
401(a)(17) and 415 of the Code limit the annual benefits that may be paid from a
tax-qualified retirement plan such as the Pension Plan. As permitted by the
Employee Retirement Income Security Act of 1974 ("ERISA"), the Company's
Supplemental Benefit Retirement Plan authorizes the payment out of the Company's
general funds of any benefits calculated under the provisions of the Pension
Plan that may be above the limits of Sections 401(a)(17) and 415 of the Code.
PENSION PLAN TABLE
THREE-YEAR
AVERAGE ANNUAL
COMPENSATION YEARS OF CREDITED SERVICE
- ------------ ------------------------------------------------------
10 15 20 25 30 32
-- -- -- -- -- --
$70,000 $ 8,750 $ 13,135 $ 17,500 $ 21,875 $ 26,250 $ 28,000
100,000 12,500 18,750 25,000 31,250 37,500 40,000
150,000 18,750 28,175 37,500 46,875 56,250 60,000
200,000 25,000 37,500 50,000 62,500 75,000 80,000
300,000 37,500 56,250 75,000 93,750 112,500 120,000
400,000 50,000 75,000 100,000 125,000 150,000 160,000
500,000 62,500 93,750 125,000 156,250 187,500 200,000
750,000 93,750 140,625 187,500 234,375 281,250 300,000
As of December 31, 1996, Mr. Chapman had eight years of credited service
under the Pension Plan, Mr. Karpowicz had seven and 1/2 years, and Mr. Ogren had
seven years of credited service, Mr. Maloney had twelve years, and Ms. Jacobson
and Mr. Schmidt each had one and 3/4 years. Mr. Karpowicz's several years of
employment with the Company in the late 1970's do not qualify as years of
credited service under the terms of the Pension Plan. Benefit amounts under the
Pension Plan are not subject to any deduction for Social Security benefits or
other offset amounts. Under the Pension Plan in effect prior to the Spin-off,
in the event of a change-in-control of the Company (as defined in the Pension
Plan), the accrued benefit of each active participant at the time of the change-
in-control would be increased by a predetermined factor (based on the
recipient's age) to the extent that the plan assets exceeded plan liabilities
immediately prior to the change-in-control. AT&T Wireless's acquisition of
approximately 52% of LIN Broadcasting common stock on March 5, 1990 and the
merger of AT&T Wireless into an AT&T subsidiary on September 19, 1994 each
constituted a change-in-control under the Pension Plan. The September 19, 1994
change-in-control did not cause an increase in participant's benefits. The 1990
change-in-control increased participant's benefits, but had no impact on any of
the Company's executive officers, other than Mr. Maloney, because their benefits
under the Pension Plan's normal formula exceeded any benefits under the Pension
Plan's change-in-control provisions. Mr. Maloney's minimum pension benefit was
increased to $38,144 as a result of the change in control, which exceeds his
benefit calculated under the Plan's normal formula.
12
EMPLOYMENT CONTRACTS AND TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENT WITH MR. CHAPMAN. The Company has an employment
agreement with Mr. Chapman. The employment agreement provides for (i) a term
that ends on December 31, 1999, (ii) a minimum base salary of $475,000, and
(iii) a target bonus of at least $150,000. The agreement also provides for
option grants, participation in certain of the Company's benefit programs,
additional severance benefits upon termination without cause, and the vesting of
unvested options in the event of certain changes in control of the Company.
SEVERANCE COMPENSATION AGREEMENTS. The Company has entered into Severance
Compensation Agreements with Mr. Chapman and the other named executive
officers of the Corporation. Under such agreements, if employment is terminated
other than for cause (as defined in the Severance Compensation Agreements), the
employee is entitled to certain severance benefits in addition to any
compensation otherwise payable. Such severance benefits include a lump sum
payment designed to provide the equivalent to the sum of (i) an amount equal to
two times the employee's annual base salary on the Date of Termination (as
defined); (ii) an amount equal to two times the bonus compensation paid to the
employee with respect to the last complete fiscal year; and (iii) the present
value as of the Date of Termination, of the sum of (a) all benefits which have
accrued to the employee but have not vested under the LIN Television Corporation
Retirement Plan as of the Date of Termination and (b) all additional benefits
which would have accrued to the employee under the Retirement Plan if the
employee had continued to be employed by the Company on the same terms the
employee was employed on the Date of Termination from the Date of Termination to
the date twelve months after the Date of Termination. In addition to such cash
payments, the employee is entitled to (i) life, health and disability and
accident insurance benefits substantially similar to those which the employee
was receiving prior to the Notice of Termination (or, if greater, immediately
prior to a Change in Control, as defined) for a period of two years; (ii)
acceleration of all stock options granted under the Company's stock option
plans, and (iii) the right within one year following the later of the Change in
Control or the exercise of each stock option to sell to the Company shares of
Common Stock that have been acquired upon the exercise of stock options at a
price equal to the average market price of the Common Stock for the 30-day
period prior to the change in control.
1994 STOCK INCENTIVE PLAN AND ADJUSTMENT STOCK INCENTIVE PLAN. Pursuant to
the 1994 Stock Incentive Plan and the Adjustment Stock Incentive Plan (which
applies to options issued as a result of the Spin-off), in the event of a change
in control of the Company (as defined in the 1994 Plan), other than certain
transactions with AT&T Wireless and certain transactions pursuant to the Private
Market Value Guarantee ("PMVG"), officers of the Company who are subject to
Section 16 of the 1934 Act may surrender vested options in exchange for a cash
payment by the Company. The amount of the cash payment per share is determined
by taking the difference between the exercise price of the shares covered by the
options so surrendered and the greater of (i) the highest market price of the
Common Stock during the 90-day period prior to the day of surrender and (ii) the
highest price paid to any stockholder of the Company in the transaction or group
of transactions resulting in the change in control. Unvested options
outstanding on August 14, 1993 vested on October 3, 1995, the date on which AT&T
Wireless closed the acquisition of all of the shares of LIN Broadcasting common
stock not then owned by AT&T Wireless. In addition, unvested options granted
after August 14, 1993 to persons who prior to the Distribution were officers in
LIN Broadcasting subject to Section 16 of the Exchange Act or certain other
corporate
13
officers of LIN Broadcasting will vest if the optionee's employment is
terminated under certain circumstances.
REPORT OF THE COMPENSATION COMMITTEE ON COMPENSATION
INTRODUCTION. This report is submitted by the Compensation Committee. The
duties of the Compensation Committee include approval of salary and other
compensation policies and remuneration arrangements, as well as administering
the Company's Amended and Restated 1994 Stock Incentive Plan, with respect to
all Company employees.
COMPENSATION PHILOSOPHY. The Compensation Committee's policy with respect
to executive officer compensation is to establish base salaries and annual
incentive bonus opportunities and to grant equity based incentives such as stock
options which, in the judgment of the Compensation Committee, enable the Company
to attract, retain and reward key management personnel who possess the abilities
and experience necessary to implement the Company's objectives and to create
incentives for high levels of individual performance, consistent with the
attainment of the financial goals and the best interests of the Company. The
Compensation Committee also recognizes that such compensation and incentives
must be at a level which are competitive with or superior to those provided to
executives holding comparable positions in the broadcast industry.
The Company bases its compensation policies on the belief that its
employees, including its executive officers, are largely responsible for the
Company's success. In administering the Company's compensation policies, the
Compensation Committee sets various objectives and rewards employees for their
contributions which positively affect the overall success of the Company by
providing leadership, strategic planning and development and involvement in the
industry. In addition to rewarding employees for current or past contributions,
it is also recognized by the Compensation Committee that the Company must
provide long-term incentives which are sufficient to motivate its executive
officers to remain with the Company over time and to manage the Company for
long-term growth. Such long-term incentives, in the form of non-qualified or
incentive stock options, also help to align the interests of the executive
officers with those of the stockholders. Additionally, the Compensation
Committee provides incentives for executives to achieve corporate and individual
performance goals, thus ensuring that compensation levels are properly aligned
with the Company's business strategy and operating performance.
COMPONENTS OF THE COMPENSATION PROGRAM. The Company compensated its
executive officers during 1996 through a combination of base salaries, year-end
cash bonuses, and stock option grants. A key component of the Company's
compensation package are grants of stock options which provide a significant
long-term incentive for executive officers not only to remain with the Company
over time but to manage the Company for long-term growth, thereby aligning their
interests with those of its stockholders.
Base salaries are set by evaluating such variables as the employee's
relative responsibilities, expertise, past year's compensation, and past year's
performance. Base salaries are also set so as to be competitive in the industry
and to attract and retain key personnel. The performance of eligible executives
is also rewarded through annual bonuses. Year-end bonuses are determined by the
Compensation Committee after considering factors including the Company's overall
revenue growth, broadcast cash flow, and audience ratings for such year. The
14
Compensation Committee evaluates each executive's performance by reviewing his
or her contribution to the long-term health and growth of the Company. Factors
used by the Compensation Committee in determining stock option grants relate to
the Company's financial performance and include revenue growth, broadcast cash
flow, audience ratings for such year and the contributions of each executive
officer to such results. Stock option awards are not made to any employee who
has not performed satisfactorily. No fixed weighting or formula is applied to
corporate performance versus individual performance in determining stock option
awards. The Company does not have a target equity ownership level for its
officers; however, it encourages such ownership for its employees in general.
Base salary and year-end bonus for Mr. Chapman, the Company's Chief
Executive Officer, is tied to both the foregoing financial performance factors
and to certain subjective factors determined by the Compensation Committee.
For the 1996 year, Mr. Chapman received a base salary of $475,000 and a bonus of
$146,250. Mr. Chapman's base salary has remained at the same level since 1994,
with a larger portion of his compensation targeted to annual bonus and stock
option grants. The Compensation Committee set a target bonus for Mr. Chapman at
the beginning of 1996 based upon the Company achieving operating cash flow
targets and certain subjective factors relating to Mr. Chapman's performance,
including providing leadership, oversight and direction to the Company's
management team, continuing to be a strong advocate of public policy that
advances the interests of the Company and the broadcast industry and providing
an ongoing, articulate and highly focused vision for the Company.
Mr. Chapman received a non-qualified option to purchase 75,000 shares of
Common Stock in January 1996, which grant was made by the Committee in respect
of the results of the Company in 1995. The Committee made option grants in
respect of the Company's 1996 results in January 1997 to executive employees,
including the grant to Mr. Chapman of a non-qualified option to purchase 100,000
shares of Common Stock based on the Company achieving operating cash flow
targets and the subjective criteria discussed above.
Compensation payments in excess of $1 million to the Chief Executive
Officer or four other most highly compensated executive officers are subject to
a limitation on deductibility for the Company under Section 162(m) of the
Internal Revenue Code. The Company's Amended and Restated 1994 Stock Incentive
Plan has been drafted to qualify options for the performance-based exception to
the $1 million limitation on deductibility of compensation payments.
COMPENSATION COMMITTEE
Roy M. Huhndorf
Wilma H. Jordan
Gary A. Swenson
STOCKHOLDERS AGREEMENT
The Company, AT&T Wireless and CICC have entered into a Stockholders
Agreement pursuant to which the parties have agreed to take all necessary action
to cause the Board of Directors to consist of 10 members, six of whom will be
designed by AT&T Wireless, one of whom will be designed by CICC and three of
whom will be the Independent Directors nominated in accordance with the PMVG.
The Stockholders Agreement provides that, if a director designated
15
by AT&T Wireless or CICC ceases to serve on the Board of Directors at a time
when the entire Board of Directors is not being elected, the party that
designated such director shall designate a replacement director as soon as
practicable, and, in the event of the resignation, withdrawal or removal of any
Independent Director, AT&T Wireless will as soon as practicable nominate another
individual, selected by a majority of the remaining Independent Directors and
otherwise in accordance with the terms of the PMVG to serve as an Independent
Director. The Stockholders Agreement also provides that a party that designated
or nominated a director subject to the terms of the PMVG (in the case of an
Independent Director), may have such director removed from the Board of
Directors by notifying the other parties, who shall cast all the votes they are
entitled to vote and otherwise cooperate to remove such director from the Board
of Directors as soon as practicable. AT&T Wireless's right to designate six
directors will cease at any time that its beneficial ownership of the
outstanding Company's Common Stock is less than 25%. Likewise, CICC's right to
designate one director will cease upon its becoming the beneficial holder of
less than 3.5% of the outstanding Common Stock.
As a result of the Stockholders Agreement and the ownership of Common Stock
by AT&T Wireless and CICC, the Company's public stockholders will be unable to
elect, or defeat the election of, any of the Company's directors (other than the
Independent Directors under certain circumstances pursuant to PMVG), amend or
prevent the amendment of the Company's Restated Certificate of Incorporation,
effect or prevent a merger, sale of assets or other corporate transaction (other
than in accordance with the PMVG), or cause the Company to accept any hostile
bid that would result in a takeover of the Company.
STOCK PRICE PERFORMANCE
The following graph compares the cumulative total stockholder return on the
Company's Common Stock against the cumulative total return of the Nasdaq (US)
Index and the Paul Kagan Associates, Inc. Broadcast Average over the period
commencing December 15, 1994 (the date that the Company's Common Stock began
trading on a "when issued" basis) and ending on December 31, 1996. The chart
assumes an investment of $100.00 on December 15, 1994, a reinvestment of
dividends and actual increase of the market value of the Company's Common Stock
relative to an initial investment of $100.00.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG LIN TELEVISION CORPORATION, NASDAQ (US) INDEX,
AND THE PAUL KAGAN ASSOCIATES, INC. BROADCAST AVERAGE
15 DEC 1994 31 DEC 1994 31 DEC 1995 31 DEC 1996
LIN Television Corporation $100.00 $103.41 $135.23 $192.05
Paul Kagan Associates, Inc. $100.00 $104.64 $145.12 $172.85
Broadcast Average
Nasdaq (US) Index $100.00 $102.91 $148.89 $183.27
16
CERTAIN TRANSACTIONS
TRANSACTIONS BETWEEN THE COMPANY AND LIN BROADCASTING
TAX ALLOCATION AGREEMENT. LIN Broadcasting and the Company have entered
into a tax allocation agreement that provides for the allocation of tax
liabilities and benefits between the two companies. No amounts are due under
this Agreement.
CONSULTING AGREEMENT AND RIGHT OF FIRST REFUSAL. The Company and certain
subsidiaries of LIN Broadcasting have entered into a consulting agreement
pursuant to which the Company will provide consulting services to station WOOD-
TV and a station affiliated with WOOD-TV under a Local Marketing Agreement
(station WOTV-TV) upon the request of such stations. The Company will receive
$250,000 per year, plus expenses. The consulting agreement is cancelable upon
six months' notice. In addition, the Company and LIN Broadcasting have entered
into a Right of First Refusal Agreement, pursuant to which the Company will
receive notice of any offers to purchase WOOD-TV; the Company will then have the
right to purchase such assets at the offered price. The Right of First Refusal
Agreement has a term ending on September 28, 1998.
PRIVATE MARKET VALUE GUARANTEE. The Company has entered into the PMVG with
AT&T Wireless that places certain obligations on AT&T Wireless for the benefit
of the Company's stockholders other than AT&T Wireless and its affiliates.
Pursuant to the PMVG, AT&T Wireless may, under certain circumstances and subject
to approval by the Company's stockholders (other than AT&T Wireless), offer to
acquire the remaining publicly owned shares of Common Stock in 1998 for their
"private market value", as then determined pursuant to an appraisal process.
There is no assurance that AT&T Wireless will agree to acquire the shares of the
Company for private market value. If AT&T Wireless does not offer to acquire
such remaining shares, the Company will be offered for sale in its entirety in a
manner intended to maximize stockholder value. The PMVG remains in effect as
long as AT&T Wireless and its affiliates beneficially own in the aggregate at
least 25% of the Company's Common Stock or AT&T Wireless' designees constitute a
majority of the Company's Board of Directors. There is no assurance that the
Company will be sold in its entirety or, if sold, that the consideration
obtained will be considered favorable by holders of Common Stock.
OTHER TRANSACTIONS
AT&T ADVERTISING. Subsidiaries of AT&T have purchased advertising time
from the Company's stations in arm's length transactions at fair market value
and at the stations' prevailing advertising rates in effect at the time of the
transactions. The amount of AT&T and AT&T Wireless purchases (including
purchases by AT&T Wireless for periods prior to the merger of AT&T Wireless and
AT&T) were $1,790,594, $1,053,138 and $1,521,704 in 1996, 1995 and 1994,
respectively.
STOCKHOLDERS AGREEMENT. The Company has entered into a Stockholders
Agreement with AT&T Wireless and CICC. See - "Stockholders Agreement".
17
EMPLOYEE LOANS. In January 1995, the Company loaned $350,000 to Peter E.
Maloney, an executive officer of the Company, in connection with his relocation
to the Company's headquarters in Providence, Rhode Island. The loan was made
interest free and was repaid to the Company by Mr. Maloney in August 1995, net
of relocation costs (see footnote 1 to Summary Compensation Table). In June
1995 the Company loaned $450,000 to Paul Karpowicz, an executive officer of the
Company, in connection with his relocation to the Company's headquarters in
Providence, Rhode Island. The loan was made interest free and was repaid to the
Company by Mr. Karpowicz in December 1996, net of relocation costs (see footnote
1 to the Summary Compensation Table). In December 1996 the Company advanced to
each of Ms. Jacobson and Mr. Schmidt the salary due for the first quarter of
1997.
DEFERRED COMPENSATION. Certain of the Company's directors and executive
officers have elected to defer a portion of their directors fees and
compensation. Deferred amounts are held in trust, subject to the general
creditors of the Company, and invested as requested by the participants subject
to the terms of the Deferred Compensation Plan.
AMENDMENT TO THE AMENDED AND RESTATED 1994 STOCK INCENTIVE PLAN
The Company's Amended and Restated 1994 Stock Incentive Plan (the "1994
Plan") became effective immediately prior to the Spin-off with 2,750,000 shares
reserved for issuance. The Company made grants in each of 1994, 1995, 1996 and
1997 of options to purchase were 550,000, 714,600, 561,311 and 650,000 shares of
Common Stock, respectively. As of April 1, 1997, options to purchase 2,398,244
shares were outstanding and there were 512,316 shares available for future
grant. On March 5, 1997, the Board of Directors voted to approve and adopt an
amendment to the 1994 Plan increasing the maximum number of shares available for
issuance thereunder from 2,750,000 to 3,750,000 shares of Common Stock. The
Board of Directors' primary reason for the amendment was to enhance the
Company's ability to retain and motivate key employees by having available
equity based incentive awards.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), enacted in 1993, generally disallows a tax deduction to public
companies for compensation over $1 million paid to the corporation's Chief
Executive Officer and four other most highly compensated executive officers.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met.
Although the 1994 Plan was not approved by the Company's stockholders after
the Company became a publicly-traded entity as a result of the Spin-off, options
granted under the 1994 Plan complied with Section 162(m) pursuant to a
transition rule implementing Section 162(m). With the submission of this
amendment to the Company's stockholders, the transition rule expires at the
Annual Meeting. To comply with Section 162(m) after the Annual Meeting, the
amendment and the continuance of the 1994 Plan, as so amended, must be approved
by the stockholders. Accordingly, a vote for approval of the amendment will
also approve the continuation of the 1994 Plan. If the Company's stockholders
do not vote to continue the 1994 Plan, the Company will not grant any further
options under the 1994 Plan.
18
SUMMARY OF THE 1994 PLAN
The purpose of the 1994 Plan is to enable the Company to attract and retain
persons of ability as officers and key employees of the Company and its
subsidiaries and Company directors who are not members of the Compensation
Committee ("Eligible Directors"), and motivate them to exert their best efforts
on behalf of the Company and its subsidiaries by providing additional
performance incentives to persons selected by the Compensation Committee, which
will administer the 1994 Plan. A copy of the 1994 Plan is available to
Stockholders upon request to the Company's Headquarters at One Richmond Square,
Suite 230E, Providence, Rhode Island, 02906.
The 1994 Plan combines the features of a stock option plan, a stock
appreciation rights plan, a restricted stock plan and a performance unit plan.
The 1994 Plan is a long-term incentive compensation plan and is designed to
provide a competitive and balanced incentive and reward program for
participants. While stock options, stock appreciation rights ("SARs") and
restricted stock awards reward participants based on the appreciation in the
market price of the Common Stock from the date of grant to the date of exercise
or maturity, the performance unit element is designed to motivate employees and
reward them for achievement of specified significant measures of performance
over extended periods of time.
If any option or SAR granted under the 1994 Plan should expire or terminate
for any reason without having been exercised in full, if any SAR is exercised
for cash or if any restricted stock award is forfeited pursuant to the terms
thereof, the unpurchased or forfeited shares will again be available for the
purposes of the 1994 Plan. Under the 1994 Plan, the Compensation Committee is
authorized to permit optionees to surrender outstanding options in exchange for
the grant of new options or require optionees to surrender outstanding options
as a condition precedent to the grant of new options; in either such event, the
number of shares covered, the option price, the option period and the other
terms and conditions of the new options may be different from the surrendered
options.
Administration and Eligibility to Receive Awards. The 1994 Plan is
administered by the Compensation Committee of the Board of Directors. Officers,
key employees and Eligible Directors of the Company selected by the Compensation
Committee are eligible to receive awards under the 1994 Plan. The type of
grants that may be awarded under the 1994 Plan is within the discretion of the
Compensation Committee. During each fiscal year of the Company, no officer or
employee may be granted awards for more than 150,000 shares of Common Stock,
except that the Company may make an additional one-time grant of up to 400,000
shares to a newly hired or elected individual.
Terms and Conditions of Stock Option Grants. The Compensation Committee is
authorized under the 1994 Plan, in its discretion, to issue options under the
1994 Plan as "incentive stock options" (as defined in Section 422 of the Code)
or as "nonqualified stock options" (defined in the 1994 Plan as being all other
options granted thereunder). The option price for each option granted under the
1994 Plan will be determined by the Compensation Committee, but will not be less
than 100% of the fair market value of the Common Stock on the date of grant,
except that (i) the Compensation Committee may specify that the exercise price
of a nonqualified stock option will be the average fair market value of the
Common Stock over a period not exceeding 30 days preceding or following the
grant date and (ii) the Compensation Committee may
19
grant nonqualified options with below-market exercise prices to newly hired
employees at the time they are hired. For purposes of the 1994 Plan "fair market
value" means the average of the high and low sale prices of the Common Stock for
the period in question as quoted on the Nasdaq National Market. No cash
consideration will be paid to the Company by optionees for the granting of any
option.
Upon exercise, the option price is to be paid in full in cash, or to the
extent permitted by the Compensation Committee, in Common Stock owned by the
optionee for at least six months and having a market value on the date of
exercise equal to the aggregate option price, or a combination of both. Each
option will have a term of not more than 10 years from the date of grant, and
may be exercisable in installments as prescribed by the Compensation Committee
in the option grant.
If an optionee's employment is terminated other than by reason of death,
normal retirement or disability, the optionee may exercise the option at any
time within one year after such termination (but not after the expiration date
of the option) to the extent of the number of shares purchasable at the date of
termination of employment. If an optionee's employment is terminated for cause,
the option will automatically terminate on the date of first notification to the
optionee of such termination, unless the Compensation Committee otherwise
determines.
If the optionee's employment is terminated because of normal retirement,
the optionee may exercise such option at any time prior to expiration of the
option, to the extent of the number of shares purchasable at the date of
termination of employment. If an optionee's employment is terminated because of
disability, the optionee may exercise such option at any time prior to
expiration of the option to the extent of the remaining shares covered by such
option, whether or not such shares had become purchasable by the optionee at the
date of termination of employment. If an optionee dies while the optionee is
employed by the Company or while such option is otherwise outstanding, the
option may be exercised by the optionee's beneficiary or legal representative at
any time within a period of one year after the optionee's death, but not after
the expiration of the option, to the extent of the remaining shares covered by
the option, whether or not such shares had become purchasable by the optionee at
the date of the optionee's death. If an optionee's death occurs during the one-
year period following termination of the optionee's employment or following
termination of employment by reason of normal retirement or disability, such
option (unless such termination is for cause) may be exercised by the optionee's
beneficiary or legal representative, but only to the extent of the number of
shares purchasable by the optionee pursuant to the provisions of the option at
the date of termination of the optionee's employment. To qualify for incentive
stock option treatment, an option must be exercised within three months after
the date of termination of employment, except that the option may be exercised
for one year after termination of employment due to disability.
Stock Appreciation Rights. The Compensation Committee is authorized under
the 1994 Plan to grant SARs to eligible participants. An SAR is an incentive
award that permits the holder to receive (per share covered thereby) an amount
equal to the amount by which the fair market value of a share of Common Stock on
the date of exercise exceeds the fair market value of such share on the date the
SAR was granted (the "base price").
The Compensation Committee may grant an SAR separately or in tandem with a
related option. An SAR granted in tandem with a related option will generally
have the same terms and provisions as the related option with respect to
exercisability, and the base price of such an SAR will generally be equal to the
option price under the related option. Upon the exercise of a tandem
20
SAR, the related option will be deemed to be exercised for all purposes of the
1994 Plan and vice versa.
An SAR granted separately, not in tandem with any option, will have such
terms as the Compensation Committee may determine, subject to the provisions of
the 1994 Plan, Under the 1994 Plan the base price of a stand-alone SAR will be
determined by the Compensation Committee as in the case of a nonqualified stock
option; the term of a stand-alone SAR may not be greater than 10 years from the
date it was granted. A stand-alone SAR may be made exercisable only following a
"change in control" (as defined below).
Unless otherwise provided by the Compensation Committee at the time of the
grant, the provisions of the 1994 Plan relating to the termination of employment
of a holder of a stock option will apply equally, to the extent applicable, to
the holder of an SAR.
Restricted Stock Awards. The Compensation Committee is authorized under
the 1994 Plan to issue restricted shares of Common Stock to eligible
participants. The consideration received for such shares by the Company is cash
in an amount equal to the par value thereof and the participant's past services.
The recipient of restricted stock will be recorded as a stockholder of the
Company and will have, subject to the restrictions described below, all the
rights of a stockholder with respect to such shares and will receive all
dividends or other distributions made or paid with respect to such shares
subject to the restrictions set forth below.
During a period following the date of grant, determined by the Compensation
Committee, which in no event will be less than one year (the "Restricted
Period"), the restricted stock may not be sold encumbered or otherwise disposed
of by the recipient, except in the event of the recipient's death or the
transfer of the restricted stock to the Company upon termination of the
recipient's employment. If a recipient retires or dies during the Restricted
Period, the restrictions on the shares will immediately lapse. If the
recipient's employment by the Company terminates during the Restricted Period
for any reason other than the recipient's retirement or death, the shares of
restricted stock held by the recipient will be forfeited to the Company and the
recipient must immediately transfer and return the certificates for the
restricted stock to the Company.
Performance Unit Awards. The Compensation Committee is authorized under
the 1994 Plan to grant performance units to eligible participants. Performance
units awarded under the 1994 Plan will have a base value, expressed in dollars,
determined by the Compensation Committee on the day on which the award is
granted, which generally will be the fair market value of the Common Stock on
such day. This value is the "unit base value." The actual amount paid to the
recipient by the Company when the award matures at the end of the award cycle
will depend on the achievement of cumulative performance measures. These
measures will be determined by the Compensation Committee at the time the award
is made and may include cumulative targets with respect to earnings per share or
pretax profits, return on stockholders' equity, asset management, cash flow or
return on capital employed of the Company and/or one of its subsidiaries,
divisions or departments. The Compensation Committee will also determine the
length of the award cycle (which may not be less than three years), a payment
schedule and whether the payment will be made in cash, Common Stock or a
combination of both. The payment schedule will provide a range of percentages
of the unit base value that will be payable to the participant in the event that
cumulative targets, of varying amounts are achieved.
21
In instances where performance measures are not achieved, no award will be
payable. The Compensation Committee has discretion under the 1994 Plan to apply
performance measures on an absolute basis or relative to industry indices and
conclusively determine whether the measures have been achieved, as well as to
revise the payment schedules and performance measure formerly determined by it
if, in its judgment, significant economic or other changes have occurred that
were not foreseeable by the Compensation Committee when it set the initial
measures.
A performance unit award will terminate if the participant does not remain
in the employ of the Company during the award cycle, except as the Compensation
Committee otherwise determines, and except in the case of death, normal
retirement or disability occurring after the first anniversary of the grant date
of the award, in which event, if the performance measure is met, a pro rata
portion of the award will be paid based on the elapsed time of the award cycle
prior to death, retirement or disability.
No payment of a performance unit award will be made prior to the end of an
award cycle, except as the Compensation Committee otherwise determines and
except in the case of death, in which event the participant's beneficiary or
legal representative may elect, subject to the Compensation Committee's
approval, to have the participant's pro rata portion of the award paid at the
end of the year in which death occurred.
Transferability. The participant's rights under stock options, SARs and
performance units may not be assigned or transferred except by will or the
applicable laws of descent and distribution or to a designated beneficiary,
except that nonqualified stock options, SARs and performance units may be
transferred, at the sole discretion of the Compensation Committee.
Capital Adjustments. In the event of any changes in the outstanding stock
of the Company by reason of stock dividends, stock splits, recapitalizations,
mergers, or other similar changes in capitalization, or any distribution to
stockholders other than cash dividends, the Compensation Committee, in its sole
discretion, may make any adjustments it determines to be appropriate in the
outstanding awards granted under the 1994 Plan.
Change in Control. Pursuant to the 1994 Plan, upon a change in control of
the Company, each outstanding option and SAR will automatically become
exercisable in full for the total remaining number of shares covered thereby.
Also, all restrictions on shares of restricted stock will lapse upon a change in
control, and performance units will be paid pro rata to the date of a change in
control and all amounts otherwise deferred to the Company and any employee in
connection with performance units will be distributed. In addition, upon a
change in control, in the Compensation Committee's sole discretion, an optionee
who is an officer subject to Section 16 of the Exchange Act may surrender vested
options in exchange for a cash payment by the Company. The amount of the cash
payment per share is determined by taking the difference between the exercise
price of the shares covered by the options so surrendered and the greater of (a)
the highest market price of the Common Stock during the 90-day period prior to
the date of surrender and (b) the highest per share price paid to any
stockholder of the Company in the transaction or group of transactions resulting
in the change in control. Such options may be surrendered during a 90-day
period following the later of the change in control or any waiting periods
arising in connection with the change in control under Section 16 of the
Exchange Act or with respect to any pooling-of-interest accounting.
22
A "change-in-control" is defined in the 1994 Plan as (a) a change in the
Board of Directors such that a majority of the seats on the Board of Directors
are occupied by individuals who were not (i) designated by AT&T Wireless or CICC
pursuant to the Stockholders Agreement ("Designated Directors"), (ii) nominated
by a majority of the Incumbent Directors of the Company then in office
("Incumbent Directors" are directors of the Company who are Designated Directors
or who were either nominated by a majority of the directors of the Company or
appointed by directors so nominated), or (iii) appointed by directors so
nominated, (b) the acquisition by any person (other than AT&T Wireless or an
AT&T Wireless successor under the PMVG (an "AT&T Wireless Successor"), the
Company, or a Company employee benefit plan) of 30% or more of the combined
voting power of the Company's then-outstanding securities or by AT&T Wireless or
an AT&T Wireless Successor of 80% or more of such voting power, or (c) the
approval by the stockholders of the Company of a complete liquidation,
dissolution, sale of substantially all of the Company's assets or a
consolidation or merger of the Company in which the Company is not the surviving
corporation or pursuant to which shares of Common Stock are converted into cash,
securities or other property, other than a merger in which the holders of the
Common Stock immediately prior to the merger have substantially the same
proportionate ownership of Common Stock of the surviving corporation immediately
after the merger.
Notwithstanding the foregoing, if (a) the change in control results in the
consolidation or merger of the Company with AT&T Wireless (including a AT&T
Wireless Successor) or a AT&T Wireless subsidiary and AT&T Wireless or a AT&T
Wireless subsidiary is the surviving company or (b) AT&T Wireless or a AT&T
Wireless subsidiary becomes the beneficial owner of 80% or more of the combined
voting power of the Company's stock (other than pursuant to a Private Market
Sale, as defined in the PMVG), each outstanding option will be converted into an
option to purchase a number of shares of AT&T Wireless's Common Stock (or the
shares of AT&T Wireless's ultimate publicly traded parent) determined by
multiplying the number of unexercised outstanding options by a fraction, the
numerator of which is the fair market value of a share of Common Stock and the
denominator of which is the fair market value of a share of AT&T Wireless's
Common Stock on the date of the change in control. The option price for AT&T
Wireless's Common Stock will be equal to the exercise price of the option
multiplied by a fraction, the numerator of which is the fair market value of a
share of AT&T Wireless's Common Stock and the denominator of which is the fair
market value of a share of Common Stock on the date of the change in control.
If a change in control results from a Private Market Sale, upon a vote by a
majority of the Independent Directors, each outstanding option will be converted
into an option to purchase the common stock of the ultimate parent of the
acquiring entity if such stock is publicly traded. If the Independent Directors
do not approve the conversion, the Company has the right to cancel each such
option in exchange for a payment in cash equal to the excess of the purchase
price of stock in the Private Market Sale over the exercise price of such
option.
Amendment and Termination. The 1994 Plan may be terminated, modified or
amended by the stockholders of the Company. The Board of Directors may also
terminate the 1994 Plan, or modify or amend it, subject to stockholder approval
in certain instances, as set forth in the 1994 Plan. No awards may be granted
under the 1994 Plan after November 21, 2004.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to options granted under the
1994 Plan and with respect to the sale of Common Stock acquired upon the
exercise of options under the 1994 Plan.
23
INCENTIVE STOCK OPTIONS
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option may, however, subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a long-
term capital loss if the participant has held the ISO Stock for more than one
year prior to the date of sale.
NONSTATUTORY STOCK OPTIONS
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises of a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the Exercise Date
over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
long-term gain or loss if the participant has held the NSO Stock for more than
one year prior to the date of the sale.
24
TAX CONSEQUENCES TO THE COMPANY
The grant of an option under the 1994 Plan will have no tax consequences to
the Company. Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Common Stock acquired upon exercise of such an option
under the 1994 Plan will have any tax consequences to the Company. The Company
generally will be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a participant under
the 1994 Plan, including as a result of the exercise of a nonstatutory stock
option or a Disqualifying Disposition. Any such deduction will be subject to
the limitation of Section 162(m) of the Code. The Company will have a
withholding obligation with respect to ordinary compensation income recognized
by participants with respect to nonstatutory stock options under the 1994 Plan
who are employees or otherwise subject to withholding.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE 1994 PLAN.
OTHER INFORMATION
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present any matter for action at the Annual Meeting other than as set
forth in this Notice of Annual Meeting. If any other matters properly come
before the meeting, it is intended that the holders of the proxies will act in
accordance with their best judgment.
STOCKHOLDERS PROPOSALS FOR THE 1998 ANNUAL MEETING
In order to be eligible for inclusion in the proxy materials for the
Company's 1998 Annual Meeting of Stockholders, any stockholder proposal,
including nominations for director, to take action at such meeting must be
received at the Company's principal executive offices by December 29, 1997.
PROXY SOLICITATION
The cost of the solicitation of proxies will be borne by the Company. In
addition to the solicitation of proxies by mail, certain of the officers and
employees of the Company, without extra remuneration, may solicit proxies
personally, by telephone, mail or facsimile. In addition, Corporate Investor
Communications, Inc. will assist in the solicitation of proxies for a fee not to
exceed $3,500. The Company will reimburse brokers, custodians, and nominees for
their expenses in sending proxies and proxy materials to beneficial owners.
25
INDEPENDENT AUDITORS
The Company has reappointed Ernst & Young L.L.P. as its independent
auditors. Representatives of Ernst & Young will be present at the Annual
Meeting to make a statement, if they wish, and to respond to appropriate
questions from stockholders.
By Order of the Board of Directors
Gregory M. Schmidt
Secretary
April 14, 1997
26
LIN TELEVISION CORPORATION NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD MAY 14, 1997.
FOUR RICHMOND SQUARE, SUITE 200
PROVIDENCE, RI 02906
Dear Stockholder:
The Annual Meeting of Stockholders of LIN Television Corporation will be held at
10:00 a.m. on Wednesday, May 14, 1997 at the Company's Headquarters located at
Four Richmond Square, Suite 200, Providence, Rhode Island, for the following
purposes:
1. To elect ten directors to the Board of Directors
2. To approve an amendment increasing the number of shares of Common Stock
issuable under the Company's Amended and Restated 1994 Stock Incentive Plan
from 2,750,000 to 3,750,000.
Only holders of Common Stock of LIN Television Corporation of record at the
close of business on April 8, 1997 will be entitled to vote at the meeting or
any adjournment thereof.
To be sure that your vote is counted, we urge you to complete and sign the
proxy/voting instruction card below, detach it from this letter and return it in
the postage paid envelope enclosed in this package. The giving of such proxy
does not effect your right to vote in person if you attend the meeting. The
prompt return of your signed proxy will aid the Company in reducing the expense
of additional proxy solicitation.
If you plan to attend the Annual Meeting in person, detach and bring this letter
to the meeting as an admission ticket.
BY ORDER OF THE BOARD OF DIRECTORS
GREGORY M. SCHMIDT
Secretary
Detach Proxy Card Here
1. Election of Directors.
FOR ALL NOMINEES [_] WITHHOLD AUTHORITY TO VOTE [_] EXCEPTIONS [_]
LISTED BELOW FOR ALL NOMINEES LISTED BELOW.
Nominees: Richard S. Bodman, Dennis J. Carey, Gary R. Chapman, James D.
Daniell, Errol A. Harris, William G. Herbster, Roy M. Huhndorf,
Wilma H. Jordan, Richard W. Kislik, Gary A. Swenson.
(INSTRUCTIONS: To withhold authority to vote for an individual
nominee, mark the "Exceptions" box and write the nominee's name in
the space provided below.)
*Explanation_______________________________________________________
In their discretion, the Proxies are authorized to vote upon such
other matters as may properly come before the meeting or any
adjournment or postponement thereof.
2. Approval of amendment increasing the number of shares of Common Stock
issuable under the Company's Amended and Restated 1994 Stock Option Plan from
2,750,000 to 3,750,000.
FOR [_] AGAINST [_] ABSTAIN [_]
CHANGE OF ADDRESS OR COMMENTS MARK HERE [_]
The Voting Instruction must be signed by the person in whose name the relevant
Receipt is registered on the books of the Depositary. In the case of a
corporation, the Voting Instruction must be executed by a duly authorized
Officer of Attorney.
Dated ________________________________, 1997
____________________________________________
Signature
____________________________________________
Signature
Sign, Date and Return the Voting Instructions Card Promptly Using the Enclosed
Envelope.
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK.