SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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WESTWOOD ONE, INC.
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(Name of Registrant as Specified In Its Charter)
WESTWOOD ONE, INC.
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Dear Shareholders:
Enclosed with this letter is a Proxy Statement and proxy card for the
Annual Meeting of Shareholders of Westwood One, Inc. (the "Company") to be held
on May 29, 2002 at 10:00 a.m., Pacific Time, in Studio 3 of the W Los Angeles
Hotel, 930 Hilgard Avenue, Los Angeles, CA 90024. A copy of the Company's Annual
Report on Form 10-K for the year ended December 31, 2001, which report contains
consolidated financial statements and other information of interest with respect
to the Company and its shareholders, is also included with this mailing.
The purpose of the Annual Meeting is to elect three directors, to ratify
the selection of the Company's independent accountants, to authorize a letter
agreement entered into between the Company and Infinity Broadcasting Corporation
("Infinity") which extends the terms of, and makes other changes to, certain
agreements between the Company and Infinity, and which provides for the issuance
to Infinity of warrants to acquire up to 4,500,000 shares of the Company's
Common Stock subject to certain performance-based thresholds, to approve an
amendment to the Company's certificate of incorporation which eliminates the
requirement that all directors entitled to be elected by holders of Common Stock
voting alone must be Class III directors and to conduct such other business as
may properly come before the meeting. We are soliciting shareholder
authorization of the letter agreement with Infinity as a result of Delaware
General Corporation Law. At the Annual Meeting, the holders of Common Stock,
voting alone, will elect one member of the Company's Board of Directors. Holders
of Common Stock and Class B Stock, voting together, will elect two members of
the Company's Board of Directors, ratify the selection of the Company's
independent accountants, act on the proposal to approve the amendment to the
Company's certificate of incorporation and conduct such other business as may
properly come before the meeting. Holders of Common Stock and Class B Stock
voting together, excluding shares owned by Infinity or its affiliates, will act
on the proposal to approve the letter agreement.
IT IS IMPORTANT THAT YOU MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD IN THE PROVIDED POSTAGE-PAID ENVELOPE IF YOU DO NOT INTEND TO BE PRESENT AT
THE MEETING. IF YOU DO LATER DECIDE TO ATTEND, YOUR PROXY WILL AUTOMATICALLY BE
REVOKED IF YOU VOTE IN PERSON. ACCORDINGLY, YOU ARE URGED TO MARK, SIGN, DATE
AND RETURN THE PROXY CARD NOW IN ORDER TO ENSURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING.
We appreciate your continued support.
Sincerely,
WESTWOOD ONE, INC.
Norman J. Pattiz
Chairman of the Board
April 29, 2002
WESTWOOD ONE, INC.
40 West 57th Street, 5th Floor
New York, NY 10019
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 29, 2002
To Our Shareholders:
The Annual Meeting of the Shareholders of Westwood One, Inc. (the
"Company") will be held in Studio 3 of the W Los Angeles Hotel, 930 Hilgard
Avenue, Los Angeles, CA 90024, on May 29, 2002 at 10:00 a.m., Pacific Time, for
the following purposes:
(1) To elect three members of the Company's Board of Directors;
(2) To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending December 31, 2002;
(3) To authorize a letter agreement between the Company and Infinity
Broadcasting Corporation ("Infinity"), which extends through March 31, 2009
certain existing agreements between the Company and Infinity which would
otherwise expire on March 31, 2004 and makes other changes to those
agreements and which provides for the issuance of warrants to purchase up
to an aggregate of 4,500,000 shares of the Company's Common Stock subject
to certain performance-based thresholds;
(4) To approve an amendment to the Company's certificate of incorporation which
eliminates the requirement that all directors entitled to be elected by
holders of Common Stock voting alone must be Class III directors; and
(5) To consider and act upon such other business as may properly come before
the meeting.
Shareholders of record at the close of business on April 12, 2002 will be
entitled to notice of and to vote at the Annual Meeting, and a list of such
shareholders will be available for examination during ordinary business hours at
least ten days prior to the Annual Meeting by any shareholder, for any purpose
germane to the Annual Meeting, at the Company's offices at 9540 Washington
Boulevard, Culver City, California 90232 (telephone (310) 204-5000).
Whether or not you intend to be present at the meeting, please mark, date,
sign and mail the enclosed proxy in the provided postage-paid envelope as
promptly as possible. You are cordially invited to attend the Annual Meeting and
your proxy will be revoked if you are present and vote in person.
By Order of the Board of Directors
Gary J. Yusko
Secretary
April 29, 2002
WESTWOOD ONE, INC.
40 West 57th Street, 5th Floor
New York, NY 10019
Proxy Statement
GENERAL
This proxy statement (first mailed to shareholders on or about April 29,
2002) is furnished in connection with the solicitation of proxies by Westwood
One, Inc., a Delaware corporation (the "Company"), for use at the Annual Meeting
of Shareholders of the Company to be held on May 29, 2002 at 10:00 a.m., Pacific
Time, in Studio 3 of the W Los Angeles Hotel, 930 Hilgard Avenue, Los Angeles,
CA 90024, and any adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders.
The Company's Annual Report on Form 10-K for the year ended December 31,
2001, including consolidated financial statements and other information,
accompanies this Proxy Statement but does not form a part of the proxy
soliciting material.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At our annual meeting, shareholders will act upon the matters outlined in
the Notice of Annual Meeting of Shareholders accompanying this proxy statement,
including the election of directors, the ratification of the selection of the
Company's independent accountants, the authorization of a letter agreement
entered into between the Company and Infinity Broadcasting Corporation
("Infinity") on April 15, 2002 (the "Letter Agreement") which extends the terms
of, and makes other changes to, certain agreements between the Company and
Infinity, and provides for the issuance to Infinity of warrants to acquire up to
4,500,000 shares of the Company's Common Stock subject to certain
performance-based thresholds, the approval of an amendment to the Company's
certificate of incorporation and such other business as may properly come before
the meeting. In addition, management will report on the performance of the
Company during 2001 and respond to questions from shareholders.
Who is entitled to vote at the meeting?
Only shareholders of record at the close of business on April 12, 2002, the
record date for the meeting, are entitled to receive notice of and to
participate in the annual meeting. If you were a shareholder of record on that
date, you will be entitled to vote all of the shares that you held on that date
at the meeting, or any postponements or adjournments of the meeting. As of the
record date, there were 106,610,947 shares of Common Stock, excluding treasury
shares, and 703,466 shares of Class B Stock outstanding.
What are the voting rights of holders of the Company's Common Stock and Class B
Stock?
Under the Company's certificate of incorporation, each holder of
outstanding Common Stock is entitled to cast one (1) vote for each share of
Common Stock held by such holder and each holder of Class B Stock is entitled to
cast fifty (50) votes for each share of Class B Stock held by such holder. Only
the Common Stock is publicly traded.
Who can attend the meeting?
All shareholders as of the record date, or their duly appointed proxies,
may attend the meeting. If you attend, please note that cameras, recording
devices and other electronic devices will not be permitted at the meeting.
Please also note that if you hold your shares in "street name" (that is,
through a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date in order to gain
entrance.
1
What constitutes a quorum?
With respect to the election of the director to be elected by the holders
of the Common Stock voting alone, the presence at the meeting, in person or by
proxy, of the holders of at least one-third of the shares of Common Stock
outstanding on the record date and the presence at the meeting, in person or by
proxy, of the holders of a majority of the aggregate voting power of the Common
Stock and the Class B Stock outstanding on the record date will constitute a
quorum, permitting the holders of Common Stock to take action on that matter.
With respect to all other matters to be voted on at the meeting, the presence at
the meeting, in person or by proxy, of the holders of a majority of the
aggregate voting power of the Common Stock and the Class B Stock outstanding on
the record date will constitute a quorum, permitting the shareholders to take
action on those matters.
Proxies received but marked as abstentions and broker non-votes will be
included in the calculation of the number of votes considered to be present at
the meeting for purposes of determining a quorum.
How do I vote?
If you complete and properly sign and date the accompanying proxy card and
return it to the Company, it will be voted as you direct. If you are a
registered shareholder and attend the meeting, you may deliver your completed
proxy card in person. "Street name" shareholders who wish to vote at the meeting
will need to obtain a proxy form from the institution that holds their shares.
Why has the Company extended its agreements with Infinity at this time?
The Board of Directors believes that Infinity has demonstrated its skill in
providing management services and that extending the existing agreements
provides the Company with the opportunity to secure such services at reasonable
rates for a long term. The Board of Directors of the Company believes that
Infinity's knowledge and experience of the Company's business, together with its
demonstrated skill, makes it uniquely qualified to perform these services.
In addition, the Board of Directors has taken into account the fact that
Infinity will not continue to provide important programming or provide
distribution of the Company's programming in the absence of the Management
Agreement after March 31, 2004 and that these relationships are extremely
important for the Company. [SEE "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS".) The Board of Directors also believes that the Company's
relationship with Infinity has increased and will continue to increase the
Company's ability to enter into relationships with Infinity radio stations
having significant listening audiences in each of the top radio markets, thereby
increasing the Company's ability to sell advertising at favorable rates.
Moreover, the Board of Directors believes that the relationship with Infinity
has provided and will continue to provide the Company with greater access to the
significant radio talent and programming that Infinity is able to obtain through
its considerable resources.
Why is the Company proposing to amend the certificate of incorporation?
The Company is proposing to amend the certificate of incorporation to
delete a sentence that requires that all directors elected by holders of Common
Stock separately be members of Class III of the Board of Directors. The Board of
Directors believes that it is in the best interests of the Company and its
shareholders to have the directors elected solely by the holders of Common Stock
spread among the classes of directors, as is consistent with the actual
historical practice of the Company.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of the
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Company either a notice of revocation or a duly executed proxy bearing a later
date. In addition, the powers of the proxy holders will be suspended if you
attend the meeting in person and vote, although attendance at the meeting
will not by itself revoke a previously granted proxy.
What are the Board's recommendations?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors. The Board's recommendation is set forth together with
the description of each item in this proxy statement. In summary, the Board
recommends a vote:
o FOR the election of the nominated directors;
o FOR ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for fiscal 2002;
o FOR authorization of the Letter Agreement between the Company and Infinity
which extends the terms of, and makes other changes to, certain agreements
entered into between the Company and Infinity and provides for the issuance
of warrants to Infinity; and
o FOR approval of an amendment to the Company's certificate of incorporation
which eliminates the requirement that all directors entitled to be elected
by holders of Common Stock voting alone must be Class III directors.
Management is not aware of any matters, other than those specified above,
that will be presented for action at the annual meeting, but if any other
matters do properly come before the meeting, the proxy holders will vote as
recommended by the Board of Directors or, if no recommendation is given, in
their own discretion.
What vote is required to approve each item?
With respect to each matter to be voted on other than the authorization of
the Letter Agreement and the approval of the amendment to the certificate of
incorporation, the affirmative vote of a majority of the votes entitled to be
cast and represented in person or by proxy at the meeting will be required to
approve each such matter. With respect to the vote on the Letter Agreement
between the Company and Infinity, the affirmative vote of 66 2/3% of the
outstanding voting stock of the Company which is not owned by Infinity or its
affiliates will be required to authorize the Letter Agreement. With respect to
the vote on the amendment to the certificate of incorporation, the affirmative
vote of a majority of the votes entitled to be cast will be required to approve
the amendment. Other than with respect to the election of Mr. Greenberg, on all
matters proposed the Common Stock and the Class B Stock vote together as a
class. With respect to the election of Mr. Greenberg, the Common Stock votes
separately as a class and the Class B Stock is not entitled to vote. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of one
or more directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether there
is a quorum. A properly executed proxy marked "ABSTAIN" with respect to any such
matter will not be voted, although it will be counted for purposes of
determining whether there is a quorum. Accordingly, an abstention will have the
effect of a negative vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some or all of the matters to be acted upon. Thus, if you do not give
your broker or nominee specific instructions, your shares may not be voted on
those matters and will not be counted in determining the number of shares
necessary for approval. Shares represented by such "broker non-votes" will,
however, be counted in determining whether there is a quorum.
What is beneficial ownership?
Beneficial ownership has been determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Under this Rule, certain shares may be deemed to be beneficially owned by more
than one person (such as where persons share voting power or investment power).
In addition, shares are deemed to be beneficially owned by a person if the
person has the right to acquire the shares (for example, upon exercise of an
option) within 60 days of the date as of which the information is provided; in
computing the percentage of ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned by such
person (and only such person) by reason of these acquisition rights. As a
result, the percentage of outstanding shares of any person as shown in the
following table does not necessarily reflect the person's actual voting power at
any particular date.
3
How much stock do the Company's largest shareholders and directors and executive
officers own?
The following table shows the amount of the Company's Common Stock and
Class B Stock beneficially owned (unless otherwise indicated) by our largest
shareholders (those who own more than 5% of the outstanding shares), directors,
the executive officers named in the Executive Compensation Summary Table below
and those directors and executive officers as a group. Except as otherwise
indicated, all information is as of April 12, 2002. At April 12, 2002, there
were 106,610,947 shares of Common Stock outstanding and 703,466 shares of Class
B Stock outstanding.
Aggregate Number of Shares Beneficially Owned (1)
-------------------------------------------------
Common Stock Class B Stock
------------ -------------
Number Percent Number Percent
------ ------- ------ -------
Infinity Network, Inc., a subsidiary of
Infinity Broadcasting Corporation (2) 17,000,000 (4) 15.8% - -
40 West 57th Street
New York, NY 10019
Putnam Investments, Inc. (2) 9,808,210 (5) 9.2% - -
One Post Office Square
Boston, MA 02109
The TCW Group, Inc. (2) 5,545,068 (6) 5.2% - -
865 South Figueroa Street
Los Angeles, CA 90017
David I. Saperstein 8,184,314 (8) 7.6% - -
P.O. Box 10719
Beverly Hills, CA 90213
Norman J. Pattiz (3) 457,330 (9) * 703,380 99.9%
9540 Washington Blvd.
Culver City, CA 90232
David L. Dennis 119,210 (10) * - -
Gerald Greenberg 2,000 * - -
Joel Hollander 179,200 (12) * - -
Dennis F. Holt 40,000 * - -
Maria D. Hummer 7,000 * - -
Mel Karmazin 1,948,200 (14) 1.8% - -
Steven A. Lerman 50,000 * - -
Joseph B. Smith 6,000 * - -
Farid Suleman 1,520,000 (15) 1.4% - -
All Current Directors and Executive 12,513,254 (16) 11.2% 703,380 99.9%
Officers as a Group (11 persons)
_____________________
* Represents less than one percent (1%) of the Company's outstanding shares
of Common Stock.
(1) The persons in the table have sole voting and investment power with
respects to all shares of Common Stock and Class B Stock, unless otherwise
indicated.
(2) Tabular information and footnotes 4, 5, 6 and 7 based on information
contained in the most recent Schedule 13D/13G filings and other information
made available to the Company. The shares indicated as held by Infinity
Network, Inc. are indirectly held by Infinity Media Corporation through its
ownership of 100% of the outstanding stock of Infinity Network, Inc.,
indirectly held by Infinity through its 100% ownership of the outstanding
stock of Infinity Media Corporation, and indirectly held by Viacom Inc.
("Viacom") through its ownership of 100% of the outstanding stock of
Infinity. NAIRI Inc. owns approximately 68% of the voting stock of Viacom,
which in turn is a wholly owned subsidiary of National Amusements, Inc.
Beneficial ownership may also be attributed to Sumner M. Redstone, as Mr.
Redstone is the chairman of the Board and the beneficial owner of a
controlling interest in National Amusements, Inc.
(3) Mr. Pattiz owned Common Stock and Class B Stock representing approximate
24.8% of the total voting power of the Company as of April 12, 2002.
(4) Includes 1,000,000 shares which may currently be acquired upon exercise of
warrants at an exercise price of $12.50 per share.
(5) Putnam Investments, Inc. as an investment advisor has no sole voting or
dispositive power, but has shared dispositive power for 9,808,210 shares
and shared voting power for 328,550 of such shares.
(6) The TCW Group, Inc., as an investment advisor, has no sole voting or
dispositive power, but has shared voting and dispositive power of such
shares.
4
(7) Goldman Sachs Asset Management has sole voting power with respect to
3,212,168 shares, shared voting power for 1,971,740 shares, sole
dispositive power with respect to 3,477,238 shares and shared dispositive
power with respect to 1,971,740 shares.
(8) Includes stock options for 600,000 shares granted by Metro Networks, Inc.
("Metro") prior to its merger with the Company on September 22, 1999,
10,000 shares granted under the Company's Amended 1999 Stock Incentive Plan
(the "1999 Plan") and 952,100 shares held by certain charitable trusts of
which Mr. Saperstein is trustee. Does not include 746,985 shares held by
certain trusts created for the benefit of Mr. Saperstein's children,
beneficial ownership of which Mr. Saperstein disclaims. Mr. Saperstein, who
is currently a Class III director, has chosen not to stand for reelection
to the Board of Directors.
(9) Includes stock options for 404,000 shares granted under the 1999 Plan.
(10) Includes stock options for 90,000 shares granted under the Company's
Amended Stock Incentive Plans. Does not include 4,000 shares held by Mr.
Dennis as custodian for his children, beneficial ownership of which Mr.
Dennis disclaims.
(11) Represents stock options granted under the Company's Amended Stock
Incentive Plans.
(12) Includes stock options for 160,000 shares granted under the 1999 Plan.
(13) Includes stock options for 2,000 shares granted under the 1999 Plan.
(14) Includes stock options for 1,896,000 shares granted under the Company's
Amended Stock Incentive Plans.
(15) Includes stock options for 1,420,000 shares granted under the Company's
Amended Stock Incentive Plans.
(16) Includes stock options for 4,680,000 shares granted under the Company's
Amended Stock Incentive Plans.
PROPOSAL 1 - ELECTION OF DIRECTORS
----------------------------------
How is the Board of Directors structured and what are their terms?
The Board of Directors is divided into three classes (Class I, II, and
III), each class serving for three-year terms, which terms do not coincide. The
Board of Directors currently is comprised of eleven individuals, one of whom is
a Class III member who is not standing for reelection. However, the Company's
Bylaws have been amended to increase the size of the Board of Directors to
thirteen. When such vacancies are filled, an additional director will be added
to each different Class. Only one class of directors is elected at each annual
meeting. Of the directors, at least 33 1/3% must be independent outside
directors. Pursuant to the Company's certificate of incorporation, holders of
Common Stock, voting alone, have the right to elect 20% of the Board of
Directors, which is currently three directors. However, it is currently intended
that the holders of the Common Stock will vote alone to elect all the
independent directors, at least one of whom will be elected each year, as set
forth below. The remaining members of the Board are elected by all shareholders
voting together as a single class.
At the annual meeting, holders of Common Stock, voting alone, will elect
the independent Class III director, and holders of Common Stock and Class B
Stock, voting together, will elect the other Class III directors, for three-year
terms, until their successors are elected and qualified. The Board of Directors
intends to nominate Gerald Greenberg (the independent director), Joel Hollander
and Steven Lerman to serve three-year terms ending in 2005. All nominees
currently serve as Class III directors of the Company. Unless otherwise
indicated on any proxy, the persons named as proxy voters on the enclosed proxy
card intend to vote the stock represented by each proxy to elect these nominees.
The nominees are willing to serve as directors, but should any or all refuse to
or be unable to serve, the named proxy holders will vote for one or more other
persons nominated by the Board of Directors. David Saperstein, currently a Class
III director, chose not to stand for reelection at the end of his current term.
The election of Mr. Greenberg, Mr. Hollander and Mr. Lerman will require
the affirmative vote of a majority of the votes entitled to be cast and
represented in person or by proxy at the meeting. With respect to the election
of Mr. Hollander and Mr. Lerman, the Common Stock and the Class B Stock vote
together as a class. With respect to the election of Mr. Greenberg, the Common
Stock votes separately as a class and the Class B Stock is not entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
OF GERALD GREENBERG, JOEL HOLLANDER AND STEVEN LERMAN AS CLASS III DIRECTORS.
5
Who are the current Board members and what are their backgrounds and
qualifications?
The continuing directors and nominees for director of the Company are:
Director Term
Name Age Since Class Expires
---- --- -------- ----- -------
Norman J. Pattiz 59 1974 I 2004
Mel Karmazin 58 1994 I 2004
Joseph B. Smith (Independent) 74 1994 I 2004
Dennis F. Holt 65 1999 I 2004
Farid Suleman 50 1994 II 2003
David L. Dennis (Independent) 53 1994 II 2003
Maria D. Hummer (Independent) 57 2000 II 2003
Gerald Greenberg (Independent) 59 1994 III 2002
Steven A. Lerman 55 1995 III 2002
Joel Hollander 46 1999 III 2002
The principal occupations of the three director nominees and each of the
other seven continuing directors are as follows:
Mr. Pattiz - founded the Company in 1974 and has held the position of
Chairman of the Board since that time. He was also the Company's Chief Executive
Officer until February 3, 1994. Mr. Pattiz has served on the Broadcasting Board
of Governors of the United States of America, which oversees all U.S.
non-military international broadcasting since November 2000. Mr. Pattiz is a
Regent of the University of California and is also past President and a member
of the Executive Board of the Broadcast Education Association, a trustee of the
Museum of Television & Radio, the Hollywood Radio and Television Society and is
a member of the Board of the Annenberg School for Communication at the
University of Southern California ("USC"). He also serves on California's 21st
Century Infrastructure Commission.
Mr. Karmazin - has been a director of the Company since February 3, 1994.
Mr. Karmazin was also President and Chief Executive Officer of the Company from
February 3, 1994 until October 8, 1998. Mr. Karmazin has been the president and
chief operating officer of Viacom since May 2000. Mr. Karmazin served as
president and chief executive officer of CBS Corporation ("CBS") from January
1999 to May 2000, and served as president and chief operating officer of CBS
from April 1998 to December 1998. Mr. Karmazin was also the Chairman, President
and Chief Executive Officer of Infinity from September 1998 to February 2001.
Mr. Karmazin joined CBS in December 1996 as chairman and chief executive officer
of CBS Radio. In May 1997, he also assumed responsibility for CBS's owned
television stations and became chairman and chief executive officer of the CBS
Station Group (Radio & Television). Prior to joining CBS, he was president and
chief executive officer of Infinity from 1981 until its acquisition by CBS in
December 1996. Mr. Karmazin was a director of CBS before its merger with Viacom
and a director of Infinity before its merger with Viacom. He is a director of
Viacom, Blockbuster and of the New York Stock Exchange and Vice Chairman of the
Board of Trustees of the Museum of Television and Radio.
Mr. Smith - has been a director of the Company since May 24, 1994. He was
previously a director of the Company from February 1984 until February 3, 1994.
Since April 1993, Mr. Smith has been the President of Unison Productions, Inc.,
through which he serves as an industry consultant involved in a number of
projects in the entertainment business.
Mr. Holt - was appointed to the Board of Directors of the Company on
September 22, 1999. Mr. Holt was a director of Metro from October 1996 through
September 22, 1999. Mr. Holt has been the Chairman and Chief Executive Officer
of Patriot Communications LLC since March 1999. Patriot Communications LLC is
one of the largest telecommunications service bureaus in the U.S. Mr. Holt was
also the Chairman and Founder of Initiative Media (formerly Western
International Media Corporation) from founding the company in 1970 through
January 2002. Mr. Holt is a director of United Online; USC Annenberg School for
Communication; USC School of Policy, Planning and Development; St. John's
Hospital; The John Douglas French Alzheimer's Foundation; and the Los Angeles
Police Foundation. Mr. Holt also serves as a member of Skull and Dagger, the
Silver Shield Foundation, the SKIRBALL Cultural Center, and the National
Advisory Council of the Autry Museum. Mr. Holt is an associate of the California
Institute of Technology. Mr. Holt was also awarded the Horatio Alger Association
award in 1998.
6
Mr. Suleman - has been a director of the Company since February 1994 and
was the Company's Executive Vice President and Chief Financial Officer from
February 1994 to March 31, 2002. Mr. Suleman has been a Special Limited Partner
with Forstmann Little & Co. since March 2002. He was President and Chief
Executive Officer of Infinity from February 2001 to March 2002. He was Executive
Vice President, Chief Financial Officer, Treasurer and a director of Infinity
from September 1998 to February 2001 when Infinity was acquired by Viacom. Mr.
Suleman was named the Senior Vice President, Finance of CBS in August 1998 and
Senior Vice President and Chief Financial Officer of the CBS Station Group in
June 1997. In May 2000, CBS Corporation merged into Viacom. From January 1997 to
June 1997, he served as Senior Vice President and Chief Financial Officer of CBS
Radio. From 1986 until its acquisition by CBS in December 1996, Mr. Suleman was
Vice President, Finance, Chief Financial Officer and a director of Infinity.
Mr. Dennis - has been a director of the Company since May 24, 1994. Mr.
Dennis has served as Vice Chairman, Office of the President, Chief Corporate
Officer and Chief Financial Officer of Tenet Healthcare, a hospital owner and
healthcare provider, since March 2000. Mr. Dennis served as Managing Director,
Investment Banking for Donaldson, Lufkin & Jenrette Securities Corporation from
April 1989 to February 2000.
Ms. Hummer - has been a director of the Company since March 29, 2000. Ms.
Hummer has been Of Counsel to Manatt, Phelps & Phillips, LLP ("Manatt, Phelps"),
a law firm with offices in Los Angeles, Orange County, Palo Alto, Sacramento and
Washington D.C., since January 1999. Prior to January of 1999, Ms. Hummer was a
partner with Manatt, Phelps holding the positions of Chairman of the Management
Committee and Co-Managing Partner. Ms. Hummer is currently on the Board of
Trustees, CNI Charter Funds; Board of Directors, Los Angeles World Affairs
Counsel; Board of Directors, The Music Center of Los Angeles County; Board of
Trustees, Scripps College; Board of Trustees, UCLA/Armand Hammer Museum of Art
and Cultural Center; Board of Trustees, Mount St. Mary's College; Woman's
Leaderships Board of The John F. Kennedy School of Government-Harvard
University; Board of Directors, Children's Institute International; and Board of
Directors, The Regency Club. Ms. Hummer is also a member of The Committee of 200
and the National Women's Forum.
Mr. Greenberg - has been a director of the Company since May 24, 1994.
Since February 2001, Mr. Greenberg has been President of Mirage Music
Entertainment, a company which owns the Mirage Record label and the Dream Street
Theatrical Group, a theatrical production company. From April 1993 to January
2001, Mr. Greenberg served as President of MJJ Music, a Michael Jackson/Sony
owned record label.
Mr. Lerman - has been a director of the Company since April 19, 1995. Since
1986, Mr. Lerman has been a member of the Washington, D.C. law firm of
Leventhal, Senter and Lerman, PLLC and is currently the manager of that firm.
Mr. Lerman was a director of Infinity from February 1992 through December 1996.
Mr. Lerman is a member of the Mid-Atlantic Regional Advisory Board of the
University of Pennsylvania.
Mr. Hollander - has been a director of the Company since September 22, 1999
and the Company's President and Chief Executive Officer since October 8, 1998.
Mr. Hollander was Vice President and General Manager of Infinity's New York
radio station WFAN from April 1992 to October 1998. Mr. Hollander is Chairman of
the CJ Foundation for SIDS and a member of the Board of Directors of Tomorrow's
Childrens Fund.
How are directors compensated?
Cash Compensation: Directors of the Company who are not officers received
$3,750 per meeting attended for their services as directors and $1,875 per
meeting attended for their services as committee members. During 2001, Messrs.
Dennis, Greenberg, Holt, Lerman, Smith and Ms. Hummer received $22,500, $18,750,
$15,000, $18,750, $16,875, and $18,750, respectively, in Board and Board
Committee fees. Mr. Karmazin has elected not to receive cash compensation for
his services as a director.
Options: Directors of the Company who are not officers receive a mandatory
grant of stock options to acquire 10,000 shares of Common Stock each year. Each
grant is made on the date of the Company's annual shareholder meeting. In 2001,
the Board of Directors authorized an additional grant of 5,000 shares to all
non-officer directors. Mr. Karmazin has elected not to receive mandatory grants
of stock options normally provided to non-officer directors.
How often did the Board meet during 2001?
The Board of Directors met four times during 2001. Each director attended
more than 75% of the total number of meetings of the Board and Committees on
which he or she served.
7
What committees has the Board established?
The Board of Directors has Audit, Nominating, and Compensation Committees.
The members of the Audit Committee in 2001 were Messrs. Dennis (Chairman),
Lerman and Ms. Hummer, each of whom are "Independent" for purposes of New York
Stock Exchange listing standards. The Audit Committee operates under a written
charter (the "Charter") adopted by the Board of Directors and its
responsibilities and activities are further discussed below under "Report of the
Audit Committee." There were five meetings of the Audit Committee during fiscal
2001.
The members of the Nominating Committee in 2001 were Messrs. Dennis,
Karmazin and Pattiz. The Nominating Committee makes nominations for directors
each year. There were no formal meetings of the Committee in 2001. The
Nominating Committee will also consider, at meetings of the Committee, those
recommendations by shareholders which are submitted, along with biographical and
business experience information, to the Company at its principal executive
office.
The members of the Compensation Committee in 2001 were Messrs. Greenberg
(Chairman), Dennis and Smith. Messrs. Smith and Greenberg have served on the
Committee since May 24, 1994, and Mr. Dennis has served on the Committee since
June 17, 1997. The Committee administers the Company's Amended Stock Incentive
Plan, and is authorized to approve, and may negotiate, employment arrangements
with key executives of the Company and its subsidiaries. There was one formal
meeting of the Compensation Committee in 2001, and Committee members engaged in
informal discussions and took several actions by written consent during fiscal
2001.
PROPOSAL 2 - SELECTION OF INDEPENDENT ACCOUNTANTS
-------------------------------------------------
Action will be taken at the annual meeting to ratify the selection of
PricewaterhouseCoopers LLP as independent accountants of the Company for the
fiscal year ending December 31, 2002. PricewaterhouseCoopers LLP has been the
independent accountants of the Company since 1984. The Company knows of no
direct or material indirect financial interest of PricewaterhouseCoopers LLP in
the Company or of any connection of that firm with the Company in the capacity
of promoter, underwriter, voting trustee, officer or employee.
Report of the Audit Committee
The Audit Committee operates pursuant to its Charter, which was approved by
the Board of Directors. The Charter, which complies with applicable SEC
regulations and New York Stock Exchange rules, addresses three broad areas of
responsibility of the Committee:
1) Reviewing and discussing the preparation of quarterly and annual financial
reports with the Company's management and its independent accountants;
2) Supervising the relationship between the Company and its independent
accountants, including discussing the matters required by SAS 61
(Codification of Standards on Auditing Standards) with its independent
accountants, evaluating the independence of the accountants in accordance
with Independence Standards Board Standard No. 1 (Independence Discussions
with Audit Committees), and recommending their appointment or removal,
reviewing the scope of their audit and non-audit services and related fees;
and
3) Overseeing management's implementation of effective systems of internal
controls.
The Committee or its Chairman met with the Company's independent
accountants and management on five occasions in 2001 to carry out its
responsibilities. The Committee or its Chairman reviewed and discussed with both
management and its independent accountants all financial statements prior to
their filing with the SEC. Management advised the Committee in each case that
all financial statements were prepared in accordance with generally accepted
accounting principles, and reviewed significant issues with the Committee. The
Committee also held discussions with the Company's independent accountants
concerning the matters required to be discussed by SAS 61.
The Committee also discussed with PricewaterhouseCoopers LLP ("PWC") their
independence and received from PWC the written disclosures and the letter from
PWC required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees. In addition, the Committee has considered
whether the provision of non-audit services by PWC is compatible with
maintaining their independence.
8
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in matters of auditor independence. Members of
the Committee may rely without independent verification on the information
provided to them and on the representations made by management and the
independent accountants. Accordingly, the Audit Committee's oversight does not
provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the Audit
Committee's considerations and discussions referred to above do not assure that
the audit of the Company's financial statements has been carried out in
accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that the Company's auditors are in fact "independent."
Based on its reviews and discussions, the Committee recommended to the
Board of Directors that the Board approve the inclusion of the Company's audited
financial statements in the Company's Annual Report on Form 10-K. The Committee
also recommended to the Board of Directors, subject to shareholder approval, the
selection of the Company's independent accountants for the year ending December
31, 2002.
The Audit Committee
David L. Dennis, Chairman of the Audit Committee
Maria D. Hummer
Steven Lerman
Audit Fees
PricewaterhouseCoopers LLP has audited the consolidated financial
statements of the Company for the year ended December 31, 2001. Direct fees
related to the issuance of the audit opinion and the timely review of quarterly
reports on Form 10-Q were $250,000.
Financial Information Systems Design and Implementation Fees
PricewaterhouseCoopers LLP did not render services relating to financial
information systems design and implementation for the year ended December 31,
2001 and, accordingly, no fees were billed for any such services.
Non-Audit Fees
PricewaterhouseCoopers LLP received $40,000 in fees for non-audit services
in 2001. Such fees relate to auditing the Company's employee benefit plans and
providing their expertise on accounting principles as it pertained to a dispute
with a third party.
Representation of Independent Accountants at Annual Meeting
A representative of PricewaterhouseCoopers LLP will be present at the
annual meeting, will have an opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
The affirmative vote of a majority of the Common Stock and Class B Stock,
voting together as a single class, represented in person or by proxy at the
annual meeting is required to ratify the selection of PricewaterhouseCoopers
LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO RATIFY THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP.
9
PROPOSAL 3 - TRANSACTIONS WITH INFINITY
---------------------------------------
Action will also be taken at the annual meeting to authorize the Letter
Agreement between the Company and Infinity which extends the terms of, and makes
other changes to, certain existing agreements with Infinity and provides for the
issuance to Infinity of warrants to acquire up to an aggregate of 4,500,000
shares of the Company's Common Stock. The Letter Agreement amends each of the
Management Agreement, dated as of March 30, 1999 (the "Management Agreement"),
between the Company and Infinity, the Representation Agreement, dated as of
March 31, 1999 (the "Representation Agreement"), between the Company and
Infinity, the Trademark License Agreement, dated as of March 30, 1999 (the
"License Agreement"), between the Company and Infinity, the Registration Rights
Agreement, dated as of March 30, 1999 (the "Registration Rights Agreement"),
between the Company and Infinity, and the News Programming Agreement, dated as
of March 31, 1999 (the "News Agreement"), between the Company and Infinity. In
this proxy statement, we refer to the Letter Agreement and the transactions
contemplated by the Letter Agreement as the "Transaction." Although the Letter
Agreement was entered into between the parties on April 15, 2002, the
transactions contemplated by the Letter Agreement will not, and cannot, become
effective until the Company has obtained the authorization of its shareholders
contemplated by this proxy statement.
The Company has entered into the Letter Agreement with Infinity because,
among other reasons, the Board of Directors of the Company believes that the
current arrangements with Infinity have been in the best interests of the
Company and its shareholders and have resulted in favorable operating results
and stock price performance over the past eight years and that the expiration of
the existing arrangements would reasonably be likely to have a material adverse
effect on the Company and its business. The Board of Directors believes that
ensuring continuity of those arrangements for another 5 year term beyond the
previously scheduled termination on March 31, 2004 is in the best interests of
the Company and its shareholders. See "Recommendation of the Board of
Directors-Reason of the Board for the Transaction" below.
Existing Agreements with Infinity
In 1994, the Company entered into a management agreement with Infinity to
manage the business and operations of the Company and a registration rights
agreement with Infinity. On March 31, 1997, the Company entered into a
representation agreement (including a related news programming agreement, a
license agreement, and a technical services agreement with CBS, an affiliate of
Infinity) to operate the CBS Radio Networks (the "Networks"). Each of those
agreements were amended and restated in March 1999. The following sections of
this proxy statement contain a description of all material terms of each of the
agreements to be amended by the Letter Agreement, as well as a related technical
services agreement (the "Technical Services Agreement") between the Company and
Infinity. However, such descriptions are not complete and are qualified by
reference to the actual agreements, each of which has been filed by the Company
with the Securities and Exchange Commission.
Management Agreement
Term, Termination and Termination Fees. The term of the Management
Agreement expires on March 31, 2004. However, the Management Agreement may be
terminated prior to such date by the Company:
o upon 30 days' prior written notice without Cause (as defined below),
o upon 90 days' prior written notice by a unanimous vote of the members of
the Board of Directors who are not designees or employees of Infinity or
any of its affiliates in the event of the willful commission of a material
act of fraud or gross misconduct in the performance of its obligations
under the Management Agreement first occurring during the term of the
Management Agreement and having a material adverse effect on the business
of the Company, or
o if Infinity becomes involved in a bankruptcy or similar proceeding.
Termination for reasons specified in the second or third bullets above
constitutes termination for "Cause" under the Management Agreement.
If the Company terminates the Management Agreement without Cause, Infinity
will be entitled to payment of the base fee in monthly installments for the
five-year term of the Agreement. In addition, all outstanding warrants will vest
immediately.
10
Compensation to Manager. Effective for contract years commencing April 1,
1999, the Company pays to Infinity a specified annual base management fee,
subject to annual increase thereafter by a percentage amount equal to the
increase for that year in a specified price index. The amount of the management
fee for the first contract year of the Management Agreement was $2,500,000.
The Board of Directors has also authorized the Company to pay Infinity an
annual cash incentive bonus of 10% of the amount, if any, by which the Company's
Operating Cash Flow (as defined below) exceeds the target amount specified for
each fiscal year during the term of the Management Agreement, as set forth
below:
Calendar Year Ending Target Amount
-------------------- -------------
1999 $80,000,000
2000 $137,600,000
2001 $151,400,000
2002 $166,500,000
2003 $183,200,000
Operating Cash Flow with respect to any calendar year is defined as
earnings before interest, taxes, depreciation and amortization, management fees
and cash incentive bonus, extraordinary gains or losses (as defined by generally
accepted accounting principles) and other non-cash income or expense items
included in the determination of earnings.
In addition, if the Company acquires or sells a business in any year, the
target amounts set forth above will be adjusted to reflect the anticipated
increase or decrease in operating cash flow from the acquisition or sale.
As additional compensation to Infinity under the Management Agreement,
Infinity was granted warrants to purchase 2,000,000 shares of Common Stock at a
price of $10.00 per share and 2,000,000 shares of Common Stock at a price of
$12.50 per share (the "Prior Warrants"), in each case exercisable only if the
Company's Common Stock exceeded a certain amount on at least twenty out of
thirty consecutive trading days. That amount was $15.00, with respect to the
$10.00 Prior Warrants, and $20.00, with respect to the $12.50 Prior Warrants. In
addition to the base fee and the cash bonus, the Company is also required to
reimburse Infinity for all out-of-pocket expenses incurred by Infinity in
performing services under the Management Agreement, except for (1) the salaries,
benefits and related costs of officers and other employees of Infinity made
available to perform services for the Company and (2) office and other overhead
expenses of Infinity.
Indemnification. The Company has agreed to indemnify Infinity and each of
its directors, officers, employees and agents against any actions, claims,
damages and liabilities, including reasonable legal fees and expenses, relating
to such party's acceptance or performance of its obligations under the
Management Agreement or otherwise relating to the Company or its business,
assets or properties. The Company, however, is not obligated to indemnify for
any such liabilities that have been finally adjudicated by a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the party seeking indemnification or a material breach of the Management
Agreement by Infinity. Any action taken or not taken by Infinity pursuant to the
directions of the Board of Directors will not constitute gross negligence,
willful misconduct or a material breach of the Management Agreement by Infinity.
Noncompetition and Right of First Refusal. Infinity has agreed that it
will, and will cause its affiliates and any of their officers and employees who
provide services to the Company pursuant to the Management Agreement to, refrain
from the following actions:
o Managing, purchasing, establishing, participating in or having a
substantial ownership interest in a radio network company, or otherwise
lending assistance (financial or otherwise) to a radio network company (as
defined in the Management Agreement) or any other radio syndicator during
the term of the Management Agreement and, if the Management Agreement is
terminated for the reason specified in the second bullet under "-Term,
Termination and Termination Fees" above, for two years after such
termination so long as the Company continues to pay Infinity the base fee
for such period. This provision will not apply to any activities engaged in
by Infinity with respect to stations owned and operated by Infinity or by
any entity acquired by Infinity or a subsidiary of Infinity if such entity
or the conflicting activities of such entity are divested or discontinued
by the later of (1) one year after the date the entity is acquired and (2)
as soon as reasonably practicable pursuant to an orderly process in which
Infinity is able to realize the fair value of such operations but in no
event more than two years after such entity is acquired,
11
o Disclosing (unless compelled by judicial or administrative process) or
using any confidential information relating to the Company or its business
except, during the term of the Management Agreement, as Infinity reasonably
determines to be necessary in connection with its performance under the
Management Agreement and in the best interest of the Company.
o Causing or attempting to cause (1) any client, customer or supplier of the
Company to terminate or materially reduce its business with the Company, or
(2) any officer, employee or consultant of the Company to resign or
terminate a relationship with the Company, during the term of the
Management Agreement and, if the Management Agreement is terminated for the
reason specified in the second bullet under "-Term, Termination and
Termination Fees" above, for two years after such termination.
Infinity has agreed that, unless it is contractually prohibited from doing
so, before it or any of its affiliates offers, sells or makes available for
syndication any radio programming featuring talent employed by or otherwise
under contract with Infinity or its affiliates (other than Howard Stern) (the
"Syndications"), Infinity will first offer such Syndications to the Company on
the same terms and conditions as Infinity or its subsidiaries intend to offer,
sell or make available such Syndications to others. Contracts between Infinity
and/or its subsidiaries and third parties for programming or other services
which were in existence prior to March 30, 1999 and any extensions or renewals
of such contracts on commercially reasonable terms are excluded from the terms
of the noncompetition and right of first refusal provisions described above.
Arm's Length Transactions. The Management Agreement provides that all
transactions between the Company and Infinity or its affiliates must be on a
basis that is at least as favorable to the Company as if the transaction were
entered into with an independent third party. In addition, subject to specified
exceptions, all agreements between the Company and Infinity or any of its
affiliates must be approved in advance by the Board of Directors.
There are a number of provisions in the various agreements which address
the resolution of conflicts between Infinity and the Company, including (1) the
provisions in the Management Agreement prohibiting certain activities by
Infinity and its affiliates in competition with the Company, (2) the limited
right of first refusal contained in the Management Agreement, (3) the
limitations on transactions between Infinity or its affiliates and the Company
and (4) the obligation of Infinity to perform its management services with such
care as a prudent manager would use in the conduct of his or her own company's
affairs with a view to maximizing the long-term value of the Company.
Governance. Pursuant to the terms of the Management Agreement, Infinity
manages the business and operations of the Company by providing to the Company
the services of the Company's Chief Executive Officer and Chief Financial
Officer. Under the Management Agreement, the Chief Executive Officer has the
authority and responsibility normally attendant to that office and is, among
other things, responsible for all operations and functions of the Company,
recommendations for strategic direction and the general implementation of the
Company's business and operating plan, subject to the authority of the Company's
Board of Directors. The Management Agreement also provides that the Chief
Financial Officer has the authority and responsibility normally attendant to
such office. The Chief Financial Officer is subject to the authority of the
Chief Executive Officer and the Board of Directors. Under the Management
Agreement, Infinity also provides support and administrative personnel needed by
these officers and pays all of the salaries, benefits and related costs of such
personnel. Infinity must provide its management services with such care as a
prudent manager would use in the conduct of his or her company's affairs and
with a view to maximizing the long-term value of the Company.
Representation Agreement
General. Pursuant to the terms of the Representation Agreement, the Company
conducts the day-to-day business and operations of the Networks, including
making decisions with respect to sales, marketing, affiliation and, in certain
cases, programming. The Company must provide its management services with such
care as a prudent manager would use in the conduct of his or her company's
affairs and must accord the Networks the same priority as it accords its own
operations and the operations of other radio networks managed or represented by
the Company. In addition, the Company must use its reasonable commercial efforts
to (1) promote the Networks as an advertising medium and (2) seek to preserve
and maximize the long-term value of the Networks, including the CBS Radio
Network tradename. Accordingly, the Company is required to furnish, at its own
expense, the services of such employees and other personnel as may be required
to properly manage the Networks. Under the Representation Agreement, subject to
certain limited exceptions, the Company may not, without the prior approval of
Infinity, institute any legal proceedings on behalf of the Networks or enter
into, terminate, extend or modify in any material respect any affiliation
agreement.
12
Term, Termination and Termination Fees. The term of the Representation
Agreement expires on March 31, 2004. However, the Representation Agreement may
be terminated by either party:
o upon the occurrence of an event of default (as defined in the
Representation Agreement), provided that such party is also not in material
default,
o upon a material change in the rules or policies of the Federal
Communications Commission, provided that the parties will first negotiate
in good faith an amendment to conform the Representation Agreement to such
new rules or policies,
o upon the institution of legal proceedings seeking to prohibit or limit in
any material respect the consummation of the transactions or the
performance of the obligations contemplated under any of the Representation
Related Agreements (as defined below) or which could reasonably be expected
to adversely affect the business of the Networks, or
o upon the non-renewal or earlier termination of the Management Agreement,
provided that in the event of termination by the Company, the Company must
provide Infinity with at least 90 days' prior written notice.
If the Representation Agreement is terminated for any reason, the Company
must pay to Infinity all amounts accrued with respect to the representation fee
through the date of termination, along with accrued interest thereon through the
date of payment. In addition, if the Company terminates the Representation
Agreement based on the termination of the Management Agreement, except
termination of the Management Agreement for the reason specified in the second
bullet under "-Management Agreement-Term, Termination and Termination Fees"
above, then the Company must pay all remaining installments of the
representation fee together with accrued interest thereon through the date of
payment.
The Representation Agreement contains other customary representations,
warranties and covenants and agreements of the parties.
Compensation. The Company is liable for all expenses associated with
operating the Networks. In return, it receives all of the Networks' advertising
revenues that it sells for its own account. In addition to paying all of the
expenses related to operating the Networks, the Company is required to pay an
annual representation fee, subject to annual increase by a percentage amount
equal to the increase for that year in a specified price index. The amount of
the representation fee for the first contract year of the Representation
Agreement was $12,000,000.
Indemnification. Under the terms of the Representation Agreement, Infinity
has agreed to indemnify the Company, its affiliates and their respective
directors, officers, affiliates, employees and agents against any actions,
claims, damages and liabilities, including reasonable legal fees and expenses,
relating to:
o a breach of Infinity's representations and warranties under the
Representation Agreement, the License Agreement, the News Agreement and the
Technical Services Agreement (collectively, the "Representation Related
Agreements") or any documents delivered in connection therewith, and
o a breach by Infinity of any covenant applicable to it under the
Representation Related Agreements.
In addition, the Company has agreed to indemnify Infinity, its affiliates
and their respective directors, officers, affiliates, employees and agents
against any actions, claims, damages and liabilities, including reasonable legal
fees and expenses, relating to:
o any liabilities associated with the operations of the Networks after March
30, 1999 (except for any actions taken by Infinity under specified
programming agreements existing on March 31, 1997),
o a breach of the Company's representations and warranties under
Representation Related Agreements or any documents delivered in connection
therewith, and
o a breach by the Company of any covenant applicable to it under the
Representation Related Agreements.
Other Related Agreements
License Agreement. Pursuant to the License Agreement, Infinity has granted
to the Company a non-exclusive, royalty-free license to use throughout the
United States (1) the CBS "eye" logo as specified in the License Agreement in
connection with the CBS Radio Network tradename and (2) the name CBS in
connection with the CBS Radio Network trade name.
13
The license expires on the earlier to occur of (1) the expiration of the
term of the Representation Agreement and (2) the termination of the
Representation Agreement. In addition, Infinity may terminate the license if the
Company breaches the License Agreement in any manner which would be
substantially likely to materially impair or diminish the value, reputation and
distinctiveness of the CBS trademarks and the Company fails to cure or commence,
and diligently proceed, to cure the breach within 90 days after notice from
Infinity of the breach.
Pursuant to the License Agreement, Infinity is required to indemnify the
Company and its directors, officers, partners, employees, representatives and
agents against any claims, causes of action, suits, damages, liabilities, costs
and expenses, including reasonable attorneys' fees and expenses, arising out of
any breach by Infinity of any warranty or agreement made by it in the License
Agreement. In addition, the Company is required to indemnify Infinity and its
directors, officers, partners, employees, representatives and agents against any
claims, causes of action, suits, damages, liabilities, costs and expenses,
including reasonable attorneys' fees and expenses, arising out of:
o the manufacture, distribution, sale, license or other use of the products
bearing the CBS trademarks,
o the use of any advertising, promotion, publicity or marketing material
bearing the CBS trademarks, or
o any breach by the Company of any warranty or agreement made in the License
Agreement.
The License Agreement contains other customary representations, warranties
and covenants and agreements of the parties.
News Agreement. Pursuant to the News Agreement, Infinity agrees to provide
to the Company specified news programming during the term of the Representation
Agreement for use by the Networks. The Company pays to Infinity a base
programming fee for each 12-month period of the term of the News Agreement,
subject to an annual increase by a percentage amount equal to the increase for
that year in a specified price index. The initial base programming fee was
$9,500,000. Infinity is responsible for all costs and expenses necessary to
produce and deliver the programming. The News Agreement will terminate
automatically upon the termination of the Representation Agreement. In addition,
if the Company terminates the Representation Agreement, then the Company must
pay to Infinity all remaining installments of the base programming fee.
The News Agreement contains other customary representations, warranties and
covenants and agreements of the parties.
Technical Services Agreement. Pursuant to the Technical Services Agreement,
Infinity agrees to provide the Networks during the term of the Representation
Agreement, in a manner and to an extent consistent with past practice, services
consisting of:
o origination services, or services of CBS Radio employees (exclusive of any
CBS News personnel) and use of CBS Radio facilities to originate live and
pre-recorded radio news programming, to gather, edit and assemble radio
news material, to originate and provide for the gathering, editing and
assembling of audio material used in the production of "The Osgood File"
programs, and to originate and provide for the gathering, editing and
assembly of audio material used in the production of "The David Letterman
Top Ten List" programs,
o distribution services, or the transmission by CBS Radio of radio news
programming, Osgood radio programming and Letterman radio programming to
affiliated radio stations, and
o operation support services, or services of CBS Radio employees (exclusive
of any CBS News personnel) and use of CBS Radio facilities to provide
day-of-air operation services and commercial continuity services in support
of gathering, editing, assembling, production and origination of radio news
programming, Osgood radio programming and Letterman radio programming.
Under the Technical Services Agreement, the Company reimburses Infinity on
a monthly basis for an amount equal to the sum of (1) all out-of-pocket costs
incurred by Infinity in providing the services described above and (2) that
portion of Infinity's costs that Infinity, in accordance with past practice,
generally allocates to the Networks. The Technical Services Agreement will
terminate automatically upon the termination of the Representation Agreement.
The Technical Services Agreement contains other customary representations,
warranties and covenants and agreements of the parties.
14
Registration Rights Agreement. Pursuant to the Registration Rights
Agreement, the Company has granted to Infinity demand and piggy-back
registration rights with respect to shares of Common Stock issuable upon
exercise of the Prior Warrants (the "Registrable Securities"). Under the
Registration Rights Agreement, Infinity has the right to require the Company on
three separate occasions to register such securities under the Securities Act of
1933, as amended (the "Securities Act"), on registration forms other than Form
S-3. In addition, in the event that the Company determines to register any of
its securities, either for its own account or for the account of other security
holders, the Company is obligated to provide Infinity with advance notice of
that registration and include in that registration all Registrable Securities
requested by Infinity, subject to cut-back by the Company's underwriters on a
proportionate basis with all other security holders entitled to a registration
of their securities.
Pursuant to the Registration Rights Agreement, Infinity has agreed to
certain transfer restrictions with respect to the Registrable Securities. If the
Management Agreement is not terminated, Infinity is entitled from and after
March 30, 2001 to sell in the aggregate 25% of the sum of (1) the Registrable
Securities then held by Infinity plus (2) any Registrable Securities which, at
the time of such calculation, could then be acquired by Infinity upon exercise
of the Prior Warrants, with such percentage amount to be increased by an
additional 25% of such securities on each subsequent anniversary date. However,
if Infinity terminates the Management Agreement, or if the Company terminated
the Management Agreement as a result of events specified in the second or third
bullets under "-Management Agreement-Term, Termination and Termination Fees"
above, Infinity will be allowed to transfer without limitation any Registrable
Securities Infinity could sell immediately prior to such termination, and will
be allowed to transfer all remaining Registrable Securities upon the earlier of
(1) one year following such termination and (2) March 31, 2004. Finally, if the
Company terminates the Management Agreement other than as a result of the events
specified in the second and third bullets under "-Management Agreement-Term,
Termination and Termination Fees" above, Infinity will be allowed to transfer
all Registrable Securities without limitation.
The Company has agreed to pay all expenses of any registration effected
pursuant to the Registration Rights Agreement, other than any stock transfer
taxes or underwriters' discounts or commissions. In addition, the Company has
agreed to indemnify Infinity and its officers, directors and affiliates and each
person controlling Infinity against certain liabilities, including liabilities
under federal or state law (including the Securities Act).
The Registration Rights Agreement contains other customary representations,
warranties and covenants and agreements of the parties.
Proposed Amendments To Existing Agreements
Under the Letter Agreement, the Company and Infinity have agreed to a
number of amendments to the Management Agreement, the Representation Agreement,
the License Agreement, the News Agreement and the Registration Rights Agreement.
The following section of the proxy statement contains a description of all
material terms of the Letter Agreement. However, such description is not
complete and is qualified by reference to the actual Letter Agreement, attached
to this proxy statement as Annex A, which is incorporated by reference in this
proxy statement.
Amendment to Management Agreement
Term and Termination. The Letter Agreement extends the term of the
Management Agreement for an additional five years until March 31, 2009. In
addition, the Letter Agreement amends the provisions dealing with termination of
the Management Agreement to expand one existing termination right of the Company
for Cause (as defined above) and to add another. Specifically, the Letter
Agreement results in the deletion of the termination right specified in the
second bullet point above under "-Management Agreement-Term, Termination and
Termination Fees" and instead provides in its place that the Company may
terminate the Management Agreement upon 90 days' prior written notice by a
unanimous vote of the members of the Board of Directors who are not employees or
designees of Infinity or any of its affiliates in the event of:
o the willful commission of a material act of fraud or gross misconduct in
the performance of Infinity's obligations under the Management Agreement
first occurring during the term of the Management Agreement, or
o the willful and material breach of a material term of the Management
Agreement which is not cured and which continues for a period of at least
30 days after the Company notifies Infinity of the breach.
15
Compensation to Manager. The Letter Agreement amends the Management
Agreement to provide that the base fee to Infinity for all years of the extended
Management Agreement will be $3,000,000 annually beginning on April 1, 2004,
subject to an annual increase for each year thereafter by a percentage amount
equal to the increase in a specified price index for the prior year.
In addition, the Letter Agreement amends the Management Agreement to
include in that agreement the cash incentive bonus arrangements described under
"Management Agreement -- Compensation to Manager". The Letter Agreement also
establishes target amounts of Operating Cash Flow for each of the additional
five calendar years added to the term of the Management Agreement, as set forth
below:
Calendar Year Ending Target Amount
-------------------- -------------
2004 $201,500,000
2005 $221,650,000
2006 $243,800,000
2007 $268,200,000
2008 $295,000,000
Finally, pursuant to the Management Agreement, the Company will also grant
to Infinity warrants to purchase:
o up to an aggregate of 1,000,000 shares of Common Stock, which warrant is
exercisable only if the Common Stock reaches a price at least equal to the
product of the average market price of the Common Stock for the 15 trading
days prior to January 2, 2003 during which the national securities
exchanges are open for trading ("Trading Days") and 1.50 on at least 20 out
of 30 consecutive Trading Days, and
o up to an aggregate of 1,000,000 shares of Common Stock, which warrant is
exercisable only if the Common Stock reaches a price at least equal to the
product of the average market price of the Common Stock for the 15 Trading
Days prior to January 2, 2003 and 1.60 on at least 20 out of 30 consecutive
Trading Days.
The exercise price with respect to each of those two warrants will be an
amount equal to 115% and 129%, respectively, above the average price of the
Common Stock for a period of 15 Trading Days ending with the Trading Day
immediately prior to January 2, 2003. In addition, the Company will grant
Infinity five additional warrants to purchase, with respect to each such
warrant, 500,000 shares of Common Stock. The warrants will become exercisable on
January 2, 2005, 2006, 2007, 2008 and 2009, respectively, if the average price
of the Common Stock for each of the 15 Trading Days prior to January 2 of such
year is (1) at least equal to the exercise price for such year and (2) equal to
or greater than the product of the average price of the Common Stock for each of
the 15 Trading Days prior to January 2 of the preceding year and 1.20. The
exercise price for each such warrant will be determined on January 2, 2004 and
will be equal to the average price of the Common Stock for each of the 15
Trading Days prior to January 2, 2004 plus an additional amount equal to a
compounded annual growth rate of 15% over that average price. All such warrants
are referred to in this proxy statement as the "New Warrants."
Each of the New Warrants specified in the bullets above terminates January
2, 2013, but will expire earlier, to the extent not then exercisable, on the
termination of the Management Agreement for the reasons specified in the second
bullet under "Management Agreement-Term, Termination and Termination Fees." Each
of the other New Warrants terminates on January 2 of the year that is 10 years
from the date on which such New Warrant becomes exercisable, but will expire
earlier, to the extent not then exercisable, on the termination of the
Management Agreement for any reason.
The exercise price of each New Warrant, and the number of shares of Common
Stock issuable upon the exercise of each New Warrants, will be subject to
adjustment as specified in the New Warrants in certain events, including:
o the declaration or payment of dividends or other distributions in Common
Stock or Class B Stock on the Common Stock or the Class B Stock,
o subdivisions, combinations and reclassifications of the Common Stock or the
Class B Stock, and
o distributions to all holders of Common Stock or Class B Stock of evidences
of indebtedness of the Company, cash or assets (including securities, but
excluding the dividends and distributions referred to above and dividends
and distributions paid in cash out of the surplus of the Company).
The exercise price of each New Warrant will also be adjusted in the event
of the sale or issuance of additional shares of Common Stock or Class B Stock
16
for a price per share less than the current market value (as defined in each New
Warrant) in effect on the earlier of (1) the date the Company enters into a
binding agreement to issue the additional shares, or (2) the date of actual
issuance of the shares. However, no adjustment will be required on:
o the exercise of any options or the issuance of shares under any rights
outstanding on or before April 15, 2002 that were issued pursuant to any of
the Company's employee stock incentive plans,
o the exercise of any options or rights granted after April 15, 2002 so long
as the exercise price is not less than the market price on the date such
grant is approved by the Board of Directors, or if later, the date the
exercise price is established,
o the exercise of any other options, warrants, conversion or exchange rights
outstanding on or before April 15, 2002,
o the exercise of any conversion or exchange rights issued by the Company
after April 15, 2002 if the issuance is approved by the Board of Directors
at a price not less than the market price on the date of such approval, or
if later, the date such conversion or exchange price is established, or
o the issuance of additional shares pursuant to a firmly underwritten public
offering.
Under each of the New Warrants described in the bullets above, if the
Company is a party to any consolidation, merger, sale of assets, reorganization
or other similar transaction in which the Company's Common Stock is acquired for
cash or other property, or is changed into or exchanged for different securities
of the Company or another entity, or any combination thereof, each New Warrant
will become exercisable with respect to all shares of Common Stock whether or
not it has otherwise become exercisable, and will be deemed to have been
exercised and will entitle the New Warrant holder to receive (upon presentation
of the New Warrant within 30 days after the date of the consummation of any such
transaction, together with the exercise price for such New Warrant) the cash,
securities or other property to which the holder would have been entitled upon
the consummation of such transaction if the New Warrant had been exercised
immediately prior to consummation of such transaction. As a condition to
effecting any such transaction, each other party to the transaction which may be
required to deliver cash, securities or other property on exercise of the New
Warrant must assume the foregoing obligation to issue such consideration to the
New Warrant holder upon the consummation of the transaction. The New Warrant
will become exercisable in connection with any such transaction, whether entered
into with an unaffiliated entity or with a direct or indirect subsidiary or
affiliate of either the Company or Infinity. Each of the other New Warrants
contains similar provisions, provided that if the applicable warrant has not yet
become exercisable and such an event occurs in connection with a transaction in
which the Management Agreement is terminated, then the warrant will expire. If,
in connection with any such transaction prior to the exercisability of the
applicable warrant, the Management Agreement is not terminated, the surviving or
resulting corporation will issue Infinity a new warrant on similar terms with
such terms to be mutually agreed.
Governance. The Letter Agreement amends the Management Agreement to provide
that the Board of Directors of the Company will have the right to remove the
Chief Executive Officer and the Chief Financial Officer at any time so long as
the Company does not exercise that right unreasonably and notifies Infinity
promptly after the Board of Directors determines to remove the Chief Executive
Officer or the Chief Financial Officer. In addition, the Letter Agreement
clarifies that the Chief Executive Officer and the Chief Financial Officer and
other Infinity officers or employees performing services for the Company are
eligible to participate in the Company's stock options plans and other incentive
compensation plans and that Infinity will reasonably consult with the Company
with respect to any compensation paid by Infinity to the Chief Executive Officer
or the Chief Financial Officer, but only to the extent such compensation relates
to and is allocated for services provided by such individuals to the Company
pursuant to the Management Agreement.
Amendment to Representation Agreement
Term. The Letter Agreement extends the term of the Representation Agreement
for an additional five years until March 31, 2009.
Representation Fees. The Letter Agreement amends the Representation
Agreement by providing that the Company will pay to Infinity for all contract
years of the extended Representation Agreement $14,000,000 annually beginning on
April 1, 2004, subject to an annual increase for each year thereafter by a
percentage amount equal to the increase in a specified price index for the prior
year. In addition, pursuant to the Letter Agreement commencing with the 2005
fiscal year adjustment, the annual representation fee will be rounded to the
nearest $500,000 after calculating the increase for the period.
Amendments to the License Agreement, News Agreement and Registration Rights
Agreement
The Letter Agreement amends the License Agreement by replacing the list of
trademarks covered by the agreement to conform the list to the current CBS marks
used by the Company.
17
The Letter Agreement amends the News Agreement by providing that in the
event of termination of the Management Agreement for the reason specified in the
second bullet under "-Management Agreement-Term, Termination and Termination
Fee," as amended as described above, then the Company will only be required to
pay the base programming fee accrued through the date of termination and not all
remaining installments of that fee.
The Letter Agreement amends the Registration Rights Agreement by providing
that the New Warrants will be covered by the Registration Rights Agreement to
the same extent as the Prior Warrants, such that the shares of Common Stock
issuable upon exercise of the New Warrants will be entitled to the same
registration rights, and subject to the same transfer restrictions, as the
shares of Common Stock that were issuable upon exercise of the Prior Warrants.
Required Vote
The Transaction is being submitted to the shareholders of the Company for
authorization in accordance with the provisions of Section 203 of the Delaware
General Corporation Law. Accordingly, the affirmative vote of the holders of 66
2/3% of the outstanding voting stock of the Company which is not owned by
Infinity or its affiliates is required to authorize the Transaction.
Recommendation of the Board of Directors; Reasons of the Board for the
Transaction
The Board of Directors believes that the proposed Transaction is fair to
and in the best interests of the Company and its shareholders. Accordingly, on
April 14, 2002, the Board, following the unanimous recommendation of a committee
of disinterested directors, approved the Transaction pursuant to the terms of
the Letter Agreement and recommended that the Transaction be authorized by the
Company's shareholders. In reaching its conclusion to approve the proposed
Transaction, the Board considered, among other things, the following factors:
o The fact that the current arrangements with Infinity have been in the best
interests of the Company and its shareholders and have resulted in
favorable operating results and stock price performance over the past eight
years,
o The belief of the Board of Directors that ensuring continuity of those
arrangements for another 5 year term beyond the previously scheduled
termination on March 31, 2004 is in the best interests of the Company and
its shareholders,
o The belief of the Board of Directors that the expiration of the existing
arrangements with Infinity would reasonably be likely to have a material
adverse effect on the Company and its business, including but not limited
to, a substantial loss of audience and programming, which would have a
material adverse impact on the Company's revenue and operating results if
such audience and programming were not replaced prior to the expiration of
the agreements with Infinity. The Company cannot provide any assurances
that it could replace the lost audience and programming.
o The fact that the Letter Agreement would extend through such time period
the alliance of Infinity, owner and operator of one of the country's
largest groups of radio stations, with Westwood One, believed by the
Company to be the nation's largest radio network. The Board of Directors
believes that the Company's relationship with Infinity has increased and
will continue to increase the Company's ability to enter into relationships
with Infinity radio stations having significant listening audiences in each
of the top radio markets, thereby increasing the Company's ability to sell
advertising at favorable rates. Moreover, the Board of Director believes
that the relationship with Infinity has provided and will continue to
provide the Company with greater access to the significant radio talent and
programming that Infinity is able to obtain through its considerable
resources, and
o The belief of the Board of Directors that Infinity has demonstrated its
skill in providing management services and that extending the existing
agreements provides the Company with the opportunity to secure such
services at reasonable rates for a long term. The Board of Directors of the
Company believes that Infinity's knowledge and experience of the Company's
business, together with its demonstrated skill, makes it uniquely qualified
to perform these services. In addition, the Board of Directors has taken
into account the fact that Infinity will not continue to provide important
programming or provide distribution of the Company's programming in the
absence of the Management Agreement after March 31, 2004 and that these
relationships are extremely important for the Company.
In reaching its conclusion regarding the proposed Transaction, the Board
also considered negative factors associated with the proposed Transaction,
including the risk that the potential benefits described above may not be
realized and the fact that the Company would, unless it paid a significant
termination fee as described above, be bound to the arrangements with Infinity
through 2009. The Board believes, however, that the positive factors outweigh
the negative factors.
18
For the reasons set forth above, the Board of Directors has approved the
proposed Transaction and believes that it is fair to and in the best interests
of the Company and its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO AUTHORIZE THE
TRANSACTION.
19
PROPOSAL 4 - AMENDMENT TO CERTIFICATE OF INCORPORATION
Action will also be taken at the annual meeting to approve an amendment to
the Company's certificate of incorporation (the "Amendment") which deletes the
following sentence in Article Eighth of the certificate of incorporation:
"Directors elected by holders of Common Stock pursuant to paragraph (a) of
Section 2 of Article Fourth shall be members of Class III." As a result of this
Amendment, directors elected by the holders of Common Stock separately will be
permitted to serve in any of Class I, Class II or Class III.
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to have the directors elected solely by the holders
of Common Stock spread among the classes of directors. This is consistent with
the actual historical practice of the Company, notwithstanding the literal
language of the provision quoted above.
Approval of the Amendment will require the affirmative vote of a majority
of the votes entitled to be cast, with the Common Stock and Class B Stock voting
together as a single class.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Karmazin and Hollander are officers or employees of Infinity, which
beneficially owns 15.8% of the Common Stock of the Company. Mr. Suleman was an
officer of Infinity until March 2002. Infinity manages the business and
operations of the Company pursuant to the terms of the Management Agreement, by
providing to the Company the services of a chief executive officer and a chief
financial officer. The current agreement was entered into in March 1999 and
provided for a five year term, which term has been extended for an additional
five years until March 31, 2009, pursuant to the Letter Agreement between the
Company and Infinity described in this proxy statement and subject to
shareholder authorization. Pursuant to the Management Agreement prior to the
effectiveness of the Letter Agreement, the Company is obligated to pay to
Infinity an annual base fee of $2,500,000 subject to an annual increase by a
percentage amount equal to the increase based on a specified consumer price
index. Following effectiveness of the Letter Agreement, the Company will be
obligated to pay to Infinity an annual base fee for the extension period in the
amount of $3,000,000 commencing with the fiscal year beginning on April 1, 2004,
subject to an annual increase for each year thereafter by a percentage amount
equal to the increase in a specified price index for the prior year.
In addition, the Company pays to Infinity incentive bonus compensation in
an amount equal to 10% of the amount by which the Company's operating cash flow
exceeds a target amount for the applicable year, subject to certain adjustments.
The Company must also reimburse Infinity for certain out-of-pocket expenses
incurred by Infinity in performing the services contemplated by the Management
Agreement consistent with past practice. For a further description of the terms
of the Management Agreement, see "Transactions with Infinity-Existing Agreements
with Infinity-Management Agreement." Under the Management Agreement, the Company
paid to Infinity or accrued amounts aggregating approximately $3,983,000 during
fiscal 2001. As additional compensation to Infinity under the Management
Agreement, Infinity was granted at March 30, 1999, the beginning of the current
five year-term of the Management Agreement, warrants to purchase 2,000,000
shares of Common Stock at a price of $10.00 per share and 2,000,000 shares of
Common Stock at a price of $12.50 per share, in each case exercisable only if
certain thresholds with respect to the Company's Common Stock price were met.
The Company and Infinity have also entered into a registration rights agreement
with respect to the shares of Common Stock issuable upon exercise of the
warrants pursuant to which the Company granted to Infinity specified demand and
registration rights. In 2001, Infinity sold its $10.00 warrants to the Company,
receiving net proceeds aggregating $41,350,000. In March 2002, Infinity sold
1,000,000 of its $12.50 warrants to the Company, receiving net proceeds
aggregating $25,430,000. The transactions, which were completed at a discount to
the market value of the securities, were reviewed and approved by the
Compensation Committee and by the Board of Directors other than the directors
who were officers or employees of Infinity.
The Management Agreement provides that all transactions between the Company
and Infinity or its affiliates will be on a basis that is at least as favorable
to the Company as if the transaction were entered into with an independent third
party. In addition, subject to specified exceptions, all agreements between the
Company and Infinity or any of its affiliates must be approved by the Board of
Directors.
20
On March 31, 1999, the Company renewed the Representation Agreement with
Infinity to operate the CBS Radio Networks for an additional five years. The
Company retains all revenue and is responsible for all expenses of the CBS Radio
Networks. In addition, a number of Infinity's radio stations are affiliated with
the Company's radio networks and the Company purchases several programs from
Infinity. For a further description of the terms of the Representation
Agreement, see "Transactions with Infinity-Existing Agreements with
Infinity-Representation Agreement." During 2001, the Company incurred expenses
aggregating approximately $77,444,000 under the Representation Agreement and for
Infinity affiliations and programs. In connection with the renewal of its
Representation Agreement in 1999, the Company entered into certain related
agreements concerning the licensing of CBS trademarks from Infinity, the
purchase of certain programming materials from Infinity and the provision of
technical services and news gathering and production services by Infinity or its
affiliates to the Company.
On April 15, 2002, the Company entered into the Letter Agreement with
Infinity which, among other things, extends the term of the Management
Agreement, the Representation Agreement and related agreements with Infinity
until March 31, 2009. The effectiveness of the transactions contemplated by the
Letter Agreement is subject to the shareholder authorization described in this
proxy statement.
Mr. Lerman has been a member of the Washington, D.C. law firm of Leventhal,
Senter and Lerman, PLLC since 1986. From time to time, the Company engages
Leventhal, Senter and Lerman, PLLC in certain matters. The fees associated with
those engagements aggregated $36,000 in 2001. In addition, from time to time
Leventhal, Senter and Lerman PLLC provides services to Infinity as well.
Compensation Committee Interlocks and Insider Participation
As stated above, the Company's Compensation Committee is comprised solely
of independent outside directors. The Compensation Committee consists of Mr.
Greenberg, Mr. Dennis and Mr. Smith. The Company has no interlocking
relationships or other transactions involving any of our Compensation Committee
members that are required to be reported pursuant to applicable Securities and
Exchange Commission rules.
EXECUTIVE COMPENSATION
Report of the Compensation Committee
The Compensation Committee of the Board of Directors must be comprised of
at least two independent outside directors. The Committee in 2001 was comprised
of three independent outside directors.
As previously stated, the Committee administers the Company's Stock
Incentive Plan and may review employment arrangements with executive officers of
the Company other than Messrs. Hollander and Suleman who served as the Company's
President and Chief Executive Officer and Executive Vice President and Chief
Financial Officer, respectively, pursuant to the Management Agreement with
Infinity. As previously stated, Mr. Suleman resigned as the Executive Vice
President and Chief Financial Officer of the Company on March 31, 2002 as a
result of his resignation as Infinity's President and Chief Executive Officer.
Infinity is currently conducting a search for Mr. Suleman's replacement as CFO
of the Company. Under the terms of the Management Agreement, the Company pays a
management fee to Infinity for the services of the Company's CEO and CFO and the
Committee has authority to grant stock option incentives to these officers.
How is executive compensation determined?
The Company's compensation program for executives consists of three key
elements - a base salary, a performance based bonus and periodic grants of stock
incentives. The compensation policies utilized by the Committee and the Chief
Executive Officer are intended to enable the Company to attract, retain and
motivate executive officers to meet Company goals. Generally, compensation
decisions are based on contractual commitments, as well as corporate
performance, the level of individual responsibility of the particular executive
and individual performance. The foregoing factors are listed in order of their
relative importance in making compensation decisions. Salary paid to Mr. Pattiz
for 2001 was based on the terms of his 1998 employment agreement with the
Company, which expires on November 30, 2003.
Mr. Hollander, the Company's President and Chief Executive Officer, was
responsible for determining the salary and cash flow objectives that would
result in bonuses being paid to executive officers (other than Mr. Pattiz, whose
salary was based on the terms of his employment agreement).
21
The Committee has granted stock incentives, under the Amended Stock
Incentive Plans approved by shareholders, to officers and employees of the
Company to reward outstanding performance during the prior fiscal year and as an
incentive to continued outstanding performance in future years. In evaluating
the performance of officers and employees other than the Chief Executive
Officer, the Committee consults with the Chief Executive Officer and others in
management, as applicable. In evaluating the performance of the Chief Executive
Officer, the Committee may consult with the entire Board of Directors. In an
effort to attract and retain highly qualified officers and employees, stock
incentives may also be granted by the Committee, at its sole discretion, to
newly hired officers and employees as an inducement to accept employment with
the Company.
The Compensation Committee
Gerald Greenberg, Chairman of the Compensation Committee
David L. Dennis
Joseph B. Smith
EXECUTIVE OFFICERS
Disclosure regarding compensation is provided for each of the executive
officers of the Company (collectively, the "Named Executive Officers") who
served as executive officers at the end of or during the fiscal year ended
December 31, 2001:
Norman J. Pattiz............ The Company's Chairman of the Board at
December 31, 2001.
Joel Hollander.............. The Company's Chief Executive Officer and
President at December 31, 2001.
Farid Suleman............... The Company's Executive Vice President and
Chief Financial Officer at December 31, 2001.
Employment Agreements
The Company has a written employment agreement with Mr. Pattiz, effective
April 29, 1998, pursuant to which Mr. Pattiz is to serve as Chairman of the
Board of the Company for a five-year term ending November 30, 2003 at an annual
salary of $500,000. The agreement also granted Mr. Pattiz ten-year options to
acquire 1,000,000 shares of Common Stock under the 1989 Plan (which vest at the
rate of 200,000 shares per year over the five-year term of the employment
agreement) and provides additional benefits which are standard for executives in
the industry. The agreement generally will be terminable by Mr. Pattiz upon
ninety days' written notice to the Company; it will be terminable by the Company
only in the event of death, permanent and total disability, or for "cause." In
the event of permanent and total disability, Mr. Pattiz will receive his base
salary for the following twelve months and 75% of his base salary for the
remainder of the term of the agreement. In the event of a "change of control,"
as defined in the agreement, any unvested options granted pursuant to this
agreement will become immediately exercisable and Mr. Pattiz will continue to
receive any base compensation he would have otherwise been entitled to receive
for the remaining term of the agreement. In addition, Mr. Pattiz has full "piggy
back registration rights" and limited demand registration rights with respect to
any and all of the Common Stock owned by Mr. Pattiz.
22
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth the compensation received by the Named
Executive Officers for the years ending December 31, 2001, 2000 and 1999.
Annual Compensation
-----------------------------------------------------------------------------------------------
Long-Term
Compensation
Securities
Name and Fiscal Other Annual Underlying All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($) Options (#) Compensation ($)
------------------ ------ ---------- --------- ---------------- ----------- ----------------
(1)
Norman J. Pattiz 2001 $500,000 -- -- -- --
Chairman of the Board 2000 500,000 -- -- -- --
1999 500,000 -- -- 20,000 --
Joel Hollander 2001 -- -- -- 100,000 --
Chief Executive Officer 2000 -- -- -- -- --
And President (2) 1999 -- -- -- 100,000 --
Farid Suleman 2001 -- -- -- -- --
Chief Financial 2000 -- -- -- 700,000 --
Officer (2) 1999 -- -- -- 400,000 --
_________________________________
(1) This column includes the aggregate cost to the Company (if such amount
exceeded the lesser of $50,000 or 10% of such officer's salary and bonus)
of providing various prerequisites and other personal benefits.
(2) Mr. Suleman assumed his position effective February 3, 1994. Mr. Hollander
assumed his position effective October 8, 1998, pursuant to the terms of
the Management Agreement between the Company and Infinity. Messrs.
Hollander and Suleman do not receive any cash compensation from the
Company. All compensation under the Management Agreement is paid to
Infinity. Mr. Hollander was granted 100,000 options to purchase Common
Stock in 1999 and 100,000 options in 2001, while Mr. Suleman was granted
400,000 options in 1999 and 700,000 options in 2000. Mr. Suleman resigned
his position as Chief Financial Officer with the Company on March 31, 2002.
The following two tables provide information on stock option grants made to
the Named Executive Officers in 2001, options exercised during 2001 and options
outstanding on December 31, 2001.
OPTION GRANTS IN FISCAL YEAR 2001
Individual Grants
---------------------------------------------------------------------------------------------------
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of Stock
Securities Options Granted Exercise or Price Appreciation for
Underlying Options to Employees in Base Price Expiration Option Term
Name Granted (#) (1) Fiscal Year (2) ($/Share) Date 5% ($) 10% ($)
---- ------------------ ---------------- ----------- ---------- -----------------------------
Joel Hollander 100,000 9.3% $21.45 03/15/11 $1,351,000 $3,410,000
-----------------------
(1) These options were granted under the Amended 1999 Stock Incentive Plan on
March 15, 2001 and become exercisable 20% per year on each anniversary date
between 2002 and 2006.
(2) Percentage calculations exclude the impact of a mandatory grant of 105,000
options at $30.30 per share (except for Mr. Saperstein whose shares were
priced at $33.33 per share) on May 30, 2001 to outside directors (15,000
each to Messrs. Dennis, Greenberg, Holt, Hummer, Lerman, Saperstein and
Smith) which, in accordance with the terms of the Amended 1999 Stock
Incentive Plan, become exercisable 20% per year on each May 30 between 2002
and 2006.
23
AGGREGATED OPTION EXERCISES IN FISCAL 2001
AND FISCAL YEAR END OPTION VALUES
Number of Securities Underlying Value of Unexercised,
Unexercised Options In-the-Money Options
at Fiscal Year End (#) at Fiscal Year End ($) (1)
Shares Acquired Value -------------------------------- ---------------------------
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ---------- ------------- ----------- -------------
Norman J. Pattiz 548,000 $6,913,000 200,000 412,000 $3,196,000 $6,600,000
Joel Hollander 200,000 4,903,000 140,000 360,000 2,619,000 5,884,000
Farid Suleman - - 1,120,000 880,000 22,057,000 5,840,000
----------------------
(1) On December 31, 2001, the closing per share price for the Company's Common
Stock on the New York Stock Exchange was $30.05.
24
PERFORMANCE GRAPH
The performance graph below compares the performance of the Company's
Common Stock to the Dow Jones Equity Market Index and the Dow Jones Media
Industry Index for the Company's last five calendar years. The graph assumes
that $100 was invested in the Company's Common Stock and each index on December
31, 1996.
The following table sets forth the closing price of the Company's Common
Stock at the end of each of the last five calendar years.
Measurement Dow Jones Dow Jones
Period Equity Media
(last business day Westwood Market Industry
of calendar year) One, Inc. Index Index
------------------ --------- --------- ---------
1996 100 100 100
1997 223 132 157
1998 183 165 203
1999 456 203 324
2000 232 184 229
2001 361 161 210
Base Year
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
$ 8.31 $18.56 $15.25 $38.00 $19.31 $30.05
====== ====== ====== ====== ====== ======
25
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Executive officers,
directors and more than ten percent shareholders are required by Securities and
Exchange Commission regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from its directors and executive officers, the Company
believes that during 2001 its executive officers, directors and more than ten
percent beneficial owners complied with all filing requirements applicable to
them.
SOLICITATION
The cost of preparing, assembling, printing and mailing this proxy
statement and the accompanying proxy card will be borne by the Company. The
Company has requested banks and brokers to solicit their customers who are
beneficial owners of Common Stock listed of record in the names of the banks and
brokers, and will reimburse these banks and brokers for the reasonable
out-of-pocket expenses of their solicitations. The original solicitation of
proxies by mail may be supplemented by telephone, telegram and personal
solicitation by officers and other regular employees of the Company, but no
additional compensation will be paid on account of these additional activities.
In addition, the Company has retained Georgeson Shareholder to assist in the
solicitation of proxies. Georgeson Shareholder may solicit proxies by mail,
telephone, telegraph and personal solicitation, and will request banks, brokers
and other nominees, fiduciaries and custodians nominally holding shares of
Common Stock of record to forward proxy soliciting material to the beneficial
owners of such shares. For these services, the Company will pay Georgeson
Shareholder a fee estimated not to exceed $9,000, plus reimbursement for
expenses.
SHAREHOLDER PROPOSALS FOR 2002
Under the rules of the Securities and Exchange Commission, any shareholder
proposal intended for inclusion in the proxy material for the Annual Meeting of
Shareholders to be held in 2003 must be received by the Company by December 31,
2002 to be eligible for inclusion in such proxy material. Proposals should be
addressed to Gary J. Yusko, Secretary, Westwood One, Inc., 40 West 57th Street,
5th Floor, New York, NY 10019. Proposals must comply with the proxy rules of the
Securities and Exchange Commission relating to shareholder proposals in order to
be included in the proxy materials. Additionally, the Company's proxy holders
for the Company's 2003 annual meeting of Shareholders will have discretionary
authority to vote on any shareholder proposal that is presented at such annual
meeting but that is not included in the Company's proxy materials, unless notice
of such proposal is received by the Secretary of the Company on or before March
30, 2003.
By Order of the Board of Directors
Gary J. Yusko
Secretary
New York, New York
April 29, 2002
26
Appendix A
PROXY
WESTWOOD ONE, INC.
Proxy for 2002 Annual Meeting of Shareholders for Holders of Common Stock
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
WESTWOOD ONE, INC.
The undersigned shareholder of Westwood One, Inc., a Delaware corporation
(the "Company"), hereby appoints Gary J. Yusko and Gary Worobow as the
undersigned's proxies, each with full power of substitution to attend and act
for the undersigned at the Annual Meeting of Shareholders of the Company to be
held on May 29, 2002 at 10:00 a.m., Pacific Time, in Studio 3 of the W Los
Angeles Hotel, 930 Hilgard Avenue, Los Angeles, California 90024 and any
adjournments thereof, and to represent and vote as designated on the reverse
side all of the shares of Common Stock of the Company that the undersigned would
be entitled to vote.
The proxies, and each of them, shall have all the powers that the
undersigned would have if acting in person. The undersigned hereby revokes any
other proxy to vote at the Annual Meeting and hereby ratifies and confirms all
that the proxies, and each of them, may lawfully do by virtue hereof. With
respect to matters not known at the time of the solicitation of this proxy, the
proxies are authorized to vote in accordance with their best judgments.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
----------- -----------
SIDE SIDE
A-1
X Please mark votes as in this example.
-----
The proxies present at the Annual Meeting, either in person or by substitute (or
if only one shall be present and act, then that one), shall vote the shares
represented by this proxy in the manner indicated below by the shareholder. IF
NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED ON THIS PROXY, IT WILL BE VOTED
FOR ITEMS 1, 2, 3 and 4 SHOWN BELOW. The Board of Directors recommends a vote
FOR all nominees in Item 1 and FOR Items 2, 3 and 4.
1. Election of Class III Directors. Nominees: Gerald Greenberg, Joel
Hollander, and Steven Lerman
----- FOR ALL NOMINEES ----- WITHHELD FROM ALL NOMINEES
----- FOR ALL NOMINEES EXCEPT AS NOTED ABOVE (to withhold authority
for a Director nominee strike out such nominees name)
2. Ratification of the selection of PricewaterhouseCoopers LLP as the
independent accountants of the Company for the fiscal year ending December
31, 2002.
FOR AGAINST ABSTAIN
----- ----- -----
3. To authorize a letter agreement between the Company and Infinity
Broadcasting Corporation dated as of April 15, 2002, and the transactions
contemplated thereby.
FOR AGAINST ABSTAIN
----- ----- -----
4. To approve the amendment to the Company's certificate of incorporation,
eliminating the requirement that all directors entitled to be elected by
holders of Common Stock voting alone must be Class III directors.
FOR AGAINST ABSTAIN
----- ----- -----
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
-----
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
IMPORTANT: In signing this proxy, please sign your
name or names on the signature line in the same way
as indicated on this proxy. When signing as an
attorney, executor, administrator, trustee or
guardian, please give your full title as such.
EACH JOINT OWNER MUST SIGN.
Signature: Date: Signature: Date:
------------- ------- ------------- -------
A-2
PROXY
WESTWOOD ONE, INC.
Proxy for 2002 Annual Meeting of Shareholders for Holders of Class B Stock
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
WESTWOOD ONE, INC.
The undersigned shareholder of Westwood One, Inc., a Delaware corporation
(the "Company"), hereby appoints Gary J. Yusko and Gary Worobow as the
undersigned's proxies, each with full power of substitution to attend and act
for the undersigned at the Annual Meeting of Shareholders of the Company to be
held on May 29, 2002 at 10:00 a.m., Pacific Time, in Studio 3 of the W Los
Angeles Hotel, 930 Hilgard Avenue, Los Angeles, California 90024 and any
adjournments thereof, and to represent and vote as designated on the reverse
side all of the shares of Class B Stock of the Company that the undersigned
would be entitled to vote.
The proxies, and each of them, shall have all the powers that the
undersigned would have if acting in person. The undersigned hereby revokes any
other proxy to vote at the Annual Meeting and hereby ratifies and confirms all
that the proxies, and each of them, may lawfully do by virtue hereof. With
respect to matters not known at the time of the solicitation of this proxy, the
proxies are authorized to vote in accordance with their best judgments.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
----------- -----------
SIDE SIDE
A-3
X Please mark votes as in this example.
-----
The proxies present at the Annual Meeting, either in person or by substitute (or
if only one shall be present and act, then that one), shall vote the shares
represented by this proxy in the manner indicated below by the shareholder. IF
NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED ON THIS PROXY, IT WILL BE VOTED
FOR ITEMS 1, 2, 3 and 4 SHOWN BELOW. The Board of Directors recommends a vote
FOR the nominee in Item 1 and FOR Items 2, 3 and 4.
1. Election of Class III Directors.
Nominee: Joel Hollander and Steven Lerman
----- FOR THE NOMINEES ----- WITHHELD FROM ALL NOMINEES
2. Ratification of the selection of PricewaterhouseCoopers LLP as the
independent accountants of the Company for the fiscal year ending December
31, 2002.
FOR AGAINST ABSTAIN
----- ----- -----
3. To authorize a letter agreement between the Company and Infinity
Broadcasting Corporation dated as of April 15, 2002, and the transactions
contemplated thereby.
FOR AGAINST ABSTAIN
----- ----- -----
4. To approve the amendment to the Company's certificate of incorporation,
eliminating the requirement that all directors entitled to be elected by
holders of Common Stock voting alone must be Class III directors.
FOR AGAINST ABSTAIN
----- ----- -----
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
-----
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
IMPORTANT: In signing this proxy, please sign your
name or names on the signature line in the same ways
as indicated on this proxy. When signing as an
attorney, executor, administrator, trustee or
guardian, please give your full title as such.
EACH JOINT OWNER MUST SIGN.
Signature: Date: Signature: Date:
------------- ------- ------------- -------
A-4
ANNEX A
-------
April 15, 2002
Westwood One, Inc.
40 West 57th Street, 15th Floor
New York, New York 10019
Attention: Legal Department
Ladies and Gentlemen:
Reference is made to (i) the Management Agreement (the "Management
Agreement"; terms are used in this Letter as defined in the Management
Agreement, unless otherwise defined herein) dated as of March 30, 1999 by and
between Westwood One, Inc. ("WON") and Infinity Broadcasting Corporation
("IBC"), (ii) the Registration Rights Agreement dated as of March 30, 1999 by
and between WON and IBC (the "Registration Rights Agreement"), (iii) the Amended
and Restated Representation Agreement dated as of March 30, 1999 by and between
WON and IBC (the "Representation Agreement"), (iv) the Trademark License
Agreement dated as of March 30, 1999 by and between WON and IBC (the "License"),
(v) the News Programming Agreement dated as of March 30, 1999 by and between WON
and IBC (the "Programming Agreement") and (vi) the Technical Services Agreement
dated as of March 30, 1999 by and between WON and IBC (the "Services Agreement"
and collectively the "Transaction Agreements").
1. Management Agreement.
(a) Section 1.1 of the Management Agreement is hereby amended by adding at
the end of the first paragraph thereof a sentence to read in full as follows:
"The Board of Directors shall have the right to remove each of the CEO
and the CFO at any time, provided that the Board of Directors may not
exercise such right unreasonably and notifies Manager to such effect
promptly after such determination is made."
(b) Section 1.6 of the Management Agreement is hereby amended and replaced
to read in full as follows:
"Reimbursement for Expenses. The compensation to be paid to Manager as
provided in Article II does not include, and the Company agrees to promptly
reimburse Manager for, all out-of-pocket expenses incurred by Manager in
performing the Management Services consistent with past practice, but not
including (a) the salaries, employee benefits and related costs of the
individuals provided by Manager pursuant to Section 1.1 and officers and
other employees of Manager made available and used as provided in Article I
(provided that such individuals, officers and employees shall be eligible
to receive stock options and other incentive compensation pursuant to the
Company's stock option and other incentive compensation plans, in
accordance with the terms thereof), or (b) office and other overhead
expenses of Manager. The Company shall have the right to reasonably consult
with Manager with respect to any compensation to be paid by Manager to the
Company's CEO and CFO appointed by Manager, but solely to the extent such
compensation directly and specifically relates to and is allocated for
services provided by such persons to the Company pursuant to this
Agreement. The Company shall promptly notify Manager of any compensation to
be paid or issued by the Company to the CEO or the CFO, including without
limitation all stock options and other incentive compensation."
(c) Section 2.1(a) of the Management Agreement is hereby amended and
replaced to read in full as follows:
"(a) The Company shall pay to Manager a base management fee at the rate of
(i) $2,500,000 for each Contract Year (as defined below) through March 31, 2004,
subject to increase each Contract Year as provided in paragraph (b) below and
(ii) $3,000,000 for each Contract Year following March 31, 2004, subject to
increase each Contract Year as provided in paragraph (b) below and, in each
case, payable in advance in monthly installments on the first business day of
each month (prorated for any partial month). "Contract Year" means each period
from April 1 of one calendar year through March 31 of the following calendar
year, in each case during the term of the Agreement."
(d) Section 2.1 of the Management Agreement is hereby amended by adding at
the end thereof a new paragraph (c) to read in full as follows:
"(c) (i) The Company shall pay to the Manager an annual cash bonus
with respect to each calendar year of the Company equal to 10% of the
amount by which the Company's Operating Cash Flow (as defined below)
exceeds the following amounts, which are subject to modification as
provided below ("Target Cash Flow"), for each fiscal year indicated below:
2002 $166,500,000
2003 $183,200,000
2004 $201,500,000
2005 $221,650,000
2006 $243,800,000
2007 $268,200,000
2008 $295,000,000
(ii) Such bonus shall be payable on or prior to the later of 95 days
after the end of such fiscal year and 5 days following the date on which
the Company's independent accountants render their opinion on the Company's
financial statements for such year. "Operating Cash Flow" with respect to
any year shall be defined as earnings before interest, taxes, depreciation
and amortization, management fees and cash bonus, extraordinary gains or
losses (as defined by Generally Accepted Accounting Principles ("GAAP"))
and other non-cash income or expense items included in the determination of
earnings, calculated on a basis consistent with past practice and, except
as set forth in the next sentence, in accordance with GAAP. In the event
that subsequent to April 15, 2002 there is a change in GAAP that results in
a different calculation of Operating Cash Flow from that which would have
otherwise resulted if such a change had not been made, the parties will
mutually elect to either (y) make future calculations on the basis that
such change in GAAP had not been made or (z) adjust the Target Cash Flow
amounts by an amount that will take into account the effect of such change
on all subsequent calculations of Operating Cash Flow (a "GAAP Change
Adjustment"). In the event the parties are unable to reach agreement on
which alternative to elect, then the Target Cash Flow amounts will be
adjusted as set forth in clause (z) of the immediately prior sentence,
subject to clause (iv) below.
(iii) The Target Cash Flow amounts shall be adjusted (either up or
down) if the Company acquires or disposes of any business, any series of
related businesses or portion of a business that accounted for, in the case
of a disposition, or that would have accounted for on a pro forma basis, in
the case of an acquisition, at least 5% of the Company's Operating Cash
Flow for the last full fiscal year immediately prior to the acquisition or
disposition, as the case may be.
2
In the case of any such acquisition or disposition that exceeds such 5%
threshold, a pro forma adjustment to the Target Cash Flow shall be made to
measure the Company's actual Operating Cash Flow on a basis comparable with
the Target Cash Flow as follows: (A) with respect to any measurement period
in which an acquisition or disposition occurs, the Target Cash Flow for
such fiscal year (the "Transaction Year") shall be adjusted to include (in
the case of an acquisition) or exclude (in the case of a disposition) the
actual Operating Cash Flow for the business, businesses or portion thereof
acquired or disposed of during such period and (B) the Target Cash Flow for
the year subsequent to the Transaction Year shall be 110% of the amount of
the original Target Cash Flow for the Transaction Year further adjusted to
include (in the case of an acquisition) or exclude (in the case of a
disposition) the pro forma effect of the Operating Cash Flow for the
Transaction Year as if such transaction was in effect for the entire twelve
months. The Target Cash Flow for each subsequent year shall similarly be
increased by 10% compounded annually applied on a pro forma basis. In the
case of an acquisition, such adjustment to the Target Cash Flow for the
year subsequent to the Transaction Year shall be based on the Operating
Cash Flow of the business being acquired for the twelve full calendar
months immediately prior to the completion of the acquisition, adjusted on
a pro forma basis for any direct cost savings resulting from the
acquisition of such business. In the case of a disposition, such adjustment
to the Target Cash Flow shall be based on the Operating Cash Flow of the
business being divested for the twelve full calendar months immediately
prior to the completion of the divestiture and for the Transaction Year,
additional costs, if any, and for subsequent years, additional recurring
costs, if any, resulting from the disposition of such business.
(iv) The parties agreed to negotiate in good faith any adjustment
required by this subsection (c). In the event the parties are unable to
agree upon a GAAP Change Adjustment or an adjustment to the Target Cash
Flow amounts, such adjustment shall be determined by the Company's
independent accountants, or, if they are unavailable, other mutually agreed
independent auditors. Each party agrees to cooperate fully with such
accountants in an attempt to resolve such adjustment. The decision reached
by such accountants shall be legally binding on the parties and admissible
in any legal proceeding."
(e) Section 2.2 of the Management Agreement is hereby amended by adding at
the end thereof two new paragraphs to read in full as follows:
"As compensation to the Manager hereunder, the Company has,
concurrently with the execution of the amendment to this Agreement dated
April 15, 2002, executed and delivered to the Manager two warrants (the
"1,000,000 Warrants"), each substantially in the form of Exhibit C hereto
(each such warrant to be deemed a Warrant as defined in the preceding
paragraph), granting Manager the right to purchase (i) in the case of the
first warrant an aggregate of 1,000,000 shares of Common Stock at a price
per share equal to the product of (x) the average Market Price (as defined
in the applicable Warrant) per share of Common Stock for each of the
fifteen (15) trading days on which the national securities exchanges are
open for trading prior to January 2, 2003 (the "2003 Base Price") and (y)
1.15, if the Market Price per share of Common Stock is at least equal to
the product of (x) such exercise price and (y) 1.50 on at least twenty (20)
out of thirty (30) consecutive trading days during which the national
securities exchanges are open for trading and (ii) in the case of the
second warrant an aggregate of 1,000,000 shares of Common Stock at a price
per share equal to the product of (x) the 2003 Base Price and (y) 1.29, if
the Market Price (as defined in the applicable Warrant) per share of Common
Stock is at least equal to the product of (x) such exercise price and (y)
1.60 on at least twenty (20) out of thirty (30) consecutive trading days
during which the national securities exchanges are open for trading.
As further compensation to the Manager hereunder, the Company has,
concurrently with the execution of the amendment to this Agreement dated
April 15, 2002, executed and delivered to the Manager five (5) warrants,
each substantially in the form of Exhibit D hereto (each such warrant to be
deemed a Warrant as defined in the first paragraph of this Section 2.2),
each such warrant granting the Manager the right to purchase an aggregate
of 500,000 shares of Common Stock, for the ten year exercise period set
3
forth therein commencing on January 2 of each of the years 2005, 2006,
2007, 2008 and 2009, if in each case the average Market Price (as defined
in the applicable Warrant) per share of Common Stock for each of the
fifteen (15) trading days prior to January 2 of such year on which the
national securities exchanges are open for trading is at least equal to the
exercise price for such year and if such average Market Price is equal to
or greater than the product of (x) the average Market Price per share of
Common Stock for each of the fifteen (15) trading days prior to January 2
of the preceding year on which the national securities exchanges are open
for trading multiplied by (y) 1.20. The five Warrants shall correspond to
each of the 2004, 2005, 2006, 2007 and 2008 fiscal years, respectively, and
the exercise price per share with respect to each such Warrant shall be
equal to the average Market Price per share of Common Stock for each of the
fifteen (15) trading days on which the national securities exchanges are
open for trading prior to January 2, 2004 (the "2004 Base Price"), plus,
for the exercise price for each such Warrant corresponding to the fiscal
years 2004, 2005, 2006, 2007 and 2008, an amount equal to a compounded
annual growth rate of 15% over the 2004 Base Price.
(f) New Exhibits C and D shall be added to the Management Agreement in the
forms of Exhibits C and D attached hereto, respectively.
(g) Section 3.1 of the Management Agreement is hereby amended by replacing
the phrase "fifth anniversary of the date of this Agreement" with the date
"March 31, 2009".
(h) Section 3.2(a) of the Management Agreement is hereby amended by
replacing the second sentence thereof to read in full as follows: "Upon any
termination of this Agreement by the Company under this Section 3.2(a), Manager
shall be entitled to (i) the payment of the Base Fee, payable in the manner set
forth in Section 2.1, for the remaining term of the Agreement, (ii) the payment
of the Cash Flow Bonus, if any, for the fiscal year in which such termination
occurs pro rated for the period from the beginning of such fiscal year until the
date of such termination, calculated on the basis of the number of days elapsed
during such period, payable in the manner set forth in Section 2.1(c) and (iii)
Manager's rights to purchase shares of Common Stock pursuant to the 1,000,000
Warrants shall immediately vest."
(i) Section 3.2(b) of the Management Agreement is hereby amended and
replaced to read in full as follows:
"(b) The Company may terminate the term of this Agreement by a
unanimous vote of the members of the Board of Directors who are not
designees or employees of the Manager or any of its affiliates, if Manager
shall have (i) willfully committed a material act of fraud or gross
misconduct in performing its obligations hereunder, and such act first
occurs during the term of this Agreement or (ii) willfully and materially
breached a material term of the Agreement and such breach is not cured and
continuing for a period of at least 30 days after the Company shall have
given the Manager written notice thereof. In each case, the date of
termination shall be specified in a written notice of termination to the
Manager given by the Board of Directors not later than ninety (90) days
prior to such date of termination, which notice specifies in reasonable
detail the basis, pursuant to this Section 3.2(b), for such termination."
(j) Section 4.1(a) of the Management Agreement is hereby amended by
inserting immediately following the phrase "this Agreement" in the first line
thereof the following parenthetical: "(including, without limitation, as
permitted under Section 4.2 of this Agreement)".
2. Representation Agreement.
(a) Section 2.1 of the Representation Agreement is hereby amended by (i)
deleting the phrase "five (5) years" and substituting therefor the phrase "ten
(10) years" and (ii) deleting the date "March 31, 2004" and substituting
therefor the date "March 31, 2009".
(b) Section 3.1(a) of the Representation Agreement is hereby amended and
replaced to read in full as follows:
4
"(a) Representative shall pay to Owner for the right to render Services
under this Agreement a fixed annual representation fee of (i) $12,000,000 for
each Contract Year through March 31, 2004, subject to increase each Contract
Year as provided in paragraph (b) below and (ii) $14,000,000 for each Contract
Year following March 31, 2004, subject to increase each Contract Year as
provided in paragraph (b) below, and, in each case, payable quarterly in arrears
in four (4) equal installments on each June 30, September 30, December 31 and
March 31 of each year during the Term."
(c) Section 3.1(b) of the Representation Agreement shall be amended by
inserting immediately following the word "increased" in the second line thereof
the following parenthetical: "(commencing April 1, 2005, rounded to the nearest
increment of $500,000)".
(d) Section 5.1 of the Representation Agreement is hereby amended and
replaced to read in full as follows:
"During the Term, Representative shall have the exclusive authority,
subject at all times to compliance with all applicable laws, rules and
regulations and all Network Agreements (including all agreements and
arrangements with advertisers or their representatives relating to the
Networks as in effect from time to time during the Term (collectively,
"Advertising Agreements")), except as otherwise expressly agreed to in
writing between Owner and Representative, to retain all revenues generated
from the operation of the Networks, including without limitation the sale
of commercial time on the Networks for its own account."
3. Registration Rights Agreement.
The definition of Management Warrants in the Registration Rights Agreement
is amended to include the warrants issued to Infinity pursuant to the second
paragraph of Section 2.2 of the Management Agreement, as amended hereby.
4. License.
Schedule A of the License is hereby amended and replaced in full with the
contents of Schedule A attached hereto.
5. Programming Agreement.
Section 9 of the Programming Agreement is hereby amended by inserting in
the second proviso thereof, immediately following the phrase "Representative
terminates the Representation Agreement", the following parenthetical: "(other
than pursuant to Section 12.4(iii) thereof)".
6. Notices.
Section 6.1 of the Management Agreement, Section 15.7 of the Representation
Agreement, Section 3.6 of the Registration Rights Agreement and Section 11 of
the License are each amended and replaced to read in full as follows:
"Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if
delivered personally (including by courier) or by facsimile (with
confirmation) or mailed (first class postage prepaid) to the parties at the
following addresses or facsimile numbers:
If to Westwood One, Inc.:
Westwood One, Inc.
40 West 57th Street, 15th Floor
New York, New York 10019
Attention: Legal Department
Fax: 212-641-2198
5
with a copy to:
Sullivan & Cromwell
1888 Century Park East Blvd. 21st floor
Los Angeles, CA 90067
Attention: Alison Ressler
Fax: 310-712-8800
If to Infinity Broadcasting Corporation:
Infinity Broadcasting Corporation
40 West 57th Street
New York, New York 10019
Attention: Chief Financial Officer
Fax: 212-846-1370
with a copy to:
Viacom Inc.
1515 Broadway
New York, New York 10036
Attention: Executive Vice President, General Counsel
and Secretary
Fax: 212-258-6099.
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section, be deemed
given upon delivery, (ii) if delivered by facsimile transmission to the
facsimile number as provided in this Section, be deemed given upon
confirmation of transmission, and (iii) if delivered by mail in the manner
described above to the address as provided in this section, be deemed given
upon receipt (in each case regardless of whether such notice, request or
other communication is received by any other person to whom a copy of such
notice, request or other communication is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile
number or other information for the purposes of notices to that party by
giving notice specifying such change to the other parties hereto."
7. Effectiveness/Miscellaneous.
(a) (i) This Letter shall be effective upon due execution and delivery by
each party hereto.
(ii) The effectiveness of the amendments to the Transaction Agreements
provided for in this Letter and the transactions contemplated thereby shall be
subject to the authorization of 66 2/3% of the outstanding voting stock of WON
which is not owned by IBC, in accordance with Section 203 of the Delaware
General Corporation Law. This letter may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
(b) Each of WON and IBC shall use their commercially reasonable efforts to
take or cause to be taken all actions and to do or cause to be done all things
necessary or desirable under applicable laws and regulations or otherwise to
consummate the transactions contemplated by this Letter, and shall execute and
deliver such documents and other papers as may be required to carry out the
provisions of this Letter and consummate and make effective the transactions
contemplated hereby.
6
(c) Neither WON nor IBC shall issue any press release or public statement
with respect to this Letter and the transactions contemplated hereby without the
prior consent of the other party, except to the extent the disclosing party
reasonably believes such press release or public statement is required by law or
applicable stock exchange regulations.
(d) WON shall use its best efforts to take all actions necessary to obtain
the shareholder authorization required under paragraph (a) above at its next
Annual Meeting of shareholders and in any event as soon as practicable,
including without limitation (i) promptly preparing, filing and clearing with
the Securities and Exchange Commission, and distributing to WON's shareholders,
a proxy statement and all other proxy materials necessary or desirable under
applicable law to obtain such authorization, (ii) including therein the
recommendation of the Board of Directors of WON to approve the transactions
contemplated by this Letter, (iii) soliciting and obtaining from its
shareholders proxies in favor of such authorization and (iv) otherwise complying
with all legal requirements applicable to such meeting. WON shall provide IBC
with copies of all drafts of such proxy materials prior to distribution or
filing thereof, and shall make such changes thereto as shall be reasonably
requested by IBC. Each of IBC and WON shall be permitted to terminate this
Letter in the event such shareholder authorization is not received on or prior
to December 31, 2002.
(e) Each of WON and IBC makes to the other the representations and
warranties contained in Section 5.1 of the Management Agreement as if made with
respect to themselves, this Letter and the transactions contemplated hereby as
of the date hereof and as of the date of effectiveness hereof, in each case
assuming that the condition set forth in Section 7(a)(ii) of this Letter has
been satisfied. WON represents and warrants that this Letter and the
transactions contemplated hereby have been duly authorized by (1) a majority of
the disinterested members of the Board of Directors of WON, which, without
limitation, shall not include any directors affiliated with IBC or its
affiliates other than WON to the extent WON would be deemed such an affiliate
and (2) a majority of the Continuing Directors of WON, as defined in WON's
Certificate of Incorporation.
(f) All expenses incurred by each party in connection with this Letter
shall be the responsibility of the party incurring such expenses.
(g) Except as expressly amended hereby, the terms of each Transaction
Agreement remain in full force and effect. Each reference to any Transaction
Agreement in any Transaction Agreement shall mean and be a reference to such
Transaction Agreement as amended hereby.
7
(h) This Letter shall be governed by and construed in accordance with the
laws of the State of Delaware.
Very Truly Yours,
INFINITY BROADCASTING
CORPORATION
By: /S/ ROBERT FREEDLINE
----------------------
ROBERT FREEDLINE
VP, TREASURER
Accepted and agreed as of the date hereof:
WESTWOOD ONE, INC.
BY: /S/ GARY J. YUSKO
------------------
GARY J. YUSKO
SENIOR VICE PRESIDENT -
FINANCIAL OPERATIONS
cc: Michael D. Fricklas (fax no. 212-258-6099)
Sullivan & Cromwell (fax no. 310-712-8800, attention: Alison Ressler)
8
EXHIBIT C
---------
Warrant to Purchase 1,000,000 Shares
of Common Stock
INCORPORATED UNDER THE LAWS OF THE STATE
OF DELAWARE
WESTWOOD ONE, INC.
THE SECURITIES EVIDENCED BY THIS WARRANT OR ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED, ASSIGNED OR OTHERWISE ENCUMBERED OR DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
WESTWOOD ONE, INC., a Delaware corporation (the "Company"), certifies that,
for value received, Infinity Broadcasting Corporation, a Delaware corporation
("Infinity"), or a designated affiliated entity (collectively, the "Holder"), is
entitled to purchase, from January 2, 2003 until the close of business on the
Termination Date (as defined in the next sentence), One Million (1,000,000)
shares of Common Stock, par value $0.01 per share, of the Company, at a price
per share equal to the product of (x) the average Market Price (as defined
below) per share of Common Stock for each of the fifteen (15) days on which the
national securities exchanges are open for trading prior to January 2, 2003 and
(y) 1.15; subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. "Termination Date" shall mean January 2, 2013.
1. Exercisability of Warrant. This Warrant shall become exercisable only if
the Market Price (as defined below) per share of Common Stock, par value $0.01
per share, of the Company is at least equal to the product of (x) the initial
exercise price determined pursuant to the introductory paragraph hereof and (y)
1.50 on at least twenty (20) out of thirty (30) consecutive days during which
the national securities exchanges are open for trading; provided that (i) this
Warrant shall immediately become exercisable upon the termination of the
Management Agreement (as defined below) by the Company pursuant to Section
3.2(a) thereof and (ii) this Warrant shall expire and shall thereafter not
become exercisable under any circumstances upon the termination of the
Management Agreement by the Company pursuant to Sections 3.2(b) or 3.2(c)
thereof, but only if this Warrant shall not have become exercisable pursuant to
this Section 1 prior to such termination.
2. Method of Exercise, Payment, Issuance of New Warrant.
(a) This Warrant may be exercised by the holder hereof, in whole or in
part, by the surrender of this Warrant, properly endorsed, to the Company at its
principal office at 40 West 57th Street, 15th Floor, New York, New York 10019,
Attention: Secretary, and by (i) unless holder exercises this Warrant pursuant
to the Net Exercise procedure set forth in paragraph (d) below, the payment to
the Company of the then applicable Warrant Price of the Common Stock being
purchased ("Warrant Price" shall mean the price specified in the first paragraph
of this Warrant and such other prices as shall result from the adjustments
specified in Section 5 hereof); and (ii) delivery to the Company of the form of
subscription at the end hereof (or a reasonable facsimile thereof).
(b) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the business day on which this
Warrant shall have been surrendered to the Company as provided in this Section
2, and at such time the person or persons in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon such exercise
shall be deemed to have become the holder or holders of record thereof.
(c) In the event of any exercise of the rights represented by this Warrant,
certificates for the shares of Common Stock so purchased shall be delivered at
the Company's expense (including the payment by the Company of any applicable
issuance taxes) to the holder hereof within five (5) business days after the
rights represented by this Warrant shall have been so exercised, and unless this
Warrant has expired, a new Warrant of like tenor representing the number of
shares of Common Stock, if any, with respect to which this Warrant shall not
then have been exercised, shall also be issued to the holder hereof within such
time.
(d) In connection with any exercise of this Warrant pursuant to this
Section 2, the holder may, at its option, elect, in lieu of paying the
applicable Warrant Price in cash to the Company and receiving the aggregate
number of shares of Common Stock that would otherwise be issuable hereunder, to
receive a number of shares of Common Stock determined in accordance with the
formula set forth below as of the date of surrender of the Warrant, for no
additional consideration, by so indicating on the form of subscription submitted
to the Company pursuant to paragraph (a) hereof (a "Net Exercise"):
X = Y(A-B)
A
X = the number of shares of Common Stock to be issued to the Holder.
Y = the number of shares of Common Stock with respect to which the Net
Exercise is being made.
A = the Current Market Value of one share of the Company's Common Stock as
of the date of surrender of the Warrant.
B = the Warrant Price as of the date of surrender of the Warrant.
3. Stock Fully Paid; Reservation of Shares. The Company covenants and
agrees that all shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable and free from all liens. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, at least the maximum number of shares
of its Common Stock as are then issuable upon the exercise of the rights
represented by this Warrant.
4. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder but in lieu of such fractional shares,
the Company shall make a cash payment therefor upon the basis of the Current
Market Value (as defined below) of the Common Stock.
5. Number of Shares Receivable Upon Exercise. The number of shares of
Common Stock receivable upon the exercise of this Warrant is subject to
adjustment upon the happening of certain events specified in this Section 5. For
the purposes of this Section 5, the "Warrant Price" referred to herein shall
initially be the price determined pursuant to the introductory paragraph hereof
and shall be adjusted and readjusted from time to time as provided in this
Section 5. Subject to Section 2(d) hereof, this Warrant shall, be exercisable at
any time for that number of shares of Common Stock determined by multiplying the
number of shares of Common Stock which would otherwise (but for the provisions
of this Section 5) be issuable upon exercise at such time by a fraction of which
(A) the numerator is the price initially determined pursuant to the introductory
paragraph hereof and (B) the denominator is the Warrant Price in effect at the
time of such exercise. The price to be paid for each such share of Common Stock
by the holder shall be the Warrant Price as adjusted pursuant to this Section 5,
provided that the price paid by the holder for any shares of Common Stock upon
exercise of this Warrant shall never be less than $0.01 per share. The Warrant
Price shall be subject to adjustment as follows:
(a) Stock Dividends, Stock Splits, Etc. If the Company at any time or from
time to time after April 15, 2002 shall issue additional shares of Common Stock
as a result of the declaration or payment of a dividend on the Common Stock
payable in Common Stock, or as a distribution to holders of Common Stock, or as
a result of a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock), then, and in each such
case, the Warrant Price then in effect shall be reduced, concurrently with the
issuance of such shares, to a price (calculated to the nearest cent) determined
by multiplying such Warrant Price by a fraction (i) the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
issuance of additional shares of Common Stock, and (ii) the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
issuance, provided that, for purposes of this Section 5(a), (x) additional
shares of Common Stock shall be deemed to have been issued (A) in the case of
any such dividend or distribution, immediately after the close of business on
the record date for the determination of holders of any class of securities
entitled to receive such dividend or distribution or (B) in the case of any such
subdivision, at the close of business on the date immediately prior to the day
upon which such corporate action becomes effective, (y) immediately after any
additional shares of Common Stock are deemed to have been issued, such
additional shares of Common Stock shall be deemed to be outstanding, and (z)
treasury shares shall be deemed not to be outstanding.
(b) Extraordinary Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding Common Stock evidences of
indebtedness of the Company, cash (other than a cash distribution made as a
dividend payable or to be payable at regularly scheduled intervals and payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the State of Delaware, but only to the extent that the
aggregate of all such dividends paid or declared after April 15, 2002 does not
exceed the consolidated net income of the Company earned subsequent to April 15,
2002, as determined in accordance with generally accepted accounting principles,
consistently applied) or assets or securities other than its Common Stock
(including stock of a subsidiary or securities convertible into or exercisable
for such stock but excluding dividends or distributions referred to in Section
5(a) above) (any such evidences of indebtedness, cash, assets or securities, the
"assets or securities"), then, in each case, the Warrant Price shall be adjusted
by subtracting from the Warrant Price then in effect the value of the assets or
securities that the holder would have been entitled to receive as a result of
such distribution had the Warrant been exercised and the relevant shares of
Common Stock issued in the name of the holder immediately prior to the record
date for such distribution; provided that if, after giving effect to such
adjustment, the Warrant Price would be less than the then par value of the
Common Stock, the Company shall distribute such assets or securities to the
holder as if the holder had exercised the Warrant and the shares of Common Stock
had been issued in the name of the holder immediately prior to the record date
for such distribution. Any adjustment required by this Section 5(b) shall be
made whenever any such distribution is made, and shall become effective on the
date of distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
(c) Combinations, Etc. If the Company at any time or from time to time
after April 15, 2002 shall combine or consolidate the outstanding shares of
Common Stock, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then, and in each such case, the Warrant Price then in effect
shall be increased, concurrently with the effectiveness of such combination or
consolidation, to a price (calculated to the nearest one cent) determined by
multiplying such Warrant Price by a fraction (i) the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to the
effectiveness of such combination or consolidation and (ii) the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after such effectiveness.
(d) Issuance of Additional Shares of Common Stock. In case the Company at
any time or from time to time after April 15, 2002 shall issue or sell
additional shares of Common Stock ("Additional Shares") for a consideration per
share less than the Current Market Value in effect on the earlier of (i) the
date on which the Company enters into a firm contract for the issuance and sale
of such Additional Shares (unless such contract specifies that the price will be
determined at a later date, then such later date shall apply to this clause (i))
or (ii), the date of actual issuance or sale of such Additional Shares, then, in
each such case, the Warrant Price in effect immediately prior to such date shall
be reduced, concurrently with such issuance or sale, to a price (calculated to
the nearest one cent) determined by multiplying such Warrant Price by a fraction
(x) the numerator of which shall be the sum of (A) the number of shares of
Common Stock outstanding immediately prior to such issue or sale, plus (B) the
number of shares of Common Stock which the aggregate consideration received by
the Company for the total number of such Additional Shares so issued or sold
would purchase at such Current Market Value, and (y) the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
issue or sale, provided that (a) treasury shares shall not be deemed to be
outstanding for purposes of this Section 5(d) and (b) the shares of Common Stock
then issuable pursuant to the terms of (i) the Warrants dated February 3, 1994,
(ii) this Warrant and (iii) the other Warrants issued pursuant to the Management
Agreement, dated as of March 31, 1999, as amended by letter amendment dated
April 15, 2002, between the Company and Infinity (the "Management Agreement"),
shall be deemed to be outstanding immediately prior to and after such issue or
sale. Notwithstanding anything contained herein to the contrary, no adjustment
to the Warrant Price shall be made pursuant to this Section 5(d) following the
issuance of Additional Shares pursuant to (1) Section 5(a) hereof, (2) the
exercise of any options or issuance of any shares under any options or purchase
or other rights that are outstanding on or prior to April 15, 2002 and that were
issued pursuant to any of the Company's employee stock option, appreciation or
purchase right plans, (3) the exercise of any options or purchase or other
rights or the issuance of any shares under any options or rights that are
granted after April 15, 2002, whether in accordance with the terms of any of the
Company's employee stock option, appreciation or purchase right plans or
otherwise, so long as the exercise price of any such option, warrant,
subscription or purchase right is not less than the Market Price on the date
that such grant is approved by the Company's Board of Directors or a duly
authorized committee thereof or, if later, the date that such exercise price is
established, (4) the exercise of any other options, warrants or other
subscription or purchase rights outstanding on or prior to April 15, 2002,
including without limitation, (a) the Warrants dated February 3, 1994, (b) this
Warrant and (c) the other Warrants issued pursuant to the Management Agreement,
(5) the exercise of any conversion or exchange rights outstanding on or prior to
April 15, 2002 issued by the Company, (6) the exercise of any conversion or
exchange rights issued by the Company after April 15, 2002, so long as the
conversion or exchange price is not less than the Market Price on the date that
such issuance is approved by the Board of Directors or a duly authorized
committee thereof or, if later, the date that such conversion or exchange price
is established or (7) the issuance or sale of Additional Shares pursuant to a
firmly underwritten public offering of such shares.
(e) Accountants' Report as to Adjustments. In each case of any adjustment
or readjustment in the Warrant Price, the Company at its expense will promptly
compute such adjustment or readjustment in accordance with the terms hereof and,
upon the reasonable request of the Holder, cause independent public accountants
of recognized national standing selected by the Company (which may be the
regular auditors of the Company) to verify such computation and prepare a report
setting forth such adjustment or readjustment and showing in reasonable detail
the method of calculation thereof and the facts upon which such adjustment or
readjustment is based, including a statement of (i) the number of shares of
Common Stock outstanding or deemed to be outstanding and (ii) the Warrant Price
in effect immediately prior to such adjustment or readjustment and as adjusted
and readjusted (if required by Section 5) on account thereto. The Company will
forthwith mail a copy of each such report to the holder of this Warrant. The
Company will also keep copies of all such reports at its principal office, and
will cause the same to be available for inspection at such office during normal
business hours by any holder of this Warrant or any prospective purchaser of a
Warrant designated in writing by the holder thereof.
(f) No Dilution or Impairment. The Company will not, by amendment of its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms hereof, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against dilution as provided herein. Without limiting the generality of
the foregoing, the Company (i) will not permit the par value of any shares of
Common Stock receivable upon the exercise of any Warrant to be increased to an
amount that exceeds the amount payable therefor upon such exercise, (ii) will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares upon
the exercise of this Warrant from time to time and (iii) will not take any
action which results in any adjustment of the Warrant Price if the total number
of shares of Common Stock issuable after such action upon the exercise of this
Warrant would exceed the total number of shares of Common Stock then authorized
by the Company's certificate of incorporation and available for the purpose of
issue upon such exercise.
(g) Exercise of Warrant in the Event of a Consolidation, Merger, Sale of
Assets, Reorganization, Etc.
(i) In case at any time after April 15, 2002, the Company shall be a party
to any Transaction except as provided in (iii) or (iv) below, then (A) upon the
consummation thereof this Warrant shall become exercisable with respect to all
shares of Common Stock covered hereby (whether or not it has otherwise become
exercisable with respect to such shares pursuant to Section 1) and shall be
deemed to have been exercised by the holder hereof without any act on the part
of such holder and without any obligation on the part of such holder to pay the
exercise price until presentation of this Warrant pursuant to clause (B) below,
and (B) this Warrant shall represent the right of such holder to receive (upon
presentation of this Warrant on or within thirty (30) days after the date of
such consummation together with payment of the aggregate exercise price payable
at the time of such consummation in accordance with Section 2 for all shares of
Common Stock issuable upon such exercise immediately prior to such
consummation), in lieu of the Common Stock issuable upon exercise of this
Warrant prior to such consummation, the cash, securities and other property to
which such holder would have been entitled upon the consummation of the
Transaction if such holder had exercised this Warrant immediately
prior thereto.
(ii) The Company will not effect any Transaction unless, prior to the
consummation thereof, each corporation or entity (other than the Company) which
may be required to deliver any cash, securities or other property upon the
exercise of this Warrant as provided herein shall assume, by written instrument
delivered to the holder of this Warrant, the obligation to deliver to such
holder such cash, securities or other property as, in accordance with the
foregoing provision, such holder may be entitled to receive.
(iii) In case after January 2, 2003, the Company shall be a party to any
Transaction pursuant to which the aggregate value of the cash, securities and
other consideration payable for a share of Common Stock is less than the price
initially determined pursuant to the introductory paragraph hereof, this Warrant
shall terminate upon the consummation thereof.
(iv) In the event of any Transaction occurring during the period between
April 15, 2002 and January 2, 2003, the holder shall be entitled to receive on
January 2, 2003, the cash, securities and other property to which such holder
would have been entitled had such holder held the number of shares of Common
Stock issuable pursuant hereto immediately prior to the closing of such
Transaction. An appropriate adjustment to the consideration to be received by
the holder shall be made such that the value of such consideration received by
the holder shall be reduced (but not below zero) by an amount equal to 115% of
the Current Market Value of the shares issuable pursuant to this Warrant
determined immediately prior to a definitive agreement with respect to such
Transaction is first publicly announced.
(h) Notices of Corporate Action. In the event of any anticipated:
(i) taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution on such securities, or
(ii) Transaction, or
(iii)voluntary or involuntary dissolution, liquidation or winding-up of the
Company,
the Company will mail to the holder of this Warrant a notice specifying (A) the
date or expected date on which any such record is to be taken for the purpose of
such dividend or distribution or (B) the date or expected date on which any such
Transaction, dissolution, liquidation or winding-up is to take place and the
time, if any such time is to be fixed, as of which the holders of record of
Common Stock shall be entitled to exchange their shares of Common Stock for the
securities or other property deliverable upon such Transaction, dissolution,
liquidation or winding-up. Such notice shall be mailed at least twenty (20) days
prior to the date therein specified, in the case of any date referred to in the
foregoing clause (A), and at least thirty (30) days prior to the date therein
specified, in the case of the date referred to in the foregoing clause (B).
(i) Adjustments Prior to January 2, 2003. Notwithstanding any provision to
the contrary in this Section 5, in the event of any adjustment required to be
made pursuant to this Section 5 as a result of any event occurring during the
period between April 15, 2002 and January 2, 2003, the following provisions
shall apply and the corresponding adjustments shall be deemed made immediately
after the initial price per share is determined pursuant to the introductory
paragraph hereof:
(i) If any event occurs during such period giving rise to an adjustment
pursuant to paragraph (a) or (c) above, the Warrant Price shall not be adjusted
as provided for therein, but the number of shares issuable pursuant to this
Warrant shall be adjusted by multiplying such number of shares by a fraction of
which (A) the numerator is the number of shares the holder would have held
immediately after such event had the holder, immediately prior to such event,
held the full number of shares issuable pursuant to this Warrant and (B) the
denominator of which is such full number of shares.
(ii) If any event occurs during such period giving rise to an adjustment
pursuant to paragraph (b) above, the Warrant Price shall not be adjusted as
provided for therein, but the number of shares issuable pursuant to this Warrant
shall be adjusted by multiplying such number of shares by a fraction of which
(A) the numerator is the number of shares the holder would have held immediately
after such event had the holder, immediately prior to such event, held the full
number of shares issuable pursuant to this Warrant, plus the number of shares of
Common Stock the holder could have acquired immediately after such event at a
price equal to the Current Market Value calculated immediately after such event
with an amount equal to the value of the assets and securities the holder would
have received had the holder held such full number of shares immediately prior
to such event and (B) the denominator of which is the full number of shares
issuable immediately prior to such event pursuant to this Warrant.
(iii) If any event occurs during such period giving rise to an adjustment
pursuant to paragraph (d) above, the Warrant Price shall not be adjusted as
provided for therein, but the number of shares issuable pursuant to this Warrant
shall be adjusted, subject to the proviso and exceptions set forth in such
paragraph (d), by multiplying such number of shares by a fraction of which (A)
the numerator is the number of shares of Common Stock outstanding immediately
after such event and (B) the denominator is the sum of (1) the number of shares
of Common Stock outstanding immediately prior to such event, plus (2) the number
of shares of Common Stock which the aggregate consideration received by the
Company for the total number of shares issued or sold in connection with such
event would purchase at the Current Market Value calculated at the time set
forth in such paragraph (d).
(iv) If any event which would give rise to any adjustment pursuant to this
Section 5 occurs during the 15 trading day period in which the initial exercise
price pursuant to the introductory paragraph hereof is determined, the Market
Price on the trading days during such period occurring before such event used in
such determination shall be equitably adjusted on a similar basis to the
adjustments for such event required pursuant to this Section 5.
6. Definitions. As used herein, the following terms have the following
respective meanings:
Common Stock: The Company's (a) Common Stock, par value $0.01 per share,
and (b) Class B Stock, par value $0.01 per share.
Current Market Value: The average of the daily Market Price per share of
Common Stock for the period of five (5) days, ending on the day immediately
prior to the date of exercise of the Warrant pursuant to Section 2(b) or Section
2(d), as applicable, or on the date determined pursuant to Section 5(d)(i) or
(ii), Section 5(g)(iv) or Section 5(i)(ii) or (i)(iii), as applicable, during
which the national securities exchanges were opened for trading, provided that
if an exercise of this Warrant occurs as a result of or in connection with the
consummation of a Transaction, Current Market Value shall be the aggregate value
of the cash, securities and other consideration payable for a share of Common
Stock in connection with such Transaction.
Market Price: Per share of Common Stock on any date specified herein shall
be (a) the last sale price, regular way, on such date or, if no such sale takes
place on such date, the average of the closing bid and asked prices on such
date, in each case as officially reported on the principal national securities
exchange on which the Common Stock is then listed or admitted to trading, or (b)
if such Common Stock is not then listed or admitted to trading on any national
securities exchange, but is designated as a national market system security by
the National Association of Securities Dealers, the last trading price of the
Common Stock on such date, or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the average of the reported
closing bid and asked prices on such date as shown by the National Association
of Securities Dealers Automated Quotation System.
Registration Rights Agreement: The Registration Rights Agreement, dated as
of March 30, 1999, as amended by letter amendment dated April 15, 2002 between
the Company and the original holder hereof.
Transaction: A merger, consolidation, sale of all or substantially all of
the Company's assets, recapitalization of the Common Stock or other similar
transaction, in each case if the previously outstanding Common Stock is acquired
for cash or changed into or exchanged for different securities of the Company or
changed into or exchanged for common stock or other securities of another
corporation or interests in a noncorporate entity or other property (including
cash) or any combination of any of the foregoing.
Warrant Price: The meaning specified in Section 5.
7. Amendments and Waivers. Any term of this Warrant may be amended or
modified or the observance of any term of this Warrant may be waived (either
generally or in a particular instance) only with the written consent of the
Company and the holder of this Warrant.
8. Assignment. The provisions of this Warrant shall be binding upon and
inure to the benefit of the original holder hereof, its successors and assigns
by way of merger, consolidation or operation of law, and each third party
transferee of this Warrant, provided that this Warrant may only be transferred
in accordance with the terms of the Registration Rights Agreement and, in the
case of any third party transferee, such transferee shall have delivered to the
Company a valid agreement of assumption of the restriction on transfer specified
in this Section 8.
9. Exchange of Warrant. Upon surrender for exchange of this Warrant,
properly endorsed, for registration of Transfer or for exchange at the principal
office of the Company, the Company, at its expense, will issue and deliver to or
upon the order of the holder hereof a new Warrant or Warrants of like tenor, in
the name of such holder or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face of
this Warrant, provided that any such transfer of this Warrant is made in
accordance with the Registration Rights Agreement.
10. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
upon delivery of an indemnity bond in such reasonable amount as the Company may
determine (or, in the case of any Warrant held by the original holder hereof or
any affiliate thereof or an institutional holder or any of their respective
nominees, of an affidavit of an authorized officer of such holder, setting forth
the fact of such loss, theft or destruction, which shall be satisfactory
evidence thereof and no further indemnity shall be required as a condition of
the execution and delivery of a new Warrant), or, in the case of any such
mutilation, upon the surrender of such Warrant for cancellation to the Company
at its principal office, the Company at its expense will execute and deliver, in
lieu thereof, a new Warrant, of like tenor. Any Warrant in lieu of which any
such new Warrant has been so executed and delivered by the Company shall not be
deemed to be an outstanding Warrant for any purpose.
11. Remedies. The Company stipulates that the remedies at law of the holder
of this Warrant in the event of any default by the Company in the performance of
or in compliance with any of the terms of this Warrant are not and will not be
adequate, and that such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise without the
requirement of the posting of a bond.
12. No Rights or Liabilities as Stockholder. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company (except to the extent that shares of Common Stock are
issued to such holder pursuant to this Warrant) or as imposing any liabilities
on such holder to purchase any securities or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors or
stockholders of the Company or otherwise.
13. Notices. All notices and other communications under this Warrant shall
be in writing and shall be mailed by registered or certified mail, return
receipt requested, or by facsimile transmission, addressed (a) if to the holder,
at the registered address or the facsimile number of such holder as set forth in
the register kept at the principal office of the Company, and (b) if to the
Company, to the attention of the Secretary at its principal office, at 40 West
57th Street, 15th Floor, New York, New York 10019, or to its facsimile number
212-258-6099, Attention: Secretary, provided that the exercise of any Warrant
shall be effected
in the manner provided in Section 2.
14. Legends. The shares of Common Stock issuable pursuant to the terms of
this Warrant shall bear a legend in substantially the following form: THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED, ASSIGNED OR OTHERWISE ENCUMBERED OR DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
15. Miscellaneous. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. The headings
in this Warrant are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof.
Dated as of April 15, 2002.
WESTWOOD ONE, INC.
By:_______________________________
Name:
Title:
FORM OF SUBSCRIPTION
[To be signed only upon exercise of the Warrant]
TO WESTWOOD ONE, INC.
[Strike paragraph below that does not apply]
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _______* shares of Common Stock of WESTWOOD ONE, INC. and
herewith makes payment of $ ________ therefor, and requests that the
certificates for such shares be issued in the name of
__________________________________, and delivered
to_______________________________, whose address is:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant and, in lieu
of paying the Warrant Price therefor, elects to receive pursuant to Section 2(d)
thereof _______* shares of Common Stock of WESTWOOD ONE, INC., and requests that
the certificates for such shares be issued in the name of
__________________________________, and delivered
to_______________________________, whose address is:
Dated:_________________________
_________________________________________
(Signature must conform in all respects to
name of holder as specified on the face
of the Warrant)
_________________________________________
(Address)
*Insert here the number of shares called for on the face of the Warrant or, in
the case of a Net Exercise, the net number of shares resulting from application
of the formula set forth in Section 2(d) using the number of shares called for
on the face of the Warrant as Y in such formula, or, in the case of a partial
exercise, the portion thereof as to which the Warrant is being exercised, in any
case without making any adjustment for additional shares of the Common Stock or
any other stock or other securities or property or cash which, pursuant to the
adjustment provisions referred to in Section 5 of the Warrant, may be
deliverable upon exercise. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the unexercised portion of
such Warrant, all as provided in the Warrant.
FORM OF ASSIGNMENT
[To be signed only upon transfer of the Warrant]
For value received, the undersigned hereby sells, assigns and transfers
unto ____________________________ the rights represented by the within Warrant
to purchase shares of Common Stock of WESTWOOD ONE, INC. to which the within
Warrant relates, and appoints _________________________Attorney to transfer such
rights on the books of WESTWOOD ONE, INC. with full power of substitution in the
premises.
Dated:_________________________
________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
________________________________________
(Address)
Signed in the presence of:
______________________________
Name:
Warrant to Purchase 1,000,000 Shares
of Common Stock
INCORPORATED UNDER THE LAWS OF THE STATE
OF DELAWARE
WESTWOOD ONE, INC.
THE SECURITIES EVIDENCED BY THIS WARRANT OR ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED, ASSIGNED OR OTHERWISE ENCUMBERED OR DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
WESTWOOD ONE, INC., a Delaware corporation (the "Company"), certifies that,
for value received, Infinity Broadcasting Corporation, a Delaware corporation
("Infinity"), or a designated affiliated entity (collectively, the "Holder"), is
entitled to purchase, from January 2, 2003, until the close of business on the
Termination Date (as defined in the next sentence), One Million (1,000,000)
shares of Common Stock, par value $0.01 per share, of the Company, at a price
per share equal to the product of (x) the average Market Price (as defined
below) per share of Common Stock for each of the fifteen (15) days on which the
national securities exchanges are open for trading prior to January 2, 2003 and
(y) 1.29; subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. "Termination Date" shall mean January 2, 2013.
1. Exercisability of Warrant. This Warrant shall become exercisable only if
the Market Price (as defined below) per share of Common Stock, par value $0.01
per share, of the Company is at least equal to the product of (x) the initial
exercise price determined pursuant to the introductory paragraph hereof and (y)
1.60 on at least twenty (20) out of thirty (30) consecutive days during which
the national securities exchanges are open for trading; provided that (i) this
Warrant shall immediately become exercisable upon the termination of the
Management Agreement (as defined below) by the Company pursuant to Section
3.2(a) thereof and (ii) this Warrant shall expire and shall thereafter not
become exercisable under any circumstances upon the termination of the
Management Agreement by the Company pursuant to Sections 3.2(b) or 3.2(c)
thereof, but only if this Warrant shall not have become exercisable pursuant to
this Section 1 prior to such termination.
2. Method of Exercise, Payment, Issuance of New Warrant.
(a) This Warrant may be exercised by the holder hereof, in whole or in
part, by the surrender of this Warrant, properly endorsed, to the Company at its
principal office at 40 West 57th Street, 15th Floor, New York, New York 10019,
Attention: Secretary, and by (i) unless holder exercises this Warrant pursuant
to the Net Exercise procedure set forth in paragraph (d) below, the payment to
the Company of the then applicable Warrant Price of the Common Stock being
purchased ("Warrant Price" shall mean the price specified in the first paragraph
of this Warrant and such other prices as shall result from the adjustments
specified in Section 5 hereof); and (ii) delivery to the Company of the form of
subscription at the end hereof (or a reasonable facsimile thereof).
(b) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the business day on which this
Warrant shall have been surrendered to the Company as provided in this Section
2, and at such time the person or persons in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon such exercise
shall be deemed to have become the holder or holders of record thereof.
(c) In the event of any exercise of the rights represented by this Warrant,
certificates for the shares of Common Stock so purchased shall be delivered at
the Company's expense (including the payment by the Company of any applicable
issuance taxes) to the holder hereof within five (5) business days after the
rights represented by this Warrant shall have been so exercised, and unless this
Warrant has expired, a new Warrant of like tenor representing the number of
shares of Common Stock, if any, with respect to which this Warrant shall not
then have been exercised, shall also be issued to the holder hereof within such
time.
(d) In connection with any exercise of this Warrant pursuant to this
Section 2, the holder may, at its option, elect, in lieu of paying the
applicable Warrant Price in cash to the Company and receiving the aggregate
number of shares of Common Stock that would otherwise be issuable hereunder, to
receive a number of shares of Common Stock determined in accordance with the
formula set forth below as of the date of surrender of the Warrant, for no
additional consideration, by so indicating on the form of subscription submitted
to the Company pursuant to paragraph (a) hereof (a "Net Exercise"):
X = Y(A-B)
A
X = the number of shares of Common Stock to be issued to the Holder.
Y = the number of shares of Common Stock with respect to which the Net
Exercise is being made.
A = the Current Market Value of one share of the Company's Common Stock as
of the date of surrender of the Warrant.
B = the Warrant Price as of the date of surrender of the Warrant.
3. Stock Fully Paid; Reservation of Shares. The Company covenants and
agrees that all shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable and free from all liens. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, at least the maximum number of shares
of its Common Stock as are then issuable upon the exercise of the rights
represented by this Warrant.
4. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder but in lieu of such fractional shares,
the Company shall make a cash payment therefor upon the basis of the Current
Market Value (as defined below) of the Common Stock.
5. Number of Shares Receivable Upon Exercise. The number of shares of
Common Stock receivable upon the exercise of this Warrant is subject to
adjustment upon the happening of certain events specified in this Section 5. For
the purposes of this Section 5, the "Warrant Price" referred to herein shall
initially be the price determined pursuant to the introductory paragraph hereof
and shall be adjusted and readjusted from time to time as provided in this
Section 5. Subject to Section 2(d) hereof, this Warrant shall be exercisable at
any time for that number of shares of Common Stock determined by multiplying the
number of shares of Common Stock which would otherwise (but for the provisions
of this Section 5) be issuable upon exercise at such time by a fraction of which
(A) the numerator is the price initially determined pursuant to the introductory
paragraph hereof and (B) the denominator is the Warrant Price in effect at the
time of such exercise. The price to be paid for each such share of Common Stock
by the holder shall be the Warrant Price as adjusted pursuant to this Section 5,
provided that the price paid by the holder for any shares of Common Stock upon
exercise of this Warrant shall never be less than $0.01 per share. The Warrant
Price shall be subject to adjustment as follows:
(a) Stock Dividends, Stock Splits, Etc. If the Company at any time or from
time to time after April 15, 2002 shall issue additional shares of Common Stock
as a result of the declaration or payment of a dividend on the Common Stock
payable in Common Stock, or as a distribution to holders of Common Stock, or as
a result of a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock), then, and in each such
case, the Warrant Price then in effect shall be reduced, concurrently with the
issuance of such shares, to a price (calculated to the nearest cent) determined
by multiplying such Warrant Price by a fraction (i) the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
issuance of additional shares of Common Stock, and (ii) the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
issuance, provided that, for purposes of this Section 5(a), (x) additional
shares of Common Stock shall be deemed to have been issued (A) in the case of
any such dividend or distribution, immediately after the close of business on
the record date for the determination of holders of any class of securities
entitled to receive such dividend or distribution or (B) in the case of any such
subdivision, at the close of business on the date immediately prior to the day
upon which such corporate action becomes effective, (y) immediately after any
additional shares of Common Stock are deemed to have been issued, such
additional shares of Common Stock shall be deemed to be outstanding, and (z)
treasury shares shall be deemed
not to be outstanding.
(b) Extraordinary Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding Common Stock evidences of
indebtedness of the Company, cash (other than a cash distribution made as a
dividend payable or to be payable at regularly scheduled intervals and payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the State of Delaware, but only to the extent that the
aggregate of all such dividends paid or declared after April 15, 2002 does not
exceed the consolidated net income of the Company earned subsequent to April 15,
2002, as determined in accordance with generally accepted accounting principles,
consistently applied) or assets or securities other than its Common Stock
(including stock of a subsidiary or securities convertible into or exercisable
for such stock but excluding dividends or distributions referred to in Section
5(a) above) (any such evidences of indebtedness, cash, assets or securities, the
"assets or securities"), then, in each case, the Warrant Price shall be adjusted
by subtracting from the Warrant Price then in effect the value of the assets or
securities that the holder would have been entitled to receive as a result of
such distribution had the Warrant been exercised and the relevant shares of
Common Stock issued in the name of the holder immediately prior to the record
date for such distribution; provided that if, after giving effect to such
adjustment, the Warrant Price would be less than the then par value of the
Common Stock, the Company shall distribute such assets or securities to the
holder as if the holder had exercised the Warrant and the shares of Common Stock
had been issued in the name of the holder immediately prior to the record date
for such distribution. Any adjustment required by this Section 5(b) shall be
made whenever any such distribution is made, and shall become effective on the
date of distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
(c) Combinations, Etc. If the Company at any time or from time to time
after April 15, 2002 shall combine or consolidate the outstanding shares of
Common Stock, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then, and in each such case, the Warrant Price then in effect
shall be increased, concurrently with the effectiveness of such combination or
consolidation, to a price (calculated to the nearest one cent) determined by
multiplying such Warrant Price by a fraction (i) the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to the
effectiveness of such combination or consolidation and (ii) the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after such effectiveness.
(d) Issuance of Additional Shares of Common Stock. In case the Company at
any time or from time to time after April 15, 2002 shall issue or sell
additional shares of Common Stock ("Additional Shares") for a consideration per
share less than the Current Market Value in effect on the earlier of (i) the
date on which the Company enters into a firm contract for the issuance and sale
of such Additional Shares (unless such contract specifies that the price will be
determined at a later date, then such later date shall apply to this clause (i))
or (ii), the date of actual issuance or sale of such Additional Shares, then, in
each such case, the Warrant Price in effect immediately prior to such date shall
be reduced, concurrently with such issuance or sale, to a price (calculated to
the nearest one cent) determined by multiplying such Warrant Price by a fraction
(x) the numerator of which shall be the sum of (A) the number of shares of
Common Stock outstanding immediately prior to such issue or sale, plus (B) the
number of shares of Common Stock which the aggregate consideration received by
the Company for the total number of such Additional Shares so issued or sold
would purchase at such Current Market Value, and (y) the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
issue or sale, provided that (a) treasury shares shall not be deemed to be
outstanding for purposes of this Section 5(d) and (b) the shares of Common Stock
then issuable pursuant to the terms of (i) the Warrants dated February 3, 1994,
(ii) this Warrant and (iii) the other Warrants issued pursuant to the Management
Agreement, dated as of March 31, 1999, as amended by letter dated April 15,
2002, between the Company and Infinity (the "Management Agreement"), shall be
deemed to be outstanding immediately prior to and after such issue or sale.
Notwithstanding anything contained herein to the contrary, no adjustment to the
Warrant Price shall be made pursuant to this Section 5(d) following the issuance
of Additional Shares pursuant to (1) Section 5(a) hereof, (2) the exercise of
any options or issuance of any shares under any options or purchase or other
rights that are outstanding on or prior to April 15, 2002 and that were issued
pursuant to any of the Company's employee stock option, appreciation or purchase
right plans, (3) the exercise of any options or purchase or other rights or the
issuance of any shares under any options or rights that are granted after April
15, 2002, whether in accordance with the terms of any of the Company's employee
stock option, appreciation or purchase right plans or otherwise, so long as the
exercise price of any such option, warrant, subscription or purchase right is
not less than the Market Price on the date that such grant is approved by the
Company's Board of Directors or a duly authorized committee thereof or, if
later, the date that such exercise price is established, (4) the exercise of any
other options, warrants or other subscription or purchase rights outstanding on
or prior to April 15, 2002, including without limitation, (a) the Warrants dated
February 3, 1994, (b) this Warrant and (c) the other Warrants issued pursuant to
the Management Agreement, (5) the exercise of any conversion or exchange rights
outstanding on or prior to April 15, 2002 issued by the Company, (6) the
exercise of any conversion or exchange rights issued by the Company after April
15, 2002, so long as the conversion or exchange price is not less than the
Market Price on the date that such issuance is approved by the Board of
Directors or a duly authorized committee thereof or, if later, the date that
such conversion or exchange price is established or (7) the issuance or sale of
Additional Shares pursuant to a firmly underwritten public offering of such
shares.
(e) Accountants' Report as to Adjustments. In each case of any adjustment
or readjustment in the Warrant Price, the Company at its expense will promptly
compute such adjustment or readjustment in accordance with the terms hereof and,
upon the reasonable request of the Holder, cause independent public accountants
of recognized national standing selected by the Company (which may be the
regular auditors of the Company) to verify such computation and prepare a report
setting forth such adjustment or readjustment and showing in reasonable detail
the method of calculation thereof and the facts upon which such adjustment or
readjustment is based, including a statement of (i) the number of shares of
Common Stock outstanding or deemed to be outstanding and (ii) the Warrant Price
in effect immediately prior to such adjustment or readjustment and as adjusted
and readjusted (if required by Section 5) on account thereto. The Company will
forthwith mail a copy of each such report to the holder of this Warrant. The
Company will also keep copies of all such reports at its principal office, and
will cause the same to be available for inspection at such office during normal
business hours by any holder of this Warrant or any prospective purchaser of a
Warrant designated in writing by the holder thereof.
(f) No Dilution or Impairment. The Company will not, by amendment of its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms hereof, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against dilution as provided herein. Without limiting the generality of
the foregoing, the Company (i) will not permit the par value of any shares of
Common Stock receivable upon the exercise of any Warrant to be increased to an
amount that exceeds the amount payable therefor upon such exercise, (ii) will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares upon
the exercise of this Warrant from time to time and (iii) will not take any
action which results in any adjustment of the Warrant Price if the total number
of shares of Common Stock issuable after such action upon the exercise of this
Warrant would exceed the total number of shares of Common Stock then authorized
by the Company's certificate of incorporation and available for the purpose of
issue upon such exercise.
(g) Exercise of Warrant in the Event of a Consolidation, Merger, Sale of
Assets, Reorganization, Etc.
(i) In case at any time after April 15, 2002, the Company shall be a party
to any Transaction except as provided in (iii) or (iv) below, then (A) upon the
consummation thereof this Warrant shall become exercisable with respect to all
shares of Common Stock covered hereby (whether or not it has otherwise become
exercisable with respect to such shares pursuant to Section 1) and shall be
deemed to have been exercised by the holder hereof without any act on the part
of such holder and without any obligation on the part of such holder to pay the
exercise price until presentation of this Warrant pursuant to clause (B) below,
and (B) this Warrant shall represent the right of such holder to receive (upon
presentation of this Warrant on or within thirty (30) days after the date of
such consummation together with payment of the aggregate exercise price payable
at the time of such consummation in accordance with Section 2 for all shares of
Common Stock issuable upon such exercise immediately prior to such
consummation), in lieu of the Common Stock issuable upon exercise of this
Warrant prior to such consummation, the cash, securities and other property to
which such holder would have been entitled upon the consummation of the
Transaction if such holder had exercised this Warrant immediately prior thereto.
(ii) The Company will not effect any Transaction unless, prior to the
consummation thereof, each corporation or entity (other than the Company) which
may be required to deliver any cash, securities or other property upon the
exercise of this Warrant as provided herein shall assume, by written instrument
delivered to the holder of this Warrant, the obligation to deliver to such
holder such cash, securities or other property as, in accordance with the
foregoing provision, such holder may be entitled to receive.
(iii) In case after January 2, 2003, the Company shall be a party to any
Transaction pursuant to which the aggregate value of the cash, securities and
other consideration payable for a share of Common Stock is less than the price
initially determined pursuant to the introductory paragraph hereof, this Warrant
shall terminate upon the consummation thereof.
(iv) In the event of any Transaction occurring during the period between
April 15, 2002 and January 2, 2003, the holder shall be entitled to receive on
January 2, 2003, the cash, securities and other property to which such holder
would have been entitled had such holder held the number of shares of Common
Stock issuable pursuant hereto immediately prior to the closing of such
Transaction. An appropriate adjustment to the consideration to be received by
the holder shall be made such that the value of such consideration received by
the holder shall be reduced (but not below zero) by an amount equal to 115% of
the Current Market Value of the shares issuable pursuant to this Warrant
determined immediately prior to a definitive agreement with respect to such
Transaction is first publicly announced.
(h) Notices of Corporate Action. In the event of any anticipated:
(i) taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution on such securities, or
(ii) Transaction, or
(iii)voluntary or involuntary dissolution, liquidation or winding-up of the
Company,
the Company will mail to the holder of this Warrant a notice specifying (A) the
date or expected date on which any such record is to be taken for the purpose of
such dividend or distribution or (B) the date or expected date on which any such
Transaction, dissolution, liquidation or winding-up is to take place and the
time, if any such time is to be fixed, as of which the holders of record of
Common Stock shall be entitled to exchange their shares of Common Stock for the
securities or other property deliverable upon such Transaction, dissolution,
liquidation or winding-up. Such notice shall be mailed at least twenty (20) days
prior to the date therein specified, in the case of any date referred to in the
foregoing clause (A), and at least thirty (30) days prior to the date therein
specified, in the case of the date referred to in the foregoing clause (B). (i)
Adjustments Prior to January 2, 2003. Notwithstanding any provision to the
contrary in this Section 5, in the event of any adjustment required to be made
pursuant to this Section 5 as a result of any event occurring during the period
between April 15, 2002 and January 2, 2003, the following provisions shall apply
and the corresponding adjustments shall be deemed made immediately after the
initial price per share is determined pursuant to the introductory paragraph
hereof:
(i) If any event occurs during such period giving rise to an adjustment
pursuant to paragraph (a) or (c) above, the Warrant Price shall not be adjusted
as provided for therein, but the number of shares issuable pursuant to this
Warrant shall be adjusted by multiplying such number of shares by a fraction of
which (A) the numerator is the number of shares the holder would have held
immediately after such event had the holder, immediately prior to such event,
held the full number of shares issuable pursuant to this Warrant and (B) the
denominator of which is such full number of shares.
(ii) If any event occurs during such period giving rise to an adjustment
pursuant to paragraph (b) above, the Warrant Price shall not be adjusted as
provided for therein, but the number of shares issuable pursuant to this Warrant
shall be adjusted by multiplying such number of shares by a fraction of which
(A) the numerator is the number of shares the holder would have held immediately
after such event had the holder, immediately prior to such event, held the full
number of shares issuable pursuant to this Warrant, plus the number of shares of
Common Stock the holder could have acquired immediately after such event at a
price equal to the Current Market Value calculated immediately after such event
with an amount equal to the value of the assets and securities the holder would
have received had the holder held such full number of shares immediately prior
to such event and (B) the denominator of which is the full number of shares
issuable immediately prior to such event pursuant to this Warrant.
(iii) If any event occurs during such period giving rise to an adjustment
pursuant to paragraph (d) above, the Warrant Price shall not be adjusted as
provided for therein, but the number of shares issuable pursuant to this Warrant
shall be adjusted, subject to the proviso and exceptions set forth in such
paragraph (d), by multiplying such number of shares by a fraction of which (A)
the numerator is the number of shares of Common Stock outstanding immediately
after such event and (B) the denominator is the sum of (1) the number of shares
of Common Stock outstanding immediately prior to such event, plus (2) the number
of shares of Common Stock which the aggregate consideration received by the
Company for the total number of shares issued or sold in connection with such
event would purchase at the Current Market Value calculated at the time set
forth in such paragraph (d).
(iv) If any event which would give rise to any adjustment pursuant to this
Section 5 occurs during the 15 trading day period in which the initial exercise
price pursuant to the introductory paragraph hereof is determined, the Market
Price on the trading days during such period occurring before such event used in
such determination shall be equitably adjusted on a similar basis to the
adjustments for such event required pursuant to this Section 5.
6. Definitions. As used herein, the following terms have the following
respective meanings:
Common Stock: The Company's (a) Common Stock, par value $0.01 per share,
and (b) Class B Stock, par value $0.01 per share.
Current Market Value: The average of the daily Market Price per share of
Common Stock for the period of five (5) days, ending on the day immediately
prior to the date of exercise of the Warrant pursuant to Section 2(b) or Section
2(d) as applicable or on the date determined pursuant to Section 5(d)(i) or
(ii), Section 5(g)(iv) or Section 5(i)(ii) or (i)(iii), as applicable, during
which the national securities exchanges were opened for trading, provided that
if an exercise of this Warrant occurs as a result of or in connection with the
consummation of a Transaction, Current Market Value shall be the aggregate value
of the cash, securities and other consideration payable for a share of Common
Stock in connection with such Transaction.
Market Price: Per share of Common Stock on any date specified herein shall
be (a) the last sale price, regular way, on such date or, if no such sale takes
place on such date, the average of the closing bid and asked prices on such
date, in each case as officially reported on the principal national securities
exchange on which the Common Stock is then listed or admitted to trading, or (b)
if such Common Stock is not then listed or admitted to trading on any national
securities exchange, but is designated as a national market system security by
the National Association of Securities Dealers, the last trading price of the
Common Stock on such date, or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the average of the reported
closing bid and asked prices on such date as shown by the National Association
of Securities Dealers Automated Quotation System.
Registration Rights Agreement: The Registration Rights Agreement, dated as
of March 30, 1999, as amended by letter dated April 15, 2002 between the Company
and the original holder hereof.
Transaction: A merger, consolidation, sale of all or substantially all of
the Company's assets, recapitalization of the Common Stock or other similar
transaction, in each case if the previously outstanding Common Stock is acquired
for cash or changed into or exchanged for different securities of the Company or
changed into or exchanged for common stock or other securities of another
corporation or interests in a noncorporate entity or other property (including
cash) or any combination of any of the foregoing.
Warrant Price: The meaning specified in Section 5.
7. Amendments and Waivers. Any term of this Warrant may be amended or
modified or the observance of any term of this Warrant may be waived (either
generally or in a particular instance) only with the written consent of the
Company and the holder of this Warrant.
8. Assignment. The provisions of this Warrant shall be binding upon and
inure to the benefit of the original holder hereof, its successors and assigns
by way of merger, consolidation or operation of law, and each third party
transferee of this Warrant, provided that this Warrant may only be transferred
in accordance with the terms of the Registration Rights Agreement and, in the
case of any third party transferee, such transferee shall have delivered to the
Company a valid agreement of assumption of the restriction on transfer specified
in this Section 8.
9. Exchange of Warrant. Upon surrender for exchange of this Warrant,
properly endorsed, for registration of Transfer or for exchange at the principal
office of the Company, the Company, at its expense, will issue and deliver to or
upon the order of the holder hereof a new Warrant or Warrants of like tenor, in
the name of such holder or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face of
this Warrant, provided that any such transfer of this Warrant is made in
accordance with the Registration Rights Agreement.
10. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
upon delivery of an indemnity bond in such reasonable amount as the Company may
determine (or, in the case of any Warrant held by the original holder hereof or
any affiliate thereof or an institutional holder or any of their respective
nominees, of an affidavit of an authorized officer of such holder, setting forth
the fact of such loss, theft or destruction, which shall be satisfactory
evidence thereof and no further indemnity shall be required as a condition of
the execution and delivery of a new Warrant), or, in the case of any such
mutilation, upon the surrender of such Warrant for cancellation to the Company
at its principal office, the Company at its expense will execute and deliver, in
lieu thereof, a new Warrant, of like tenor. Any Warrant in lieu of which any
such new Warrant has been so executed and delivered by the Company shall not be
deemed to be an outstanding Warrant for any purpose.
11. Remedies. The Company stipulates that the remedies at law of the holder
of this Warrant in the event of any default by the Company in the performance of
or in compliance with any of the terms of this Warrant are not and will not be
adequate, and that such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise without the
requirement of the posting of a bond.
12. No Rights or Liabilities as Stockholder. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company (except to the extent that shares of Common Stock are
issued to such holder pursuant to this Warrant) or as imposing any liabilities
on such holder to purchase any securities or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors or
stockholders of the Company or otherwise.
13. Notices. All notices and other communications under this Warrant shall
be in writing and shall be mailed by registered or certified mail, return
receipt requested, or by facsimile transmission, addressed (a) if to the holder,
at the registered address or the facsimile number of such holder as set forth in
the register kept at the principal office of the Company, and (b) if to the
Company, to the attention of the Secretary at its principal office, at 40 West
57th Street, 15th Floor, New York, New York 10019, or to its facsimile number
212-258-6099, Attention: Secretary, provided that the exercise of any Warrant
shall be effected in the manner provided in Section 2.
14. Legends. The shares of Common Stock issuable pursuant to the terms of
this Warrant shall bear a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY
NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, ASSIGNED OR OTHERWISE
ENCUMBERED OR DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
15. Miscellaneous. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. The headings
in this Warrant are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof.
Dated as of April 15, 2002.
WESTWOOD ONE, INC.
By:____________________________
Name:
Title:
FORM OF SUBSCRIPTION
[To be signed only upon exercise of the Warrant]
TO WESTWOOD ONE, INC.
[Strike paragraph below that does not apply]
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _______* shares of Common Stock of WESTWOOD ONE, INC. and
herewith makes payment of $ ________ therefor, and requests that the
certificates for such shares be issued in the name of
__________________________________, and delivered
to_______________________________, whose address is:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant and, in lieu
of paying the Warrant Price therefor, elects to receive pursuant to Section 2(d)
thereof _______* shares of Common Stock of WESTWOOD ONE, INC., and requests that
the certificates for such shares be issued in the name of
__________________________________, and delivered
to_______________________________, whose address is:
Dated:_________________________
_________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
_________________________________________
(Address)
*Insert here the number of shares called for on the face of the Warrant or,
in the case of a Net Exercise, the net number of shares resulting from
application of the formula set forth in Section 2(d) using the number of
shares called for on the face of the Warrant as Y in such formula, or, in
the case of a partial exercise, the portion thereof as to which the Warrant
is being exercised, in any case without making any adjustment for
additional shares of the Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions
referred to in Section 5 of the Warrant, may be deliverable upon exercise.
In the case of a partial exercise, a new Warrant or Warrants will be issued
and delivered, representing the unexercised portion of such Warrant, all as
provided in the Warrant.
FORM OF ASSIGNMENT
[To be signed only upon transfer of the Warrant]
For value received, the undersigned hereby sells, assigns and transfers
unto ____________________________ the rights represented by the within Warrant
to purchase shares of Common Stock of WESTWOOD ONE, INC. to which the within
Warrant relates, and appoints _________________________Attorney to transfer such
rights on the books of WESTWOOD ONE, INC. with full power of substitution in the
premises.
Dated:_________________________
________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
________________________________________
(Address)
Signed in the presence of:
______________________________
Name:
EXHIBIT D
Warrant to Purchase 500,000 Shares
of Common Stock
INCORPORATED UNDER THE LAWS OF THE STATE
OF DELAWARE
WESTWOOD ONE, INC.
THE SECURITIES EVIDENCED BY THIS WARRANT OR ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED, ASSIGNED OR OTHERWISE ENCUMBERED OR DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
WESTWOOD ONE, INC., a Delaware corporation (the "Company"), certifies that,
for value received, Infinity Broadcasting Corporation, a Delaware corporation
("Infinity"), or a designated affiliated entity (collectively, the "Holder"), is
entitled to purchase, from January 2, [2005] [2006] [2007] [2008] [2009] until
the close of business on the Termination Date (as defined in the next sentence),
Five Hundred Thousand (500,000) shares of Common Stock, par value $0.01 per
share, of the Company, at a price per share equal to the average Market Price
(as defined below) per share of Common Stock for each of the fifteen (15) days
on which the national securities exchanges are open for trading prior to January
2, 2004 (the "2004 Base Price"), plus an amount equal to a compounded annual
growth rate of 15% over the 2004 Base Price as of January 2, [2005] [2006]
[2007] [2008] [2009]; subject, however, to the provisions and upon the terms and
conditions hereinafter set forth. "Termination Date" shall mean January 2,
[2015] [2016] [2017] [2018] [2019].
1. Exercisability of Warrant. This Warrant shall become exercisable only if
the average Market Price per share of Common Stock, par value $0.01 per share,
of the Company for each of the fifteen (15) days prior to January 2, 2005]
[2006] [2007] [2008] [20090 on which the national securities exchanges are open
for trading is at least equal to the initial exercise price determined pursuant
to the introductory paragraph hereof, and if such average Market Price is equal
to or greater than (x) the average Market Price per share of Common Stock for
each of the fifteen (15) days prior to January 2, [2004] [2005] [2006] [2007]
[2008] on which the national securities exchange are open for trading,
multiplied (y) by 1.20; provided that this Warrant shall expire and shall
thereafter not become exercisable under any circumstances upon the termination
of the Management Agreement, but only if this Warrant shall not have become
exercisable pursuant to this Section 1 prior to such termination. If the
conditions for exercisability set forth in this Section 1 are not met as of
January 2, [2005] [2006] [2007] [2008] [2009], then this Warrant shall expire
and shall not become exercisable under any circumstances.
2. Method of Exercise, Payment, Issuance of New Warrant.
(a) This Warrant may be exercised by the holder hereof, in whole or in
part, by the surrender of this Warrant, properly endorsed, to the Company at its
principal office at 40 West 57th Street, 15th Floor, New York, New York 10019,
Attention: Secretary, and by (i) unless holder exercises this Warrant pursuant
to the Net Exercise procedure set forth in paragraph (d) below, the payment to
the Company of the then applicable Warrant Price of the Common Stock being
purchased ("Warrant Price" shall mean the price specified in the first paragraph
of this Warrant and such other prices as shall result from the adjustments
specified in Section 5 hereof); and (ii) delivery to the Company of the form of
subscription at the end hereof (or a
reasonable facsimile thereof).
(b) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the business day on which this
Warrant shall have been surrendered to the Company as provided in this Section
2, and at such time the person or persons in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon such exercise
shall be deemed to have become the holder or holders of record thereof.
(c) In the event of any exercise of the rights represented by this Warrant,
certificates for the shares of Common Stock so purchased shall be delivered at
the Company's expense (including the payment by the Company of any applicable
issuance taxes) to the holder hereof within five (5) business days after the
rights represented by this Warrant shall have been so exercised, and unless this
Warrant has expired, a new Warrant of like tenor representing the number of
shares of Common Stock, if any, with respect to which this Warrant shall not
then have been exercised, shall also be issued to the holder hereof within such
time.
(d) In connection with any exercise of this Warrant pursuant to this
Section 2, the holder may, at its option, elect, in lieu of paying the
applicable Warrant Price in cash to the Company and receiving the aggregate
number of shares of Common Stock that would otherwise be issuable hereunder, to
receive a number of shares of Common Stock determined in accordance with the
formula set forth below as of the date of surrender of the Warrant, for no
additional consideration, by so indicating on the form of subscription submitted
to the Company pursuant to paragraph (a) hereof (a "Net Exercise"):
X = Y(A-B)
A
X = the number of shares of Common Stock to be issued to the Holder.
Y = the number of shares of Common Stock with respect to which the Net
Exercise is being made.
A = the Current Market Value of one share of the Company's Common Stock as
of the date of surrender of the Warrant.
B = the Warrant Price as of the date of surrender of the Warrant.
3. Stock Fully Paid; Reservation of Shares. The Company covenants and
agrees that all shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable and free from all liens. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, at least the maximum number of shares
of its Common Stock as are then issuable upon the exercise of the rights
represented by this Warrant.
4. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder but in lieu of such fractional shares,
the Company shall make a cash payment therefor upon the basis of the Current
Market Value (as defined below) of the Common Stock.
5. Number of Shares Receivable Upon Exercise. The number of shares of
Common Stock receivable upon the exercise of this Warrant is subject to
adjustment upon the happening of certain events specified in this Section 5. For
the purposes of this Section 5, the "Warrant Price" referred to herein shall
initially be the price determined pursuant to the introductory paragraph hereof
and shall be adjusted and readjusted from time to time as provided in this
Section 5. Subject to Section 2(d) hereof, this Warrant shall be exercisable at
any time for that number of shares of Common Stock determined by multiplying the
number of shares of Common Stock which would otherwise (but for the provisions
of this Section 5) be issuable upon such exercise at such time by a fraction of
which (A) the numerator is the price initially determined pursuant to the
introductory paragraph hereof and (B) the denominator is the Warrant Price in
effect at the time of such exercise. The price to be paid for each such share of
Common Stock by the holder shall be the Warrant Price as adjusted pursuant to
this Section 5, provided that the price paid by the holder for any shares of
Common Stock upon exercise of this Warrant shall never be less than $0.01 per
share. The Warrant Price shall be subject to adjustment as follows:
(a) Stock Dividends, Stock Splits, Etc. If the Company at any time or from
time to time after April 15, 2002 shall issue additional shares of Common Stock
as a result of the declaration or payment of a dividend on the Common Stock
payable in Common Stock, or as a distribution to holders of Common Stock, or as
a result of a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock), then, and in each such
case, the Warrant Price then in effect shall be reduced, concurrently with the
issuance of such shares, to a price (calculated to the nearest cent) determined
by multiplying such Warrant Price by a fraction (i) the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
issuance of additional shares of Common Stock, and (ii) the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
issuance, provided that, for purposes of this Section 5(a), (x) additional
shares of Common Stock shall be deemed to have been issued (A) in the case of
any such dividend or distribution, immediately after the close of business on
the record date for the determination of holders of any class of securities
entitled to receive such dividend or distribution or (B) in the case of any such
subdivision, at the close of business on the date immediately prior to the day
upon which such corporate action becomes effective, (y) immediately after any
additional shares of Common Stock are deemed to have been issued, such
additional shares of Common Stock shall be deemed to be outstanding, and (z)
treasury shares shall be deemed not to be outstanding.
(b) Extraordinary Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding Common Stock evidences of
indebtedness of the Company, cash (other than a cash distribution made as a
dividend payable or to be payable at regularly scheduled intervals and payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the State of Delaware, but only to the extent that the
aggregate of all such dividends paid or declared after April 15, 2002 does not
exceed the consolidated net income of the Company earned subsequent to April 15,
2002, as determined in accordance with generally accepted accounting principles,
consistently applied) or assets or securities other than its Common Stock
(including stock of a subsidiary or securities convertible into or exercisable
for such stock but excluding dividends or distributions referred to in Section
5(a) above) (any such evidences of indebtedness, cash, assets or securities, the
"assets or securities"), then, in each case, the Warrant Price shall be adjusted
by subtracting from the Warrant Price then in effect the value of the assets or
securities that the holder would have been entitled to receive as a result of
such distribution had the Warrant been exercised and the relevant shares of
Common Stock issued in the name of the holder immediately prior to the record
date for such distribution; provided that if, after giving effect to such
adjustment, the Warrant Price would be less than the then par value of the
Common Stock, the Company shall distribute such assets or securities to the
holder as if the holder had exercised the Warrant and the shares of Common Stock
had been issued in the name of the holder immediately prior to the record date
for such distribution. Any adjustment required by this Section 5(b) shall be
made whenever any such distribution is made, and shall become effective on the
date of distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
(c) Combinations, Etc. If the Company at any time or from time to time
after April 15, 2002 shall combine or consolidate the outstanding shares of
Common Stock, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then, and in each such case, the Warrant Price then in effect
shall be increased, concurrently with the effectiveness of such combination or
consolidation, to a price (calculated to the nearest one cent) determined by
multiplying such Warrant Price by a fraction (i) the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to the
effectiveness of such combination or consolidation and (ii) the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after such effectiveness.
(d) Issuance of Additional Shares of Common Stock. In case the Company at
any time or from time to time after April 15, 2002 shall issue or sell
additional shares of Common Stock ("Additional Shares") for a consideration per
share less than the Current Market Value in effect on the earlier of (i) the
date on which the Company enters into a firm contract for the issuance and sale
of such Additional Shares (unless such contract specifies that the price will be
determined at a later date, then such later date shall apply to this clause (i))
or (ii), the date of actual issuance or sale of such Additional Shares, then, in
each such case, the Warrant Price in effect immediately prior to such date shall
be reduced, concurrently with such issuance or sale, to a price (calculated to
the nearest one cent) determined by multiplying such Warrant Price by a fraction
(x) the numerator of which shall be the sum of (A) the number of shares of
Common Stock outstanding immediately prior to such issue or sale, plus (B) the
number of shares of Common Stock which the aggregate consideration received by
the Company for the total number of such Additional Shares so issued or sold
would purchase at such Current Market Value, and (y) the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
issue or sale, provided that (a) treasury shares shall not be deemed to be
outstanding for purposes of this Section 5(d) and (b) the shares of Common Stock
then issuable pursuant to the terms of (i) the Warrants dated February 3, 1994,
(ii) this Warrant and (iii) the other Warrants issued pursuant to the Management
Agreement, dated as of March 31, 1999, as amended by letter amendment dated
April 15, 2002, between the Company and Infinity (the "Management Agreement"),
shall be deemed to be outstanding immediately prior to and after such issue or
sale. Notwithstanding anything contained herein to the contrary, no adjustment
to the Warrant Price shall be made pursuant to this Section 5(d) following the
issuance of Additional Shares pursuant to (1) Section 5(a) hereof, (2) the
exercise of any options or issuance of any shares under any options or purchase
or other rights that are outstanding on or prior to April 15, 2002 and that were
issued pursuant to any of the Company's employee stock option, appreciation or
purchase right plans, (3) the exercise of any options or purchase or other
rights or the issuance of any shares under any options or rights that are
granted after April 15, 2002, whether in accordance with the terms of any of the
Company's employee stock option, appreciation or purchase right plans or
otherwise, so long as the exercise price of any such option, warrant,
subscription or purchase right is not less than the Market Price on the date
that such grant is approved by the Company's Board of Directors or a duly
authorized committee thereof or, if later, the date that such exercise price is
established, (4) the exercise of any other options, warrants or other
subscription or purchase rights outstanding on or prior to April 15, 2002,
including without limitation, (a) the Warrants dated February 3, 1994, (b) this
Warrant and (c) the other Warrants issued pursuant to the Management Agreement,
(5) the exercise of any conversion or exchange rights outstanding on or prior to
April 15, 2002 issued by the Company, (6) the exercise of any conversion or
exchange rights issued by the Company after April 15, 2002, so long as the
conversion or exchange price is not less than the Market Price on the date that
such issuance is approved by the Board of Directors or a duly authorized
committee thereof or, if later, the date that such conversion or exchange price
is established or (7) the issuance or sale of Additional Shares pursuant to a
firmly underwritten public offering of such shares.
(e) Accountants' Report as to Adjustments. In each case of any adjustment
or readjustment in the Warrant Price, the Company at its expense will promptly
compute such adjustment or readjustment in accordance with the terms hereof and,
upon the reasonable request of the Holder, cause independent public accountants
of recognized national standing selected by the Company (which may be the
regular auditors of the Company) to verify such computation and prepare a report
setting forth such adjustment or readjustment and showing in reasonable detail
the method of calculation thereof and the facts upon which such adjustment or
readjustment is based, including a statement of (i) the number of shares of
Common Stock outstanding or deemed to be outstanding and (ii) the Warrant Price
in effect immediately prior to such adjustment or readjustment and as adjusted
and readjusted (if required by Section 5) on account thereto. The Company will
forthwith mail a copy of each such report to the holder of this Warrant. The
Company will also keep copies of all such reports at its principal office, and
will cause the same to be available for inspection at such office during normal
business hours by any holder of this Warrant or any prospective purchaser of a
Warrant designated in writing by the holder thereof.
(f) No Dilution or Impairment. The Company will not, by amendment of its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms hereof, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against dilution as provided herein. Without limiting the generality of
the foregoing, the Company (i) will not permit the par value of any shares of
Common Stock receivable upon the exercise of any Warrant to be increased to an
amount that exceeds the amount payable therefor upon such exercise, (ii) will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares upon
the exercise of this Warrant from time to time and (iii) will not take any
action which results in any adjustment of the Warrant Price if the total number
of shares of Common Stock issuable after such action upon the exercise of this
Warrant would exceed the total number of shares of Common Stock then authorized
by the Company's certificate of incorporation and available for the purpose of
issue upon such exercise.
(g) Exercise of Warrant in the Event of a Consolidation, Merger, Sale of
Assets, Reorganization, Etc.
(i) In case at any time after April 15, 2002, the Company shall be a party
to any Transaction except as provided in (iii) or (iv) below, then (A) upon the
consummation thereof this Warrant shall become exercisable with respect to all
shares of Common Stock covered hereby (whether or not it has otherwise become
exercisable with respect to such shares pursuant to Section 1) and shall be
deemed to have been exercised by the holder hereof without any act on the part
of such holder and without any obligation on the part of such holder to pay the
exercise price until presentation of this Warrant pursuant to clause (B) below,
and (B) this Warrant shall represent the right of such holder to receive (upon
presentation of this Warrant on or within thirty (30) days after the date of
such consummation together with payment of the aggregate exercise price payable
at the time of such consummation in accordance with Section 2 for all shares of
Common Stock issuable upon such exercise immediately prior to such
consummation), in lieu of the Common Stock issuable upon exercise of this
Warrant prior to such consummation, the cash, securities and other property to
which such holder would have been entitled upon the consummation of the
Transaction if such holder had exercised this Warrant immediately
prior thereto.
(ii) The Company will not effect any Transaction unless, prior to the
consummation thereof, each corporation or entity (other than the Company) which
may be required to deliver any cash, securities or other property upon the
exercise of this Warrant as provided herein shall assume, by written instrument
delivered to the holder of this Warrant, the obligation to deliver to such
holder such cash, securities or other property as, in accordance with the
foregoing provision, such holder may be entitled to receive.
(iii) In case after January 2, 2004 the Company shall be a party to any
Transaction pursuant to which the aggregate value of the cash, securities and
other consideration payable for a share of Common Stock is less than the price
initially determined pursuant to the introductory paragraph hereof, this Warrant
shall terminate upon the consummation thereof.
(iv) Upon termination of the Management Agreement in accordance with its
terms in connection with any Transaction, if this Warrant shall not have become
exercisable pursuant to Section 1 hereof, this Warrant shall expire and shall
thereafter not become exercisable under any circumstances. In the event of any
Transaction occurring prior to the first date of exercisability hereof, in
connection with which the Management Agreement is not terminated, the
corporation or other entity or entities which shall acquire the Company or shall
be the successor thereto shall issue to the holder a new warrant which shall
reflect as closely as possible the economic and incentive, as well as the other,
terms and conditions of this Warrant. The Company, the holder hereof and such
corporation, entity or entities shall negotiate the terms and conditions of such
new warrant in good faith and if such parties are unable to agree to such terms
and conditions prior to the consummation of the Transaction, such parties shall
appoint a mutually acceptable independent accounting firm to determine such
terms and conditions.
(h) Notices of Corporate Action. In the event of any anticipated:
(i) taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution on such securities, or
(ii) Transaction, or
(iii)voluntary or involuntary dissolution, liquidation or winding-up of the
Company,
the Company will mail to the holder of this Warrant a notice specifying (A) the
date or expected date on which any such record is to be taken for the purpose of
such dividend or distribution or (B) the date or expected date on which any such
Transaction, dissolution, liquidation or winding-up is to take place and the
time, if any such time is to be fixed, as of which the holders of record of
Common Stock shall be entitled to exchange their shares of Common Stock for the
securities or other property deliverable upon such Transaction, dissolution,
liquidation or winding-up. Such notice shall be mailed at least twenty (20) days
prior to the date therein specified, in the case of any date referred to in the
foregoing clause (A), and at least thirty (30) days prior to the date therein
specified, in the case of the date referred to in the foregoing clause (B).
(i) Adjustments Prior to January 2, 2004. Notwithstanding any provision to
the contrary in this Section 5, in the event of any adjustment required to be
made pursuant to this Section 5 as a result of any event occurring during the
period between April 15, 2002 and January 2, 2004, the following provisions
shall apply and the corresponding adjustments shall be deemed made immediately
after the initial price per share is determined pursuant to the introductory
paragraph hereof:
(i) If any event occurs during such period giving rise to an adjustment
pursuant to paragraph (a) or (c) above, the Warrant Price shall not be adjusted
as provided for therein, but the number of shares issuable pursuant to this
Warrant shall be adjusted by multiplying such number of shares by a fraction of
which (A) the numerator is the number of shares the holder would have held
immediately after such event had the holder, immediately prior to such event,
held the full number of shares issuable pursuant to this Warrant and (B) the
denominator of which is such full number of shares.
(ii) If any event occurs during such period giving rise to an adjustment
pursuant to paragraph (b) above, the Warrant Price shall not be adjusted as
provided for therein, but the number of shares issuable pursuant to this Warrant
shall be adjusted by multiplying such number of shares by a fraction of which
(A) the numerator is the number of shares the holder would have held immediately
after such event had the holder, immediately prior to such event, held the full
number of shares issuable pursuant to this Warrant, plus the number of shares of
Common Stock the holder could have acquired immediately after such event at a
price equal to the Current Market Value calculated immediately after such event
with an amount equal to the value of the assets and securities the holder would
have received had the holder held such full number of shares immediately prior
to such event and (B) the denominator of which is the full number of shares
issuable immediately prior to such event pursuant to this Warrant.
(iii) If any event occurs during such period giving rise to an adjustment
pursuant to paragraph (d) above, the Warrant Price shall not be adjusted as
provided for therein, but the number of shares issuable pursuant to this Warrant
shall be adjusted, subject to the proviso and exceptions set forth in such
paragraph (d), by multiplying such number of shares by a fraction of which (A)
the numerator is the number of shares of Common Stock outstanding immediately
after such event and (B) the denominator is the sum of (1) the number of shares
of Common Stock outstanding immediately prior to such event, plus (2) the number
of shares of Common Stock which the aggregate consideration received by the
Company for the total number of shares issued or sold in connection with such
event would purchase at the Current Market Value calculated at the time set
forth in such paragraph (d).
(iv) If any event which would give rise to any adjustment pursuant to this
Section 5 occurs during the 15 trading day period in which the initial exercise
price pursuant to the introductory paragraph hereof is determined, the Market
Price on the trading days during such period occurring before such event used in
such determination shall be equitably adjusted on a similar basis to the
adjustments for such event required pursuant to this Section 5.
6. Definitions. As used herein, the following terms have the following
respective meanings:
Common Stock: The Company's (a) Common Stock, par value $0.01 per share,
and (b) Class B Stock, par value $0.01 per share.
Current Market Value: The average of the daily Market Price per share of
Common Stock for the period of five (5) days, ending on the day immediately
prior to the date of exercise of the Warrant pursuant to Section 2(b) or Section
2(d), as applicable, or on the date determined pursuant to Section 5(d)(i) or
(ii), Section 5(g)(iv) or Section 5(i)(ii) or (i)(iii), as applicable, during
which the national securities exchanges were opened for trading, provided that
if an exercise of this Warrant occurs as a result of or in connection with the
consummation of a Transaction, Current Market Value shall be the aggregate value
of the cash, securities and other consideration payable for a share of Common
Stock in connection with such Transaction.
Market Price: Per share of Common Stock on any date specified herein shall
be (a) the last sale price, regular way, on such date or, if no such sale takes
place on such date, the average of the closing bid and asked prices on such
date, in each case as officially reported on the principal national securities
exchange on which the Common Stock is then listed or admitted to trading, or (b)
if such Common Stock is not then listed or admitted to trading on any national
securities exchange, but is designated as a national market system security by
the National Association of Securities Dealers, the last trading price of the
Common Stock on such date, or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the average of the reported
closing bid and asked prices on such date as shown by the National Association
of Securities Dealers Automated Quotation System.
Registration Rights Agreement: The Registration Rights Agreement, dated as
of March 30, 1999, as amended by letter amendment dated April 15, 2002 between
the Company and the original holder hereof.
Transaction: A merger, consolidation, sale of all or substantially all of
the Company's assets, recapitalization of the Common Stock or other similar
transaction, in each case if the previously outstanding Common Stock is acquired
for cash or changed into or exchanged for different securities of the Company or
changed into or exchanged for common stock or other securities of another
corporation or interests in a noncorporate entity or other property (including
cash) or any combination of any of the foregoing.
Warrant Price: The meaning specified in Section 5.
7. Amendments and Waivers. Any term of this Warrant may be amended or
modified or the observance of any term of this Warrant may be waived (either
generally or in a particular instance) only with the written consent of the
Company and the holder of this Warrant.
8. Assignment. The provisions of this Warrant shall be binding upon and
inure to the benefit of the original holder hereof, its successors and assigns
by way of merger, consolidation or operation of law, and each third party
transferee of this Warrant, provided that this Warrant may only be transferred
in accordance with the terms of the Registration Rights Agreement and, in the
case of any third party transferee, such transferee shall have delivered to the
Company a valid agreement of assumption of the restriction on transfer specified
in this Section 8.
9. Exchange of Warrant. Upon surrender for exchange of this Warrant,
properly endorsed, for registration of Transfer or for exchange at the principal
office of the Company, the Company, at its expense, will issue and deliver to or
upon the order of the holder hereof a new Warrant or Warrants of like tenor, in
the name of such holder or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face of
this Warrant, provided that any such transfer of this Warrant is made in
accordance with the Registration Rights Agreement.
10. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
upon delivery of an indemnity bond in such reasonable amount as the Company may
determine (or, in the case of any Warrant held by the original holder hereof or
any affiliate thereof or an institutional holder or any of their respective
nominees, of an affidavit of an authorized officer of such holder, setting forth
the fact of such loss, theft or destruction, which shall be satisfactory
evidence thereof and no further indemnity shall be required as a condition of
the execution and delivery of a new Warrant), or, in the case of any such
mutilation, upon the surrender of such Warrant for cancellation to the Company
at its principal office, the Company at its expense will execute and deliver, in
lieu thereof, a new Warrant, of like tenor. Any Warrant in lieu of which any
such new Warrant has been so executed and delivered by the Company shall not be
deemed to be an outstanding Warrant for any purpose.
11. Remedies. The Company stipulates that the remedies at law of the holder
of this Warrant in the event of any default by the Company in the performance of
or in compliance with any of the terms of this Warrant are not and will not be
adequate, and that such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise without the
requirement of the posting of a bond.
12. No Rights or Liabilities as Stockholder. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company (except to the extent that shares of Common Stock are
issued to such holder pursuant to this Warrant) or as imposing any liabilities
on such holder to purchase any securities or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors or
stockholders of the Company or otherwise.
13. Notices. All notices and other communications under this Warrant shall
be in writing and shall be mailed by registered or certified mail, return
receipt requested, or by facsimile transmission, addressed (a) if to the holder,
at the registered address or the facsimile number of such holder as set forth in
the register kept at the principal office of the Company, and (b) if to the
Company, to the attention of the Secretary at its principal office, at 40 West
57th Street, 15th Floor, New York, New York 10019, or to its facsimile number
212-258-6099, Attention: Secretary, provided that the exercise of any Warrant
shall be effected in the manner provided in Section 2.
14. Legends. The shares of Common Stock issuable pursuant to the terms of
this Warrant shall bear a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY
NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, ASSIGNED OR OTHERWISE
ENCUMBERED OR DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
15. Miscellaneous. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. The headings
in this Warrant are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof.
Dated as of April 15, 2002.
WESTWOOD ONE, INC.
By:_______________________________
Name:
Title:
FORM OF SUBSCRIPTION
[To be signed only upon exercise of the Warrant]
TO WESTWOOD ONE, INC.
[Strike paragraph below that does not apply]
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _______* shares of Common Stock of WESTWOOD ONE, INC. and
herewith makes payment of $ ________ therefor, and requests that the
certificates for such shares be issued in the name of
__________________________________, and delivered
to_______________________________, whose address is:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant and, in lieu
of paying the Warrant Price therefor, elects to receive pursuant to Section 2(d)
thereof _______* shares of Common Stock of WESTWOOD ONE, INC., and requests that
the certificates for such shares be issued in the name of
__________________________________, and delivered
to_______________________________, whose address is:
Dated:_________________________
_________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
_________________________________________
(Address)
*Insert here the number of shares called for on the face of the Warrant or, in
the case of a Net Exercise, the net number of shares resulting from application
of the formula set forth in Section 2(d) using the number of shares called for
on the face of the Warrant as Y in such formula, or, in the case of a partial
exercise, the portion thereof as to which the Warrant is being exercised, in any
case without making any adjustment for additional shares of the Common Stock or
any other stock or other securities or property or cash which, pursuant to the
adjustment provisions referred to in Section 5 of the Warrant, may be
deliverable upon exercise. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the unexercised portion of
such Warrant, all as provided in the Warrant.
FORM OF ASSIGNMENT
[To be signed only upon transfer of the Warrant]
For value received, the undersigned hereby sells, assigns and transfers
unto ____________________________ the rights represented by the within Warrant
to purchase shares of Common Stock of WESTWOOD ONE, INC. to which the within
Warrant relates, and appoints _________________________Attorney to transfer such
rights on the books of WESTWOOD ONE, INC. with full power of substitution in the
premises.
Dated:_________________________
__________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
__________________________________
(Address)
Signed in the presence of:
______________________________
Name: