<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
WESTWOOD ONE, INC.
_____________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
WESTWOOD ONE, INC.
_____________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_______________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
_______________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________________________________________
Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
_______________________________________________________________________
2) Form, Schedule or Registration Statement No.:
_______________________________________________________________________
3) Filing Party:
_______________________________________________________________________
4) Date Filed:
_______________________________________________________________________
<PAGE>
Dear Shareholders:
Enclosed with this letter is a Proxy Statement and proxy card for
the Annual Meeting of Shareholders to be held on August 18, 1994 at 10:00 a.m.,
Pacific Time, in the Marquis Room of the Westwood Marquis, 930 Hilgard
Avenue, Los Angeles, California. A copy of the Company's Annual Report on
Form 10-K, as amended by Form 10-K/A, for the year ended November 30, 1993,
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.
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, vote upon a proposal to approve certain
amendments to the Company's Amended 1989 Stock Incentive Plan, vote upon a
proposal to approve the incentive compensation provision of the employment
agreement between the Company and its Chairman of the Board, vote upon a
proposal to ratify the selection of independent accountants for the Company
and conduct such other business as may properly come before the meeting.
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.
/s/ Norman J. Pattiz
--------------------
Norman J. Pattiz
Chairman of the Board
July 20, 1994
<PAGE>
WESTWOOD ONE, INC.
9540 Washington Boulevard
Culver City, California 90232
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on
August 18, 1994
To Our Shareholders:
The Annual Meeting of the Shareholders of Westwood One, Inc. (the
"Company") will be held in the Marquis Room of the Westwood Marquis, 930 Hilgard
Avenue, Los Angeles, California, on August 18, 1994 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 approve the amendments to the Company's
Amended 1989 Stock Incentive Plan (the
"Plan") to: (i) increase by 2,000,000
the number of shares of the Company's
Common Stock (the "Common Stock") as to
which options may be granted under the
Plan; (ii) set a maximum number of shares
of Common Stock as to which stock options
may be awarded under the Plan to any
particular individual and amend certain
other provisions of the Plan to preserve
the deductibility by the Company for
Federal income tax purposes of
compensation payable thereunder; and
(iii) amend certain provisions of the
Plan regarding the mandatory grant of
stock options to outside directors;
(3) To approve the incentive compensation
provision of the employment agreement
between the Company and its Chairman
of the Board, thereby preserving the
deductibility by the Company for Federal
income tax purposes of cash compensation
payable thereunder;
(4) To ratify the selection of Price
Waterhouse as the Company's independent
accountants for the fiscal year ending
November 30, 1994; 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 July 7, 1994 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 City National Bank, Corporate
Trust Department, 120 South Spalding Drive, Beverly Hills, California
90212 (telephone (310) 550-5821).
Whether or not you intend to be present at the meeting, please 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 prefer to vote in
person.
By Order of the Board of Directors
/s/ Farid Suleman
-----------------
Farid Suleman
Secretary
July 20, 1994
<PAGE>
WESTWOOD ONE, INC.
9540 Washington Boulevard
Culver City, California 90232
-----------------------------
PROXY STATEMENT
-----------------------------
This Proxy Statement (first mailed to shareholders on or about
July 20, 1994) is furnished in connection with the solicitation of proxies by
the management of Westwood One, Inc., a Delaware corporation, (the "Company")
for use at the Annual Meeting of Shareholders of the Company to be held on
August 18, 1994 at 10:00 a.m., Pacific Time, in the Marquis Room of the
Westwood Marquis, 930 Hilgard Avenue, Los Angeles, California, and any
adjournments thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders.
Holders of record of the Common Stock and Class B Stock at the close
of business on July 7, 1994 are entitled to vote at the Annual Meeting. As
of the close of business on July 7, 1994, 30,443,652 shares of Common Stock
and 351,733 shares of Class B Stock were issued and outstanding.
Each holder of outstanding Common Stock is entitled to cast one (1)
vote for each share of Common Stock held by such holder. 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. 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, vote upon the three
proposals and conduct such other business that may properly come before the
meeting.
A majority of the outstanding votes entitled to be cast at the Annual
Meeting and represented in person or by proxy will constitute a quorum. With
regard to the election of directors and any other proposal submitted to a vote,
approval requires the affirmative vote of a majority of the votes entitled to
be cast and represented in person or by proxy at the meeting. Where a choice
is specified on the proxy as to the vote on any matter to come before the
meeting, the proxy will be voted in accordance with such specification. If no
specification is made, but the proxy is properly signed, the shares represented
thereby will be voted in favor of the director nominees, in favor of the
proposal to approve the amendments to the Company's Amended 1989 Stock Incentive
Plan, in favor of the proposal to approve the incentive compensation provision
of the Chairman of the Board's employment agreement and in favor of the
ratification of the selection of Price Waterhouse as the Company's independent
accountants. 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 proxies will vote upon such
matters in accordance with their best judgement.
Shares represented by proxies which are marked "abstain," "withhold
authorization" or to deny discretionary authority on any matter will be counted
as shares present for purposes of determining the presence of a quorum; such
shares will also be treated as shares present and entitled to vote, which will
have the same effect as a vote against any such matter. Proxies relating to
"street name" shares which are not voted by brokers on one or more matters
will not be treated as shares present for purposes of determining the presence
of a quorum unless they are voted by the broker on at least one matter. Such
non-voted shares will not be treated as shares represented at the meeting as
to any matter for which non-vote is indicated on the broker's proxy.
Any shareholder submitting the accompanying proxy card has the right
to revoke it by notifying the Secretary of the Company in writing at any time
prior to the voting of the proxy, or by signing and delivering to the Secretary
a later-dated proxy. A proxy will be automatically revoked if the person giving
the proxy attends the Annual Meeting and chooses to vote in person.
The Company's Annual Report on Form 10-K, as amended by Form 10-K/A,
for the year ended November 30, 1993, including consolidated financial
statements and other information, accompanies this Proxy Statement but does
not form a part of the proxy soliciting material.
- 1 -
<PAGE>
ELECTION OF DIRECTORS
At a Special Meeting of Shareholders held on January 28, 1994, the
Company's shareholders approved, among other matters as more fully discussed
elsewhere in this report, a Voting Agreement entered into among: (i) the
Company; (ii) Infinity Network, Inc. ("INI"), a subsidiary of Infinity
Broadcasting Corporation ("Infinity"); and (iii) Norman J. Pattiz, the
Company's current Chairman of the Board. The Voting Agreement, which became
effective February 3, 1994, reconstituted the Board of Directors into a
nine-member Board to which Mr. Pattiz has the right to designate three
members (the "Pattiz Designees"), INI has the right to designate three
members (the "INI Designees") and a nominating committee consisting of
one Pattiz Designee and one INI Designee has the right to designate the
final three directors ("Independents"), all of whom must be independent
outside directors as defined in the Company's By-Laws. The Voting Agreement
also requires: (i) Mr. Pattiz and INI to vote their respective shares of the
Common Stock in favor of their respective Designees to the Board of Directors;
and (ii) Mr. Pattiz to vote all of his shares of Class B Stock in accordance
with the recommendation of the majority of the full incumbent Board of
Directors on any matters presented to the Company's shareholders.
As reconstituted, the Board of Directors currently consists of nine
individuals and is divided into three classes (Class I, II, and III), each
class serving for three-year terms, which terms do not coincide. Only one
class of directors is elected at each Annual Meeting. Of the directors, at
least 331/3% 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 currently amounts to two
members. However, it is currently intended that the holders of the Common
Stock will vote alone to elect the three Independents, one of which 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 II director, and holders of Common Stock and Class
B Stock, voting together, will elect the other two Class II directors, for
three-year terms, until their successors are elected and qualified. The Board
of Directors intends to nominate Arthur E. Levine, Farid Suleman and David L.
Dennis to serve for three-year terms ending in 1997. All of these nominees
currently serve as Class II 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 management proxy holders will vote
for one or more other persons nominated by the Board of Directors.
MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE TO ELECT MESSRS. LEVINE, SULEMAN
AND DENNIS AS DIRECTORS OF THE COMPANY.
The current and continuing directors of the Company are:
<TABLE>
<CAPTION>
Director Term
Name Age Since Class Expires
- - ---- --- -------- ----- -------
<S> <C> <C> <C> <C>
Norman J. Pattiz......(Pattiz Designee).....51 1974 I 1995
Mel Karmazin..........(INI Designee)........50 1994 I 1995
Joseph B. Smith.......(Independent).........66 1994 I 1995
Arthur E. Levine......(Pattiz Designee).....42 1991 II 1994
Farid Suleman.........(INI Designee)........42 1994 II 1994
David L. Dennis.......(Independent).........45 1994 II 1994
Paul G. Krasnow.......(Pattiz Designee).....56 1989 III 1996
William J. Hogan......(INI Designee)........50 1994 III 1996
Gerald Greenberg......(Independent).........51 1994 III 1996
</TABLE>
- 2 -
<PAGE>
The principal occupations of the three director nominees and each of
the other six current 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. He currently serves on the Board
of Directors of the Radio Advertising Bureau, along with the chief executives
of other major broadcast companies.
Mr. Karmazin - has been a director and has held the position of
President and Chief Executive Officer of the Company since February 3, 1994.
He is also President and Chief Executive Officer of Infinity and has held
these offices since 1988. He was Executive Vice President of Infinity from
1981 until 1988. Mr. Karmazin has been a director of Infinity since 1984.
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. He was President and Chief Executive Officer of EMI/Capitol
Records until April 1, 1993. Mr. Smith is currently an industry consultant
involved in a number of production projects in the music business, Executive
Producer for World Cup Soccer Entertainment and a consultant to Blockbuster
Entertainment.
Mr. Levine - has been a director of the Company since May 1991.
Additionally, he was an independent financial consultant to the Company from
June 1990 through February 1994. For the last eight years Mr. Levine has
been a private investor. Mr. Levine is a principal in the investment
partnership of Levine Leichtman Capital Partners, L.P.
Mr. Suleman - has been a director and has held the position of Chief
Financial Officer of the Company since February 3, 1994. He is also Vice
President - Finance and Chief Financial Officer of Infinity and has held
these offices since 1986. Mr. Suleman has been a director of Infinity since
February 1992.
Mr. Dennis - has been a director of the Company since May 24, 1994.
Mr. Dennis has served as Managing Director, Investment Banking for Donaldson,
Lufkin & Jenrette Securities Corporation since April 1989. Mr. Dennis is
also a director of Community Psychiatric Centers, Inc.
Mr. Krasnow - has been a director of the Company since January 1989.
Since September 1974, he has been the President and sole shareholder of
Krasnow Insurance Services, Inc., an insurance agency providing life,
disability and health benefits, of which he is the sole agent.
Mr. Hogan - has been a director of the Company since March 7, 1994.
Mr. Hogan was appointed President - Westwood One Radio Networks in April 1994.
From August 1989 to April 1994 he was President - Unistar Radio Networks
(formerly United Stations Radio Networks). He served as Vice President and
General Manager of United Stations Radio Networks from April 1985 to August
1989.
Mr. Greenberg - has been a director of the Company since May 24, 1994.
Since April 1993, Mr. Greenberg has served as President of MJJ Music, a
Michael Jackson/Sony owned record label. From June 1988 to April 1993, he
served as President of WTG/Sony Records.
- 3 -
<PAGE>
Committees of the Board
The Board of Directors has a Compensation Committee which consisted
of Messrs. Levine and Krasnow through March 16, 1993. Effective March 16,
1993 Mr. Smith replaced Mr. Levine on the Compensation Committee and served
with Mr. Krasnow through February 3, 1994. Effective May 24, 1994, Mr. Smith
was appointed to the Compensation Committee and Mr. Greenberg replaced Mr.
Krasnow. The Compensation Committee administers the Company's Amended 1989
Stock Incentive Plan and is authorized to negotiate employment arrangements
with key executives of the Company and its subsidiaries. There were ten
meetings of the Compensation Committee during fiscal 1993.
The Board of Directors also has an Audit Committee which consisted of
Messrs. Levine and Krasnow during all of fiscal 1993. Effective May 24, 1994,
Mr. Dennis replaced Mr. Krasnow and Mr. Suleman was added as a third member.
The Audit Committee is authorized to review the Company's financial statements,
meet with the Company's auditors, and make recommendations to the Board of
Directors about internal accounting controls and procedures. There were eight
meetings of the Audit Committee during fiscal 1993.
Director Attendance and Compensation
In fiscal 1993 the Board as a whole met on twelve occasions. During
fiscal 1993, each of the current directors who was then in office attended at
least 75% of the meetings of the Board of Directors and all meetings of
committees of the Board of Directors on which such director served.
Directors of the Company who are not officers received $2,500 per
meeting attended for their services as directors or committee members through
March 16, 1993. Effective March 16, 1993, director and committee fees were
increased to $3,750 per meeting attended, except for certain specified Audit
Committee meetings for which fees were $1,500. Effective May 24, 1994, the
fees for all committee meeting attendance were lowered to $1,875. Directors
are also reimbursed for expenses incurred in attending such meetings. During
fiscal 1993, Messrs. Krasnow, Levine and Smith received $96,000, $77,000 and
$59,000, respectively, in Board and Board committee fees. Mr. Levine also
received compensation pursuant to a consulting arrangement with the Company
(see "Compensation Committee Interlocks and Insider Participation" appearing
elsewhere in this report). Effective May 24, 1994, all independent outside
directors receive a mandatory grant of stock options to acquire 10,000 shares
of Common Stock every four years under the terms of the Company's Amended 1989
Stock Incentive Plan (see "PROPOSAL TO APPROVE THE AMENDMENTS OF THE AMENDED
1989 STOCK INCENTIVE PLAN" appearing elsewhere in this report).
Principal Shareholders
The following table sets forth as of July 7, 1994, the number and
percentage of outstanding shares of Common Stock and Class B Stock held by:
(1) each person or group known to the Company to beneficially own more than
five percent of the outstanding Common Stock or Class B Stock of the Company;
(2) each of the three director nominees and each of the other six current
directors; (3) the Named Executive Officers (see "EXECUTIVE COMPENSATION"
appearing elsewhere in this report); and (4) all current directors and executive
officers as a group. At July 7, 1994, there were 30,443,652 shares of Common
Stock outstanding and 351,733 shares of Class B Stock outstanding.
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
ofan option or the conversion of a debenture into common stock) 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.
- 4 -
<PAGE>
<TABLE>
<CAPTION>
Shares of Common Stock Shares of Class B Stock
Beneficially Owned (1) Beneficially Owned (1)
---------------------- -----------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Norman J. Pattiz (2) (10)................... 1,787,790 (3) 5.8% 351,690 99.9%
Mel Karmazin................................ 126,000 * - -
Gerald Greenberg............................ - - - -
Arthur E. Levine............................ 95,000 (6) * - -
Farid Suleman............................... - - - -
David L. Dennis............................. 16,000 (4) * - -
Paul G. Krasnow............................. 98,750 (5) * - -
William J. Hogan............................ - - - -
Joseph B. Smith............................. 33,750 * - -
Gregory P. Batusic.......................... 12,500 (6) * - -
Eric R. Weiss............................... 82,500 (6) * - -
Bruce E. Kanter............................. 291,500 * - -
Robert M. Wilson............................ 25,000 * - -
Infinity Network Inc.,
a subsidiary of Infinity
Broadcasting Corporation (9) (10)......... 5,000,000 16.4% - -
600 Madison Avenue
New York, NY 10022
Putnam Investments, Inc. (9)................ 2,723,383 (8) 8.9% - -
One Post Office Square
Boston, MA 02109
All current directors and executive officers
as a group (11 persons)................... 2,252,290 (7) 7.2% 351,690 99.9%
</TABLE>
[FN]
____________________________________
* Represents less than one percent (1%) of the Company's outstanding shares
of Common Stock.
(1) The persons named in the table have sole voting and investment
power with respect to all shares of Common Stock and Class B
stock, unless otherwise indicated.
(2) As of July 7, 1994, Mr. Pattiz, whose business address is 9540
Washington Boulevard, Culver City, California 90232, owned
Common Stock and Class B Stock representing approximately 39.2%
of the total voting power of the Company.
(3) Includes stock options for 525,000 shares granted pursuant to
Mr. Pattiz' 1986 Employment Agreement (see "1993 Compensation
for Chief Executive Officer" under "Compensation Committee Report"
appearing elsewhere in this report) and 18,750 shares under the
Company's Amended 1989 Stock Incentive Plan.
(4) Includes 15,000 shares which may be acquired upon exercise of
warrants at an exercise price of $2.375 per share.
(5) Includes stock options for 83,750 shares granted under the Company's
Amended 1989 Stock Incentive Plan.
(6) Represents stock options granted under the Company's Amended 1989
Stock Incentive Plan.
(7) Includes stock options for 822,500 shares granted under the Company's
Amended 1989 Stock Incentive Plan and Mr. Pattiz' 1986 Employment
Agreement.
(8) Putnam Investments, Inc. as an investment advisor has no sole voting
dispositive power, but has shared voting and dispositive power for
2,723,383 shares. All information provided is based upon information
contained in the most recent 13G filing made available to the
Company.
- 5 -
<PAGE>
(9) Tabular information and footnote 8 are based upon information
contained in Schedule 13G filings and other information made
available to the Company.
(10) Pursuant to the terms of the Voting Agreement (as discussed under
"ELECTION OF DIRECTORS" appearing elsewhere in this report),
Mr. Pattiz and INI will vote their respective shares of the Company's
Common stock in favor of their respective designees to the Board of
Directors. Accordingly, Mr. Pattiz and INI together beneficially own
6,787,790 shares (21.9%) of the Common Stock with respect to election
of directors. Pursuant to the Voting Agreement, Mr. Pattiz also is
required to vote all of his shares of Class B Stock in accordance
with the recommendation of the full incumbent Board of Directors on
any matters presented to the Company's shareholders. Mr. Pattiz'
and INI's beneficially owned Common Stock, voting together,
represents approximately 13% of the Company's total voting power.
Mr. Pattiz' and INI's beneficially owned Common Stock and Class B
Stock, voting together, represents approximately 50.7% of the
Company's total voting power.
Executive Officers
The names, ages and principal occupations (if not set out previously) of
the current executive officers of the Company and its subsidiaries are as
follows:
<TABLE>
Name Age Position
---- --- --------
<S> <C> <C>
Norman J. Pattiz........ 51 Chairman of the Board
Mel Karmazin............ 50 President, Chief Executive Officer and Director
Farid Suleman........... 42 Chief Financial Officer, Secretary and Director
William J. Hogan........ 50 President - Westwood One Radio Networks and Director
Gregory P. Batusic...... 40 President - Westwood One Entertainment
Eric R. Weiss........... 36 Executive Vice President - Business and Legal
Affairs and Assistant Secretary
</TABLE>
Mr. Batusic - was appointed President-Westwood One Entertainment in
April 1994. From June 1992 to April 1994, he was President-Network Division.
He was Executive Vice President-Sales Division from June 1987 to June 1992.
Mr. Weiss - was appointed Executive Vice President-Business and Legal
Affairs in August 1993. From September 1992 to August 1993, he was Senior
Vice President-Business and Legal Affairs. From September 1987 to September
1992, he was Vice President-Business and Legal Affairs.
Messrs. Karmazin and Suleman serve under a Management Agreement which
is discussed in the following paragraph. Messrs. Pattiz, Hogan, Batusic and
Weiss have written employment agreements with the Company.
At a Special Meeting of Shareholders held on January 28, 1994,
the Company's shareholders approved, among other matters (including the
acquisition of Unistar Radio Networks, Inc. ("Unistar")), a Management
Agreement between the Company and Infinity. Pursuant to the terms of the
Management Agreement, which became effective February 3, 1994 for a period
of five years, Infinity manages the business and operations of the Company,
subject to the direction and supervision of the Board of Directors, for an
annual base management fee of $2,000,000 (adjusted for inflation), an
annual cash bonus payable in the event certain cash flow targets are achieved
and warrants to purchase up to 1,500,000 shares of Common Stock exercisable at
purchase prices ranging from $3.00 to $5.00 if the Common Stock trades above
certain target price levels for a specified period of time. Also under the
Management Agreement, on February 3, 1994: (i) Infinity's President and Chief
Executive Officer, currently Mel Karmazin, became the Company's Chief
Executive Officer (replacing Norman J. Pattiz) and President; and (ii)
Infinity's Chief Financial Officer, currently Farid Suleman, became the
Company's Chief Financial Officer (replacing Bruce E. Kanter). Infinity
provides support and administrative personnel needed by these officers and
pays all salaries, benefits and related costs of these personnel. In
connection with the foregoing matters, INI also acquired 5,000,000 newly issued
shares of Common Stock and a ten-year warrant to purchase up to an additional
3,000,000 shares of Common Stock (which becomes exercisable in equal annual
installments of 1,000,000 shares on February 3, 1995, 1996 and 1997,
respectively) at an exercise price of $3.00 per share for an aggregate purchase
- 6 -
<PAGE>
price of $15,000,000. INI currently beneficially owns approximately
16.4% of the Common Stock of the Company (see "Principal Shareholders"
appearing elsewhere in this report).
EXECUTIVE COMPENSATION
Disclosure regarding compensation is provided for the following executive
officers of the Company ("Named Executive Officers") who served as executive
officers at the end of or during the fiscal year ended November 30, 1993:
Norman J. Pattiz...... the Company's Chief Executive Officer for
the fiscal year ended November 30, 1993.
Bruce E. Kanter....... the Company's Executive Vice President and
Chief Financial Officer for the fiscal year ended
November 30, 1993.
Gregory P. Batusic.... the Company's President - Network Division for
the fiscal year ended November 30, 1993.
Eric R. Weiss......... the Company's Executive Vice President-Business
and Legal Affairs at November 30, 1993.
Robert M. Wilson...... Publisher and Chief Executive Officer of Radio
& Records (disposed of on November 1, 1993).
Compensation Committee Report
The Compensation Committee of the Company's Board of Directors consists
of at least two independent, outside directors. Messrs. Levine and Krasnow
were members of the Committee until March 16, 1993, at which time Mr. Levine
was replaced by Mr. Smith who, along with Mr. Krasnow, served on the Committee
for the balance of fiscal year 1993. Since the INI Designees did not become
directors of the Company until February 3, 1994, they did not participate in
any decisions regarding executive compensation made during fiscal year 1993,
including with respect to the 1993 Employment Agreement of Mr. Pattiz (see
"1993 Compensation for Chief Executive Officer" appearing elsewhere in this
Compensation Committee Report).
The Compensation Committee administers the Amended 1989 Stock Incentive
Plan (the "Plan") and is authorized to negotiate employment arrangements with
the executives of the Company and its subsidiaries. The Committee is also
responsible for developing policies and making recommendations with respect
to employee compensation, including short-term and long-term incentives. The
Company's executive compensation policies are designed to help the Company
achieve its business objectives by:
- Establishing levels of compensation considered
necessary to attract and retain superior executives
in a competitive environment.
- Developing compensation programs that support the
short and long-term strategic goals of the Company.
- Providing short-term compensation that varies
directly with individual and Company performance.
- Providing long-term compensation such as stock
options and other incentives under the Plan
("Stock Incentives") directly linked to share
performance.
Westwood One has attracted most of its senior executives from
broadcasting and other advertising or media companies where creative talent
is highly sought after and commands a relatively high level of compensation
due to the competitive market for such talent. Decisions made by a relatively
small number of such key executives with an in-depth knowledge of the media
business can have a significant impact on the financial performance of the
Company. Executives with these unique qualifications are often difficult to
attract and retain. Therefore, the Compensation Committee considers one of
its primary responsibilities to be structuring and administering a
compensation program that is designed to meet the demands of a highly
competitive marketplace for top executive talent.
The Compensation Committee generally evaluates the competitiveness
of its executive compensation program based on information drawn from a
variety of sources with respect to companies in the entertainment industry,
- 7 -
<PAGE>
including published survey data, information obtained from the media and the
Company's own experience recruiting and retaining executives. Although
complete information is not easily obtainable, the Committee believes it has
used its best efforts to design the Company's compensation policies
to meet the competitive challenge.
Base Salaries - Base salary levels for the Company's executive officers are
intended to be consistent with competitive practice and the level of
responsibility of the particular executive. In determining salaries, the
Committee also considers individual performance and specific issues
particular to the Company.
Annual Incentives - Annual incentives for executive officers and key managers
provide a direct financial incentive in the form of an annual cash bonus.
Company performance is a significant consideration in determining bonus amounts.
However, an assessment is also made of individual performance, including
contributions in a number of specific areas, such as creativity, leadership,
decision making and financial and general management. Strong consideration
is also given to the individual's contributions in helping the Company achieve
its short and long-term strategic goals.
Stock Incentives - Stock Incentives may be granted by the Committee, at its
sole discretion, 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 consults with the entire Board of Directors.
Officer and employee performance for each fiscal year is reviewed and evaluated
by the Committee following the end of such fiscal year.
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.
1993 Compensation for Chief Executive Officer - Until December 1, 1993,
Mr. Pattiz received compensation under his employment agreement with the
Company dated as of December 1, 1986, which was later amended on November 25,
1987 and June 30, 1993, (the "1986 Employment Agreement"). Pursuant to the
1986 Employment Agreement, Mr. Pattiz' fiscal 1993 base compensation was
scheduled to be $710,000 and he was entitled to receive bonus compensation at
the discretion of the Board of Directors. However, due to the sizeable
operating losses experienced by the Company, Mr. Pattiz elected beginning
December 1, 1990 to forego the salary increases he was entitled to under the
1986 Employment Agreement. As a result of this election, Mr. Pattiz' cash
compensation remained at its fiscal 1990 level of $570,000 for three years,
through fiscal 1993, and over this period Mr. Pattiz relinquished $270,000 in
cash compensation to which he was entitled under the 1986 Employment Agreement.
The initial term of the 1986 Employment Agreement expired as of
November 30, 1993, and the Committee (which then consisted of Messrs. Krasnow
and Smith) began its review of Mr. Pattiz' future compensation in April 1993.
In analyzing the issue of Mr. Pattiz' compensation, the Committee reviewed
comparable compensation packages for executives of companies in the
entertainment or communications industry. The Committee also considered
Mr. Pattiz' qualitative performance under the 1986 Employment Agreement, as
well as the Company's recent success in: (i) divesting itself of radio station
assets including the sales of radio stations WYNY-FM and KQLZ-FM and the sale of
its one-half interest in radio station WNEW-AM; (ii) meeting its financial
obligations including the restructuring of its credit facilities; and (iii)
improving its network operations by significantly reducing the Company's
operating expenses. In establishing base compensation under the 1993 Employment
Agreement, the Committee further noted that Mr. Pattiz had voluntarily
relinquished substantial compensation beginning December 1, 1990 by agreeing
to forego salary increases to which he was entitled under the 1986 Employment
Agreement.
Prior to the involvement of Infinity in the management of the
Company (which commenced February 3, 1994), a proposal regarding future
compensation was presented to Mr. Pattiz by the Committee in July 1993.
Following a period of negotiations, a new employment agreement was finalized
and executed effective October 18, 1993, which was later amended on January 1,
1994 and February 2, 1994, (the "1993 Employment Agreement"). Prior to and
during the interim negotiation period, the Company had discussions regarding
the proposed acquisition of Unistar (the "Unistar Acquisition") and the
related Management Agreement (described under "EXECUTIVE OFFICERS" appearing
elsewhere in this report), as outlined in the Letter of Intent dated
October 10, 1993.
- 8 -
<PAGE>
Therefore, other factors in evaluating Mr. Pattiz' compensation were his
significant contributions in negotiating the Unistar Acquisition and the
need to secure his services in finalizing such negotiations and in making a
smooth transition in the event that the Unistar Acquisition was consummated.
The Committee also noted that, as Chairman of the Board, Mr. Pattiz would
continue to perform significant duties with respect to the acquisition and
production of entertainment and talk programming produced by the Company.
Moreover, his stature in the radio industry is instrumental in attracting
top producers and broadcast talent.
Under the 1993 Employment Agreement Mr. Pattiz will continue to
serve as Chairman of the Board of the Company. The 1993 Employment Agreement
is for a five-year term ending November 30, 1998 at an annual base salary of
$750,000. In addition, the Company will pay directly or reimburse Mr. Pattiz
for one-half of his home security costs, not to exceed $115,000 annually.
Consistent with the Committee's goal of more closely aligning annual
incentives with Company performance, Mr. Pattiz will receive an annual
incentive cash bonus payable only in the event that the Company achieves
certain objective targets. After reviewing the potential effect of Section
162(m) of the Internal Revenue Code of 1986, as amended, (the "Code") which
generally sets a limit of $1 million on the amount of compensation (other
than certain types of compensation, including "performance-related"
compensation) that the Company can deduct for Federal income tax purposes for
taxable years beginning on or after January 1, 1994, the Compensation
Committee determined that the Company's general policy will be to structure
the compensation arrangements for the Chairman of the Board, the CEO and other
senior executive officers, to the extent feasible and taking into account all
relevant considerations, so as to satisfy the Code's conditions for
deductibility. Accordingly, pursuant to the terms of the 1993 Employment
Agreement, compensation in excess of $1 million in any taxable year will
not be paid to Mr. Pattiz unless the material terms of the cash incentive
compensation is approved by the shareholders at the 1994 Annual Meeting of
Shareholders (see "PROPOSAL TO APPROVE INCENTIVE COMPENSATION PROVISION OF
MR. PATTIZ' EMPLOYMENT AGREEMENT" appearing elsewhere in this report).
Other terms of the 1993 Employment Agreement are substantially
similar to the terms of the 1986 Employment Agreement. Mr. Pattiz was granted
options to acquire 350,000 shares of the Company's Common Stock at $5.38 per
share under the Amended 1989 Stock Incentive Plan, which shares vest at the
rate of 70,000 per year over the five-year term of the 1993 Employment
Agreement. As part of Mr. Pattiz's 1986 Employment Agreement, he was also
granted options to acquire 350,000 shares (adjusted for a subsequent stock
split to 525,000 shares) of the Company's Common Stock at exercise prices
which were based on the fair value of the Company's common stock at the end
of each fiscal year. Mr. Pattiz also received 75,000 shares (adjusted for a
subsequent stock split to 112,500 shares) of Class B Stock pursuant to his
1986 Employment Agreement which vested on March 31, 1994 at a value of
$1,026,563 (112,500 shares at $9.125 per share). The 1993 Employment
Agreement also provides additional benefits for Mr. Pattiz, similar to those
provided in the 1986 Employment Agreement which are standard for executives
in the industry. (See "Employment Agreements" appearing elsewhere in this
report for a more detailed description of the 1993 Employment Agreement).
1993 Compensation for Other Executive Officers - The salary and annual and
long-term incentives in 1993 for executive officers were based on contract
provisions, as well as contributions made by individuals in helping the
Company achieve its long-term goals, such as restructuring debt, the
divestiture of the Company's non-core assets and consummating the Unistar
Acquisition.
Compensation Committee
Paul G. Krasnow, Chairman of the Compensation Committee
Joseph Smith
- 9 -
<PAGE>
Summary Compensation Table
The following table shows for fiscal years ending November 30,
1993, 1992 and 1991, the cash compensation as well as certain other
compensation paid to the Named Executive Officers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Annual Compensation
---------------------------------- Securities
Fiscal Other Annual Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Options (#) Compensation ($)
- - ---------------------------- ------ ---------- --------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Norman J. Pattiz.......................... 1993 $570,000 0 (5) 350,000 0
Chairman of the Board 1992 570,000 0 (5) 0 0
and Chief Executive Officer 1991 570,000 0 (5) 0 0
Bruce E. Kanter (1)....................... 1993 275,000 $220,000 $52,921 (4) 0 $4,953 (7)
Executive Vice President 1992 243,217 167,438 (6) 46,457 (4) 250,000 4,252 (7), (2)
and Chief Financial Officer 1991 0 0 0 0 0
Gregory P. Batusic........................ 1993 300,000 50,000 (5) 0 2,249 (8)
President - Network Division 1992 327,750 73,500 (5) 50,000 2,238 (8)
1991 331,000 0 (5) 0 2,063 (8)
Eric R. Weiss............................. 1993 206,250 25,000 (5) 70,000 2,249 (8)
Executive Vice President - 1992 147,250 0 (5) 50,000 2,182 (8)
Business and Legal Affairs 1991 138,000 0 (5) 0 1,585 (8)
Robert M. Wilson (3)...................... 1993 320,833 0 (5) 100,000 0
Publisher and Chief Executive 1992 350,000 150,000 (5) 200,000 0
Officer, Radio & Records 1991 343,000 150,000 (5) 0 0
</TABLE>
[FN]
_________________________________
(1) Mr. Kanter joined the Company as Executive Vice President and
Chief Financial Officer effective December 6, 1991.
(2) In December 1991 the Company established a Supplemental Executive
Retirement Plan (SERP) for Mr. Kanter. The SERP provides
supplemental insurance and long-term retirement benefits payable
in annual installments of $200,000 for 15 years beginning in 2008
when Mr. Kanter becomes 65 years old. The $488,521 present value
of these benefits was expensed during fiscal 1992. Mr. Kanter vested
in the SERP upon commencement of employment in December 1991.
(3) Mr. Wilson no longer served as an executive officer or employee of
the Company after the November 1, 1993 disposition of Radio &
Records. Mr. Wilson is included in this table as an additional
individual who would have otherwise qualified for disclosure but
for the fact that he was not serving as an executive officer
at November 30, 1993.
(4) Other Annual Compensation for Mr. Kanter consisted of: (a) long-term
disability insurance premiums of $13,646, personal financial planning
and legal services of $11,425, country club dues of $6,538, car
allowance of $16,250 and reimbursement for medical expenses of $5,062
in 1993 and (b) long-term disability insurance premiums of $12,758,
personal financial planning and legal services of $1,660, country
club dues of $6,498, car allowance of $15,000 and reimbursement for
medical expenses of $10,541 in 1992.
(5) Messrs. Pattiz, Batusic, Weiss and Wilson enjoyed certain perquisites
and other personal benefits commensurate with industry practice. The
aggregate amount of these items did not exceed the lesser of
$50,000 or 10% of such officer's salary and bonus.
(6) Bonus in 1992 for Mr. Kanter included a common stock award without
restrictions of $67,438 (41,500 shares at market value of $1.625 per
share).
(7) All Other Compensation for Mr. Kanter consisted of life insurance
premiums of $2,704 in 1993 and $2,533 in 1992 and company
contributions to the employee Savings and Profit-Sharing Plan of
$2,249 in 1993 and $1,719 in 1992.
(8) All Other Compensation for Messrs. Batusic and Weiss consisted of
company contributions to the employee Savings and Profit-Sharing
Plan.
- 10 -
<PAGE>
Stock Option Tables
The following two tables provide information on stock option
grants made to the Named Executive Officers in fiscal 1993, options exercised
during fiscal 1993 and options outstanding on November 30, 1993.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1993
Potential Realizable
Individual Grants Value at Assumed
----------------------------------------------------------------- Annual Rates of Stock
Number of Price Appreciation for
Securities Option Term
Underlying % of Total Options Exercise or -----------------------
Options Granted to Employees Base Price Expiration
Name Granted (#) in Fiscal Year (5) ($/Share) Date 5% ($) 10% ($)
---- ------------ --------------------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Norman J. Pattiz........... 350,000 (1) 60% $ 5.38 10/17/03 $1,186,290 $2,993,970
Bruce E. Kanter............ 0 - - - - -
Gregory P. Batusic......... 0 - - - - -
Eric R. Weiss.............. 20,000 (2) 3% 2.13 2/15/03 26,838 67,734
50,000 (3) 9% 2.75 8/29/03 86,625 218,625
------- ___ ------- -------
70,000 12% 113,463 286,359
------- --- ------- -------
Robert M. Wilson........... 100,000 (4) 17% 2.00 2/21/03 126,000 318,000
</TABLE>
[FN]
_____________________________
(1) These options were granted on October 18, 1993, with 70,000 shares
becoming exercisable on each October 18 anniversary between 1994 and
1998.
(2) These options were granted on February 16, 1993 and will become
exercisable on February 16, 1994.
(3) These options were granted on August 30, 1993 and will become
exercisable on August 30, 1994.
(4) These options were granted on February 22, 1993 and, in accordance
with an acceleration of exercisabilty provision in the option
agreement, became exercisable upon the November 1, 1993 disposal
of Radio & Records.
(5) Percentage calculations exclude the impact of a mandatory grant of
150,000 options on March 3, 1993 to outside directors (50,000 each
to Messrs. Levine, Smith and Krasnow) which, in accordance with the
terms of the Amended and Restated 1989 Stock Incentive Plan (as
approved by the Company's shareholders at its May 4, 1993 Annual
Meeting), became exercisable six months from the date of grant.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1993
AND FISCAL YEAR END OPTION VALUES
Number of Securities Underlying Value of Unexercised,
Unexercised Options In-the-Money Options
at Fiscal Year End (#) at Fiscal Year End ($) (1)
Shares Acquired Value ------------------------------ ---------------------------
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman J. Pattiz.......... 0 0 543,750 356,250 $1,482,844 $999,031
Bruce E. Kanter........... 0 0 250,000 0 1,623,750 0
Gregory P. Batusic........ 75,000 $328,125 12,500 62,500 76,563 382,813
Eric R. Weiss............. 20,000 78,810 57,500 112,500 333,438 630,213
Robert M. Wilson.......... 125,000 303,250 175,000 (2) 0 1,062,875 0
</TABLE>
[FN]
_______________________________
(1) On November 30, 1993, the closing per share price for the Company's
Common Stock on the NASDAQ National Market System was $8 1/8.
(2) Mr. Wilson's option agreements contained an acceleration of
exercisability provision in the event of a sale of Radio & Records.
Radio & Records was disposed of on November 1, 1993, at which time
all of Mr. Wilson's then outstanding options became exercisable.
Mr. Wilson exercised all 175,000 options on December 13, 1993.
- 11 -
<PAGE>
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 fiscal years. The graph
assumes that $100 was invested in the Company's Common Stock and each index
on November 30, 1988.
<TABLE>
<CAPTION>
Dow Jones Dow Jones
Equity Media
Measurement Westwood Market Industry
Period One, Inc. Index Index
------------------ ----------- ----------- ----------
<C> <C> <C> <C>
11/30/88 $100 $100 $100
11/30/89 $107 $131 $129
11/30/90 $29 $125 $99
11/30/91 $22 $152 $102
11/30/92 $19 $182 $139
11/30/93 $97 $200 $167
</TABLE>
- 12 -
<PAGE>
Employment Agreements
The following employment agreements were all entered into prior
to the commencement of the management of the Company by Infinity pursuant to
the Management Agreement (as discussed under "Executive Officers" appearing
elsewhere in this report).
During fiscal 1993, the Company entered into a new written
employment agreement with Mr. Pattiz, effective October 18, 1993 (as amended
on January 26, 1994 and February 2, 1994), pursuant to which Mr. Pattiz was
to serve as Chairman of the Board and Chief Executive Officer of the Company
for a five-year term ending November 30, 1998 at an annual salary of $750,000
(the 1993 base salary to which he was entitled under his prior employment
agreement with the Company, although he elected to receive a salary of only
$570,000) plus an annual cash bonus of at least $250,000 payable in the event
that the Company achieves certain earnings targets. In addition, the Company
will pay directly or reimburse Mr. Pattiz for one-half of his home security
costs, not to exceed $115,000 annually. The Agreement also granted Mr. Pattiz
ten-year options to acquire 350,000 shares of Common Stock under the Amended
1989 Stock Incentive Plan (which vest at the rate of 70,000 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 and
cash bonus 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 1993 Employment Agreement, any unvested options
granted pursuant to this Agreement will become immediately exercisable and
Mr. Pattiz will continue to receive any base and cash bonus compensation he
would have otherwise been entitled to receive for the remaining term of the
agreement. On February 3, 1994, pursuant to the terms of the Management
Agreement (as discussed under "Executive Officers" appearing elsewhere in
this report), Mr. Karmazin replaced Mr. Pattiz as Chief Executive Officer.
However, the 1993 Employment Agreement otherwise remains in effect and the
transactions entered into in connection with the Unistar Acquisition were
not considered a "change in control" for purposes of the 1993 Employment
Agreement.
During fiscal 1993, the Company had a written employment
agreement with its then Executive Vice President and Chief Financial Officer,
Mr. Kanter, effective December 6, 1991. Pursuant to the three-year agreement,
Mr. Kanter received a base salary of $250,000 in fiscal 1992, $275,000 in
fiscal 1993 and was to receive $300,000 in fiscal 1994, plus a minimum bonus
of $100,000 per year. The agreement also granted Mr. Kanter options to
acquire 250,000 shares of Common Stock under the Amended 1989 Stock Incentive
Plan, all of which were exercised by Mr. Kanter in June 1994, and provided
Mr. Kanter with supplemental insurance, additional benefits which were
standard for executives in the industry, and a Supplemental Executive
Retirement Plan (SERP), which will provide an annual benefit of not less than
$200,000 per year for a period of 15 years beginning December 2007. On
February 3, 1994, pursuant to the terms of the Management Agreement (as
discussed under "Executive Officers" appearing elsewhere in this report),
Mr. Suleman replaced Mr. Kanter as Chief Financial Officer. Pursuant to the
terms of his employment agreement, Mr. Kanter will continue to receive the
base salary he would have otherwise been entitled to receive for the remaining
term of the agreement, an additional year's $300,000 base salary and the
continuation of certain benefits.
The Company has a written three-year employment agreement with
the President of Westwood One's Entertainment Division, Mr. Batusic, effective
June 1, 1992. Pursuant to the terms of the agreement, Mr. Batusic receives a
base salary of $300,000 per year. Additionally, pursuant to the agreement,
Mr. Batusic received a guaranteed bonus of $73,500 in the first quarter of 1993,
a discretionary bonus of $50,000 in February 1994 and is eligible to receive a
bonus of $50,000 in February 1995 upon approval of the Board of Directors. The
agreement provides Mr. Batusic with additional benefits which are standard for
executives in the industry. The agreement may be terminated by the Company for
cause without further obligation to Mr. Batusic. The agreement may also be
terminated by the Company for any reason, at its discretion, upon written notice
and, in such an event, the Company must pay Mr. Batusic's $300,000 base salary
for one-year. In the event of a merger or sale of substantially all of the
Company's assets, if the purchaser or successor company fails to assume the
remaining compensation obligations for a period of not less than two years, the
Company must pay Mr. Batusic's $300,000 base salary for two years.
- 13 -
<PAGE>
During fiscal 1993, the Company entered into a written employment
agreement with Mr. Weiss, effective August 30, 1993, pursuant to which Mr. Weiss
is to serve as Executive Vice President - Business and Legal Affairs or other
such capacity as determined by the Board of Directors. Pursuant to the
agreement, which commenced on September 1, 1993 and continues through
November 30, 1995, Mr. Weiss receives an annual base salary of $300,000
through November 30, 1994 and $250,000 in fiscal 1995. Mr. Weiss is also
eligible to receive a $50,000 bonus in January 1996 upon approval of the
Board of Directors. The agreement also granted Mr. Weiss options to acquire
50,000 shares of Common Stock under the Amended 1989 Stock Incentive Plan, all
exercisable one year from the date of grant, benefits standard for executives
in the industry, and certain relocation expense reimbursements should he be
required to relocate. The agreement may be terminated by the Company for cause
without further obligation to Mr. Weiss. The agreement may also be terminated
by the Company for any reason, at its discretion, upon written notice and, in
such an event, the Company must pay Mr. Weiss the base salary he would have
otherwise been entitled to receive for the remaining term of the agreement
plus an additional year's $250,000 base salary. In the event of a merger or
sale of substantially all of the Company's assets, if the purchaser or successor
company fails to assume the remaining compensation obligations for a period of
not less than two years, the Company must pay Mr. Weiss his $250,000 base salary
for two years. In the event that the agreement is not renewed for a period of
two years on the same or better terms, the Company will be obligated to pay an
additional year's $250,000 base salary.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are set forth under
"Committees of the Board" appearing elsewhere in this report. Mr. Levine was
formerly an executive officer of the Company until May 1986. The Company
entered into a written consulting agreement with Mr. Levine, effective August
1, 1990, whereby Mr. Levine provided management and financial consulting
services until May 31, 1992 for a monthly fee of $20,833. The agreement was
extended on a month-to-month basis through February 1994. The agreement also
provided for additional compensation under certain circumstances in connection
with specific matters where Mr. Levine provided services. In February 1994,
Levine Leichtman Capital Partners, of which Mr. Levine is a principal, received
a $781,250 financial advisor fee for acting as one of the Company's advisors in
connection with the acquisition of Unistar (as more fully discussed under
"EXECUTIVE OFFICERS" appearing elsewhere in this report). During fiscal 1993,
Mr. Levine received $327,000 for his services, including Board and Board
committee fees.
Mr. Krasnow is an agent of Northwestern Mutual Life Insurance
Company ("NML"). The Company has paid premiums to NML on insurance policies
covering life for certain executive officers and disability for its employees.
During fiscal 1993, the Company paid approximately $400,000 in premiums to NML
for these policies, for which Mr. Krasnow earned less than $60,000 in
commissions.
Certain Relationships and Transactions
Mary Turner, Mr. Pattiz's wife and an independent contractor for
the Company for the past thirteen years, received aggregate compensation of
$152,000 from the Company in fiscal 1993 for services as an interviewer and
voice talent for a Company program.
Mr. Dennis has served as Managing Director, Investment Banking of
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") since April 1989.
In February 1994, DLJ received a $1,106,000 fee for acting as one of the
Company's investment advisors in connection with the acquisition of Unistar
(as more fully discussed under "Executive Officers" appearing elsewhere in
this report). In July 1993, DLJ received a $950,000 fee for acting as the
Company's investment advisor in connection with the Company's sales of radio
stations WYNY-FM and KQLZ-FM.
Messrs. Karmazin and Suleman are also officers and directors of
Infinity. INI beneficially owns 16.4% of the Common Stock of the Company
(see "Principal Shareholders" appearing elsewhere in this report). Infinity
manages the business and operations of the Company pursuant to the terms of a
Management Agreement between the Company and Infinity (as discussed under
"Executive Officers" appearing elsewhere in this report).
Effective October 1990, the Company entered into 12 affiliation
agreements with radio stations owned and operated by Infinity. Such
affiliation agreements were entered into in the ordinary course of the Company's
- 14 -
<PAGE>
business on terms substantially similar to those entered into with other radio
station affiliates not owned by Infinity. The Company paid approximately
$4,038,000 to Infinity radio station affiliates in the fiscal year ended
November 30, 1993. The Company currently anticipates that it will continue
to have such agreements with Infinity radio stations in the future. 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, all agreements between the Company and Infinity or
any of its affiliates must be approved by the Board of Directors.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 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 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 1993 its executive officers, directors and
more than ten percent beneficial owners complied with all filing requirements
applicable to them.
PROPOSAL TO APPROVE THE AMENDMENTS OF
THE AMENDED 1989 STOCK INCENTIVE PLAN
The Board of Directors recommends approval of the amendments to
the Company's Amended 1989 Stock Incentive Plan, as follows. In May 1994,
the Board of Directors approved, subject to shareholder approval, amendments
of the Company's Amended 1989 Stock Incentive Plan, as amended and restated
effective March 3, 1993 (the "1989 Plan") to: (i) increase by 2,000,000 the
number of shares of Common Stock reserved and available for issuance upon the
exercise of stock incentives; (ii) set the maximum number of shares as to
which stock options or stock appreciation rights ("SAR") may be awarded to any
one participant in any fiscal year; (iii) revise Article X (Mandatory Grants
to Outside Directors) to decrease to 10,000 from 50,000 the number of shares as
to which periodic mandatory grants of stock options to directors who are not
also employees or officers of the Company shall be made (as well as to extend
the period over which such stock options shall vest), and to ensure that such
grants will be made to each new non-employee director at the time that such
director is appointed to the Board; and (iv) generally preserve the Company's
ability to deduct, for Federal income tax purposes, compensation paid pursuant
to the exercise of stock options and other stock incentives. The foregoing
are the only substantive changes to the Amended 1989 Plan, as amended and
restated effective May 24, 1994, subject to shareholder approval (the
"Amended 1989 Plan"), from the 1989 Plan previously approved by shareholders
in 1992, as amended with Shareholder approval in 1993.
Increase in Authorized Shares
The Board of Directors continues to believe that a stock incentive
program is an important factor in attracting, retaining and rewarding
executives, directors and other selected persons who are important to the
success of the Company, and in reinforcing long-term mutuality of interest
between such persons and the Company's shareholders. Options have been
granted with respect to all but approximately 200,000 of the 2,800,000 shares
of Common Stock previously authorized for issuance under the 1989 Plan. The
increase in the number of shares of Common Stock available for issuance will
enable the Plan Administrator, currently the Compensation Committee, to
continue to grant performance based compensation in the form of stock options
and other stock incentives.
Annual Award Limit and other Amendments Relating to Section 162(m)
Section 162(m) of the Code, requires as a condition to
the deductibility of compensation realized upon the exercise of stock options
or SARs with an exercise price equal to the fair market value of the
underlying shares on the date of grant, that a plan specify the maximum
number of shares as to which options may be awarded to any particular
individual beginning on or after January 1, 1994. To satisfy this
requirement, the Amended 1989 Plan imposes a limit of 400,000 shares of
Common Stock as to which stock options or SARs may be granted to any
- 15 -
<PAGE>
individual, inclusive of all stock options and SARs that have been canceled,
surrendered or repriced, but exclusive of all stock options and SARs granted,
canceled, surrendered or repriced prior to January 1, 1994.
The Amended 1989 Plan also contains provisions designed to
preserve the deductibility of compensation paid upon the exercise of Purchase
Rights and Performance Rights (as such terms are defined below). Although no
such rights have been granted under the 1989 Plan as of the date hereof, the
Amended 1989 Plan provides that any performance goals set by the Compensation
Committee for any participant with respect to Purchase or Performance Rights
awarded to such participant will be set in compliance with the Treasury
Department Regulations under Section 162(m) (the "Regulations"), as finally
promulgated. It is anticipated that the Regulations as finally promulgated,
will generally require that the performance goals be set within 90 days after
the commencement of the services to which they relate and must be based on
verifiable, objective criteria. Finally, the Amended 1989 Plan provides that,
in addition to the requirement that the Plan Administrators be Disinterested
Persons (as defined below), they must also qualify as "disinterested" within
the meaning of the Regulations, to the extent and when required by such
regulations. It is anticipated that the Regulations, as finally promulgated:
(i) will generally require that administrators of a company's stock incentive
plan be directors who are not also officers or employees of such company, and
who are not controlling shareholders or employees of other companies that
transact a significant amount of business with such company; and (ii) will
become effective with respect to the Company on the date of its Annual Meeting
of Shareholders in 1995.
Mandatory Grants to Outside Directors
The Board of Directors believes that the Company is in a better
position to attract and retain qualified outside directors if the Company's
stock incentive program provides for mandatory grants to such directors on
an ongoing basis. Accordingly, Article X of the 1989 Plan provided for the
grant of stock options to acquire 50,000 shares of Common Stock to such
directors on March 3, 1993 and every four (4) years thereafter. In order to
attract new qualified outside directors to the Board, Article X of the
Amended 1989 Plan has been revised to ensure that effective May 24, 1994,
each new director will receive a mandatory grant of stock options effective
upon the date that such director is appointed to the Board. However,
consistent with the practices of other public companies in the radio
advertising industry, Article X has been further revised to reduce from
50,000 to 10,000 the number of shares of Common Stock with respect to which
such initial mandatory grants of stock options, and all subsequent mandatory
grants under Article X, will be made. In addition, the vesting schedule has
been revised to provide that options granted under Article X on or after
May 24, 1994 will vest 20% per year on the anniversary of the date of grant
as opposed to 100% 6 months from the date of grant.
SUMMARY OF MATERIAL PROVISIONS OF THE AMENDED 1989 STOCK INCENTIVE PLAN
General Terms
The material provisions of the entire Amended 1989 Plan are
described below and such description is qualified in its entirety by reference
to the text of the Amended 1989 Plan, a copy of which may be obtained by
shareholders of the Company upon written request directed to Farid Suleman,
Secretary, Westwood One, Inc., 9540 Washington Boulevard, Culver City, CA 90232.
The text of each of the proposed amendments to the Amended 1989 Plan is attached
as Exhibit A.
Under the Amended 1989 Plan, 4,800,000 shares of authorized but
unissued Common Stock have been reserved for issuance. This number is subject
to adjustment in the event of a reorganization, recapitalization, stock split
or similar transaction affecting the capital structure of the Company. The
Amended 1989 Plan limits the number of shares of Common Stock as to which the
Compensation Committee may award stock options or SARs to any individual to
400,000, inclusive of all stock options and SARs that have been canceled,
surrendered or repriced, but exclusive of all stock options and SARs granted,
canceled, surrendered or repriced prior to January 1, 1994. The Amended 1989
Plan will remain in existence for 10 years from its inception in March 1989,
or until otherwise terminated by the Board of Directors.
The Amended 1989 Plan will be administered by the Board
of Directors, provided that each member of the Board consists of
Disinterested Persons, or by a committee consisting of at least two
directors who are Disinterested Persons (the "Plan Administrator").
"Disinterested Person" means a director who does not, during his term of
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<PAGE>
service as a Plan Administrator or the one year prior thereto, receive
grants under the Amended 1989 Plan (other than a mandatory grant of
options to a director who is not also an employee or officer) or, subject to
certain limited exceptions, any similar plan of the Company. To the extent
and at the time required by the Regulations, as finally promulgated, such
directors must also qualify as "disinterested" within the meaning of the
Regulations. Currently, the Plan Administrator is the Compensation Committee,
consisting of Disinterested Persons.
The Amended 1989 Plan permits the grant of stock options,
purchase rights, performance rights and SARs (collectively referred to as
"Rights") to employees, officers, consultants or directors of the Company or
a subsidiary of the Company, who are responsible for or contribute to the
management, growth or profitability of the Company. As of the date hereof,
the approximate number of persons who will be eligible to participate is 75.
Under the Amended 1989 Plan, if the employment or service of a
Rights holder is terminated other than by death or disability (a "Special
Terminating Event"), Rights that are then exercisable may be exercisable for a
period of up to three months after the date of termination. If a Special
Terminating Event occurs, Rights that are then exercisable may be exercised
within one year after the date of such occurrence.
Stock Options
Stock options granted under the Amended 1989 Plan may be either
statutory incentive stock options ("Incentive Stock Options") within the
meaning of the Code, or options which do not qualify for special tax treatment
("Non-Qualified Stock Options"). Only employees of the Company may receive
Incentive Stock Options.
Stock options granted under the Amended 1989 Plan (except certain
Incentive Stock Options, discussed below) may be exercisable for a term of no
longer than ten years from the date of grant at an exercise price per share of
not less than 100% of the fair market value of the Common Stock at the date of
the grant. Under the Amended 1989 Plan, the Plan Administrator may also grant
repriced "Reload Stock Options" to participants. A Reload Stock Option may be
an Incentive Stock Option or Non-Qualified Stock Option depending on the type
of stock option previously granted to the optionee and being adjusted by the
Reload Stock Option. The optionee must elect to retain the previously granted
stock option or to exchange it for the Reload Stock Option. The Reload Stock
Option will be for the number of shares of Common Stock underlying the Stock
Option surrendered by the participant. The exercise price will be not less
than the fair market value of the Common Stock at the date of grant of the
Reload Stock Option. Additionally, the Plan Administrator will have the right
to determine a new vesting schedule for the Reload Stock Option. The exercise
price of any options granted under the Amended 1989 Plan may be paid in cash,
Common Stock, or promissory notes under such terms as authorized by the Plan
Administrator.
In the case of the Incentive Stock Options granted to officers
or employees who own more than ten percent of the voting power of all classes
of stock of the Company, or any of its subsidiaries, immediately prior to the
grant, the exercise price cannot be less than 110% of the fair market value of
the Common Stock at the date of grant, and the option term cannot expire more
than five years after the date of grant. The aggregate fair market value
(determined as of the time the option is granted) of the shares with respect
to which Incentive Stock Options are first exercisable by any eligible person
during any calendar year may not exceed $100,000. A maximum of 280,000 shares
of the Common Stock reserved under the Amended 1989 Plan may be allocated to
Incentive Stock Options.
Mandatory Grants to Outside Directors
Effective on the Initial Date of Grant (as defined below) and
every four (4) years thereafter, the Board of Directors will grant a ten year
Non-Qualified Stock Option to purchase 10,000 shares of Common Stock to each
director who is not also an officer or employee of the Company. All stock
options awarded under this provision will be granted at an exercise price per
share equal to 100% of the fair market value of the Common Stock on the date
of grant and will be exercisable at the rate of 20% per year on the anniversary
of the date of grant. With respect to outside directors appointed to the Board
on May 24, 1994, the Initial Date of Grant means May 24, 1994. With respect to
outside directors that were members of the Board immediately prior to May 24,
1994, the Initial Date of Grant means March 3, 1993 (the date such directors
received an initial mandatory grant of stock options). With respect to
outside directors appointed to the Board on or after May 24, 1994, the Initial
Date of Grant means the date such director is appointed to the Board.
All other provisions of the Amended 1989 Plan regarding the
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<PAGE>
terms of Non-Qualified Stock Options will be applicable to the mandatory
grants to directors. The provisions regarding mandatory grants to directors
may not be amended more than once every six (6) months, other than to comply
with changes in the Code, the Employee Retirement Income Security Act, or
the rules thereunder.
Stock Appreciation Rights
Under the Amended 1989 Plan, the Plan Administrator may grant SARs
alone or in tandem with stock options. SARs granted alone may have a term of no
longer than ten years from the date of grant, and will grant to the holder the
right to receive upon exercise of the SAR, either in cash or in whole shares of
Common Stock as determined by the Plan Administrator, an amount equal to the
difference between the fair market value of the Common Stock on the date of
exercise of the SAR and the fair market value of the Common Stock on the date of
grant of the SAR.
SARs granted in tandem with a stock option (the "Related Stock
Option") will grant to the holder the right to receive upon exercise of the SAR,
either in cash or in whole shares of Common Stock as determined by the Plan
Administrator, an amount equal to the difference between the fair market value
of the shares of Common Stock subject to the Related Stock Option surrendered by
the holder on the date of exercise of the SAR, and the exercise price of the
Related Stock Option. SARs granted in tandem with stock options shall only be
exercisable when the Related Stock Option is exercisable and shall have a term
equal to the term of the Related Stock Option.
Purchase Rights
Under the Amended 1989 Plan, the right to purchase Common Stock
("Purchase Rights") may be granted to eligible persons. The shares subject to
purchase will have a purchase price not less than the fair market value of the
Common Stock on the date of grant. The purchase price will be paid in full at
the time of exercise in cash or cash equivalent, or shares of Common Stock,
subject to certain requirements. Subject to approval by the Plan Administrator,
a participant may borrow money from the Company to purchase the shares. The
loan will be evidenced by a promissory note. Liability on principal and
interest under a promissory note may be forgiven by the Company, in whole or in
part, in accordance with a formula based on the achievement of certain objective
and verifiable performance goals (such as earnings per share or earnings before
interest, taxes, depreciation and amortization ("EBITDA")) established by the
Plan Administrator in accordance with the Regulations, as finally promulgated.
Performance Rights
Under the Amended 1989 Plan, the payment of cash or grant of Common
Stock subject to the performance of a specified goal or goals ("Performance
Rights") may be awarded to eligible persons. The Plan Administrator will
specify objective and verifiable performance goals to be achieved by the Rights
holder during an incentive period of not less than two years from the date of
grant (the "Incentive Period"), such as earnings per share or EBITDA in
accordance with the Regulations, as finally promulgated. No payment may be made
with respect to any Performance Right prior to the expiration of the applicable
Incentive Period. Payment with respect to a Performance Right may be made in
cash, in shares of Common Stock, or by a combination thereof as determined by
the Plan Administrator. In the event that payment is made pursuant to a
Performance Right (in whole or in part) in the form of Common Stock, the shares
will be valued at their fair market value at the end of the Incentive Period.
The amount actually paid to any grantee pursuant to any single
Performance Right, regardless of the terms of the Performance Right, may not
exceed 125% of the grantee's highest annual rate of base compensation for the
final year in the Incentive Period. In addition, not more than one Performance
Right awarded to a grantee shall become payable in a single fiscal year.
Effect of Certain Transactions
The Amended 1989 Plan provides that if the Company merges or
consolidates with another corporation, or if the Company is liquidated or sells
substantially all of its assets while unexercised Rights remain outstanding
under the Amended 1989 Plan, the Plan Administrator will have the right to
make one or more of the following adjustments: (i) any limitations or
vesting periods set out in or imposed pursuant to the Amended 1989 Plan may
- 18 -
<PAGE>
be waived or accelerated, so that Rights will be exercisable in part or in full
from and after a date specified by the Plan Administrator; (ii) after the
effective date of the merger, consolidation, liquidation, sale or other
disposition (the "Corporate Event"), each holder of an outstanding Right may be
entitled, upon exercise, to receive, in lieu of Common Stock, the type and
amount of securities (or assets) to which the holder would have been entitled
if, immediately prior to the Corporate Event, the holder had been the holder of
a number of shares of Common Stock equal to the number of shares as to which the
Right may be exercised; or (iii) all outstanding Rights may be canceled by the
Plan Administrator as of the effective date of any Corporate Event.
Amendment and Termination
The Board of Directors may amend, alter or discontinue the Amended
1989 Plan without shareholder approval, except no amendment may be made without
shareholder approval that would: (i) materially increase the total number of
shares reserved for issuance; (ii) materially increase the benefits accruing to
participants; (iii) materially modify the requirements for eligibility; or (iv)
increase the number of shares allocable to Incentive Stock Options.
Tax Consequences - Incentive Stock Options Under the Amended 1989 Plan
(Statutory Options)
Under current Federal law, the recipient of an Incentive Stock
Option does not recognize taxable income either upon grant of the option or
upon its exercise. However, upon disposition of Common Stock acquired through
the exercise of an Incentive Stock Option, the participant is taxed on the
excess of any amount realized over the exercise price.
If the participant has been an employee of the Company from the
date of grant of the Incentive Stock Option until the day three months prior to
the exercise date, and satisfies two holding period requirements, the gain
recognized upon disposition of the Common Stock is taxed as a capital gain. To
satisfy the requisite holding period requirements, the participant may not
dispose of the Common Stock within two years from the date of grant of the
Incentive Stock Option or for one year from the date of exercise of the
Incentive Stock Option. If a participant's disposition of Common Stock acquired
through the exercise of an Incentive Stock Option is treated as a capital
transaction, the Company is not entitled to a deduction at any time for the
transfer to the participant of either Incentive Stock Options or Common Stock
acquired pursuant to the exercise of an Incentive Stock Options.
If the participant does not satisfy both of the holding period
requirements, he or she will recognize ordinary income in the year of
disposition of the Common Stock equal to the excess of: the lesser of (a) the
fair market value of the Common Stock on the date the Incentive Stock Option
is exercised, or (b) the amount realized on the disposition, over (c) the
exercise price for the Incentive Stock Option. In addition, the Company will
be entitled to a deduction equal to the ordinary income reported by the
participant. Any remaining gain will be treated as a short-term or long-term
capital gain, depending upon how long the Common Stock has been held (i.e.,
if the Common Stock appreciates between the date the Incentive Stock Option is
exercised and the date of disposition). Under current law, long-term capital
gain treatment applies to stock held for more than one year.
Tax Consequences - Non-Qualified Stock Options Under the Amended 1989 Plan
(Non-Statutory Options)
A participant will not be deemed to have received income upon the
grant of a Non-Qualified Stock Option pursuant to the Amended 1989 Plan if the
option itself does not have a "readily ascertainable fair market value."
Generally, the value of an option is not readily ascertainable unless the option
is actively traded on an established market. Options to purchase the Company's
Common Stock are not currently traded on an established market and are not
likely to be treated as having an ascertainable value under the current
Treasury Regulations.
Generally, under current Federal law, a participant will recognize
ordinary income upon the exercise of an option equal to the excess (if any) of
the fair market value of the Common Stock purchased at the time of exercise over
the exercise price. The Company is entitled to a tax deduction in the same
amount and at the same time as the participant recognizes such income, provided,
in the case of an employee, the Company withholds Federal income tax.
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<PAGE>
Upon the sale of such Common Stock, the participant will recognize
capital gain or loss measured by the difference between the amount realized on
the sale and the fair market value of the Common Stock at the time of exercise.
Such capital gain or loss will be short-term or long-term, depending upon the
length of time the shares are held by the participant. The gain or loss from
the sale or exchange of Common Stock held for more than one year is treated as
long-term capital gain or loss.
In the event the Common Stock acquired upon exercise of the option
is deemed to be "restricted" due to the fact that it is subject to a substantial
risk of forfeiture and is non-transferable, the participant will not be taxed
until one of these restrictions lapse. At such time, the participant will be
subject to taxation on the difference between the fair market value of the
Common Stock at the time one of the restrictions lapse and the amount paid for
the Common Stock. If the sale of the Common Stock at a profit within six months
after the purchase of the stock could subject the participant to suit under
Section 16(b) of the Exchange Act, the participant's rights in the Common Stock
are treated as subject to a substantial risk of forfeiture and as not
transferable until the earlier of: (a) the expiration of such 6-month period, or
(b) the first day on which the sale of such stock at a profit will not subject
the participant to suit under Section 16(b) of the Exchange Act.
A participant may make an election to be taxed upon the receipt of
restricted stock. The participant would then recognize ordinary income equal
to the excess (if any) of the fair market value of the Common Stock at the time
of exercise over the exercise price. When the restrictions lapse, the
participant would not be subject to any additional tax.
The Company would be entitled to a compensation deduction at the
same time as, and in an amount equal to, the income recognized by the
participant (upon the lapse of a restriction or upon the participant's election
to recognize ordinary income).
Tax Consequences - Other Rights
Under current Federal law, no income is recognized by a holder of
SARs, Purchase Rights or Performance Rights at the time such Rights are granted
under the Plan. In general, at the time cash is transferred or shares are
issued to a holder pursuant to exercise of Rights, the holder will recognize
ordinary income equal to the excess of the sum of cash and the fair market value
of the shares on the date of exercise over the exercise price. If the holder is
an officer or director within the meaning of Section 16(b) of the Exchange Act
(a "Section 16(b) Person"), taxable income with respect to any shares received
is generally deferred until the earlier of (a) the expiration of the six-month
holding periodic under Section 16(b), and (b) the first day on which the sale of
the shares at a profit would not subject the recipient to suit under the
Exchange Act. A holder who is a Section 16(b) Person may, however, make an
election under Section 83(b) of the Code, in which case the tax consequences of
the exercise of the Rights are the same as if the Section 16(b) restrictions did
not apply.
A holder will recognize gain or loss on the subsequent sale of
shares acquired upon exercise of Rights in an amount equal to the difference
between the selling price and the tax basis of the shares, which will include
the price paid plus the amount included in the holder's income by reason of the
exercise of the Rights. Provided the shares are held as a capital asset, any
gain or loss will a be a long-term or short-term capital gain or loss depending
upon whether the shares have been held for more than one year.
The Company will be entitled to a deduction for Federal income tax
purposes in the year and in the same amount as the holder is considered to have
realized ordinary income in connection with the exercise of other Rights if
provision is made for withholding of federal income taxes, where applicable.
Options Granted and Market Value of Common Stock
Since its adoption in 1989, stock options have been granted under
the Amended 1989 Plan as follows: 715,000 had been granted to current executive
officers, comprised of 375,000 to Mr. Pattiz, 150,000 to Mr. Batusic and 190,000
to Mr. Weiss; 550,000 have been granted to certain other Named Executive
Officers, comprised of 250,000 to Mr. Kanter and 300,000 to Mr. Wilson; 303,750
have been granted to current non-executive directors, 30,000 of which are
subject to shareholder approval; 95,000 have been granted to Mr. Levine; 10,000
have been granted to Mr. Dennis, all of which are subject to shareholder
approval; and 1,551,000 have been granted to employees, including officers other
than current executive officers. Additionally, assuming shareholder approval
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<PAGE>
of the Amended 1989 Plan at the 1994 Annual Meeting, if then on the Board, a
mandatory grant of options to purchase 10,000 shares of Common Stock will be
made to Messrs. Levine and Krasnow effective March 3, 1997 and to Messrs.
Dennis, Greenberg and Smith effective May 24, 1998. Any future outside
directors will also receive a mandatory grant of options to purchase 10,000
shares of Common Stock effective the date such director is appointed to the
Board, and every four years thereafter. Other than the foregoing mandatory
grants, the Plan Administrator, currently the Compensation Committee, will
determine the number of stock options and other Rights to be granted under the
Amended 1989 Plan in the future.
The last sales price for the Common stock as reported
on the NASDAQ/National Market System on July 7, 1994 was $8.75 per
share.
New Plan Benefits
1989 Stock Incentive Plan as Amended
Stock options granted under the Amended 1989 Plan are made (except
for certain mandatory grants to non-executive directors) at the discretion of
the Plan Administrator, currently the Compensation Committee, which has the
discretion to award less than the maximum number of options permitted under
the Amended 1989 Plan. Accordingly, the benefits that will be received by
each of the following are not determinable (except for the mandatory grants to
non-executive directors further discussed under "Mandatory Grants to Outside
Directors" appearing elsewhere in this report). The following table, which is
required to be presented under the rules of the Securities and Exchange
Commission, identifies, for illustrative purposes, the stock options granted
during fiscal 1993 to each of the following pursuant to the Amended 1989 Plan
(as more fully discussed under "Option Grants in Fiscal 1993" on page 11).
<TABLE>
Dollar Number
Name and Position Value ($)(1) of Units
----------------- ------------ --------
<S> <C> <C>
Norman J. Pattiz..................................... $0 350,000
Chairman of the Board
and Chief Executive Officer
Bruce E. Kanter...................................... $0 0
Executive Vice President
and Chief Financial Officer
$0 0
Gregory P. Batusic...................................
President-Network Division
Eric R. Weiss........................................ $0 70,000
Executive Vice President-
Business and Legal Affairs
Robert M. Wilson..................................... $0 100,000
Publisher and Chief Executive
Officer-Radio & Records
Executive Group (6 persons).......................... $0 420,000
Non-Executive Director Group (5 persons)............. $0 150,000
Non-Executive Officer Employee Group................. $0 75,000
</TABLE>
[FN]
________________________
(1) Based upon the difference between the fair market value of the
underlying stock on the date of the grant and the exercise price
of the options. This valuation does not take into account stock
price appreciation which may occur over the term of the options.
MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
PROPOSAL TO APPROVE THE AMENDED 1989 PLAN. THE AFFIRMATIVE VOTE OF A MAJORITY
OF THE COMMON STOCK AND CLASS B STOCK, VOTING TOGETHER, PRESENT OR REPRESENTED
AT THE ANNUAL MEETING IS REQUIRED TO APPROVE THE PROPOSAL.
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<PAGE>
PROPOSAL TO APPROVE INCENTIVE COMPENSATION PROVISION
OF MR. PATTIZ' EMPLOYMENT AGREEMENT
The Board of Directors recommends approval of the material terms
of the incentive compensation payable under Mr. Pattiz' employment agreement
with the Company, as follows. During fiscal 1993, the Company entered into a
new employment agreement with Mr. Pattiz effective October 18, 1993 (as amended
effective January 26, 1994 and February 2, 1994). The 1993 Employment Agreement
(which is more fully discussed under "Employment Agreements" appearing elsewhere
in this report) provides for the payment of certain incentive compensation to
Mr. Pattiz in the event that the Company reaches certain targets, as described
below. The Compensation Committee structured the incentive compensation
provision of the 1993 Employment Agreement to ensure that it satisfies the
requirements under Section 162(m) of the Code, which generally sets a limit
of $1 million on the amount of compensation (other than certain types of
compensation, including "performance related" compensation) that the Company
can deduct for Federal income tax purposes, so as to preserve the Company's
ability to deduct such compensation for Federal income tax purposes.
Approval by the shareholders of the material terms of the incentive
compensation described below is one of several requirements that must be met
under Section 162(m) of the Code if incentive compensation payable pursuant
to the 1993 Employment Agreement is to qualify for the performance-based
compensation exception to the limitation on the Company's ability to deduct
compensation in excess of $1 million paid to Mr. Pattiz in taxable years
beginning on or after January 1, 1994. Accordingly, the 1993 Employment
Agreement provides that compensation in excess of $1 million in any taxable
year will not be paid to Mr. Pattiz unless the material terms of the incentive
compensation described below are approved by the shareholders.
Incentive Compensation Provisions of the 1993 Employment Agreement
The 1993 Employment Agreement provides that, for each fiscal year,
commencing with the year ending November 30, 1994, that the Company meets or
exceeds its EBITDA (as defined below) target as established by the Compensation
Committee, Mr. Pattiz will be entitled to receive cash incentive compensation
(the "CIC Bonus") as follows:
<TABLE>
<CAPTION>
Fiscal Year CIC Bonus
----------- ---------
<C> <C>
1994 $250,000
1995 $275,000
1996 $302,500
1997 $332,750
1998 $366,025
</TABLE>
If the 1993 Employment Agreement terminates on a date other than
the last day of a fiscal year, Mr. Pattiz will be entitled to a pro-rated CIC
Bonus for the portion of the year preceding the termination date if the EBITDA
target is met through the end of the month ending on or next preceding the
termination date. The CIC Bonus earned in any year will be paid within 30 days
after the filing of the Company's Form 10-K for such year, or if the CIC Bonus
is for a part of the year, within 60 days after the end of the last month taken
into account in determining whether the EBITDA target has been met.
For purpose of the 1993 Employment Agreement, EBITDA means earnings
before interest, taxes, depreciation and amortization as reported in the
Company's Form 10-K for the fiscal year, or, if for a portion of the year, as
approved by the Compensation Committee based on the Company's books and records.
The EBITDA target will be set by the Compensation Committee in accordance with
the Regulations under 162(m), which currently require that the target be set
no later than 90 days after the beginning of the fiscal year to which it
relates.
MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
PROPOSAL TO APPROVE THE INCENTIVE COMPENSATION PROVISION OF THE 1993
EMPLOYMENT AGREEMENT. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE COMMON STOCK
AND CLASS B STOCK, VOTING TOGETHER, PRESENT OR REPRESENTED AT THE ANNUAL
MEETING IS REQUIRED TO APPROVE THE PROPOSAL.
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<PAGE>
SELECTION OF INDEPENDENT ACCOUNTANTS
Action will be taken at the Annual Meeting to ratify the selection
of Price Waterhouse as independent accountants of the Company for the fiscal
year ending November 30, 1994. Price Waterhouse has been the independent
accountants of the Company since 1984. The Company knows of no direct or
material indirect financial interest of Price Waterhouse in the Company or of
any connection of that firm with the Company in the capacity of promoter,
underwriter, voting trustee, officer or employee. Members of Price Waterhouse
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.
MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE TO RATIFY THE
SELECTION OF PRICE WATERHOUSE. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
COMMON STOCK AND CLASS B STOCK, VOTING TOGETHER, PRESENT OR REPRESENTED AT
THE ANNUAL MEETING IS REQUIRED TO RATIFY THE SELECTION OF PRICE WATERHOUSE.
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.
SHAREHOLDER PROPOSALS FOR 1995
Under the rules of the Commission, any shareholder proposal
intended for inclusion in the proxy material for the Annual Meeting of
Shareholders to be held in 1995 must be received by the Company by November
30, 1994 to be eligible for inclusion in such proxy material. Proposals
should be addressed to Farid Suleman, Secretary, Westwood One, Inc., 9540
Washington Boulevard, Culver City, CA 90232. Proposals must comply with the
proxy rules of the Commission relating to stockholder proposals in order to
be included in the proxy materials.
By Order of the Board of Directors
/s/ Farid Suleman
-----------------
Farid Suleman
Secretary
Culver City, California
July 20, 1994
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<PAGE>
Exhibit A
AMENDMENTS TO THE
WESTWOOD ONE, INC.
AMENDED 1989 STOCK INCENTIVE PLAN
_________________________________
The following amendments to the Westwood One, Inc. 1989 Stock
Incentive Plan (the "Plan"), as amended and restated effective as of May 24,
1994, will become effective upon approval by the shareholders of the Company:
1. Page ii of the INDEX is amended so that ARTICLE X
reads as follows:
"ARTICLE X - Mandatory Grants to Outside Directors"
2. ARTICLE II (Definitions), Section 2.9 of the Plan
(Disinterested Person) is amended to read in its entirety as follows:
"2.9 "Disinterested Person" shall mean a person
who is "disinterested" within the meaning of Rule 16 b-3 of
the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended, (the "Exchange
Act") or any successor definition adopted by the SEC and, to
the extent and when required by such regulations, within the
meaning of Section 162(m) of the Code and the final regulations
of the U.S. Treasury Department promulgated thereunder."
3. ARTICLE IV (Stock Subject to Plan), Section 4.1 of
the Plan (Common Stock Subject to the Plan) is amended so that the first
sentence thereof reads as follows:
"The total number of shares of Common Stock reserved and
available for issuance under the Plan is 4,800,000 shares,
subject to adjustment as provided in Article XI."
4. ARTICLE IV (Stock Subject to Plan) of the Plan is
amended by adding the following new Section 4.3:
"Section 4.3 Limitation on Number of Shares
Underlying Stock Options and SARs Granted to Any One
Participant. To the extent required by applicable regulations
of the U.S. Treasury Department promulgated under Section 162(m)
of the Code, the maximum number of shares of Common Stock
subject to Stock Options and SARs that may be granted to any one
Participant pursuant to this Plan is 400,000, inclusive of all
Stock Options and SARs that have been canceled, surrendered, or
repriced, but exclusive of all stock options and SARs granted,
canceled, surrendered or repriced prior to January 1, 1994."
5. ARTICLE VI (Stock Options), Section 6.2(a) of the
Plan (Number of Shares) is amended by adding a new final sentence thereto, as
follows:
"The number of such shares are subject to the limitations of
Section 4.3 hereof."
6. ARTICLE VII (Stock Appreciation Rights), Section
7.1(b) of the Plan (General) is amended by adding a new final sentence thereto,
as follows:
"The number of shares to which the SARs relate is subject to
the limitations of Section 4.3 hereof."
7. ARTICLE VIII (Purchase Rights), Section 8.2(d) of
the Plan (Incentive Period) is amended to read as follows:
"(d) Incentive Period. A Participant's liability
on the principal and interest under a promissory note issued
pursuant to 8.2(c) above, may be forgiven by the Company, in
whole or in part, in accordance with a formula based on
achievement during the Incentive Period of performance goals.
Performance goals established for each Participant may vary.
For example, the goals may relate to cumulative earnings per
share of Common Stock; weighted average return on assets;
return on invested capital; earnings before interest, taxes,
depreciation and amortization or such other objective and
verifiable performance goals as may be established by the
Plan Administrator on the Date of Grant. The Incentive
Period will be determined by the Plan Administrator, but
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will not be less than two (2) fiscal years from the Date of
Grant. Notwithstanding any provision in this Article VIII
to the contrary, the performance goals and the Incentive
Period will be determined by the Plan Administrator in
compliance with Section 162(m) of the Code and the final
regulations promulgated by the U.S. Treasury Department
thereunder to the extent required thereby. The Stock
Purchase agreement may also contain restrictions on
distribution as set forth in Section 13.1 and will prohibit
the sale or other disposition of Common Stock received upon
the exercise of any Purchase Right during the applicable
Incentive Period."
8. ARTICLE IX (Performance Rights), Section 9.1(a) of
the Plan is amended by inserting a new sentence after the second sentence as
follows:
"Notwithstanding any provision in this Article IX to the
contrary, performance goals will be determined by the Plan
Administrator in compliance with Section 162(m) of the Code
and the final regulations promulgated by the U.S. Treasury
Department thereunder to the extent required thereby."
9. ARTICLE IX (Performance Rights), Section 9.1(b) of
the Plan is amended so that the second sentence thereof will now read as
follows:
"For example, the goals may relate to cumulative earnings per
share of Common Stock; weighted average return on assets; return
on invested capital; earnings before interest, taxes,
depreciation and amortization or such other objective and
verifiable performance goals as may be established by the Plan
Administrator on the Date of Grant."
10. ARTICLE X (Mandatory Grants to Outside Directors) of
the Plan is amended in its entirety to read as follows:
"Section 10.1 Grants. Notwithstanding any other provision of
this Plan, mandatory grants of Stock Options to Directors who
are not also employees or officers of the Company will be made
in accordance with and be subject to the following limitations
of this Article X:
(i) Effective on the Initial Date of Grant (as
defined in Section 10.2 hereof), and every four (4) years
thereafter on the anniversary of such Initial Date of Grant,
the Board of Directors will grant to each Director of the
Company who is not also an employee or officer of the Company,
a ten-year Non-Qualified Stock Option under this Plan to
purchase ten thousand (10,000) shares of Common Stock.
(ii) All Stock Options granted to Directors under
this Article X will be exercisable at an Exercise Price equal
to 100% of the Fair Market Value of a share of Common Stock on
the Date of Grant. For purposes of this Article X, the Date of
Grant of each such Stock Option will be the date upon which such
Stock Option is required to be granted pursuant to Subsection
10.1(i) hereof.
(iii) All Stock Options granted to Directors under
this Article X will become exercisable at the rate of 20% per
year on the anniversary of the Date of Grant.
(iv) Unless otherwise provided in the Plan, all
provisions regarding the terms of Non-Qualified Stock Options
will be applicable to the Stock Options granted to Directors
under this Article X. Specifically Section 13.7
(Nontransferability of Rights) and Section 13.9 (Six Month
Holding Period) are hereby incorporated by reference.
Section 10.2 Initial Date of Grant. For purposes of this
Article X, the Initial Date of Grant shall be determined as
follows:
(i) With respect to Directors appointed to the
Board on May 24, 1994, the Initial Date of Grant shall mean
May 24, 1994.
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(ii) With respect to Directors that were members of
the Board immediately prior to May 24, 1994, the Initial Date
of Grant shall mean March 3, 1993.
(iii) With respect to Directors appointed to the
Board after May 24, 1994, the Initial Date of Grant shall
mean the date such Director is appointed to the Board.
Section 10.3 Amendment. Notwithstanding any other provision of
this Plan, the provisions regardingmandatory grants to Directors
may not be amended more than once every six (6) months, other
than to comport with changes in the Code, the Employee
Retirement Income Security Act, or the rules thereunder."
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