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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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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:
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<PAGE>
Dear Shareholders:
Enclosed with this letter is a Proxy Statement and proxy card for the
Annual Meeting of Shareholders to be held on June 17, 1997 at 10:00 a.m.,
Pacific Time, in the La Ventana Room of the Westwood Marquis, 930 Hilgard
Avenue, Los Angeles, California. A copy of the Company's Annual Report on Form
10-K for the year ended December 31, 1996, 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 an amendment to the
Company's Amended 1989 Stock Incentive Plan, 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.
Norman J. Pattiz
Chairman of the Board
April 29, 1997
<PAGE>
WESTWOOD ONE, INC.
9540 Washington Boulevard
Culver City, California 90232
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on
June 17, 1997
To Our Shareholders:
The Annual Meeting of the Shareholders of Westwood One, Inc. (the
"Company") will be held in the La Ventana Room of the Westwood Marquis, 930
Hilgard Avenue, Los Angeles, California, on June 17, 1997 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 an amendment to the Amended 1989 Stock Incentive Plan
to increase by 2,000,000 the number of shares of the Company's
Common Stock (the "Common Stock") as to which options and other
stock incentives may be granted under such Plan;
(3) To ratify the selection of Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending December 31,
1997; and
(4) To consider and act upon such other business as may properly come
before the meeting.
Shareholders of record at the close of business on May 9, 1997 will be
entitled to notice of and to vote at the Annual Meeting, and a list of such
shareholders will be available for examination during ordinary business hours at
least ten days prior to the Annual Meeting by any shareholder, for any purpose
germane to the Annual Meeting, at the Company's offices at 9540 Washington
Boulevard, Culver City, California 90232 (telephone (310) 204-5000).
Whether or not you intend to be present at the meeting, please 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
Farid Suleman
Secretary
April 29, 1997
<PAGE>
WESTWOOD ONE, INC.
9540 Washington Boulevard
Culver City, California 90232
-----------------------------------
PROXY STATEMENT
-----------------------------------
This Proxy Statement (first mailed to shareholders on or about May 16,
1997) 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 June 17,
1997 at 10:00 a.m., Pacific Time, in the La Ventana 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 May 9, 1997 are entitled to vote at the Annual Meeting. As of the
close of business on April 11, 1997, 29,807,257 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 an amendment to the Amended 1989
Stock Incentive Plan, vote upon the ratification of Price Waterhouse LLP as the
Company's independent accountants 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
amendment to the Amended 1989 Stock Incentive Plan, and in favor of the
ratification of the selection of Price Waterhouse LLP 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 for the year ended December 31,
1996, 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., a wholly owned subsidiary of CBS Radio;
and (iii) Norman J. Pattiz, the Company's current Chairman of the Board (the
"Voting Agreement"). The Voting Agreement, which became effective February 3,
1994, reconstituted the Board of Directors into a nine-member Board to which Mr.
Pattiz designated three members (the "Pattiz Designees"), CBS Radio designated
three members (the "CBS Designees") and a nominating committee consisting of one
Pattiz Designee and one CBS Designee designated the final three directors
("Independents"), all of whom are independent outside directors as defined in
the Company's By-Laws. The Voting Agreement also requires: (i) Mr. Pattiz and
CBS 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.
The Voting Agreement also provides for a reduction in the number of Board
Members Mr. Pattiz may designate if he reduces his stock ownership below
predetermined levels. If Mr. Pattiz loses a Designee as a result of his stock
transactions, the size of the Board of Directors is automatically reduced as of
the next election of directors. As a result of Mr Pattiz's 1995 stock
transactions, he currently may only designate two members of the Board of
Directors and accordingly the Board was reduced to eight members as of June 17,
1996.
The Board of Directors, consisting of eight individuals, 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 33 1/3% must be independent outside
directors. Pursuant to the Company's Certificate of Incorporation, holders of
Common Stock, voting alone, have the right to elect 20% of the Board of
Directors, which 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 Class II directors, for three-year
terms, until their successors are elected and qualified. The Board of Directors
intends to nominate Paul Krasnow (the Pattiz Designee), Farid Suleman (the CBS
Designee) and David L. Dennis (the Independent director) to serve for three-year
terms ending in 2000. All of these nominees currently serve as Class II
directors of the Company, except for Mr. Krasnow, who will be replacing Arthur
E. Levine upon the expiration of his term. 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. THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE TO ELECT MESSRS. KRASNOW, SULEMAN AND DENNIS AS DIRECTORS OF
THE COMPANY.
The continuing directors and nominees for director of the Company are:
<TABLE>
Director Term
Name Age Since Class Expires
- - ---- --- -------- ----- -------
<S> <C> <C> <C> <C> <C>
Norman J. Pattiz ........ (Pattiz Designee)............... 54 1974 I 1998
Mel Karmazin ............ (CBS Designee).................. 53 1994 I 1998
Joseph B. Smith.......... (Independent)................... 69 1994 I 1998
Paul G. Krasnow.......... (Pattiz Designee)............... 58 -- II --
Farid Suleman ........... (CBS Designee).................. 45 1994 II 1997
David L. Dennis.......... (Independent)................... 48 1994 II 1997
Steven A. Lerman......... (CBS Designee).................. 50 1995 III 1999
Gerald Greenberg......... (Independent)................... 54 1994 III 1999
</TABLE>
2
<PAGE>
The principal occupations of the three director nominees and each of the
other five continuing directors are as follows:
Mr. Pattiz - founded the Company in 1974 and has held the position of
Chairman of the Board since that time. He was also the Company's Chief Executive
Officer until February 3, 1994.
Mr. 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 a
director of Westinghouse Electric Corporation since March 1997 and Chairman and
Chief Executive Officer of CBS Radio since December 1996. Mr. Karmazin is also a
member of the Board of Trustees for the Museum of Television and Radio. From
1988 to December 1996, Mr. Karmazin was President and Chief Executive Officer of
Infinity Broadcast Corporation ("Infinity"). In addition, from 1984 to December
1996, Mr. Karmazin was a director of Infinity.
Mr. Smith - has been a director of the Company since May 24, 1994. He was
previously a director of the Company from February 1984 until February 3, 1994.
Since April 1993, Mr. Smith has been the President of Unison Productions, Inc.,
through which he serves as an industry consultant involved in a number of
projects in the entertainment business. He was President and Chief Executive
Officer of EMI/Capitol Records from January 1987 until April 1, 1993.
Mr. Krasnow - 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. Krasnow was also a director
of the Company from 1989 until June 17, 1996.
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 Senior Vice
President and Chief Financial Officer of CBS Radio since December 1996. Mr.
Suleman was a director of Infinity from February 1992 through December 1996.
From 1986 to December 1996, Mr. Suleman was Vice President-Finance and Chief
Financial Officer of Infinity.
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. Lerman - has been a director of the Company since April 19, 1995. Since
1986, Mr. Lerman has been a partner in the Washington, D.C. law firm of
Leventhal, Senter and Lerman. Mr. Lerman was a director of Infinity from
February 1992 through December 1996 and he was also a director of Premiere Radio
Networks, Inc. until April 18, 1995.
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 currently
consists of Messrs. Smith and Greenberg. The Compensation Committee administers
the Company's Amended 1989 Stock Incentive Plan, establishes the annual earnings
target for the payment of an incentive bonus to the Company's Chairman and is
authorized to approve, and may negotiate, employment arrangements with key
executives of the Company and its subsidiaries. There were no formal meetings of
the Compensation Committee during fiscal 1996, however, Committee members
engaged in informal discussions and took several actions by written consent.
The Board of Directors also has an Audit Committee which currently consists
of Messrs. Levine, Dennis and Suleman. 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 two meetings of the Audit Committee during
fiscal 1996.
Director Attendance and Compensation
- - ------------------------------------
In fiscal 1996 the Board as a whole met on six occasions. During fiscal
1996, each of the current directors then in office attended at least 75% of the
aggregate of the total number of meetings of the Board of Directors and the
total number of meetings of committees of the Board of Directors on which such
director served.
Directors of the Company who are not officers received $3,750 per meeting
attended for their services as directors and $1,875 per meeting attended for
their services as committee members. In addition, all directors who are not
officers receive a mandatory grant of stock options to acquire 10,000 shares of
Common Stock each year. Directors are also reimbursed for expenses incurred in
attending such meetings. During fiscal 1996, Messrs. Smith, Levine, Dennis,
Lerman and Greenberg received $30,000, $35,625, $35,625, $22,500 and $31,875,
respectively, in Board and Board committee fees. In addition, Mr. Krasnow
received $7,500 for attending meetings of the Board of Directors prior to his
resignation in June 1996.
Principal Shareholders
- - ----------------------
The following table sets forth as of April 11, 1997, 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 five 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 April 11, 1997, there were 29,807,257 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 of an
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>
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) (16)......................... 749,040 (3) 2.5% 351,690 99.9%
Mel Karmazin...................................... 312,000 (4) * - -
Joseph B. Smith................................... 8,000 (5) * - -
Arthur E. Levine.................................. 2,000 (5) * - -
Farid Suleman..................................... 100,000 (5) * - -
David L. Dennis................................... 21,605 (6) * - -
Paul G. Krasnow................................... 75,000 * - -
Steven A. Lerman ................................. 6,000 (5) * - -
Gerald Greenberg.................................. 4,000 (5) * - -
Jeffrey B. Lawenda................................ 100 * - -
Gregory P. Batusic................................ 50,000 (7) * - -
Michael D'Ambrose................................. - - -
Infinity Network Inc., a subsidiary of CBS
Radio (14) (15).................................. 8,000,000 (9) 24.4% - -
40 West 57th Street
New York, NY 10019
Putnam Investments, Inc. (14).................... 4,394,949 (10) 14.7% - -
One Post Office Square
Boston, MA 02109
Denver Investment Advisors LLC (14)............... 3,435,370 (11) 11.5% - -
1225 17th Street
Denver, CO 80202
College Retirement Equities Fund (14)............. 2,887,000 (12) 9.7% - -
730 Third Avenue
New York, NY 10017
The Capital Group Companies, Inc. (14)............ 2,445,000 (13) 8.2% - -
333 South Hope Street
Los Angeles, CA 90071
All current directors and executive officers as
a group (11 persons)............................ 1,252,745 (8) 4.1% 351,690 99.9%
</TABLE>
* 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 April 11, 1997, Mr. Pattiz, whose business address is 9540 Washington
Boulevard, Culver City, California 90232, owned Common Stock and Class B
Stock representing approximately 38.4% of the total voting power of the
Company.
(3) Includes stock options for 75,000 shares (which expire on November 30,
2003) granted pursuant to Mr. Pattiz' December 1, 1986 employment
agreement, as amended on November 25, 1987 and June 30, 1993 (the "1986
Employment Agreement"), and 70,000 shares granted under the Company's
Amended 1989 Stock Incentive Plan.
(4) Includes stock options for 140,000 shares granted under the Company's
Amended 1989 Stock Incentive Plan.
(5) Represents stock options granted under the Company's Amended 1989 Stock
Incentive Plan.
(6) Includes stock options for 8,000 shares granted under the Company's Amended
1989 Stock Incentive Plan.
(7) Includes stock options for 45,000 shares granted under the Company's
Amended 1989 Stock Incentive Plan.
(8) Includes stock options for 458,000 shares granted under the Company's
Amended 1989 Stock Incentive Plan and Mr. Pattiz' 1986 Employment
Agreement.
5
<PAGE>
(9) Includes 3,000,000 shares which may currently be acquired upon exercise of
warrants at an exercise price of $3.00 per share.
(10) Putnam Investments, Inc. as an investment advisor has no sole voting or
dispositive power, but has shared voting and dispositive power for
4,394,949 shares. In addition, Putnam Voyager Fund has shared dispositive
power for 2,015,000 shares.
(11) Denver Investment Advisors LLC, as an investment advisor, has sole voting
power with respect to 2,231,300 shares, and has shared voting and
dispositive power with respect to 3,435,370 shares.
(12) The College Retirement Equities Fund, as an investment company, has sole
voting and dispositive power for 2,887,000 shares.
(13) The Capital Group Companies, Inc., through its operating subsidiaries,
Capital Guardian Trust Company and Capital Research Management Company, has
investment discretion with respect to 2,445,000 shares owned by various
institutional investors.
(14) Tabular information and footnotes 9, 10, 11, 12 and 13 are based upon
information contained in the most recent Schedule 13G filings and other
information made available to the Company.
(15) Pursuant to the terms of the Voting Agreement (as discussed under "ELECTION
OF DIRECTORS" appearing elsewhere in this report), Mr. Pattiz and CBS Radio
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 CBS Radio together beneficially own 8,749,040 shares (26.6%) of
the Common Stock with respect to election of Independent directors and
52.1% of the Company's total voting power with respect to the election of
the Pattiz and CBS Radio Designees. 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' s and
CBS Radio's beneficially owned Common Stock, voting together, represents
approximately 17.3% of the Company's total voting power. Mr. Pattiz' s and
CBS Radio's beneficially owned Common Stock and Class B Stock, voting
together, represents approximately 52.1% of the Company's total voting
power.
Executive Officers
- - ------------------
The names, ages and principal occupations (if not set out previously) of
the executive officers of the Company and its subsidiaries are as follows:
Name Age Position
---- --- --------
Norman J. Pattiz........... 54 Chairman of the Board
Mel Karmazin............... 53 President, Chief Executive Officer and
Director
Farid Suleman.............. 45 Executive Vice President, Chief Financial
Officer, Secretary and Director
Michael D'Ambrose.......... 40 Senior Vice President - Westwood One, Inc.
and Chief Executive Officer - Westwood One
Broadcasting Services, Inc.
Gregory P. Batusic......... 42 President - Westwood One Entertainment
Jeffrey B. Lawenda......... 54 President - Westwood One Radio Networks
Mr. D'Ambrose - was appointed Senior Vice President - Westwood One, Inc. in
March 1997 and Chief Executive Officer - Westwood One Broadcasting Services,
Inc. (Shadow) in March 1996. From 1992 to March 1996, he was Chief Executive
Officer of Shadow Broadcasting Services.
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.
6
<PAGE>
Mr. Lawenda - was appointed President - Westwood One Radio Networks in
April 1995. From November 1990 to March 1995, he was Senior Vice President of
Cabin Fever Entertainment, a home video, television and film production and
distribution company. Mr. Lawenda resigned his position with the Company
effective April 10, 1997.
Messrs. Karmazin and Suleman serve under a Management Agreement which is
discussed in the following paragraph. Messrs. Pattiz, D'Ambrose, and Batusic
have written employment agreements with the Company.
Pursuant to the terms of the five year Management Agreement between the
Company and CBS Radio effective February 3, 1994, CBS Radio manages the business
and operations of the Company, subject to the direction and supervision of the
Board of Directors, for a base management fee of $2,123,000 (in 1996), an annual
cash bonus payable in the event certain cash flow targets are achieved and
warrants to purchase shares of Common Stock. Currently, CBS Radio has a warrant
to purchase 500,000 shares of Common Stock at $5.00 per share. This warrant
becomes exercisable after the Company's Common Stock trades above $20 per share
for a specified period of time. In connection with the foregoing matters, CBS
Radio 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 at an
exercise price of $3.00 per share for an aggregate purchase price of
$15,000,000. CBS Radio currently beneficially owns approximately 24.4% of the
Common Stock of the Company (see "Principal Shareholders" appearing elsewhere in
this report).
EXECUTIVE COMPENSATION
----------------------
Disclosure regarding compensation is provided for each of the executive
officers of the Company (collectively, the "Named Executive Officers") who
served as executive officers at the end of or during the fiscal year ended
December 31, 1996:
Norman J. Pattiz.............. the Company's Chairman of the Board at
December 31, 1996.
Mel Karmazin.................. the Company's Chief Executive Officer and
President at December 31, 1996.
Farid Suleman................. the Company's Executive Vice President and Chief
Financial Officer at December 31, 1996.
Gregory P. Batusic............ the Company's President - Westwood One
Entertainment at December 31, 1996.
Jeffrey B. Lawenda............ the Company's President - Westwood One Radio
Networks at December 31, 1996.
Michael D'Ambrose............. the Company's Chief Executive Officer-Westwood
One Broadcasting Services, Inc. since
March 1, 1996.
Compensation Committee Report
- - -----------------------------
The Compensation Committee of the Company's Board of Directors consists of
at least two independent, outside directors, currently Messrs. Smith and
Greenberg.
7
<PAGE>
The Compensation Committee administers the Amended 1989 Stock Incentive
Plan and may review employment arrangements with executive officers of the
Company other than Messrs. Karmazin and Suleman who serve as the Company's Chief
Executive Officer and Chief Financial Officer, respectively, pursuant to the
Management Agreement described above. (See "Executive Officers" appearing
elsewhere in this report for a more detailed description of the Management
Agreement.) In addition, the Committee establishes the annual earnings targets
which must be achieved by the Company for the payment of a cash incentive bonus
to Mr. Pattiz pursuant to his current employment agreement with the Company.
(See "Employment Agreements" appearing elsewhere in this report for a
description of Mr. Pattiz' employment agreement.)
Under the terms of the Management Agreement, pursuant to which Mel Karmazin
serves as the Company's Chief Executive Officer and President, and Farid Suleman
serves as the Company's Chief Financial Officer, the Company pays a management
fee to CBS Radio. Accordingly, the Compensation Committee does not set the base
salaries or annual cash bonus incentives of Messrs. Karmazin or Suleman, but
does have the authority to grant stock incentives to such officers. Moreover,
during 1996 Mr. Karmazin, as the Company's Chief Executive Officer under the
Management Agreement, was responsible for determining the amount of salary and
bonus payable to the Company's executive officers, except to the extent that
such matters were required to be determined in accordance with pre- existing
employment arrangements.
The compensation policies utilized by the Compensation Committee and the
Chief Executive Officer are intended to enable the Company to attract, retain
and motivate executive officers to meet Company goals using appropriate
combinations of base salary and incentive compensation in the form of annual
cash bonuses and stock incentives. Generally, compensation decisions are based
on contractual commitments, as well as corporate performance, the level of
individual responsibility of the particular executive and individual
performance. The foregoing factors are listed in order of their relative
importance in making compensation decisions.
Stock incentives may be granted under the Amended 1989 Stock Incentive Plan
by the Compensation 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 Compensation Committee consults with the Chief Executive
Officer and others in management, as applicable. In evaluating the performance
of the Chief Executive Officer, the Compensation Committee may consult with the
entire Board of Directors. In an effort to attract and retain highly qualified
officers and employees, stock incentives may also be granted by the Compensation
Committee, at its sole discretion, to newly hired officers and employees as an
inducement to accept employment with the Company.
1996 Compensation for Executive Officers
- - ----------------------------------------
Salary paid to Mr. Pattiz for 1996 was based on the terms of pre-existing
employment agreement with the Company. The payment of the cash incentive bonus
to Mr. Pattiz for fiscal year 1996 pursuant to his employment agreement was
based on the achievement by the Company of the 1996 earnings target set by the
Compensation Committee in the first quarter of 1996 for the payment of such
bonus. The salary and annual incentives in 1996 for other executive officers,
except for Messrs. Karmazin and Suleman, who serve pursuant to the Management
Agreement, were based on the terms of employment agreements between the Company
and its executive officers, described elsewhere herein. These agreements were
structured in a manner that considered the competitive job market as well as the
individual's performance in helping the Company achieve its short and long-term
goals. The executive officers' incentive bonuses are based on their ability to
achieve cash flow targets established by the Company's Chief Executive Officer
for their respective divisions. (See "Employment Agreements" appearing elsewhere
in this report).
The Board of Directors
----------------------
Joseph B. Smith, Chairman of the Compensation Committee
Gerald Greenberg, member of the Compensation Committee
Mel Karmazin, Chief Executive Officer
Norman J. Pattiz, Chairman of the Board
Arthur E. Levine
Farid Suleman
David L. Dennis
Steven A. Lerman
8
<PAGE>
Summary Compensation Table
The following table sets forth the compensation received by the Named
Executive Officers for the years ending December 31, 1996, and 1995 and the
thirteen month period ending December 31, 1994.
<TABLE>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation ------------
-------------------------------------------- Securities
Name and Fiscal Other Annual Underlying All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($) Options ($) Compensation ($)
- - ------------------ ------ ---------- --------- ---------------- ------------- ----------------
(1) (2)
<S> <C> <C> <C> <C> <C> <C>
Norman J. Pattiz .......... 1996 $750,000 $302,500 -- -- --
Chairman of the Board (3) 1995 750,000 275,000 -- -- --
1994 812,500 -- -- -- $1,026,563 (7)
Mel Karmazin............... 1996 -- -- -- -- --
Chief Executive Officer 1995 -- -- -- -- --
and President (4) 1994 -- -- -- 350,000 --
Farid Suleman.............. 1996 -- -- -- -- --
Chief Financial Officer 1995 -- -- -- -- --
(4) 1994 -- -- -- 250,000 --
Gregory P. Batusic......... 1996 379,167 133,333 -- -- 2,250 (8)
President - Westwood 1995 329,167 -- -- 100,000 2,250 (8)
One Entertainment 1994 325,000 -- -- -- 2,310 (8)
Jeffrey B. Lawenda......... 1996 398,187 -- -- 2,250 (8)
President - Westwood 1995 254,647 84,259 -- 100,000 453 (8)
One Radio Networks (5) 1994 -- -- -- -- --
Michael D'Ambrose.......... 1996 250,000 100,000 -- -- --
Chief Executive Officer 1995 -- -- -- -- --
Westwood One 1994 -- -- -- -- --
Broadcasting Services
Inc. (6)
</TABLE>
- - ------------------------------------------------
(1) During 1994, the Company changed its fiscal year end from November 30 to
December 31 effective with the fiscal year ending December 31, 1995.
Accordingly, this table includes compensation information for the
thirteen-month period ending December 31, 1994 and the fiscal years ending
December 31, 1995 and 1996.
(2) This column includes the aggregate cost to the Company (if such amount
exceeded the lesser of $50,000 or 10% of such officer's salary and bonus) of
providing various prerequisites and other personal benefits.
(3) Mr. Pattiz held the position of Chief Executive Officer until February 3,
1994, at which time he was replaced by Mr. Karmazin pursuant to the
Management Agreement between the Company and CBS Radio.
(4) Messrs. Karmazin and Suleman assumed their positions effective February 3,
1994, pursuant to the terms of the Management Agreement between the Company
and CBS Radio. Messrs. Karmazin and Suleman do not receive any cash
compensation from the Company. All compensation under the Management
Agreement is paid to CBS Radio. See "Certain Relationships and
Transactions."
(5) Mr. Lawenda became an executive officer of the Company on April 10, 1995.
Mr. Lawenda resigned from the Company effective April 10, 1997.
(6) Mr. D'Ambrose became an executive officer of the Company upon the March 1,
1996 acquisition of Shadow Broadcasting.
(7) Pursuant to his 1986 Employment Agreement, Mr. Pattiz received 75,000 shares
(adjusted for a subsequent stock split to 112,500 shares) of Class B Stock
which vested on March 31, 1994 at a value of $1,026,563.
(8) All Other Compensation for Messrs. Batusic and Lawenda consisted of company
contributions to the employee Savings and Profit-Sharing Plan.
9
<PAGE>
The following table provides information on stock options exercised by the
Named Executive Officers during fiscal 1996 and options outstanding on December
31, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND FISCAL YEAR END OPTION VALUES
Number of Securities
Underlying Value of Unexercised,
Unexercised Options In-the-Money Options
at Fiscal Year End (#) at Fiscal Year End ($) (1)
Shares Acquired Value --------------------------------- ---------------------------
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman J. Pattiz......... 70,000 (2) $749,025 (3) 145,000 210,000 $810,775 $2,361,450
Mel Karmazin............. - - 140,000 210,000 962,500 1,443,750
Farid Suleman............ - - 100,000 150,000 687,500 1,031,250
Gregory P. Batusic....... - - 45,000 80,000 408,125 170,000
Jeffrey B. Lawenda....... - - 20,000 80,000 42,500 170,000
Michael D'Ambrose........ - - - - - -
</TABLE>
- - -------------------------------------------------
(1) On Tuesday, December 31, 1996, the closing per share price for the
Company's Common Stock on the NASDAQ National Market System was $16 5/8.
(2) Represents the exercise of options granted under the Amended 1989 Stock
Incentive Plan.
(3) The reported amount excludes the per share exercise prices for all option
shares exercised.
10
<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 calendar years. The graph assumes
that $100 was invested in the Company's Common Stock and each index on December
31, 1991.
Measurement Dow Jones Dow Jones
Period Equity Media
(last business day Westwood Market Industry
of calendar year) One, Inc. Index Index
------------------ --------- ---------- ---------
1991 $ 100 $100 $100
1992 $ 107 $109 $118
1993 $ 548 $119 $143
1994 $ 637 $120 $137
1995 $ 924 $166 $197
1996 $1,087 $206 $203
The following table sets forth the closing price of the Company's Common
Stock at the end of each of the last five calendar years.
Base Year
---------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
$1 17/32 $1 5/8 $8 3/8 $9 3/4 $14 1/8 $16 5/8
======== ====== ====== ====== ======= =======
11
<PAGE>
Employment Agreements
- - ---------------------
The Company has a 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 plus an annual cash bonus of at least $250,000
($275,000 for fiscal 1995 and $302,500 for fiscal 1996 and $332,750 for 1997)
payable in the event that the Company achieves certain earnings targets as
established annually by the Compensation Committee of the Board of Directors. 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 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
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 agreement otherwise remains in effect and the transactions
entered into in connection with the Management Agreement and the Voting
Agreement were not considered a "change in control" for purposes of the
agreement.
The Company has a written thirty-one month employment agreement with the
President of Westwood One's Entertainment Division, Mr. Batusic, effective June
1, 1995. Pursuant to the terms of the agreement, Mr. Batusic receives a base
salary of $350,000 in the first year of the agreement, $400,000 in the second
year of the agreement and $233,333 for the period June 1, 1997 to December 31,
1997. Additionally, pursuant to the agreement, Mr. Batusic is eligible for an
annual bonus equal to one-third of his base salary provided the Entertainment
Division meets predetermined cash flow objectives. 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 to Mr. Batusic an amount equal to the lesser of
fifty-two weeks of his base salary, or the remaining period of the agreement.
The Company has a written two year employment agreement with the President
of Westwood One's Network Division, Mr. Lawenda, effective April 10, 1995.
Pursuant to the terms of the agreement, Mr. Lawenda receives a base salary of
$350,000 in the first year of the agreement and $400,000 in the second year of
the agreement. Additionally, pursuant to the agreement, Mr. Lawenda is eligible
for an annual bonus equal to one-third of his base salary provided the Network
Division meets predetermined cash flow objectives. The agreement provides Mr.
Lawenda 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. Lawenda. 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 to Mr. Lawenda an amount equal to the greater of
thirteen weeks of his base salary, or the remaining period of the agreement. Mr.
Lawenda resigned effective April 10, 1997 upon the expiration of the agreement.
The Company has a written three-year employment agreement with the
Company's Senior Vice President, Mr. D'Ambrose, effective March 1, 1996.
Pursuant to the terms of the agreement, Mr. D'Ambrose receives a minimum base
salary of $300,000. Additionally, pursuant to the agreement, Mr. D'Ambrose is
eligible for an annual bonus of $100,000 provided Westwood One Broadcasting
Services ("Shadow") meets predetermined cash flow objectives. The agreement
provides Mr. D'Ambrose 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. D'Ambrose. The agreement may also be
12
<PAGE>
terminated by the Company for any reason, at its discretion, upon written notice
and, in such event, the Company must pay to Mr. D'Ambrose an amount equal to the
amount he would have received for the remainder of the agreement.
Compensation Committee Interlocks and Insider Participation
- - -----------------------------------------------------------
The current members of the Compensation Committee, Messrs. Smith and
Greenberg, have served on the Committee since May 24, 1994.
In 1995, Mr. Karmazin, the Company's Chief Executive Officer, was
responsible for determining the salary and cash flow objectives that would
result in bonuses being paid to executive officers pursuant to their employment
agreements (other than Mr. Pattiz whose salary and bonus were based on the terms
of pre-existing employment agreements). (See "Employment Agreements" and
"Compensation Committee Report" appearing elsewhere in this report.)
Certain Relationships and Transactions
- - --------------------------------------
Messrs. Karmazin and Suleman are officers of CBS Radio which beneficially
owns 24.4% of the Common Stock of the Company (see "Principal Shareholders"
appearing elsewhere in this report). CBS Radio manages the business and
operations of the Company pursuant to the terms of a Management Agreement
between the Company and CBS Radio (as discussed under "Executive Officers"
appearing elsewhere in this report), under which the Company paid or accrued
expenses aggregating approximately $2,825,000 during fiscal 1996. The Company
also acquired and cancelled CBS's $4.00 vested incentive warrants covering
500,000 shares of Common Stock granted under the Management Agreement for
$5,750,000.
In addition, a number of CBS Radio's radio stations are affiliated with the
Company's radio networks and the Company purchases several programs from CBS
Radio. During fiscal 1996, the Company incurred expenses aggregating
approximately $22,886,000 to CBS Radio and its radio stations for CBS Radio
affiliations and programs. The Company currently anticipates that it will
continue to have such arrangements with CBS Radio and its radio stations in the
future. The Management Agreement provides that all transactions between the
Company and CBS Radio 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 CBS
Radio or any of its affiliates must be approved by the Board of Directors.
Mr. Dennis has served as a Managing Director, Investment Banking of
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") since April 1989.
During 1996, the Company used DLJ as its broker to repurchase 598,000 shares of
Common Stock in the open market for approximately $9,377,500.
Compliance with Section 16(a) of the Exchange Act
- - -------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Executive officers, directors and more than ten percent
shareholders are required by Securities 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 1996 its executive officers, directors and more than ten
percent beneficial owners complied with all filing requirements applicable to
them, except for Mr. Pattiz who filed a Form 4, 30 days late due to a clerical
error.
13
<PAGE>
PROPOSAL TO APPROVE THE AMENDMENT OF THE AMENDED 1989 STOCK INCENTIVE PLAN
--------------------------------------------------------------------------
In April 1997, the Board of Directors approved, subject to shareholder
approval, an amendment to the Company's Amended 1989 Stock Incentive Plan (the
"Amended 1989 Plan") to increase by 2,000,000 the number of shares of Comon
Stock reserved and available for issuance upon the exercise of stock incentives.
The Plan currently has 4,800,000 shares authorized, but only 189,500 shares
remain available for issuance under new stock options. All other provisions of
the Amended 1989 Plan will remain unchanged. The Plan currently provides for
mandatory annual grants of 10,000 shares to qualified outside directors. The
Board of Directors believes that the Company needs to be able to continue to
grant stock options and other stock incentives in order to attract and retain
qualified directors, officers and key employees. The Board of Directors
recommends approval of the foregoing amendment to the Company's Amended 1989
Stock Incentive Plan.
SUMMARY OF MATERIAL PROVISIONS OF THE AMENDED 1989 STOCK INCENTIVE PLAN
-----------------------------------------------------------------------
General Terms
- - -------------
The material provisions of the entire Amended 1989 Plan, as amended by the
Board in April 1997, subject to shareholder approval, 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 the proposed
amendment to the Amended 1989 Plan is attached as Exhibit A.
Under the Amended 1989 Plan, 6,800,000 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 Non-Employee Directors within
the meaning of Rule 16 b-3 under the Exchange Act (so long as disinterested
administration is required under Rule 16 b-3), or by a committee consisting of
at least two directors who are Non-Employee Directors (the "Plan
Administrator"). To the extent and at the time required by the final Treasury
Department Regulations (the "Regulations") under Section 162(m) and the Internal
Revenue Code of 1986 (the "Code"), such directors must also qualify as outside
directors within the meaning of the Regulations. Currently, the Plan
Administrator is the Compensation Committee.
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.
14
<PAGE>
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 year
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 that were members of the Board on March 12,
1996, the Initial Date of Grant means March 12, 1996 (the date of Board approval
of the amendment to the Plan). With respect to outside directors appointed or
elected to the Board after March 12, 1996, 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 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.
15
<PAGE>
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.
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. 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 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.
16
<PAGE>
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 - General
- - --------------------------
The following discussion is a general summary of the anticipated Federal
income tax consequences of the transactions discussed below under current
Federal law. State, local and international tax issues are not addressed. Due to
the complexity of the tax law and applicable regulations, and the lack of direct
authority on many of the issues discussed below, other tax treatments of the
transactions discussed below are possible. Changes in the law and regulations
may also affect the consequences discussed below.
Tax Consequences - Incentive Stock Options Under the Amended 1989 Plan
- - -----------------------------------------------------------------------
(Statutory Options)
- - -------------------
Under current Federal law, the recipient of an Incentive Stock Option
generally 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 Option.
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.
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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.
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 generally 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 period
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 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, except as
otherwise provided by Section 162(m) of the Code and the Regulations.
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Options Granted and Market Value of Common Stock
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Since its adoption in 1989, stock options have been granted under the
Amended 1989 Plan as follows: 1,645,000 have been granted to current executive
officers, comprised of 375,000 to Mr. Pattiz, 350,000 to Mr. Karmazin, 450,000
to Mr. Suleman, 350,000 to Mr. Batusic, 100,000 to Mr. D'Ambrose and 20,000 to
Mr. Lawenda; 280,000 have been granted to current non-executive directors; and
2,685,500 have been granted to employees, including officers other than current
executive officers. Additionally an annual aggregate mandatory grant of options
to purchase 50,000 shares of Common Stock will be made to non-executive
directors in 1997 and each year thereafter. 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 year
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 Plan in the future.
The last sales price for the Common Stock as reported on the
NASDAQ/National Market System on April 11, 1997 was $21.50 per share.
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New Plan Benefits - 1989 Stock Incentive Plan as Amended
- - --------------------------------------------------------
Stock options granted under the Amended 1989 Plan are made (except for
certain mandatory grants to non-executive directors) at the discretion of the
Plan Administrator, currently the Compensation Committee, which has the
discretion to award less than the maximum number of options permitted under the
Amended 1989 Plan. Accordingly, the benefits that will be received by each of
the following are not determinable (except for the mandatory grants to
non-executive directors further discussed under "Mandatory Grants to Outside
Directors" appearing elsewhere in this report). The following table, which is
required to be presented under the rules of the Securities and Exchange
Commission, identifies, for illustrative purposes, the stock options granted
during fiscal 1996 to each of the following pursuant to the Amended 1989 Plan.
Name and Position Dollar Value ($) (1) Number of Shares
- - ----------------- -------------------- ----------------
Norman J. Pattiz ................... $0 0
Chairman of the Board
Mel Karmazin........................ $0 0
President and Chief Executive
Officer
Farid Suleman....................... $0 0
Chief Financial Officer
Gregory Batusic..................... $0 0
President - Entertainment Division
Jeffrey Lawenda..................... $0 0
President - Network Division
Michael D'Ambrose................... $0 0
Chief Executive Officer -
Westwood One Broadcasting
Services Inc.
Executive Group (6 persons)......... $0 0
Non-Executive Director Group........ $0 50,000
(5 persons)
Non-Executive Officer Employee $0 0
Group
- - ------------------------------------
(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.
THE BOARD OF DIRECTORS 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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SELECTION OF INDEPENDENT ACCOUNTANTS
------------------------------------
Action will be taken at the Annual Meeting to ratify the selection of Price
Waterhouse LLP as independent accountants of the Company for the fiscal year
ending December 31, 1997. Price Waterhouse LLP has been the independent
accountants of the Company since 1984. The Company knows of no direct or
material indirect financial interest of Price Waterhouse LLP in the Company or
of any connection of that firm with the Company in the capacity of promoter,
underwriter, voting trustee, officer or employee. Members of Price Waterhouse
LLP will be present at the Annual Meeting, will have an opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO RATIFY THE
SELECTION OF PRICE WATERHOUSE LLP. 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 LLP.
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 1998
------------------------------
Under the rules of the Securities and Exchange Commission, any shareholder
proposal intended for inclusion in the proxy material for the Annual Meeting of
Shareholders to be held in 1998 must be received by the Company by December 31,
1997 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 Securities and Exchange Commission relating to stockholder proposals in
order to be included in the proxy materials.
By Order of the Board of Directors
Farid Suleman
Secretary
Culver City, California
April 29, 1997
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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, as amended effective April 1, 1997 (the "Plan"), will become effective
upon approval by the shareholders of the Company at the 1997 Annual Meeting of
Shareholders:
1. 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 6,800,000 shares, subject to adjustment as
provided in Article XI."
