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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-85609
JOINT PROXY STATEMENT/PROSPECTUS
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MERGER PROPOSED--YOUR VOTE IS IMPORTANT
The Boards of Directors of Westwood One, Inc., referred to herein as
Westwood, and Metro Networks, Inc., referred to herein as Metro, have agreed on
a merger.
In the proposed merger,
- Copter Acquisition Corp., a direct, wholly-owned subsidiary of Westwood
referred to herein as Merger Sub, will be merged with and into Metro, with
Metro surviving the merger as a wholly-owned subsidiary of Westwood;
- each share of Metro common stock issued and outstanding immediately prior
to merger will be converted into the right to receive 1.5 shares of
Westwood common stock;
- each share of Metro Series A convertible preferred stock issued and
outstanding immediately prior to the merger will be converted into the
right to receive 1.5 shares of Westwood preferred stock having terms that
are substantially identical to those of the Metro Series A convertible
preferred stock; and
- each Metro stock option that is outstanding and unexercised immediately
prior to the merger will become an option to acquire shares of Westwood
common stock in such amount and at the exercise price as set forth in the
merger agreement.
The merger cannot be completed unless the stockholders of both Westwood and
Metro approve the matters relating to the merger described in this joint proxy
statement/prospectus. Metro directors and executive officers owning
approximately 52.7% of the total voting power of Metro's outstanding capital
stock have entered into a voting agreement with Westwood pursuant to which they
have agreed to vote their shares in favor of the approval and adoption of the
merger agreement. Infinity Broadcasting Corporation, which is referred to herein
as Infinity and owns indirectly approximately 16.6% of the total voting power of
Westwood's outstanding capital stock, has agreed with Metro to vote its shares
in favor of the issuance of shares of Westwood common stock in connection with
the merger.
In addition to the proposals relating to the merger, this joint proxy
statement/prospectus contains proposals of Westwood with respect to certain
other matters to be submitted to its stockholders at its annual meeting. The
approval of these proposals by Westwood stockholders is not a condition to the
completion of the merger.
This joint proxy statement/prospectus relates to the stockholders meetings
of Westwood and Metro that their respective board of directors have called for
the purpose of voting on the matters described in this joint proxy
statement/prospectus or otherwise validly coming before the stockholders
meetings. The Westwood stockholders meeting will be held at 9:00 a.m. Pacific
Time on September 22, 1999 in the La Ventana Room of the Westwood Marquis Hotel,
930 Hilgard Avenue, Los Angeles, California 90024. The Metro stockholders
meeting will be held at 10:00 a.m. Eastern Time on September 22, 1999 at the
offices of Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, 31st Floor,
New York, New York 10022. This joint proxy statement/prospectus also constitutes
a prospectus with respect to the shares of Westwood common stock to be issued in
connection with the merger. We encourage you to read this entire document
carefully.
If the merger is completed, Metro stockholders will hold approximately 45.0%
of the aggregate outstanding Westwood common stock and approximately 37.5% of
the total voting power of Westwood's capital stock.
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After careful consideration of the recommendations and advice of their
respective financial advisors and, in the case of Metro, the Special Committee
of the Board of Directors of Metro, the Boards of Directors of Westwood and
Metro have respectively determined that the merger is fair to, advisable and in
the best interests of their respective stockholders and recommend that their
respective stockholders vote in favor of the matters described in this joint
proxy statement/prospectus.
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Joel Hollander David I. Saperstein
Chief Executive Officer Chairman and Chief Executive Officer
Westwood One, Inc. Metro Networks, Inc.
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The Westwood common stock is listed on the New York Stock Exchange under the
symbol "WON." Westwood intends to apply for listing of the shares of Westwood
common stock offered in connection with the merger on the New York Stock
Exchange.
THE "RISK FACTORS" SECTION OF THIS JOINT PROXY STATEMENT/PROSPECTUS
BEGINNING ON PAGE 15 LISTS SOME OF THE IMPORTANT FACTORS YOU SHOULD CONSIDER IN
EVALUATING THE MERGER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus is dated August 20, 1999, and was
first mailed to stockholders on August 24, 1999.
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WESTWOOD ONE, INC.
9540 WASHINGTON BOULEVARD
CULVER CITY, CALIFORNIA 90232
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 22, 1999
------------------
To our Stockholders:
An annual meeting of the stockholders of Westwood will be held at 9:00 a.m.
Pacific Time on September 22, 1999, in the La Ventana Room of the Westwood
Marquis Hotel, 930 Hilgard Avenue, Los Angeles, California 90024, for the
following purposes, as further described in the accompanying joint proxy
statement/prospectus:
1. To consider and vote on a proposal to approve the issuance of shares of
Westwood common stock in the merger contemplated by the Agreement and
Plan of Merger, dated as of June 1, 1999, as amended, by and among
Westwood, Metro and Merger Sub;
2. To elect two (2) Class III directors for terms expiring in 2002;
3. To approve the 1999 Stock Incentive Plan;
4. To ratify the selection of PricewaterhouseCoopers LLP as Westwood's
independent accountants for the fiscal year ending December 31, 1999; and
5. To consider and transact any other business as may properly come before
the annual meeting or any adjournment or postponement of the annual
meeting.
The Board of Directors of Westwood has established the close of business on
August 20, 1999 as the record date for determination of Westwood stockholders
entitled to notice of and to vote at the annual meeting or any adjournments or
postponements of the annual meeting. Only holders of record of shares of
Westwood common stock and Westwood Class B stock at the close of business on the
record date are entitled to notice of, and to vote at, the annual meeting.
Your vote is very important. You are requested to complete, sign and date
the enclosed proxy and return it promptly in the enclosed envelope, whether or
not you expect to attend the Westwood annual meeting, to assure that your shares
will be represented. You may revoke your proxy and vote in person if you decide
to attend the annual meeting.
By Order of the Board of Directors:
Farid Suleman
SECRETARY
Culver City, California
August 24, 1999
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METRO NETWORKS, INC.
2800 POST OAK BLVD., SUITE 4000
HOUSTON, TEXAS 77056
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 22, 1999
------------------
To our Stockholders:
A special meeting of the stockholders of Metro will be held at 10:00 a.m.
Eastern Time on September 22, 1999, at the offices of Paul, Hastings, Janofsky &
Walker LLP, 399 Park Avenue, 31st Floor, New York, New York 10022, for the
following purposes, as further described in the accompanying joint proxy
statement/prospectus:
1. To consider and vote on a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of June 1, 1999, as amended, by and among
Metro, Westwood and Merger Sub; and
2. To consider and transact any other business as may properly come before
the special meeting or any adjournment or postponement of the special
meeting.
The Board of Directors of Metro has established the close of business on
August 20, 1999 as the record date for determination of Metro stockholders
entitled to notice of and to vote at the special meeting or any adjournments or
postponements of the special meeting. Only holders of record of shares of Metro
common stock and Metro Series A convertible preferred stock at the close of
business on the record date are entitled to notice of, and to vote at, the
special meeting.
Your vote is very important. You are requested to complete, sign and date
the enclosed proxy card and return it promptly in the enclosed envelope, whether
or not you expect to attend the special meeting, to assure that your shares will
be represented. You may revoke your proxy and vote in person if you decide to
attend the special meeting.
By Order of the Board of Directors:
Gary Worobow
SECRETARY
Houston, Texas
August 24, 1999
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER..................................................................... 1
SUMMARY.................................................................................................... 3
COMPARATIVE PER SHARE INFORMATION.......................................................................... 9
METRO SELECTED HISTORICAL FINANCIAL DATA................................................................... 10
WESTWOOD SELECTED HISTORICAL FINANCIAL DATA................................................................ 11
SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION....................................... 12
COMPARATIVE MARKET PRICE AND DIVIDEND DATA................................................................. 13
RISK FACTORS............................................................................................... 15
FORWARD-LOOKING STATEMENTS................................................................................. 20
WHERE TO FIND MORE INFORMATION............................................................................. 21
METRO SPECIAL MEETING...................................................................................... 23
Purpose of the Metro Special Meeting..................................................................... 23
Solicitation of Proxies.................................................................................. 23
Record Date; Voting Rights............................................................................... 23
Proxies.................................................................................................. 24
Required Vote............................................................................................ 24
Quorum................................................................................................... 24
Other Information........................................................................................ 24
WESTWOOD ANNUAL MEETING.................................................................................... 25
Purpose of the Westwood Annual Meeting................................................................... 25
Solicitation of Proxies.................................................................................. 25
Record Date; Voting Rights............................................................................... 25
Proxies.................................................................................................. 26
Required Vote............................................................................................ 26
Quorum................................................................................................... 27
Other Information........................................................................................ 27
THE PARTIES TO THE MERGER.................................................................................. 28
Metro.................................................................................................... 28
Westwood................................................................................................. 28
Merger Sub............................................................................................... 29
THE MERGER................................................................................................. 30
Background of the Merger................................................................................. 30
Recommendation of the Board of Directors of Metro and Reasons of Metro for the Merger.................... 32
Opinion of Metro's Financial Advisor..................................................................... 33
Recommendation of the Board of Directors of Westwood And Reasons of Westwood for the Merger.............. 41
Opinion of Westwood's Financial Advisor.................................................................. 42
Interests of Certain Persons in the Merger............................................................... 48
Accounting Treatment..................................................................................... 49
Material Federal Income Tax Consequences of the Merger................................................... 49
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TABLE OF CONTENTS (CONTINUED)
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Regulatory Filings And Approvals......................................................................... 50
Restrictions on Sales of Shares of Westwood Common Stock by Affiliates of Metro.......................... 51
Dissenters Rights........................................................................................ 51
Stock Exchange Listing................................................................................... 51
THE MERGER AGREEMENT....................................................................................... 52
Terms of the Merger...................................................................................... 52
Issuance of New Stock Certificates....................................................................... 53
Charter, Bylaws, Directors and Officers After the Merger................................................. 54
Representations and Warranties........................................................................... 54
Covenants and Agreements................................................................................. 55
No Solicitation of Transactions.......................................................................... 58
Employee Benefits........................................................................................ 59
Indemnification and Insurance............................................................................ 59
Conditions to the Merger................................................................................. 59
Termination.............................................................................................. 60
Amendment and Waiver..................................................................................... 62
ADDITIONAL AGREEMENTS...................................................................................... 63
Metro Stockholder Voting Agreement....................................................................... 63
Westwood Stockholder Voting Agreement.................................................................... 65
Saperstein Consulting Agreement.......................................................................... 66
Saperstein Non-Compete Agreement......................................................................... 66
Bortnick Employment Agreement............................................................................ 67
Coppola Employment Agreement............................................................................. 68
Registration Rights Agreement............................................................................ 69
Stock Loan and Pledge Agreement.......................................................................... 69
COMPARISON OF RIGHTS OF WESTWOOD STOCKHOLDERS AND METRO STOCKHOLDERS....................................... 70
ELECTION OF WESTWOOD DIRECTORS............................................................................. 78
Committees of the Westwood Board of Directors............................................................ 79
Director Attendance and Compensation..................................................................... 80
PRINCIPAL STOCKHOLDERS OF WESTWOOD......................................................................... 81
EXECUTIVE OFFICERS OF WESTWOOD............................................................................. 83
WESTWOOD EXECUTIVE COMPENSATION............................................................................ 83
Summary Compensation Table............................................................................... 84
Stock Options............................................................................................ 85
Employment Agreements.................................................................................... 86
Compensation Committee Interlocks and Insider Participation.............................................. 86
Relationships and Transactions of Note................................................................... 86
Compliance with Section 16(a) of the Securities Exchange Act of 1934..................................... 87
Compensation Committee Report............................................................................ 87
Performance Graph........................................................................................ 89
APPROVAL OF WESTWOOD 1999 STOCK INCENTIVE PLAN............................................................. 90
Summary of Material Provisions of the 1999 Stock Incentive Plan.......................................... 90
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TABLE OF CONTENTS (CONTINUED)
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SELECTION OF WESTWOOD'S INDEPENDENT ACCOUNTANTS............................................................ 96
LEGAL MATTERS.............................................................................................. 97
EXPERTS.................................................................................................... 97
STOCKHOLDER PROPOSALS...................................................................................... 97
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION............................................... F-1
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS....................................... F-4
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ANNEXES
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Annex A Agreement and Plan of Merger, dated as of June 1, 1999, as amended, among Metro, Westwood and
Merger Sub
Annex B Opinion of Goldman, Sachs & Co., dated June 1, 1999
Annex C Opinion of Donaldson, Lufkin & Jenrette Securities Corporation, dated June 1, 1999
Annex D Metro Stockholder Voting Agreement
Annex E Westwood Stockholder Voting Agreement
Annex F Registration Rights Agreement
Annex G Westwood One, Inc. 1999 Stock Incentive Plan
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHY ARE METRO AND WESTWOOD PROPOSING TO MERGE?
A. We are proposing to merge because we believe that the merger will:
- better enable the combined company to make the investments necessary to
develop more sophisticated traffic reporting systems;
- supplement Westwood's strong national programming with Metro's strong
local programming;
- enable the combined company to provide better reporting coverage in large
markets and to improve its services generally;
- allow the combined company to recognize certain cost synergies;
- enable the combined company to compete more effectively in the highly
competitive, consolidating radio broadcasting industry; and
- provide the combined company with the services of our talented and
experienced management teams.
Q. WHAT IS THE "COMBINED COMPANY"?
A. When we refer to the "combined company," we mean the combined businesses
of Metro and Westwood after the merger. Although Metro and Westwood will not be
legally combined into a single entity, Metro will operate as a wholly-owned
subsidiary of Westwood and Westwood's consolidated financial statements will
include both Westwood and Metro financial results.
Q. WHAT WILL METRO STOCKHOLDERS RECEIVE IN THE MERGER?
A. Holders of Metro common stock will receive 1.5 shares of Westwood common
stock in exchange for each of their shares of Metro common stock. Holders of
Metro Series A convertible preferred stock will receive 1.5 shares of Westwood
preferred stock having terms that are substantially identical to those of the
Metro Series A convertible preferred stock in exchange for each of their shares
of Metro Series A convertible preferred stock. These exchange ratios will not
change even if the market prices of Westwood or Metro common stock or preferred
stock increase or decrease between now and the date the merger is completed.
Accordingly, Metro stockholders will not be able to determine the value of the
shares of Westwood stock that they will receive in the merger until the merger
is completed.
Westwood will not issue any fractional shares of Westwood common stock in
the merger. Metro stockholders who would otherwise be entitled to receive a
fractional share of Westwood common stock upon conversion of their shares of
Metro common stock in connection with the merger instead will receive cash based
on the market value of the fractional share of Westwood common stock.
EXAMPLE: IF YOU CURRENTLY OWN 101 SHARES OF METRO COMMON STOCK, AFTER THE
MERGER YOU WILL BE ENTITLED TO RECEIVE 151 SHARES OF WESTWOOD COMMON STOCK AND A
CHECK FOR THE MARKET VALUE OF THE .5 FRACTIONAL SHARE.
Q. WILL WESTWOOD STOCKHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE MERGER?
A. No. Westwood stockholders will continue to hold the shares of Westwood
stock they own at the effective time of the merger. After the merger, these
shares will represent an ownership interest in the combined company.
Q. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
A. In general, Metro stockholders will not recognize any gain or loss as a
result of the merger except for cash received, if any, instead of fractional
shares of Westwood common stock.
Q. DO STOCKHOLDERS HAVE APPRAISAL RIGHTS?
A. No, under applicable law, neither Metro stockholders nor Westwood
stockholders will have the right to receive an appraisal of the value of their
shares in connection with the merger.
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Q. WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A. We are working towards completing the merger as quickly as possible and
expect to complete it by September 30, 1999.
Q. WHAT SHOULD STOCKHOLDERS DO NOW?
A. Stockholders should complete, sign, date and mail their proxy card in
the enclosed postage paid envelope as soon as possible so that their shares will
be voted at the meetings.
METRO STOCKHOLDERS SHOULD NOT SEND IN THEIR SHARE CERTIFICATES NOW. IF AND
WHEN THE MERGER IS COMPLETED, WESTWOOD'S EXCHANGE AGENT WILL SEND METRO
STOCKHOLDERS WRITTEN INSTRUCTIONS FOR EXCHANGING THEIR SHARE CERTIFICATES.
Q. CAN STOCKHOLDERS CHANGE THEIR VOTE?
A. Yes. Stockholders can change their vote at any time prior to the
stockholders' meetings by mailing a later dated signed proxy card to the
applicable company or by attending the applicable stockholders meeting and
voting in person.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A. YOUR BROKER WILL VOTE YOUR SHARES ONLY IF YOU PROVIDE INSTRUCTIONS ON
HOW TO VOTE. You should instruct your broker to vote your shares in accordance
with the directions provided by your broker.
Q. WHAT SHOULD STOCKHOLDERS DO IF THEY HAVE QUESTIONS?
A. Metro stockholders should call Shane Coppola at Metro at (212) 832-9500.
They may call collect.
Westwood stockholders should call Innisfree, Westwood's proxy solicitor, at
1-888-750-5834 (toll free in the United States) or (212) 750-5833 (call
collect).
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SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. For more detailed information about the proposed merger, we
encourage you to read the entire merger agreement attached to this joint proxy
statement/prospectus as Annex A and the other documents to which we have
referred you. See "WHERE TO FIND MORE INFORMATION" on page 21.
METRO NETWORKS, INC.
2800 Post Oak Blvd., Suite 4000
Houston, Texas 77056
(713) 407-6000
Metro is the largest provider of traffic reporting services and a leading
supplier of local news, sports, weather and video news services to the
television and radio broadcast industries. Metro operates in over 80 markets
nationally and provides services to more than 1,800 radio and television station
affiliates.
For further information on Metro, see "THE PARTIES TO THE MERGER--Metro" on
page 28.
WESTWOOD ONE, INC.
9540 Washington Boulevard
Culver City, California 90232
(310) 204-5000
Westwood is America's largest radio network, providing over 150 news,
sports, music, talk and entertainment programs, features, live events, 24-hour
formats and Shadow Broadcast Services including Shadow Traffic, News and Sports.
Westwood's business and operations are managed by Infinity.
For further information on Westwood, see "THE PARTIES TO THE MERGER--
Westwood" on page 28.
THE STOCKHOLDERS MEETINGS (PAGES 23 AND 25)
The special meeting of Metro stockholders will be held on September 22, 1999
at 10:00 a.m. Eastern Time at the offices of Paul, Hastings, Janofsky & Walker
LLP, 399 Park Avenue, 31st Floor, New York, New York 10022. The annual meeting
of Westwood stockholders will be held on September 22, 1999 at 9:00 a.m. Pacific
Time in the La Ventana Room of the Westwood Marquis Hotel, 930 Hilgard Avenue,
Los Angeles, California 90024.
The record date for Metro stockholders entitled to receive notice of and to
vote at the Metro special meeting is the close of business on August 20, 1999.
On that date, there were 16,737,481 shares of Metro common stock and 2,549,750
shares of Metro Series A convertible preferred stock outstanding.
The record date for Westwood stockholders entitled to receive notice of and
to vote at the Westwood annual meeting is the close of business on August 20,
1999. On that date, there were 30,735,035 shares of Westwood common stock
(excluding 7,368,695 shares held in treasury) and 351,733 shares of Westwood
Class B stock outstanding.
RECOMMENDATIONS TO STOCKHOLDERS
The Metro board of directors believes that the merger agreement and the
merger are fair to, advisable and in the best interest of Metro stockholders and
recommends that they vote FOR the proposal to approve and adopt the merger
agreement.
The Westwood board of directors believes that the merger agreement and the
merger are fair to, advisable and in the best interest of Westwood stockholders
and recommends that they vote FOR the proposal to issue shares of Westwood
common stock in connection with the merger. The Westwood board of directors also
recommends that Westwood stockholders vote FOR each of the other Westwood
proposals described in this joint proxy statement/prospectus.
OWNERSHIP OF THE COMBINED COMPANY FOLLOWING THE MERGER
Based on the number of Metro shares and Westwood shares outstanding as of
the record dates for the respective stockholders meetings, we anticipate that
Westwood will issue approximately 25,106,200 shares of Westwood common stock to
holders of Metro common stock in connection with the merger and that such shares
will
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represent approximately 45.0% of the outstanding shares of Westwood common stock
and approximately 32.5% of the total voting power of Westwood's outstanding
capital stock upon completion of the merger. In addition, Westwood will issue
3,824,625 shares of preferred stock to holders of Metro Series A convertible
preferred stock, which shares will be convertible into 3,824,625 shares of
Westwood common stock and will represent approximately 5.0% of the total voting
power of Westwood's outstanding capital stock upon completion of the merger.
The shares of Westwood preferred stock to be issued in connection with the
merger will be subject to a stock loan and pledge agreement, dated as of October
16, 1996, between Mr. Saperstein and Metro that effectively will be assumed by
Westwood in connection with the merger on terms identical to those currently in
effect, except that Westwood has agreed not to call the stock loan described
below prior to the fifth anniversary of the completion of the merger. The shares
of Westwood preferred stock which will be issued to Mr. Saperstein in exchange
for his shares of Metro Series A convertible preferred stock will be pledged to
Westwood to secure the loan of shares of Metro common stock made to Mr.
Saperstein pursuant to the stock loan and pledge agreement. Prior to the
repayment of the loan, Mr. Saperstein will be entitled to vote his shares of
Westwood preferred stock notwithstanding the pledge of those shares as
substitute collateral under the terms of the stock loan and pledge agreement.
The shares of Westwood preferred stock will not be entitled to receive any
dividends. If Mr. Saperstein elects to convert the pledged shares into shares of
Westwood common stock, the loan will become due and payable immediately.
THE MERGER (PAGE 30)
WHAT METRO STOCKHOLDERS WILL RECEIVE IN CONNECTION WITH THE MERGER (PAGE 52)
In connection with the merger, holders of Metro common stock will receive
1.5 shares of Westwood common stock in exchange for each share of Metro common
stock that they own at the time the merger is completed. Holders of Metro Series
A convertible preferred stock will receive 1.5 shares of Westwood preferred
stock having terms that are substantially identical to those of the Metro Series
A convertible preferred stock in exchange for each share of Metro Series A
convertible preferred stock that they own at the time the merger is completed.
These exchange ratios will not change even if the market prices of Westwood or
Metro common stock or preferred stock increase or decrease between now and the
date the merger is completed. Accordingly, Metro stockholders will not be able
to determine the value of the shares of Westwood stock that they will receive in
connection with the merger until the merger has been completed.
Because the merger agreement provides that Westwood will not issue
fractional shares of common stock in connection with the merger, holders of
Metro common stock will receive a cash payment equal to the value of any
fraction of a share of Westwood common stock that they would otherwise receive
upon conversion of their Metro stock at the time the merger has been completed.
Upon completion of the merger, each outstanding option to purchase shares of
Metro common stock will be converted into an option to acquire shares of
Westwood common stock. Based on the number of outstanding options to purchase
shares of Metro common stock at the close of business on August 20, 1999, an
aggregate of up to 3,068,757 shares of Westwood common stock will be issuable
upon the exercise of such converted options.
WHAT WESTWOOD STOCKHOLDERS WILL RECEIVE IN CONNECTION WITH THE MERGER
After the merger, each share of Westwood common stock and Westwood Class B
stock will remain outstanding and will represent one share of the combined
company's common stock or Class B stock, as applicable.
STOCKHOLDER VOTES REQUIRED (PAGES 24 AND 26)
The favorable vote of a majority of the outstanding shares of Metro common
stock and Metro Series A convertible preferred stock, voting together as a
single class, is required to approve and adopt the merger agreement. Pursuant to
the terms of a voting agreement,
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David I. Saperstein, Charles I. Bortnick and Shane E. Coppola, each of whom is a
director and an executive officer of Metro and who hold, in the aggregate,
shares of Metro common stock and Metro Series A convertible preferred stock
representing approximately 52.7% of the total voting power of Metro's
outstanding capital stock, have agreed with Westwood to vote their shares in
favor of the approval and adoption of the merger agreement. Accordingly, no
other vote or action of Metro's stockholders is required to approve and adopt
the merger agreement.
The approval of the issuance of the shares of Westwood common stock in
connection with the merger requires the affirmative vote of a majority of votes
cast on the proposal, provided that the total number of votes cast on the
proposal represents a majority of the votes entitled to be cast. Pursuant to the
terms of a voting agreement, Infinity, the indirect owner of 8,000,000 shares of
Westwood common stock representing approximately 16.6% of the total voting power
of Westwood's outstanding capital stock and the direct or indirect owner of
warrants to acquire 2,000,000 shares of Westwood common stock (which warrants
are currently exercisable for 1,000,000 shares), has agreed to vote its shares
in favor of the issuance of shares of Westwood common stock in connection with
the merger. If Westwood's stockholders fail to approve the issuance of shares of
Westwood common stock in connection with the merger, Westwood will be required
to make significant payments to Metro.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE 49)
METRO STOCKHOLDERS
In the opinion of Weil, Gotshal & Manges LLP, counsel to Westwood, and Paul,
Hastings, Janofsky & Walker LLP, counsel to Metro, the merger will qualify as a
tax-free reorganization for federal income tax purposes. Accordingly, the
exchange of your shares of Metro common stock and Metro Series A convertible
preferred stock for Westwood common stock and Westwood preferred stock,
respectively, generally will not cause you to recognize any gain or loss for
federal income tax purposes. You may, however, have to recognize gain in
connection with any cash received instead of fractional shares.
THIS TAX TREATMENT MAY NOT APPLY TO EVERY METRO STOCKHOLDER. DETERMINING THE
ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU MAY BE VERY COMPLICATED AND DEPEND
ON YOUR SPECIFIC SITUATION. YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
WESTWOOD STOCKHOLDERS
Because your shares of Westwood stock will remain unchanged as a result of
the merger, you will not recognize any gain or loss for federal income tax
purposes.
CONDITIONS TO THE MERGER (PAGE 59)
The completion of the merger is subject to certain conditions, including:
- the approval and adoption by the Metro stockholders of the merger
agreement;
- the approval by the Westwood stockholders of the issuance of Westwood
common stock in connection with the merger;
- there not being in effect any law or court order prohibiting the closing
of the merger;
- the registration statement with respect to the issuance of shares of
Westwood common stock in connection with the merger not being the subject
of any stop order;
- the shares of Westwood common stock to be issued in connection with the
merger having been authorized for listing on the New York Stock Exchange,
subject to official notice of issuance;
- the receipt of all required governmental authorizations, consents and
approvals;
- the absence of certain pending or threatened litigation; and
- the delivery of legal opinions with respect to the tax-free nature of the
merger.
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TERMINATION OF THE MERGER AGREEMENT (PAGE 60)
The merger agreement may be terminated by the mutual written consent of
Metro and Westwood. Either of them may terminate the merger agreement if:
- the merger has not been consummated by June 1, 2000;
- the Metro stockholders fail to approve and adopt the merger agreement;
- the Westwood stockholders fail to approve the issuance of Westwood common
stock in connection with the merger; or
- a law or court order permanently prohibits the merger.
The merger agreement may also be terminated by Metro if:
- subject to certain requirements, Metro's board of directors determines in
good faith, based on the advice of outside legal counsel, that it is
consistent with its fiduciary duties to Metro stockholders to terminate
the merger agreement to enter into an agreement with respect to or to
consummate a transaction that constitutes a Metro Superior Proposal (which
term is defined on page 58);
- Westwood's board of directors withdraws its approval or recommendation of
the issuance of shares of Westwood common stock in connection with the
merger, or fails to call a stockholders meeting for the purpose of
obtaining stockholder approval of such issuance of shares; or
- Westwood or Merger Sub breaches any representation, warranty, covenant or
agreement contained in the merger agreement that would give rise to the
failure of a closing condition to the merger and such breach has not been
cured within 30 business days of Westwood's and Merger Sub's receipt of a
notice of such breach.
The merger agreement may also be terminated by Westwood if:
- Metro enters into a binding agreement for a transaction that constitutes a
Metro Superior Proposal;
- Metro's board of directors withdraws or adversely modifies its approval or
recommendation of the merger agreement or the merger, or fails to call a
stockholders meeting for the purpose of obtaining stockholder approval and
adoption of the merger agreement; or
- Metro breaches any representation, warranty, covenant or agreement
contained in the merger agreement that would give rise to the failure of a
condition to the merger and such breach has not been cured within 30
business days of Metro's receipt of a notice of such breach.
TERMINATION FEES AND PAYMENTS (PAGE 62)
METRO
The merger agreement requires Metro to pay Westwood a $30 million fee if:
- the merger agreement is terminated by Metro or Westwood because Metro
elects to enter into a binding agreement with respect to a Metro Superior
Proposal;
- the merger agreement is terminated by Westwood because Metro's board of
directors withdraws or adversely modifies its approval or recommendation
of the merger agreement or the merger, or fails to call a meeting of the
Metro stockholders for the purpose of considering the approval and
adoption of the merger agreement; or
- the merger agreement is terminated by Westwood because of a willful breach
by Metro of the merger agreement and within twelve months of such
termination Metro enters into, agrees to or consummates a Metro
Acquisition Proposal (which term is defined on page 58).
If a Metro Acquisition Proposal is made to Metro prior to or at the Metro
special meeting and thereafter the merger agreement is terminated because Metro
stockholders fail to
6
<PAGE>
approve and adopt the merger agreement, Metro will be required to reimburse
Westwood for all expenses incurred by Westwood in connection with the merger
agreement in an amount not to exceed $1 million.
WESTWOOD
If the merger agreement is terminated by Metro because Westwood's board of
directors withdraws or adversely modifies its approval or recommendation of the
issuance of shares of Westwood common stock in connection with the merger or
fails to call the related stockholders meeting, then Westwood will be required
to pay Metro a $30 million termination fee.
If the merger agreement is terminated by Metro or Westwood because
Westwood's stockholders fail to approve the issuance of shares of Westwood
common stock in connection with merger, Westwood will be required to:
- pay Metro a $10 million termination fee; and
- purchase from Metro unregistered shares of Metro common stock for an
aggregate purchase price of $10 million.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 48)
In considering the recommendation of the Metro board of directors in favor
of the approval and adoption of the merger agreement, Metro stockholders should
be aware that certain members of Metro's board of directors and management have
interests in the merger in addition to or different from the interests of Metro
stockholders generally.
DIRECTORS AND MANAGEMENT OF THE COMBINED COMPANY (PAGE 54)
At the Westwood annual meeting (and prior to the completion of merger), it
is expected that two Class III directors will be elected to Westwood's board of
directors. Following the merger, David I. Saperstein, Metro's Chairman and Chief
Executive Officer, Mr. Saperstein's designee and Joel Hollander, Westwood's
President and Chief Executive Officer, are expected to be added to Classes III,
I and III, respectively, of the board of directors of the combined company by
action of the new board of directors. Following the merger, Joel Hollander will
serve as President and Chief Executive Officer of the combined company.
DISSENTERS' RIGHTS (PAGE 51)
Neither Metro stockholders nor Westwood stockholders have dissenters' rights
of appraisal or other rights to demand the fair value of their shares in cash
because of the merger.
7
<PAGE>
OPINION OF METRO'S FINANCIAL ADVISOR
(PAGE 33)
On June 1, 1999, Goldman, Sachs & Co., referred to herein as Goldman Sachs,
delivered its oral opinion to the board of directors of Metro that, as of such
date, the exchange ratio was fair from a financial point of view to Metro
stockholders. Goldman Sachs subsequently confirmed its oral opinion by delivery
of its written opinion dated June 1, 1999. The opinion of Goldman Sachs does not
constitute a recommendation as to how any stockholder of Metro should vote with
respect to the merger agreement.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED JUNE 1, 1999,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX B AND IS
INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. YOU SHOULD
READ THE OPINION IN ITS ENTIRETY.
OPINION OF WESTWOOD'S FINANCIAL ADVISOR
(PAGE 42)
On June 1, 1999, Donaldson, Lufkin & Jenrette Securities Corporation,
referred to herein as DLJ, delivered its oral opinion to the board of directors
of Westwood that, as of such date, the exchange ratio was fair from a financial
point of view to Westwood. DLJ subsequently confirmed its oral opinion by
delivery of its written opinion dated June 1, 1999. The opinion of DLJ does not
constitute a recommendation as to how any stockholder of Westwood should vote
with respect to the issuance of shares of Westwood common stock in connection
with the merger.
THE FULL TEXT OF THE WRITTEN OPINION OF DLJ, DATED JUNE 1, 1999, WHICH SETS
FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX C AND IS
INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. YOU SHOULD
READ THE OPINION IN ITS ENTIRETY.
ACCOUNTING TREATMENT (PAGE 49)
The merger will be accounted for under the purchase method of accounting.
For accounting purposes, Westwood will be the acquiring company and Metro will
be the acquired company.
LISTING OF WESTWOOD COMMON STOCK
Westwood will list on the New York Stock Exchange the shares of Westwood
common stock to be issued in connection with the merger.
8
<PAGE>
COMPARATIVE PER SHARE INFORMATION
The table below provides you with historical per share information of
Westwood and Metro. It also provides you with pro forma combined per share
information as if the merger had occurred as of January 1, 1998 for the income
from continuing operations per share information and as of June 30, 1999 for the
book value per share information. The table also presents Metro's equivalent pro
forma per share information. See "METRO SELECTED HISTORICAL FINANCIAL DATA,"
"WESTWOOD SELECTED HISTORICAL FINANCIAL INFORMATION" and "SUMMARY UNAUDITED PRO
FORMA COMBINED CONDENSED FINANCIAL INFORMATION" for additional information. The
pro forma per share information is intended for informational purposes only. It
does not purport to represent what the combined company's results of continuing
operations actually would have been had the transaction occurred as of January
1, 1998 or project the results for any future period. Neither Westwood nor Metro
paid cash dividends on its common stock during calendar 1998 or 1999.
<TABLE>
<CAPTION>
METRO
WESTWOOD METRO EQUIVALENT
HISTORICAL HISTORICAL UNAUDITED PRO FORMA
PER SHARE PER SHARE PRO FORMA PER PER SHARE
DATA DATA SHARE DATA (A) DATA (B)
----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Six months ended June 30, 1999 (unaudited) net income (loss)
per share:
Basic.......................................................... $ 0.15 $ 0.52 $ (0.11) $ (0.17)
Diluted........................................................ 0.13 0.50 (0.11) (0.17)
Book value per share........................................... $ 2.37 $ 6.91 $ 19.00 $ 28.50
Year ended December 31, 1998 net income (loss) per share:
Basic.......................................................... $ 0.43 $ 1.23 $ (0.08) $ (0.12)
Diluted........................................................ 0.39 1.20 (0.08) (0.12)
</TABLE>
- ------------------------
(a) See "Unaudited Pro Forma Combined Condensed Financial Information."
(b) Metro's equivalent pro forma per share data represents the unaudited pro
forma per share data multiplied by an exchange ratio of 1.5.
9
<PAGE>
METRO SELECTED HISTORICAL FINANCIAL DATA
The table below provides you with selected historical financial information
of Metro. Metro has prepared this information using the consolidated financial
statements of Metro for each of the fiscal years in the five-year period ended
December 31, 1998 and for the six-month periods ended June 30, 1998 and 1999.
The consolidated financial statements for each of the fiscal years in the
five-year period ended December 31, 1998 have been audited by KPMG LLP, Metro's
independent auditors. The consolidated financial statements for the six-month
periods ended June 30, 1998 and 1999 have not been audited. The results for the
six months ended June 30, 1999 may not be indicative of the operating results to
be expected for the entire year. When you read the selected historical financial
information of Metro, you should read it along with the consolidated financial
statements and related notes in Metro's annual and quarterly reports as filed
with the SEC. See "WHERE TO FIND MORE INFORMATION" on page 21.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- ------------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- -------------
IN THOUSANDS, EXCEPT PER SHARE DATA (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................................... $ 60,048 $ 72,433 $ 109,237 $ 139,125 $ 172,132 $ 77,342 $ 91,347
--------- --------- --------- --------- --------- --------- -------------
Broadcasting costs.............................. 32,239 41,286 50,686 67,224 87,028 40,153 47,828
Marketing expense............................... 11,355 14,504 21,378 26,526 31,053 15,172 17,935
General and administrative expense.............. 5,939 7,194 10,158 11,425 11,026 5,854 5,549
Depreciation and amortization expense........... 1,302 3,980 6,213 8,878 10,043 4,845 5,714
--------- --------- --------- --------- --------- --------- -------------
Total operating costs........................... 50,835 66,964 88,435 114,053 139,150 66,024 77,026
--------- --------- --------- --------- --------- --------- -------------
Income from operations.......................... 9,213 5,469 20,802 25,072 32,982 11,318 14,321
Interest/other income........................... (164) (137) (408) (1,865) (1,144) (578) (272)
Interest expense................................ 293 1,260 1,779 230 113 95 31
--------- --------- --------- --------- --------- --------- -------------
Income before tax provision..................... 9,084 4,346 19,431 26,707 34,013 11,801 14,562
Income tax provision............................ 2,179 1,036 3,462 11,164 13,659 4,774 5,821
--------- --------- --------- --------- --------- --------- -------------
Net income...................................... $ 6,905 $ 3,310 $ 15,969 $ 15,543 $ 20,354 $ 7,027 $ 8,741
--------- --------- --------- --------- --------- --------- -------------
--------- --------- --------- --------- --------- --------- -------------
Pro forma net income (1)........................ $ -- $ 2,803 $ 12,047 $ -- $ -- $ -- $ --
--------- --------- --------- --------- --------- --------- -------------
--------- --------- --------- --------- --------- --------- -------------
Basic earnings per common share................. -- -- -- $ 0.94 $ 1.23 $ 0.42 $ 0.52
Basic average common shares outstanding......... -- -- -- 16,555 16,594 16,588 16,707
Diluted earnings per common share (1)........... -- $ 0.23 $ 0.94 $ 0.93 $ 1.20 $ 0.42 $ 0.50
Diluted average common shares outstanding (1)... -- 12,252 12,884 16,714 16,955 16,927 17,335
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------------------------------- 1999
BALANCE SHEET DATA AT: 1994 1995 1996 1997 1998 -----------
- -------------------------------------------------- --------- --------- --------- --------- --------- (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Current assets.................................... $ 24,810 $ 25,504 $ 77,951 $ 72,479 $ 88,244 $ 96,484
Working capital................................... 7,414 7,900 49,294 48,106 59,773 71,944
Total assets...................................... 25,990 46,230 103,757 115,073 139,087 145,711
Total debt........................................ 6,650 22,624 1,310 1,478 992 587
Total stockholders' equity/partners' capital...... 9,401 4,478 71,930 88,293 108,804 119,751
</TABLE>
- ------------------------------
(1) Prior to October 1996, the business of Metro was operated through Metro
Traffic Control, Inc., Metro Networks, Ltd., Metro Video News, Inc., Metro
Reciprocal, Inc. and their subsidiaries (collectively, the "Predecessor
Companies"). Until October 1996, all of the equity interests in the
Predecessor Companies were owned by David I. Saperstein and certain members
of his family. In October 1996, the Saperstein family established Metro as a
holding company and consolidated the issued and outstanding equity interests
in the Predecessor Companies by exchanging such interests for 9,350,607
shares of Metro common stock and 2,549,750 shares of Metro Series A
convertible preferred stock (the "Reorganization").
For the years ended December 31, 1995 and 1996, diluted average common shares
outstanding and earnings per share have been calculated on a pro forma basis
assuming the shares issued in conjunction with the Reorganization were
outstanding for all periods presented, adjusted for excess distributions and
assuming the Predecessor Companies were taxed at rates applicable to Metro
subsequent to the Reorganization.
10
<PAGE>
WESTWOOD SELECTED HISTORICAL FINANCIAL DATA
The table below provides you with selected historical financial information
of Westwood. Westwood has prepared this information using the consolidated
financial statements of Westwood for each of the fiscal years in the five-year
period ended December 31, 1998 and for the six-month periods ended June 30, 1998
and 1999. The consolidated financial statements for each of the fiscal years in
the five-year period ended December 31, 1998 have been audited by
PricewaterhouseCoopers LLP, Westwood's independent auditors. The consolidated
financial statements for the six-month periods ended June 30, 1998 and 1999 have
not been audited. The results for the six months ended June 30, 1999 may not be
indicative of the operating results to be expected for the entire year. When you
read the selected historical financial information of Westwood, you should read
it along with the consolidated financial statements and related notes in
Westwood's annual and quarterly reports as filed with the SEC. See "WHERE TO
FIND MORE INFORMATION" on page 21.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1994 1995 1996(A) 1997(B) 1998(C) 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
IN THOUSANDS, EXCEPT PER SHARE DATA
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS DATA:
Net revenues....................................... $ 136,340 $ 145,729 $ 171,784 $ 240,790 $ 259,310 $ 116,827 $ 124,871
Operating and corporate costs, excluding
depreciation and amortization.................... 112,198 112,661 132,247 191,854 206,996 96,618 102,463
Depreciation and amortization...................... 18,160 13,753 12,265 13,031 18,409 8,631 9,293
Operating income................................... 5,982 19,315 27,272 35,905 33,354 11,578 13,115
Income (loss) before extraordinary items........... (2,730) 9,685 17,500 25,496 13,046 4,127 4,181
Extraordinary (loss)............................... (590) -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss).................................. $ (3,320) $ 9,685 $ 17,500 $ 25,496 $ 13,046 $ 4,127 $ 4,181
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
INCOME (LOSS) PER SHARE:
Basic:
Income (loss) before extraordinary item........ $ (0.09) $ 0.31 $ 0.56 $ 0.83 $ 0.43 $ 0.13 $ 0.15
Extraordinary item............................. (0.02) -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss).............................. $ (0.11) $ 0.31 $ 0.56 $ 0.83 $ 0.43 $ 0.13 $ 0.15
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Diluted:
Income (loss) before extraordinary item........ $ (0.09) $ 0.28 $ 0.51 $ 0.74 $ 0.39 $ 0.12 $ 0.13
Extraordinary item............................. (0.02) -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss).............................. $ (0.11) $ 0.28 $ 0.51 $ 0.74 $ 0.39 $ 0.12 $ 0.13
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------------------------------- 1999
BALANCE SHEET DATA AT: 1994 1995 1996 1997 1998 -----------
- --------------------------------------------------------- --------- --------- --------- --------- --------- (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Current assets........................................... $ 46,157 $ 41,885 $ 48,379 $ 77,933 $ 85,663 $ 72,843
Working capital.......................................... 7,685 6,563 (3,647) 12,180 7,111 8,235
Total assets............................................. 260,112 245,595 273,046 317,695 345,279 325,854
Long-term debt........................................... 115,443 107,943 130,443 115,000 170,000 167,000
Total stockholders' equity............................... 95,454 94,123 86,848 124,678 77,218 76,598
</TABLE>
- ------------------------------
(a) Results for the year ended December 31, 1996 include the New York, Los
Angeles, Chicago and Philadelphia Shadow Traffic operations from the time
they were acquired in March 1996.
(b) Results for the year ended December 31, 1997 include Westwood's operation of
the CBS Radio Network from April 1, 1997, the effective date of the
Representation Agreement, dated as of March 30, 1997, between Westwood and
CBS, Inc.
(c) Results for the year ended December 31, 1998 include the remaining Shadow
Traffic operations from the time they were acquired in May 1998.
11
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following table provides you with summary unaudited pro forma combined
condensed financial information. The operating results data assume that the
merger had been completed at January 1, 1998 and the balance sheet data assumes
that the merger had been completed on the related balance sheet date. The
summary unaudited pro forma combined condensed financial information does not
reflect any potential cost reductions which may occur as a result of the merger.
In addition, it is not necessarily indicative of the operating results or
financial position which would have occurred had the merger been completed at
the times assumed, nor is it necessarily indicative of Westwood's future
operating results or financial position. When you read the summary unaudited pro
forma combined condensed financial information of Westwood and Metro, you should
read it along with the "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION" included in this joint proxy statement/prospectus beginning on page
F-1.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -----------------
IN THOUSANDS, EXCEPT PER SHARE DATA
------------------------------------
<S> <C> <C>
OPERATING RESULTS DATA
Net revenues................................................................ $ 431,442 $ 216,218
-------- -----------------
Operating costs and expenses excluding depreciation and amortization........ 320,219 166,031
Depreciation and amortization............................................... 69,152 35,357
Corporate general and administrative expenses............................... 15,884 7,744
Nonrecurring items, net expense............................................. 551 --
-------- -----------------
405,806 209,132
-------- -----------------
Operating income............................................................ 25,636 7,086
Interest expense............................................................ 5,153 3,435
Other income................................................................ (687) (141)
-------- -----------------
Income before taxes......................................................... 21,170 3,792
Income taxes................................................................ 25,825 9,972
-------- -----------------
Net income loss............................................................. $ (4,655) $ (6,180)
-------- -----------------
Loss per share:
Basic..................................................................... $ (0.08) $ (0.11)
Diluted................................................................... $ (0.08) $ (0.11)
Weighted average shares outstanding (1):
Basic..................................................................... 58,201(1) 56,402
Diluted................................................................... 58,201(1) 56,402
BALANCE SHEET DATA AT JUNE 30, 1999
Current assets
Cash...................................................................... $ 4,000
Accounts receivable, net.................................................. 130,185
Other current assets...................................................... 10,790
-----------------
Total current assets........................................................ 144,975
Property and equipment...................................................... 53,216
Intangible assets, net of accumulated amortization.......................... 1,051,009
Other assets................................................................ 12,614
-----------------
Total assets................................................................ $ 1,261,814
-----------------
-----------------
Current liabilities......................................................... $ 89,148
Long-term debt.............................................................. 82,011
Other liabilities........................................................... 19,057
-----------------
Total liabilities........................................................... 190,216
Stockholders' equity........................................................ 1,071,598
-----------------
Total liabilities and stockholders' equity.................................. $ 1,261,814
-----------------
-----------------
</TABLE>
- ------------------------
(1) Reflects additional shares to be issued in connection with the merger,
including the assumed exercise of outstanding Metro stock options. As a
result of the pro forma losses, basic and diluted shares are equivalent.
12
<PAGE>
COMPARATIVE MARKET PRICE AND DIVIDEND DATA
METRO
The common stock of Metro is listed for trading on the Nasdaq National
Market under the symbol "MTNT." The following table sets forth, for the calendar
quarters indicated, the high and low closing sales prices per share of Metro
common stock as reported on the Nasdaq National Market, based on published
financial sources. Metro has never paid cash dividends on its common stock.
CLOSING SALES PRICE
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
- -------------------- -------- --------
<S> <C> <C>
1999
Third Quarter
(through August
20, 1999)......... $ 62 23/32 $ 51 7/16
Second Quarter...... 57 45
First Quarter....... 55 42
1998
Fourth Quarter...... 42 13/16 29 3/16
Third Quarter....... 44 1/2 34 1/32
Second Quarter...... 44 3/8 37 3/8
First Quarter....... 43 30 3/8
1997
Fourth Quarter...... 35 1/2 29 1/2
Third Quarter....... 33 7/8 25 5/16
Second Quarter...... 25 1/2 21 7/8
First Quarter....... 26 3/4 21 7/8
</TABLE>
WESTWOOD
Since December 15, 1998, the common stock of Westwood has been traded on the
New York Stock Exchange under the symbol "WON." From the time of its initial
public offering on April 24, 1984 through December 14, 1998, the common stock of
Westwood was traded on the Nasdaq National Market System. The following table
sets forth, for the calendar quarters indicated, the high and low closing sale
prices per share of Westwood common stock as reported on the New York Stock
Exchange or the Nasdaq National Market System, as the case may be, based on
published financial sources. No cash dividends were paid on Westwood's common
stock during the calendar quarters indicated below.
CLOSING SALES PRICE
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
- -------------------- ---------- ----------
<S> <C> <C>
1999
Third Quarter
(through August
20, 1999)......... $ 42 9/16 $ 34 7/16
Second Quarter...... 37 11/16 29 3/16
First Quarter....... 29 13/16 23 3/16
1998
Fourth Quarter...... 30 9/16 16
Third Quarter....... 27 7/16 15 3/4
Second Quarter...... 30 3/8 24 5/8
First Quarter....... 35 7/8 29 3/8
1997
Fourth Quarter...... 37 1/8 29
Third Quarter....... 33 5/8 27 5/16
Second Quarter...... 32 1/4 19 1/8
First Quarter....... 19 11/16 16 3/4
</TABLE>
13
<PAGE>
On June 1, 1999, the last trading day immediately preceding the public
announcement of the proposed merger, the closing sales price on the Nasdaq
National Market per share of Metro common stock was $55 1/2 and the closing
sales price on the New York Stock Exchange per share of Westwood common stock
was $35.
On August 20, 1999, the last trading day prior to the printing of this joint
proxy statement/ prospectus, the closing sales price on the Nasdaq National
Market per share of Metro common stock was $53 3/8 and the closing sales price
on the New York Stock Exchange per share of Westwood common stock was $36.
Because the market price of Westwood common stock is subject to fluctuation,
the market value of the shares of Westwood common stock that holders of shares
of Metro common stock will receive in connection with the merger may increase or
decrease before or after the proposed merger. STOCKHOLDERS ARE ENCOURAGED TO
OBTAIN CURRENT QUOTATIONS FOR SHARES OF WESTWOOD COMMON STOCK AND METRO COMMON
STOCK.
Following the completion of the merger, shares of Westwood common stock will
continue to trade on the New York Stock Exchange and shares of Metro common
stock will cease to be authorized for trading on the Nasdaq National Market.
14
<PAGE>
RISK FACTORS
THE MERGER AGREEMENT DOES NOT CONTAIN ANY PROVISIONS FOR ADJUSTMENT OF THE
EXCHANGE RATIOS AND DOES NOT PROVIDE FOR RIGHTS OF TERMINATION BY EITHER PARTY
BASED UPON FLUCTUATIONS IN THE PER SHARE PRICE OF THE METRO COMMON STOCK OR
METRO SERIES A CONVERTIBLE PREFERRED STOCK OR THE WESTWOOD COMMON STOCK.
Because no adjustment will be made to the exchange ratios, the value of the
consideration to be received by holders of Metro common stock and Series A
convertible preferred stock in connection with the merger is not presently
ascertainable and will vary based upon the market price of Westwood common stock
at the time the merger is completed. Such variations may be the result of
changes in the business operations or prospects of Westwood or Metro, market
assessments of the likelihood that the merger will be consummated, the timing
thereof, the prospects for the post-merger operations of the combined company,
regulatory considerations, general market and economic conditions and other
factors beyond the control of Metro or Westwood. Holders of Metro common stock
are urged to obtain current market quotations for their shares and for shares of
Westwood common stock.
THE COMBINED COMPANY MAY BE UNABLE TO RECOGNIZE THE SYNERGIES AND OTHER BENEFITS
ANTICIPATED BY METRO AND WESTWOOD.
The merger involves the integration of two companies that have previously
operated independently. There can be no assurances that the companies will not
encounter significant difficulties in integrating their respective operations or
that the benefits expected from such integration will be realized. The
incurrence of unexpected costs or delays in connection with such integration
could have a material adverse effect on the combined company's business,
financial condition or results of operations.
THE COMBINED COMPANY FACES INTENSE COMPETITION FOR AUDIENCE AND ADVERTISING
REVENUES.
The combined company will compete in a highly competitive business. Its
radio programming will compete for audiences and advertising revenues directly
with radio and television stations and other syndicated programming, as well as
with such other media as newspapers, magazines, cable television, outdoor
advertising and direct mail. Audience ratings and revenue shares are subject to
change and any adverse change in a particular geographic area could have a
material and adverse effect on the combined company's ability to attract not
only advertisers in that region, but national advertisers as well. Future
operations are further subject to many factors which could have an adverse
effect upon the combined company's financial performance. These factors include:
- economic conditions, both generally and relative to the broadcasting
industry;
- shifts in population and other demographics;
- the level of competition for advertising dollars;
- fluctuations in programming costs;
- technological changes and innovations;
- changes in labor conditions; and
- changes in governmental regulations and policies and actions of federal
regulatory bodies.
Although Westwood believes that the combined company's radio programming
will be able to compete effectively and will continue to attract audiences and
advertisers, there can be no assurance that the combined company will be able to
maintain or increase the current audience ratings and advertising revenues of
Westwood and Metro.
15
<PAGE>
MAJOR RADIO STATION GROUPS COULD CHOOSE TO DEVELOP THEIR OWN PROGRAMMING OR
OBTAIN IT FROM OTHER PROVIDERS.
The radio broadcasting industry has experienced a significant amount of
consolidation in recent years. As a result, certain major station groups,
including Infinity, have emerged as powerful forces in the industry. Given the
size and financial resources of these station groups, they may be able to
develop their own programming as a substitute to that offered by the combined
company. Alternatively, they could seek to obtain programming from the combined
company's competitors. Any such occurrences, or merely the threat of such
occurrences, could adversely affect the combined company's ability to negotiate
favorable terms with its station affiliates, to attract audiences and to attract
national advertisers. Because several of Metro's key station affiliates compete
with Infinity, which manages Westwood's business and operations, this risk may
become particularly pronounced following the completion of the merger.
INFINITY AND DAVID I. SAPERSTEIN WILL OWN A LARGE PERCENTAGE OF WESTWOOD'S
VOTING STOCK AND NORMAN J. PATTIZ, WESTWOOD'S CHAIRMAN, WILL OWN CERTAIN SHARES
THAT ENTITLE HIM TO A DISPROPORTIONATELY LARGE SHARE OF THE TOTAL VOTING POWER
OF WESTWOOD'S CAPITAL STOCK.
Infinity owns indirectly through a subsidiary, 8,000,000 shares of Westwood
common stock, which shares will represent approximately 14.3% of the outstanding
shares of Westwood common stock and approximately 10.4% of the total voting
power of Westwood's capital stock upon completion of the merger. Infinity also
beneficially owns warrants to acquire 2,000,000 additional shares of Westwood
common stock (which warrants are currently exercisable for 1,000,000 shares),
which, if fully exercised, would increase such percentages to approximately
17.9% and 12.6%, respectively. Mr. Saperstein will own 11,423,415 shares of
Westwood common stock, which shares will represent approximately 20.5% of the
outstanding shares of Westwood common stock, and all 3,824,625 shares of
outstanding Westwood preferred stock upon completion of the merger, all of which
shares together will represent approximately 19.7% of the total voting power of
Westwood's capital stock.
Norman J. Pattiz, Westwood's Chairman, owns 227,840 shares of Westwood
common stock, which shares will represent approximately 0.4% of the outstanding
shares of Westwood common stock and approximately 0.3% of the total voting power
of Westwood's capital stock upon completion of the merger. Mr. Pattiz also owns
351,690 (or 99.9%) of the 351,733 outstanding shares of Westwood Class B stock.
The Westwood Class B stock is similar in all respects to the Westwood common
stock (into which it may be converted on a share-for-share basis), except that
each share of Westwood Class B stock is entitled to 50 votes, rather than just
one. Because of this feature of the Westwood Class B stock, Mr. Pattiz owns in
the aggregate shares of Westwood capital stock that will represent only
approximately 1.0% of the economic interest of Westwood's capital stock, but
approximately 23.1% of its total voting power, upon completion of the merger.
Infinity's and Mr. Saperstein's large ownership stakes and Mr. Pattiz's
disproportionately large voting interest may have the effect of discouraging
certain types of transactions involving an actual or potential change of control
combined company, including transactions in which the holders of the combined
company's capital stock might otherwise receive a premium for their shares over
then-current market prices.
FOLLOWING THE MERGER, EACH OF INFINITY AND MR. SAPERSTEIN WILL OWN OR HAVE
RIGHTS TO ACQUIRE A SUBSTANTIAL NUMBER OF SHARES OF WESTWOOD COMMON STOCK. SALES
OF SUCH SHARES COULD ADVERSELY AFFECT THE MARKET PRICE OF WESTWOOD COMMON STOCK.
Subject to certain restrictions under the Securities Act and certain
agreements with Westwood, Infinity and Mr. Saperstein are free to sell their
shares of Westwood stock from time to time for any reason. Pursuant to the terms
of separate registration rights agreements that they have or will have with
Westwood, Infinity and Mr. Saperstein could sell large amounts of their
respective shares by
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<PAGE>
causing Westwood to file registration statements with respect to such shares. In
addition, they could sell their respective shares without registration pursuant
to Rule 144 under the Securities Act. Westwood can make no prediction as to the
effect, if any, that sales of such shares would have on the prevailing market
price of Westwood common stock. Sales of substantial amounts of such shares, or
even the mere availability of such shares for sale, could adversely affect
prevailing market prices. Sales or transfers of such shares could also result in
another person or entity becoming a controlling stockholder of Westwood.
WESTWOOD IS AUTHORIZED TO ISSUE SHARES OF PREFERRED STOCK HAVING TERMS THAT ARE
ADVERSE TO THE INTERESTS OF HOLDERS OF WESTWOOD COMMON STOCK.
Westwood's certificate of incorporation authorizes for issuance up to
10,000,000 shares of undesignated preferred stock; 6,175,375 of these shares
will be available for issuance following the issuance of Westwood preferred
stock in connection with the merger. The Westwood board of directors has the
authority, without further vote or action by Westwood stockholders, to issue
undesignated shares of preferred stock in one or more series and to fix all
preferences, rights, qualifications, limitations and restrictions of each such
series, including dividend rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of such series. Although it currently has no plans
to do so, the Westwood board of directors, without stockholder approval, could
cause Westwood to issue preferred stock with economic, voting and conversion
rights which could adversely affect the economic interest and voting power of
the holders of Westwood common stock. In addition, the issuance by Westwood of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of Westwood and could therefore have a negative impact on the
trading price or the Westwood common stock. Westwood may also issue other types
of securities in the future that may have the same or similar negative effects
as the undesignated preferred stock.
WESTWOOD'S CERTIFICATE OF INCORPORATION CONTAINS A BUSINESS COMBINATION
PROVISION THAT COULD PREVENT WESTWOOD STOCKHOLDERS FROM RECEIVING A PREMIUM
OVER MARKET PRICE FOR THEIR SHARES.
In addition to providing disproportionate voting rights to holders of
Westwood Class B stock and permitting the issuance of undesignated preferred
stock (each as described above), Westwood's certificate of incorporation
contains a provision that imposes restrictions on certain "business combination"
transactions with parties that are deemed to be "interested stockholders." The
intent and effect of this provision is to make it more difficult for a third
party to acquire control of Westwood. See the section of this joint proxy
statement/prospectus entitled "COMPARISON OF RIGHTS OF WESTWOOD STOCKHOLDERS AND
METRO STOCKHOLDERS" beginning on page 70.
WESTWOOD DOES NOT INTEND TO PAY ANY DIVIDENDS ON THE WESTWOOD COMMON STOCK.
Westwood has not paid any dividends to its stockholders. In the future,
Westwood intends to retain all available earnings, if any, generated by its
operations for the development and growth of its business and does not
anticipate paying any dividends on the Westwood common stock in the foreseeable
future. Accordingly, any economic gain on ownership of Westwood common stock
will be derived solely from the appreciation, if any, in the market price of the
Westwood common stock.
SOME DIRECTORS AND OFFICERS OF METRO MAY HAVE INTERESTS IN THE MERGER THAT ARE
DIFFERENT FROM OR IN ADDITION TO THE INTERESTS OF METRO STOCKHOLDERS GENERALLY.
In considering the recommendation of Metro's board of directors to vote in
favor of the approval and adoption of the merger agreement, Metro stockholders
should be aware that some of Metro's directors and executive officers have
personal interests in the merger that are different from or in
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addition to the interests of Metro stockholders generally. These persons include
the following, each of whom is both a director and an officer of Metro:
- David I. Saperstein;
- Charles I. Bortnick; and
- Shane E. Coppola.
The interests of these persons, together with other factors deemed relevant,
were considered by Metro's board of directors, as well as the special committee
of its board of directors formed for the express purpose of evaluating the
merger agreement, in approving the merger agreement and recommending that Metro
stockholders vote to approve and adopt the merger agreement. The personal
interests that these persons have in connection with the merger include:
- the agreement of Westwood to appoint Mr. Saperstein and his designee as
directors of Westwood at the close of business on the date that the merger
is completed;
- Mr. Saperstein's consulting and non-competition agreements with Westwood,
each of which will become effective only upon completion of the merger;
- Mr. Bortnick's and Mr. Coppola's employment agreements with Westwood, each
of which will become effective only upon completion of the merger;
- the agreement of Westwood to keep in effect certain exculpation and
indemnification rights and directors and officers liability insurance
policies for the benefit of all of Metro's current and former directors
and officers; and
- the agreement of Westwood to enter into a registration rights agreement
with Mr. Saperstein pursuant to which he will have certain demand and
piggyback registration rights with respect to the shares of Westwood
common stock that he receives in the merger.
See "THE MERGER--Interests of Certain Persons in the Merger" beginning on page
48 and "ADDITIONAL AGREEMENTS" beginning on page 63.
CERTAIN OF WESTWOOD'S EXECUTIVE OFFICERS ARE EMPLOYED AND PAID BY INFINITY.
Joel Hollander, Westwood's President and Chief Executive Officer, and Farid
Suleman, Westwood's Executive Vice President and Chief Financial Officer, serve
in their respective capacities pursuant to the terms of a management agreement
between Westwood and Infinity which expires on March 31, 2004. They are employed
and paid by Infinity, not Westwood. Mr. Suleman, who also serves as the Chief
Financial Officer of Infinity and the Vice President-Finance for CBS
Corporation, spends most of his professional time and effort on behalf of
Infinity. Westwood has not established any minimum time requirement that Mr.
Suleman must devote to Westwood's business. In many instances, his efforts for
Infinity relate to activities which are unrelated, or may be adverse, to the
interests of Westwood. For example, many of Infinity's radio stations compete
with Westwood for advertising revenues.
THE COMBINED COMPANY'S OPERATIONS MAY BE ADVERSELY AFFECTED BY YEAR 2000
PROBLEMS.
In operating its businesses, Westwood and Metro are dependent on information
technology and process control systems that employ computers as well as embedded
microprocessors. They also depend on the proper functioning of the business
systems of third parties. Many computer systems and microprocessors can only
process dates in which the year is represented by two digits. As a result, some
of these systems and processors may interpret "00" incorrectly as the year 1900
instead of the year 2000, in which event they could malfunction or become
inoperable after December 31, 1999. Systems and microprocessors that can
properly recognize the year 2000 are referred to as "year 2000 compliant."
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<PAGE>
Westwood and Metro believe that they have developed effective programs to
address year 2000 problems. Based upon current plans and assumptions, we do not
expect year 2000 problems to have a material adverse impact on the combined
company's financial condition or results of operations. We cannot give
assurances, however, that this will be the case. Additionally, we cannot give
assurances that the systems of third parties on which the combined company will
rely will be year 2000 compliant in a timely manner or that a failure by any
third party to be year 2000 compliant will not have a material adverse impact on
the combined company's financial condition or results of operations.
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<PAGE>
FORWARD-LOOKING STATEMENTS
This document and the documents incorporated by reference in this joint
proxy statement/ prospectus contain both historical and forward-looking
statements. All statements other than statements of historical fact are, or may
be deemed to be, forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are only predictions and generally can be identified
by use of statements that include phrases such as "believe," "expect,"
"anticipate," "intend," "plan," "foresee" or other similar words or phrases.
Similarly, statements that describe objectives, plans or goals are or may be
forward-looking statements. These forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the combined company to be different
from future results, performance and achievements expressed or implied by these
statements. You should review carefully all information, including the financial
statements and the notes to the financial statements, included or incorporated
by reference into this joint proxy statement/prospectus.
Although we believe that the assumptions and expectations reflected in the
forward-looking statements contained in this joint proxy statement/prospectus
are reasonable, we cannot assure you that those assumptions or expectations will
ultimately be correct. Important factors that could cause actual results to
differ materially from our expectations are disclosed under "RISK FACTORS"
beginning on page 15.
The risk factors described under "RISK FACTORS" in this joint proxy
statement/prospectus are not necessarily all of the important factors that could
cause actual results to differ materially from those expressed in any of our
forward-looking statements. Other unknown or unpredictable factors also could
have material adverse effects on our future results. The forward-looking
statements included in this joint proxy statement/prospectus are made only as of
the date of this joint proxy statement/ prospectus and we undertake no
obligation to publicly update any forward-looking statements to reflect
subsequent events or circumstances. We cannot assure you that projected results
or events will be achieved.
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WHERE TO FIND MORE INFORMATION
Westwood and Metro file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy reports,
statements or other information filed by Westwood and Metro at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The filings of Westwood and Metro with the SEC are also
available to the public from commercial document retrieval services and at the
world wide web site maintained by the SEC at "http://www.sec.gov".
Westwood filed a registration statement on Form S-4 to register with the SEC
the shares of Westwood common stock to be issued in connection with the merger.
This joint proxy statement/ prospectus is a part of that registration statement
and constitutes a prospectus of Westwood in addition to being a joint proxy
statement of Westwood and Metro for the meetings of their respective
stockholders. As allowed by SEC rules, this joint proxy statement/prospectus
does not contain all the information you can find in the registration statement
or the exhibits to the registration statement.
The SEC allows Westwood and Metro to "incorporate by reference" information
into this document, which means that they can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this document,
except for any information superseded by information in this document. This
document incorporates by reference the documents set forth below that Westwood
and Metro have previously filed with the SEC. These documents contain important
information about Westwood and Metro and their finances.
<TABLE>
<CAPTION>
WESTWOOD SEC FILINGS (FILE NO. 0-13020) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended June 30, 1999 and March 31, 1999
Form 8-K Filed on June 4, 1999
The description of Westwood's capital stock set forth in Filed on May 5, 1996
its Registration Statement on Form S-3/A
</TABLE>
<TABLE>
<CAPTION>
METRO SEC FILINGS (FILE NO. 000-21575) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended June 30, 1999 and March 31, 1999
Form 8-K Filed on June 10, 1999
</TABLE>
Westwood and Metro are also incorporating by reference additional documents
that they file with the SEC between the date of this document and the date of
their respective stockholders meetings.
You should rely only on the information contained or incorporated by
reference in this joint proxy statement/prospectus to vote your shares at the
applicable stockholders meeting. Neither Westwood nor Metro has authorized
anyone to provide you with information that is different from that which is
contained in this joint proxy statement/prospectus. This joint proxy
statement/prospectus is dated August 20, 1999. You should not assume the
information contained in this joint proxy statement/ prospectus is accurate as
of any date other than that date, or such other date as this joint proxy
statement/prospectus indicates. Neither the mailing of this joint proxy
statement/prospectus to you nor the issuance of Westwood capital stock in the
merger creates any implication to the contrary.
If you are a stockholder, Westwood or Metro may not have sent you some of
the documents incorporated by reference in this joint proxy
statement/prospectus, but you can obtain any of them
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through Westwood or Metro, as the case may be, or the SEC. Documents
incorporated by reference are available from Westwood or Metro, as the case may
be, without charge. Exhibits to the documents will not be sent, however, unless
those exhibits have specifically been incorporated by reference as exhibits in
this document. Stockholders may obtain without charge documents incorporated by
reference in this document by requesting them in writing or by telephone from
the appropriate party at the following address:
<TABLE>
<S> <C>
Westwood One, Inc. Metro Networks, Inc.
1675 Broadway, 17(th) Floor 681 Fifth Avenue, 10(th) Floor
New York, New York 10019 New York, New York 10022
Gary J. Yusko Gary L. Worobow
Senior Vice President--Financial Operations Senior Vice President and General Counsel
(212) 641-2000 (212) 832-9500
</TABLE>
If you would like to request documents from Westwood or Metro, please do so
by September 8, 1999 to receive them before their respective stockholders
meetings.
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METRO SPECIAL MEETING
PURPOSE OF THE METRO SPECIAL MEETING
At the Metro special meeting to be held at 10:00 a.m. Eastern Time on
September 22, 1999 at the offices of Paul, Hastings, Janofsky & Walker LLP, 399
Park Avenue, 31st Floor, New York, New York, Metro stockholders will consider
and vote upon a proposal to approve and adopt the merger agreement.
THE BOARD OF DIRECTORS OF METRO HAS APPROVED THE MERGER AGREEMENT AND THE
MERGER AND RECOMMENDS THAT METRO STOCKHOLDERS VOTE "FOR" THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. SEE "THE MERGER--RECOMMENDATION OF THE BOARD
OF DIRECTORS OF METRO AND REASONS OF METRO FOR THE MERGER" BEGINNING ON PAGE 32
AND "THE MERGER--INTERESTS OF CERTAIN PERSONS IN THE MERGER" BEGINNING ON PAGE
48 FOR ADDITIONAL INFORMATION REGARDING THE RECOMMENDATION OF METRO'S BOARD OF
DIRECTORS.
SOLICITATION OF PROXIES
The solicitation of the enclosed proxy is made on behalf of the board of
directors of Metro. The expenses of the solicitation of proxies, including
preparing, handling, printing and mailing the proxy soliciting materials, will
be borne by Metro, except that printing and mailing costs will be shared equally
by Westwood. Solicitation will be made by mail, by electronic telecommunications
or in person. In soliciting proxies, Metro may use the services of its
directors, officers and employees, who will not receive any additional
compensation for such services, but will be reimbursed for their out-of-pocket
expenses. In addition, directors, officers and employees of Westwood may assist
Metro in soliciting proxies, but will not receive compensation for such
assistance. Metro will reimburse banks, brokers, nominees, custodians and
fiduciaries for their expenses in forwarding copies of the proxy soliciting
materials to the beneficial owners of the stock held by such persons and in
requesting authority for the execution of proxies.
RECORD DATE; VOTING RIGHTS
Only holders of record of shares of Metro common stock and Metro Series A
convertible preferred stock at the close of business on August 20, 1999 are
entitled to notice of and to vote at the Metro special meeting.
As of August 20, 1999, there were 16,737,481 outstanding shares of Metro
common stock held by approximately 200 holders of record and owned beneficially
by over 1,600 persons and 2,549,750 outstanding shares of Metro Series A
convertible preferred stock held by David I. Saperstein, Metro's Chairman and
Chief Executive Officer. Each holder of Metro common stock or Metro Series A
convertible preferred stock is entitled to one vote per share on any matter
brought before the Metro special meeting. All shares of Metro stock represented
by properly executed proxies will be voted in accordance with the instructions
indicated in such proxies, unless such proxies have been previously revoked. IF
NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF METRO STOCK WILL BE VOTED IN FAVOR
OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Metro is not proposing any matters to come before the Metro special meeting
other than approval and adoption of the merger agreement, and Metro has not
received notice of any other proposal to be considered at the Metro special
meeting. However, if any other matters incidental to the approval and adoption
of the merger agreement or conduct of the meeting are properly presented for
action at the Metro special meeting, including a motion to adjourn the meeting
to another time or place, the persons named in the enclosed form of proxy will
have the discretion to vote on such matters in accordance with their best
judgment, unless such authorization is withheld by notation on the proxy.
However, no proxy which is voted against the proposal to approve and adopt the
merger agreement will be voted in
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favor of any adjournment of the Metro special meeting and such discretionary
authority will only be exercised to the extent permitted by applicable federal
and state securities and corporate law.
PROXIES
Metro stockholders can vote by mailing their completed and signed proxy card
to Metro's transfer agent--American Stock Transfer & Trust Company, Attention:
Proxy Tabulation Department. Metro stockholders can change their vote prior to
the Metro special meeting by mailing a later dated signed proxy to the same
address. A stockholder who has given a proxy may revoke it at any time prior to
its exercise by giving written notice of revocation to Gary Worobow, the
Secretary of Metro, at 681 Fifth Avenue, 10th Floor, New York, New York 10022,
or by voting in person at the Metro special meeting. However, mere attendance at
the Metro special meeting will not, in and of itself, have the effect of
revoking the proxy.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the outstanding shares
of Metro common stock and Metro Series A convertible preferred stock, voting
together as a single class, is required to approve and adopt the merger
agreement. Accordingly, abstentions and "broker non-votes" will have the effect
of a vote against the approval and adoption of the merger agreement. "Broker
non-votes" are shares held by brokers or nominees which are represented at a
meeting but as to which the broker or nominee is not empowered to vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to the matter and has not received voting instructions from the
beneficial owner. A failure to vote also will have the effect of a vote against
the approval and adoption of the merger agreement.
QUORUM
The presence in person or by proxy of holders of a majority of the shares of
Metro common stock and Metro Series A convertible preferred stock entitled to
vote is necessary to constitute a quorum for the transaction of business at the
Metro special meeting. Abstentions and "broker non-votes" are counted for
purposes of determining whether there is a quorum at the Metro special meeting.
OTHER INFORMATION
On August 20, 1999, the executive officers and directors of Metro, including
their affiliates, had voting power with respect to an aggregate of 7,673,010
shares of Metro common stock and 2,549,750 shares of Metro Series A convertible
preferred stock, or approximately 53.0% of the outstanding shares of Metro
common stock and Metro Series A convertible preferred stock and approximately
53.0% of the total voting power of Metro's outstanding capital stock. Metro
currently expects that these directors and officers will vote all of such shares
in favor of the approval and adoption of the merger agreement. In fact, pursuant
to a Company Stockholder Voting Agreement dated as of June 1, 1999, Messrs.
Saperstein, Bortnick and Coppola, each of whom is a director and executive
officer of Metro, have agreed with Westwood to vote their shares of Metro common
stock and Metro Series A convertible preferred stock in favor of the approval
and adoption of the merger agreement and, in furtherance of such obligations,
have appointed representatives of Westwood as their proxies to vote their
shares. Because Messrs. Saperstein and Coppola own in the aggregate shares of
Metro common stock and Metro Series A convertible preferred stock representing
approximately 52.7% of the voting power of all Metro capital stock, the merger
agreement may be approved and adopted without the vote of or any action by any
other Metro stockholders.
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<PAGE>
WESTWOOD ANNUAL MEETING
PURPOSE OF THE WESTWOOD ANNUAL MEETING
At the Westwood annual meeting to be held at 9:00 a.m. Pacific Time on
September 22, 1999 in the La Ventana Room of the Westwood Marquis Hotel, 930
Hilgard Avenue, Los Angeles, California 90024, Westwood stockholders will
consider and vote upon proposals to:
- approve the issuance of shares of Westwood common stock in connection with
the merger;
- elect two (2) class III directors for terms expiring in 2002;
- approve the 1999 Stock Incentive Plan; and
- ratify the selection of PricewaterhouseCoopers LLP as Westwood's
independent accountants for the fiscal year ending December 31, 1999.
THE BOARD OF DIRECTORS OF WESTWOOD HAS APPROVED THE MERGER AND THE MERGER
AGREEMENT AND RECOMMENDS THAT WESTWOOD STOCKHOLDERS VOTE "FOR" THE ISSUANCE OF
WESTWOOD COMMON STOCK IN CONNECTION WITH THE MERGER. SEE "THE
MERGER--RECOMMENDATION OF THE BOARD OF DIRECTORS OF WESTWOOD AND REASONS OF
WESTWOOD FOR THE MERGER" BEGINNING ON PAGE 41 FOR ADDITIONAL INFORMATION
REGARDING THE RECOMMENDATION OF WESTWOOD'S BOARD OF DIRECTORS. THE BOARD OF
DIRECTORS OF WESTWOOD ALSO RECOMMENDS THAT WESTWOOD STOCKHOLDERS VOTE "FOR" THE:
- election of the two nominated class III directors;
- approval of the 1999 Stock Incentive Plan; and
- ratification of the selection of PricewaterhouseCoopers LLP as Westwood's
independent accountants for the fiscal year ending December 31, 1999.
SOLICITATION OF PROXIES
The solicitation of the enclosed proxy is made on behalf of the board of
directors of Westwood. The expenses of the solicitation of proxies, including
preparing, handling, printing and mailing the proxy soliciting materials, will
be borne by Westwood, except that printing and mailing cost will be shared
equally by Metro. Solicitation will be made by mail, by electronic
telecommunications or in person. Westwood has retained the services of Innisfree
to assist in the solicitation of proxies for a fee estimated at $10,000 plus
out-of-pocket expenses. In soliciting proxies, Westwood may also use the
services of its directors, officers and employees in soliciting proxies, who
will not receive any additional compensation for such services, but will be
reimbursed for their out-of-pocket expenses. In addition, directors, officers
and employees of Metro may assist Westwood in soliciting proxies, but will not
receive any compensation for such assistance. Westwood will reimburse banks,
brokers, nominees, custodians and fiduciaries for their expenses in forwarding
copies of the proxy soliciting materials to the beneficial owners of the stock
held by such persons and in requesting authority for the execution of proxies.
RECORD DATE; VOTING RIGHTS
Only holders of record of shares of Westwood common stock and Westwood Class
B stock at the close of business on August 20, 1999 are entitled to notice of
and to vote at the Westwood annual meeting.
As of August 20, 1999, there were 30,735,035 outstanding shares of Westwood
common stock held by approximately 220 holders of record and owned beneficially
by approximately 3,300 persons, and 351,733 outstanding shares of Westwood Class
B stock, 351,690 of which were held of record by Norman J. Pattiz, Westwood's
Chairman and 43 of which were held of record by two other holders.
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<PAGE>
Each holder of Westwood common stock is entitled to one vote per share and each
holder of Westwood Class B stock is entitled to fifty votes per share. Holders
of Westwood common stock and Westwood Class B stock will vote together as a
single class on:
- the approval of the issuance of shares of Westwood common stock in
connection with the merger;
- the election of the non-independent nominated class III director;
- the approval of the 1999 Stock Incentive Plan;
- the ratification of the selection of PricewaterhouseCoopers LLP as
Westwood's independent accountants for the fiscal year ending December 31,
1999; and
- such other matters as may properly come before the meeting.
Holders of Westwood common stock, voting alone, will elect the independent
nominated class III director. All shares of Westwood common stock and Westwood
Class B stock represented by properly executed proxies will be voted in
accordance with the instructions indicated in such proxies, unless such proxies
have been previously revoked. IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF
WESTWOOD COMMON STOCK AND WESTWOOD CLASS B STOCK WILL BE VOTED IN FAVOR OF EACH
PROPOSAL DESCRIBED ABOVE.
Westwood is not proposing any matters to come before the Westwood annual
meeting other than those described above, and Westwood has not received notice
of any other proposal to be considered at the Westwood annual meeting. However,
if any other matters incidental to the approval of the matters described above
or the conduct of the meeting are properly presented for action at the Westwood
annual meeting, including a motion to adjourn the meeting to another time or
place, the persons named in the enclosed form of proxy will have the discretion
to vote on such matters in accordance with their best judgment, unless such
authorization is withheld by notation on the proxy. However, no proxy which is
voted against any of the proposals described above will be voted in favor of any
adjournment of the Westwood annual meeting and such discretionary authority will
only be exercised to the extent permitted by applicable federal and state
securities and corporate law.
PROXIES
Westwood stockholders can vote by mailing their completed and signed proxy
card to Westwood's transfer agent--BankBoston, NA--c/o EquiServe at P.O. Box
8040, Boston, MA 02266-8040. Westwood stockholders can change their vote prior
to the Westwood annual meeting by mailing a later dated signed proxy to the same
address. A stockholder who has given a proxy may revoke it at any time prior to
its exercise by giving written notice of revocation to the Secretary of Westwood
or by voting in person at the Westwood annual meeting. However, mere attendance
at the Westwood annual meeting will not, in and of itself, have the effect of
revoking the proxy.
REQUIRED VOTE
Under the rules of the New York Stock Exchange, the approval of the issuance
of the shares of Westwood common stock to be issued in connection with the
merger requires the affirmative vote of a majority of votes cast on the
proposal, provided that the total number of votes cast on the proposal
represents a majority of the votes entitled to be cast. Abstentions and "broker
non-votes" will not affect the outcome of the vote on the share issuance unless,
as a result of excluding such broker non-votes, the number of votes cast
constitutes less than a majority of the votes entitled to be cast. If an
insufficient number of votes are cast on the share issuance proposal, the
Westwood board of directors likely will adjourn the annual meeting to solicit
additional proxies.
The two Class III directors will be elected by a plurality of votes cast. As
to each other proposal to be voted upon, approval will require the affirmative
vote of a majority of the votes cast.
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<PAGE>
QUORUM
The presence in person or by proxy of holders of a majority of the votes
entitled to be cast is necessary to constitute a quorum for the transaction of
business at the Westwood annual meeting. Abstentions and "broker non-votes" are
counted for purposes of determining whether there is a quorum at the annual
meeting.
OTHER INFORMATION
On August 20, 1999, the executive officers and directors of Westwood,
including their affiliates, had voting power with respect to an aggregate of
513,594 shares of Westwood common stock and 351,690 shares of Westwood Class B
stock, or approximately 37.5% of the aggregate votes entitled to be cast at the
Westwood annual meeting, except with respect to the election of the independent
Class III director. Westwood currently expects that these directors and officers
(other than Mr. Pattiz, who on that date had voting power with respect to an
aggregate of 227,840 shares of Westwood common stock and 351,690 shares of
Westwood Class B stock, or approximately 36.9% of the total voting power of
Westwood's capital stock and has advised Westwood that he has not determined how
he will vote), will vote all of such shares in favor of the issuance of Westwood
common stock in connection with the merger. Pursuant to a Parent Stockholder
Voting Agreement dated as of June 1, 1999, Infinity, the indirect owner of
8,000,000 shares of Westwood common stock (representing approximately 16.6% of
the total voting power of outstanding Westwood capital stock) and the owner of
currently exercisable warrants to acquire 1,000,000 shares of Westwood common
stock (which, if fully exercised, would increase its percentage of the total
voting power to 18.2%), has agreed with Metro to vote its shares of Westwood
common stock in favor of the issuance of shares of Westwood common stock in
connection with the merger and, in furtherance of such obligation, has appointed
representatives of Metro as its proxies to vote its shares.
As described in greater detail under "THE MERGER AGREEMENT--Termination"
beginning on page 60, if the merger agreement is terminated because Westwood's
stockholders fail to approve the issuance of shares of Westwood common stock in
connection with merger, Westwood will be required to:
- pay Metro a $10 million termination fee; and
- purchase from Metro unregistered shares of Metro common stock for an
aggregate purchase price of $10 million.
27
<PAGE>
THE PARTIES TO THE MERGER
METRO
Metro is the largest domestic outsource provider of traffic reporting
services and is a leading supplier of local news, sports, weather, video news
and other information programming services to the television and radio broadcast
industries. Metro's information reports, which are customized to meet the
specific needs of each of Metro's radio and television station affiliates, are
presently being broadcast by approximately 1,688 radio station affiliates and
155 television station affiliates. Metro provides local broadcast information
reports in 81 Metro Survey Area markets (referred to herein as MSA markets) in
the United States. In exchange for Metro's information reports, radio and
television station affiliates provide commercial airtime inventory to Metro. The
packaging and sale of this commercial airtime inventory accounts for
substantially all of Metro's revenues.
Because Metro has numerous television and radio station affiliates in each
of its MSA markets (averaging approximately 23 affiliates per market), Metro
believes that its broadcasts of local information enable advertisers to reach
more people, more often, in a higher impact manner than can be achieved using
other advertising media. Metro's information reports are broadcast in 67 of the
75 largest MSA markets in the United States and are seen and heard by more than
100 million people (age 12 and over) daily. Such reports and Metro's commercial
messages are listened to by an average of approximately 73% of the population
(age 12 and over) in its markets. Metro's large network of affiliates offers
advertisers the opportunity to reach a broad-based local, regional or national
audience through a single purchase of commercial airtime inventory from Metro.
Metro offers advertisers two different networks on which to broadcast their
advertisements:
- the network of radio station affiliates which includes the affiliate
stations to which Metro provides its core traffic information reports and
the affiliate stations to which Metro provides its news, sports, weather
and other information reports; and
- the network of broadcast television station affiliates and cable news
channel affiliates to which Metro provides its traffic information reports
and video news information products.
WESTWOOD
Westwood is a leading producer and distributor of nationally sponsored radio
programs and is the nation's largest radio network. In addition, Westwood owns
and operates Westwood One Broadcasting Services, Inc. (referred to herein as
WBS) which provides local traffic, news, sports and weather programming to radio
stations and other media outlets in 16 major cities, including New York,
Chicago, Los Angeles, Philadelphia and Washington, D.C. Westwood is managed by
Infinity Broadcasting Corporation pursuant to a five-year management agreement
which expires on March 31, 2004.
Westwood's principal source of revenue is selling radio time to advertisers
through one of its two operating divisions: the Network Division and WBS.
Westwood generates revenue principally by its Network Division entering into
radio station affiliation agreements to obtain audience and commercial spots and
then selling the spots to national advertisers. WBS generates revenue
principally by selling audience it obtains from radio stations and other media
outlets where it has operations to local as well as national advertisers.
Westwood is strategically positioned to provide a broad range of programming and
services which both deliver audience to advertisers and news, talk, sports, and
entertainment programs to radio stations.
The Network Division offers radio stations traditional news services (such
as CBS Radio News, CNN Radio and Fox news), in addition to eight 24-hour
satellite-delivered continuous play music
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<PAGE>
formats and weekday and weekend news and entertainment features and programs.
The Network Division also produces sports, talk, music and special event
programming. These programs include:
- major sporting events (principally covering the NFL, Notre Dame football
and other college football, basketball games, NHL and the Olympics);
- live, personality-intensive talk shows;
- live concert broadcasts;
- countdown shows;
- music and interview programs; and
- exclusive satellite simulcasts with HBO and other cable networks.
Westwood's programs are broadcast in every radio market in the United States
that is measured by The Arbitron Ratings Company, the leading rating service, as
well as being broadcast internationally.
WBS provides radio stations and other media outlets, including television
and cable television companies, with local traffic, news, sports and weather
programming in New York, Chicago, Los Angeles, Philadelphia, Baltimore, Boston,
Dallas, Detroit, Hartford, Houston, Miami, Minneapolis, San Diego, Sacramento,
San Francisco and Washington, D.C.
Westwood, through the Network Division and WBS, enables national advertisers
to purchase advertising time and have their commercial messages broadcast on
radio stations throughout the United States, reaching demographically defined
listening audiences. Westwood delivers both of the major demographic groups
targeted by national advertisers, the 25 to 54-year old adult market and the 12
to 34-year-old youth market. Westwood currently sells advertising time to over
300 national advertisers, including each of the 25 largest network radio
advertisers. Radio stations are able to obtain quality programming from Westwood
to meet their objective of attracting larger listening audiences and increasing
local advertising revenue. Westwood, through the development of internal
programming as well as through acquisitions, has developed an extensive tape
library of previously aired programs, interviews, live concert performances,
news and special events.
MERGER SUB
Merger Sub is a direct, wholly-owned subsidiary of Westwood that was
incorporated in May 1999 in the State of Delaware. Merger Sub has conducted no
operations other than those related to the transactions contemplated by the
merger agreement.
29
<PAGE>
THE MERGER
This section of this document, as well as the next section entitled "THE
MERGER AGREEMENT," describes the material aspects of the proposed merger. These
discussions are qualified in their entirety by reference to the merger
agreement, a copy of which is attached as Annex A to this document. YOU SHOULD
READ THE MERGER AGREEMENT IN ITS ENTIRETY AS IT IS THE LEGAL DOCUMENT THAT
GOVERNS THE TERMS OF THE MERGER.
BACKGROUND OF THE MERGER
On July 2, 1998, Farid Suleman, Westwood's Chief Financial Officer, met with
Mr. Saperstein, Metro's Chairman and Chief Executive Officer, in Los Angeles to
raise with him the possibility of a merger of Westwood and Metro.
Mr. Saperstein and Mr. Coppola, Metro's Executive Vice President, met with
Mr. Suleman in New York on July 7, 1998 to discuss in greater detail the terms
of the proposed merger.
On July 15, 1998, Mr. Suleman and Mel Karmazin, then Westwood's Chief
Executive Officer, met with Mr. Coppola. At this meeting, a tentative agreement
was reached as to the key terms of a proposed merger. Additional matters were
discussed by Mr. Suleman, Mr. Coppola and other representatives of Weil, Gotshal
& Manges LLP, Westwood's legal counsel, and Paul, Hastings, Janofsky & Walker
LLP, Metro's legal counsel, on July 27, 1998 at the New York offices of Weil,
Gotshal.
On August 4, 1998, a telephonic meeting of Westwood's board of directors was
held at which representatives of Weil, Gotshal were present. At this meeting,
the board of directors was informed of the status of discussions with Metro
concerning the proposed merger and the proposed terms thereof were discussed.
On August 4, 1998, a meeting of Metro's board of directors was held at which
representatives of Paul, Hastings and Goldman Sachs were present. At this
meeting, the Metro board was informed of the status of discussions with Westwood
concerning the proposed merger and the proposed terms thereof were discussed.
A meeting was held at the New York offices of Paul, Hastings on August 6,
1998 to discuss the parties' respective due diligence reviews. Representatives
of Westwood and Metro and their respective legal counsel attended the meeting.
Among other things, the parties discussed the future business prospects of both
Westwood and Metro individually and as a combined company. The parties also
conducted negotiations regarding certain significant terms and conditions of the
proposed merger.
The due diligence discussions continued at a meeting held on August 11,
1998. The meeting was attended by representatives of Westwood and Metro and
their respective legal counsel.
On August 25, 1998, Mr. Suleman met with representatives of Weil, Gotshal in
New York to discuss the terms of the proposed merger. Later that day, Mr.
Suleman met with Mr. Coppola to further discuss various significant terms of the
proposed merger. After lengthy discussions, the parties could not reach
agreement on several significant terms of the proposed merger. Consequently, the
parties agreed to abandon merger discussions at that time.
In February 1999, Mr. Coppola contacted Joel Hollander, Westwood's President
and Chief Executive Officer, to renew discussions of a possible merger of
Westwood and Metro. Subsequently, Messrs. Coppola and Hollander had further
discussions regarding a potential merger.
On March 2, 1999, Messrs. Hollander and Suleman met with Mr. Coppola to
discuss the terms of the new merger proposal. Also attending the meeting was
Gary Yusko, Westwood's Senior Vice President-Financial Operations. Mr. Suleman
expressed Westwood's concern that the relative prices of
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<PAGE>
Westwood common stock and Metro common stock would require an exchange ratio
that was unacceptable to Westwood.
By late April, 1999, the relative prices of Westwood common stock and Metro
common stock were such that Westwood's management believed that the proposed
merger could be completed at an acceptable exchange ratio. On April 29, 1999,
Messrs. Suleman, Hollander and Coppola met to renew their earlier discussions.
Westwood's board of directors met telephonically on May 5, 1999 to discuss
the new merger proposal.
On May 7, 1999, Messrs. Suleman and Coppola met to discuss the terms of the
proposed merger.
On May 17, 1999, Mr. Suleman and representatives of DLJ, Westwood's
financial advisor, met with Mr. Coppola and representatives of Goldman Sachs,
Metro's financial advisor, to discuss in greater detail the terms and structure
of the merger.
Also on May 17, 1999, Metro's board of directors met to review certain
matters relating to the proposed merger with Westwood. At that meeting, Metro's
board appointed a special committee of the board to evaluate the proposed merger
on behalf of the board and to make a recommendation to the board regarding the
proposed merger. The Metro board appointed two non-employee directors, Kenin M.
Spivak (as chairman) and Dennis Holt, and Mr. Coppola to serve on the special
committee; Mr. Spivak, on behalf of the Metro special committee, subsequently
retained Munger, Tolles & Olson, LLP as legal counsel to the special committee.
From May 18, 1999 to June 1, 1999, Westwood, Metro and their respective
financial and legal advisors continued to negotiate the terms of the proposed
merger.
On May 19, 1999, May 25, 1999 and May 27, 1999, the Metro special committee
held meetings to discuss the status of negotiations with Westwood regarding the
proposed merger agreement, the key issues outstanding in such merger agreement
and related matters. In addition, from the date of its formation through June 1,
1999, members of Metro's special committee held numerous informal discussions
regarding the proposed merger and, through the chairman of the special
committee, with Metro's legal and financial advisors.
On May 25, 1999 and May 28, 1999, Metro's board of directors met with its
legal and financial advisors to review the status of negotiations with respect
to the Westwood merger and the key issues outstanding in the draft merger
agreement. At the May 28, 1999 meeting, representatives of Goldman Sachs made a
presentation to the board regarding the financial terms of the proposed merger.
On June 1, 1999, the Metro special committee held a meeting to review the
negotiations with Westwood and the outstanding issues regarding the proposed
merger agreement. The special committee then reviewed various factors it would
consider in assessing the fairness of the merger to Metro's stockholders,
including but not limited to those listed below under "Recommendations of the
Board of Directors of Metro and Reasons for the Merger." At the conclusion of
the meeting, each member of the special committee voted to approve the merger
agreement and to recommend to the Metro board of directors that they approve the
merger and the merger agreement and recommend to Metro's stockholders that they
approve the merger and the merger agreement.
On June 1, 1999, Westwood's board met telephonically to consider the
approval of the merger. At this meeting, representatives of Weil, Gotshal
reviewed with the board of directors the key terms of the proposed merger
agreement, a draft of which had been distributed to the board of directors in
advance of the meeting, and the board's legal obligations to Westwood and its
stockholders. Representatives of DLJ made a presentation to the board regarding
the financial terms of the proposed merger and rendered orally its opinion that
the exchange ratio was fair to Westwood stockholders from a financial point of
view. At the conclusion of the meeting, each director other than Mr. Pattiz, who
abstained,
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<PAGE>
voted to approve the merger agreement and to recommend to Westwood stockholders
that they approve the issuance of shares of Westwood common stock in connection
with the merger.
On June 1, 1999, Metro's board of directors also met telephonically to
consider the approval of the merger agreement. Representatives of Metro's
financial and legal advisors as well as Metro's independent auditor, KPMG LLP,
were present. At this meeting, representatives of Paul, Hastings reviewed with
the board of directors the key terms of the proposed merger agreement, a draft
of which had been distributed to the board of directors in advance of the
meeting, and the board's legal obligations to Metro and its stockholders.
Representatives of Goldman Sachs made a presentation to the board regarding the
financial merits of the proposed merger and delivered its oral opinion that, as
of such date, the exchange ratio was fair to Metro's stockholders from a
financial point of view. During the course of this meeting, the independent
directors on Metro's board of directors met separately and, after consultation
with Metro's financial and legal advisors, unanimously resolved to recommend
that the Metro board of directors approve the proposed merger. Further, the
Metro special committee unanimously recommended that the Metro board approve the
proposed merger. At the conclusion of the meeting of the entire board of
directors, the Metro board unanimously voted to approve the merger and the
merger agreement and to recommend to Metro's stockholders that they approve the
merger and the merger agreement.
The parties entered into the definitive merger agreement as of June 1, 1999
and issued a joint press release announcing the terms of the merger the next
day.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF METRO AND REASONS OF METRO FOR THE
MERGER
At a meeting of the Metro board of directors held on June 1, 1999, after
careful consideration, the Metro board of directors, among other things:
- determined that the merger is fair to, advisable and in the best interests
of Metro and its stockholders;
- approved the merger agreement and the merger; and
- recommended that Metro stockholders approve and adopt the merger
agreement.
The Metro board of directors believes that the merger will:
- better enable the combined company to make the investments necessary to
develop more sophisticated traffic reporting systems;
- supplement Metro's strong local programming with Westwood's strong
national programming;
- enable the combined company to provide better reporting coverage in large
markets and to improve its services generally;
- allow the combined company to recognize certain cost synergies;
- enable the combined company to compete more effectively in the highly
competitive, consolidating radio broadcasting industry; and
- provide the combined company with the services of Westwood's talented and
experienced management team.
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<PAGE>
In reaching its decision to approve the merger agreement and recommend that
stockholders approve and adopt the merger agreement, the Metro board of
directors considered a number of factors, including:
- the results of Metro's due diligence investigation of Westwood and other
information concerning the business, assets, capital structure, financial
performance and prospects of Westwood and Metro;
- current and historical market prices and trading information with respect
to Westwood common stock and Metro common stock;
- the financial and other analyses prepared by Goldman Sachs and the opinion
of Goldman Sachs to the Metro board of directors that, as of June 1, 1999,
and based upon the assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion, the exchange ratio
was fair from a financial point of view to Metro's stockholders (see
"Opinion of Metro's Financial Advisor" below);
- that the merger is expected to be tax-free to both Westwood and Metro
stockholders, except with respect to cash received by Metro stockholders
instead of fractional shares;
- the terms and structure of the merger, including the fixed exchange ratio
of 1.5 Westwood shares for each Metro share, which implied a price of
$52.50 per share based on Westwood's closing price on June 1, 1999; and
- that certain directors and officers have interests in the merger that are
in addition to or different from those of Metro stockholders generally.
The Metro board of directors also considered the following risks inherent in
proceeding with the merger:
- the significant time and effort required of management to combine the
operations of Metro and Westwood;
- the expected synergies and other benefits of the merger might not be
realized;
- the possible loss of business from radio and television station affiliates
as a result of the merger; and
- the fact that based on the per share price of Metro common stock at the
time of execution of the merger agreement, the exchange ratio would result
in Metro stockholders receiving a price per share for their Metro common
stock that would be at a discount to the market price of Metro common
stock at the time of execution of the merger agreement.
This discussion of the information and factors considered and weight given
to such factors by the Metro board of directors is not intended to be
exhaustive. In view of the variety of factors considered in connection with its
evaluation of the merger, the Metro board of directors did not find it
practicable to and did not quantify or otherwise assign relative weights to the
specific factors considered in reaching its determination. In addition,
individual members of Metro's board of directors may have given different
weights to different factors.
THE METRO BOARD OF DIRECTORS RECOMMENDS THAT METRO STOCKHOLDERS VOTE "FOR"
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF METRO'S FINANCIAL ADVISOR
On June 1, 1999, Goldman Sachs delivered its oral opinion to the board of
directors of Metro that, as of such date, the exchange ratio was fair from a
financial point of view to Metro's stockholders.
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<PAGE>
Goldman Sachs subsequently confirmed its oral opinion by delivery of its written
opinion dated June 1, 1999.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED JUNE 1, 1999,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX B AND IS
INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/ PROSPECTUS. YOU SHOULD
READ THE OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
- the merger agreement;
- Metro's Registration Statement on Form S-1, including the prospectus
contained therein, dated October 16, 1996, relating to the initial public
offering of Metro common stock;
- annual reports to stockholders and annual reports on Form 10-K of Metro
for the three years ended December 31, 1998 and of Westwood for the five
years ended December 31, 1998;
- interim reports to stockholders and quarterly reports on Form 10-Q of
Metro and Westwood;
- other communications from Metro and Westwood to their respective
stockholders; and
- internal financial analyses and forecasts for Metro and Westwood prepared
by their respective managements, including cost savings and operating
synergies jointly projected by the managements of Metro and Westwood to
result from the merger.
Goldman Sachs also held discussions with members of the senior management of
Metro and Westwood regarding the strategic rationale for, and the potential
benefits of, the merger and the past and current business operations, financial
condition and future prospects of their respective companies. In addition,
Goldman Sachs:
- reviewed the reported price and trading activity for the Metro common
stock and the Westwood common stock;
- compared certain financial and stock market information for Metro and
Westwood with similar information for other companies the securities of
which are publicly traded;
- reviewed the financial terms of certain recent business combinations in
the radio broadcasting industry specifically and in other industries
generally; and
- performed such other studies and analyses as Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In that regard, Goldman
Sachs assumed, with the consent of Metro's board of directors, that the
synergies jointly projected by the managements of Metro and Westwood to result
from the merger were reasonably prepared on a basis reflecting the best
currently available judgments and estimates of Metro and Westwood and that those
projected synergies would be realized in the amounts and time periods
contemplated thereby. Goldman Sachs did not make an independent evaluation or
appraisal of the assets and liabilities of Metro or Westwood or any of their
respective subsidiaries and was not furnished with any such evaluation or
appraisal. Goldman Sachs, at the instruction of Metro's board of directors, also
took into account the view of the management of Metro with respect to the
prospects of Metro as an independent entity. Goldman Sachs' opinion did not
address the relative merits of the merger as compared to any alternative
business transaction that might be available to Metro. The advisory services and
opinion of Goldman Sachs were provided for the information and assistance of the
board of directors of Metro in connection with its consideration of the merger
and such opinion did not constitute a recommendation as to how any Metro
stockholder should vote with respect to the merger.
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<PAGE>
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its oral opinion to the Metro board
of directors on June 1, 1999. Goldman Sachs utilized substantially the same type
of financial analyses in connection with providing its written opinion attached
as Annex B.
THE FOLLOWING SUMMARIES OF FINANCIAL ANALYSES INCLUDE INFORMATION PRESENTED
IN TABULAR FORMAT. YOU SHOULD CAREFULLY READ THESE TABLES TOGETHER WITH THE TEXT
OF EACH SUMMARY.
HISTORICAL PREMIUM ANALYSIS
Goldman Sachs calculated the implied premium being paid in the transaction
based on the price on the following dates, or the average prices over the
following periods, of the Metro common stock and Westwood common stock:
<TABLE>
<CAPTION>
DATE/PERIOD IMPLIED PREMIUM
- ---------------------------------------------------------------------------- -------------------
<S> <C>
April 29, 1999.............................................................. 3.4%
May 17, 1999 (Board Meeting)................................................ 5.1%
May 28, 1999 (Board Meeting)................................................ (6.3)%
June 1, 1999................................................................ (5.4)%
15-day average preceding June 1, 1999....................................... (1.2)%
30-day average preceding June 1, 1999....................................... 1.1%
60-day average preceding June 1, 1999....................................... (6.4)%
</TABLE>
SELECTED COMPANIES ANALYSIS
Goldman Sachs reviewed and compared selected financial information, ratios
and multiples relating to Metro and Westwood to corresponding financial
information, ratios and market multiples for ten publicly traded corporations in
the radio broadcasting industry:
- Infinity Broadcasting Corporation
- Citadel Communications Corporation
- Clear Channel Communications, Inc.
- Chancellor Media Corporation
- Cox Radio Inc.
- Cumulus Media Inc.
- Emmis Communications Corporation
- Entercom Communications Corp.
- Hispanic Broadcasting Corporation
- Saga Communications, Inc.
Goldman Sachs' analyses compared the following to the multiples for the
selected companies, Metro, Westwood and Infinity, in each case using the closing
price of the particular company's shares on June 1, 1999:
- Equity market capitalization, which is the fully diluted market value of
equity, as a multiple of FCF, on the basis of selected research analysts'
estimates for 1999 and 2000 for Metro, Westwood and the selected
companies. FCF stands for free cash flow and is calculated as net income
plus depreciation, amortization and other non-cash charges less capital
expenditures.
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- Equity market capitalization as a multiple of ATCF on the basis of
selected research analysts' estimates for 1999 and 2000 for Metro,
Westwood and the selected companies. ATCF stands for after tax cash flow
and is calculated as net income plus depreciation, amortization and other
non-cash charges.
- Levered market capitalization, which is calculated as equity market
capitalization plus total debt less cash, as a multiple of EBITDA, on the
basis of selected research analysts' estimates for 1999 and 2000 for
Metro, Westwood and the selected companies. EBITDA stands for earnings
before interest, taxes, depreciation and amortization.
- Levered market capitalization as a multiple of BCF, on the basis of
selected research analysts' estimates for 1999 and 2000 for Metro,
Westwood and the selected companies. BCF stands for broadcast cash flow
and is calculated as revenue minus broadcasting costs.
<TABLE>
<CAPTION>
EQUITY FCF EQUITY ATCF LEVERED EBITDA LEVERED BCF
MULTIPLE MULTIPLE MULTIPLE MULTIPLE
-------------------- -------------------- -------------------- --------------------
COMPANY 1999E 2000E 1999E 2000E 1999E 2000E 1999E 2000E
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Metro................................ 40.2x 29.2x 27.0x 22.5x 18.4x 15.1x 15.0x 12.7x
Westwood............................. 33.2x 26.8x 31.4x 25.4x 21.5x 18.0x 19.9x 16.8x
Infinity............................. 34.0x 28.3x 32.0x 26.8x 21.3x 17.8x 20.6x 17.3x
Other selected radio broadcasting
companies:
Range.............................. 17.4x- 14.8x- 14.7x- 12.8x- 11.8x- 10.1x- 10.2x- 8.9x-
53.6x 45.0x 50.5x 42.8x 42.0x 32.8x 39.0x 30.9x
Mean............................... 32.2x 25.8x 29.2x 23.7x 21.4x 17.7x 19.5x 16.4x
Median............................. 31.6x 25.8x 28.4x 24.6x 19.3x 16.1x 17.8x 15.0x
</TABLE>
HISTORICAL EXCHANGE RATIO ANALYSIS
Goldman Sachs calculated the ratio of the average closing market price of
the Westwood common stock to the average closing market price of the Metro
common stock (which is referred to herein as the implied exchange ratio) over
various periods ending on June 1, 1999. The results are shown below:
<TABLE>
<CAPTION>
PERIOD IMPLIED EXCHANGE RATIO
- -------------------------------------------------- -------------------------
<S> <C>
1 week ending June 1, 1999........................ 1.63
1 month ending June 1, 1999....................... 1.51
3 months ending June 1, 1999...................... 1.65
6 months ending June 1, 1999...................... 1.67
9 months ending June 1, 1999...................... 1.76
12 months ending June 1, 1999..................... 1.72
Since Metro IPO (October 17, 1996)................ 1.36
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS
Goldman Sachs performed a discounted cash flow analysis for Metro based on
estimates provided by the management of Metro. Goldman Sachs calculated a
present value of free cash flow for cash flows estimated through 2004 using
discount rates ranging from 9% to 13% and calculated a terminal value using
discount rates varying from 9% to 13% and multiples of Metro's estimated forward
2004
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<PAGE>
ATCF ranging from 15.0x to 25.0x. The implied equity values per share of Metro
common stock derived from such analysis are set forth in the chart below:
<TABLE>
<CAPTION>
DISCOUNT RATES
FORWARD 2004E -------------------------------------
ATCF MULTIPLE 9.0% 11.0% 13.0%
- --------------- ----------- ----------- -----------
<S> <C> <C> <C>
15.0 x...... $ 57.90 $ 53.51 $ 49.52
17.5 x...... 66.57 61.49 56.88
20.0 x...... 75.23 69.47 64.25
22.5 x...... 83.89 77.45 71.62
25.0 x...... 92.55 85.43 78.98
</TABLE>
Goldman Sachs also analyzed the sensitivity of the implied equity value per
share of Metro common stock on a discounted cash flow basis to variances in
Metro management projected revenue growth and for projected EBITDA margins. For
purposes of this analysis, Goldman Sachs held the discount rate constant at 11%
and used an estimated forward 2004 ATCF multiple of 20.0x. The implied equity
values per share of Metro common stock derived from such analyses are set forth
in the chart below:
<TABLE>
<CAPTION>
ANNUAL VARIANCE ANNUAL VARIANCE FROM METRO PROJECTED REVENUE GROWTH
FROM METRO PROJECTED -----------------------------------------------------
EBITDA MARGINS (6.0)% (3.0)% 0.0% 3.0% 6.0%
- -------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(6.0)% $ 46.43 $ 52.12 $ 58.45 $ 65.45 $ 73.19
(3.0)% 50.74 57.00 63.96 71.66 80.17
0.0 % 55.05 61.88 69.47 77.87 87.16
3.0 % 59.36 66.76 74.98 84.09 94.15
6.0 % 63.67 71.64 80.49 90.30 101.13
</TABLE>
Goldman Sachs also performed a discounted cash flow analysis for the
combined company on a pro forma basis based on joint financial projections
provided by Metro's and Westwood's managements. Goldman Sachs calculated a
present value of free cash flow for cash flows estimated through 2004 using
discount rates ranging from 9% to 13% and calculated a terminal value using
discount rates varying from 9% to 13% and multiples ranging from 15.0x to 25.0x
forward estimated ATCF in three scenarios:
- achievement of no synergies;
- achievement of $10 million in annual pre-tax synergies; and
- achievement of $20 million in annual pre-tax synergies.
The implied equity values per share of Metro common stock derived from such
analyses are as follows:
PRO FORMA EXCLUDING SYNERGIES
<TABLE>
<CAPTION>
DISCOUNT RATES
FORWARD 2004E -------------------------------------
ATCF MULTIPLE 9.0% 11.0% 13.0%
- --------------- ----------- ----------- -----------
<S> <C> <C> <C>
15.0 x...... $ 57.96 $ 53.62 $ 49.69
17.5 x...... 66.31 61.32 56.79
20.0 x...... 74.66 69.01 63.89
22.5 x...... 83.01 76.71 70.99
25.0 x...... 91.36 84.40 78.09
</TABLE>
37
<PAGE>
PRO FORMA INCLUDING $10 MILLION IN PRE-TAX SYNERGIES
<TABLE>
<CAPTION>
DISCOUNT RATES
FORWARD 2004E -------------------------------------
ATCF MULTIPLE 9.0% 11.0% 13.0%
- --------------- ----------- ----------- -----------
<S> <C> <C> <C>
15.0 x...... $ 59.98 $ 55.50 $ 51.44
17.5 x...... 68.59 63.44 58.76
20.0 x...... 77.20 71.37 66.08
22.5 x...... 85.81 79.30 73.40
25.0 x...... 94.42 87.23 80.72
</TABLE>
PRO FORMA INCLUDING $20 MILLION IN PRE-TAX SYNERGIES
<TABLE>
<CAPTION>
DISCOUNT RATES
FORWARD 2004E -------------------------------------
ATCF MULTIPLE 9.0% 11.0% 13.0%
- --------------- ----------- ----------- -----------
<S> <C> <C> <C>
15.0 x $ 62.01 $ 57.38 $ 53.19
17.5 x 70.88 65.56 60.73
20.0 x 79.75 73.73 68.27
22.5 x 88.61 81.90 75.81
25.0 x 97.48 90.07 83.35
</TABLE>
CONTRIBUTION ANALYSIS
Goldman Sachs reviewed estimates for future revenue, EBITDA and ATCF for
Metro, Westwood and the pro forma combined company. Based on estimates from
Metro's and Westwood's respective managements, Goldman Sachs noted that holders
of Metro common stock would receive 44.9% of the outstanding common equity of
the combined company, based on the exchange ratio. The analyses indicated the
contributions by Metro and Westwood to the pro forma combined company as set
forth in the chart below:
<TABLE>
<CAPTION>
WESTWOOD METRO
----------- ---------
<S> <C> <C>
REVENUE
1999E................................................................ 59.4% 40.6%
2000E................................................................ 58.3% 41.7%
2001E................................................................ 56.9% 43.1%
EBITDA
1999E................................................................ 53.5% 46.5%
2000E................................................................ 54.3% 45.7%
2001E................................................................ 53.6% 46.4%
ATCF
1999E................................................................ 48.8% 51.2%
2000E................................................................ 49.8% 50.2%
2001E................................................................ 49.5% 50.5%
</TABLE>
38
<PAGE>
REVIEW OF SELECTED TRANSACTIONS IN THE RADIO BROADCASTING INDUSTRY
Goldman Sachs reviewed 95 acquisitions in the radio broadcasting industry
that were announced since January 1994. Goldman Sachs' analyses of the selected
transactions included a review of the following data:
- levered value of the acquisition, which is the amount paid by the acquiror
plus net debt of the acquired company;
- levered multiple of current BCF, which is the value of acquisition as a
multiple of broadcast cash flow of the target for the calendar year in
which the transaction was announced; and
- levered multiple of forward BCF, which is the value of acquisition as a
multiple of broadcast cash flow of the target for the year immediately
following the year in which the acquisition was announced.
The results of the analyses are set forth in the chart below:
<TABLE>
<CAPTION>
LEVERED MULTIPLE OF BCF
------------------------
<S> <C> <C>
CURRENT FORWARD
----------- -----------
Mean......................................... 13.5x 12.3x
Median....................................... 12.7x 11.8x
High......................................... 29.3x 16.8x
Low.......................................... 7.1x 9.2x
</TABLE>
ACCRETION/DILUTION ANALYSIS
Goldman Sachs analyzed the accretion/dilution to ATCF for both Metro and
Westwood shareholders on the basis of estimates for 2000 and 2001 ATCF provided
by the management of Westwood and Metro and by Wall Street analysts for the pro
forma combined company in three scenarios:
- without achievement of synergies;
- the achievement of $10 million in annual pre-tax synergies; and
- the achievement of $20 million in annual pre-tax synergies.
39
<PAGE>
<TABLE>
<CAPTION>
METRO STOCKHOLDERS WESTWOOD STOCKHOLDERS
---------------------------- ------------------------------
<S> <C> <C> <C> <C>
WALL STREET WALL STREET
ANALYST MANAGEMENT ANALYST MANAGEMENT
ESTIMATES ESTIMATES ESTIMATES ESTIMATES
------------- ------------- ------------- ---------------
EXCLUDING SYNERGIES
2000E..................................................... (8.8)% (10.3)% 8.9% 10.7%
2001E..................................................... (9.5)% (10.9)% 9.6% 11.3%
INCLUDING $10 MILLION PRE-TAX SYNERGIES
2000E..................................................... (2.6)% (4.3)% 16.2% 18.1%
2001E..................................................... (4.3)% (5.8)% 15.8% 17.6%
INCLUDING $20 MILLION PRE-TAX SYNERGIES
2000E..................................................... 3.6% 1.7% 23.6% 25.5%
2001E..................................................... 0.8% (0.8)% 22.1% 23.9%
</TABLE>
Goldman Sachs also compared, on the basis of the management estimates, the
implied 2003 price of the Metro common stock on a stand-alone basis to the value
of the shares of the combined company based on the application of forward
multiples to estimated 2004 ATCF for Metro and the combined company and the
results of such analysis are set forth below:
<TABLE>
<CAPTION>
IMPLIED 2003E STOCK PRICE AT
VARIOUS FORWARD ATCF MULTIPLES
2004E ATCF -----------------------------------------------------
SCENARIO PER SHARE 15.0X 17.5X 20.0X 22.5X 25.0X
- -------------------------------------------------------- ------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Metro Standalone........................................ $ 5.11 $ 76.60 $ 89.36 $ 102.13 $ 114.90 $ 127.66
Westwood Merger.........................................
Excluding Synergies..................................... $ 4.73 $ 70.93 $ 82.75 $ 94.57 $ 106.39 $ 118.21
Pre-Tax Synergies of:
$10 million........................................... $ 5.04 $ 75.67 $ 88.28 $ 100.90 $ 113.51 $ 126.12
$20 million........................................... $ 5.36 $ 80.42 $ 93.82 $ 107.22 $ 120.63 $ 134.03
</TABLE>
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Metro or Westwood or the merger.
The analyses were prepared solely for purposes of providing an opinion to
the Metro board of directors as to the fairness from a financial point of view
to Metro stockholders of the exchange ratio. The analyses do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of the parties or their respective advisors, none of Metro,
Westwood, Goldman Sachs or any other person assumes responsibility if future
results are materially different from those forecasted.
As described above, Goldman Sachs' opinion to the Metro board of directors
was one of many factors taken into consideration by the Metro board of directors
in making its determination to approve the merger. The foregoing summary does
not purport to be a complete description of the analyses performed by Goldman
Sachs.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Metro, having
40
<PAGE>
provided certain investment banking services to Metro from time to time,
including having acted as lead underwriter of the initial public offering of
8,250,000 shares of Metro common stock in October 1996, and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the merger agreement. Goldman Sachs provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of Metro or Westwood for its own
account and for the accounts of customers. As of June 1, 1999, Goldman Sachs
accumulated a net long position of 657,100 shares of Metro common stock and of
223,920 shares of Westwood common stock. Goldman Sachs may provide investment
banking services to Westwood and its subsidiaries in the future.
Pursuant to a letter agreement dated June 1, 1999, Metro engaged Goldman
Sachs to act as its exclusive financial advisor in connection with a possible
merger of all or a majority of Metro with Westwood. Pursuant to the terms of the
letter agreement, Metro has agreed to pay Goldman Sachs a fee based on the
outcome of the merger as follows:
- if the merger is consummated, the fee paid to Goldman Sachs will be $6.4
million, subject to increase by Metro in its sole discretion up to $7.4
million; and
- if the merger is not consummated, the fee paid to Goldman Sachs will be
equal to the lesser of (i) 10% of any payment made to Metro in connection
with the termination of the merger agreement or the failure to consummate
the merger and (ii) $2 million.
Metro also has agreed to reimburse Goldman Sachs for its reasonable
out-of-pocket expenses, including attorneys' fees, and to indemnify Goldman
Sachs against certain liabilities, including certain liabilities under the
federal securities laws.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF WESTWOOD AND REASONS OF WESTWOOD FOR
THE MERGER
At a meeting of the Westwood board of directors held on June 1, 1999, after
careful consideration, the Westwood board of directors, among other things:
- determined that the merger is fair to, advisable and in the best interests
of Westwood and its stockholders;
- approved the merger agreement; and
- recommended that Westwood stockholders approve the issuance of shares of
Westwood common stock in connection with the merger.
The Westwood board of directors believes that the merger will:
- better enable the combined company to make the investments necessary to
develop more sophisticated traffic reporting systems;
- supplement Westwood's strong national programming with Metro's strong
local programming;
- enable the combined company to provide better reporting coverage in large
markets and to improve its services generally;
- allow the combined company to recognize certain cost synergies;
- enable the combined company to compete more effectively in the highly
competitive, consolidating radio broadcasting industry; and
- provide the combined company with the services of Metro's talented and
experienced management team.
41
<PAGE>
In reaching its decision to approve the merger agreement and recommend that
stockholders approve the issuance of shares of Westwood common stock in
connection with the merger, the Westwood board of directors considered a number
of factors, including:
- the terms and structure of the merger, including the fixed exchange ratio
of 1.5 Westwood shares for each Metro share, which implied a price of
$52.50 per share based on Westwood's closing price on June 1, 1999;
- the results of Westwood's due diligence investigation of Metro and other
information concerning the business, assets, capital structure, financial
performance and prospects of Metro and Westwood;
- current and historical market prices and trading information with respect
to Westwood common stock and Metro common stock;
- the financial and other analyses prepared by DLJ and the opinion of DLJ to
the Westwood board of directors that, as of June 1, 1999, and based upon
the assumptions made, matters considered and limits of review set forth in
that opinion, the exchange ratio was fair to Westwood from a financial
point of view (see "Opinion of Westwood's Financial Advisor" below);
- that the merger is expected to be tax-free to both Westwood and Metro
stockholders, except for cash received by Metro stockholders instead of
fractional shares;
- the strategic and operating benefits of the merger described above; and
- the cost synergies and other strategic benefits expected to result from
the merger and the ability of the combined company to compete more
effectively in its highly competitive industry.
The Westwood board of directors also considered the following risks inherent
in proceeding with the merger:
- the significant time and effort required of management to combine the
operations of Metro and Westwood;
- the expected synergies and other benefits of the merger might not be
realized;
- the potential loss of business of certain of Metro's key clients, either
as a result of the merger or as a result of the trend of consolidation in
the radio broadcasting industry; and
- the risk that antitrust authorities could require certain divestitures or
other actions adverse to the interest of the combined company as a
condition to their clearance of the merger.
This discussion of the information and factors considered and weight given
to such factors by Westwood board of directors is not intended to be exhaustive.
In view of the variety of factors considered in connection with its evaluation
of the merger, the Westwood board of directors did not find it practicable to
and did not quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. In addition, individual
members of the Westwood board of directors may have given different weights to
different factors.
THE WESTWOOD BOARD OF DIRECTORS RECOMMENDS THAT WESTWOOD STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE ISSUANCE OF SHARES OF WESTWOOD COMMON STOCK IN
CONNECTION WITH THE MERGER.
OPINION OF WESTWOOD'S FINANCIAL ADVISOR
In its role as financial advisor to Westwood, DLJ was asked by Westwood to
render an opinion to the Westwood board as to the fairness to Westwood, from a
financial point of view, of the exchange ratio pursuant to the terms of the
merger agreement. DLJ was not retained as an advisor or agent to
42
<PAGE>
Westwood stockholders or any other person, other than as an advisor to the
Westwood board of directors. On June 1, 1999, DLJ delivered an oral opinion,
subsequently confirmed in writing as of the same date, to the effect that as of
the date of such opinion, and based upon and subject to the assumptions,
limitations and qualifications set forth in such opinion, the exchange ratio was
fair to Westwood from a financial point of view.
The full text of DLJ's opinion is attached to this document as Annex C.
Westwood stockholders are urged to read DLJ's opinion in its entirety for
assumptions made, procedures followed, other matters considered and limits of
the review undertaken in arriving at such opinion. DLJ's opinion was prepared
for the Westwood board and is directed only to the fairness of the exchange
ratio to Westwood from a financial point of view. The opinion does not address
the merits of the underlying decision by Westwood to engage in the merger or
other business strategies considered by the Westwood board. DLJ's opinion does
not constitute a recommendation to any Westwood stockholder as to how such
stockholder should vote at the Westwood stockholders' meeting.
DLJ's opinion does not constitute an opinion as to the price at which the
Westwood common stock will actually trade at any time. The exchange ratio was
determined in arm's-length negotiations between Westwood and Metro. Westwood did
not impose any restrictions or limitations upon DLJ with respect to the
investigations made or the procedures followed by DLJ in rendering its opinion.
In arriving at its opinion, DLJ reviewed, among other things:
- the May 26, 1999 draft of the merger agreement and the exhibits to that
agreement;
- financial and other information that was publicly available;
- information that Westwood and Metro furnished to DLJ, including
information provided during discussions with their respective managements
and auditors;
- certain financial projections of Westwood prepared by the management of
Westwood; and
- certain financial projections of Metro prepared by the management of
Metro.
In addition, DLJ:
- compared certain financial and securities data of Westwood and Metro with
various other companies whose securities are traded in public markets;
- reviewed the historical stock prices and trading volumes of Westwood
common stock and Metro common stock; and
- reviewed prices and premiums paid in certain other business combinations
and conducted such other financial studies, analyses and investigations as
DLJ deemed appropriate for purposes of rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
it from public sources, that Westwood and Metro or their respective
representatives provided to it, or that DLJ otherwise reviewed. DLJ also assumed
that the financial projections and estimated cost savings supplied to it were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the managements of Westwood and Metro as to the future
operating and financial performance of Westwood and Metro, respectively. DLJ did
not assume any responsibility for making any independent evaluation or appraisal
of the assets or liabilities of Westwood or Metro, nor did DLJ independently
verify the information reviewed by it.
DLJ's opinion is necessarily based on economic, market, financial and other
conditions as they existed on, and on the information made available to DLJ as
of, the date of its opinion. Although subsequent developments may affect its
opinion, DLJ does not have any obligation to update, revise or reaffirm its
opinion as a result of changes in such conditions or otherwise.
43
<PAGE>
Included in the textual discussion below are summaries of certain of the
statistical information appearing in such discussion presented in a tabular
format. While these tables are presented for the purpose of clarity and ease of
reference, they are not substitutes for, and must be read along with, all of the
information appearing under the captions immediately preceding them as well as
all of the information under this caption.
EXCHANGE RATIO ANALYSIS
DLJ reviewed the daily closing prices of Westwood common stock and Metro
common stock to determine the implied exchange ratio based upon the relative
prices of Westwood common stock and Metro common stock. Based on the May 28,
1999 closing prices of $34.75 for Westwood and $55.625 for Metro, the implied
exchange ratio was 1.60x ($55.625 divided by $34.75). DLJ analyzed the implied
exchange ratio between Westwood common stock and Metro common stock for the
period from October 17, 1996 to May 28, 1999. DLJ also calculated the average
historical implied exchange ratios for the last 6, 12, 18, 24 and 30 months
ending on May 28, 1999.
SUMMARY OF EXCHANGE RATIO ANALYSIS
<TABLE>
<CAPTION>
TIME PERIOD (PRECEDING MAY 28, 1999) IMPLIED EXCHANGE RATIO
- ---------------------------------------------------------- -------------------------------------
<S> <C>
Last 6 months............................................. 1.69x
Last 12 months............................................ 1.73x
Last 18 months............................................ 1.58x
Last 24 months............................................ 1.41x
Last 30 months............................................ 1.37x
Average................................................... 1.56x
</TABLE>
RELATIVE CONTRIBUTION ANALYSIS
DLJ analyzed the relative contribution of Westwood and Metro to the combined
entity with respect to sales, EBITDA, after-tax cash flow and free cash flow.
For purposes of DLJ's analysis, EBITDA was defined as net income before interest
income and expense, income taxes, depreciation and amortization and after-tax
cash flow (or ATCF) was defined as net income before depreciation, amortization,
deferred taxes and interest expense on dilutive convertible securities; and free
cash flow (or FCF) was defined as ATCF less capital expenditures. This analysis
was performed for the projected results for the fiscal years ending December 31,
1999, 2000 and 2001 (based on projections supplied by Westwood's and Metro's
management). Based on an exchange ratio of 1.50x and the closing price of
Westwood common stock on May 28, 1999 of $34.75 per share, Westwood and Metro
provided 56.6% and 43.4%, respectively, of the combined equity value on such a
pro forma basis (including shares underlying outstanding options using the
treasury stock method) and 60.0% and 40.0%, respectively, of the combined
enterprise value. For purposes of DLJ's analyses, enterprise value is defined as
(A) the product of the stock price and total diluted shares outstanding plus (B)
total debt and preferred equity at liquidation value less cash and cash
equivalents and unconsolidated investments.
SUMMARY OF RELATIVE CONTRIBUTION ANALYSIS
<TABLE>
<CAPTION>
1999 2000 2001
--------- --------- ---------
<S> <C> <C> <C>
Westwood's sales as a percentage of combined entity............... 59.4% 58.3% 56.9%
Westwood's EBITDA as a percentage of combined entity.............. 53.6% 54.3% 53.6%
Westwood's ATCF as a percentage of combined entity................ 48.9% 49.8% 49.5%
Westwood's FCF as a percentage of combined entity................. 53.0% 53.1% 51.6%
</TABLE>
44
<PAGE>
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES.
To provide comparative market information, DLJ compared selected historical
common stock prices, earnings and operating and financial ratios for Metro to
the corresponding data and ratios of certain comparable companies whose
securities are publicly traded, including Westwood, based on May 28, 1999 prices
for the stocks of these comparable companies and projections derived from
published equity research analysts' reports prepared by investment banking
firms, including DLJ. The comparable companies were chosen because they possess
general business, operating, and financial characteristics representative of
companies in the industry in which Metro operates. The comparable companies
consisted of:
- Clear Channel Communications Corporation;
- Chancellor Media Corporation, Cox Radio, Inc.;
- Emmis Communications Corporation;
- Citadel Communications Corporation; and
- Infinity Broadcasting Corporation.
Such data and ratios included enterprise value as a multiple of projected
EBITDA for 1999 and 2000 and equity value as a multiple of projected after-tax
cash flow (ATCF) and free cash flow (FCF) for 1999 and 2000 calculated based
upon estimates contained in published equity research analysts' research reports
prepared by investment banking firms, including DLJ.
SUMMARY OF ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES
<TABLE>
<CAPTION>
EQUITY VALUE/ FCF EQUITY VALUE/ ATCF ENTERPRISE
VALUE/EBITDA
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
1999 2000 1999 2000 1999 2000
--------- --------- --------- --------- --------- ---------
Median.......................................................... 33.6x 27.5x 30.5x 25.4x 18.9x 16.3x
High............................................................ 50.4x 31.7x 44.5x 29.5x 27.2x 23.7x
Low............................................................. 15.8x 12.3x 14.0x 11.2x 13.6x 11.8x
Westwood........................................................ 26.3x 28.7x 24.4x 26.5x 21.8x 18.9x
Metro........................................................... 36.9x 29.6x 26.8x 22.5x 18.4x 15.5x
</TABLE>
No other company utilized in DLJ's analysis of certain comparable publicly
traded companies is identical to Westwood or Metro. Accordingly, such analysis
necessarily involves complex considerations and judgments concerning differences
in financial and operating characteristics of Westwood and Metro and other
factors that could affect the public trading values of Westwood, Metro and the
other companies included in such analysis.
COMPARABLE TRANSACTION ANALYSIS
DLJ reviewed 16 selected comparable acquisitions announced since February
1996. For purposes of the comparable transaction analysis, transaction value was
calculated as the aggregate purchase price of equity (in the case of stock
purchases), or the aggregate purchase price of the assets (in the case of asset
purchases), plus total debt and preferred equity less cash and cash equivalents.
For each of the comparable transactions, DLJ calculated a forward after-tax cash
flow multiple (representing the ratio of purchase price to forward after-tax
cash flow values) and a forward EBITDA multiple (representing the ratio of
transaction value to forward EBITDA).
45
<PAGE>
SUMMARY OF COMPARABLE TRANSACTION ANALYSIS
<TABLE>
<CAPTION>
PURCHASE PRICE/ TRANSACTION VALUE/
FORWARD ATCF FORWARD EBITDA
----------------- -------------------
<S> <C> <C>
High....................................................... 38.1x 26.0x
Median..................................................... 24.5x 17.4x
Low........................................................ 14.2x 11.0x
</TABLE>
No transaction utilized in the comparable transaction analysis is identical
to the merger. Accordingly, such analysis necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of Westwood and Metro and other factors that could affect the
acquisition value of the companies to which they are being compared.
DISCOUNTED CASH FLOW ANALYSIS
DLJ performed a discounted cash flow analysis for the five-year period
ending with fiscal year 2004 on the stand-alone projected operating free cash
flows of Westwood and Metro, using financial projections provided by the
respective managements of both companies. Operating free cash flows were
calculated as the after-tax operating earnings of Westwood and Metro, before any
cost savings resulting from the merger, plus projected depreciation and
amortization, plus (or minus) projected net changes in working capital, and
minus projected capital expenditures. DLJ calculated both terminal values and
perpetuity values. Terminal values were calculated by applying a range of
estimated EBITDA multiples of 12.0x to 14.0x to projected EBITDA of Westwood and
Metro in 2004. The unlevered free cash flows and terminal values were then
discounted to the present using a range of discount rates of 10.0% to 12.0%,
representing an estimated range of the weighted average cost of capital for
Westwood and Metro and other subjective judgments, including industry prospects.
Perpetuity values were calculated by applying a range of perpetuity growth rates
of 3.0% to 5.0% to EBITDA of Westwood and Metro in fiscal year 2004. The
operating free cash flows and perpetuity values were then discounted to the
present using a range of discount rates of 10.0% to 12.0%, representing an
estimated range of the weighted average cost of capital for Westwood and Metro
and other subjective judgments including industry prospects.
SUMMARY OF DISCOUNTED CASH FLOW ANALYSIS
<TABLE>
<CAPTION>
LOW HIGH
--------- ---------
<S> <C> <C>
Terminal value methodology:
Westwood per share equity value........................................ $ 35.43 $ 44.77
Metro per share equity value........................................... $ 65.23 $ 80.43
Perpetuity value methodology:
Westwood per share equity value........................................ $ 20.21 $ 37.88
Metro per share equity value........................................... $ 38.17 $ 64.82
</TABLE>
PREMIUMS PAID ANALYSIS
DLJ compared the premium of Metro's share price implied by the exchange
ratio (vis-a-vis the Westwood share price as of one day, one week and one month
prior to DLJ's presentation) to the premiums paid in selected stock-for-stock
transactions valued between $500 million and $1.5 billion completed during the
preceding 24 months.
46
<PAGE>
SUMMARY OF PREMIUMS PAID ANALYSIS
<TABLE>
<CAPTION>
PREMIUM PAID
STOCK-FOR-STOCK
---------------------------------
<S> <C> <C> <C> <C>
METRO PRICE LOW AVERAGE HIGH
----------- --------- ----------- ---------
One day................................................. $ 55.63 (13.5%) 22.3% 87.5%
One week................................................ $ 52.19 (12.2%) 24.1% 94.6%
One month............................................... $ 49.00 (7.6%) 30.8% 84.3%
</TABLE>
ACCRETION/DILUTION ANALYSIS
DLJ analyzed the impact of the merger on Westwood's EBITDA per share,
after-tax cash flow per share and free cash flow per share for 2000 and 2001
using earnings estimates for Westwood and Metro provided by their management and
equity research analysts' reports. These analyses were performed both assuming
no cost savings resulting from the merger and assuming pre-tax cost savings
resulting from the merger of $8.0 million in 2000 and $10.0 million in 2001.
This analysis did not assume any benefit from the revenue opportunities arising
from the merger that Westwood's and Metro's management believe may further
enhance cash flow. The analysis indicated that, with and without the pre-tax
cost savings, the merger is expected to add to Westwood's EBITDA per share,
after-tax cash flow per share and free cash flow per share in fiscal 2000 and
2001.
The summary set forth above describes the material elements of the
presentation made by DLJ to the Westwood board on June 1, 1999. The preparation
of a fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description.
Each of the analyses conducted by DLJ was carried out in order to provide a
different perspective on the transaction and add to the total mix of information
available. DLJ did not form a conclusion as to whether any individual analysis,
considered in isolation, supported or failed to support an opinion as to
fairness from a financial point of view. Rather, in reaching its conclusion, DLJ
considered the results of the analyses in light of each other and ultimately
reached its opinion based on the results of all analyses taken as a whole. DLJ
did not place particular reliance or weight on any individual analysis, but
instead concluded that its analyses, taken as a whole, supported its
determination. Accordingly, notwithstanding the separate factors summarized
above, DLJ believes that its analyses must be considered as a whole and that
selecting portions of its analysis and the factors considered by it, without
considering all analyses and factors, could create an incomplete or misleading
view of the evaluation process underlying its opinion.
The analyses performed by DLJ are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses.
Pursuant to an engagement letter, dated May 17, 1999, Westwood agreed to pay
DLJ a retainer fee of $250,000 and a fee of $1.0 million upon notification that
DLJ was prepared to deliver its opinion. Additionally, DLJ will receive a fee of
$100,000 for each update of its opinion delivered to the Westwood board.
Westwood has also agreed to reimburse DLJ promptly for all out-of-pocket
expenses, including the reasonable fees and out-of-pocket expenses of counsel,
incurred by DLJ in connection with its engagement, and to indemnify DLJ and
related persons against liabilities in connection with its engagement, including
liabilities under the federal securities laws. The terms of the fee arrangement
with DLJ, which DLJ and Westwood believe are customary in transactions of this
nature, were negotiated at arm's-length between Westwood and DLJ and the
Westwood board was aware of such arrangement.
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In the ordinary course of business, DLJ may actively trade the securities of
both Westwood and Metro for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. DLJ, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in connection with
mergers, acquisition, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. DLJ has performed investment banking and other services for Westwood
and its affiliates (including Infinity) and Metro in the past and has been
compensated for such services, including acting as a broker for Westwood to
repurchase shares of Westwood common stock in the open market, acting as a
co-manager of Infinity's $2.9 billion initial public offering in 1998, and
acting as co-manager of Metro's $132 million initial public offering in 1996. In
addition, a managing director of DLJ serves as a member of the Westwood board of
directors.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Metro board of directors with
respect to the merger agreement, stockholders of Metro should be aware that
Metro's directors and executive officers have interests in the merger that are
different from, and in addition to, the interests of Metro's stockholders
generally. The Metro board of directors was aware of such interests and
considered them, among other matters, when approving the merger agreement and
the merger.
DIRECTORS
The merger agreement provides that Mr. Saperstein, Metro's current Chairman
and Chief Executive Officer, and Mr. Saperstein's designee, will serve as
members of Westwood's board of directors following the merger.
Each member of the special committee of Metro's board of directors (other
than Mr. Coppola) will receive $35,000 for his service on the special committee.
Under the terms of Metro's stock option plans, the vesting of Metro stock
options held by non-employees directors will accelerate upon consummation of the
merger.
INDEMNIFICATION AND INSURANCE
Pursuant to the merger agreement, Westwood has agreed:
- that all rights of exculpation and indemnification for acts or omissions
occurring prior to the completion of the merger in favor of the current or
former directors, officers, employees, or agents of Metro as provided in
Metro's charter or bylaws or in any agreement between Metro and any of
such directors, officers, employees or agents will survive the merger and
will continue in full force and effect in accordance with their terms
following the completion of the merger; and
- to provide, for a period of six years after the consummation of the
merger, an insurance policy that provides Metro's officers and directors
in office immediately prior to the consummation of the merger with
coverage substantially equivalent to Metro's policy in effect as of June
1, 1999; PROVIDED, HOWEVER, that:
- in no event will expenditures in any one year for such coverage exceed
150% of the annual premiums currently paid by Metro; and
- if the annual premiums for such coverage exceed such amount, then a
policy providing the best available coverage not exceeding such amount
will be provided.
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BORTNICK AND COPPOLA EMPLOYMENT AGREEMENTS
Each of Messrs. Bortnick and Coppola has entered into an employment
agreement with Westwood, that will become effective at the time the merger is
completed. The terms of those agreements are described under "ADDITIONAL
AGREEMENTS--Bortnick Employment Agreement" and "ADDITIONAL AGREEMENTS--Coppola
Employment Agreement" beginning on pages 67 and 68, respectively.
SAPERSTEIN CONSULTING AGREEMENT
Mr. Saperstein has entered into a consulting agreement with Westwood, which
agreement will become effective at the time the merger is completed. The terms
of that agreement are described under "ADDITIONAL AGREEMENTS--Saperstein
Consulting Agreement" beginning on page 66.
REGISTRATION RIGHTS AGREEMENT
Mr. Saperstein will enter into a registration rights agreement with Westwood
at the time the merger is completed. The terms of that agreement are described
under "ADDITIONAL AGREEMENTS--Registration Rights Agreement" beginning on page
69.
ACCOUNTING TREATMENT
The merger will be accounted for under the purchase method of accounting.
Westwood will allocate the purchase price, comprising the aggregate fair value
of Metro's common stock and common stock equivalents outstanding on the date of
the merger, to the identifiable assets and liabilities of Metro based upon their
fair values. The purchase price, if any, in excess of the fair value of the
assets acquired, net of the liabilities assumed, will be recorded as goodwill.
The operating results of Metro will be combined with the results of Westwood
from the date of the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a general discussion of the material federal income tax
consequences of the merger to the holders of Metro common stock and Metro Series
A convertible preferred stock, and to Westwood, Merger Sub and Metro and is
based on the opinions of Weil, Gotshal, counsel to Westwood, and Paul, Hastings,
counsel to Metro. The opinions are based upon current provisions of the Internal
Revenue Code, existing regulations promulgated under the Internal Revenue Code
and current administrative rulings and court decisions, all of which are subject
to change, possibly with retroactive effect. No attempt has been made to comment
on all federal income tax consequences of the merger that may be relevant to
particular holders, including holders that are subject to special tax rules, for
example, dealers in securities, foreign persons, mutual funds, insurance
companies, tax-exempt entities and holders who do not hold their shares as
capital assets. HOLDERS OF METRO COMMON STOCK AND METRO SERIES A CONVERTIBLE
PREFERRED STOCK ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IN LIGHT OF THEIR PERSONAL
CIRCUMSTANCES AND THE CONSEQUENCES UNDER APPLICABLE STATE, LOCAL AND FOREIGN TAX
LAWS.
Westwood has received from its counsel, Weil, Gotshal & Manges LLP, an
opinion to the effect that the merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. Metro has received from its counsel, Paul, Hastings,
Janofsky & Walker LLP, an opinion to the effect that the merger will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. In rendering their opinions,
counsel to each of Westwood and Metro have relied upon representations made by
Westwood, Metro and certain stockholders of Metro.
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Assuming the merger is treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, no gain or loss will be recognized
for federal income tax purposes by Westwood, Merger Sub or Metro as a result of
the merger. Except as described below with respect to cash received by holders
of Metro common stock instead of fractional shares, a holder of Metro common
stock and a holder of Metro Series A convertible preferred stock will not
recognize gain or loss on the exchange of shares of Metro common stock and Metro
Series A convertible preferred stock for Westwood common stock and Westwood
preferred stock, respectively, pursuant to the merger. The aggregate tax basis
of the Westwood common stock, including any fractional share deemed received,
and Westwood preferred stock received by a holder of Metro common stock and
Metro Series A convertible preferred stock, respectively, will be the same as
the aggregate tax basis of the Metro common stock and Metro Series A convertible
preferred stock surrendered therefor. The holding period of the Westwood common
stock, including any fractional share deemed received, and Westwood preferred
stock, respectively, will include the holding period of the Metro common stock
and Metro Series A convertible preferred stock surrendered therefor, provided
that the shares of Metro common stock and Metro Series A convertible preferred
stock, respectively, are held as capital assets at the time of the merger.
CASH INSTEAD OF A FRACTIONAL SHARE. Cash received by a holder of Metro
common stock instead of a fractional share of Westwood common stock will be
treated as received in exchange for such fractional share interest, and gain or
loss will be recognized for federal income tax purposes, measured by the
difference between the amount of cash received and the portion of the basis of
the Metro common stock allocable to the fractional share interest. The gain or
loss will be capital gain or loss provided that the shares of Metro common stock
were held as capital assets and will be long term capital gain or loss if the
Metro common stock had been held for more than one year at the time of the
merger.
BACKUP WITHHOLDING. Under the Internal Revenue Code, a holder of Metro
common stock may be subject, under certain circumstances, to backup withholding
at a rate of 31% with respect to the amount of cash, if any, received instead of
fractional share interests unless the holder provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the backup withholding rules. Any amounts
withheld under the backup withholding rules are not an additional tax and may be
refunded or credited against the holder's federal income tax liability, provided
the required information is furnished to the Internal Revenue Service.
REGULATORY FILINGS AND APPROVALS
HSR AND ANTITRUST
Federal antitrust laws prohibit us from completing the merger until a
required notification and report form is filed and a required waiting period has
expired or been terminated. On June 16, 1999, Metro and Westwood filed the
required notification and report forms. The waiting period for the filings
terminated on July 17, 1999. Even though the waiting period has terminated, the
Antitrust Division of the Department of Justice or the Federal Trade Commission
could take action under the antitrust laws that could adversely affect the
merger or the combined company after the merger. In addition, state antitrust
authorities could take legal action under state antitrust laws seeking to enjoin
the completion of the merger or require divestiture of certain assets and
private parties could take legal action under antitrust laws under certain
circumstances. However, Metro and Westwood do not believe that the completion of
the merger will result in the violation of any applicable antitrust laws.
Metro and Westwood do not believe that any additional material governmental
filings in the United States are required with respect to the merger, other than
the filing of the certificate of merger with the Delaware Secretary of State.
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RESTRICTIONS ON SALES OF SHARES OF WESTWOOD COMMON STOCK BY AFFILIATES OF METRO
The shares of Westwood common stock to be issued in connection with the
merger will be registered under the Securities Act and will be freely
transferable under the Securities Act, except for shares of Westwood common
stock issued to any person who is deemed to be an "affiliate" of Metro at the
time of the merger. Persons who may be deemed to be affiliates of Metro include
individuals or entities that control, are controlled by, or are under common
control with Metro and may include some officers, directors and principal
stockholders of Metro. Affiliates of Metro may not sell their shares of Westwood
common stock acquired in connection with the merger except pursuant to:
- an effective registration statement under the Securities Act covering the
resale of those shares;
- an exemption under paragraph (d) of Rule 145 under the Securities Act; or
- any other applicable exemption under the Securities Act.
The merger agreement requires Metro to use its reasonable best efforts to
cause each of its affiliates to execute a letter agreement prior to the closing
of the merger to the effect that such affiliates will not offer, sell or
otherwise dispose of any of the shares of Westwood common stock issued to such
affiliates in the merger in violation of the Securities Act.
Westwood's registration statement on Form S-4, of which this joint proxy
statement/prospectus forms a part, does not cover the resale of shares of
Westwood common stock to be received by the Metro affiliates in the merger.
However, Westwood has agreed to provide Mr. Saperstein with certain registration
rights pursuant to a registration rights agreement to be entered into at the
time the merger is completed. The terms of that agreement are described under
"ADDITIONAL AGREEMENTS-- Registration Rights Agreement" beginning on page 69.
DISSENTERS' RIGHTS
Neither Metro stockholders nor Westwood stockholders have dissenters' rights
of appraisal or other rights to demand the fair value in cash for their shares
by reason of the merger or other transactions contemplated by the merger
agreement.
STOCK EXCHANGE LISTING
The shares of Westwood common stock to be issued in connection with the
merger will be listed on the New York Stock Exchange, subject to notice of
official issuance. It is a condition to the merger that such shares be
authorized for listing on the New York Stock Exchange.
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THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement and is not intended to be complete. The summary is qualified in its
entirety by reference to the merger agreement, a copy of which is attached as
Annex A to this document and is incorporated herein by reference. WE URGE YOU TO
READ THE MERGER AGREEMENT CAREFULLY AND IN ITS ENTIRETY.
TERMS OF THE MERGER
GENERAL
The merger agreement provides for the merger of Merger Sub into Metro. After
the merger, Metro will survive as a wholly-owned subsidiary of Westwood. The
merger will be completed once we file the certificate of merger with the
Delaware Secretary of State. We believe that this filing will occur at the same
time as the closing under the merger agreement which, unless we otherwise agree,
will occur no later than the second business day after the satisfaction or
waiver of the conditions set forth in the merger agreement.
CONVERSION OF SECURITIES
Unless described differently below under "--Fractional Shares" and "Issuance
of New Stock Certificates--Dividends and Distributions," once we complete the
merger:
- each share of Metro common stock will be converted into the right to
receive 1.5 shares of Westwood common stock; and
- each share of Metro Series A convertible preferred stock will be converted
into the right to receive 1.5 shares of Westwood preferred stock having
terms substantially identical to the terms of the Metro Series A
convertible preferred stock.
FRACTIONAL SHARES
Westwood will not issue any fractional shares of its common stock in the
merger. Each holder of Metro common stock will instead receive cash equal to the
product of:
- the per share closing price of Westwood's common stock on the New York
Stock Exchange on the first business day immediately following the date
the merger is completed; and
- the fraction of a share to which the stockholder would otherwise be
entitled.
As soon as reasonably practicable after the merger is completed, but only
upon surrender of the certificate representing the applicable shares of Metro
common stock, Westwood's exchange agent will pay each former holder of shares of
Metro common stock this amount in cash in lieu of issuing fractional shares,
subject to any back-up withholding for taxes.
STOCK OPTIONS AND OTHER STOCK RIGHTS
At the time the merger becomes effective, each outstanding option to
purchase shares of Metro common stock issued under Metro's stock option plans or
otherwise will be converted into an option to acquire shares of Westwood common
stock and, subject to certain exceptions, will continue to vest in accordance
with the current vesting schedules with respect thereto under the applicable
Metro stock option plan or option grant. An option will be exercisable for the
number of shares of Westwood common stock equal to the product (rounded down to
the nearest whole share if necessary) of:
- the number of shares of Metro common stock subject to the original option;
and
- the exchange ratio, which is 1.5.
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The exercise price per share of Westwood common stock under the option will
be equal to a price (rounded up to the nearest whole cent) obtained by dividing:
- the exercise price immediately prior to the effective time divided; by
- the exchange ratio, which is 1.5.
If Metro, as the corporation surviving the merger, or one of its affiliates
terminates without cause the employment of a holder of converted Metro stock
options (other than David I. Saperstein) within three years after the completion
of the merger, Westwood must cause such holder's unvested converted stock
options to immediately vest. After the merger is completed, Westwood will
deliver to the holders of Metro stock options notices setting forth these
adjustments.
ISSUANCE OF NEW STOCK CERTIFICATES
EXCHANGE AGENT
Promptly after we complete the merger, Westwood will deposit with its
exchange agent, for the benefit of holders of Metro common stock:
- the certificates or other evidence representing their shares of Westwood
common stock;
- a sufficient amount of cash to be paid in lieu of fractional shares; and
- to the extent applicable, any related dividends or distributions,
all of which are issuable in connection with the merger in exchange for
outstanding shares of Metro common stock.
As soon as reasonably practicable after we complete the merger, the exchange
agent will mail a letter of transmittal and instructions to all holders of Metro
common stock explaining how to surrender their shares of Metro common stock to
the exchange agent. Upon surrender of their Metro common stock share
certificate(s) to the exchange agent, along with a duly executed letter of
transmittal and such other documents as may reasonably be requested, holders of
Metro common stock will be entitled to receive a certificate representing that
number of whole shares of Westwood common stock and a check for any fractional
share interest and/or dividends or distributions to which they become entitled
to receive in connection with the merger, less any required withholding taxes.
No interest will be paid on any cash to be paid in connection with the merger.
DIVIDENDS AND DISTRIBUTIONS
WESTWOOD WILL NOT PAY TO HOLDERS OF METRO COMMON STOCK ANY DIVIDENDS OR
OTHER DISTRIBUTIONS WITH RESPECT TO THE SHARES OF WESTWOOD COMMON STOCK TO WHICH
THEY ARE ENTITLED WITH A RECORD DATE OCCURRING AFTER THE TIME WE COMPLETE THE
MERGER UNTIL THEY HAVE PROPERLY SURRENDERED THEIR METRO COMMON STOCK SHARE
CERTIFICATES. NO CASH WILL BE PAID TO HOLDERS OF METRO COMMON STOCK INSTEAD OF A
FRACTIONAL SHARE INTEREST UNTIL THEY HAVE SURRENDERED THESE CERTIFICATE(S).
TRANSFERS
As soon as we complete the merger, the stock transfer books of Metro will be
closed and there will be no further registration of transfers of Metro common
stock or Metro Series A convertible preferred stock.
TERMINATION OF EXCHANGE FUND
Westwood will receive any shares of Westwood common stock and cash which
remains undistributed by the exchange agent to former holders of Metro common
stock six months after the
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date we complete the merger. Any former holders of Metro common stock that have
not previously complied with the exchange procedures may then look only to
Westwood for payment.
NO LIABILITY
None of Westwood, Merger Sub, Metro or the surviving corporation will be
liable to any former holders of Metro common stock or Metro Series A convertible
preferred stock for any undistributed Westwood common stock or cash that is
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar laws.
NO INTEREST
No interest will be paid or accrue on cash to be paid to former holders of
Metro common stock instead of fractional shares. In addition, no interest will
be paid or accrue on unpaid dividends and other distributions, if any, which may
be payable upon surrender of Metro common stock.
CHARTER, BYLAWS, DIRECTORS AND OFFICERS AFTER THE MERGER
Upon completion of the merger, the charter and bylaws of Merger Sub will be
the charter and bylaws of the surviving corporation. The directors of Merger Sub
immediately prior to the merger will be the initial directors of the surviving
corporation. The officers of Merger Sub immediately prior to the merger will be
the initial officers of the surviving corporation.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains certain representations and warranties of
Metro relating to, among other things:
- its due organization and qualification;
- the ownership, due organization and qualification of its subsidiaries;
- its capital structure;
- its authority to enter into and perform its obligations under the merger
agreement;
- the recommendation by its board and the vote required to approve the
merger;
- the vote of its stockholders required to approve and adopt the merger
agreement;
- its filings with the Securities and Exchange Commission;
- the financial statements included in its filings with the Securities and
Exchange Commission;
- the absence of undisclosed liabilities;
- the absence of any untrue statement or omission of material fact made by
Metro in connection with this joint proxy statement/prospectus and the
registration statement of which it forms a part;
- necessary governmental consents and approvals;
- the absence of any violation or breach of its charter or bylaws, contracts
or other agreements or applicable laws as a result of the merger agreement
or the merger;
- the absence of any other default or violation of its charter or bylaws,
contracts or other agreements or applicable laws;
- the absence of certain changes or events since January 1, 1999;
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- the absence of material litigation and governmental proceedings;
- its permits and authorizations and compliance with applicable laws;
- employee benefit, labor relations, environmental and tax matters;
- material contracts and agreements to which it or any of its subsidiaries
is a party;
- its insurance policies;
- its real property leases and its ownership of and title to real property;
- title to its assets and the existence of liens on its assets;
- its intellectual property rights;
- year 2000 compliance;
- its and its subsidiaries' books and records;
- the absence of unlawful contributions or payments;
- its receipt of the fairness opinion of Goldman Sachs, its financial
advisor;
- the absence of certain broker's fees;
- the inapplicability of legal restrictions on business combinations and of
dissenter's rights; and
- the absence of discussions with third parties regarding alternative
transactions.
The merger agreement also contains representations and warranties of
Westwood and Merger Sub that are substantially identical to those of Metro.
The representations and warranties of each of the parties are subject to
various qualifications and limitations. None of the representations and
warranties of Metro, Westwood or Merger Sub will have any effect after the
merger is completed.
COVENANTS AND AGREEMENTS
COVENANTS OF WESTWOOD AND METRO
Each of Westwood and Metro has agreed to, among other things:
- cooperate in preparing and filing this joint proxy
statement/prospectus;
- to call a meeting of its stockholders as promptly as practicable to
approve and adopt the merger agreement, in the case of Metro, and to
approve the issuance of shares of Westwood common stock in connection
with the merger, in the case of Westwood;
- notify the other of any action that would likely result in its failure
to comply with any covenant, condition or agreement contained in the
merger agreement or any actual failure;
- use commercially reasonable efforts to cause its accountants to deliver
customary letters in connection with registration statements on Form
S-4;
- use reasonable best efforts to ensure that the merger is completed as
soon as practicable;
- take or cause to be taken any actions and refrain from taking or
causing to be taken any action as may be necessary to cause the merger
to qualify as a tax-free reorganization; and
- not take any actions that would be reasonably be expected to result in
the failure of the conditions to the other party's obligations to
complete the merger.
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CONDUCT OF BUSINESS OF METRO
Metro has agreed that during the period from June 1, 1999 until we complete
the merger, except as contemplated or expressly permitted by the merger
agreement, it will and will cause each of its subsidiaries to:
- conduct its operations in the ordinary course of business consistent with
past practice and with no less diligence and effort than would be applied
in the absence of the merger agreement; and
- seek to:
- preserve intact its current business organizations;
- keep available the service of its current officers and employees; and
- preserve its relationships with customers, suppliers and others having
business dealings with it so that goodwill and ongoing businesses will
be unimpaired in any material respect at the completion of the merger.
Metro has further agreed that, without the written consent of Westwood, it
will not and will not permit any of its subsidiaries to, among other things:
- amend its charter or bylaws;
- authorize for issuance, issue, sell or deliver or agree to issue, sell or
deliver any stock or any other securities or equity equivalents (including
stock options) or accelerate the vesting schedule or modify the terms of
any existing stock options, except for:
- the issuance or sale of shares of Metro common stock pursuant to
outstanding options granted prior to the date of the merger agreement;
- sales pursuant to Metro's employee stock purchase plan; and
- grants of options to purchase up to 50,000 shares of Metro common stock
at an exercise price of not less than the fair market value of such
shares on the grant date;
- split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution in respect of its
capital stock, or redeem or otherwise acquire any of its securities;
- adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization;
- alter the corporate structure or ownership of any subsidiary in a manner
that would reasonably be expected to have a material adverse effect on
Metro;
- enter into, adopt or amend or terminate any compensatory, severance,
benefit or similar agreement or arrangement for the benefit or welfare of
any director, officer or employee other than:
- certain renewals of employment arrangements with officers and managers;
- certain ordinary course severance and termination arrangements with
respect to employees (other than executive officers and directors); and
- certain ordinary course increases in compensation and fringe benefits
of directors, officers and employees that are not material in the
aggregate;
- except in the ordinary course of business consistent with past practice,
hire or retain any individual as an employee or consultant;
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- except in the ordinary course of business consistent with past practice,
enter into, renew or modify in a manner that could reasonably be expected
to materially adversely affect its rights under any material contract to
which it is a party;
- change any of its accounting principles or practices except as may be
required as a result of a change of law or generally accepted accounting
principles;
- revalue any of its assets;
- make or revoke any tax election or settle or compromise any material tax
liability or change any material aspect of its method of accounting for
tax purposes;
- pay, discharge or satisfy any material claims, liabilities or obligations,
other than the payment, discharge or satisfaction in the ordinary course
of business of liabilities reflected or reserved against in or
contemplated by its financial statements as of March 31, 1999 or incurred
in the ordinary course of business consistent with past practice;
- settle or compromise any pending or threatened material suit, action or
claim or join any material suit, action or claim for an amount in excess
of $250,000;
- incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings under existing lines of credit in the
ordinary course of business and in amounts not material to it and its
subsidiaries;
- assume, guarantee, endorse or otherwise become liable or responsible for
the obligations of any other person except in the ordinary course of
business consistent with past practice and in an amount not material to
it;
- make any loans, advances or capital contributions to, or investments in,
any other person, except for certain limited exceptions;
- pledge or otherwise encumber any shares of its capital stock or the
capital stock of its subsidiaries;
- mortgage or pledge, or create or allow to exist any lien on, any of its
assets;
- acquire, sell, lease or dispose of any assets outside the ordinary course
of business or any assets which in the aggregate are material to it and
its subsidiaries taken as a whole or enter into any commitment or
transaction outside the ordinary course of business;
- acquire any corporation, partnership or other business organization or
division thereof or any equity interest therein, for an amount in excess
of $3 million individually or $10 million in the aggregate;
- authorize any capital expenditure or expenditures not provided for in its
1999 capital budget which, individually, is in excess of $100,000 or, in
the aggregate, are in excess of $500,000;
- enter into or amend any contract, agreement or commitment or arrangement
providing for the taking of any action that would be prohibited under the
merger agreement;
- take any action that would prevent or impede the merger from qualifying as
a reorganization under Section 368(a) of the Internal Revenue Code; or
- take, propose to take or agree to take any of the actions described above
or any action which would cause any of Metro's representations and
warranties in the merger agreement to be untrue or incorrect in any
material respect.
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CONDUCT OF BUSINESS OF WESTWOOD
Westwood has agreed that during the period from June 1, 1999 until we
complete the merger, it will and will cause each of its subsidiaries to abide by
covenants that are substantially identical to those described above under
"--Conduct of Business of Metro," except that Westwood is not subject to the
restriction with respect to asset acquisitions outside the ordinary course of
business to which Metro is subject.
NO SOLICITATION OF TRANSACTIONS
The merger agreement provides that Metro and its subsidiaries will not, and
will not authorize or permit any of their officers, directors, employees,
investment bankers, attorneys, accountants or other advisors or representatives
to, directly or indirectly:
- solicit, initiate or encourage the submission of any Metro Acquisition
Proposal (as defined below);
- participate in any discussions or negotiations regarding, or furnish to
any person any non-public information with respect to Metro or any of its
subsidiaries, or take any other action to facilitate, any Metro
Acquisition Proposal or any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Metro
Acquisition Proposal;
- amend or grant any waiver or release under any standstill or similar
agreement with respect to any class of equity securities of Metro; or
- enter into any agreement with respect to a Metro Acquisition Proposal.
However, prior to the approval of the merger agreement by Metro
stockholders, Metro may furnish information to, or enter into unsolicited
discussions or negotiations with, any person or entity that makes an unsolicited
bona fide written offer or proposal that constitutes a Metro Acquisition
Proposal if, and only to the extent that:
- after consultation with, and based on the advice of, outside legal
counsel, the Metro board of directors determines in good faith that
such action is consistent with its fiduciary duties to Metro's
stockholders under applicable law; and
- the Metro board of directors determines in good faith, after
consultation with an independent, nationally-recognized financial
advisor, that such Metro Acquisition Proposal, if accepted, would
constitute, or is reasonably likely to lead to, a "Metro Superior
Proposal."
A "METRO ACQUISITION PROPOSAL" is any inquiry, offer or proposal regarding:
- a merger, consolidation, share exchange, recapitalization, business
combination or similar transaction;
- any sale, lease, exchange, mortgage, pledge, transfer or disposition of
a significant portion of the assets of Metro and its subsidiaries,
taken as a whole, in a single transaction or series of related
transactions;
- any tender offer or exchange offer for more than 20% of Metro's
outstanding voting capital stock or the filing of a registration
statement in connection with such offer; or
- any public announcement of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the foregoing.
A "METRO SUPERIOR PROPOSAL" is a bona fide written Metro Acquisition
Proposal on terms which a majority of the members of Metro's board of directors
determine in their good faith judgment (after
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consultation with an independent, nationally-recognized financial advisor) and
after taking into account all legal, financial, regulatory and other aspects of
the Metro Acquisition Proposal, the person making the proposal, the strategic
benefits to be derived from the merger with Westwood and the long-term prospects
of Metro and its subsidiaries, to be more favorable from a financial point of
view to Metro's stockholders than the merger with Westwood, and for which the
members of Metro's Board of Directors determine in their good faith judgment
(after such consultation) that financing, to the extent required, is then
committed or reasonably available.
EMPLOYEE BENEFITS
The merger agreement provides that for a period of one year following the
merger, Westwood will provide each Metro employee with benefits that are at
least substantially equivalent on an aggregate basis to the benefits offered
under Metro's current employee benefit plans (other than any stock option and
employee stock purchase plans). Westwood will not be required to continue any
specific employee benefit plan or to continue the employment of any employee.
INDEMNIFICATION AND INSURANCE
Westwood has agreed that all rights to exculpation and indemnification for
acts or omissions occurring prior to the completion of the merger in favor of
the current or former directors, officers, employees or agents of Metro as
provided in its charter or bylaws or in any agreement between Metro and any of
such current or former directors, officers, employees or agents shall survive
the merger and will continue in full force and effect in accordance with their
terms for a period of six years following the completion of the merger.
Westwood has also agreed that for a period of six years after the completion
of the merger, Westwood will cause to be maintained in effect the policies of
directors' and officers' liability insurance maintained by Metro for the benefit
of those persons who are covered by such policies at the time of the merger, to
the extent that such liability insurance can be maintained annually at a cost to
Westwood not greater than 150 percent of the annual premium for the current
Metro directors' and officers' liability insurance; PROVIDED, HOWEVER,that if
the annual premiums for such coverage exceed such amount, Westwood will be
required only to obtain a policy providing the best available coverage not
exceeding such amount.
CONDITIONS TO THE MERGER
The obligations of Westwood and Metro to complete the merger are subject to
the satisfaction or waiver of certain conditions, including the following:
- the Metro stockholders shall have approved and adopted the merger
agreement;
- the Westwood stockholders shall have approved the issuance of shares of
Westwood common stock in connection with the merger;
- no statute, rule, regulation, executive order, decree, ruling or
injunction shall have be enacted, entered, promulgated or enforced by any
governmental authority prohibiting the merger;
- all applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 shall have terminated or expired;
- the registration statement of which this joint proxy statement/prospectus
is a part shall have become effective, and shall not be the subject of any
stop order or proceedings seeking a stop order;
- the shares of the Westwood common stock to be issued in connection with
the merger shall have been authorized for listing on the New York Stock
Exchange, subject to notice of issuance;
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- all required regulatory approvals shall have been obtained without any
limitation, restriction or condition that has or would reasonably be
expected to have a material adverse effect on the other party;
- there shall not be pending or threatened in writing by any regulatory
authority any suit, action or proceeding:
- seeking to prohibit the merger or obtain from Westwood or Metro damages
that are material to such party;
- seeking to impose limitations on Westwood's ability to acquire or hold,
or exercise full rights of ownership of, any shares of Metro's capital
stock; or
- which could reasonably be expected to have a material adverse effect;
- the receipt of tax opinions from Paul, Hastings, Janofsky & Walker LLP,
counsel to Metro, and Weil, Gotshal & Manges LLP, counsel to Westwood;
- the accuracy of, as of the date of the merger, the other party's
representations and warranties, subject to certain qualifications; and
- performance in all material respects by the other party of its covenants
and agreements under the merger agreement;
The obligation of Metro to complete the merger are also subject to the
satisfaction or waiver of certain additional conditions, including the
following:
- the execution and delivery by Westwood of the registration rights
agreement described in the section of this joint proxy
statement/prospectus entitled "ADDITIONAL AGREEMENTS-- Registration Rights
Agreement" on page 69;
- the filing of a certificate of designations with respect to the shares of
Westwood preferred stock to be issued in connection with the merger; and
- the effectiveness of the Amended and Restated Representation Agreement and
the Management Agreement with Infinity (both of which are described in the
section of this joint proxy statement/ prospectus entitled "WESTWOOD
EXECUTIVE COMPENSATION--Relationships and Transactions of Note").
TERMINATION
CONDITIONS TO TERMINATION
The merger agreement may be terminated at any time prior to the completion
of the merger, notwithstanding the approval and adoption by Metro stockholders
of the merger agreement and the approval by Westwood stockholders of the
issuance of shares of Westwood common stock in connection with the merger:
- by mutual written consent of Metro and Westwood by action of their
respective boards of directors;
- by either of Metro or Westwood if:
- the merger has not been consummated by June 1, 2000 (subject to
extension for up to six months if Metro or Westwood requests additional
time to obtain any required regulatory approvals);
- the Metro stockholders fail to approve and adopt the merger agreement;
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- the Westwood stockholders fail to approve the issuance of shares of
Westwood common stock in connection with the merger; or
- a law or court order permanently prohibits the merger;
- by Metro if:
- subject to certain requirements, including the payment of the
termination fee described below, Metro's board of directors determines
in good faith, based on the advice of outside legal counsel, that it is
consistent with its fiduciary duties to Metro stockholders to terminate
the merger agreement to enter into an agreement with respect to or to
consummate a Metro Superior Proposal;
- Westwood's board of directors withdraws its approval or recommendation
of the issuance of shares of Westwood common stock in connection with
the merger, or fails to call a stockholders meeting for the purpose of
obtaining stockholder approval of such issuance of shares; or
- Westwood or Merger Sub breaches any representation, warranty, covenant
or agreement contained in the merger agreement that would give rise to
the failure of a closing condition to the merger and such breach is not
cured within 30 business days of Westwood's and Merger Sub's receipt of
a notice of such breach; and
- by Westwood if:
- Metro enters into a binding agreement for a Metro Superior Proposal;
- Metro's board of directors withdraws or adversely modifies its approval
or recommendation of the merger agreement or the merger, or fails to
call a stockholders meeting for the purpose of obtaining stockholder
approval and adoption of the merger agreement; or
- Metro breaches any representation, warranty, covenant or agreement
contained in the merger agreement that would give rise to the failure
of a closing condition to the merger and such breach is not cured
within 30 business days of Metro's receipt of a notice of such breach.
EFFECT OF TERMINATION
If the merger agreement is terminated and the merger is abandoned, the
merger agreement will become void. No liability will arise on the part of any
party to the merger agreement, or any of its directors, officers, employees,
agents, legal and financial advisors or other representatives; PROVIDED,
HOWEVER, that neither such termination of the merger agreement nor the
obligation of Metro or Westwood to pay the other a termination fee will relieve
any party to the merger agreement of any liability resulting from:
- any willful breach of any representations or warranties contained in the
merger agreement; or
- any breach of any covenant or agreement contained in the merger agreement;
unless, in the case of Metro, Westwood elects to receive the termination fee
described below under "--Termination Fees and Payments--Metro," or, in the case
of Westwood, Metro elects to receive either of the termination fees and/or the
stock sale proceeds described below under "--Termination Fees and
Payments--Westwood," in which case such receipt will be in full satisfaction of
any amount or obligations owned to such party and will be such party's sole
remedy.
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TERMINATION FEES AND PAYMENTS--METRO
The merger agreement requires Metro to pay Westwood a $30 million
termination fee if:
- the merger agreement is terminated by Metro or Westwood because Metro
elects to enter into a binding agreement with respect to a Metro Superior
Proposal;
- the merger agreement is terminated by Westwood because Metro's board of
directors withdraws or adversely modifies its approval or recommendation
of the merger agreement or the merger, or fails to call a meeting of the
Metro stockholders for the purpose of considering the approval and
adoption of the merger agreement; or
- the merger agreement is terminated by Westwood as a result of a willful
breach by Metro of the merger agreement and within 12 months of such
termination, Metro enters into, agrees to or consummates a Metro
Acquisition Proposal.
If a Metro Acquisition Proposal has been proposed to Metro prior to or at
the Metro special meeting and thereafter the merger agreement is terminated
because Metro's stockholders fail to approve and adopt the merger agreement,
Metro will reimburse Westwood for all expenses incurred by Westwood in
connection with the merger agreement in an amount not to exceed $1 million.
TERMINATION FEES AND PAYMENTS--WESTWOOD
If the merger agreement is terminated by Metro because Westwood's board of
directors withdraws or adversely modifies its approval or recommendation of the
issuance of shares of Westwood common stock in connection with the merger or
fails to call the related stockholders meeting, then Westwood will be required
to pay Metro a $30 million termination fee.
If the merger agreement is terminated by Metro or Westwood because
Westwood's stockholders fail to approve the issuance of shares of Westwood
common stock in connection with merger, Westwood will be required to:
- pay Metro a $10 million termination fee; and
- promptly purchase from Metro unregistered shares of Metro common stock for
an aggregate purchase price of $10 million (based on a per share price
equal to the greater of (1) $50 and (2) the average closing price of Metro
common stock on the Nasdaq National Market during the 30 trading days
immediately prior to the date of the Westwood annual meeting).
AMENDMENT AND WAIVER
The parties may amend the merger agreement by a written instrument executed
by each of the parties at any time before or after approval of the merger
agreement by Metro stockholders. However, after the approval and adoption of the
merger agreement by Metro stockholders, the parties may not make any amendment
that would require the further approval of Metro stockholders without obtaining
their approval.
At any time prior to the completion of the merger, each party may:
- extend the time for the performance of any of the obligations or other
acts of the other party;
- waive any inaccuracies in the representations and warranties of the
other party contained in the merger agreement; or
- waive compliance by the other party with any of the agreements or
conditions contained in the merger agreement.
Any such waiver must be in writing signed on behalf of the waiving party.
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ADDITIONAL AGREEMENTS
THE DESCRIPTIONS OF THE METRO STOCKHOLDER VOTING AGREEMENT, THE WESTWOOD
STOCKHOLDER VOTING AGREEMENT, THE SAPERSTEIN CONSULTING AGREEMENT, THE
SAPERSTEIN NON-COMPETE AGREEMENT, THE BORTNICK EMPLOYMENT AGREEMENT, THE COPPOLA
EMPLOYMENT AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT BELOW ARE NOT
INTENDED TO BE COMPLETE. THE DESCRIPTIONS OF THESE AGREEMENTS ARE QUALIFIED IN
THEIR ENTIRETY BY REFERENCE TO SUCH AGREEMENTS, COPIES OF WHICH HAVE BEEN FILED
AS EXHIBITS TO THE REGISTRATION STATEMENT IN WHICH THIS JOINT PROXY
STATEMENT/PROSPECTUS IS INCLUDED AND ARE INCORPORATED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS BY REFERENCE. COPIES OF THE METRO STOCKHOLDER VOTING
AGREEMENT, THE WESTWOOD STOCKHOLDER VOTING AGREEMENT AND THE REGISTRATION RIGHTS
AGREEMENT ALSO HAVE BEEN ATTACHED HERETO AS ANNEXES D, E AND F, RESPECTIVELY.
METRO STOCKHOLDER VOTING AGREEMENT
As an inducement to Westwood to enter into the merger agreement, each of
David I. Saperstein, Charles I. Bortnick and Shane E. Coppola entered into a
voting agreement, dated as of June 1, 1999, with Westwood. Pursuant to the such
voting agreement, each of Messrs. Saperstein, Bortnick and Coppola agreed with
Westwood that for an established period of time, he would vote or cause to be
voted all shares of voting capital stock of Metro beneficially owned by him or
his wholly owned affiliates in favor of the approval and adoption of the merger
agreement. In addition, each of them agreed to appoint representatives of
Westwood as proxies to vote all outstanding voting capital stock of Metro
beneficially owned by him in favor of the approval and adoption of the merger
agreement.
As of August 20, 1999, Messrs. Saperstein, Bortnick and Coppola together
owned shares of Metro's voting capital stock representing approximately 52.7% of
the voting power of all then outstanding shares of Metro's capital stock. As a
result, no further vote or action by Metro's stockholders is necessary to
approve and adopt the merger agreement.
If the merger agreement is terminated under circumstances where Westwood is
entitled to receive a termination fee, each of Messrs. Saperstein, Bortnick and
Coppola will be required to pay to Westwood on demand, an amount in cash or
shares of Metro's voting capital stock, at his election, equal to all profit
derived by him from the consummation of any Metro Acquisition Proposal that is
consummated within twelve months, or if entered into within twelve months,
consummated within eighteen months, of such termination. "PROFIT" is defined in
the voting agreement as an amount equal to 60% of the sum of:
- the aggregate consideration received by the applicable stockholder
pursuant to the Metro Acquisition Proposal, valuing any non-cash
consideration at its fair market value on the date the transactions
contemplated by the Metro Acquisition Proposal is consummated; plus
- the fair market value, on the date of disposition of such stockholder's
shares of Metro voting capital stock disposed of after the termination of
the merger agreement and prior to the date of consummation of the
transactions contemplated by the Metro Acquisition Proposal; less
- the fair market value of the aggregate consideration that would have been
paid or payable to such stockholder if he had received the merger
consideration contemplated by the merger agreement as originally executed,
valued as of immediately prior to the first public announcement by Metro
of its intention to terminate the merger agreement to pursue a Metro
Superior Proposal or by any party making a Metro Acquisition Proposal
(whichever is lower).
If prior to the completion of the merger a Metro Acquisition Proposal has
been made and the merger is subsequently completed and Westwood for any reason
shall have increased the amount of merger consideration payable over that
provided for in the merger agreement on June 1, 1999, each of
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Messrs. Saperstein, Bortnick and Coppola will be required to pay Westwood on
demand an amount in cash equal to the product of:
- the number of his shares of Metro voting capital stock; and
- 60% of the excess of:
- the per share cash consideration or the per share fair market value of
any non-cash consideration, determined as of the completion of the
merger, actually received by him as a result of the merger; OVER
- the fair market value of the original merger consideration, determined
as of the time of the first increase in the amount of such original
merger consideration.
Each of Messrs. Saperstein, Bortnick and Coppola further agreed pursuant to
the voting agreement that he would not, directly or indirectly:
- offer for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of or enter into any contract, option or other
arrangement or understanding with respect to, or consent to the offer for
sale, sell, transfer, tender, pledge, encumber, assign or other
disposition of his shares of Metro voting capital stock;
- grant any proxies or powers of attorney, deposit any shares into a voting
trust or enter into any voting agreement with respect to such shares; or
- take any action that would make any of his representations and warranties
in the voting agreement untrue or incorrect or prevent or disable him from
performing his obligations under the voting agreement or Metro from
performing its obligations under the merger agreement.
Moreover, each of them agreed not to effect the disposition of more than
one-third of the shares of Westwood common stock received by him in connection
with the merger during any of the first three twelve-month periods following the
completion of the merger.
If the merger agreement is terminated in accordance with its terms, the
voting agreement will terminate and be of no further force or effect (other than
pursuant to the profit capture provision described above). Upon such
termination, except for the rights that any party to the voting agreement may
have in respect of any breach by any other party under the voting agreement,
none of the parties will have any further obligation or liability under the
voting agreement (other than pursuant to the profit capture provision described
above).
The voting agreement will continue in full force and effect despite any
amendment or other modification of, or any consent or waiver under, the merger
agreement; PROVIDED, HOWEVER, that:
- any amendment to:
- the exchange ratio or the merger consideration;
- the non-solicitation provision contained in the merger agreement;
- the termination and amendment provisions of the merger agreement; or
- the waiver on or prior to the closing date by Metro of any material
condition precedent set forth in the merger agreement,
will require the written consent of Messrs. Saperstein, Bortnick and Coppola.
Any of them who has not consented to such amendment or such waiver will be
entitled to terminate the voting agreement with respect to himself. In any
event, if the merger has not been completed by June 1, 2000 (subject to certain
extensions which may not exceed an additional six months), the voting agreement
may be terminated in writing by any of them.
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Mr. Saperstein also agreed to enter into a voting agreement with Infinity
Broadcasting Corporation at the time of the completion of the merger pursuant to
which each of them will agree, subject to any applicable laws or regulations of
the stock exchange on which shares of Westwood's common stock are listed, to
vote all shares of Westwood's capital stock held by it or him for the election
of the other's designees to Westwood's board of directors.
WESTWOOD STOCKHOLDER VOTING AGREEMENT
As an inducement to Metro to enter into the merger agreement, Infinity
entered into a voting agreement, dated as of June 1, 1999, with Metro. Pursuant
to the such voting agreement, Infinity agreed with Metro that for an established
period of time, it would vote or cause to be voted all shares of voting capital
stock of Westwood beneficially owned by it or its wholly-owned affiliates in
favor of the approval of the issuance of shares of Westwood common stock in
connection with the merger. In addition, it agreed to appoint representatives of
Metro as proxies to vote all outstanding voting capital stock of Westwood
beneficially owned by it in favor of the approval of such share issuance.
As of August 20, 1999, Infinity owned, indirectly through a subsidiary,
8,000,000 shares of Westwood common stock representing approximately 16.6% of
the total voting power of Westwood's capital stock. Of such 8,000,000 shares,
3,000,000 were acquired upon the exercise of a warrant to purchase such shares
at an exercise price of $3.00 per share, which warrant was issued in connection
with a securities purchase agreement, dated as of November 4, 1993, between
Westwood and Infinity Network Inc., a wholly-owned indirect subsidiary of
Infinity. Infinity was required to exercise such warrant pursuant to the voting
agreement which obligated Infinity to exercise up to three million warrants
unless Metro had received, not later than the second business day immediately
prior to the record date for the annual meeting of Westwood stockholders,
irrevocable written commitments to vote in favor of the issuance of shares to
Metro stockholders in the merger from Westwood stockholders holding an adequate
number of shares of Westwood voting stock to approve the share issuance.
Infinity further agreed pursuant to the voting agreement that it would not,
directly or indirectly:
- offer for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of or enter into any contract, option or other
arrangement or understanding with respect to, or consent to the offer for
sale, sell, transfer, tender, pledge, encumber, assign or other
disposition of its shares of Westwood voting capital stock;
- grant any proxies or powers of attorney, deposit any shares into a voting
trust or enter into any voting agreement with respect to such shares; or
- take any action that would make any of its representations and warranties
in the voting agreement untrue or incorrect or prevent or disable it from
performing its obligations under the voting agreement or Westwood from
performing its obligations under the merger agreement.
If the merger agreement is terminated in accordance with its terms, the
voting agreement will terminate and be of no further force or effect. Upon such
termination, except for the rights that any party to the voting agreement may
have in respect of any breach by any other party under the voting agreement,
none of the parties will have any further obligation or liability under the
voting agreement. The voting agreement will continue in full force and effect
despite any amendment or other modification of, or any consent or waiver under,
the merger agreement; PROVIDED, HOWEVER, that:
- any amendment to:
- the exchange ratio or the merger consideration; or
- the termination and amendment provisions of the merger agreement; or
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- the waiver on or prior to the closing date by Westwood of any material
condition precedent set forth in the merger agreement,
will require the written consent of Infinity, failing which the voting agreement
may be terminated in writing by it. In any event, if the merger has not been
completed by June 1, 2000 (subject to certain extensions not to exceed six
months), the voting agreement may be terminated in writing by Infinity.
Infinity also agreed to enter into a voting agreement with David I.
Saperstein at the time of the completion of the merger as described above under
"--Metro Stockholder Voting Agreement."
SAPERSTEIN CONSULTING AGREEMENT
As an inducement to Westwood to enter into the merger agreement, Mr.
Saperstein entered into a consulting agreement with Westwood dated as of June 1,
1999. Pursuant to the consulting agreement, which will become effective on the
date the merger is completed and continue in effect thereafter for a period of
two and one-half years, Mr. Saperstein will provide consulting services to
Westwood from time to time at the reasonable request of Westwood, up to a
maximum of ten hours per month. In the event that the merger agreement is
terminated, the consulting agreement will be cancelled. Pursuant to the terms of
the consulting agreement, Westwood will pay Mr. Saperstein consulting fees at
the rate of $100,000 per annum and will appoint Mr. Saperstein to the position
of Vice-Chairman of Metro Networks, Inc. during the term of the consulting
agreement.
The consulting agreement provides that all Metro stock options held by Mr.
Saperstein that are converted into Westwood stock options in connection with the
merger will remain outstanding and continue to vest in accordance with their
terms and will be exercisable for a period ending ninety days after the end of
the term of the consulting agreement. However, any converted stock options that
have not become exercisable as of the time of the termination of the consulting
agreement will be terminated.
The consulting agreement will terminate automatically upon Mr. Saperstein's
death. Westwood also may terminate the consulting agreement:
- if, as a result of Mr. Saperstein's incapacity due to mental or physical
illness, he becomes incapable of performing consulting services for a
continuous period of six months; or
- for cause upon ten days notice.
"CAUSE" includes:
- a felony conviction (including a no contest plea);
- willful misconduct that is demonstrably and materially injurious to
Westwood; or
- any breach of the non-compete agreement described below.
SAPERSTEIN NON-COMPETE AGREEMENT
As an inducement to Westwood to enter into the merger agreement, Mr.
Saperstein entered into a non-compete agreement with Westwood dated as of June
1, 1999. The non-compete agreement will commence at the time the merger is
completed and continue in effect until the later of June 1, 2003 or the second
anniversary of the date on which Mr. Saperstein ceases to be a member of
Westwood's board of directors.
Pursuant to the non-compete agreement, Mr. Saperstein may not:
- disclose, divulge, publish or otherwise communicate to anyone;
- retain, copy or permit to be copied; or
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- make use of for personal purposes or for the benefit of any other person,
firm or entity other than Westwood and its subsidiaries and certain
related entities (all of which are collectively referred to herein as the
Westwood Group), any trade secrets or any other secret or confidential
information or knowledge relating to Westwood's businesses (as conducted
or contemplated to be conducted as of June 1, 1999), including the
business of providing:
- traffic reporting services, however distributed; and
- local news, sports, or weather reporting services distributed to radio
stations.
During the term of the non-compete agreement, without the prior written
consent of Westwood, Mr. Saperstein may not engage, directly or indirectly, in
the "business" of Westwood described above. Mr. Saperstein will be deemed to be
"engaged" in such business if he directly or indirectly controls, engages or
invests in, owns, manages, operates, controls or participates in the ownership,
management, operation or control of, is employed by, provides financial support,
or renders services or advice to, any business which engages in such "business."
Pursuant to the terms of the non-compete agreement, Mr. Saperstein may not,
directly or indirectly, request, induce, attempt to influence or have any other
business contact with any other employee, officer, agent or consultant of any
member of the Westwood Group or any talent providing services to the Westwood
Group, to terminate his or her relationship with such member of the Westwood
Group, subject to certain limited exceptions including:
- such person's employment agreement with the applicable member of the
Westwood Group has expired (and not been renewed or extended);
- such person has been terminated without cause by such member; or
- such person has voluntarily left the employment of such member at the
conclusion of the term of his or her employment agreement with such
member.
BORTNICK EMPLOYMENT AGREEMENT
As an inducement to Westwood to enter into the merger agreement, Charles I.
Bortnick entered into an employment agreement with Westwood dated as of June 1,
1999 which provides that Mr. Bortnick will serve as the President and Chief
Operating Officer of Westwood's Metro/Shadow operations on a full time basis.
The Bortnick employment agreement will become effective at the time the merger
is completed and continue in effect until the later of twenty-four months from
the date of the merger and December 31, 2001.
For his services to Westwood, Westwood will pay Mr. Bortnick a base salary
of $325,000 during year one and $350,000 during year two of his employment
agreement. Mr. Bortnick will be entitled to a cash bonus of $125,000 for year
one and $150,000 for year two of his employment agreement based on the
achievement of certain cash flow objectives established by Westwood's chief
executive officer. In addition to such compensation, Westwood will grant Mr.
Bortnick stock options under Westwood's 1999 Stock Option Plan to purchase
75,000 shares of Westwood common stock on each of the date of the completion of
the merger and the first anniversary of such date. These stock options will vest
ratably over five years unless Mr. Bortnick is terminated without cause or if
his employment agreement is not renewed on terms substantially similar to those
of such agreement, in which case vesting will be accelerated.
Westwood will have the right to terminate Mr. Bortnick's employment with or
without notice if he:
- willfully fails, refuses or has habitually neglected to carry out or
perform the reasonable duties required of him or otherwise breached any
material terms of his employment agreement after
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ten days prior written notice from Westwood's chief executive officer or
board of directors and such failure or neglect has not been remedied
following such ten-day period;
- is convicted of a felony or a crime involving moral turpitude or if
Westwood, acting in good faith and upon reasonable grounds, has determined
that he has willfully engaged in conduct which would injure the reputation
of Westwood or otherwise adversely affect its interest if he were retained
as an employee;
- becomes unable by reason of physical disability or other incapacity to
carry out or to perform the duties required of him under his employment
agreement for a continuous period of 90 days, during which period his
compensation may be reduced in accordance with Westwood's policies and by
any disability payments which he is entitled to receive under group or
other disability insurance policies of Westwood during such period;
- breaches any of the confidentiality, non-competition or Communications Act
of 1934 provisions of his employment agreement or the provisions of any
other non-competition or confidentiality agreements between him and
Westwood; or
- steals or embezzles assets of Westwood.
Mr. Bortnick's employment with Westwood will be terminated automatically upon
his death or loss of legal capacity.
In the event of his termination pursuant to the provisions described above,
Mr. Bortnick (or his estate, if applicable), will be entitled to receive:
- his base salary, prorated to the date of termination;
- his then present entitlement under Westwood's employee benefit plans; and
- no other compensation.
Mr. Bortnick's employment agreement also contains confidentiality and
non-competition provisions that are substantially identical to those contained
in Mr. Saperstein's non-compete agreement described above.
COPPOLA EMPLOYMENT AGREEMENT
As an inducement to Westwood to enter into the merger agreement, Shane E.
Coppola entered into an employment agreement with Westwood dated as of June 1,
1999 which provides that Mr. Coppola will serve as an Executive Vice President
of Westwood's Metro/Shadow operations on a full time basis. The Coppola
employment agreement will become effective at the time the merger is completed
and continue in effect until the later of twenty-four months from the date of
the merger and December 31, 2001.
For his services to Westwood, Westwood will pay Mr. Coppola a base salary of
$250,000 during year one and $275,000 during year two of his employment
agreement. Mr. Coppola will be entitled to a cash bonus of $125,000 for year one
and $150,000 for year two of his employment agreement based on the achievement
of certain cash flow objectives established by Westwood's chief executive
officers. In addition to such compensation, Westwood will grant Mr. Coppola
stock options under Westwood's 1999 Stock Option Plan to purchase 75,000 shares
of Westwood common stock on each of the date of the completion of the merger and
the first anniversary of such date. These stock options will vest ratably over
five years unless Mr. Coppola is terminated without cause or if his employment
agreement is not renewed on terms substantially similar to those of such
agreement, in which case vesting will be accelerated.
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Mr. Coppola's employment agreement also contains termination,
confidentiality and non-competition provisions that are substantially identical
to those contained in Mr. Bortnick's non-compete agreement described above.
REGISTRATION RIGHTS AGREEMENT
Pursuant to the terms of the merger agreement, Westwood agreed to enter into
a registration rights agreement, in the form attached to this joint proxy
statement/prospectus as Annex F, with Mr. Saperstein at the closing of the
merger.
The registration rights agreement will require Westwood, upon the request of
Mr. Saperstein at any time during the period beginning with the completion of
the merger and ending on October 1, 2006, to register for sale under the
Securities Act the securities received by him in connection with the merger. Mr.
Saperstein will be entitled to exercise his "demand" registration rights only
three times. In addition to his demand registration rights, Mr. Saperstein will
have certain "piggyback" registration rights that will require Westwood to
include his securities in certain registrations effected by Westwood for its own
account or the accounts of other Westwood securityholders.
Mr. Saperstein's rights under the registration rights agreement will be
subject to certain customary requirements, restrictions and conditions,
including certain cutback limitations, holdback obligations and blackout period
restrictions.
STOCK LOAN AND PLEDGE AGREEMENT
Mr. Saperstein and Metro are parties to a stock loan and pledge agreement
dated as of October 16, 1996. Pursuant to this agreement, Mr. Saperstein
borrowed 2,549,750 shares of Metro common stock from Metro. The loan of the
shares is for a term of ten years, although Metro has the right to require Mr.
Saperstein to repay the loaned shares prior to the end of the ten-year term at
any time upon three days prior notice. As security for the loan of shares, Mr.
Saperstein pledged 2,549,750 shares of Metro Series A convertible preferred
stock, which shares are convertible into an equivalent number of shares of Metro
common stock. Mr. Saperstein is obligated to pay to Metro an annual fee in
connection with the loan equal to 0.10% of the average value of the loaned
securities during the five-day trading period following October 16, 1996,
one-half of which is payable annually and the other half of which is payable
upon the termination of the loan pursuant to an event of default under the stock
loan and pledge agreement or at the end of the ten year term. Metro will forfeit
the latter portion of the fee if it calls the loan of shares prior to the end of
the ten-year term. Mr. Saperstein paid Metro an upfront fee of $2,550 for the
loan of shares and is obligated to repay to Metro any dividends that are paid by
Metro on the loaned shares.
In connection with the merger, Westwood will effectively assume the rights
and obligations of Metro under the stock loan and pledge agreement. The terms of
the stock loan and pledge agreement will be the same after the merger, except
that the 3,824,625 shares of Westwood preferred stock issued to Mr. Saperstein
in exchange for his 2,549,750 shares of Metro Series A convertible preferred
stock will be substituted as collateral for the loan of shares (which loaned
shares shall be comprised of 3,824,625 shares of Westwood Common Stock upon
completion of the merger). In addition, Westwood has agreed pursuant to the
terms of Mr. Saperstein's consulting agreement that it will not exercise its
right to call the loan of shares prior to the fifth anniversary of the
completion of the merger.
Prior to the repayment of the loan, Mr. Saperstein will be entitled to vote
his shares of Westwood preferred stock notwithstanding the pledge of those
shares as substitute collateral under the terms of the stock loan and pledge
agreement. The shares of Westwood preferred stock will not be entitled to
receive any dividends. If Mr. Saperstein elects to convert the pledged shares
into shares of Westwood common stock, the loan will become due and payable
immediately.
69
<PAGE>
COMPARISON OF RIGHTS OF WESTWOOD STOCKHOLDERS AND METRO STOCKHOLDERS
Metro stockholders' rights are currently governed by Metro's charter and
bylaws and applicable provisions of the Delaware General Corporation Law
(referred to herein as the DGCL). Westwood stockholders' rights are currently
governed by Westwood's charter and bylaws and the same provisions of the DGCL.
If we complete the merger, Metro stockholders will become Westwood stockholders
and their rights will be governed by Westwood's charter and bylaws and
applicable provisions of the DGCL.
Because both Metro and Westwood are organized under the laws of the State of
Delaware, any differences in the rights of a stockholder of Metro and Westwood
will arise from differences in the charters and bylaws of Metro and Westwood,
rather than from differences of law. The following summary highlights important
similarities and differences between the rights of Westwood stockholders and
Metro stockholders. This summary does not purport to be a complete discussion of
the charters and bylaws of Metro and Westwood and is qualified in its entirety
by reference to those documents. Copies of the Metro charter, the Metro by-laws,
the Westwood charter and the Westwood by-laws have been filed with the SEC and
will be sent to the Metro and Westwood stockholders upon request. See "WHERE TO
FIND MORE INFORMATION" on page 21.
<TABLE>
<CAPTION>
<S> <C>
AUTHORIZED CAPITAL STOCK
<CAPTION>
WESTWOOD METRO
<S> <C>
Westwood's charter authorizes Westwood to Metro's charter authorizes Metro to issue
issue 130,000,000 shares of capital stock, 35,000,000 shares of capital stock, of
of which: which:
- - 117,000,000 shares are designated as - 25,000,000 shares are designated as
common stock, $0.01 par value per share; common stock, $0.001 par value per share;
- - 3,000,000 shares are designated as Class and
B stock, $0.01 par value per share; and - 10,000,000 shares are designated as
- - 10,000,000 shares are designated as preferred stock, $0.001 par value per
preferred stock, $0.01 par value per share, of which 7,500,000 are designated
share. as Series A convertible preferred stock.
As of August 20, 1999, there were issued As of August 20, 1999, there were issued
and outstanding: and outstanding:
- - 30,735,035 shares of common stock - 16,737,481 shares of common stock; and
(excluding 7,368,695 shares held in - 2,549,750 shares of Series A convertible
treasury); preferred stock.
- - 351,733 shares of Class B stock; and
- - no shares of preferred stock.
FOLLOWING THE COMPLETION OF THE MERGER,
THERE WILL BE AUTHORIZED, ISSUED AND
OUTSTANDING APPROXIMATELY 55,841,256
SHARES OF COMMON STOCK AND 3,824,625
SHARES OF A NEWLY CREATED CLASS OF
PREFERRED STOCK HAVING TERMS SUBSTANTIALLY
IDENTICAL TO METRO'S SERIES A CONVERTIBLE
PREFERRED STOCK.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
DIVIDENDS
WESTWOOD METRO
<S> <C>
Holders of common stock and Class B stock Holders of common stock are entitled, when
are entitled, when declared by the board declared by the board of directors, to
of directors, to receive dividends or receive dividends in cash or other
other distributions payable in cash, property subject to the rights of holders
capital stock or otherwise, subject to the of preferred stock and any other
rights of holders of preferred stock and provisions of Metro's charter. Holders of
any other provisions of Westwood's Series A convertible preferred stock are
charter. not entitled to receive dividends.
Cash dividends may be distributed to Class
B stockholders only if holders of common
stock receive a corresponding 25% per
share greater dividend. Holders of common
stock may receive a cash dividend even
where Class B stockholders do not.
In the case of non-cash dividends, holders
of common stock and Class B stock shares
must be treated equally, provided that
only common stock will be distributed in
respect of common stock, and only Class B
Stock will be distributed in respect of
Class B Stock.
FOLLOWING THE COMPLETION OF THE MERGER,
WESTWOOD'S NEWLY AUTHORIZED, ISSUED AND
OUTSTANDING SHARES OF PREFERRED STOCK WILL
NOT BE ENTITLED TO RECEIVE DIVIDENDS.
<CAPTION>
LIQUIDATION
WESTWOOD METRO
<S> <C>
Except as otherwise required by the DGCL, In the event of a liquidation, the Series
the common stock and Class B stock have A convertible preferred stock is entitled
identical liquidation rights. to receive ratably per share, before any
FOLLOWING THE COMPLETION OF THE MERGER, distribution or payment made on the common
WESTWOOD'S NEW PREFERRED STOCK WILL HAVE A stock, an amount in cash equal to ten
PER SHARE LIQUIDATION PREFERENCE OVER THE percent of the aggregate offering price of
COMMON STOCK AND CLASS B STOCK EQUAL TO the common stock in Metro's initial public
$.01, THE NEW PREFERRED STOCK'S PAR VALUE. offering (or $1.60). If Metro's assets are
insufficient to pay the total distribution
to which Series A convertible preferred
stockholders are entitled, then all assets
owned by Metro at that time will be
ratably distributed to the Series A
convertible preferred stockholders so that
an equal amount per share is received by
them. Any remaining assets will be
distributed to holders of common stock.
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
VOTING RIGHTS
WESTWOOD METRO
Holders of common stock have one vote per Holders of common stock have one vote per
share and holders of Class B stock have 50 share and holders of Series A convertible
votes per share on all matters, except as preferred stock have one vote per share on
set forth under "Board of Directors" all matters.
below.
Except as described under "Board of Holders of common stock and Series A
Directors" below, holders of common stock convertible preferred stock vote together
and Class B stock vote together as a as a single class.
single class, subject to any voting rights
granted to holders of preferred stock.
There is no cumulative voting for holders There is no cumulative voting for holders
of common stock or Class B stock. of common stock or Series A convertible
preferred stock.
Except as otherwise required by law, the All matters to be voted on by stockholders
charter or as described below under "Board must be approved by a majority in interest
of Directors," all matters to be voted on of the stockholders present in person or
by stockholders must be approved by the by proxy.
affirmative vote of a majority of shares
present in person or represented by proxy
and entitled to vote thereon. The vote
with respect to the approval of the
issuance of the shares of Westwood common
stock to be issued in connection with the
merger is required by the rules of the New
York Stock Exchange rather than by the
charter, the bylaws or the DGCL. For a
description of the vote required by the
rules of the New York Stock Exchange, see
"WESTWOOD ANNUAL MEETING-- Required Vote"
on page 26.
FOLLOWING THE MERGER, THE HOLDERS OF
WESTWOOD'S NEWLY ISSUED PREFERRED STOCK
WILL BE ENTITLED TO ONE VOTE PER SHARE ON
ALL MATTERS AND WILL VOTE TOGETHER WITH
THE HOLDERS OF COMMON STOCK AND CLASS B
STOCK AS A SINGLE CLASS.
</TABLE>
72
<PAGE>
<TABLE>
<S> <C>
MODIFICATIONS OF STOCK AUTHORIZATION, POWERS, PREFERENCES OR RIGHTS
WESTWOOD METRO
The board of directors is authorized to Same.
establish from time to time the number of
shares to be included in stock series, and
to fix the designation, powers,
preferences and rights, dividend rights,
dividend rates, conversion rights,
exchange rights, voting rights, rights and
terms of redemption, the redemption price
or prices and the liquidation preferences
of any wholly unissued series of shares of
preferred stock, or any of them.
The board of directors may also increase Same.
or decrease the number of shares of any
series after the issue of the shares of
that series, but not above the total
number of authorized shares of preferred
stock and not below the number of shares
of the series then outstanding. Where the
number of any shares of any series is
decreased below the number of shares of
the series then outstanding, the shares
making up this decrease will resume the
status they had prior to the resolution
originally fixing the number of shares of
the series.
Any proposed amendment to the charter Without the prior approval of the holders
which would: of a majority of the Series A convertible
- - increase or decrease the number of preferred stock, no additional shares of
authorized shares of common stock or Series A convertible preferred stock may
Class B stock; be issued, and no change of any
- - increase or decrease the par value of characteristic or provision of, the Series
the common stock or Class B stock; or A convertible preferred stock may be
- - alter or change the powers, preferences, authorized.
relative voting power or special rights
of the common stock or Class B stock,
that would affect the foregoing in a
negative manner
requires the approval of a majority of the
votes entitled to be cast by the holders
of the class affected by the proposed
amendment, voting separately as a class,
in addition to the approval of a majority
of the votes entitled to be cast by the
holders of the common stock and the Class
B stock voting together without regard to
class.
FOLLOWING THE COMPLETION OF THE MERGER
(AND THE ISSUANCE OF SHARES OF NEW
PREFERRED STOCK IN CONNECTION THEREWITH),
NO ADDITIONAL SHARES OF SUCH SERIES OF
PREFERRED STOCK MAY BE ISSUED, AND NO
CHANGE OF ANY CHARACTERISTIC OR PROVISION
OF SUCH SERIES OF PREFERRED STOCK MAY BE
AUTHORIZED WITHOUT THE APPROVAL OF HOLDERS
OF A MAJORITY OF SUCH NEW PREFERRED STOCK.
</TABLE>
73
<PAGE>
<TABLE>
<S> <C>
MEETINGS OF STOCKHOLDERS
<CAPTION>
WESTWOOD METRO
<S> <C>
Special meetings of the stockholders may Special meetings of the stockholders may
be called at any time by a majority of the be called at any time by a majority of the
board of directors or its chairman. board of directors or authorized committee
of the board of directors.
An annual meeting shall be held for the Same.
purpose of electing directors and
transacting such business that may
properly be brought before the annual
meeting.
Stockholders having the right to vote at a Same.
meeting of stockholders may vote either in
person or by proxy executed in writing and
signed by the stockholder. Proxies are
valid for three years unless such proxy
provides for a longer period.
ACTION BY STOCKHOLDERS WITHOUT A MEETING
<CAPTION>
WESTWOOD METRO
<S> <C>
Stockholders may take action without a Any action which may be taken at any
meeting only where that action is approved annual or special meeting of the
by a majority of continuing directors, and stockholders may be taken without a
where written consent is obtained from the meeting, without prior notice and without
holders of outstanding shares of voting a vote, if a written consent is obtained
stock having at least the minimum voting from the holders of outstanding shares of
power that would be necessary to take the voting stock having at least the minimum
action at a meeting of stockholders at voting power that would be necessary to
which all shares entitled to vote on the take action at a meeting of stockholders
matter were present and voted. at which all shares entitled to vote on
the matter were present and voted.
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
BOARD OF DIRECTORS
<CAPTION>
WESTWOOD METRO
<S> <C>
There are currently eight directors. There are currently eight directors.
There can be no less than three, and no There can be no less than three and no
more than nine, directors. more than nine directors.
Of the directors, at least 33 1/3% must be
independent outside directors. Pursuant to
Westwood's certificate of incorporation,
holders of common stock, voting as a
separate class, have the right to elect
20% of the Board, which amounts to two
directors currently.
IN CONNECTION WITH THE MERGER, THE SIZE OF
THE BOARD OF DIRECTORS WILL BE EXPANDED TO
INCLUDE THIRTEEN SEATS. AFTER SUCH
INCREASE, FIVE DIRECTORS WILL BE REQUIRED
TO BE INDEPENDENT AND THE HOLDERS OF
COMMON STOCK WILL BE ENTITLED TO ELECT
THREE OF THE 13 DIRECTORS.
The board of directors is divided into The board of directors is divided into
three classes, each consisting of at least three classes, as nearly equal in number
two directors. The term of the Class I as the then total number of directors
directors expires at the 2001 annual constituting the board permits. The term
meeting of stockholders, the term of the of Class I directors expires at the 2000
Class II directors expires at the 2000 annual meeting of the stockholders, the
annual meeting of stockholders and the term of the Class II directors expires at
term of the Class III directors, who will the 2001 annual meeting, and the term of
be elected at the upcoming annual meeting, the Class III directors expires at the
will expire at the 2002 annual meeting of 2002 annual meeting. Each Metro director
stockholders. Each Westwood director serves a three year term.
serves a three year term.
Stockholders may remove a director for Stockholders may remove a director only
cause by the affirmative vote of at least for cause, by majority vote of the
75% of the combined voting power of outstanding shares of all classes of stock
outstanding shares of capital stock entitled to vote in the election of
entitled to vote in the election of directors voting as a single class.
directors, regardless of class and voting
together as a single class; PROVIDED,
HOWEVER, that if a removal is approved by
a majority of continuing directors, then
only an affirmative vote of the majority
of all outstanding shares entitled to vote
for directors, regardless of class and
voting together as a single class, is
needed.
Vacancies resulting from death, Any vacancies resulting from death,
resignation, removal or other causes may resignation, disqualification, an increase
be filled by a majority of the remaining in the number of directors or any other
directors. cause may be filled by a majority of the
remaining directors, even where less than
a quorum, or by a sole remaining director.
The board of directors or any stockholder The board of directors or any stockholder
may nominate persons for election to the may nominate persons for election to the
board of directors. The board of directors board of directors.
has a two member Nominating Committee.
</TABLE>
75
<PAGE>
<TABLE>
<S> <C>
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
WESTWOOD METRO
Directors have no personal liability to Same.
Westwood or any of its stockholders for
monetary damages for breach of fiduciary
duty as a director, except for liability:
- for any breach of the director's duty
of loyalty to Westwood or its
stockholders;
- for acts or omissions not in good
faith or which involve intentional
misconduct or a knowing violation of
law;
- under Section 174 of the DGCL; or
- for any transaction from which the
director derived an improper personal
benefit.
Westwood indemnifies to the fullest extent Metro indemnifies all persons permissible,
allowed by the DGCL any person who was or and for each person to the full extent
is a party or is threatened to be made a allowed, by Section 145 of DGCL, as
party to any threatened, pending, or amended from time to time.
completed action, suit or proceeding,
whether civil, criminal, administrative,
or investigative, including all appeals by
reason of the fact he or she is or was a
director or officer of the company.
AMENDMENT OF CHARTER AND BYLAWS
<CAPTION>
WESTWOOD METRO
<S> <C>
Stockholders may adopt, repeal, alter or Same.
amend the Westwood charter by a majority
vote of both all outstanding capital stock
taken together, and all outstanding
capital stock of each class taken
individually, except as otherwise provided
for in the DGCL.
</TABLE>
76
<PAGE>
<TABLE>
<S> <C>
DELAWARE TAKEOVER LAW
<CAPTION>
WESTWOOD METRO
<S> <C>
Westwood is subject to the anti-takeover Metro's charter provides that Section 203
provisions of Section 203 of the DGCL. of the DGCL is not applicable to it.
The Westwood charter imposes certain
additional requirements with respect to
the approval of "business combinations".
Generally, in addition to any vote
required by law, the charter requires that
a business combination be approved by an
affirmative vote of the holders of at
least:
- 75% of the voting power of all
outstanding shares of voting stock,
voting together as a single class; and
- a majority of the voting power of all
outstanding shares of voting stock,
other than shares held by any
"interested stockholder" which is a
party to the business combination or
by any associate or affiliate of the
"interested stockholder," voting
together as a single voting class.
A "business combination" includes a merger
of consolidation with, a sale or other
disposition of assets to, the issuance of
equity securities to, and certain other
transactions involving, an interested
stockholder.
An "interested stockholder" is generally a
person who, together with its affiliates
and associates, is the beneficial owner,
directly or indirectly, of 5% or more of
Westwood's voting stock.
Notwithstanding the general rule, a
business combination will be approved if:
- there are one or more continuing
directors and a majority of these
continuing directors have approved the
business combination; and
- the business combination is approved
by the affirmative vote of Westwood's
stockholders as required by law (if
any vote is so required).
Alternatively, a business combination may
be approved if it is approved by the
affirmative vote of holders of a majority
of the voting power of all outstanding
shares of voting stock, voting together as
a single class, and certain other
transactional criteria (including criteria
pertaining to both price and process) are
met.
</TABLE>
77
<PAGE>
ELECTION OF WESTWOOD DIRECTORS
At the Westwood annual meeting, holders of common stock, voting as a
separate class, will elect the independent Class III director and holders of
common stock and Class B stock, voting together as a single class, will elect
the other Class III director, each of whom will serve for a three-year term. The
Nominating Committee of the board of directors has nominated Gerald Greenberg
(the independent director) and Steven A. Lerman to serve for three-year terms
ending in 2002. Both nominees currently serve as Class III directors. Unless
otherwise indicated on any proxy, the persons named as proxy voters on the
enclosed proxy card for the Westwood annual meeting intend to vote the stock
represented by each proxy to elect these nominees. The nominees are willing to
serve as directors, but if either refuses or is unable to serve, the management
proxy holders will vote for one or more other persons nominated by the
Nominating Committee of the board of directors. THE BOARD OF DIRECTORS OF
WESTWOOD RECOMMENDS THAT WESTWOOD STOCKHOLDERS VOTE FOR THE ELECTION OF MESSRS.
GREENBERG AND LERMAN AS CLASS III DIRECTORS.
The continuing directors and nominees for director of Westwood are:
<TABLE>
<CAPTION>
TERM
NAME AGE DIRECTOR SINCE CLASS EXPIRES
- --------------------------------------------------------------------------- --- --------------- ----- -----------
<S> <C> <C> <C> <C>
Mel Karmazin............................................................... 55 1994 I 2001
Norman J. Pattiz........................................................... 56 1974 I 2001
Joseph B. Smith (Independent).............................................. 71 1994 I 2001
Paul G. Krasnow............................................................ 61 1997 II 2000
Farid Suleman.............................................................. 47 1994 II 2000
David L. Dennis (Independent).............................................. 50 1994 II 2000
Steven A. Lerman........................................................... 52 1995 III 1999
Gerald Greenberg (Independent)............................................. 56 1994 III 1999
</TABLE>
The principal occupations of the two director nominees and each of the six
continuing directors are as follows:
MR. KARMAZIN -- has been a director of Westwood since February 3, 1994. Mr.
Karmazin was also President and Chief Executive Officer of Westwood from
February 3, 1994 until October 8, 1998. Mr. Karmazin has been the Chief
Executive Officer of CBS Corporation since January 1999 and Chairman, President
and Chief Executive Officer of Infinity since September 1998. He has been a
director of CBS since March 1997 and President and Chief Operating Officer of
CBS since April 1998. From May 1997 through April 1998, Mr. Karmazin was
Chairman and Chief Executive Officer of the CBS Station Group. From December
1996 through May 1997 he was Chairman and Chief Executive Officer of CBS Radio.
From 1981 through December 1996, Mr. Karmazin was President and Chief Executive
Officer of Infinity and was a director of Infinity from 1984 through December
1996. Mr. Karmazin is also a member of the Board of Trustees for the Museum of
Television and Radio.
MR. PATTIZ -- founded Westwood in 1974 and has held the position of Chairman
of the Board since that time. He was also Westwood's Chief Executive Officer
until February 3, 1994.
MR. SMITH -- has been a director of Westwood since May 24, 1994. He was
previously a director of Westwood from February 1984 until February 3, 1994.
Since April 1993, Mr. Smith has been the President of Unison Productions, Inc.,
through which he serves as an industry consultant involved in a number of
projects in the entertainment business.
MR. KRASNOW -- has been a director of Westwood since June 17, 1997. 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. Krasnow was also a director
of Westwood from 1989 until June 17, 1996.
78
<PAGE>
MR. SULEMAN -- has been the Executive Vice President, Chief Financial
Officer, Secretary and a director of Westwood since February 1994. He has been
Executive Vice President, Chief Financial Officer, Treasurer and a director of
Infinity since September 1998. Mr. Suleman has been the Senior Vice President,
Finance of CBS since August 1998. He also has served as Senior Vice President
and Chief Financial Officer of the CBS Station Group since June 1997. From
January 1997 to June 1997, he served as Senior Vice President and Chief
Financial Officer of CBS Radio. From 1986 until its acquisition by CBS in
December 1996, Mr. Suleman was Vice President, Finance, Chief Financial Officer
and a director of Infinity.
MR. DENNIS -- has been a director of Westwood 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 Westwood since April 19, 1995. Since
1986, Mr. Lerman has been a member of the Washington, D.C. law firm of
Leventhal, Senter and Lerman, PLLC. 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 Westwood since May 24, 1994. Since
April 1993, Mr. Greenberg has served as President of MJJ Music, a Michael
Jackson/Sony owned record label.
The Westwood board of directors, currently comprised of 8 directors, is
divided into three classes (designated as Classes I, II and III) serving
staggered three-year terms. Of the directors, at least 33 1/3% must be
independent outside directors. Pursuant to Westwood's certificate of
incorporation, holders of common stock, voting as a separate class, have the
right to elect 20% of the directors. Immediately after the completion of the
merger, the number of directorships will increase by five to thirteen by action
of the board of directors. Two of the five new directorships will be Class I
directorships, one will be a Class II directorship and two will be Class III
directorships. One each of the additional Class I and Class III directorships
will be designated as independent directorships. It is currently anticipated
that Joel Hollander, Westwood's President and Chief Executive Officer, will be
appointed as a Class III director and that, pursuant to the merger agreement,
David I. Saperstein and Mr. Saperstein's designee will be appointed as Class III
and Class I directors, respectively.
Following the merger, holders of Westwood common stock and the new preferred
stock issued in connection with the merger will vote together as a single class
to elect all independent directors, at least one of which will be elected each
year. The remaining members of the board of directors will be elected by all
Westwood stockholders voting together as a single class.
COMMITTEES OF THE WESTWOOD BOARD OF DIRECTORS
The board of directors has a Compensation Committee, the current members of
which are Messrs. Smith, Dennis and Greenberg. The Compensation Committee
administers Westwood's stock incentive plan, and is authorized to approve, and
may negotiate, employment arrangements with key executives of Westwood and its
subsidiaries. During fiscal 1998, there was one formal meeting of the
Compensation Committee and the committee members engaged in informal discussions
and took several actions by written consent.
The board of directors also has an Audit Committee, the current members of
which are Messrs. Dennis, Krasnow, and Lerman. The Audit Committee is authorized
to review Westwood's financial statements, meet with Westwood's auditors and
make recommendations to the board of directors about Westwood's internal
accounting controls and procedures. There were two meetings of the Audit
Committee during fiscal 1998.
Finally, the board of directors has a Nominating Committee, the current
members of which are Messrs. Pattiz and Karmazin, which makes nominations for
directors each year. There were no formal
79
<PAGE>
meetings of the Nominating Committee in fiscal 1998. Following the Westwood
annual meeting, Mr. Dennis also will become a member of the Nominating
Committee.
DIRECTOR ATTENDANCE AND COMPENSATION
During fiscal 1998, the board of directors met on seven occasions. 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 of the total number
of meetings of committees of the board of directors on which such director
served.
Each director of Westwood who is not also an officer of Westwood receives
$3,750 per board meeting attended and $1,875 per committee meeting attended. In
addition, each director receives a mandatory annual grant of stock options to
acquire 10,000 shares of Westwood common stock. Directors are also reimbursed
for expenses incurred in attending meetings. During fiscal 1998, Messrs. Smith,
Krasnow, Dennis, Lerman and Greenberg received $28,125, $31,875, $37,500,
$31,875 and $31,875, respectively, in board and committee fees.
80
<PAGE>
PRINCIPAL STOCKHOLDERS OF WESTWOOD
The following table sets forth, as of August 20, 1999, the number and
percentage of outstanding shares of Westwood common stock and Westwood Class B
stock held by:
- each person or group of persons known to Westwood to beneficially own
more than five percent of the outstanding common stock or Class B
stock of Westwood;
- each of the two director nominees and each of the other directors;
- each of the executive officers who are listed under "Westwood
Executive Compensation" on page 83; and
- all current directors and executive officers of Westwood as a group.
At August 20, 1999, there were 30,735,035 shares of Westwood common stock
outstanding, excluding treasury shares, and 351,733 shares of Westwood Class B
stock outstanding.
Beneficial ownership has been determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934, as amended. Under this rule, some shares
may be considered beneficially owned by more than one person (such as where
persons share voting power or investment power). In addition, shares are
considered beneficially owned by a person if that person has the right to
acquire the shares (upon exercise of an option, for example) within 60 days of
the date as of which the information is provided. In computing the ownership
percentage of any person, the amount of shares outstanding is considered to
include the amount of shares beneficially owned by this person (and only this
person) because 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.
<TABLE>
<CAPTION>
SHARES OF WESTWOOD COMMON SHARES OF WESTWOOD CLASS
STOCK B STOCK
BENEFICIALLY OWNED (3) BENEFICIALLY OWNED (3)
------------------------------ ------------------------
<S> <C> <C> <C> <C>
NUMBER PERCENTAGE NUMBER PERCENTAGE
--------------- ------------- --------- -------------
Infinity Broadcasting Corporation (1)........................ 9,000,000(4) 28.4% -- --
40 West 57th Street
New York, NY 10019
Putnam Investments, Inc. (1)................................. 4,539,949(5) 14.8% -- --
One Post Office Square
Boston, MA 02109
Capital Research and Management Company (1).................. 3,918,300(6) 12.8% -- --
333 South Hope Street
Los Angeles, CA 90071
Denver Investment Advisors LLC (1)........................... 3,627,800(7) 11.8% -- --
1225 17th Street, 26th Floor
Denver, CO 80202
FMR Corp. (1)................................................ 1,983,850(8) 6.5% -- --
82 Devonshire Street
Boston, MA 02109
Metro Networks, Inc.......................................... 8,000,000(9) 26.0% -- --
2800 Post Oak Blvd., Suite 4000
Houston, Texas 77056
Norman J. Pattiz (2)......................................... 397,840 (10) 1.3% 351,690 99.9%
Mel Karmazin................................................. 778,149 (11) 2.5% -- --
Farid Suleman................................................ 280,000 (12) * -- --
Joseph B. Smith.............................................. 14,000 (12) * -- --
David L. Dennis.............................................. 35,605 (13) * -- --
Paul G. Krasnow.............................................. 76,000 (14) * -- --
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
SHARES OF WESTWOOD COMMON SHARES OF WESTWOOD CLASS
STOCK B STOCK
BENEFICIALLY OWNED (3) BENEFICIALLY OWNED (3)
------------------------------ ------------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE
--------------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Steven A. Lerman............................................. 20,000 (12) * -- --
Gerald Greenberg............................................. 8,000 (12) * -- --
Joel Hollander............................................... 50,000 (12) * -- --
All current directors and executive officers as a group (9
persons)................................................... 1,659,594 (15) 5.2% 351,690 99.9%
</TABLE>
- ------------------------
* Represents less than one percent (1%) of the outstanding shares of Westwood
common stock.
(1) Tabular information and footnotes 4 through 8 are based upon information
contained in the most recent Schedule 13D or 13G filings and other
information made available to Westwood.
(2) As of August 20, 1999, Mr. Pattiz, whose business address is 9540
Washington Boulevard, Culver City, California 90232, owned Westwood common
stock and Westwood Class B stock representing approximately 36.9% of the
total voting power of Westwood capital stock.
(3) The persons named in the table have sole voting and investment power with
respect to all shares of Westwood common stock and Westwood Class B stock,
unless otherwise indicated.
(4) Includes 1,000,000 shares which may currently be acquired upon exercise of
warrants at an exercise price of $20 per share.
(5) Putnam Investments, Inc. as an investment advisor, has no sole voting or
dispositive power, but has shared dispositive power for 4,539,949 shares
and shared voting power for 106,050 of such shares.
(6) Capital Research and Management Company, as an investment advisor, has sole
dispositive power for 1,975,200 shares. SmallCap World Fund, Inc., an
investment advisor which is advised by Capital Research, has sole voting
power for 1,943,100 shares.
(7) Denver Investment Advisors LLC, as an investment advisor, has sole
dispositive power for 3,627,800 shares and sole voting power for 2,040,800
of such shares.
(8) FMR Corp. has sole dispositive power for 1,983,850 shares and has sole
voting power for 422,600 of such shares.
(9) Pursuant to a voting agreement with Infinity, Infinity has agreed to vote,
or cause to be voted, all shares owned by it, directly or indirectly, in
favor of the issuance of shares of Westwood common stock in connection with
the merger, and has granted Metro proxies to vote its shares accordingly.
Infinity has also agreed to certain transfer restrictions with respect to
its shares.
(10) Includes stock options for 170,000 shares granted under Westwood's amended
1989 stock incentive plan.
(11) Includes stock options for 576,000 shares granted under Westwood's amended
1989 stock incentive plan.
(12) Represents stock options granted under Westwood's amended 1989 stock
incentive plan.
(13) Includes stock options for 22,000 shares granted under Westwood's amended
1989 stock incentive plan.
(14) Includes stock options for 6,000 shares granted under Westwood's amended
1989 stock incentive plan.
(15) Includes stock options for 1,096,000 shares granted under Westwood's
amended 1989 stock incentive plan.
82
<PAGE>
EXECUTIVE OFFICERS OF WESTWOOD
The names, ages and principal occupations (if not set out previously) of the
current executive officers of Westwood and its subsidiaries are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Norman J. Pattiz........................... 56 Chairman of the Board
Joel Hollander............................. 43 President and Chief Executive Officer
Farid Suleman.............................. 47 Executive Vice President, Chief Financial
Officer, Secretary and Director
</TABLE>
MR. HOLLANDER -- has been Westwood's President and Chief Executive Officer
since October 8, 1998. Mr. Hollander was Vice President and General Manager of
Infinity's New York radio station WFAN from April 1992 to October 1998. Mr.
Hollander is Chairman of the CJ Foundation for SIDS and a member of the Board of
Directors of Tomorrow's Children Fund and the CBS Foundation.
Messrs. Hollander and Suleman serve under a management agreement which is
discussed in the following paragraph. Mr. Pattiz has a written employment
agreement with Westwood which expires on November 30, 2003, the terms of which
are summarized below under "WESTWOOD EXECUTIVE COMPENSATION--Employment
Agreements."
Pursuant to the terms of the management agreement between Westwood and
Infinity dated as of March 31, 1999, Infinity manages the business and
operations of Westwood, subject to the direction and supervision of the
Westwood's Board of Directors, for:
- a base management fee of $2,500,000;
- warrants to purchase 1,000,000 shares of Westwood common stock at an
exercise price of $20 per share, which warrants became exercisable on
April 30, 1999, after the market price of Westwood common stock
reached $30 per share for 20 days during a period of 30 consecutive
days; and
- warrants to purchase 1,000,000 shares of Westwood common stock at an
exercise price of $25 per share, which warrants are exercisable only
if the market price of Westwood common stock reaches $40 per share for
20 days during any period of 30 consecutive days.
Infinity also owns, indirectly through a subsidiary, 8,000,000 shares of
common stock and currently beneficially owns approximately 28.4% of the Westwood
common stock.
WESTWOOD EXECUTIVE COMPENSATION
Details regarding compensation are provided in this joint proxy
statement/prospectus for each of the executive officers of Westwood who served
as an executive officer at the end of, or during, the fiscal year ended December
31, 1998:
<TABLE>
<S> <C>
Norman J. Pattiz..................... Westwood's Chairman of the Board at
December 31, 1998.
Joel Hollander....................... Westwood's President and Chief
Executive Officer at December 31,
1998.
Mel Karmazin......................... Westwood's President and Chief
Executive Officer until October 8,
1998.
Farid Suleman........................ Westwood's Executive Vice President
and Chief Financial Officer at
December 31, 1998.
Gregory P. Batusic................... President of Westwood One
Entertainment until March 26, 1998.
</TABLE>
83
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by Westwood's
executive officers for the years ending December 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
FISCAL ---------------------- OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) (1) OPTIONS (#) ($)
- --------------------------------------- ----------- ---------- ---------- ----------------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman J. Pattiz....................... 1998 $ 729,167 -- -- 500,000 --
Chairman of the Board 1997 750,000 -- -- -- --
1996 750,000 $ 302,500 -- -- --
Mel Karmazin........................... 1998 -- -- -- -- --
Chief Executive Officer and President 1997 -- -- -- -- 740,000 --
(2) (3) 1996 -- -- -- --
Joel Hollander......................... 1998 -- -- -- 250,000 --
Chief Executive Officer and President
(2) (3)
Farid Suleman.......................... 1998 -- -- -- -- --
Executive Vice President and Chief 1997 -- -- -- 200,000 --
Financial Officer (2) 1996 -- -- -- -- --
Gregory P. Batusic..................... 1998 130,769 -- -- -- $ 1,000(5)
President-Westwood One Entertainment 1997 1996 400,000 -- -- 100,000 2,250(5)
(4) 379,167 133,333 -- -- 2,250(5)
</TABLE>
- ------------------------
(1) This column includes the aggregate cost to Westwood (if such amount exceeded
the lesser of $50,000 or 10% of such officer's salary and bonus) of
providing various perquisites and other personal benefits.
(2) Messrs. Karmazin and Suleman assumed their positions effective February 3,
1994 and Mr. Hollander assumed his position effective October 8, 1998, in
each case pursuant to the terms of a management agreement between Westwood
and Infinity. Messrs. Karmazin, Hollander and Suleman do not receive any
cash compensation from Westwood. All compensation under the management
agreement is paid to Infinity. Mr. Hollander was granted 250,000 options to
purchase common stock in 1998, while Messrs. Karmazin and Suleman were
granted 740,000 and 200,000 options, respectively, in 1997.
(3) On October 8, 1998 Mr. Karmazin resigned his positions of Chief Executive
Officer and President and Mr. Hollander became an executive officer of
Westwood.
(4) Mr. Batusic became an executive officer of Westwood on June 1, 1992. Mr.
Batusic resigned his position with Westwood effective March 26, 1998.
(5) All other compensation for Mr. Batusic consisted of Westwood contributions
to the employee savings and profit-sharing plan.
84
<PAGE>
STOCK OPTIONS
The following two tables provide information on stock option grants made to
the executive officers in 1998, options exercised during 1998 and options
outstanding on December 31, 1998.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS GRANTED STOCK PRICE APPRECIATION
UNDERLYING TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED (#) FISCAL YEAR (4) ($/SHARE) DATE 5% ($) 10% ($)
- -------------------------------------- ----------- ----------------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Norman J. Pattiz...................... 500,000(2) 67% $ 28.13 04/29/08 $ 8,861,000 $ 22,363,000
Mel Karmazin.......................... -- -- -- -- -- --
Joel Hollander........................ 250,000(3) 33% 16.32 10/08/08 5,141,000 12,974,000
Farid Suleman......................... -- -- -- -- -- --
Gregory P. Batusic (1)................ -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Mr. Batusic forfeited his unvested options on March 26, 1998, the date he
resigned his position with Westwood.
(2) These options were granted under the amended 1989 stock incentive plan on
April 29, 1998 and become exercisable 20% per year (100,000) on each
anniversary date between 1999 and 2003.
(3) These options were granted under the amended 1989 stock incentive plan on
October 8, 1998 and become exercisable 20% per year (50,000) on each
anniversary date between 1999 and 2003.
(4) Percentage calculations exclude the impact of a mandatory grant of 50,000
options at $26.00 per share on June 16, 1998 to outside directors (10,000
each to Messrs. Dennis, Greenberg, Krasnow, Lerman and Smith) of which, in
accordance with the terms of the amended 1989 stock incentive plan, 20%
became exercisable on June 16, 1999 and the remainder become exercisable 20%
per year on each June 16 between 2000 and 2003.
AGGREGATE OPTION EXERCISES IN FISCAL 1998
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED,
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END (#) AT FISCAL YEAR END ($) (1)
SHARES ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- --------------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Norman J. Pattiz............... 215,000(2) $ 3,502,000(3) 170,000 400,000 $ 1,995,000 $ 948,000
Mel Karmazin................... -- -- 428,000 662,000 5,884,000 1,749,000
Joel Hollander................. -- -- -- 250,000 -- 3,545,000
Farid Suleman.................. -- -- 280,000 170,000 5,130,000 2,508,000
Gregory P. Batusic............. 75,000(2) 905,000(3) -- -- -- --
</TABLE>
- ------------------------
(1) On December 31, 1998, the closing per share price for Westwood's common
stock on the New York Stock Exchange was $30.50.
(2) Represents the exercise of options granted under the amended 1989 stock
incentive plan and, in the case of Mr. Pattiz, also includes options granted
pursuant to his 1986 employment agreement.
(3) The reported amount excludes the per share exercise prices for all option
shares exercised.
85
<PAGE>
EMPLOYMENT AGREEMENTS
Westwood has a written employment agreement with Mr. Pattiz, effective April
29, 1998, pursuant to which Mr. Pattiz is to serve as Chairman of the Board for
a five-year term ending November 30, 2003 at an annual salary of $500,000. The
agreement also granted Mr. Pattiz ten-year options to acquire 500,000 shares of
Common Stock under the amended 1989 stock incentive plan (which vest at the rate
of 100,000 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 Westwood. It will be terminable by Westwood only in the
event of death, permanent and total disability, or for "cause." In the event of
permanent and total disability, Mr. Pattiz will receive his base salary for the
following twelve months and 75% of his base salary for the remainder of the term
of the agreement. In the event of a "change of control," as defined in the
agreement, any unvested options granted pursuant to this agreement will become
immediately exercisable and Mr. Pattiz will continue to receive any base
compensation he would have otherwise been entitled to receive for the remaining
term of the agreement. In addition, Mr. Pattiz has full "piggy back registration
rights" and limited demand registration rights with respect to any and all
Westwood common stock owned by him.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Smith and Greenberg, have served on the Compensation Committee since
May 24, 1994 and Mr. Dennis has served on the Compensation Committee since June
17, 1997.
Mr. Karmazin, Westwood's Chief Executive Officer until 1998, was responsible
until October 8, 1998 for determining the salary and cash flow objectives that
would result in bonuses being paid to Westwood's executive officers (other than
with respect to Mr. Pattiz, whose salary was determined pursuant to the terms of
his employment agreement). Since October 8, 1998, Mr. Hollander, Westwood's
current President and Chief Executive Officer, has been responsible for
determining such salary and cash flow objectives.
Mr. Dennis has served as a Managing Director, Investment Banking of DLJ
since April 1989. During 1998, Westwood used DLJ as its broker to repurchase
3,237,800 shares of common stock in the open market for approximately
$62,013,000. DLJ has served as Westwood's financial advisor in connection with
the merger with Metro. For its role as such, DLJ will receive fees of $1.25
million, as well as an additional $100,000 each time that it is required to
deliver an update of its fairness opinion.
RELATIONSHIPS AND TRANSACTIONS OF NOTE
Messrs. Karmazin, Hollander and Suleman are officers or employees of
Infinity, which at August 20, 1999 owned indirectly 8,000,000 shares of Westwood
common stock and owned directly currently exercisable warrants to purchase
1,000,000 shares of Westwood common stock. Infinity manages the business and
operations of Westwood pursuant to the terms of a management agreement between
the two companies which become effective as of March 31, 1999. Under a
predecessor management agreement, Westwood incurred expenses aggregating
approximately $2,226,000 during fiscal 1998.
Effective as of March 31, 1999, Westwood entered into an amended and
restated representation agreement with Infinity to operate the CBS Radio Network
for five years, which agreement replaced a two-year old representation
agreement. Westwood retains all revenue and is responsible for all expenses of
the CBS Radio Networks from the effective date of the representation agreement.
In addition, a number of Infinity's radio stations are affiliated with
Westwood's radio networks and Westwood purchases several programs from Infinity.
During 1998, Westwood incurred expenses aggregating approximately $67,612,000
for the representation agreement and Infinity affiliations and programs.
Westwood currently anticipates that it will continue to have these kinds of
arrangements with Infinity
86
<PAGE>
and its radio stations in the future. The management agreement provides that all
transactions between Westwood and Infinity or its affiliates will be on a basis
that is at least as favorable to Westwood as if the transaction were entered
into with an independent third party. In addition, all agreements between
Westwood and Infinity or any of its affiliates must be approved by the Westwood
board of directors.
Mr. Lerman has been a member of the Washington, D.C. law firm of Leventhal,
Senter and Lerman, PLLC since 1986. From time to time, Westwood engages
Leventhal, Senter and Lerman, PLLC in certain matters.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Westwood's
executive officers and directors, and persons who own more than ten percent of a
registered class of Westwood's equity securities, to file reports of ownership
and changes in ownership with the SEC. Executive officers, directors and ten
percent shareholders are required by SEC regulation to furnish Westwood 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, Westwood
believes that during 1998 its executive officers, directors and ten percent
beneficial owners complied with all filing requirements applicable to them.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors consists of at least
two independent, outside directors. Currently, Messrs. Smith, Dennis and
Greenberg serve on the Committee.
The Compensation Committee administers Westwood's stock incentive plan and
may review employment arrangements with executive officers of Westwood other
than Mr. Hollander, who serves as Westwood's President and Chief Executive
Officer, and Mr. Suleman, who serves as Westwood's Executive Vice President and
Chief Financial Officer, respectively, pursuant to the management agreement with
Infinity described above.
Under the terms of the management agreement--pursuant to which Mr. Karmazin
served as Westwood's President and Chief Executive Officer until October 8,
1998--Mr. Hollander currently serves as Westwood's President and Chief Executive
Officer, and Mr. Suleman serves as Westwood's Executive Vice President and Chief
Financial Officer. Westwood pays a management fee to Infinity in lieu of
salaries to these officers. Accordingly, the Compensation Committee does not set
the base salaries or annual cash bonus incentives for these officers, but does
have the authority to grant stock incentives to these officers. Moreover, during
1998 Messrs. Karmazin and Hollander, as Westwood's chief executive officers
under the Infinity management agreement, were responsible for determining the
amount of salary and bonus payable to Westwood'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 Westwood 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 have been granted under Westwood's amended 1989 Stock
Incentive Plan and, subject to stockholder approval of Westwood's 1999 Stock
Incentive Plan at the Westwood annual meeting, may be granted under Westwood's
1999 Stock Incentive Plan, by the Compensation Committee, at its sole
discretion, to officers and employees of Westwood to reward outstanding
87
<PAGE>
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.
Salary paid to Mr. Pattiz for 1998 was based on the terms of his 1994
employment agreement with Westwood, as well as pursuant to a new five-year
employment agreement which expires on November 30, 2003. In arriving at the
terms of Mr. Pattiz's new employment agreement, the Committee considered Mr.
Pattiz's contributions in assisting Westwood to achieve its strategic objectives
as well as the future contributions which can be made by Mr. Pattiz. The
Committee also considered Westwood's overall performance and comparative
compensation information.
THE COMPENSATION COMMITTEE
Joseph B. Smith, Chairman of the Compensation Committee
Gerald Greenberg
David L. Dennis
88
<PAGE>
PERFORMANCE GRAPH
The performance graph below compares the performance of Westwood's common
stock to the Dow Jones Equity Market Index and the Dow Jones Media Industry
Index for Westwood's last five calendar years. The graph assumes that $100 was
invested in Westwood's common stock and each index on December 31, 1992.
The following table sets forth the closing price of Westwood's Common Stock
at the end of each of the last five calendar years.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C>
Westwood One DJ Equity Market DJ Media Industry
1993 100.000 100.000 100.000
1994 116.348 100.771 96.149
1995 168.616 139.280 137.893
1996 198.449 172.155 142.206
1997 443.019 228.937 201.046
1998 363.962 293.891 268.413
</TABLE>
<TABLE>
<CAPTION>
BASE YEAR 1993 1994 1995 1996 1997 1998
- ------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 8 3/8 $ 9 3/4 $ 14 1/8 $ 16 5/8 $ 37 1/8 $ 30 1/2
</TABLE>
89
<PAGE>
APPROVAL OF WESTWOOD 1999 STOCK INCENTIVE PLAN
In March 1999, the Westwood board of directors approved the 1999 Stock
Incentive Plan. On July 23, 1999, the Westwood board of directors amended the
1999 Stock Incentive Plan to increase the number of shares authorized for
issuance thereunder from 2,000,000 to 7,000,000 to provide for an adequate
number of option shares after the completion of the merger. The 1999 Stock
Incentive Plan, as so amended, is subject to the approval of Westwood
stockholders at the annual meeting. The 1999 Stock Incentive Plan is designed to
replace, and is substantially identical to, Westwood's amended 1989 Stock
Incentive Plan, which was previously approved by Westwood's stockholders and
which has expired. The following summary of the material provisions of the 1999
Stock Incentive Plan is a summary description only and is not intended to be a
complete description of the plan. For a complete discussion, the full text of
the plan, as amended, is attached to this joint proxy statement/prospectus as
Annex G.
The purpose of the 1999 Stock Incentive Plan is to authorize the grant to
key employees of Westwood or any of its subsidiaries of stock options, purchase
rights, performance rights and stock appreciation rights. The board of directors
continues to believe that a stock incentive program is an important factor in
retaining and rewarding executives, directors and other selected persons who are
important to the success of Westwood. The board of directors believes, moreover,
that Westwood is in a better position to attract and retain qualified outside
directors if its stock incentive program provides for mandatory grants to such
directors on an ongoing basis. Accordingly, the board of directors unanimously
recommends a vote in favor of approving the 1999 Stock Incentive Plan.
SUMMARY OF MATERIAL PROVISIONS OF THE 1999 STOCK INCENTIVE PLAN
GENERAL TERMS
Under the 1999 Stock Incentive Plan, 7,000,000 shares of authorized but
unissued Westwood 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 Westwood. The
plan limits to 400,000 the number of shares of common stock as to which the
Compensation Committee may award stock options or stock appreciation rights
(referred to herein as SARs) to any individual, inclusive of all stock options
and SARs that have been canceled, surrendered or repriced. The plan will remain
in existence for 10 years from its inception in March 1999, or until otherwise
terminated by the Westwood board of directors.
The 1999 Stock Incentive Plan will be administered by the board of
directors, provided that each member of the board of directors consists of
non-employee directors within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934 (so long as disinterested administration is required under
Rule 16b-3), or by a committee consisting of at least two directors who are
non-employee directors, or otherwise in compliance with Rule 16b-3. To the
extent and at the time required by the Treasury Department Regulations under
Section 162(m) and the Internal Revenue Code, these directors must also qualify
as outside directors within the meaning of such regulations. Currently, the
Compensation Committee administers the plan.
The 1999 Stock Incentive Plan permits the grant of stock options, stock
purchase rights, stock performance rights and SARs to employees, officers,
consultants or directors of Westwood (or a subsidiary) who are responsible for,
or contribute to, the management, growth or profitability of Westwood. As of the
date of this joint proxy statement/prospectus, approximately 75 people are
eligible to participate.
90
<PAGE>
Under the 1999 Stock Incentive Plan, if the employment or service of someone
who holds the options or rights described above is terminated other than as a
result of death or disability, the options or rights that are then exercisable
may continue to be exercisable for a period of up to three months after the date
of termination. If termination is due to death or disability, then the options
or rights that are then exercisable may be exercised within one year after the
date of such occurrence.
STOCK OPTIONS
Stock options granted under the 1999 Stock Incentive Plan may be either
statutory incentive stock options within the meaning of the Internal Revenue
Code, or options which do not qualify for special tax treatment, often referred
to as non-qualified stock options. Only employees of Westwood may receive
incentive stock options.
Stock options granted under the 1999 Stock Incentive Plan (except some
incentive stock options as described 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 plan, the plan administrator may also grant repriced
"reload stock options" to participants. A reload stock option may be an
incentive stock option or a non-qualified stock option depending on the type of
stock option previously granted to the optionee, and which is 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 1999 Stock Incentive Plan may be paid in cash,
common stock, or promissory notes under terms 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
Westwood, or any of its subsidiaries, immediately prior to the grant, the
exercise price may not be less than 110% of the fair market value of the common
stock at the date of grant, and the option term may not 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 200,000 shares of the common stock
reserved under the 1999 Stock Incentive 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 on the date of the annual meeting of Westwood stockholders, 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 Westwood. 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. The initial date of grant means June
10, 1999 with respect to directors who serve on the board of directors at this
date, and with respect to any other director means the date the director is
appointed to the board of directors. All other provisions of the 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 Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules thereunder.
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STOCK APPRECIATION RIGHTS
Under the 1999 Stock Incentive 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 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 issued
under a stock option granted in tandem with the SAR and surrendered by the
holder on the date of exercise of the SAR, and the exercise price of the common
stock issued under the stock option granted in tandem with the SAR. SARs granted
in tandem with stock options shall only be exercisable when the tandem stock
option is exercisable and shall have a term equal to the term of that stock
option.
STOCK PURCHASE RIGHTS
Under the 1999 Stock Incentive Plan, the right to purchase common stock may
be granted to certain 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 equivalents, or shares of common stock, subject to some
requirements. Subject to approval by the plan administrator, a participant may
borrow money from Westwood to purchase the shares. This loan will be evidenced
by a promissory note. Liability for principal and interest under this promissory
note may be forgiven by Westwood, in whole or in part, in accordance with a
formula based on the achievement of specific objective and verifiable
performance goals (such as earnings per share or earnings before interest,
taxes, depreciation and amortization) established by the plan administrator in
accordance with the Treasury Department Regulations.
STOCK PERFORMANCE RIGHTS
Under the 1999 Stock Incentive Plan, the payment of cash or grant of common
stock subject to the performance of a specified goal or goals may be awarded to
eligible persons. The plan administrator will specify objective and verifiable
performance goals to be achieved by the holder of options or rights during an
incentive period of not less than two years from the date of grant, such as
earnings per share or earnings before interest, taxes, depreciation and
amortization in accordance with the Treasury Department Regulations. No payment
may be made with respect to any of these rights prior to the expiration of the
incentive period described above. Payment with respect to any of these rights
may be made in cash, in shares of common stock, or by a combination of these as
determined by the plan administrator. In the event that payment is made pursuant
to any of these rights (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 one of these rights,
regardless of its terms, 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 of these rights awarded to a grantee shall become
payable in a single fiscal year.
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TRANSACTIONS THAT MAY AFFECT THE 1999 STOCK INCENTIVE PLAN
The plan provides that if Westwood merges or consolidates with another
corporation, or if it is liquidated or sells substantially all of its assets
while unexercised rights remain outstanding under the plan, the plan
administrator will have the right to make one or more of the following
adjustments:
- any limitations or vesting periods set out in or imposed pursuant to the
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;
- after the effective date of the merger, consolidation, liquidation, sale
or other disposition, 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 this event, the holder had been the holder of a
number of shares of common stock equal to the number of shares to which
the right may be exercised; or
- all outstanding rights may be canceled by the plan administrator as of the
effective date of any merger, consolidation, liquidation, sale or other
disposition.
AMENDMENT AND TERMINATION
The Board of Directors may amend, alter or discontinue the 1999 Stock
Incentive Plan without stockholder approval, except that no amendment may be
made without stockholder approval if such amendment would:
- materially increase the total number of shares reserved for issuance;
- materially increase the benefits accruing to participants;
- materially modify the requirements for eligibility; or
- increase the number of shares allocable to incentive stock options.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The statements in the following paragraphs of the principal federal income
tax consequences of awards under the 1999 Stock Incentive Plan are based on
statutory authority and judicial and administrative interpretations, as of the
date of this joint proxy statement/prospectus, which are subject to change at
any time (possibly with retroactive effect). The law is technical and complex,
and the discussion below represents only a general summary.
INCENTIVE STOCK OPTIONS. Incentive stock options ("ISOs") granted under the
1999 Stock Incentive Plan are intended to meet the definitional requirements of
Section 422(b) of the Internal Revenue Code for "incentive stock options."
An employee who receives an ISO does not recognize any taxable income upon
the grant of the ISO. Similarly, the exercise of an ISO generally does not give
rise to federal income tax to the employee, provided that (1) the federal
"alternative minimum tax," which depends on the employee's particular tax
situation, does not apply and (2) the employee is employed by Westwood or a
subsidiary corporation (within the meaning of Section 424(f) of the Internal
Revenue Code) of Westwood from the date of grant of the option until three
months prior to its exercise, except where the employment terminates by reason
of disability (where the three month period is extended to one year) or death
(where this requirement does not apply). If an employee exercises an ISO after
these requisite periods, the ISO will be treated as an NSO (as we define it
below) and will be subject to the rules set forth below under the caption
"Non-Qualified Stock Options, Stock Appreciation Rights, Stock Purchase Rights
and Stock Performance Rights."
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If after exercising an ISO, an employee disposes of the Westwood stock
acquired under the ISO more than two years from the date of grant and more than
one year from the date of transfer of the Westwood stock pursuant to the
exercise of the ISO (the "applicable holding period"), the employee will
generally recognize a long-term capital gain or loss equal to the difference, if
any, between the amount received for the shares and the exercise price. If,
however, an employee does not hold the shares for the applicable holding
period--thereby making a "disqualifying disposition"--the employee would
recognize ordinary income equal to the excess of the fair market value of the
shares at the time the ISO was exercised over the exercise price and the
balance, if any, would be long-term capital gain (provided the holding period
for the shares exceeded one year and the employee held the shares as a capital
asset at the time of disposition). If the disqualifying disposition is a sale or
exchange that would permit a loss to be recognized under the Internal Revenue
Code (were a loss in fact to be realized), and the sale proceeds are less than
the fair market value of the shares on the date of exercise, the employee's
ordinary income therefrom would be limited to the gain (if any) realized on the
sale.
An employee who exercises an ISO by delivering Westwood stock previously
acquired pursuant to the exercise of another ISO is treated as making a
"disqualifying disposition" of the Westwood stock if the shares are delivered
before the expiration of their applicable holding period. Upon the exercise of
an ISO with previously acquired shares as to which no disqualifying disposition
occurs, despite some uncertainty, it appears that the employee would not
recognize gain or loss with respect to the previously acquired shares.
Westwood will not be allowed a federal income tax deduction upon the grant
or exercise of an ISO or the disposition, after the applicable holding period,
of the Westwood stock acquired upon exercise of an ISO. In the event of a
disqualifying disposition, Westwood generally will be entitled to a deduction in
an amount equal to the ordinary income included by the employee, provided that
the amount constitutes an ordinary and necessary business expense to Westwood
and is reasonable and the limitations of Sections 280G and 162(m) of the
Internal Revenue Code (which we discuss below) do not apply.
NON-QUALIFIED STOCK OPTIONS, STOCK APPRECIATION RIGHTS, STOCK PURCHASE
RIGHTS AND STOCK PERFORMANCE RIGHTS. Non-qualified stock options ("NSOs")
granted under the 1999 Stock Incentive Plan are options that do not qualify as
ISOs. An individual who receives an NSO or a stock right will not recognize any
taxable income upon the grant of an NSO or right. However, the individual
generally will recognize ordinary income upon exercise of an NSO in an amount
equal to the excess of the fair market value of the shares of Westwood stock at
the time of exercise over the exercise price. Similarly, upon the receipt of
cash or shares pursuant to the exercise of a right, the individual generally
will recognize ordinary income in an amount equal to the sum of the cash and the
fair market value of the shares received.
As a result of Section 16(b) of the Exchange Act, the timing of income
recognition may be deferred (generally for up to six months) for any individual
who is an officer or director of Westwood or a beneficial owner of more than ten
percent (10%) of any class of equity securities of Westwood. Absent an election
pursuant to Section 83(b) of the Internal Revenue Code (as we describe it
below), recognition of income by the individual will be deferred until the
expiration of the deferral period, if any.
The ordinary income recognized with respect to the receipt of shares or cash
upon exercise of an NSO or a right will be subject to both wage withholding and
other employment taxes. In addition to the customary methods of satisfying the
withholding tax liabilities that arise upon the exercise of an NSO or the
exercise of a right, Westwood may satisfy the liability in whole or in part by
withholding shares of Westwood stock from those that otherwise would be issuable
to the individual or by the individual tendering other shares owned by him or
her, valued at their fair market value as of the date that the tax withholding
obligation arises.
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A federal income tax deduction generally will be allowed to Westwood in an
amount equal to the ordinary income included by the individual with respect to
his or her NSO or right, provided that such amount constitutes an ordinary and
necessary business expense to Westwood and is reasonable and the limitations of
Sections 280G and 162(m) of the Internal Revenue Code do not apply.
If an individual exercises an NSO by delivering shares of Westwood stock,
other than shares previously acquired pursuant to the exercise of an ISO which
is treated as a "disqualifying disposition" as described above, the individual
will not recognize gain or loss with respect to the exchange of such shares,
even if their then fair market value is different from the individual's tax
basis. The individual, however, will be taxed as described above with respect to
the exercise of the NSO as if he or she paid the exercise price in cash, and
Westwood likewise generally will be entitled to an equivalent tax deduction.
If the board of directors permits an individual to transfer an NSO to a
member or members of the individual's immediate family or to a trust for the
benefit of such persons or other entity owned by such persons and such
individual makes such a transfer and such transfer constitutes a completed gift
for gift tax purposes (which determination may depend on a variety of factors
including, without limitation, whether the NSO or a portion thereof has vested)
then such transfer will be subject to federal gift tax except, generally, to the
extent protected by the individual's $10,000 per donee annual exclusion, by his
or her lifetime unified credit or by the marital deduction. The amount of the
individual's gift is the value of the NSO at the time of the gift. If the
transfer of the NSO constitutes a completed gift and the individual retains no
interest in or power over the NSO after the transfer, the NSO generally will not
be included in his or her gross estate for federal estate tax purposes. The
transfer of the NSO will not cause the transferee to recognize taxable income at
the time of the transfer. If the transferee exercises the NSO while the
transferor is alive, the transferor will recognize ordinary income as described
above as if the transferor had exercised the NSO. If the transferee exercises
the NSO after the death of the transferor, it is uncertain whether the
transferor's estate or the transferee will recognize ordinary income for federal
income tax purposes.
With respect to awards or grants under the 1999 Stock Incentive Plan that
are settled in shares of Westwood stock that are restricted as to
transferability and subject to a substantial risk of forfeiture-- absent a
written election pursuant to Section 83(b) of the Internal Revenue Code filed
with the Internal Revenue Service within 30 days after the date of transfer of
such shares pursuant to the award or grant (a "Section 83(b) election")--an
individual will recognize ordinary income at the earlier of the time at which
(1) the shares become transferable or (2) the restrictions that impose a
substantial risk of forfeiture of the shares lapse, in an amount equal to the
excess of the fair market value (on such date) of such shares over the price
paid for the award or grant, if any. The ordinary income recognized with respect
to the receipt of shares of Westwood stock will be subject to both wage
withholding and other employment taxes.
Westwood will be allowed a deduction for federal income tax purposes in an
amount equal to the ordinary income recognized by the individual, provided that
such amount constitutes an ordinary and necessary business expense to Westwood
and is reasonable and the limitations of Sections 280G and 162(m) of the
Internal Revenue Code do not apply.
CHANGE IN CONTROL. In general, if the total amount of payments to an
individual that are contingent upon a "change of control" of Westwood (as
defined in Section 280G of the Internal Revenue Code), including payments under
the 1999 Stock Incentive Plan that vest upon a "change in control," equals or
exceeds three times the individual's "base amount" (generally, the individual's
average annual compensation for the five calendar years preceding the change in
control), then, the payments may be treated as "parachute payments" under the
Internal Revenue Code, in which case a portion of such payments would be
non-deductible to Westwood and the individual would be subject to a 20% excise
tax on that portion of the payments.
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CERTAIN LIMITATIONS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION. With
certain exceptions, Section 162(m) of the Internal Revenue Code denies a
deduction to publicly held corporations for compensation paid to certain
executive officers in excess of $1 million per executive per taxable year
(including any deduction with respect to the exercise of an NSO or a right or
the disqualifying disposition of stock purchased pursuant to an ISO). One
exception applies to certain performance-based compensation provided that the
compensation has been approved by stockholders in a separate vote and certain
other requirements are met. If approved by its stockholders, Westwood believes
that options and certain performance-based awards granted under the 1999 Stock
Incentive Plan should qualify for the performance-based compensation exception
to Section 162(m) of the Internal Revenue Code.
NEW PLAN BENEFITS AND MARKET VALUE OF COMMON STOCK
No stock options or other rights have been granted under the 1999 Stock
Incentive Plan. Subject to stockholder approval of the plan at the annual
meeting, an annual mandatory grant of options to purchase an aggregate of 10,000
shares of Westwood common stock will be made to each of Westwood's outside
directors in 1999 and each year thereafter. Any future outside directors will
also receive a mandatory grant of options to purchase 10,000 shares of Westwood
common stock effective on the date on which such director is appointed to the
board of directors 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 NYSE on August
20, 1999 was $36 per share.
THE BOARD OF DIRECTORS OF WESTWOOD RECOMMENDS THAT WESTWOOD STOCKHOLDERS
VOTE FOR THE APPROVAL OF THE 1999 STOCK INCENTIVE PLAN. THE AFFIRMATIVE VOTE OF
A MAJORITY OF THE WESTWOOD COMMON STOCK AND WESTWOOD CLASS B STOCK, VOTING
TOGETHER AS A SINGLE CLASS, PRESENT OR REPRESENTED AT THE WESTWOOD ANNUAL
MEETING IS REQUIRED TO APPROVE THE PROPOSAL.
SELECTION OF WESTWOOD'S INDEPENDENT ACCOUNTANTS
Action will be taken at the annual meeting to ratify the selection of
PricewaterhouseCoopers LLP as independent accountants of Westwood for the fiscal
year ending December 31, 1999. PricewaterhouseCoopers LLP has been the
independent accountants of Westwood since 1984. Westwood knows of no direct or
material indirect financial interest of PricewaterhouseCoopers LLP in Westwood
or of any connection of that firm with Westwood in the capacity of promoter,
underwriter, voting trustee, officer or employee. Members of
PricewaterhouseCoopers LLP will be present at the annual meeting, will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS OF WESTWOOD RECOMMENDS THAT WESTWOOD STOCKHOLDERS
VOTE FOR THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS
WESTWOOD'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER
31, 1999. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE WESTWOOD COMMON STOCK AND
WESTWOOD CLASS B STOCK, VOTING TOGETHER AS A SINGLE CLASS, PRESENT OR
REPRESENTED AT THE WESTWOOD ANNUAL MEETING IS REQUIRED TO RATIFY THE SELECTION
OF PRICEWATERHOUSECOOPERS LLP AS WESTWOOD'S INDEPENDENT PUBLIC ACCOUNTANTS FOR
THE FISCAL YEAR ENDING DECEMBER 31, 1999.
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LEGAL MATTERS
The legality of the shares of Westwood common stock to be issued in the
merger will be passed on by Weil, Gotshal & Manges LLP. Some other legal matters
relating to the merger are being passed upon for Westwood by Weil, Gotshal &
Manges LLP. Some legal matters relating to the merger are being passed upon for
Metro by Paul, Hastings, Janofsky & Walker LLP.
EXPERTS
The financial statements incorporated in this joint proxy
statement/prospectus by reference to Westwood's Annual Report on Form 10-K for
the year ended December 31, 1998 have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements included in Metro's Annual Report on
Form 10-K for the year ended December 31, 1998 have been audited by KPMG LLP,
independent public accountants, as indicated in their report on that matter, and
are incorporated by reference herein in reliance upon their authority as experts
in accounting and auditing in giving these kinds of reports.
STOCKHOLDER PROPOSALS
Due to the pending completion of the merger, Metro does not currently expect
to hold a 2000 Annual Meeting of Stockholders because it will be a wholly-owned
subsidiary of Westwood following the merger. In the event the merger is not
completed, proposals of Metro stockholders to be included in the proxy statement
to be mailed to all Metro's stockholders entitled to vote at the Metro's 2000
Annual Meeting must be received at Metro's principal executive offices not later
than December 31, 1999.
Any stockholder proposal intended for inclusion in Westwood's proxy
statement for Westwood's 2000 Annual Meeting of Stockholders must be received at
Westwood's principal executive offices no later than December 31, 1999.
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The unaudited pro forma combined condensed financial information relating to
the combined company is presented for you below. The Unaudited Pro Forma
Combined Condensed Balance Sheet assumes that the merger had been completed on
June 30, 1999. The Unaudited Pro Forma Combined Condensed Statements of
Operations assume that the merger had been completed on January 1, 1998. The
unaudited pro forma combined condensed financial information does not reflect
any potential cost reductions which may occur as a result of the merger. In
addition, the unaudited pro forma combined condensed financial information is
not necessarily indicative of the operating results or financial position which
would have occurred had the merger been completed at the times assumed, nor is
it necessarily indicative of the combined company's future operating results or
financial position. When you read the financial information below of Westwood
and Metro, you should read it along with the historical financial information of
Westwood and Metro which is incorporated by reference in this joint proxy
statement/prospectus. See "WHERE TO FIND MORE INFORMATION" on page 21.
WESTWOOD ONE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AT JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------ -------------------------
<S> <C> <C> <C> <C>
WESTWOOD ONE METRO NETWORKS ADJUSTMENTS COMBINED
------------- --------------- ----------- ------------
<CAPTION>
(NOTE C)
<S> <C> <C> <C> <C>
<CAPTION>
ASSETS
<S> <C> <C> <C> <C>
Current Assets
Cash............................................ $ 257 $ 28,095 $ 60,648(1) $ 4,000
(85,000)(3)
Accounts Receivable, net........................ 64,972 64,212 129,184
Other Current Assets............................ 7,614 4,177 11,791
------------- --------------- ----------- ------------
72,843 96,484 (24,352) 144,975
Property and Equipment............................ 22,629 30,587 53,216
Intangible Assets, Net of Accumulated
Amortization.................................... 219,053 17,355 814,601(2) 1,051,009
Other Assets...................................... 11,329 1,285 12,614
------------- --------------- ----------- ------------
Total Assets...................................... $ 325,854 $ 145,711 $ 790,249 $ 1,261,814
------------- --------------- ------------
------------- --------------- ----------- ------------
-----------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Current Liabilities............................... $ 64,608 $ 24,540 $ 89,148
Long-term Debt.................................... 167,000 11 $ (85,000)(3) 82,011
Other Liabilities................................. 17,648 1,409 19,057
------------- --------------- ----------- ------------
Total Liabilities................................. 249,256 25,960 (85,000) 190,216
Shareholders' Equity.............................. 76,598 119,751 60,648(1) 1,071,598
(180,399)(2)
995,000(2)
------------- --------------- ----------- ------------
Total Liabilities and Shareholders' Equity........ $ 325,854 $ 145,711 $ 790,249 $ 1,261,814
------------- --------------- ------------
------------- --------------- ----------- ------------
-----------
</TABLE>
F-1
<PAGE>
WESTWOOD ONE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------ -----------------------
<S> <C> <C> <C> <C>
WESTWOOD ONE METRO NETWORKS ADJUSTMENTS COMBINED
------------- --------------- ----------- ----------
<CAPTION>
(NOTE D)
<S> <C> <C> <C> <C>
Net Revenues..................................... $ 259,310 $ 172,132 $ 431,442
------------- --------------- ----------
Operating Costs and Expenses
Excluding Depreciation and
Amortization................................. 202,138 118,081 320,219
Depreciation and Amortization.................... 18,409 10,043 $ 40,700(2) 69,152
Corporate General and
Administrative Expenses........................ 4,858 11,026 15,884
Nonrecurring Items, Net Expense.................. 551 551
------------- --------------- ----------- ----------
225,956 139,150 40,700 405,806
------------- --------------- ----------- ----------
Operating Income (Loss).......................... 33,354 32,982 (40,700) 25,636
Interest Expense................................. 10,340 113 (5,300)(3) 5,153
Other Income..................................... (432) (1,144) 889(3) (687)
------------- --------------- ----------- ----------
Income (Loss) Before Taxes....................... 23,446 34,013 (36,289) 21,170
Income Taxes..................................... 10,400 13,659 1,766(4) 25,825
------------- --------------- ----------- ----------
Net Income (Loss)................................ $ 13,046 $ 20,354 $ (38,055) $ (4,655)
------------- --------------- ----------- ----------
------------- --------------- ----------- ----------
Income (Loss) Per Share:
Basic.......................................... $ 0.43 $ 1.23 $ (0.08)
Diluted........................................ $ 0.39 $ 1.20 $ (0.08)
Weighted Average Shares Outstanding:
Basic.......................................... 30,098 16,594 58,201(1)
Diluted........................................ 33,434 16,955 58,201(1)
</TABLE>
F-2
<PAGE>
WESTWOOD ONE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------ -----------------------
<S> <C> <C> <C> <C>
WESTWOOD ONE METRO NETWORKS ADJUSTMENTS COMBINED
------------- --------------- ----------- ----------
<CAPTION>
(NOTE D)
<S> <C> <C> <C> <C>
Net Revenues..................................... $ 124,871 $ 91,347 $ 216,218
------------- ------- ----------- ----------
Operating Costs and Expenses Excluding
Depreciation and Amortization.................. 100,268 65,763 166,031
Depreciation and Amortization.................... 9,293 5,714 $ 20,350(2) 35,357
Corporate General and Administrative Expenses.... 2,195 5,549 7,744
------------- ------- ----------- ----------
111,756 77,026 20,350 209,132
------------- ------- ----------- ----------
Operating Income (Loss).......................... 13,115 14,321 (20,350) 7,086
Interest Expense................................. 5,954 31 (2,550)(3) 3,435
Other Income..................................... (319) (272) 450(3) (141)
------------- ------- ----------- ----------
Income (Loss) Before Taxes....................... 7,480 14,562 (18,250) 3,792
Income Taxes..................................... 3,299 5,821 852(4) 9,972
------------- ------- ----------- ----------
Net Income (Loss)................................ $ 4,181 $ 8,741 $ (19,102) $ (6,180)
------------- ------- ----------- ----------
------------- ------- ----------- ----------
Income (Loss) Per Share:
Basic.......................................... $ 0.15 $ 0.52 $ (0.11)
Diluted........................................ $ 0.13 $ 0.50 (0.11)
Weighted Average Shares Outstanding:
Basic.......................................... 28,299 16,707 56,402(1)
Diluted........................................ 32,355 17,335 56,402(1)
</TABLE>
F-3
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
NOTE A--DESCRIPTION OF PROPOSED TRANSACTION:
Westwood has entered into a merger agreement with Metro pursuant to which
holders of Metro common stock will receive 1.5 shares of Westwood common stock
for each share of Metro common stock they own. In addition, Westwood will issue
shares of a series of preferred stock with provisions substantially identical to
Metro's Series A convertible preferred stock. Westwood will exchange 1.5 shares
of its new preferred stock for each outstanding share of Metro preferred stock.
Under the terms of the merger agreement, there are no floors or ceilings in
determining the exchange ratio.
NOTE B--BASIS OF PRESENTATION:
The unaudited pro forma condensed combined financial statements assume a
business combination between Westwood and Metro which will be accounted for as a
purchase. As the merger has not been completed, the costs of the merger and the
allocation of purchase price may only be estimated for purposes of preparing the
pro forma combined condensed financial information contained herein, however,
Westwood and Metro believe that any required adjustments as a result of the
final allocation of purchase price will not be material.
NOTE C-- PRO FORMA ADJUSTMENTS FOR UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET (In thousands):
Amounts in parentheses represent adjustments decreasing historical balances.
The Pro Forma Adjustments below are based on preliminary values for the
Metro assets and liabilities acquired, including the estimated costs of the
merger. A final allocation of the aggregate consideration paid in connection
with the merger will be made after the merger is finalized. Therefore, the
preliminary allocation reflected below (and the related amortization expense in
the Unaudited Pro Forma Combined Condensed Statements of Operations) may differ
from the amounts and asset categories ultimately determined. For every $1,000
increase/decrease in aggregate consideration, the related depreciation and
amortization expense in the pro forma financials will increase/decrease by
approximately $42.
(1) To reflect the cash proceeds to be received by Westwood of the assumed
exercise of all the outstanding Incentive and Non-qualified stock options of
Metro.
(2) To reflect and allocate, at the closing of the merger, the allocation
of purchase price based upon the preliminary estimated fair values related to
the merger. The total purchase price of $995,000 was derived by multiplying
Westwood's June 1, 1999 closing stock price by the number of shares of Westwood
common stock which Metro stockholders will receive as a result of the merger and
adding the estimated costs of the merger, which are primarily comprised of
investment banking and professional fees. The estimated fair market value of
assets acquired is $180,399. Westwood has assumed the fair market value of
Metro's tangible assets will approximate the carrying amount on Metro's latest
balance sheet.
(3) To reflect, at the closing of the merger, the repayment of debt with
Metro's excess cash.
NOTE D-- PRO FORMA ADJUSTMENTS FOR UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS (In thousands, except per share amounts):
(1) To adjust weighted average shares outstanding to reflect the additional
shares to be issued in connection with the merger, including the assumed
exercise of Metro's outstanding incentive and non-qualified stock options. As a
result of the pro forma losses, basic and diluted outstanding shares are
equivalent.
F-4
<PAGE>
(2) To adjust depreciation and amortization based on the preliminary
purchase price allocation. Goodwill resulting from the merger will be amortized
over 20 years.
(3) To adjust historical interest expense and interest income based on
using Metro's cash balance to reduce Westwood's outstanding debt and to adjust
the interest rate on outstanding borrowings based on Westwood's credit
agreement.
(4) To adjust income tax expense for adjustments made herein.
(5) No adjustment reflecting potential cost reductions which may occur as a
result of the merger has been made. Preliminary estimates indicate a potential
annual pre-tax savings of $8,000 to $10,000 (including the eventual elimination
of any duplicate facilities and aircraft rentals). However, no assurance can be
given that such savings will be realized.
F-5
<PAGE>
ANNEX A
COMPOSITE COPY*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
WESTWOOD ONE, INC.,
COPTER ACQUISITION CORP.
AND METRO NETWORKS, INC.
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
* This composite copy of the merger agreement combines the merger agreement
dated as of June 1, 1999 and the amendment to the merger agreement dated as
of August 19, 1999. Any text that has been added to, or that has replaced
text in, the original merger agreement as a result of the amendment appears
in italics and bold.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
Article 1 THE MERGER.................................................................................. A-1
1.1 The Merger.................................................................................. A-1
1.2 Effective Time.............................................................................. A-1
1.3 Closing of the Merger....................................................................... A-2
1.4 Effects of the Merger....................................................................... A-2
1.5 Certificate of Incorporation and Bylaws of the Surviving Corporation........................ A-2
1.6 Directors of the Surviving Corporation...................................................... A-2
1.7 Officers of the Surviving Corporation....................................................... A-2
Article 2 CONVERSION OF SHARES; MERGER CONSIDERATION.................................................. A-2
2.1 Conversion of Shares........................................................................ A-2
2.2 Exchange Fund............................................................................... A-3
2.3 Stock Options............................................................................... A-5
Article 3 REPRESENTATIONS AND WARRANTIES OF COMPANY................................................... A-6
3.1 Organization and Qualification; Subsidiaries................................................ A-6
3.2 Capitalization of Company and Its Subsidiaries.............................................. A-6
3.3 Authority Relative to This Agreement........................................................ A-7
3.4 SEC Reports; Financial Statements; No Undisclosed Liabilities............................... A-8
3.5 Information Supplied........................................................................ A-9
3.6 Consents and Approvals; No Violations....................................................... A-9
3.7 No Default.................................................................................. A-10
3.8 Absence of Changes.......................................................................... A-10
3.9 Litigation.................................................................................. A-12
3.10 Compliance with Applicable Law.............................................................. A-12
3.11 Employee Plans.............................................................................. A-12
3.12 Labor and Employment Matters................................................................ A-13
3.13 Taxes....................................................................................... A-14
3.14 Material Contracts.......................................................................... A-16
3.15 Insurance................................................................................... A-17
3.16 Real Property............................................................................... A-17
3.17 Tangible Property........................................................................... A-18
3.18 Intellectual Property....................................................................... A-18
3.19 Year 2000................................................................................... A-19
3.20 Books and Records........................................................................... A-19
3.21 Absence of Questionable Payments............................................................ A-19
3.22 Opinion of Financial Advisor................................................................ A-19
3.23 Brokers..................................................................................... A-19
3.24 Takeover Statutes; Dissenters' Rights....................................................... A-19
3.25 Existing Discussions........................................................................ A-20
Article 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..................................... A-20
4.1 Organization and Qualification; Subsidiaries................................................ A-20
4.2 Capitalization of Parent and Its Subsidiaries............................................... A-20
4.3 Authority Relative to This Agreement........................................................ A-21
4.4 SEC Reports; Financial Statements; No Undisclosed Liabilities............................... A-22
4.5 Information Supplied........................................................................ A-23
4.6 Consents and Approvals; No Violations....................................................... A-23
4.7 No Default.................................................................................. A-23
4.8 Absence of Changes.......................................................................... A-24
</TABLE>
A-i
<PAGE>
<TABLE>
<C> <S> <C>
4.9 Litigation.................................................................................. A-25
4.10 Compliance with Applicable Law.............................................................. A-25
4.11 Employee Plans.............................................................................. A-25
4.12 Labor and Employment Matters................................................................ A-26
4.13 Taxes....................................................................................... A-27
4.14 Material Contracts.......................................................................... A-28
4.15 Insurance................................................................................... A-29
4.16 Real Property............................................................................... A-30
4.17 Tangible Property........................................................................... A-30
4.18 Intellectual Property....................................................................... A-30
4.19 Year 2000................................................................................... A-31
4.20 Books and Records........................................................................... A-31
4.21 Absence of Questionable Payments............................................................ A-31
4.22 Opinion of Financial Advisor................................................................ A-31
4.23 Brokers..................................................................................... A-31
4.24 Takeover Statutes; Dissenters' Rights....................................................... A-31
4.25 No Prior Activities of Merger Sub........................................................... A-31
4.26 Existing Discussions........................................................................ A-32
4.27 Affiliate Agreements........................................................................ A-32
Article 5 COVENANTS................................................................................... A-32
5.1 Conduct of Business of Company.............................................................. A-32
5.2 Conduct of Business of Parent............................................................... A-35
5.3 Conduct of Business of Merger Sub........................................................... A-37
5.4 Preparation of Joint Proxy Statement; Stockholders Approval................................. A-37
5.5 No Solicitation by the Company.............................................................. A-39
5.6 Intentionally Omitted....................................................................... A-40
5.7 Accountants' Letters........................................................................ A-40
5.8 Access to Information....................................................................... A-41
5.9 Additional Agreements; Reasonable Best Efforts.............................................. A-41
5.10 Regulatory Reviews.......................................................................... A-42
5.11 Public Announcements........................................................................ A-42
5.12 Indemnification; Directors' and Officers' Insurance......................................... A-42
5.13 Notification of Certain Matters............................................................. A-43
5.14 Tax-Free Reorganization Treatment........................................................... A-43
5.15 Company Affiliates.......................................................................... A-44
5.16 SEC Filings................................................................................. A-44
5.17 Employee Benefits........................................................................... A-44
5.18 Parent Board................................................................................ A-44
5.19 Fees and Expenses........................................................................... A-44
5.20 Antitakeover Statutes....................................................................... A-45
Article 6 CONDITIONS TO CONSUMMATION OF THE MERGER.................................................... A-45
6.1 Conditions to Each Party's Obligations to Effect the Merger................................. A-45
6.2 Conditions to the Obligations of the Company................................................ A-46
6.3 Conditions to the Obligations of Parent and Merger Sub...................................... A-47
Article 7 TERMINATION; AMENDMENT; WAIVER.............................................................. A-47
7.1 Termination by Mutual Agreement............................................................. A-47
7.2 Termination by Either Parent or the Company................................................. A-47
7.3 Termination by the Company.................................................................. A-48
7.4 Termination by Parent....................................................................... A-49
7.5 Effect of Termination and Abandonment....................................................... A-49
7.6 Amendment................................................................................... A-50
</TABLE>
A-ii
<PAGE>
<TABLE>
<C> <S> <C>
7.7 Extension; Waiver........................................................................... A-50
Article 8 MISCELLANEOUS............................................................................... A-50
8.1 Nonsurvival of Representations and Warranties............................................... A-50
8.2 Entire Agreement; Assignment................................................................ A-50
8.3 Notices..................................................................................... A-51
8.4 Governing Law............................................................................... A-51
8.5 Descriptive Headings........................................................................ A-51
8.6 Parties in Interest......................................................................... A-52
8.7 Severability................................................................................ A-52
8.8 Specific Performance........................................................................ A-52
8.9 Brokers..................................................................................... A-52
8.10 Disclosure Generally........................................................................ A-52
8.11 Counterparts................................................................................ A-52
8.12 Interpretation.............................................................................. A-52
</TABLE>
EXHIBITS
Exhibit A--Company Stockholders Voting Agreement
Exhibit B--Parent Stockholder Voting Agreement
Exhibit C--Company Affiliate's Letter
Exhibit D--Registration Rights Agreement
A-iii
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERMS PAGE NUMBER
- ---------------------------------------------------------------------------------------------------- -----------------
<S> <C>
Acquisition......................................................................................... A-37
Agreement........................................................................................... A-1
Business Combination................................................................................ A-37
Certificate......................................................................................... A-2
Certificate of Designations......................................................................... A-3
Closing............................................................................................. A-2
Closing Date........................................................................................ A-2
Code................................................................................................ A-1
Company............................................................................................. A-1
Company Acquisition Proposal........................................................................ A-40
Company Affiliate................................................................................... A-44
Company Affiliate Letter............................................................................ A-44
Company Board....................................................................................... A-7
Company Common Stock................................................................................ A-1
Company Disclosure Schedule......................................................................... A-6
Company Employee Benefit Plan....................................................................... A-12
Company Employee Benefit Plans...................................................................... A-12
Company Financial Advisor........................................................................... A-19
Company Material Contracts.......................................................................... A-16
Company Notice...................................................................................... A-48
Company Option Plans................................................................................ A-7
Company Permits..................................................................................... A-12
Company Real Property Leases........................................................................ A-17
Company Requisite Vote.............................................................................. A-8
Company SEC Reports................................................................................. A-8
Company Securities.................................................................................. A-7
Company Series A Preferred Stock.................................................................... A-1
Company Software.................................................................................... A-18
Company Stock Options............................................................................... A-7
Company Stockholder................................................................................. A-1
Company Stockholder Voting Agreement................................................................ A-1
Company Stockholders Meeting........................................................................ A-38
Company Superior Proposal........................................................................... A-39
Company Termination Fee............................................................................. A-49
Company Year 2000 Plan.............................................................................. A-19
Confidentiality Agreement........................................................................... A-41
Covered Transactions................................................................................ A-19
Current Premium..................................................................................... A-43
DGCL................................................................................................ A-1
Effective Time...................................................................................... A-1
Environmental Laws.................................................................................. A-12
ERISA............................................................................................... A-12
Exchange Act........................................................................................ A-8
Exchange Agent...................................................................................... A-3
Exchange Fund....................................................................................... A-3
Exchange Ratio...................................................................................... A-2
Expenses............................................................................................ A-45
Filed Company SEC Reports........................................................................... A-9
</TABLE>
A-iv
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERMS PAGE NUMBER
- ---------------------------------------------------------------------------------------------------- -----------------
<S> <C>
Filed Parent SEC Reports............................................................................ A-22
GAAP................................................................................................ A-8
Governmental Entity................................................................................. A-9
HSR Act............................................................................................. A-9
Indemnified Parties................................................................................. A-42
Joint Proxy Statement/Prospectus.................................................................... A-37
Law................................................................................................. A-10
Letter Transmittal.................................................................................. A-3
Lien................................................................................................ A-7
Material Adverse Effect............................................................................. A-6
Merger.............................................................................................. A-1
Merger Consideration................................................................................ A-2
Merger Sub.......................................................................................... A-1
Parent.............................................................................................. A-1
Parent Acquisition Proposal......................................................................... A-32
Parent Board........................................................................................ A-21
Parent Class B Stock................................................................................ A-20
Parent Common Stock................................................................................. A-1
Parent Disclosure Schedule.......................................................................... A-20
Parent Employee Benefit Plan........................................................................ A-25
Parent Employee Benefit Plans....................................................................... A-25
Parent Expenses..................................................................................... A-49
Parent Financial Advisor............................................................................ A-31
Parent Material Contracts........................................................................... A-29
Parent Option Plans................................................................................. A-20
Parent Permits...................................................................................... A-25
Parent Real Property Leases......................................................................... A-30
Parent Requisite Vote............................................................................... A-21
Parent SEC Reports.................................................................................. A-22
Parent Securities................................................................................... A-21
Parent Series A Preferred Stock..................................................................... A-3
Parent Stock Options................................................................................ A-20
Parent Stockholder.................................................................................. A-1
Parent Stockholder Voting Agreement................................................................. A-1
Parent Stockholders Meeting......................................................................... A-38
Parent Year 2000 Plan............................................................................... A-31
Permitted Liens..................................................................................... A-11
Registration Rights Agreement....................................................................... A-46
SEC................................................................................................. A-8
Securities Act...................................................................................... A-8
Share............................................................................................... A-2
Share Issuance...................................................................................... A-21
subsidiary.......................................................................................... A-6
Surviving Corporation............................................................................... A-1
Takeover Statutes................................................................................... A-19
Tax................................................................................................. A-16
Tax Returns......................................................................................... A-16
Termination Date.................................................................................... A-47
</TABLE>
A-v
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 1, 1999 (the
"AGREEMENT"), is among WESTWOOD ONE, INC., a Delaware corporation ("PARENT"),
COPTER ACQUISITION CORP. ("MERGER SUB"), a Delaware corporation and a direct
wholly owned subsidiary of Parent, and METRO NETWORKS, INC., a Delaware
corporation (the "COMPANY").
WHEREAS, the Boards of Directors of the Company, Parent and Merger Sub each
have determined that the Merger (as defined in Section 1.1) is advisable and
fair to, and in the best interests of, their respective stockholders and have
approved the Merger in accordance with this Agreement;
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, concurrently with the execution and delivery of this Agreement,
David I. Saperstein, Charles I. Bortnick and Shane E. Coppola (the "COMPANY
STOCKHOLDERS") have entered into a voting agreement with Parent in the form of
Exhibit A hereto (the "COMPANY STOCKHOLDERS VOTING AGREEMENT") providing for,
among other things, the agreement of the Company Stockholders to vote any and
all outstanding shares of common stock, par value $.001 per share ("COMPANY
COMMON STOCK") and Series A Convertible Preferred Stock, par value $.001 per
share ("COMPANY SERIES A PREFERRED STOCK"), that they beneficially own in favor
of the adoption of this Agreement and the Merger; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
Infinity Broadcasting Corporation (the "PARENT STOCKHOLDER") has entered into a
voting agreement in the form of Exhibit B hereto (the "PARENT STOCKHOLDER VOTING
AGREEMENT") providing for, among other things, the agreement of the Parent
Stockholder to vote any and all outstanding shares of common stock, par value
$.01 per share ("PARENT COMMON STOCK"), of the Company that it beneficially owns
in favor of the Share Issuance (as defined in Section 4.3(a)) by the Parent; and
WHEREAS, each of Charles I. Bortnick and Shane E. Coppola have entered into
employment agreements with Parent, and David I. Saperstein has entered into a
consulting agreement with Parent, which agreements shall become effective upon
consummation of the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
Company, Parent and Merger Sub hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2), upon
the terms and subject to the conditions of this Agreement and in accordance with
the Delaware General Corporation Law (the "DGCL"), Merger Sub shall be merged
with and into the Company (the "MERGER"). Following the Merger, the Company
shall continue as the surviving corporation under the name "Metro Networks,
Inc." (the "SURVIVING CORPORATION") and shall continue its corporate existence
under the DGCL, and the separate corporate existence of Merger Sub shall cease.
1.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, Parent,
Merger Sub and the Company shall cause the Merger to be consummated by filing a
certificate of merger complying with the DGCL with the Secretary of State of the
State of Delaware as soon as practicable on or after the Closing Date (as
defined in Section 1.3). The Merger shall become effective upon the later of
such filing or at such time thereafter as may be agreed to in writing by each of
the parties hereto and specified in such certificate of merger (the "EFFECTIVE
TIME").
A-1
<PAGE>
1.3 CLOSING OF THE MERGER. The closing of the Merger (the "CLOSING") will
take place at a time and on a date (the "CLOSING DATE") to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article 6 (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions), at the offices of Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, New York, New York 10153, unless another time,
date or place is agreed to in writing by the parties hereto.
1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the DGCL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the properties, rights, privileges, immunities,
powers and franchises of Merger Sub and the Company shall vest in the Surviving
Corporation, and all debts, liabilities, obligations and duties of Merger Sub
and the Company shall become the debts, liabilities, obligations and duties of
the Surviving Corporation.
1.5 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION. The Certificate of Incorporation of Merger Sub in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation (except that the name of Merger Sub
shall be changed to "Metro Networks, Inc.", until amended in accordance with
such Certificate of Incorporation and the DGCL. The Bylaws of Merger Sub in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation, until amended in accordance with such Bylaws and the
DGCL.
1.6 DIRECTORS OF THE SURVIVING CORPORATION. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation until such director's
successor is duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.7 OFFICERS OF THE SURVIVING CORPORATION. The officers of Merger Sub at
the Effective Time shall be the initial officers of the Surviving Corporation,
each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation until such officer's successor is duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
ARTICLE 2
CONVERSION OF SHARES; MERGER CONSIDERATION
2.1 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of any of the parties hereto or their
respective stockholders:
(a) COMMON STOCK OF MERGER SUB. Each share of common stock, par
value $.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one fully paid and
non-assessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
(b) COMMON STOCK OF THE COMPANY. Each share of the Company Common
Stock issued and outstanding immediately prior to the Effective Time
(each, a "SHARE"), other than Shares to be cancelled in accordance with
Section 2.1(d), shall be converted into the right to receive 1.5 fully
paid and non-assessable shares (the "EXCHANGE RATIO") of Parent Common
Stock (all such shares of Parent Common Stock issued, together with any
cash in lieu of fractional shares of Parent Common Stock to be paid
pursuant to Section 2.2(f), being referred to as the "MERGER
CONSIDERATION"), and shall cease to be outstanding and shall
automatically be cancelled and shall cease to exist, and each holder of a
certificate previously evidencing any such Shares (each, a "CERTIFICATE")
shall cease to have any rights with respect thereto, except the right to
A-2
<PAGE>
receive, upon the surrender of such Certificate in accordance with the
provisions of Section 2.2, the Merger Consideration with respect to the
Shares previously evidenced by such Certificate.
(c) PREFERRED STOCK OF THE COMPANY. Each share of the Company
Series A Preferred Stock issued and outstanding immediately prior to the
Effective Time, other than Company Series A Preferred Stock to be
cancelled in accordance with Section 2.1(d), shall be converted into the
right to receive 1.5 fully paid and non-assessable shares of a
corresponding series of preferred stock of Parent (the "PARENT SERIES A
PREFERRED STOCK") that shall have the terms set forth in a Certificate of
Designations which is substantially identical to the certificate of
designations relating to the Company Series A Preferred Stock, except
that Parent's name shall be substituted for the Company's therein and the
liquidation preference payable to holders of Parent Series A Preferred
Stock shall be the par value thereof (the "CERTIFICATE OF DESIGNATIONS").
Upon surrender at the Closing of a certificate representing shares of
Company Series A Preferred Stock to Parent, together with such customary
instruments of transfer and other documents as Parent may reasonably
request, the holder of such certificate shall be entitled to receive in
exchange therefor certificates or other evidence representing the number
of shares of Parent Series A Preferred Stock which such holder has the
right to receive pursuant to the immediately preceding sentence.
(d) CANCELLATION OF TREASURY SHARES AND PARENT-OWNED SHARES. Each
share of Company Common Stock and Company Series A Preferred Stock that
is owned by the Company, Parent or Merger Sub shall automatically be
cancelled and shall cease to exist, and no consideration shall be
delivered or deliverable in exchange therefor.
2.2 EXCHANGE FUND.
(a) LETTER OF TRANSMITTAL. As soon as reasonably practicable after
the Effective Time, a bank or trust company to be designated by Parent,
which bank or trust company shall be reasonably acceptable to the Company
(the "EXCHANGE AGENT"), shall mail to each holder of record of Shares
immediately prior to the Effective Time (excluding any Shares to be
cancelled pursuant to Section 2.1(d)) (i) a letter of transmittal (the
"LETTER OF TRANSMITTAL") which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of such Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Parent shall reasonably
specify and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration with respect to the
Shares formerly represented thereby.
(b) DEPOSIT OF MERGER CONSIDERATION. Promptly after the Effective
Time, Parent shall deposit with the Exchange Agent, for the benefit of
the holders of Shares for exchange in accordance with this Article 2,
certificates or other evidence representing the shares of Parent Common
Stock issuable pursuant to Section 2.1(b). Parent agrees to make
available to the Exchange Agent from time to time as needed, cash
sufficient to pay cash in lieu of fractional shares pursuant to Section
2.2(f) and any dividends or other distributions pursuant to Section
2.2(e). Any cash and certificates or other evidence representing shares
of Parent Common Stock deposited with the Exchange Agent shall
hereinafter be referred to as the "EXCHANGE FUND."
(c) SURRENDER OF CERTIFICATES. Upon surrender of a Certificate to
the Exchange Agent, together with the Letter of Transmittal, duly
executed, and such other customary documents as Parent or the Exchange
Agent shall reasonably request, the holder of such Certificate shall be
entitled to receive in exchange therefor, (i) certificates or other
evidence representing the number of whole shares of Parent Common Stock
which such Holder has the right to receive
A-3
<PAGE>
pursuant to Section 2.1(b), (ii) any cash in lieu of fractional shares of
Parent Common Stock pursuant to Section 2.2(f) and (iii) any dividends or
other distributions pursuant to Section 2.2(e) (in each case without
interest and less the amount of any required withholding Taxes, if any,
in accordance with Section 2.2(i)).
(d) RULES GOVERNING EXCHANGE. Parent, in consultation with the
Company prior to the Effective Time, shall have the right to make
reasonable rules, not inconsistent with the terms of this Agreement,
governing the issuance and delivery of certificates for, or other
evidence of, shares of Parent Common Stock and Parent Series A Preferred
Stock.
(e) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT
COMMON STOCK. The shares of Parent Common Stock issuable pursuant to
Section 2.1(b) shall be deemed to have been issued at the Effective Time
for purposes of entitlement to dividends or other distributions declared,
if any, after the Effective Time. No dividends or other distributions
with respect to shares of Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock such holder
is entitled to receive until such Certificate is surrendered by such
holder.
(f) FRACTIONAL SHARES. No scrip or fractional share certificate for
Parent Common Stock will be issued upon the surrender of Certificates,
and an outstanding fractional share interest will not entitle the owner
thereof to vote, to receive dividends or to any rights of a stockholder
of Parent with respect to such fractional share interest. In lieu of the
issuance of fractional shares, Parent shall pay to the Exchange Agent an
amount sufficient for the Exchange Agent to pay each holder of Shares an
amount in cash equal to the product obtained by multiplying (i) the
fractional share interest to which such holder would otherwise be
entitled (after taking into account all Shares held at the Effective Time
by such holder) by (ii) the closing price for a share of Parent Common
Stock on the NYSE Composite Transaction Tape on the first business day
immediately following the Effective Time.
(g) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the former holders of Shares for six (6)
months after the Effective Time shall be delivered to Parent, upon
demand, and any former holders of Shares who have not theretofore
complied with this Article 2 shall thereafter look only to Parent for,
and subject to Section 2.2(h) Parent shall deliver, the Merger
Consideration and any dividends or other distributions with respect to
the Parent Common Stock to which such holder is entitled pursuant to this
Article 2.
(h) NO LIABILITY. None of Parent, Merger Sub, the Company or the
Surviving Corporation shall be liable to any former holder of Shares for
any Merger Consideration from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or
similar law.
(i) WITHHOLDING RIGHTS. Parent, the Surviving Corporation and the
Exchange Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any former
holder of Shares, such amounts as Parent, the Surviving Corporation or
the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code or any provision of state, local or
foreign Tax law. To the extent that amounts are so withheld by Parent,
the Surviving Corporation or the Exchange Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid
to the former holder of the Shares in respect of which such deduction and
withholding was made by Parent, the Surviving Corporation or the Exchange
Agent.
A-4
<PAGE>
(j) LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a
bond in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to
such Certificate, the Exchange Agent will deliver in exchange for such
lost, stolen or destroyed Certificate the applicable Merger Consideration
with respect to the Shares formerly represented thereby and any unpaid
dividends and distributions on shares of Parent Common Stock deliverable
in respect thereof pursuant to Section 2.2(e).
(k) STOCK TRANSFER BOOKS. The stock transfer books of the Company
shall be closed immediately upon the Effective Time and there shall be no
further registration of transfers of Shares thereafter on the records of
the Company.
(l) AFFILIATES. Notwithstanding anything to the contrary herein, no
shares of Parent Common Stock or cash shall be delivered to a person who
may be deemed a Company Affiliate in accordance with Section 5.15, until
such person has executed and delivered to Parent a Company Affiliate
Letter (as defined in Section 5.15).
2.3 STOCK OPTIONS.
(a) Parent and the Company shall take such commercially reasonable actions
as are necessary to provide that (i) at the Effective Time each outstanding
Company Stock Option (as defined in Section 3.2(a)) shall be adjusted in
accordance with the terms thereof and this Agreement to be exercisable to
purchase shares of Parent Common Stock as provided below and (ii) except as
otherwise provided for in this Agreement or in option grants to non-employee
directors of the Company, or as agreed to in writing by Parent, the vesting of
exercisability of any Company Stock Option shall not be accelerated due to the
Merger or this Agreement. Following the Effective Time, each Company Stock
Option shall continue to have, and shall be subject to, the same terms and
conditions (including vesting and transfer restrictions) set forth in the
Company Option Plans (as defined in Section 3.2(a)) or any other agreement
pursuant to which such Company Stock Option was subject immediately prior to the
Effective Time, except that (i) each Company Stock Option shall be exercisable
for that number of shares of Parent Common Stock equal to the product of (x) the
aggregate number of shares of the Company Common Stock for which such Company
Stock Option was exercisable and (y) the Exchange Ratio, rounded down to the
nearest whole share, if necessary, (ii) the per share exercise price of such
Company Stock Option shall be the exercise price immediately prior to the
Effective Time divided by the Exchange Ratio (rounded up to the nearest whole
cent) and (iii) in the event an optionee's (other than David Saperstein's)
employment is terminated by the Surviving Corporation or one of its affiliates
without "cause" (as defined in the optionee's option agreement) within three
years following the Effective Time, Parent shall cause any unvested options held
by the optionee which were granted pursuant to the Company Option Plans prior to
the Effective Time to immediately vest. The adjustments provided herein to any
options which are incentive stock options (as defined in Section 422 of the
Code) shall be effected in a manner consistent with Section 424(a) of the Code.
(b) As soon as practicable after the Effective Time, Parent shall deliver to
the holders of the Company Stock Options appropriate notices setting forth such
holders' rights pursuant to the respective Company Option Plans and the
agreements evidencing the grants of such Company Stock Options and that such
Company Stock Options and agreements shall continue in effect on the same terms
and conditions (subject to the adjustments required by this Section 2.3) after
giving effect to the Merger and the provisions set forth above. Parent shall
comply with the terms of the Company Option Plans.
(c) Parent shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Parent Common Stock for delivery upon exercise
of Company Stock Options. Parent shall
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file a registration statement on Form S-8 as of or prior to the Effective Time
with respect to the shares of Parent Common Stock subject to Company Stock
Options and shall use commercially reasonable efforts to maintain the
effectiveness of such registration statement (and maintain the current status of
the prospectus or prospectuses contained therein) for so long as such options
remain outstanding.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby represents and warrants to each of Parent and Merger Sub
as follows:
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company and each of its subsidiaries (as defined in Section 3.1(b))
is a corporation or legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite corporate, partnership or similar power and authority to
own, lease and operate its properties and to carry on its businesses as now
conducted and proposed by the Company to be conducted.
(b) Except as set forth in Section 3.1(b) of the Disclosure Schedule
previously delivered by the Company to Parent (the "COMPANY DISCLOSURE
SCHEDULE"), the Company has no subsidiaries and does not own, directly or
indirectly, beneficially or of record, any shares of capital stock or other
security of any other entity or any other investment in any other entity (other
than marketable securities which are held as investments and are reflected as
such on the consolidated financial statements of the Company). The term
"SUBSIDIARY" means, when used with reference to any entity, any corporation or
other organization, whether incorporated or unincorporated, (i) of which such
party or any other subsidiary of such party is a general or managing partner or
managing member, (ii) the outstanding voting securities or interests of which,
having by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization, are directly or indirectly owned or
controlled by such party or by any one or more of its subsidiaries, or (iii)
more than fifty percent (50%) of the value of the outstanding equity securities
or interests (including membership interests) of which are owned directly or
indirectly by such party.
(c) The Company and each of its subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing has
not had and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. When used in connection
with any party to this Agreement, the term "MATERIAL ADVERSE EFFECT" means, with
respect to any entity, any event, change, occurrence, development, circumstance
or effect that is or would reasonably be expected to be materially adverse to
(i) the assets, properties, condition (financial or otherwise), business or
results of operations of such entity and its subsidiaries taken as a whole or
(ii) the ability of such entity to consummate the transactions contemplated by
this Agreement.
(d) The Company has heretofore delivered or made available to Parent
accurate and complete copies of the articles or certificate of incorporation and
by-laws, or other similar organizational documents, as currently in effect, of
the Company and each of its subsidiaries.
3.2 CAPITALIZATION OF COMPANY AND ITS SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of: (i) 25,000,000
shares of Company Common Stock, of which, as of May 31, 1999, 16,730,969 shares
were issued and outstanding and no
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shares were held in treasury and (ii) 10,000,000 shares of Preferred Stock, par
value $.001 per share, of which, as of May 31, 1999, 2,549,750 shares of Company
Series A Preferred Stock were authorized, issued and outstanding. All of the
issued and outstanding shares of the Company Common Stock and Company Series A
Preferred Stock have been validly issued, and are fully paid, nonassessable and
free of preemptive rights. As of May 31, 1999, (i) 2,050,123 shares of the
Company Common Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of outstanding options granted by
the Company to purchase shares of the Company Common Stock (the "COMPANY STOCK
OPTIONS") issued pursuant to the Company stock option plans listed in Section
3.2(a) of the Company Disclosure Schedule (the "COMPANY OPTION PLANS") and (ii)
2,549,750 shares of the Company Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the conversion of
outstanding shares of the Company Series A Preferred Stock. Since May 31, 1999,
no shares of the Company's capital stock have been issued other than pursuant to
the exercise of the Company Stock Options already in existence on such date and,
since May 31, 1999, no Company Stock Options have been granted. Section 3.2(a)
of the Company Disclosure Schedule sets forth a complete and correct list of all
holders of options to acquire shares of the Company Common Stock, including such
person's name, the number of options (vested, unvested and total) held by such
person, the remaining term for vesting of such options and the exercise price
for each such option. Except as set forth above in this Section 3.2(a), as of
the date hereof, there are outstanding (i) no shares of capital stock or other
voting securities of the Company, (ii) no securities of the Company or its
subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of the Company, (iii) no options or other rights to acquire
from the Company or its subsidiaries, and no obligations of the Company or its
subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and (iv) no equity equivalents, or interests in the ownership or
earnings, of the Company or its subsidiaries or other similar rights (including
stock appreciation rights) (collectively, "COMPANY SECURITIES"). There are no
outstanding obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any Company Securities. Except as set forth in Section
3.2(a) of the Company Disclosure Schedule, there are no shareholder agreements,
voting trusts or other agreements or understandings to which the Company is a
party or to which it is bound relating to the voting or disposition of any
shares of capital stock of the Company.
(b) Except as disclosed in Section 3.2(b) of the Company Disclosure
Schedule, all of the outstanding capital stock of the Company's subsidiaries is
owned by the Company, directly or indirectly, free and clear of any Lien (as
defined below) or any other limitation or restriction (including any restriction
on the right to vote or sell the same, except as may be provided as a matter of
law). There are no securities of the Company or its subsidiaries convertible
into or exchangeable for, no options or other rights to acquire from the Company
or its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly of, any capital stock or other ownership interests in, or
any other securities of, any subsidiary of the Company. There are no outstanding
contractual obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. For purposes of this Agreement,
"LIEN" means, with respect to any asset (including, without limitation, any
security), any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement and, subject to obtaining the Company Requisite Vote
(as defined below), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized and
approved by the Board of Directors of the Company (the "COMPANY BOARD") and no
other corporate
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proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby (other than, with respect
to the Merger, the approval and adoption of this Agreement and the transactions
contemplated hereby, including the Merger, by holders of a majority of the
voting stock of the Company (which is comprised solely of Company Common Stock
and Company Series A Preferred Stock) acting as a single class (the "COMPANY
REQUISITE VOTE")). This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid, legal and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other laws affecting
the enforcement of creditors' rights generally, and the application of equitable
principles (whether considered in a proceeding at law or in equity).
(b) The Company Board has duly and validly approved, and taken all corporate
actions required to be taken by the Company Board for, the consummation of the
transactions, including the Merger, contemplated hereby and has resolved (i) to
deem this Agreement and the transactions contemplated hereby, including the
Merger, taken together, advisable and fair to, and in the best interests of, the
Company and its stockholders, (ii) to recommend to the Company's stockholders
that they approve and adopt this Agreement and the transactions contemplated
hereby, including the Merger, and (iii) to approve the Company Stockholders
Voting Agreement.
(c) The Company Board has directed that this Agreement be submitted to the
Company's stockholders for their approval and adoption at the Company
Stockholders Meeting (as defined in Section 5.4(c)).
(d) The Company Requisite Vote is the only vote of the holders of any class
or series of capital stock of the Company necessary to adopt this Agreement and
approve the transactions contemplated hereby, including the Merger. No other
vote or consent of the stockholders of the Company is required by law, the
certificate of incorporation or bylaws of the Company or otherwise in order for
the Company to adopt this Agreement or to approve the transactions contemplated
hereby, including the Merger. Based upon the currently outstanding capital stock
of the Company, the Company Stockholders own of record a majority of the issued
and outstanding shares of voting capital stock of the Company. Based upon the
currently outstanding capital stock of the Company, the affirmative vote of the
Company Stockholders will be sufficient to obtain the Company Requisite Vote.
3.4 SEC REPORTS; FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES.
(a) The Company has filed all required forms, reports and documents with the
Securities and Exchange Commission (the "SEC") since October 16, 1996 (the
"COMPANY SEC REPORTS"), each of which has complied in all material respects with
all applicable requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), each as in effect on the dates such forms, reports and
documents were filed. None of the Company SEC Reports, including, without
limitation, any financial statements or schedules included or incorporated by
reference therein, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of the Company included in the Company SEC
Reports complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto in effect on the date when such Company SEC Reports were filed and
fairly present, in all material respects, in conformity with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and their consolidated results of operations and changes in financial
position for the periods then ended (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments that have not been
and are not expected to be material in amount).
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(b) Neither the Company nor any of its subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, and
there is no existing condition, situation or set of circumstances which could be
expected to result in such a liability or obligation, except for liabilities or
obligations (i) reflected in the Company SEC Reports filed prior to the date
hereof (the "FILED COMPANY SEC REPORTS"), (ii) disclosed in the Company
Disclosure Schedule, (iii) incurred in the ordinary course of business which do
not and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company or (iv) incurred in
connection with the transactions contemplated hereby.
(c) The Company has heretofore made available to Parent a complete and
correct copy of any material amendments or modifications, which have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the Exchange
Act.
3.5 INFORMATION SUPPLIED.
(a) None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in the S-4 (as defined in Section 5.4),
will, at the time the S-4 is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(b) The Joint Proxy Statement/Prospectus (as defined in Section 5.4), will
not, at the date first mailed to the Company's stockholders, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. No representation
or warranty is made by the Company in this Section 3.5(b) with respect to (i)
statements made or incorporated by reference therein based on information
supplied by Parent or any of its subsidiaries for inclusion or incorporation by
reference in the S-4 or (ii) compliance with the requirements of the Securities
Act or the Exchange Act with respect to documents incorporated by reference in
the S-4 from the Parent SEC Reports (as defined in Section 4.4). The Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
thereunder.
3.6 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), the filing and recordation of a certificate of
merger as required by the DGCL, and as otherwise set forth in Section 3.6 of the
Company Disclosure Schedule, no filing with or notice to, and no permit,
authorization, consent or approval of, any court or tribunal or administrative,
governmental or regulatory body, agency or authority (a "GOVERNMENTAL ENTITY")
is necessary for the execution and delivery by the Company of this Agreement or
the consummation by the Company of the transactions contemplated hereby, except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notice would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company. Except as set forth in Section 3.6 of the Company Disclosure Schedule,
neither the execution, delivery and performance of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the respective
certificate or articles of incorporation or bylaws (or similar governing
documents) of the Company or any of its subsidiaries, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions or
provisions of any note,
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bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party, including, without limitation, station affiliation agreements, or by
which any of them or any of their respective properties or assets may be bound,
or (iii) violate any order, writ, injunction, decree, law, statute, rule or
regulation ("LAW") applicable to the Company or any of its subsidiaries or any
of their respective properties or assets, except in the case of (ii) or (iii)
for violations, breaches or defaults which would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company. No rights of first refusal or first offer, preemptive rights or similar
rights of participation are applicable to the transactions contemplated by this
Agreement.
3.7 NO DEFAULT. Except as disclosed in Section 3.7 of the Company
Disclosure Schedule, none of the Company or its subsidiaries is in default or
violation (and no event has occurred which with or without due notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its certificate or articles of incorporation or
bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its subsidiaries is now a party or by which any
of them or any of their respective properties or assets may be bound or (iii)
any order, writ, injunction, decree, law, statute, rule or regulation applicable
to the Company, its subsidiaries or any of their respective properties or
assets, except, in the case of (i), for immaterial defaults with respect to
subsidiaries and, in the case of (ii) or (iii), for violations, breaches or
defaults which do not or would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company.
3.8 ABSENCE OF CHANGES. Except as and to the extent disclosed by the
Company in the Filed Company SEC Reports or as disclosed in Section 3.8 of the
Company Disclosure Schedule, since January 1, 1999, the Company and its
subsidiaries have, in all material respects, conducted their businesses in the
ordinary and usual course consistent with past practice and there has not been:
(a) any event, change, occurrence, development or state of circumstances or
facts which does or would reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect on the Company, excluding, any change,
effect, event, development, state of facts or circumstances or occurrence (i)
relating to the United States economy in general, (ii) relating to events or
developments affecting the industry in which the Company and its subsidiaries
operate generally, (iii) with respect to station affiliation agreements only,
arising out of or otherwise resulting from the announcement of the execution and
delivery of this Agreement or (iv) arising out of or otherwise resulting from
any action taken or not taken by the Company at the direction of Parent or
Merger Sub in compliance with the terms and conditions of this Agreement;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any subsidiary of
any Company Securities;
(c) any amendment of any term of any outstanding security of the Company or
any subsidiary;
(d) (i) any incurrence or assumption by the Company or any subsidiary of any
indebtedness for borrowed money (A) other than in the ordinary course of
business consistent with past practice or (B) in connection with any acquisition
or capital expenditure permitted by Section 5.1 or (ii) any guarantee,
endorsement or other incurrence or assumption of liability (whether directly,
contingently or otherwise) by the Company or any subsidiary for the obligations
of any other person (other than any wholly owned subsidiary of the Company),
other than in the ordinary course of business consistent with past practice;
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(e) any creation or assumption by the Company or any subsidiary of any Lien
(other than (i) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (ii) Liens for taxes, assessments
or governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded; PROVIDED that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(iii) statutory Liens of landlords, carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens arising in the ordinary
course of business and with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings; (iv) Liens securing zoning
restrictions, easements, rights-of-way, restrictions under governmental licenses
or authorizations, restrictions and other similar charges or encumbrances or
minor defects in title not interfering in any material respect with the business
of such party; (v) Liens incurred in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security or similar legislation; and (vi) Liens which do not materially
interfere with the occupant's use and enjoyment of such real property or
materially detract from or diminish the value thereof (collectively, "PERMITTED
LIENS")) of any kind or nature whatsoever on any material asset of the Company
or any subsidiary other than in the ordinary course of business consistent with
past practice;
(f) any making of any loan, advance or capital contribution to or investment
in any person by the Company or any subsidiary other than (i) any acquisition
permitted by Section 5.1, (ii) loans, advances or capital contributions to or
investments in wholly owned subsidiaries of the Company or (iii) loans or
advances to employees of the Company or any subsidiary made in the ordinary
course of business consistent with past practice not in excess of $50,000
individually or $250,000 in the aggregate;
(g) (i) any contract or agreement entered into by the Company or any
subsidiary relating to any material acquisition or disposition of any assets or
business or (ii) any modification, amendment, assignment, termination or
relinquishment by the Company or any subsidiary of any contract, license or
other right (including any insurance policy naming it as a beneficiary or a loss
payee) that does or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company, other than, in the case of
(i) and (ii), transactions, commitments, contracts or agreements in the ordinary
course of business consistent with past practice and those contemplated by this
Agreement;
(h) any material change in any method of accounting or accounting principles
or practice (for financial accounting or tax purposes) by the Company or any
subsidiary, except for any such change required by GAAP;
(i) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any of its subsidiaries other than, with
respect to employees (but not executive officers or directors), in the ordinary
course of business or involving payments not in excess of $25,000 in any one
case, or $100,000 in the aggregate or in accordance with the Company's severance
guidelines in effect on the date hereof; (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company or any
of its subsidiaries; (iii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements; or (iv) increase
in compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any of its subsidiaries other than, in the case of
clauses (ii), (iii) or (iv) the entering into of such agreements (or amendments
thereto) or the payment of increases made prior to the date hereof in the
ordinary and usual course of business consistent with past practice; or
(j) any action or proceeding commenced or, to the knowledge of the Company,
threatened or proposed, to condemn or take by eminent domain or other
governmental action any real or personal property owned or used by the Company
and its subsidiaries.
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3.9 LITIGATION. Except as disclosed by the Company in the Filed Company
SEC Reports or as disclosed in Section 3.9 of the Company Disclosure Schedule,
(i) there is no suit, claim, action, proceeding or investigation pending or, to
the knowledge of the Company, threatened against the Company or any of its
subsidiaries or any of their respective properties or assets and (ii) none of
the Company or its subsidiaries is subject to any outstanding judgment, order,
writ, injunction or decree, which, in the case of either (i) or (ii), would
require the Company to make payments in excess of $250,000 with respect to any
single suit, claim, action, proceeding, investigation, judgment, order, writ,
injunction or decree, or has had or would reasonably be expected to have a
Material Adverse Effect on the Company.
3.10 COMPLIANCE WITH APPLICABLE LAW. Except as disclosed by the Company in
the Filed Company SEC Reports or Section 3.10 of the Company Disclosure
Schedule, and except for failures which do not or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company, (i) the Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "COMPANY
PERMITS"), (ii) the Company and its subsidiaries are in compliance with the
terms of the Company Permits, (iii) the businesses of the Company and its
subsidiaries are not being conducted in violation of any Law of any Governmental
Entity, including Laws relating to the protection of natural resources, the
environment and public and employee health and safety or pollution or the
release of or exposure to hazardous materials (collectively, "ENVIRONMENTAL
LAWS"), and (iv) except as disclosed in Section 3.13 hereof, no investigation or
review by any Governmental Entity with respect to the Company or its
subsidiaries is pending or, to the knowledge of the Company, threatened, nor, to
the knowledge of the Company, has any Governmental Entity indicated an intention
to conduct the same.
3.11 EMPLOYEE PLANS.
(a) Section 3.11(a) of the Company Disclosure Schedule lists all "employee
benefit plans," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all other employee benefit plans
or other benefit arrangements, including but not limited to all employment and
consulting agreements and all bonus and other incentive compensation, deferred
compensation, disability, severance, retention, salary continuation, stock and
stock-related award, stock option, stock purchase or collective bargaining
agreements, plans, policies and arrangements which the Company or any of its
subsidiaries maintains, is a party to, contributed to or has any obligation to
or liability for in respect of current or former employees and directors (each,
a "COMPANY EMPLOYEE BENEFIT PLAN" and collectively, the "COMPANY EMPLOYEE
BENEFIT PLANS"). None of the Company Employee Benefit Plans other than a
"multiemployer plan" (within the meaning of section 3(37) of ERISA) is subject
to Title IV of ERISA.
(b) True, correct and complete copies of the following documents, which are
correct and complete in all material respects, with respect to each of the
Company EMPLOYEE BENEFIT Plans (other than a multiemployer plan (as defined
below)), have been made available to Parent, to the extent applicable: (i) any
plans, all material amendments thereto and related trust documents, and
amendments thereto; (ii) the most recent Forms 5500 and all schedules thereto
and the most recent actuarial report, if any; (iii) the most recent IRS
determination letter; (iv) summary plan descriptions; (v) material written
communications to employees relating to the Company EMPLOYEE BENEFIT Plans; and
(vi) written descriptions of all material non-written agreements relating to the
Company EMPLOYEE BENEFIT Plans.
(c) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, (i) all payments required to be made by or under
any Company Employee Benefit Plan, any related trusts, insurance policies or
ancillary agreements, or any collective bargaining agreement have been timely
made, (ii) the Company and its subsidiaries have performed all obligations
required to be
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performed by them under any Company Employee Benefit Plan, (iii) the Company
Employee Benefit Plans have been administered and are in compliance in all
respects with their terms and the requirements of ERISA, the Code and other
applicable laws, and (iv) there are no actions, suits, arbitrations, claims
(other than routine claims for benefits) or administrative proceedings pending
or, to the knowledge of the Company, threatened with respect to any Company
Employee Benefit Plan.
(d) Except as disclosed in Section 3.11(d) of the Company Disclosure
Schedule, each Company Employee Benefit Plan and its related trust which are
intended to be "qualified" within the meaning of Sections 401(a) and 501(a) of
the Code, respectively, have been determined by the Internal Revenue Service to
be so "qualified" under such Sections, as amended by the Tax Reform Act of 1986,
and the Company knows of no fact which would adversely affect the qualified
status of any such Company Employee Benefit Plan and its related trust.
(e) Except as disclosed in Section 3.11(e) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, solely or in
connection with any other event, (i) increase any benefits otherwise payable
under any Company Employee Benefit Plan, or (ii) result in the acceleration of
the time of payment or vesting of any such benefits. Except as disclosed in
Section 3.11(e) of the Company Disclosure Schedule, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will, solely or in connection with any other event, result in any payment
becoming due, or increase the compensation due, to any current or former
employee or director of the Company or any of its subsidiaries.
(f) Except as disclosed in Section 3.11(f) of the Company Disclosure
Schedule, none of the Company Employee Benefit Plans provides for
post-employment life or health insurance, benefits or coverage for any
participant or any beneficiary of a participant, except as may be required under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(g) Neither the Company nor any of its subsidiaries has incurred, nor, to
the Company's knowledge is likely to incur any withdrawal liability with respect
to any "multiemployer plan" (within the meaning of section 3(37) of ERISA) which
remains unsatisfied in an amount which would have a Material Adverse Effect. The
termination of, or withdrawal from, any multiemployer plan to which the Company
or any of its subsidiaries contributes, on or prior to the Effective Time, will
not subject the Company or any of its subsidiaries to any liability under Title
IV of ERISA that would reasonably be expected to have a Material Adverse Effect
on the Company.
3.12 LABOR AND EMPLOYMENT MATTERS.
(a) Section 3.12 of the Company Disclosure Schedule sets forth a list of all
employment or severance compensation agreements that require the Company or its
subsidiaries to make payments in excess of $250,000 annually, and labor or
collective bargaining agreements to which the Company or any subsidiary is
party. Except as set forth in Section 3.12 of the Company Disclosure Schedule,
(i) there are no employment or severance compensation agreements that require
the Company or its subsidiaries to make payments in excess of $250,000 annually,
(ii) there are no labor or collective bargaining agreements which pertain to
employees of the Company or any of its subsidiaries and (iii) neither the
Company nor any of its subsidiaries is a party to or bound by any agreement with
any employee or consultant pursuant to which such person would be entitled to
receive any additional compensation (including stock options) or an accelerated
payment of compensation (including the accelerated vesting of stock options) as
a result of the (A) consummation of the transactions contemplated hereby or (B)
the termination of such employment or consulting following such consummation.
The Company has heretofore made available to Parent true and complete copies of
the agreements listed on Section 3.12 of the Company Disclosure Schedule,
together with all amendments,
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modifications, supplements and side letters affecting the duties, rights and
obligations of any party thereunder.
(b) Except as disclosed in Section 3.12 of the Company Disclosure Schedule,
no employees of the Company or any of its subsidiaries are represented by any
labor organization; no labor organization or group of employees of the Company
or any of its subsidiaries has made a pending demand for recognition or
certification; and, to the Company's knowledge, there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or threatened in writing to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. To the Company's knowledge, there are no organizing activities
involving the Company or its subsidiaries pending with any labor organization or
group of employees of the Company or any of its subsidiaries.
(c) Except as disclosed in Section 3.12 of the Company Disclosure Schedule,
there are no material unfair labor practice charges, grievances or complaints
pending before any Government Entity or threatened in writing by or on behalf of
any employee or group of employees of the Company or its subsidiaries.
(d) Except as disclosed in Section 3.12 of the Company Disclosure Schedule,
there are no material complaints, charges or claims against the Company or its
subsidiaries filed and currently pending, or threatened in writing to be brought
or filed, with any Governmental Entity or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment of any individual by the Company or its subsidiaries.
(e) Except as disclosed in Section 3.12 of the Company Disclosure Schedule,
the Company and each of its subsidiaries is in compliance in all material
respects with all Laws relating to the employment of labor, including all such
Laws and orders relating to wages, hours, collective bargaining, discrimination,
civil rights, safety and health workers' compensation and the collection and
payment of withholding and/or Social Security Taxes and similar Taxes.
3.13 TAXES.
(a) Except as disclosed in Section 3.13 of the Company Disclosure Schedule:
(i) Each of the Company and its subsidiaries has timely filed, or has
caused to be timely filed on its behalf (taking into account any extension
of time within which to file), all federal income Tax Returns (as
hereinafter defined) and all other material Tax Returns required to be filed
by it, and all such filed Tax Returns are true, complete and accurate in all
material respects. All Taxes shown to be due on such Tax Returns have been
timely paid.
(ii) The most recent financial statements contained in the Company SEC
Reports reflect an adequate reserve for all Taxes payable by the Company and
its subsidiaries for all Taxable periods and portions thereof through the
date of such financial statements. No deficiency with respect to Taxes has
been proposed, asserted or assessed against the Company or any subsidiary in
excess of $250,000. No liens for Taxes exist with respect to any asset of
Company or any subsidiary of the Company, except for statutory liens for
Taxes not yet due.
(iii) The federal income Tax Returns of the Company and each subsidiary
of the Company have been examined by and settled with the United States
Internal Revenue Service (or the applicable statute of limitations has
expired) for all years through 1994, and the material state income and
franchise Tax Returns and the foreign Tax Returns of the Company and each
subsidiary of the Company have been examined by and settled with the
applicable Tax authorities for the years specified in Section 3.13 of the
Company Disclosure Schedule. All assessments for Taxes due with respect to
such completed and settled examinations or any concluded litigation
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have been fully paid. Neither the Company nor its subsidiaries has requested
or been granted an extension of time for filing any Tax Return that has not
yet been filed.
(iv) Neither the Company nor any subsidiary of the Company is a party to
a Tax allocation or sharing agreement.
(v) Neither the Company nor any subsidiary of the Company has
constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for Tax-free treatment under Section 355 of
the Code.
(vi) Neither the Company nor any subsidiary of the Company (i) has been
a member of an affiliated group of corporations within the meaning of
Section 1504 of the Code, other than the affiliated group of which the
Company is the common parent or (ii) has any liability for the Taxes of any
person (other than the Company and its subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(vii) No audit or other administrative or court proceedings are pending
with respect to federal, state or foreign income or franchise Taxes of the
Company or any subsidiary of the Company and no written notice thereof has
been received. Neither the Company nor any subsidiary has any outstanding
agreements, waivers, or arrangements extending the statutory period of
limitation applicable to any claim for, or the period for the collection or
assessment of, federal, state or foreign income or franchise Taxes due from
or with respect to the Company or any subsidiary for any taxable period.
(viii) No claim has been made in writing by a Tax authority in a
jurisdiction where neither the Company nor any subsidiary of the Company
files Tax Returns that the Company or any subsidiary of the Company is or
may be subject to taxation in that jurisdiction.
(ix) Neither the Company nor any subsidiary of the Company is a party to
any contract, agreement or other arrangement which provides for the payment
of any amount which would not be deductible by reason of Section 162(m) or
Section 280G of the Code.
(x) The Company has made available to Parent true and complete copies of
(i) all federal, state and foreign income and franchise Tax Returns of the
Company and its subsidiaries for the preceding three Taxable years and (ii)
any audit report issued within the last three years (or otherwise with
respect to any audit or proceeding in progress) relating to Taxes of the
Company or any subsidiary of the Company.
(xi) No subsidiary of the Company owns any Shares.
(xii) None of the Company or any of its subsidiaries has taken, agreed
to take or will take any action that would prevent the Merger from
constituting a reorganization qualifying under the provisions of Section
368(a) of the Code.
(xiii) The Company and each of its subsidiaries are not currently, have
not been within the last five years, and do not anticipate becoming, a
"United States real property holding corporation" within the meaning of
Section 897(c) of the Code.
(xiv) Neither the Company nor any subsidiary has filed a consent under
Section 341(f) of the Code concerning collapsible corporations.
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For purposes of this Agreement:
"TAX" means any and all United States federal, state, county or local, or
foreign or provincial taxes, assessments, duties, levies or similar charges of
any kind including, without limitation, all income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, value added,
alternative or added minimum, ad valorem or transfer tax, or any other tax,
custom, duty or governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty imposed by any governmental
authority.
"TAX RETURNS" means all federal, state, local, provincial and foreign Tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax return relating to Taxes.
3.14 MATERIAL CONTRACTS.
(a) Section 3.14 of the Company Disclosure Schedule (together with Section
3.12 of the Company Disclosure Schedule) lists all material contracts and
agreements (and all material amendments, modifications and supplements thereto
and all side letters to which the Company or any of its subsidiaries is a party
materially affecting the obligations of any party thereunder) to which the
Company or any of its subsidiaries is a party or by which any of its properties
or assets are bound including, without limitation, all: (i) employment,
severance, product design or development, personal services or consulting
agreements (other than contracts with affiliates or as identified in clause
(iii) of this Section 3.14) pursuant to which the Company or its subsidiaries
are required to pay more than $250,000 annually, or by which the Company or its
subsidiaries receive more than $1,000,000 annually; (ii) except for contracts
relating to the normal business operations of the Company and its subsidiaries
entered into in the ordinary course of business consistent with past practice,
contracts pursuant to which the Company is obligated to indemnify any other
individual or entity; (iii) contracts and agreements for the sale of advertising
or advertising services or with advertising agencies or representatives, that
contain exclusivity or "most favored nation" provisions and account,
individually or in the aggregate for a series of related contracts for a single
advertising client, for revenues or expenses per annum, as the case may be, in
excess of $1,000,000; (iv) contracts and agreements providing for a right of
first refusal, first negotiation, "tag along" or "drag along" rights applicable
to any capital stock or material assets of the Company or any of its
subsidiaries; (v) partnership, joint venture or cooperative development
agreements pursuant to which the Company could be required to contribute or make
payments in excess of $1,000,000; (vi) contracts and agreements with any
Governmental Entity requiring payments by either party in excess of $500,000;
(vii) material promotion or marketing arrangements; (viii) other than with
respect to intercompany indebtedness or as set forth in the consolidated
financial statements of the Company or the notes thereto, loan or credit
agreements, mortgages, indentures, or other agreements on instruments evidencing
indebtedness for borrowed money by the Company or any of its subsidiaries or any
such agreement or instrument pursuant to which indebtedness for borrowed money
may be incurred, including guaranties; (ix) contracts and agreements providing
for the provision of any services, products or payments to or from any officer,
director, employee or other affiliate of the Company or such officer, director
or employee; (x) contracts and agreements that purport to limit, curtail or
restrict the ability of the Company or any of its subsidiaries, or would
restrict the ability of Parent or any of its subsidiaries, to compete in any
geographic area or line of business; (xi) contracts or agreements that would be
required to be filed as an exhibit to a Form 10-K filed by the Company if such
Form 10-K were required to be filed on the date hereof; and (xii) all
commitments and agreements to enter into any contracts or agreements relating to
any of the foregoing (collectively, together with any such contracts entered
into in accordance with Section 5.1 hereof, the "COMPANY MATERIAL CONTRACTS").
The Company has heretofore delivered or made available to Parent true, correct
and complete copies of all Company Material Contracts.
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(b) Each of the Company Material Contracts is valid and enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other laws affecting the enforcement of creditors' rights
generally, and the application of equitable principles (whether considered in a
proceeding at law or in equity) and there is no default under any Company
Material Contract either by the Company or any of its subsidiaries or, to the
knowledge of the Company, by any other party thereto, and no event has occurred
that with the lapse of time or the giving of notice or both would constitute a
default thereunder by the Company or any of its subsidiaries (including the
consummation of the Merger) or, to the knowledge of the Company, any other
party, in any such case in which such default or event does, or would reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company.
(c) To the Company's knowledge, no party to any such Company Material
Contract has given notice to the Company or any of its subsidiaries of or made a
claim against the Company or any of its subsidiaries with respect to any
material breach or default thereunder.
(d) To the knowledge of the Company, during the three months immediately
prior to the date hereof, the parties to station affiliation agreements with the
Company or its subsidiaries have not communicated to the Company or its
subsidiaries an intent to terminate or not to renew any of such affiliation
agreements at a rate that is greater than the rate of such communications during
the nine months immediately prior to such three month period.
3.15 INSURANCE. The Company and each of its subsidiaries maintains
adequate insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by corporations of established
reputations engaged in the same or similar business and similarly situated, of
such types and in such amounts as are customarily carried under similar
circumstances by such other corporations.
3.16 REAL PROPERTY.
(a) Section 3.16(a) of the Company Disclosure Schedule sets forth all of the
real property owned in fee by the Company and its subsidiaries that is material
to the conduct of the business of the Company and its subsidiaries, taken as a
whole. Each of the Company and its subsidiaries has good and marketable title to
each parcel of real property owned by it free and clear of all Liens, except
Permitted Liens.
(b) Section 3.16(b) of the Company Disclosure Schedule sets forth all
leases, subleases and other agreements (the "COMPANY REAL PROPERTY LEASES") (i)
involving payments by the Company or any of its subsidiaries in excess of
$500,000 per year under which the Company or any of its subsidiaries uses or
occupies or has the right to use or occupy, now or in the future, any real
property or (ii) that are material to the conduct of the business of the Company
and its subsidiaries, taken as a whole. The Company has heretofore delivered or
made available to Parent true, correct and complete copies of all Company Real
Property Leases (and all material modifications, amendments and supplements
thereto and all side letters to which the Company or any of its subsidiaries is
a party materially affecting the obligations of any party thereunder). Each
Company Real Property Lease constitutes the valid and legally binding obligation
of the Company or its subsidiaries, enforceable in accordance with its terms and
is in full force and effect, except as enforcement may be limited by general
principles of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally. All rent and other sums and charges
payable by the Company and its subsidiaries as tenants under each Company Real
Property Lease are current, no termination event or condition or uncured default
of a material nature on the part of the Company or any such subsidiary or, to
the Company's knowledge, the landlord, exists under any Company Real Property
Lease. Each of the Company and its subsidiaries has a good and valid leasehold
interest in each parcel of real property leased by it free and clear of all
Liens, except Permitted Liens.
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(c) No party to any such Company Real Property Leases has given written
notice to the Company or any of its subsidiaries of or made a claim against the
Company or any of its subsidiaries with respect to any material breach or
default thereunder.
3.17 TANGIBLE PROPERTY. With respect to the tangible properties and assets
of the Company and its subsidiaries (excluding real property), the Company and
its subsidiaries have good title to, or hold pursuant to valid and enforceable
leases, all such properties and assets, except where the failure to have good
title or hold valid and enforceable leases does not and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company. All of the material assets of the Company and its subsidiaries have
been maintained and repaired for their continued operation and are in good
repair and condition (ordinary wear and tear excepted) in all material respects.
3.18 INTELLECTUAL PROPERTY.
(a) Subject to such exceptions which, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect
on the Company, the Company and its subsidiaries own or possess adequate
licenses or other valid rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights copyrights service marks, trade
secrets, applications for trademarks and for service marks, know-how and other
proprietary rights and information used or held for use in connection with the
business of the Company and its subsidiaries as currently conducted or as
contemplated to be conducted and, to the Company's knowledge or as disclosed in
Section 3.18 of the Company Disclosure Schedule, there has been no assertion or
claim challenging the validity or enforceability of any of the foregoing which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Company. Subject to such exceptions which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect on the Company, there have been no
claims made or notices that the conduct of the Company's business has infringed
the intellectual property rights of any third party.
(b) Except as disclosed in Section 3.18 of the Company Disclosure Schedule,
to the knowledge of the Company: (i) the Company owns all right, title and
interest in, or possesses valid licenses or other rights to use, all computer
software programs, including, without limitation, the Metro Source Software,
developed by the Company or by the Company's employees on behalf of the Company
(the "COMPANY SOFTWARE"), and such programs perform in all material respects in
accordance with the specifications, documentation and other written materials
used in connection therewith and are operational in the business environment,
are in machine readable form, contain all current revisions thereof, and include
all tapes and object and source codes; (ii) neither the Company nor any employee
or agent of the Company has developed or assisted in the enhancement of the
Company Software, except for enhancements which are owned or licensed by the
Company; (iii) no employee of the Company is, or is now expected to be, in
default under any term of any employment contract, agreement or arrangement
relating to the Company Software or any noncompetition arrangement, or any other
contract or any restrictive covenant relating to the Company Software or its
development or exploitation; (iv) the Company has no obligation to compensate
any Person for the development, use, sale or exploitation of the Company
Software nor has the Company granted to any other Person any license, option or
other rights to develop, use, sell or exploit in any manner the Company
Software, whether requiring the payment of royalties or not; (v) the Company has
taken appropriate measures to protect the confidential and proprietary nature of
the Company Software; (vi) there have been no patents applied for and no
copyrights registered for any part of the Company Software; and (vii) there are
no trademark rights of any person or entity (other than the Company) with
respect to any of the Company Software, except in respect of clauses (i)-(vii)
for such exceptions which, individually or in the
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aggregate, do not or would not reasonably be expected to have a Material Adverse
Effect on the Company.
3.19 YEAR 2000. The Company and its subsidiaries have developed and are
executing a plan with respect to Year 2000 readiness (the "COMPANY YEAR 2000
PLAN"). The Company has provided Parent with a copy of the Company Year 2000
Plan and has provided a report on the status of the Company Year 2000 Plan
through April 30, 1999 that is accurate in all material respects. The Company
Year 2000 Plan addresses the Year 2000 issues which, to the knowledge of the
Company, are material to the Company and its subsidiaries, including internal
information systems and process control risks, embedded circuitry risks and
third party risks.
3.20 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Company and its subsidiaries, all of which have
been made available to Parent, are complete and correct in all material respects
and have been maintained in accordance with sound business practices and the
requirements of Section 13(b)(2) of the Exchange Act (regardless of whether the
Company and its subsidiaries are subject to that Section), including the
maintenance of and adequate system of internal controls. The minute books of the
Company and its subsidiaries contain accurate and complete records (in all
material respects) of all meetings held of and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Company and its subsidiaries. At the Closing, all of those books and
records will be in the possession of the Company and its subsidiaries.
3.21 ABSENCE OF QUESTIONABLE PAYMENTS. Neither the Company nor any of its
subsidiaries nor, to the Company's knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or any of its
subsidiaries, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in violation of Section 30A of the
Exchange Act. Neither the Company nor any of its subsidiaries nor, to the
Company's knowledge, any director, officer, agent, employee or other person
acting on behalf of the Company or any of its subsidiaries, has accepted or
received any unlawful contributions, payments, gifts, or expenditures.
3.22 OPINION OF FINANCIAL ADVISOR. Goldman, Sachs & Co. (the "COMPANY
FINANCIAL ADVISOR") has delivered to the Company Board its opinion, dated the
date of this Agreement, to the effect that, as of such date, the Exchange Ratio
is fair to the holders of Shares from a financial point of view, and such
opinion has not been withdrawn or adversely modified.
3.23 BROKERS. No broker, finder or investment banker (other than the
Company Financial Advisor, a true and correct copy of whose engagement agreement
has been provided to Parent) is entitled to any brokerage, finder's or other fee
or commission or expense reimbursement in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
the Company or any of its affiliates.
3.24 TAKEOVER STATUTES; DISSENTERS' RIGHTS. The Company has taken all
action required to be taken by it in order to exempt this Agreement and the
Company Stockholders Voting Agreement and the transactions contemplated hereby
and thereby from, and this Agreement and the transactions contemplated hereby
and thereby (the "COVERED TRANSACTIONS") are exempt from, the requirements of
any "moratorium", "control share", "fair price", "affiliate transaction",
"business combination" or other anti-takeover Laws and regulations
(collectively, "TAKEOVER STATUTES") of the State of Delaware, including, without
limitation, Section 203 of the DGCL, and, to the knowledge of the Company, all
other states, or any anti-takeover provision in the Company's certificate of
incorporation. The
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provisions of Section 203 of the DGCL do not apply to the Covered Transactions.
Holders of Shares do not have dissenters' rights in connection with the Merger.
3.25 EXISTING DISCUSSIONS. Except as disclosed in Section 3.25 of the
Company Disclosure Schedule, as of the date hereof, neither the Company nor any
of its subsidiaries is engaged, directly or indirectly, in any discussions or
negotiations with any other party with respect to a Company Acquisition Proposal
(as defined in Section 5.5(c)).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company as
follows:
4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Parent and each of its subsidiaries is a corporation or legal entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate, partnership or similar power and authority to own, lease and operate
its properties and to carry on its businesses as now conducted and proposed by
Parent to be conducted.
(b) Except as set forth in Section 4.1(b) of the Disclosure Schedule
previously delivered by Parent to the Company (the "PARENT DISCLOSURE
SCHEDULE"), Parent has no subsidiaries and does not own, directly or indirectly,
beneficially or of record, any shares of capital stock or other security of any
other entity or any other investment in any other entity (other than marketable
securities which are held as investments and are reflected as such on the
consolidated financial statements of PARENT).
(c) Parent and each of its subsidiaries is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing has not had
and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent.
(d) Parent has heretofore delivered or made available to the Company
accurate and complete copies of the articles or certificate of incorporation and
by-laws, or other similar organizational documents, as currently in effect, of
Parent and each of its subsidiaries.
4.2 CAPITALIZATION OF PARENT AND ITS SUBSIDIARIES.
(a) The authorized capital stock of Parent consists of: (i) 117,000,000
shares of Parent Common Stock, of which, as of June 1, 1999, 27,996,135 shares
were issued and outstanding, EXCLUDING 7,058,595 shares WHICH WERE held in
treasury, (ii) 3,000,000 shares of Class B Stock, par value $.01 per share
("PARENT CLASS B STOCK"), of PARENT, of which, as of June 1, 1999, 351,733
shares were issued and outstanding and (iii) 10,000,000 shares of Preferred
Stock, par value $.01 per share, none of which was outstanding as of June 1,
1999. All of the issued and outstanding shares of Parent Common Stock and Parent
Class B Stock have been validly issued, and are fully paid, nonassessable and
free of preemptive rights. As of June 1, 1999, (i) 3,832,500 shares of Parent
Common Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of outstanding options granted by
Parent to purchase shares of Parent Common Stock (the "PARENT STOCK OPTIONS")
issued pursuant to the Parent stock option plans listed in Section 4.2(a) of the
Parent Disclosure Schedule (the "PARENT OPTION PLANS"), (ii) 351,733 shares of
the Parent Common Stock were reserved for issuance and issuable upon or
otherwise deliverable in connection with the conversion of outstanding shares of
Parent Class B Stock and (iii) 4,000,000 shares of the Parent Common Stock were
reserved for issuance upon conversion of warrants described in Section 4.2(a) of
the Parent Disclosure Schedule. Since
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January 1, 1999, no shares of Parent's capital stock have been issued other than
pursuant to the exercise of Parent Stock Options already in existence on such
date and, since March 10, 1999, no Parent Stock Options have been granted.
Section 4.2(a) of the Parent Disclosure Schedule sets forth a complete and
correct list of all holders of options to acquire shares of Parent Common Stock,
including such person's name, the number of options (vested, unvested and total)
held by such person, the remaining term for vesting of such options and the
exercise price for each such option. Except as set forth above in this Section
4.2(a), as of the date hereof, there are outstanding (i) no shares of capital
stock or other voting securities of Parent, (ii) no securities of Parent or its
subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of Parent, (iii) no options or other rights to acquire from
Parent or its subsidiaries, and no obligations of Parent or its subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent, and (iv) no
equity equivalents, or interests in the ownership or earnings, of Parent or its
subsidiaries or other similar rights (including stock appreciation rights)
(collectively, "PARENT SECURITIES"). There are no outstanding obligations of
Parent or its subsidiaries to repurchase, redeem or otherwise acquire any Parent
Securities. The Shares of Parent Common Stock and Parent Series A Preferred
Stock to be issued pursuant to the Merger will be duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights and,
with respect to the Parent Common Stock, when issued, be registered under the
Securities Act and the Exchange Act and registered or exempt from registration
under applicable state securities laws. Parent has reserved for issuance shares
of Parent Common Stock, issuable upon conversion of shares of Parent Series A
Preferred Stock. Except as set forth in Section 4.2(a) of the Parent Disclosure
Schedule, there are no shareholder agreements, voting trusts or other agreements
or understandings to which Parent is a party or to which it is bound relating to
the voting or disposition of any shares of capital stock of Parent.
(b) All of the outstanding capital stock of Parent's subsidiaries is owned
by Parent, directly or indirectly, free and clear of any Lien or any other
limitation or restriction (including any restriction on the right to vote or
sell the same, except as may be provided as a matter of law). There are no
securities of Parent or its subsidiaries convertible into or exchangeable for,
no options or other rights to acquire from Parent or its subsidiaries, and no
other contract, understanding, arrangement or obligation (whether or not
contingent) providing for the issuance or sale, directly or indirectly of, any
capital stock or other ownership interests in, or any other securities of, any
subsidiary of Parent. There are no outstanding contractual obligations of Parent
or its subsidiaries to repurchase, redeem or otherwise acquire any outstanding
shares of capital stock or other ownership interests in any subsidiary of
Parent.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Each of Parent and Merger Sub has all necessary corporate power and
authority to execute and deliver this Agreement and, subject to obtaining the
Parent Requisite Vote (as defined below), to consummate the transactions
contemplated hereby to be performed by it (including, in the case of Parent, the
issuance of shares of Parent Common Stock in the Merger (the "SHARE ISSUANCE")
and the issuance of shares of Parent Series A Preferred Stock in the Merger).
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby to be performed by it (including, in the case
of Parent, the Share Issuance and the issuance of shares of Parent Series A
Preferred Stock in the Merger) have been duly and validly authorized and
approved by the Board of Directors of Parent (the "PARENT BOARD"), the Board of
Directors of Merger Sub and Parent as the sole stockholder of Merger Sub and no
other corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than, with respect to the Share Issuance, the approval by the holders of
a majority of the then outstanding shares of Parent Common Stock and Parent
Class B Stock acting as a single class (the "PARENT REQUISITE VOTE")). This
Agreement has been duly and validly executed and delivered by Parent and Merger
Sub and constitutes a valid, legal and binding agreement of Parent and Merger
Sub, enforceable against each of them in accordance with its terms, subject to
applicable bankruptcy,
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insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally, and the application of equitable principles (whether
considered in a proceeding at law or in equity).
(b) The Parent Board has duly and validly approved, and taken all corporate
actions required to be taken by the Parent Board for, the consummation of the
transactions, including the Merger, the Share Issuance and the issuance of
shares of Parent Series A Preferred Stock in the Merger, contemplated hereby and
has resolved (i) to deem the Share Issuance advisable and fair to, and in the
best interests of, Parent and its stockholders and (ii) to recommend to Parent's
stockholders that they approve the Share Issuance.
(c) The Parent Board has directed that the Share Issuance be submitted to
Parent's stockholders for their approval at the Parent Stockholders Meeting (as
defined in Section 5.4(d)).
(d) The Parent Requisite Vote is the only vote of the holders of any class
or series of capital stock of Parent necessary to approve the Share Issuance. No
other vote or consent of the stockholders of Parent is required by law, the
certificate of incorporation or bylaws of Parent or otherwise in order for
Parent to approve the Share Issuance.
4.4 SEC REPORTS; FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES.
(a) Parent has filed all required forms, reports and documents with the SEC
since December 31, 1995 (the "PARENT SEC REPORTS"), each of which has complied
in all material respects with all applicable requirements of the Securities Act
and the Exchange Act, each as in effect on the dates such forms, reports and
documents were filed. None of the Parent SEC Reports, including, without
limitation, any financial statements or schedules included or incorporated by
reference therein, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of Parent included in the Parent SEC Reports
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto in effect on the date when such Parent SEC Reports were filed and fairly
present, in all material respects, in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments that have
not been and are not expected to be material in amount).
(b) Neither Parent nor any of its subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, and
there is no existing condition, situation or set of circumstances which could be
expected to result in such a liability or obligation, except for liabilities or
obligations (i) disclosed in the Parent Disclosure Schedule, (ii) reflected in
the Parent SEC Reports filed prior to the date hereof (the "FILED PARENT SEC
REPORTS"), (iii) incurred in the ordinary course of business which do not and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent or (iv) incurred in connection with the
transactions contemplated hereby.
(c) Parent has heretofore made available to the Company a complete and
correct copy of any material amendments or modifications, which have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by Parent with the SEC pursuant to the Exchange Act.
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4.5 INFORMATION SUPPLIED. (a) None of the information supplied or to be
supplied by Parent or Merger Sub for inclusion or incorporation by reference in
the Joint Proxy Statement/Prospectus will, at the date the Joint Proxy
Statement/Prospectus is mailed to stockholders of the Company, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
(b) Neither the S-4 nor any amendment or supplement thereto will, at the
time it becomes effective under the Securities Act or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. No representation or warranty is made by Parent or Merger Sub in
this Section 4.5(b) with respect to (i) statements made or incorporated by
reference therein based on information supplied by the Company or any of its
subsidiaries for inclusion or incorporation by reference in the S-4 or (ii)
compliance with the requirements of the Securities Act or the Exchange Act with
respect to documents incorporated by reference in the S-4 from the Company SEC
Reports. The S-4 will comply as to form in all material respects with the
applicable provisions of the Securities Act and the rules and regulations
thereunder.
4.6 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, the filing and recordation of a
certificate of merger and a certificate of designations relating to the Parent
Series A Preferred Stock as required by the DGCL, and as otherwise set forth in
Section 4.6 of the Parent Disclosure Schedule, no filing with or notice to, and
no permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery by Parent or Merger Sub of this
Agreement or the consummation by Parent and Merger Sub of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Except as set forth in Section
4.6 of the Parent Disclosure Schedule, neither the execution, delivery and
performance of this Agreement by Parent or Merger Sub nor the consummation by
Parent or Merger Sub of the transactions contemplated hereby will (i) conflict
with or result in any breach of any provision of the respective certificate or
articles of incorporation or bylaws (or similar governing documents) of Parent
or any of its subsidiaries, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or any of its subsidiaries is a party, including,
without limitation, station affiliation agreements, or by which any of them or
any of their respective properties or assets may be bound, or (iii) violate any
Law applicable to Parent or any of its subsidiaries or any of their respective
properties or assets, except in the case of (ii) or (iii) for violations,
breaches or defaults which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent. No rights
of first refusal or first offer, preemptive rights or similar rights of
participation are applicable to the transactions contemplated by this Agreement.
4.7 NO DEFAULT. None of Parent or its subsidiaries is in default or
violation (and no event has occurred which with or without due notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its certificate or articles of incorporation or
bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Parent or any of its subsidiaries is now a party or by which any of
them or any of their respective properties or assets may be bound or (iii) any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
Parent, its subsidiaries or any of
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their respective properties or assets, except, in the case of (i), for
immaterial defaults with respect to subsidiaries and, in the case of (ii) or
(iii), for violations, breaches or defaults which do not or would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent.
4.8 ABSENCE OF CHANGES. Except as and to the extent disclosed by Parent in
the Filed Parent SEC Reports or as disclosed in Section 4.8 of the Parent
Disclosure Schedule, since January 1, 1999, Parent and its subsidiaries have, in
all material respects, conducted their businesses in the ordinary and usual
course consistent with past practice and there has not been:
(a) any event, change, occurrence, development or state of circumstances
or facts which does or would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent, excluding any change,
effect, event, development, state of facts or circumstances or occurrence
(i) relating to the United States economy in general, (ii) relating to
events or developments affecting the industry in which Parent and its
subsidiaries operate generally, (iii) with respect to station affiliation
agreements only, arising out of or otherwise resulting from the announcement
of the execution and delivery of this Agreement or (iv) arising out of or
otherwise resulting from any action taken or not taken by Parent or Merger
Sub at the direction of the Company in compliance with the terms and
conditions of this Agreement;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Parent, or any
repurchase, redemption or other acquisition by Parent or any subsidiary of
any Parent Securities;
(c) any amendment of any term of any outstanding security of Parent or
any subsidiary;
(d) (i) any incurrence or assumption by Parent or any subsidiary of any
indebtedness for borrowed money (A) other than in the ordinary course of
business consistent with past practice or (B) in connection with any
acquisition or capital expenditure permitted by Section 5.2 or (ii) any
guarantee, endorsement or other incurrence or assumption of liability
(whether directly, contingently or otherwise) by Parent or any subsidiary
for the obligations of any other person (other than any wholly owned
subsidiary of Parent), other than in the ordinary course of business
consistent with past practice;
(e) any creation or assumption by Parent or any subsidiary of any Lien
(other than Permitted Liens) of any kind or nature whatsoever on any
material asset of Parent or any subsidiary other than in the ordinary course
of business consistent with past practice;
(f) any making of any loan, advance or capital contribution to or
investment in any person by Parent or any subsidiary other than (i) any
acquisition permitted by Section 5.2, (ii) loans, advances or capital
contributions to or investments in wholly owned subsidiaries of Parent or
(iii) loans or advances to employees of Parent or any subsidiary made in the
ordinary course of business consistent with past practice not in excess of
$50,000 individually or $250,000 in the aggregate;
(g) (i) any contract or agreement entered into by Parent or any
subsidiary relating to any material acquisition or disposition of any assets
or business or (ii) any modification, amendment, assignment, termination or
relinquishment by Parent or any subsidiary of any contract, license or other
right (including any insurance policy naming it as a beneficiary or a loss
payee) that does or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent, other than, in the case
of (i) and (ii), transactions, commitments, contracts or agreements in the
ordinary course of business consistent with past practice and those
contemplated by this Agreement;
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(h) any material change in any method of accounting or accounting
principles or practice (for financial accounting or tax purposes) by Parent
or any subsidiary, except for any such change required by GAAP;
(i) any (i) grant of any severance or termination pay to any director,
officer or employee of Parent or any of its subsidiaries other than, with
respect to employees (but not executive officers or directors), in the
ordinary course of business or involving payments not in excess of $25,000
in any one case, or in the aggregate $100,000; (ii) entering into of any
employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of Parent or any of its subsidiaries; (iii) increase in benefits
payable under any existing severance or termination pay policies or
employment agreements; or (iv) increase in compensation, bonus or other
benefits payable to directors, officers or employees of Parent or any of its
subsidiaries other than, in the case of clauses (ii), (iii) or (iv), the
entering into of such agreements (or amendments thereto) or the payment of
increases made prior to the date hereof in the ordinary and usual course of
business consistent with past practice; or
(j) any action or proceeding commenced or, to the knowledge of Parent,
threatened or proposed, to condemn or take by eminent domain or other
governmental action any real or personal property owned or used by Parent
and its subsidiaries.
4.9 LITIGATION. Except as disclosed by Parent in the Filed Parent SEC
Reports or as disclosed in Section 4.9 of the Parent Disclosure Schedule, (i)
there is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of Parent, threatened against Parent or any of its subsidiaries or any
of their respective properties or assets and (ii) none of Parent or its
subsidiaries is subject to any outstanding judgment, order, writ, injunction or
decree, which, in the case of either (i) or (ii) would require Parent to make
payments in excess of $250,000 with respect to any single suit, claim, action,
proceeding, investigation, judgment, order, writ, injunction or decree, or has
had or would reasonably be expected to have a Material Adverse Effect on Parent.
4.10 COMPLIANCE WITH APPLICABLE LAW. Except as disclosed by Parent in the
Filed Parent SEC Reports or Section 4.10 of the Parent Disclosure Schedule, and
except for failures which do not or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent, (i)
Parent and its subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "PARENT PERMITS"), (ii) Parent and
its subsidiaries are in compliance with the terms of the Parent Permits, (iii)
the businesses of Parent and its subsidiaries are not being conducted in
violation of any Law of any Governmental Entity, including Environmental Laws,
and (iv) except as disclosed in Section 4.13 hereof, no investigation or review
by any Governmental Entity with respect to Parent or its subsidiaries is pending
or, to the knowledge of Parent, threatened, nor, to the knowledge of Parent, has
any Governmental Entity indicated an intention to conduct the same.
4.11 EMPLOYEE PLANS.
(a) Section 4.11(a) of the Parent Disclosure Schedule lists all "employee
benefit plans," as defined in Section 3(3) of ERISA, and all other employee
benefit plans or other benefit arrangements, including but not limited to all
employment and consulting agreements and all bonus and other incentive
compensation, deferred compensation, disability, severance, retention, salary
continuation, stock and stock-related award, stock option, stock purchase or
collective bargaining agreements, plans, policies and arrangements which Parent
or any of its subsidiaries maintains, is a party to, contributed to or has any
obligation to or liability for in respect of current or former employees and
directors (each, a "PARENT EMPLOYEE BENEFIT PLAN" and collectively, the "PARENT
EMPLOYEE BENEFIT PLANS"). None of the
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Parent Employee Benefit Plans other than a "multiemployer plan" (within the
meaning of section 3(37) of ERISA) is subject to Title IV of ERISA.
(b) True, correct and complete copies of the following documents, which are
correct and complete in all material respects, with respect to each of the
Parent EMPLOYEE BENEFIT Plans (other than a multiemployer plan) have been made
available to the Company, to the extent applicable: (i) any plans, all material
amendments thereto and related trust documents, and amendments thereto; (ii) the
most recent Forms 5500 and all schedules thereto and the most recent actuarial
report, if any; (iii) the most recent IRS determination letter; (iv) summary
plan descriptions; (v) material written communications to employees relating to
the Parent EMPLOYEE BENEFIT Plans; and (vi) written descriptions of all material
non-written agreements relating to the Parent EMPLOYEE BENEFIT Plans.
(c) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on Parent, (i) all payments required to be made by or under any
Parent Employee Benefit Plan, any related trusts, insurance policies or
ancillary agreements, or any collective bargaining agreement have been timely
made, (ii) Parent and its subsidiaries have performed all obligations required
to be performed by them under any Parent Employee Benefit Plan, (iii) the Parent
Employee Benefit Plans have been administered and are in compliance in all
respects with their terms and the requirements of ERISA, the Code and other
applicable laws, and (iv) there are no actions, suits, arbitrations, claims
(other than routine claims for benefits) or administrative proceedings pending
or, to the knowledge of Parent, threatened with respect to any Parent Employee
Benefit Plan.
(d) Except as disclosed in Section 4.11(d) of the Parent Disclosure
Schedule, each Parent Employee Benefit Plan and its related trust which are
intended to be "qualified" within the meaning of Sections 401(a) and 501(a) of
the Code, respectively, have been determined by the Internal Revenue Service to
be so "qualified" under such Sections, as amended by the Tax Reform Act of 1986,
and Parent knows of no fact which would adversely affect the qualified status of
any such Parent Employee Benefit Plan and its related trust.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, solely or in
connection with any other event, (i) increase any benefits otherwise payable
under any Parent Employee Benefit Plan, or (ii) result in the acceleration of
the time of payment or vesting of any such benefits. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will, solely or in connection with any other event, result in any payment
becoming due, or increase the compensation due, to any current or former
employee or director of Parent or any of its subsidiaries.
(f) Except as disclosed in Section 4.11(f) of the Parent Disclosure
Schedule, none of the Parent Employee Benefit Plans provides for post-employment
life or health insurance, benefits or coverage for any participant or any
beneficiary of a participant, except as may be required under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended.
(g) Neither Parent nor any of its subsidiaries has incurred, nor, to
Parent's knowledge, is likely to incur, any withdrawal liability with respect to
any "multiemployer plan" (within the meaning of section 3(37) of ERISA) which
remains unsatisfied in an amount which would have a Material Adverse Effect. The
termination of, or withdrawal from, any multiemployer plan to which Parent or
any of its subsidiaries contributes, on or prior to the Effective Time, will not
subject Parent or any of its subsidiaries to any liability under Title IV of
ERISA that would reasonably be expected to have a Material Adverse Effect on
Parent.
4.12 LABOR AND EMPLOYMENT MATTERS.
(a) Section 4.12(a) of the Parent Disclosure Schedule sets forth a list of
all employment or severance compensation agreements that require Parent or its
subsidiaries to make payments in excess
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of $250,000 annually, and labor or collective bargaining agreements to which
Parent or any subsidiary is party. Except as set forth in Section 4.12(a) of the
Parent Disclosure Schedule, (i) there are no employment or severance
compensation agreements that require Parent or its subsidiaries to make payments
in excess of $250,000 annually, (ii) there are no labor or collective bargaining
agreements which pertain to employees of Parent or any of its subsidiaries and
(iii) neither Parent nor any of its subsidiaries is a party to or bound by any
agreement with any employee or consultant pursuant to which such person would be
entitled to receive any additional compensation (including stock options) or an
accelerated payment of compensation (including the accelerated vesting of stock
options) as a result of the (A) consummation of the transactions contemplated
hereby or (B) the termination of such employment or consulting following such
consummation. Parent has heretofore made available to the Company true and
complete copies of the agreements listed on Section 4.12(a) of Parent Disclosure
Schedule, together with all amendments, modifications, supplements and side
letters affecting the duties, rights and obligations of any party thereunder.
(b) Except as disclosed in Section 4.12(b) of the Parent Disclosure
Schedule, no employees of Parent or any of its subsidiaries are represented by
any labor organization; no labor organization or group of employees of Parent or
any of its subsidiaries has made a pending demand for recognition or
certification; and, to Parent's knowledge, there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or threatened in writing to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. To Parent's knowledge, there are no organizing activities involving
Parent or its subsidiaries pending with any labor organization or group of
employees of Parent or any of its subsidiaries.
(c) Except as disclosed in Section 4.12(c) of the Parent Disclosure
Schedule, there are no material unfair labor practice charges, grievances or
complaints pending before any Governmental Entity or threatened in writing by or
on behalf of any employee or group of employees of Parent or its subsidiaries.
(d) Except as disclosed in Section 4.12(d) of the Parent Disclosure
Schedule, there are no material complaints, charges or claims against Parent or
its subsidiaries filed and currently pending, or threatened in writing to be
brought or filed, with any Governmental Entity or arbitrator based on, arising
out of, in connection with, or otherwise relating to the employment or
termination of employment of any individual by Parent or its subsidiaries.
(e) Except as disclosed in Section 4.12(e) of the Parent Disclosure
Schedule, Parent and each of its subsidiaries are in compliance in all material
respects with all Laws relating to the employment of labor, including all such
Laws and orders relating to wages, hours, collective bargaining, discrimination,
civil rights, safety and health workers' compensation and the collection and
payment of withholding and/or Social Security Taxes and similar Taxes.
4.13 TAXES. Except as disclosed in Section 4.13 of the Parent Disclosure
Schedule:
(a) Each of Parent and its subsidiaries has timely filed, or has caused
to be timely filed on its behalf (taking into account any extension of time
within which to file), all federal income Tax Returns (as hereinafter
defined) and other material Tax Returns required to be filed by it, and all
such filed Tax Returns are true, complete and accurate in all material
respects. All Taxes shown to be due on such Tax Returns have been timely
paid.
(b) The most recent financial statements contained in the Parent SEC
Reports reflect an adequate reserve for all Taxes payable by Parent and its
subsidiaries for all Taxable periods and portions thereof through the date
of such financial statements. No deficiency with respect to Taxes has been
proposed, asserted or assessed against Parent or any subsidiary in excess of
$250,000. No liens for Taxes exist with respect to any asset of Parent or
any subsidiary or Parent, except for statutory liens for Taxes not yet due.
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(c) The federal income Tax Returns of Parent and each subsidiary of
Parent have been examined by and settled with the United States Internal
Revenue Service (or the applicable statute of limitations has expired) for
all years through 1994, and the material state income and franchise Tax
Returns and the foreign Tax Returns of Parent and each subsidiary of Parent
have been examined by and settled with the applicable Tax authorities for
the years specified in Section 4.13(c) of the Parent Disclosure Schedule.
All assessments for Taxes due with respect to such completed and settled
examinations or any concluded litigation have been fully paid. Neither
Parent nor its subsidiaries has requested or been granted an extension of
time for filing any Tax Return that has not yet been filed.
(d) Neither Parent nor any subsidiary of Parent is a party to a Tax
allocation or sharing agreement.
(e) Neither Parent nor any subsidiary of Parent (i) has been a member of
an affiliated group of corporations within the meaning of Section 1504 of
the Code, other than the affiliated group of which Parent is the common
parent or (ii) has any liability for the Taxes of any person (other than
Parent and its subsidiaries) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(f) No audit or other administrative or court proceedings are pending
with respect to federal, state or foreign income or franchise Taxes of
Parent or any subsidiary of Parent and no written notice thereof has been
received. Neither Parent nor any subsidiary has any outstanding agreements,
waivers, or arrangements extending the statutory period of limitation
applicable to any claim for, or the period for the collection or assessment
of, federal, state or foreign income or franchise Taxes due from or with
respect to Parent or any subsidiary for any taxable period.
(g) No claim has been made in writing by a Tax authority in a
jurisdiction where neither Parent nor any subsidiary of Parent files Tax
Returns that Parent or any subsidiary of Parent is or may be subject to
taxation in that jurisdiction.
(h) Neither Parent nor any subsidiary of Parent is a party to any
contract, agreement or other arrangement which provides for the payment of
any amount which would not be deductible by reason of Section 162(m) of the
Code.
(i) Parent has made available to the Company true and complete copies of
(i) all federal, state and foreign income and franchise Tax Returns of
Parent and its subsidiaries for the preceding three Taxable years and (ii)
any audit report issued within the last three years (or otherwise with
respect to any audit or proceeding in progress) relating to Taxes of Parent
or any subsidiary of Parent.
(j) None of Parent or any of its subsidiaries has taken, agreed to take
or will take any action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the
Code.
(k) Parent and each of its subsidiaries are not currently, have not been
within the last five years, and do not anticipate becoming, a "United States
real property holding corporation" within the meaning of Section 897(c) of
the Code.
(l) Neither Parent nor any subsidiary has filed a consent under Section
341(f) of the Code concerning collapsible corporations.
4.14 MATERIAL CONTRACTS.
(a) Section 4.14 of the Parent Disclosure Schedule (together with Sections
4.12(a), (b), (c), (d) and (e) of the Parent Disclosure Schedule) lists all
material contracts and agreements (and all material amendments, modifications
and supplements thereto and all side letters to which Parent or any of its
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subsidiaries is a party materially affecting the obligations of any party
thereunder) to which Parent or any of its subsidiaries is a party or by which
any of its properties or assets are bound including, without limitation, all:
(i) employment, severance, personal services or consulting (other than contracts
with affiliates or as identified in clause (iii) of this Section 4.14)
agreements pursuant to which Parent or its subsidiaries are required to pay more
than $250,000 annually, or by which Parent or its subsidiaries receive more than
$1,000,000 annually; (ii) except for contracts relating to the normal business
operations of Parent entered into in the ordinary course of business consistent
with past practice, contracts pursuant to which Parent is obligated to indemnify
any other individual or entity; (iii) contracts and agreements providing for a
right of first refusal, first negotiation, "tag along" or "drag along" rights
applicable to any capital stock or material assets of Parent or any of its
subsidiaries; (iv) partnership, joint venture or cooperative development
agreements pursuant to which Parent could be required to contribute or make
payments in excess of $1,000,000; (v) contracts and agreements with any
Governmental Entity requiring payments by either party in excess of $500,000;
(vi) material promotion or marketing arrangements; (vii) other than with respect
to intercompany indebtedness or as set forth in the consolidated financial
statements of Parent or the notes thereto, loan or credit agreements, mortgages,
indentures, or other agreements on instruments evidencing indebtedness for
borrowed money by Parent or any of its subsidiaries or any such agreement or
instrument pursuant to which indebtedness for borrowed money may be incurred,
including guaranties; (viii) contracts and agreements providing for the
provision of any services, products or payments to or from any officer,
director, employee or other affiliate of Parent or such officer, director or
employee; (ix) contracts and agreements that purport to limit, curtail or
restrict the ability of Parent or any of its subsidiaries to compete in any
geographic area or line of business; (x) contracts and agreements that would be
required to be filed as an exhibit to a Form 10-K filed by Parent with the SEC
if such Form 10-K were required to be filed on the date hereof; and (xi) all
commitments and agreements to enter into any contracts or agreements relating to
any of the foregoing (collectively, together with any such contracts entered
into in accordance with Section 5.2 hereof, the "PARENT MATERIAL CONTRACTS").
Parent has heretofore delivered or made available to the Company true, correct
and complete copies of all Parent Material Contracts.
(b) Each of the Parent Material Contracts is valid and enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other laws affecting the enforcement of creditors' rights
generally, and the application of equitable principles (whether considered in a
proceeding at law or in equity) and there is no default under any Parent
Material Contract either by Parent or any of its subsidiaries or, to the
knowledge of Parent, by any other party thereto, and no event has occurred that
with the lapse of time or the giving of notice or both would constitute a
default thereunder by Parent or any of its subsidiaries (including the
consummation of the Merger or the Share Issuance) or, to the knowledge of
Parent, any other party, in any such case in which such default or event does,
or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
(c) To Parent's knowledge, no party to any such Parent Material Contract has
given notice to Parent or any of its subsidiaries of or made a claim against
Parent or any of its subsidiaries with respect to any material breach or default
thereunder.
(d) To the knowledge of Parent, during the three months immediately
preceding the date hereof, the parties to station affiliation agreements with
Parent or its subsidiaries have not communicated to Parent or its subsidiaries
an intent to terminate or not to renew any of such affiliation agreements at a
rate that is greater than the rate of such communications during the nine months
immediately prior to such three month period.
4.15 INSURANCE. Parent and each of its subsidiaries maintains adequate
insurance with respect to its properties and business against loss or damage of
the kinds customarily insured against by
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corporations of established reputations engaged in the same or similar business
and similarly situated, of such types and in such amounts as are customarily
carried under similar circumstances by such other corporations.
4.16 REAL PROPERTY.
(a) Section 4.16(a) of the Parent Disclosure Schedule sets forth all of the
real property owned in fee by Parent and its subsidiaries that is material to
the conduct of the business of Parent and its subsidiaries, taken as a whole.
Each of Parent and its subsidiaries has good and marketable title to each parcel
of real property owned by it free and clear of all Liens, except Permitted
Liens.
(b) Section 4.16(b) of the Parent Disclosure Schedule sets forth all leases,
subleases and other agreements (the "PARENT REAL PROPERTY LEASES") (i) involving
payments by Parent or its subsidiaries in excess of $500,000 per year under
which Parent or any of its subsidiaries uses or occupies or has the right to use
or occupy, now or in the future, any real property, or (ii) that are material to
the conduct of the business of Parent and its subsidiaries, taken as a whole.
Parent has heretofore delivered or made available to the Company true, correct
and complete copies of all Parent Real Property Leases (and all material
modifications, amendments and supplements thereto and all side letters to which
Parent or any of its subsidiaries is a party materially affecting the
obligations of any party thereunder). Each Parent Real Property Lease
constitutes the valid and legally binding obligation of Parent or its
subsidiaries, enforceable in accordance with its terms, and is in full force and
effect, except as enforcement may be limited by general principles of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally. All rent and other sums and charges payable by Parent and
its subsidiaries as tenants under each Parent Real Property Lease are current,
no termination event or condition or uncured default of a material nature on the
part of Parent or any such subsidiary or, to Parent's knowledge, the landlord,
exists under any Parent Real Property Lease. Each of Parent and its subsidiaries
has a good and valid leasehold interest in each parcel of real property leased
by it free and clear of all Liens, except Permitted Liens.
(c) No party to any such Parent Real Property Leases has given written
notice to Parent or any of its subsidiaries of or made a claim against Parent or
any of its subsidiaries with respect to any material breach or default
thereunder.
4.17 TANGIBLE PROPERTY. With respect to the tangible properties and assets
of Parent and its subsidiaries (excluding real property) Parent and its
subsidiaries have good title to, or hold pursuant to valid and enforceable
leases, all such properties and assets, except where the failure to have good
title or hold valid and enforceable leases does not and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Parent. All of the material assets of Parent and its subsidiaries have been
maintained and repaired for their continued operation and are in good repair and
condition (ordinary wear and tear excepted) in all material respects.
4.18 INTELLECTUAL PROPERTY. Subject to such exceptions which, individually
or in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect on Parent, Parent and its subsidiaries own or possess
adequate licenses or other valid rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights copyrights service
marks, trade secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information used or held for use in
connection with the business of Parent and its subsidiaries as currently
conducted or as contemplated to be conducted and, to Parent's knowledge or as
disclosed in Section 4.9 of the Parent Disclosure Schedule, there has been no
assertion or claim challenging the validity or enforceability of any of the
foregoing which, individually or in the aggregate, has had or would reasonably
be expected to have a Material Adverse Effect on Parent. Subject to such
exceptions which, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on Parent, there have
been no claims made or notices that the conduct of Parent's business has
infringed the intellectual property rights of any third party.
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4.19 YEAR 2000. Parent and its subsidiaries have developed and are
executing a plan with respect to Year 2000 readiness (the "PARENT YEAR 2000
PLAN"). Parent has provided the Company with a report on the status of the
Parent Year 2000 Plan through April 30, 1999 that is accurate in all material
respects. The Parent Year 2000 Plan addresses the Year 2000 issues which, to the
knowledge of Parent, are material to Parent and its subsidiaries, including
internal information systems and process control risks, embedded circuitry risks
and third party risks.
4.20 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of Parent and its subsidiaries, all of which have been
made available to the Company, are complete and correct in all material respects
and have been maintained in accordance with sound business practices and the
requirements of Section 13(b)(2) of the Exchange Act (regardless of whether the
Parent and its subsidiaries are subject to that Section), including the
maintenance of and adequate system of internal controls. The minute books of
Parent and its subsidiaries contain accurate and complete records (in all
material respects) of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of Parent and its subsidiaries. At the Closing, all of those books and records
will be in the possession of Parent and its subsidiaries.
4.21 ABSENCE OF QUESTIONABLE PAYMENTS. Neither Parent nor any of its
subsidiaries nor, to Parent's knowledge, any director, officer, agent, employee
or other person acting on behalf of Parent or any of its subsidiaries, has used
any corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others or established or maintained any unlawful or
unrecorded funds in violation of Section 30A of the Exchange Act. Neither Parent
nor any of its subsidiaries nor, to Parent's knowledge, any director, officer,
agent, employee or other person acting on behalf of Parent or any of its
subsidiaries, has accepted or received any unlawful contributions, payments,
gifts, or expenditures.
4.22 OPINION OF FINANCIAL ADVISOR. Donaldson, Lufkin & Jenrette Securities
Corporation (the "PARENT FINANCIAL ADVISOR") has delivered to the Parent Board
its opinion, dated the date of this Agreement, to the effect that, as of such
date, the Exchange Ratio is fair to the stockholders of Parent from a financial
point of view, and such opinion has not been withdrawn or adversely modified.
4.23 BROKERS. No broker, finder or investment banker (other than Parent
Financial Advisor, a true and correct copy of whose engagement agreement has
been provided to the Company) is entitled to any brokerage, finder's or other
fee or commission or expense reimbursement in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
Parent or any of its affiliates.
4.24 TAKEOVER STATUTES; DISSENTERS' RIGHTS. Parent has taken all action
required to be taken by it in order to exempt this Agreement and the Covered
Transactions from, and this Agreement and the Covered Transactions are exempt
from, the requirements of any Takeover Statutes of the State of Delaware,
including, without limitation, Section 203 of the DGCL, and, to Parent's
knowledge, all other states, or any anti-takeover provision in Parent's
certificate of incorporation. The provisions of Section 203 of the DGCL do not
apply to the Covered Transactions. Parent's stockholders do not have dissenters'
rights in connection with the Merger.
4.25 NO PRIOR ACTIVITIES OF MERGER SUB. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby, Merger
Sub has neither incurred any obligation or liability nor engaged in any business
or activity of any time or kind whatsoever or entered into any agreement or
arrangement with any person.
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4.26 EXISTING DISCUSSIONS. Except as disclosed in Section 4.26 of the
Parent Disclosure Schedule, as of the date hereof, neither Parent nor any of its
subsidiaries is engaged, directly or indirectly, in any discussions or
negotiations with any other party with respect to an inquiry, offer or proposal
regarding any of the following (other than the transactions contemplated by this
Agreement) involving Parent or any of its subsidiaries: (i) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of a significant portion of the assets of Parent and its
subsidiaries, taken as a whole, in a single transaction or series of related
transactions; (iii) any tender offer or exchange offer for twenty percent (20%)
or more of the outstanding voting capital stock of Parent or the filing of a
registration statement under the Securities Act in connection therewith; or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing (any of the
foregoing, a "PARENT ACQUISITION PROPOSAL").
4.27 AFFILIATE AGREEMENTS. Parent and Infinity Broadcasting Corporation
have duly and validly executed and delivered the Amended and Restated
Representation Agreement, effective as of March 30, 1999, the Management
Agreement, effective as of March 30, 1999, and each of the other related
agreements attached thereto as exhibits or schedules, each such agreement
substantially in the form previously provided to the Company and, assuming the
accuracy of the representations and warranties of Infinity Broadcasting
Corporation set forth therein (other than with respect to enforceability) are
the legal, valid, binding and enforceable obligations of the parties thereto,
subject to applicable bankruptcy, insolvency, moratorium or other laws affecting
the enforcement of creditors' rights generally, and the application of equitable
principles (whether considered in a proceeding at law or in equity).
ARTICLE 5
COVENANTS
5.1 CONDUCT OF BUSINESS OF COMPANY. Except as contemplated by this
Agreement or as permitted by the provisions of this Section 5.1, during the
period from the date hereof to the Effective Time, the Company shall, and shall
cause each of its subsidiaries to, conduct its operations in the ordinary course
of business consistent with past practice and, to the extent consistent
therewith, with no less diligence and effort than would be applied in the
absence of this Agreement, seek to preserve intact its current business
organizations, seek to keep available the service of its current officers and
employees and seek to preserve its relationships with customers, suppliers and
others having business dealings with it to the end that goodwill and ongoing
businesses shall be unimpaired in any material respect at the Effective Time.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement or in Section 5.1 of the Company Disclosure
Schedule, prior to the Effective Time, the Company shall not, and shall not
permit any of its subsidiaries to, without the prior written consent of Parent:
(a) amend its certificate or articles of incorporation or bylaws (or
other similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities or equity equivalents (including,
without limitation, any stock options or stock appreciation rights) or
accelerate the vesting schedule or make any other modifications to the terms
of existing stock options, except for (i) the issuance or sale of shares of
Company Common Stock pursuant to outstanding options granted prior to the
date hereof under the Company Option Plans, (ii) pursuant to the Company's
employee stock purchase plan described in Section 5.1 of the Company
Disclosure Schedule or (iii) the granting of options (having an exercise
price not less than the fair market value of the
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Company Common Stock at the time of such grant) to purchase up to 50,000
shares of Company Common Stock under the Company Option Plans;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, make any other actual, constructive or deemed distribution in
respect of any shares of its capital stock or otherwise make any payments to
shareholders in their capacity as such, or redeem or otherwise acquire any
of its securities or any securities of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries other than the
Merger (except that the Company and/or any subsidiary of the Company may
adopt a plan of merger in connection with (i) a merger of any subsidiary of
the Company into the Company or another subsidiary of the Company or (ii) an
acquisition or disposition of a business or assets otherwise permitted by
this Section 5.1);
(e) alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of any subsidiary,
except for any such alteration which would not reasonably be expected to
have a Material Adverse Effect on the Company;
(f) except as may be required by Law (i) enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund, award or other arrangement for the benefit or welfare of
any director, officer or employee in any manner (other than (A) renewals
(following reasonable prior notice to Parent) of employment arrangements
with any officer or manager (or replacement for an officer or manager) on
terms substantially similar to such officer's or manager's (or replaced
officer's or manager's) existing agreement or the entering into of
employment arrangements with talent hired in the ordinary course of business
consistent with past practice or (B) with respect to employees (but not
executive officers or directors), severance or termination arrangements in
the ordinary course of business consistent with past practice or with
respect to payments not in excess of $25,000 in any one case, or $100,000 in
the aggregate or in accordance with the Company's severance guidelines in
effect on the date hereof); or (ii) except for normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company, increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights or
performance units);
(g) except, (i) for (A) at-will employees (other than officers) in the
ordinary course of business and (B) replacement officers or managers, or
talent, in accordance with Section 5.1(f), or (ii) as set forth on Section
5.1(g) of the Company Disclosure Schedule or contemplated hereby, hire or
retain any individual as an employee of or consultant to the Company or any
subsidiary of the Company;
(h) except in the ordinary course of business upon prior notice to
Parent, or as set forth on Section 5.1(h) of the Company Disclosure
Schedule, enter into, renew or modify in a manner that could reasonably be
expected to materially adversely affect the rights of the Company any
agreement which, if in effect on the date hereof, would have been required
to be disclosed in Section 3.14 of the Company Disclosure Schedule;
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(i) except as may be required as a result of a change in Law or in GAAP,
change any of the accounting principles or practices (whether for financial
accounting or tax purposes) used by it;
(j) revalue any of its assets, including, without limitation, writing up
or down the value of inventory or writing-off notes or accounts receivable
other than in the ordinary course of business consistent with past practice;
(k) make or revoke any Tax election or settle or compromise any Tax
liability material to the Company and its subsidiaries taken as a whole, or
change (or make a request to any Taxing authority to change) any material
aspect of its method of accounting for Tax purposes;
(l) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved against in,
or contemplated by, the consolidated financial statements as of March 31,
1999 (or the notes thereto) of the Company and its subsidiaries or incurred
in the ordinary course of business consistent with past practice;
(m) settle or compromise any pending or threatened material suit, action
or claim or initiate or join any material suit, action or claim for an
amount in excess of $250,000;
(n) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business and in amounts not material to the Company and
its subsidiaries, taken as a whole; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except in the ordinary
course of business consistent with past practice and in amounts not material
to the Company and its subsidiaries, taken as a whole, and except for
obligations of wholly owned subsidiaries of the Company; (iii) make any
loans, advances or capital contributions to, or investments in, any other
person (other than to wholly owned subsidiaries of the Company or customary
loans or advances to employees in the ordinary course of business consistent
with past practice and in amounts not to exceed $50,000 individually or
$250,000 in the aggregate); (iv) pledge or otherwise encumber shares of
capital stock of the Company or its subsidiaries; or (v) mortgage or pledge
any of its assets, tangible or intangible, or create or suffer to exist any
Lien thereupon (other than Permitted Liens);
(o) (i) other than as contemplated by Section 5.1(p), acquire, sell,
lease or dispose of any assets outside the ordinary course of business or
any assets which in the aggregate are material to the Company and its
subsidiaries, taken as a whole or (ii) enter into any commitment or
transaction outside the ordinary course of business;
(p) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein, other than acquisitions
which require the Company to pay consideration not in excess of $3,000,000
individually, or $10,000,000 in the aggregate; (ii) authorize any capital
expenditure or expenditures not provided for in the Company's 1999 capital
budget (a true and correct copy of which has been provided to Parent) which,
individually, is in excess of $100,000 or, in the aggregate, are in excess
of $500,000; or (iii) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action that would
be prohibited hereunder;
(q) take any action that would prevent or impede the Merger from
qualifying as a reorganization under Section 368(a) of the Code; or
(r) take, propose to take, or agree in writing or otherwise to take, any
of the actions described in Sections 5.1(a) through 5.1(q) or any action
which would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect in any material respect.
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5.2 CONDUCT OF BUSINESS OF PARENT. Except as contemplated by this
Agreement or as permitted by the provisions of this Section 5.2, during the
period from the date hereof to the Effective Time, Parent shall, and shall cause
each of its subsidiaries to conduct its operations in the ordinary course of
business consistent with past practice and, to the extent consistent therewith,
with no less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, seek to
keep available the service of its current officers and employees and seek to
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that goodwill and ongoing businesses shall be
unimpaired in any material respect at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement or Section 5.2 of the Parent Disclosure Schedule, prior to the
Effective Time, Parent shall not, and shall not permit its subsidiaries to,
without the prior written consent of the Company:
(a) amend its certificate or articles of incorporation or bylaws (or other
similar governing instrument) in a manner which adversely affects the rights,
powers and preferences of the Parent Common Stock, except as expressly
contemplated by this Agreement;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights), except for (i) the
issuance or sale of shares of the Parent Common Stock pursuant to outstanding
options granted prior to the date hereof under the Parent Option Plans, or (ii)
the granting of options (having an exercise price not less than the fair market
value of the Parent Common Stock at the time of grant) to purchase up to 50,000
shares of Parent Common Stock under the Parent Option Plans;
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, make any
other actual, constructive or deemed distribution in respect of any shares of
its capital stock or otherwise make any payments to shareholders in their
capacity as such, or redeem or otherwise acquire any of its securities or any
securities of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of Parent
or any of its subsidiaries other than the Merger (except that Parent and/or any
subsidiary of Parent may adopt a plan of merger in connection with (i) a merger
of any subsidiary of Parent into Parent or another subsidiary of Parent or (ii)
an acquisition or disposition of a business or assets otherwise permitted by
this Section 5.2);
(e) alter through merger, liquidation, reorganization, restructuring or in
any other fashion the corporate structure or ownership of Parent or any of its
subsidiaries, except for any such alteration which would not reasonably be
expected to have a Material Adverse Effect on Parent;
(f) except as may be required by Law, (i) enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan, fund,
award or other arrangement for the benefit or welfare of any director, officer
or employee in any manner (other than (A) renewals (following reasonable prior
notice to the Company) of employment arrangements with any officer or manager
(or replacement for any officer or manager) on terms substantially similar to
such officer's or manager's (or replaced officer's or manager's) existing
agreement or the entering into of employment arrangements with talent hired in
the ordinary course of business consistent with past practice or (B) with
respect to employees (but not executive officers or directors), severance or
termination arrangements in the ordinary course of business consistent with past
practice or with respect to payments not in excess of $25,000 in any one case,
or $100,000 in the aggregate or in accordance with Parent's severance guidelines
in effect on the date hereof); or (ii) except for normal
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increases in the ordinary course of business consistent with past practice that,
in the aggregate, do not result in a material increase in benefits or
compensation expense to Parent, increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights or
performance units);
(g) except (i) for (A) at-will employees (other than officers) in the
ordinary course of business and (B) replacement officers or managers or talent,
in accordance with Section 5.2(f), or (ii) as set forth in Section 5.2(g) of the
Parent Disclosure Schedule or contemplated hereby, hire or retain any individual
as an employee of or consultant to Parent or any subsidiary of Parent;
(h) except in the ordinary course of business upon prior notice to Parent,
or as set forth on Section 5.2(h) of the Parent Disclosure Schedule, enter into,
renew or modify in a manner that could reasonably be expected to materially
adversely affect the rights of Parent any agreement which, if in effect on the
date hereof, would have been required to be disclosed in Section 4.14 of the
Parent Disclosure Schedule;
(i) except as may be required as a result of a change in Law or in GAAP,
change any of the accounting principles or practices (whether for financial
accounting or tax purposes) used by it;
(j) revalue any of its assets, including, without limitation, writing up or
down the value of inventory or writing-off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(k) make or revoke any Tax election or settle or compromise any Tax
liability material to Parent and its subsidiaries taken as a whole, or change
(or make a request to any Taxing authority to change) any material aspect of its
method of accounting for Tax purposes;
(l) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements as of March 31, 1999 (or
the notes thereto) of Parent and its subsidiaries or incurred in the ordinary
course of business consistent with past practice;
(m) settle or compromise any pending or threatened material suit, action or
claim or initiate or join any material suit, action or claim for an amount in
excess of $250,000;
(n) (i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings under existing lines of credit in the ordinary
course of business and in amounts not material to Parent and its subsidiaries,
taken as a whole; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person except in the ordinary course of business consistent with past
practice and in amounts not material to Parent and its subsidiaries, taken as a
whole, and except for obligations of wholly owned subsidiaries of Parent; (iii)
make any loans, advances or capital contributions to, or investments in, any
other person (other than to wholly owned subsidiaries of Parent or customary
loans or advances to employees in the ordinary course of business consistent
with past practice and in amounts not to exceed $50,000 individually or $250,000
in the aggregate); (iv) pledge or otherwise encumber shares of capital stock of
Parent or its subsidiaries; or (v) mortgage or pledge any of its assets,
tangible or intangible, or create or suffer to exist any Lien thereupon (other
than Permitted Liens);
(o) (i) sell, lease or dispose of any assets outside the ordinary course of
business or any assets which in the aggregate are material to Parent and its
subsidiaries, taken as a whole or (ii) enter into any commitment or transaction
outside the ordinary course of business;
(p) (i) acquire (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership or other business organization or division thereof
or any equity interest therein, other than
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acquisitions which require Parent to pay consideration not in excess of
$3,000,000 individually or $10,000,000 in the aggregate, (ii) authorize any
capital expenditure or expenditures not provided for in Parent's 1999 capital
budget (a true and correct copy of which has been provided to the Company)
which, individually, is in excess of $100,000 or, in the aggregate, are in
excess of $500,000; or (iii) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action that would be
prohibited hereunder;
(q) take any action that would prevent or impede the Merger from qualifying
as a reorganization under Section 368(a) of the Code; or
(r) take, propose to take, or agree in writing or otherwise to take, any of
the actions described in Sections 5.2(a) through 5.2(q) or any action which
would make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect in any material respect.
Notwithstanding anything to the contrary contained in this Section 5.2,
Parent shall be permitted to effect an acquisition of any business, corporation
or other entity (by merger, purchase of stock or other equity interest,
recapitalization or otherwise) or assets of any third party (the foregoing being
hereinafter defined as an "ACQUISITION") or any business combination,
recapitalization or merger with any third party or any affiliate thereof (the
foregoing being referred to as a "BUSINESS COMBINATION") so long as Parent would
not be required to issue in such Acquisitions or Business Combinations,
individually or in the aggregate, a number of shares of Parent Common Stock
greater than 40% of the number of outstanding shares of Parent Common Stock on
the date hereof (on a fully diluted basis) and, in connection with any such
Acquisition or Business Combination, Parent may, to the extent reasonably
required in such transaction, issue equity securities (subject to the foregoing
40% limitation), assume outstanding stock options, assume obligations under
employee benefit plans, enter into employment agreements or assume indebtedness.
In addition, to the extent reasonably necessary to facilitate obtaining the
Parent Requisite Vote, the Company will not unreasonably withhold or delay its
consent to the taking of any action otherwise prohibited by this Section 5.2
that does not adversely affect (other than by dilution of overall voting
interest on a basis that is PARI PASSU with other holders of Parent Common
Stock) the Company or its stockholders.
5.3 CONDUCT OF BUSINESS OF MERGER SUB. During the period from the date of
this Agreement to the Effective Time, Merger Sub shall not engage in any
activities of any nature except as provided in or contemplated by this
Agreement.
5.4 PREPARATION OF JOINT PROXY STATEMENT; STOCKHOLDERS APPROVAL.
(a) As promptly as practicable (and, in any event, within 60 days) following
the date hereof, Parent and the Company shall prepare and file with the SEC a
preliminary proxy statement, which shall constitute a joint proxy statement and
a prospectus (such joint proxy statement/prospectus, and any amendments or
supplements thereto, the "JOINT PROXY STATEMENT/PROSPECTUS"), and Parent shall,
as promptly as practicable after receipt of notification from the SEC that it
has no further comments on the Joint Proxy Statement/Prospectus, in cooperation
with the Company, prepare and file with the SEC a registration statement on Form
S-4 with respect to the Share Issuance (such registration statement, and any
amendments or supplements thereto, the "S-4"). The Joint Proxy
Statement/Prospectus will be included in the S-4 as Parent's prospectus. The S-4
and the Joint Proxy Statement/Prospectus shall comply as to form in all material
respects with the applicable provisions of the Securities Act and the Exchange
Act and the rules and regulations thereunder. Each of Parent and the Company
shall use all reasonable efforts to have the S-4 declared effective by the SEC
as promptly as practicable after filing the S-4 with the SEC and to keep the S-4
effective as long as is necessary to consummate the Merger and the Share
Issuance. The parties shall promptly provide copies, consult with each other and
prepare written responses with respect to any written comments received from the
SEC with respect to the Joint Proxy Statement/Prospectus and the S-4. The
parties will cooperate in preparing and filing with
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the SEC any amendment or supplement to the Joint Proxy Statement/Prospectus or
the S-4. No amendment or supplement to the Joint Proxy Statement/Prospectus
shall be filed without the approval of both parties, which approvals shall not
be unreasonably withheld or delayed. If, at any time prior to the Effective
Time, any event with respect to the Company, Parent, any of their respective
officers and directors or any of their respective subsidiaries should occur
which is required to be described in the Joint Proxy Statement/Prospectus or the
S-4 (or an amendment or supplement thereto), the Company or Parent, as the case
may be, shall promptly so advise the other.
(b) Parent and the Company each hereby (i) consents to the use of its name
and, on behalf of its subsidiaries and affiliates, the names of such
subsidiaries and affiliates, and to the inclusion of financial statements and
business information relating to such party and its subsidiaries and affiliates
(in each case, to the extent required by applicable securities laws), in the S-4
and the Joint Proxy Statement/ Prospectus, (ii) agrees to use all reasonable
efforts to obtain the written consent of any person or entity retained by it
which may be required to be named (as an expert or otherwise) in the S-4 or the
Joint Proxy Statement/Prospectus, and (iii) agrees to cooperate fully, and
agrees to use all reasonable efforts to cause its subsidiaries and affiliates to
cooperate fully, with any legal counsel, investment banker, accountant or other
agent or representative retained by any of the parties specified in clause (i)
above in connection with the preparation of any and all information required, as
determined after consultation with each party's counsel, to be disclosed by
applicable securities laws in the S-4 or the Joint Proxy Statement/Prospectus.
(c) The Company shall call a meeting of its stockholders to be held as
promptly as practicable for the purpose of voting upon this Agreement and the
Merger (the "COMPANY STOCKHOLDERS MEETING"), and, subject to such delays as may
be reasonably necessary in order to comply with the time periods set forth in
Section 7.3(a), shall use its reasonable best efforts to cause the Company
Stockholders Meeting to be held, and approval of this Agreement and the Merger
to be obtained, within forty-five (45) days after the date on which the S-4 is
declared effective by the SEC. The Company agrees that its obligations pursuant
to the first sentence of this Section 5.4(c) shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
of any Company Acquisition Proposal. The Company Board shall recommend to its
stockholders that they approve this Agreement and the Merger and, except as
permitted by Section 5.5(b), the Company Board shall not withdraw, amend or
modify in a manner adverse to Parent such recommendation (or announce publicly
its intention to do so). Notwithstanding the foregoing, regardless of whether
the Company Board has withdrawn, amended or modified its recommendation that its
stockholders approve and adopt this Agreement, unless this Agreement has been
terminated pursuant to the provisions of Article 7, the Company shall be
required to hold the Company Stockholders Meeting.
(d) Parent shall call a meeting of its stockholders to be held as promptly
as practicable for the purpose of voting upon the Share Issuance (including any
adjournments or postponements thereof, the "PARENT STOCKHOLDERS MEETING") and
shall use its reasonable best efforts to cause the Parent Stockholders Meeting
to be held, and approval of the Share Issuance to be obtained (including, but
not limited to, to the extent reasonably required, by engaging a proxy
solicitation firm) within forty-five (45) days after the date on which the S-4
is declared effective by the SEC. Parent shall be entitled to adjourn or
postpone the Parent Stockholders Meeting for up to forty-five (45) days to the
extent deemed necessary by the Parent Board in order to obtain the Parent
Requisite Vote. Parent agrees that its obligations pursuant to the first
sentence of this Section 5.4(d) shall not be affected by the commencement,
public proposal, public disclosure or communication to Parent of any Parent
Acquisition Proposal. The Parent Board shall recommend to its stockholders that
they approve the Share Issuance and, the Parent Board shall not withdraw, amend
or modify in a manner adverse to the Company such recommendation (or announce
publicly its intention to do so). Notwithstanding the foregoing, regardless of
whether the Parent Board has withdrawn, amended or modified its recommendation
that its stockholders approve the Share Issuance, unless this Agreement has been
terminated pursuant to the provisions of Article 7, Parent shall be required to
hold the Parent Stockholders Meeting.
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(e) The Company and Parent shall coordinate and cooperate with respect to
the timing of such stockholders' meetings and shall use their reasonable best
efforts to hold such meetings on the same day.
5.5 NO SOLICITATION BY THE COMPANY.
(a) From the date hereof until the termination hereof and except as
expressly permitted by the following provisions of this Section 5.5, the Company
will not, nor will it permit any of its subsidiaries to, nor will it authorize
or permit any officer, director or employee of or any investment banker,
attorney, accountant or other advisor or representative of, the Company or any
of its subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage the submission of any Company Acquisition Proposal (as defined in
Section 5.5(c)), (ii) participate in any discussions or negotiations regarding,
or furnish to any person any non-public information with respect to the Company
or any of its subsidiaries, or take any other action to facilitate, any Company
Acquisition Proposal or any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Company Acquisition
Proposal, (iii) amend or grant any waiver or release under any standstill or
similar agreement with respect to any class of equity securities of the Company,
or (iv) enter into any agreement with respect to a Company Acquisition Proposal
(other than a confidentiality agreement as described below); PROVIDED, HOWEVER,
that nothing contained in this Section 5.5(a) shall prohibit the Company Board
from furnishing information to, or entering into discussions or negotiations
with, any person that makes an unsolicited bona fide written offer or proposal
that constitutes a Company Acquisition Proposal if, and only to the extent that,
(A) such action is taken prior to receipt of the Company Requisite Vote, (B) the
Company Board, after consultation with and based upon the advice of outside
legal counsel, determines in good faith that such action is consistent with its
fiduciary duties to the Company stockholders under applicable Law, (C) the
Company Board determines in good faith, after consultation with an independent,
nationally recognized financial advisor, that such Company Acquisition Proposal,
if accepted, would constitute, or is reasonably likely to lead to, a Company
Superior Proposal (as hereinafter defined), and (D) prior to taking such action,
the Company (x) provides reasonable notice to Parent to the effect that it is
taking such action and (y) receives from such person an executed confidentiality
agreement in reasonably customary form. For purposes of this Agreement, "COMPANY
SUPERIOR PROPOSAL" means a bona fide written Company Acquisition Proposal on
terms which a majority of the members of the Company Board determine in their
good faith judgment (after consultation with an independent,
nationally-recognized financial advisor) and after taking into account all
legal, financial, regulatory and other aspects of the Company Acquisition
Proposal, the person making the proposal, the strategic benefits to be derived
from the Merger and the long-term prospects of the Company and its subsidiaries,
to be more favorable from a financial point of view to the Company's
stockholders than the Merger, and for which the members of the Company Board
determine in their good faith judgment (after such consultation) that financing,
to the extent required, is then committed or reasonably available. Prior to
providing any information to or entering into discussions or negotiations with
any person in connection with a Company Acquisition Proposal by such person, the
Company shall notify Parent of any Company Acquisition Proposal (including,
without limitation, the material terms and conditions thereof and the identity
of the person making it) as promptly as practicable (but in no case later than
36 hours) after its receipt thereof, and shall thereafter inform Parent on a
prompt basis of the status of any discussions or negotiations with such a third
party, and any material changes to the terms and conditions of such Company
Acquisition Proposal, and (with respect to discussions or negotiations with
Parent) the Company shall be entitled to so inform such third party. Immediately
after the execution and delivery of this Agreement, the Company will, and will
cause its subsidiaries and affiliates, and their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents to, cease
and terminate any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any
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possible Company Acquisition Proposal and shall promptly inform the individuals
or entities referred to in the first sentence hereof of the obligations
undertaken in this Section 5.5(a).
(b) The Company Board will not withdraw or modify or propose to withdraw or
modify, in a manner adverse to Parent, its approval or recommendation of this
Agreement or the Merger unless (i) the Company has complied in all material
respects with the terms of Section 5.5(a), (ii) a Company Superior Proposal is
pending at the time the Company Board determines to take any such action, and
(iii) the Company Board, after consultation with and based upon the advice of
outside legal counsel, determines in good faith that such action is consistent
with its fiduciary duties to the Company's stockholders under applicable Law;
PROVIDED, HOWEVER, that the Company Board may not approve or recommend a Company
Acquisition Proposal (and in connection therewith, withdraw or modify its
approval or recommendation of this Agreement or the Merger) unless such a
Company Acquisition Proposal is a Company Superior Proposal (and the Company
shall have first complied with its obligations set forth in Section 7.3(a) and
the time period referred to in the last sentence of Section 7.3(a) has expired)
and unless it shall have first consulted with outside legal counsel and have
determined, based upon such advice, that such action is consistent with its
fiduciary duties to the Company stockholders. Nothing contained in this Section
5.5(b) shall prohibit the Company from taking and disclosing to its stockholders
a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or
from making any disclosure to the Company's stockholders which, in the good
faith reasonable judgment of the Company Board, based on the advice of outside
legal counsel, is required under applicable Law; PROVIDED, HOWEVER, that (i) the
Company Board shall not recommend that the stockholders of the Company tender
their shares in connection with a tender offer except to the extent the Company
Board by a majority vote determines in its good faith that such a recommendation
is consistent with the fiduciary duties of the Company Board to the Company's
stockholders under applicable Law, after receiving the advice of outside legal
counsel and (ii) except as otherwise permitted in this Section 5.5(b) and
Article 7, the Company shall not withdraw or modify, or propose to withdraw or
modify, its position with respect to the Merger or approve or recommend, or
propose to approve or recommend, a Company Acquisition Proposal. Nothing in this
Section 5.5(b) shall (i) permit the Company to terminate this Agreement (except
as provided in Article 7 hereof) or (ii) affect any other obligations of the
Company under this Agreement.
(c) "COMPANY ACQUISITION PROPOSAL" means an inquiry, offer or proposal
regarding any of the following (other than the transactions contemplated by this
Agreement) involving the Company or any of its subsidiaries: (i) other than as
permitted pursuant to Section 5.1(p) hereof or acquisitions by the Company
pursuant to which the Company would not be required to issue a number of shares
of Company Common Stock greater than 20% of the number of outstanding shares on
a fully diluted basis immediately prior to such issuance, any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of a significant portion of the assets of the Company and
its subsidiaries, taken as a whole, in a single transaction or series of related
transactions; (iii) any tender offer or exchange offer for 20% or more of the
outstanding voting capital stock of the Company or the filing of a registration
statement under the Securities Act in connection therewith; or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
5.6 INTENTIONALLY OMITTED.
5.7 ACCOUNTANTS' LETTERS.
(a) The Company shall use all reasonable best efforts to cause to be
delivered to Parent a letter of KPMG LLP (or its successor firm), the Company's
independent auditors, dated a date within two (2) business days before the date
on which the S-4 shall become effective and addressed to Parent, in
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form and substance reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the S-4.
(b) Parent shall use all reasonable best efforts to cause to be delivered to
the Company a letter of PricewaterhouseCoopers LLP, Parent's independent
auditors, dated a date within two business days before the date on which the S-4
shall become effective and addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the S-4.
5.8 ACCESS TO INFORMATION.
(a) Between the date hereof and the Effective Time, each party will give the
other parties and their respective authorized representatives reasonable access
during normal business hours to all employees (which access shall be coordinated
with such party's executive management), offices and other facilities and to all
books and records of such party and its subsidiaries, will permit such other
parties to make such inspections as such other parties may reasonably require
and will cause such party's officers and those of its subsidiaries to furnish
such other parties with such financial and operating data and other information
with respect to the business, properties and personnel of such party and its
subsidiaries as such other parties may from time to time reasonably request;
PROVIDED, HOWEVER, that no investigation made by any party pursuant to this
Section 5.8(a) shall effect or be deemed to modify any of the representations or
warranties made by any other party in this Agreement.
(b) Between the date hereof and the Effective Time, each party shall furnish
to the other parties (i) within two business days after the delivery thereof to
management, such monthly financial statements and data as are regularly prepared
for distribution to such party's Chief Executive Officer and (ii) at the
earliest time at which they are available and prior to filing thereof with the
SEC, such quarterly and annual financial statements as are prepared for such
party's SEC filings, which shall be in accordance with the books and records of
such party, and drafts of all such party's SEC filings.
(c) Each party will hold and will use its best efforts to cause its
consultants and advisors to hold in confidence all documents and information
concerning the other parties and their respective subsidiaries furnished to such
party in connection with the transactions contemplated by this Agreement to the
extent required by that certain confidentiality agreement entered into between
the Company and Parent dated July 31, 1998 and amended by letter agreement
between the Company and Parent dated May 7, 1999 (the "CONFIDENTIALITY
AGREEMENT").
5.9 ADDITIONAL AGREEMENTS; REASONABLE BEST EFFORTS. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable Laws to consummate and make effective the transactions contemplated
by this Agreement, including, without limitation, (i) cooperation in the
preparation and filing of the Joint Proxy Statement/Prospectus and the S-4, any
filings that may be required under the HSR Act, and any amendments or
supplements to any thereof, (ii) cooperation in obtaining, prior to the
Effective Time, the approval for listing on the NYSE, effective upon the
official notice of issuance, of the shares of Parent Common Stock into which the
Shares will be converted, into which the Parent Series A Preferred Stock will be
convertible and for which the Company Stock Options may become exercisable
pursuant to Article 2 hereof, (iii) the taking of all action reasonably
necessary, proper or advisable to secure any necessary consents of all third
parties and Governmental Entities, including those relating to existing debt
obligations of the Company and its subsidiaries, (iv) the transfer of existing
Company Permits to the Surviving Corporation, (v) contesting any legal
proceeding relating to the Merger or the Share Issuance and (vi) the execution
of any additional instruments necessary to consummate the
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transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, Parent, Merger Sub and the Company agree to use all reasonable
efforts to cause the Effective Time to occur as soon as practicable after the
LATER TO OCCUR OF THE Parent Stockholders Meeting AND THE METRO STOCKHOLDERS
MEETING. In case at any time after the Effective Time any further action is
necessary to carry out the purposes of this Agreement, the proper officers and
directors of each party hereto shall use their reasonable best efforts to take
all such necessary action.
5.10 REGULATORY REVIEWS. Each party hereto will use its reasonable best
efforts to (i) file with the U.S. Department of Justice and U.S. Federal Trade
Commission, as soon as practicable and in no event later than fifteen (15) days
after the date hereof, the Notification and Report Form under the HSR Act and to
provide promptly any supplemental information or material requested pursuant to
the HSR Act, and (ii) comply as soon as practicable after the date hereof with
any other Laws of any country under which any consent, authorization,
registration, declaration or other action with respect to the transactions
contemplated herein may be required. Each party hereto shall furnish to the
other such information and assistance as the other may reasonably request in
connection with any filing or other act undertaken in compliance with the HSR
Act or other such laws, and shall keep each other timely apprised of the status
of any communications with, and any inquiries or requests for additional
information from, any Governmental Entity under the HSR Act or other such laws.
Parent, Merger Sub and the Company will each use its reasonable best efforts to
cause termination or expiration of the HSR waiting period(s) in connection with
any review of the transactions contemplated by this Agreement under the HSR Act
and the Company agrees to cooperate fully with Parent and Merger Sub in respect
thereof and to accept, in case of any dispute between the parties regarding
dealings with any Governmental Entity, actions required to effect the
termination or expiration of the HSR waiting period(s) or resolution of any
Governmental Entity's concerns, the decision of Parent and Merger Sub; PROVIDED,
HOWEVER, that Parent agrees, to the extent permitted by applicable Law and as
practicable, to provide prior notice to, and consult with, the Company with
respect to any actions contemplated by Parent in connection with this Section
5.10, and, except to the extent the applicable Governmental Entity requires
otherwise, to include the Company in all substantive communications, meetings,
negotiations and proceedings related thereto. In connection with any litigation
or administrative proceeding instituted to prevent the consummation of the
Merger, Parent, Merger Sub and the Company shall take any and all action
reasonably necessary in connection with such litigation or administrative
proceeding (i) to prevent the entry of any order, preliminary or permanent
injunction, or other legal restraint or prohibition preventing consummation of
the Merger or any related transactions contemplated by this Agreement and (ii)
to vacate any order, injunction or legal restraint or prohibition which would
prevent the consummation of the transactions contemplated by this Agreement.
5.11 PUBLIC ANNOUNCEMENTS. Each of Parent, Merger Sub and the Company will
agree on the text of any press release before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement, including, without limitation, the Merger. None
of Parent, Merger Sub or the Company shall issue any such press release or make
any such public statement prior to such agreement, except as may be required by
applicable Law or by obligations pursuant to any agreement with the NYSE or
NASDAQ, as determined by Parent or the Company, as the case may be, in which
case such release or statement shall be limited to a factual summary of the
material provisions of this Agreement and the transactions contemplated hereby.
5.12 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) Parent agrees that all rights to exculpation and indemnification for
acts or omissions occurring prior to the Effective Time now existing in favor of
the current or former directors or officers (the "INDEMNIFIED PARTIES") of the
Company as provided in its certificate of incorporation or bylaws or in any
agreement between the Company and any of the Indemnified Parties shall survive
the Merger and shall
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continue in full force and effect in accordance with their terms for a period of
six years following the Effective Time, and accordingly during such period, the
Surviving Corporation shall indemnify the Indemnified Parties to the same extent
as such Indemnified Parties are entitled to indemnification pursuant to the
preceding sentence.
(b) For a period of six (6) years after the Effective Time, Parent shall
cause to be maintained in effect the policies of directors' and officers'
liability insurance maintained by the Company for the benefit of those persons
who are covered by such policies at the Effective Time (or Parent may substitute
therefor policies of at least the same coverage with respect to matters
occurring prior to the Effective Time), to the extent that such liability
insurance can be maintained annually at a cost to Parent not greater than 150
percent of the annual premium (the "CURRENT PREMIUM") for the current Company
directors' and officers' liability insurance; PROVIDED, HOWEVER, that if such
insurance cannot be so maintained or obtained at such costs, Parent shall
maintain or obtain as much of such insurance as can be so maintained or obtained
at a cost equal to 150 percent of the current annual premiums of the Company for
such insurance. The Company represents and warrants to Parent that the Current
Premium is approximately $140,000 per annum.
(c) To the fullest extent permitted by Law, from and after the Effective
Time, all rights to indemnification now existing in favor of the employees,
agents, directors or officers of the Company and its subsidiaries with respect
to their activities as such prior to the Effective Time, as provided in the
Company's certificate of incorporation or bylaws, in effect on the date thereof
or otherwise in effect on the date hereof, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Time.
(d) The rights of each Indemnified Party under this Section 5.12 are
intended to benefit, and shall be enforceable by, each Indemnified Party.
5.13 NOTIFICATION OF CERTAIN MATTERS. The Company, on the one hand, and
Parent and Merger Sub, on the other, shall give prompt written notice to each
other upon their obtaining knowledge of (i) the occurrence or nonoccurrence of
any event the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time, (ii) any
material failure of a party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder, (iii) any notice of,
or other communication relating to, a default or event which, with notice or
lapse of time or both, would become a default, received by a party or any of its
subsidiaries subsequent to the date of this Agreement and prior to the Effective
Time, under any contract or agreement material to the financial condition,
properties, businesses or results of operations of a party and its subsidiaries
taken as a whole to which it or any of its subsidiaries is a party or is
subject, (iv) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement, (v) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any condition to the obligations of any party to the effect of
the transactions contemplated hereby not to be satisfied, (vi) any notice or
other communication from any Governmental Entity in connection with the Merger
or (vii) any Material Adverse Effect on a party; PROVIDED, HOWEVER, that the
delivery of any notice pursuant to this Section 5.13 shall not cure such breach
or non-compliance or limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
5.14 TAX-FREE REORGANIZATION TREATMENT. The Company, certain stockholders
of the Company, and Parent shall execute and deliver to Paul, Hastings, Janofsky
& Walker LLP, counsel to the Company, and Weil, Gotshal & Manges LLP, counsel to
Parent and Merger Sub, certificates substantially in the forms agreed to prior
to the date hereof at such time or times as may be reasonably requested by such
law firms in connection with their respective deliveries of opinions, pursuant
to Sections 6.2(e) and
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6.3(c) hereof, with respect to the tax-free reorganization treatment of the
Merger. Prior to the Effective Time, none of the Company, Parent, or Merger Sub
shall take or cause to be taken any action which would cause to be untrue (or
fail to take or cause not to be taken any action which would cause to be untrue)
any of the representations in such certificates. The Company, Parent and Merger
Sub agree to report the Merger on all Tax Returns and other filings as a
tax-free reorganization under Section 368(a) of the Code.
5.15 COMPANY AFFILIATES. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying each affiliate (as such term is defined
in Rule 12b-2 under the Exchange Act) of the Company at the time the Merger is
submitted for approval to the stockholders of the Company (each, a "COMPANY
AFFILIATE") and the Company shall use its reasonable best efforts to cause each
Company Affiliate to deliver to Parent on or prior to the Closing Date, a letter
agreement in the form attached hereto as Exhibit C (each, a "COMPANY AFFILIATE
LETTER").
5.16 SEC FILINGS. Each of Parent and the Company shall promptly provide
the other party (or its counsel) with copies of all filings made by the other
party or any of its subsidiaries with the SEC or any other state or federal
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
5.17 EMPLOYEE BENEFITS. For a period of one year after the Effective Time,
Parent will provide each employee (and, to the extent applicable, former
employees) of the Surviving Corporation and its Subsidiaries with benefits that,
with respect to such employee (or former employee), are at least substantially
equivalent on an aggregate basis to the benefits of such Company Employee
Benefit Plans (other than any stock option plans and employee stock purchase
plans). Without limiting the generality of the foregoing, all vacation, holiday,
sickness and personal days accrued by the employees of the Company and of its
subsidiaries shall be honored. In the event that any employee of the Surviving
Corporation or one of its subsidiaries is at any time after the Effective Time
transferred to Parent or any affiliate of Parent or becomes a participant in an
employee benefit plan, program or arrangement maintained by or contributed by
Parent or any affiliate of Parent, Parent shall cause such plan, program or
arrangement to treat the prior service of such employee with the Company or its
subsidiaries, to the extent prior service is generally recognized under the
comparable plan, program or arrangement of the Company, as service rendered to
Parent or such affiliates for purposes of eligibility, vesting, vacation time or
severance benefits under such plans. Parent shall cause to be waived any
pre-existing condition limitation under ITS OR ITS AFFILIATES' welfare plans
that might otherwise apply to such employee or, to the extent applicable, a
former employee. Parent agrees to recognize (or cause to be recognized) the
dollar amount of all expenses incurred by such employees or, to the extent
applicable, former employees, during the calendar year in which the Effective
Time occurs for purposes of satisfying the calendar year deductibles, co-payment
limitations and lifetime maximums for such year under the relevant benefit plans
of Parent and its subsidiaries. Nothing contained in this Section 5.17 shall be
construed as requiring Parent to continue any specific Company Employee Benefit
Plan or to continue the employment of any employee, PROVIDED, HOWEVER, that any
changes that Parent may make to any such Company Employee Benefit Plan are
consistent with the prior parts of this Section 5.17, and are permitted by the
terms of the Company Employee Benefit Plan and under applicable law.
5.18 PARENT BOARD. Parent shall take all necessary action to cause
Saperstein to be appointed to Class III of the Parent Board and a designee
selected by Saperstein to be appointed to Class I of the Parent Board as of the
close of business on the date on which the Effective Time occurs and to serve
until the next election of directors of the respective class to which such
individual is appointed.
5.19 FEES AND EXPENSES. Whether or not the Merger is consummated, all
Expenses (as hereinafter defined) incurred in connection with this Agreement,
and the transactions contemplated
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hereby shall be paid by the party incurring such Expenses, except Expenses
incurred in connection with the filing, printing and mailing of the Joint Proxy
Statement/Prospectus and the S-4 and filing fees incurred pursuant to the
requirements of the HSR Act, which shall be shared equally by the Company and
Parent. As used in this Agreement, "EXPENSES" includes all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with, or
related to, the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, filing, printing and mailing of the Joint Proxy
Statement/Prospectus and the S-4.
5.20 ANTITAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the Merger, each of the Company and Parent shall take such
commercially reasonable actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of any Takeover Statute on the Merger.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The
respective obligations of each party hereto to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) this Agreement shall have been adopted and the Merger approved by
the Company Requisite Vote;
(b) the Share Issuance shall have been approved by the Parent Requisite
Vote;
(c) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
Governmental Entity and continued in effect which prohibits, restrains,
enjoins or restricts the consummation of the Merger;
(d) any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired;
(e) the S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop
order and Parent shall have received all state securities laws or "blue sky"
permits and authorizations necessary to issue shares of Parent Common Stock
in exchange for the Shares in the Merger;
(f) the Parent Common Stock issuable in the Merger (or otherwise as
contemplated pursuant to Section 2.3) shall have been authorized for listing
on the NYSE, subject to official notice of issuance; and
(g) (i) all authorizations, consents or approvals of a Governmental
Entity required in connection with the execution and delivery of this
Agreement and the performance of the obligations hereunder shall have been
made or obtained, without any limitation, restriction or condition that has
or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company (in the case of Parent's obligation
to effect the Merger) or Parent (in the case of the Company's obligation to
effect the Merger), except for such authorizations, consents or approvals,
the failure of which to have been made or obtained does not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company (in the case of Parent's obligation to effect
the Merger) or Parent (in the case of the Company's obligation to effect the
Merger); and
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(ii) there shall not be pending or threatened in writing by any
Governmental Entity any suit, action or proceeding, in each case (A) seeking
to restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from the
Company or Parent any damages that are material in relation to the Company
and its subsidiaries taken as a whole or Parent and its subsidiaries taken
as a whole, as applicable, (B) seeking to impose limitations on the ability
of Parent to acquire or hold, or exercise full rights of ownership of, any
shares of capital stock of the Company or the Surviving Corporation,
including the right to vote the common stock of the Surviving Corporation,
on all matters properly presented to the stockholders of the Surviving
Corporation or (C) which otherwise could reasonably be expected to have a
Material Adverse Effect on the Company or Parent.
6.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation of the
Company to effect the Merger is subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) the representations and warranties of Parent and Merger Sub set
forth in this Agreement shall be true and correct (without regard to any
materiality qualifications or references to Material Adverse Effect
contained therein), as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except to the extent such
representations and warranties (i) expressly relate to an earlier date (in
which case, as of such date) or (ii) may not be true or accurate by reason
of actions taken by Parent or Merger Sub as permitted by Section 5.2 hereof;
PROVIDED, HOWEVER, that this paragraph (a) shall be deemed satisfied so long
as the failure of all such representations and warranties to be true and
correct, individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect on Parent and its
subsidiaries, taken as a whole, and the Company shall have received a
certificate signed on behalf of Parent by a senior executive officer of
Parent to such effect;
(b) each of the obligations of Parent and Merger Sub to be performed at
or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the Effective
Time and, at the Closing, Parent and Merger Sub shall have delivered to the
Company a certificate executed by a senior officer of Parent to that effect;
(c) Parent shall have executed and delivered to David Saperstein a
registration rights agreement in the form of Exhibit D hereto (the
"REGISTRATION RIGHTS AGREEMENT");
(d) the Certificate of Designations with respect to the Parent Series A
Preferred Stock shall have been filed with the Secretary of State of the
State of Delaware;
(e) the Company shall have received an opinion of Paul, Hastings,
Janofsky & Walker LLP, dated the Closing Date, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code. In rendering such opinion, Paul,
Hastings, Janofsky & Walker LLP shall have received and may rely upon the
representations contained in the certificates referred to in Section 5.14;
(f) there shall not have been a material breach of the Parent
Stockholder Voting Agreement by the Parent Stockholder; and
(g) each of the agreements referenced in Section 4.27 shall be in full
force and effect, and there shall exist no claims that would give rise to a
right of termination by either of the parties thereto.
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6.3 CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The respective
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) the representations and warranties of the Company set forth in this
Agreement shall be true and correct (without regard to any materiality
qualifications or references to Material Adverse Effect contained therein),
as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except to the extent such representations and
warranties (i) expressly relate to an earlier date (in which case, as of
such date) or (ii) may not be true or accurate as of the Closing Date by
reason of actions taken by the Company as permitted by Section 5.1 hereof;
PROVIDED, HOWEVER, that this paragraph (a) shall be deemed satisfied so long
as the failure of all such representations and warranties to be true and
correct, individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect on the Company and
its subsidiaries, taken as a whole, and Parent shall have received a
certificate signed on behalf of the Company by a senior executive officer of
the Company to such effect;
(b) each of the obligations of the Company to be performed at or before
the Effective Time pursuant to the terms of this Agreement shall have been
duly performed in all material respects at or before the Effective Time and,
at the Closing, the Company shall have delivered to Parent and Merger Sub a
certificate executed by a senior officer of the Company to that effect;
(c) Parent shall have received an opinion of Weil, Gotshal & Manges LLP,
dated the Closing Date to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion, Weil, Gotshal &
Manges LLP shall have received and may rely upon the representations
contained in the certificates referred to in Section 5.14; and
(d) there shall not have been a material breach of the Company
Stockholders Voting Agreement by the Company Stockholders.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
7.1 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by the
mutual written consent of Parent and the Company by action of their respective
Board of Directors.
7.2 TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company if:
(a) the Merger shall not have been consummated by the first anniversary
of the date of this Agreement, (the "TERMINATION DATE"); PROVIDED, HOWEVER,
that if either Parent or the Company determines that additional time is
necessary in connection with obtaining any consent, registration, approval,
permit or authorization required to be obtained from any Governmental
Entity, the Termination Date may be extended by Parent or the Company from
time to time by written notice to the other party to a date not beyond
eighteen months from the date of this Agreement;
(b) the Company Requisite Vote shall not have been obtained at the
Company Stockholders Meeting;
(c) the Parent Requisite Vote shall not have been obtained at the Parent
Stockholders Meeting; or
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(d) any Law permanently restraining, enjoining or otherwise prohibiting
consummation of the Merger shall become final and non-appealable;
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant to this
Section 7.2 shall not be available to any party that has breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the occurrence of the failure of the Merger to
be consummated.
7.3 TERMINATION BY THE COMPANY. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action of the
Company Board if:
(a) (i) the Company is not in breach of Section 5.5, (ii) the Merger
shall not have been approved by the Company Requisite Vote, (iii) the
Company Board shall have determined in good faith, based on the advice of
outside legal counsel, that it is consistent with its fiduciary duties to
the Company's stockholders under applicable Law, to terminate this Agreement
to enter into an agreement with respect to or to consummate a transaction
constituting a Company Superior Proposal, (iv) the Company Board authorizes
the Company, subject to complying with the terms of this Agreement, to enter
into a binding written agreement with a third party concerning a transaction
that constitutes a Company Superior Proposal and the Company notifies Parent
in writing (the "COMPANY NOTICE") that it intends to enter into such an
agreement (it being understood that the Company shall be required to deliver
a new Company Notice in respect of any revised Company Superior Proposal
from such third party or its affiliates that the Company proposes to
accept), attaching the most current version of such agreement to such
Company Notice (which version shall be updated on a current basis), and (v)
during the five business day (or, in the case of any Company Notice with
respect to a particular third party other than the initial Company Notice
with respect to such third party's Company Acquisition Proposal, three
business day) period after delivery of the Company Notice, (A) the Company
shall have negotiated in good faith with, and shall have caused its
respective financial and legal advisors to, negotiate in good faith with
Parent to attempt to make such commercially reasonable adjustments in the
terms and conditions of this Agreement as would enable the Company to
proceed with the transactions contemplated herein and (B) the Company Board
shall have concluded, after considering the results of such negotiations,
that any Company Superior Proposal giving rise to the Company Notice
continues to be a Company Superior Proposal. The Company may not effect any
termination pursuant to this Section 7.3(a) unless (i) prior thereto or
simultaneously therewith, the Company pays to Parent in immediately
available funds the fees required to be paid pursuant to Section 7.5(b) and
(ii) such termination is within 3 business days after the termination of the
five (or, if applicable, three) business day period referred to in clause
(v) above. The Company agrees (x) that it will not enter into a binding
agreement referred to in clause (iii) above until the first business day
after the five (or, if applicable, three) business day period referred to in
clause (v) above, and (y) to notify Parent promptly of its intention to
enter into a written agreement referred to in a Company Notice if its
notification shall change at any time after giving such notification;
(b) the Parent Board, whether or not permitted to do so by this
Agreement, shall have withdrawn or adversely modified its approval or
recommendation of the Share Issuance, or shall have failed to call the
Parent Stockholders Meeting in accordance with Section 5.4(d); or
(c) there is a breach by Parent or Merger Sub of any representation,
warranty, covenant or agreement contained in this Agreement that would give
rise to a failure of a condition set forth in Section 6.2(a) or 6.2(b),
which has not been cured within 30 business days following receipt by Parent
and Merger Sub of written notice of such breach.
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7.4 TERMINATION BY PARENT. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time by action of the Parent
Board if:
(a) the Company enters into a binding agreement for a Company Superior
Proposal, or the Company Board, whether or not permitted to do so by this
Agreement, shall have withdrawn or adversely modified its approval or
recommendation of this Agreement or the Merger, or shall have failed to call
the Company Stockholders Meeting in accordance with Section 5.4(C); or
(b) there is a breach by the Company of any representation, warranty,
covenant or agreement contained in this Agreement would give rise to a
failure of a condition set forth in Section 6.3(a) or 6.3(b), which has not
been cured within 30 business days following receipt by the Company of
written notice of such breach.
7.5 EFFECT OF TERMINATION AND ABANDONMENT.
(a) In the event of termination of this Agreement and the abandonment of the
Merger pursuant to this Article 7, this Agreement (other than this Section 7.5
and Sections 5.8(c), 5.19 and Article 8) shall become void and of no effect with
no liability on the part of any party hereto (or of any of its directors,
officers, employees, agents, legal and financial advisors or other
representatives); PROVIDED, HOWEVER, neither such termination nor the existence
of any rights provided for in Section 7.5(b) or Section 7.5(c) shall relieve any
party hereto of any liability or eliminate or reduce any damages resulting from
(i) any willful breach of any representations or warranties contained in this
Agreement or fraud or (ii) any breach of any covenant or agreement contained in
this Agreement; and PROVIDED, FURTHER, that in the event Parent elects to
receive the Company Termination Fee (as defined below) or the Company elects to
receive the payments contemplated by Section 7.5(c)(i) or (ii), as the case may
be, the receipt of such payments and amounts shall be in full satisfaction of
any amount or obligations owed to the recipient by the other party or parties
hereto, and shall be such recipient's sole remedy hereunder (except for cases of
fraud).
(b) (i) In the event that this Agreement is terminated by the Company
pursuant to Section 7.3(a) or by Parent pursuant to Section 7.4(a), then the
Company shall pay Parent a termination fee of $30 million in same-day funds (the
"COMPANY TERMINATION FEE"), on the date of such termination.
(ii) In the event that prior to or at the Company Stockholders Meeting a
Company Acquisition Proposal shall have been made to the Company or any of
its subsidiaries or any of its stockholders, and thereafter this Agreement
is terminated by either Parent or the Company pursuant to Section 7.2(b),
then the Company shall reimburse Parent for its documented expenses incurred
in connection with the transactions contemplated hereby, up to a maximum
reimbursement of $1.0 million (the "PARENT EXPENSES"), promptly upon
presentment of statements documenting such expenses.
(iii) In the event that this Agreement is terminated by Parent pursuant
to Section 7.4(b) as a result of a willful breach and, within 12 months of
any such termination, any Company Acquisition Proposal (whether received
prior to or after such termination) is entered into, agreed to or
consummated by the Company, then the Company shall pay to Parent the Company
Termination Fee, on the earlier of the date an agreement is entered into
with respect to a Company Acquisition Proposal or a Company Acquisition
Proposal is consummated.
(c) (i) In the event that this Agreement is terminated by the Company
pursuant to Section 7.3(b), then Parent shall pay the Company a fee of $30
million in same-day funds (the "PARENT TERMINATION FEE"), on the day of such
termination.
(ii) In the event that this Agreement is terminated by the Company or
Parent pursuant to Section 7.2(c), then (A) Parent shall pay the Company a fee
of $10 million, on the date of such termination, and (B) Parent shall promptly
thereafter purchase from the Company unregistered shares
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of Company Common Stock for an aggregate purchase price equal to $10 million
(based on a per share price equal to the greater of $50 and the average closing
price of Company Common Stock on the Nasdaq National Market during the 30
trading days immediately prior to the date of the Parent Stockholders Meeting).
The provisions of Section 7.5(c)(ii) shall automatically be of no further
force or effect if holders of shares of Parent Common Stock or Parent Class B
Stock enter into one or more voting agreements in favor of the Company
substantially to the effect of the Parent Stockholders Voting Agreement (other
than Section 2 thereof) such that the aggregate number of votes represented by
such agreements is adequate to obtain the Parent Requisite Vote.
(d) The Company and Parent acknowledge that the agreements contained in
Sections 7.5(b) and 7.5(c) are an integral part of the transactions contemplated
by this Agreement, and that, without these agreements, Parent and Merger Sub and
the Company, as the case may be, would not have entered into this Agreement;
accordingly, if the Company fails to promptly pay the amount due pursuant to
Section 7.5(b) or Parent fails to pay promptly the amount due pursuant to
Section 7.5(c), and, in order to obtain such payment, Parent or the Company, as
the case may be, commences a suit which results in a judgment against the
Company or Parent for the fee set forth in this Section 7.5, the Company shall
pay to Parent, or Parent shall pay to the Company, as the case may be, its costs
and expenses (including attorney's fees) in connection with such suit, together
with interest from the date of termination of this Agreement on the amounts owed
at the prime rate of Citibank, N.A. in effect from time to time during such
period plus two percent.
7.6 AMENDMENT. This Agreement may be amended by action taken by the
Company, Parent and Merger Sub at any time before or after approval of the
Merger by the stockholders of the Company but, after any such approval, no
amendment shall be made which requires the approval of such stockholders under
applicable Law without such approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of the parties hereto.
7.7 EXTENSION; WAIVER. At any time prior to the Effective Time, each party
hereto (for these purposes, Parent and Merger Sub shall together be deemed one
party and the Company shall be deemed the other party) may (i) extend the time
for the performance of any of the obligations or other acts of the other party,
(ii) waive any inaccuracies in the representations and warranties of the other
party contained herein or in any document, certificate or writing delivered
pursuant hereto or (iii) waive compliance by the other party with any of the
agreements or conditions contained herein. Any agreement on the part of either
party hereto to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of either
party hereto to assert any of its rights hereunder shall not constitute a waiver
of such rights.
ARTICLE 8
MISCELLANEOUS
8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made herein shall not survive beyond the Effective Time or a
termination of this Agreement.
8.2 ENTIRE AGREEMENT; ASSIGNMENT. THIS AGREEMENT:
(a) constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof; and
(b) shall not be assigned by operation of law or otherwise; PROVIDED,
HOWEVER, that Parent may assign any or all of its rights and obligations
under this Agreement to any direct wholly owned
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subsidiary of Parent, but any representation, warranty or covenant of Parent
contained in this Agreement shall remain a representation, warranty or
covenant of Parent and no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
Any assignment in violation of this Section 8.2(b) shall be void AB INITIO.
8.3 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, confirmed facsimile or telex, or by first class mail (postage prepaid,
return receipt requested), to the other party as follows:
<TABLE>
<S> <C>
if to Parent or Merger Sub to: Westwood One, Inc. 9540 Washington Boulevard
Culver City, California 90232
Attention: Joel Hollander
Facsimile: (310) 840-4059
with copies to: Infinity Broadcasting Corporation
40 West 57(th) Street
New York, New York 10019
Attention: Farid Suleman
Facsimile: (212) 314-9336
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Howard Chatzinoff, Esq.
Facsimile: (212) 310-8007
if to the Company to: Metro Networks, Inc.
681 Fifth Avenue, 10(th) Floor
New York, New York 10022
Attention: Gary Worobow, Esq.
Facsimile: (212) 750-5393
with a copy to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Neil A. Torpey, Esq.
Facsimile: (212) 319-4090
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
8.4 GOVERNING LAW. Except to the extent that Delaware Law is mandatorily
applicable to the Merger and the rights of the stockholders of the Company, this
Agreement shall be governed by and construed in accordance with the Laws of the
State of New York, without regard to the principles of conflicts of Law thereof.
8.5 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
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8.6 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and its successors and permitted
assigns, and except as provided in Section 5.12, nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
8.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
8.8 SPECIFIC PERFORMANCE. The parties hereto acknowledge that irreparable
damage would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under this
Agreement may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall, however, not be exclusive and
shall be in addition to any other remedies which any party may have under this
Agreement or otherwise.
8.9 BROKERS. The Company agrees to indemnify and hold harmless Parent and
Merger Sub, and Parent agrees to indemnify and hold harmless the Company, from
and against any and all liability to which Parent and Merger Sub, on the one
hand, or the Company, on the other hand, may be subjected by reason of any
broker's, finder's or similar fees or expenses with respect to the transactions
contemplated by this Agreement to the extent such similar fees and expenses are
attributable to any action undertaken by or on behalf of the Company, or Parent
or Merger Sub, as the case may be.
8.10 DISCLOSURE GENERALLY. The parties acknowledge and agree that (i) the
Company Disclosure Schedule and Parent Disclosure Schedule may include certain
items and information solely for informational purposes for the convenience of
the parties hereto and (ii) the disclosure of any matter in the Company
Disclosure Schedule or Parent Disclosure Schedule shall not be deemed to
constitute an acknowledgement by the Company or Parent, as the case may be, that
the matter is material or required to be disclosed pursuant to the provisions of
this Agreement.
8.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
8.12 INTERPRETATION.
(a) The words "hereof," "herein" and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles,
sections, paragraphs, exhibits and schedules of this Agreement unless otherwise
specified. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." All terms defined in this Agreement shall have the defined meanings
contained herein when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such terms. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time, amended, qualified
or supplemented, including (in the case of agreements and instruments) by waiver
or consent and (in the case of statutes) by succession of comparable successor
statutes and all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
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(b) The phrases "the date of this Agreement," "the date hereof" and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to June 1, 1999. "KNOW" or "KNOWLEDGE" means, (i) with respect to the Company,
the actual knowledge of David I. Saperstein, Charles I. Bortnick, Shane E.
Coppola or Gary Worobow, and (ii) with respect to Parent, the actual knowledge
of Farid Suleman, Joel Hollander or Gary Yusko.
(c) The parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
[SIGNATURES BEGIN ON NEXT PAGE]
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SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed on its behalf as of the day and year first above written.
<TABLE>
<S> <C> <C>
WESTWOOD ONE, INC.
By: /s/ FARID SULEMAN
-----------------------------------------
Name: Farid Suleman
Title: Executive Vice President,
Chief Financial Office and Secretary
COPTER ACQUISITION CORP.
By: /s/ JOEL HOLLANDER
-----------------------------------------
Name: Joel Hollander
Title: Vice President and Secretary
METRO NETWORKS, INC.
By: /s/ DAVID I. SAPERSTEIN
-----------------------------------------
Name: David I. Saperstein
Title: Chief Executive Officer
</TABLE>
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ANNEX B
[LOGO]
[LOGO]
PERSONAL AND CONFIDENTIAL
June 1, 1999
Board of Directors
Metro Networks, Inc.
2800 Post Oak Boulevard
Suite 4000
Houston, TX 77056
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of Common Stock, par value $.001 per
share (the "Shares"), of Metro Networks, Inc. (the "Company") of the exchange
ratio of 1.50 shares of Common Stock, par value $.01 per share (the "Westwood
Shares", of Westwood One, Inc. ("Westwood") to be received for each Share (the
"Exchange Ratio") pursuant to the Agreement and Plan of Merger, dated as of June
1, 1999, among Westwood, Copter Acquisition Corp., a wholly-owned subsidiary of
Westwood, and the Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having provided certain investment banking services to the Company
from time to time, including having acted as lead underwriter of the initial
public offering of 8,250,000 Shares in October 1996, and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. Goldman, Sachs & Co. provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of the Company or Westwood for its
own account and for the accounts of customers. As of the date hereof, Goldman,
Sachs & Co. accumulated a net long position of 657,100 Shares and of 223,920
Westwood Shares. Goldman, Sachs & Co. may provide investment banking services to
Westwood and its subsidiaries in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Registration Statement of the Company on Form S-1, including the
Prospectus contained therein, dated October 16, 1996, relating to the initial
public offering of Shares; Annual Reports to Stockholders and Annual Reports on
Form 10-K of the Company for the three years ended December 31, 1998 and of
Westwood for the five years ended December 31, 1998; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company and Westwood;
certain other communications from the Company and Westwood to their respective
stockholders; and certain internal financial analyses and forecasts for the
Company and Westwood prepared by their respective managements, including certain
cost savings and operating synergies jointly projected by the managements of the
Company and Westwood to result from the transaction contemplated by the
Agreement (the "Synergies"). We also
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Metro Networks, Inc.
June 1, 1999
Page Two
have held discussions with members of the senior management of the Company and
Westwood regarding the strategic rationale for, and the potential benefits of,
the transaction contemplated by the Agreement and the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, we have reviewed the reported price and trading activity
for the Shares and the Westwood Shares, compared certain financial and stock
market information for the Company and Westwood with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the radio
broadcasting industry specifically and in other industries generally and
performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. In that regard, we have assumed with
your consent that the Synergies have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the Company
and Westwood and that the Synergies will be realized in the amounts and time
periods contemplated thereby. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or Westwood
or any of their subsidiaries and we have not been furnished with any such
evaluation or appraisal. We also, at your instruction, have taken into account
the view of the management of the Company with respect to the prospects of the
Company as an independent entity. Our opinion does not address the relative
merits of the transaction contemplated pursuant to the Agreement as compared to
any alternative business transaction that might be available to the Company. Our
advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to how any
holder of Shares should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair from a financial point of view to the
holders of Shares.
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Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- ------------------------------
GOLDMAN, SACHS & CO.
</TABLE>
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<PAGE>
ANNEX C
[LOGO]
June 1, 1999
Board of Directors
Westwood One, Inc.
9540 Washington Boulevard
Culver City, CA 90232
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to Westwood One, Inc. (the "Company") of the consideration to be paid by
the Company pursuant to the terms of the Agreement and Plan of Merger, dated as
of June 1, 1999 (the "Agreement"), among the Company, Copter Acquisition Corp.
("Merger Sub"), a wholly owned subsidiary of the Company, and Metro Networks,
Inc. ("Metro"), pursuant to which Merger Sub will be merged (the "Merger") with
and into Metro.
Pursuant to the Agreement, each share of common stock, par value $0.001 per
share ("Metro Common Stock"), of Metro will be converted, subject to certain
exceptions, into the right to receive 1.5 shares (the "Exchange Ratio") of
common stock, $0.01 par value per share ("Company Common Stock"), of the
Company.
In arriving at our opinion, we have reviewed a draft dated May 26, 1999 of
the Agreement, and drafts dated May 24, 1999 of a Company Stockholder Voting
Agreement and a Non-compete Agreement with a key Metro stockholder. We also have
reviewed financial and other information that was publicly available or
furnished to us by the Company and Metro, including information provided during
discussions with their respective managements. Included in the information
provided during discussions with the respective managements were certain
financial projections of Metro for the period beginning January 1, 1999 and
ending December 31, 2004 prepared by the management of Metro and certain
financial projections of the Company for the period beginning January 1, 1999
and ending December 31, 2004 prepared by the management of the Company. In
addition, we have compared certain financial and securities data of the Company
and Metro with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of Company
Common Stock and Metro Common Stock, reviewed prices and premiums paid in
certain other business combinations and conducted such other financial studies,
analyses and investigations as we deemed appropriate for purposes of this
opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company and Metro or
their respective representatives, or that was otherwise reviewed by us. In
particular, we have relied upon the estimates of the management of the Company
of the operating synergies achievable as a result of the Merger and upon our
discussion of such synergies with the management of both Metro and the Company.
With respect to the financial projections supplied to us, we have relied on
representations that they have been reasonably prepared on the basis reflecting
the best currently available estimates and judgments of the management of the
Company and Metro as to the future operating and financial performance of the
Company and Metro. We have not assumed any responsibility for making and
independent evaluation of any assets or liabilities or for making any
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independent verification of any of the information reviewed by us. We have
relied as to certain legal matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may effect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which Company Common Stock will actually trade at any time. Our
opinion does not address the relative merits of the Merger and the other
business strategies being considered by the Company's Board of Directors, nor
does it address the Board's decision to proceed with the Merger. Our opinion
does not constitute a recommendation to any stockholder as to how such
stockholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for the Company and its affiliates (including
Infinity Broadcasting Corporation)_and Metro in the past and has been
compensated for such services, including acting as broker for the Company to
repurchase shares of Company Common Stock in the open market, acting as
co-manager of Infinity Broadcasting Corporation's $2.9 billion initial public
offering in 1998, and acting as co-manager of Metro's $320 million initial
public offering in 1996. In addition as you are aware, a managing director of
DLJ serves as a member of the Board of Directors of the Company.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair to the Company from a financial
point of view.
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Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ LOUIS P. FRIEDMAN
-----------------------------------------
Louis P. Friedman
Managing Director
</TABLE>
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ANNEX D
COMPANY STOCKHOLDER VOTING AGREEMENT
COMPANY STOCKHOLDER VOTING AGREEMENT, dated as of June 1, 1999 (this
"AGREEMENT"), by and among WESTWOOD ONE, INC., a Delaware corporation
("PARENT"), and each of the other signatories hereto (each, a "STOCKHOLDER" and,
collectively, the "STOCKHOLDERS").
WHEREAS, concurrently herewith, Parent, Copter Acquisition Corp., a Delaware
corporation ("MERGER SUB"), and Metro Networks, Inc. a Delaware corporation (the
"COMPANY"), are entering into an Agreement and Plan of Merger (the "MERGER
AGREEMENT"; capitalized terms used without definition herein having the meanings
ascribed thereto in the Merger Agreement);
WHEREAS, among other things, the Merger Agreement provides for the merger
(the "Merger") of Merger Sub into the Company and the Share Issuance pursuant
thereto;
WHEREAS, each Stockholder is the record and beneficial owner of the number
of shares ("SHARES") of each class of capital stock of the Company entitled to
vote ("VOTING STOCK") set forth opposite such Stockholder's name in Schedule I
hereto;
WHEREAS, approval and adoption of the Merger Agreement by the Company's
stockholders is required in order to consummate the Merger;
WHEREAS, the Board of Directors of the Company has, prior to the execution
of this Agreement, duly and validly approved and adopted the Merger Agreement
and has resolved and agreed to recommend to its stockholders that they approve
and adopt the Merger Agreement, and such approval, adoption, resolution and
agreement has not been withdrawn;
WHEREAS, the Stockholders are executing this Agreement (i) as an inducement
to Parent to enter into and execute the Merger Agreement and (ii) in reliance
upon the representations, warranties, agreements and covenants of Parent set
forth in the Merger Agreement; and
WHEREAS, a certain holder of shares of Parent capital stock is concurrently
executing the Parent Stockholder Voting Agreement pursuant to which such holder
is agreeing to vote for the Share Issuance as an inducement to the Company to
enter into and execute the Merger Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
Section 1. AGREEMENT TO VOTE.
Each Stockholder hereby agrees (for itself and not as to any other
Stockholder) that, during the term of this Agreement, such Stockholder shall,
from time to time, at any meeting (whether annual or special and whether or not
an adjourned or postponed meeting) of stockholders of the Company, however
called, or in connection with any written consent of the holders of Voting
Stock, in either case, prior to the earlier of the Effective Time and the
termination of this Agreement, appear at such meeting or otherwise cause the
Shares to be counted as present thereat for purposes of establishing a quorum,
and such Stockholder shall vote or consent (or cause to be voted or consented),
in person or by proxy, all Shares, and any other voting securities of the
Company (whether acquired heretofore or hereafter) that are beneficially owned
by such Stockholder or its wholly-owned Affiliates or as to which such
Stockholder has, directly or indirectly, the right to vote or direct the voting,
in favor of the approval and adoption of the Merger Agreement. Each Stockholder
agrees, during the period commencing on the date hereof and ending on the
earlier of the Effective Time and the termination of this Agreement, not to, and
not to permit any of its wholly-owned Affiliates to, vote or execute any written
consent in lieu of a stockholders meeting or vote of the Company, if such
consent or vote by
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the stockholders of the Company would be inconsistent with or frustrate the
purposes or terms this Agreement or the Merger Agreement.
In furtherance and not in limitation of the foregoing, each Stockholder
hereby grants to, and appoints, Parent and each of Farid Suleman and Joel
Hollander in their respective capacities as officers of Parent, and any
individual who shall hereafter succeed to any such officer of Parent, and any
other designee of Parent, each of them individually, its irrevocable proxy and
attorney-in-fact (with full power of substitution) to vote the Shares as
indicated in this Section 1. Each Stockholder intends this proxy to be
irrevocable and coupled with an interest and will take such further action and
execute such other instruments as may be necessary to effectuate the intent of
this proxy.
Each Stockholder hereby revokes any and all previous proxies with respect to
its Shares or any other voting securities of the Company that may relate to the
approval of the Merger Agreement.
Section 2. CAPTURE. In order to induce Parent and Merger Sub to enter into
the Merger Agreement, each of the Stockholders hereby agrees to the matters set
forth in this Section 2 with respect to the number of shares of Voting Stock set
forth opposite such Stockholder's name on SCHEDULE I hereto, and all other
shares of Voting Stock acquired by such Stockholder after the date of this
Agreement (collectively, the "SUBJECT SHARES"):
(a) In the event that the Merger Agreement shall have been terminated under
circumstances where Parent is entitled to receive a Termination Fee, each
Stockholder shall pay to Parent on demand, an amount in cash or Voting
Stock (or securities into which such Voting Stock becomes convertible
pursuant to the consummation of a Company Acquisition Proposal), at such
Stockholder's election, equal to all Profit (as defined below) of such
Stockholder from the consummation of any Company Acquisition Proposal
that is consummated within twelve months or, if entered into within
twelve months, consummated within eighteen months of such termination.
The "Profit" of any Stockholder from any Company Acquisition Proposal
shall equal 60% of the sum of (i) the aggregate consideration received by
such Stockholder pursuant to such Company Acquisition Proposal, valuing
any non-cash consideration (including any residual interest in the
Company) at its fair market value on the date of such consummation plus
(ii) the fair market value, on the date of disposition, of all Subject
Shares of such Stockholder disposed of after the termination of the
Merger Agreement and prior to the date of such consummation less (iii)
the fair market value of the aggregate consideration that would have been
paid or payable to such Stockholder if he had received the Merger
Consideration and/or Parent Series A Preferred Stock (based on the fair
market value of Parent Common Stock to which such Parent Series A
Preferred Stock would be convertible into) pursuant to the Merger
Agreement as originally executed, valued as of immediately prior to the
first public announcement by the Company of its intention to terminate
the Merger Agreement to pursue a Superior Proposal or by any party making
a Company Acquisition Proposal (whichever is lower).
(b) In the event that (i) prior to the Effective Time, a Company Acquisition
Proposal shall have been made and (ii) the Effective Time of the Merger
shall have occurred and Parent for any reason shall have increased the
amount of Merger Consideration payable, or the value of the Parent Series
A Preferred Stock exchangeable, over that set forth in the Merger
Agreement in effect on the date hereof (the "ORIGINAL MERGER
CONSIDERATION"), each Stockholder shall pay to Parent on demand an amount
in cash equal to the product of (A) the number of Subject Shares of such
Stockholder and (B) 60% of the excess, if any, of (1) the per share cash
consideration or the per share fair market value of any non-cash
consideration, determined as of the Effective Time of the Merger as the
case may be, actually received by the Stockholder as a result of the
Merger, over (2) the fair market value of the Original Merger
Consideration
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determined as of the time of the first increase in the amount of the
Original Merger Consideration.
(c) For purposes of this Section 2, the fair market value of any non-cash
consideration consisting of:
(i) securities listed on a national securities exchange or traded on the
Nasdaq National Market shall be equal to the average closing price per
share of such security as reported on such exchange or Nasdaq National
Market for the five trading days before and after the date of
determination; and
(ii) consideration which is other than cash or securities of the form
specified in clause (i) of this Section 2(c) shall be determined by a
nationally recognized independent investment banking firm mutually
agreed upon by the parties within ten (10) business days of the event
requiring selection of such banking firm; PROVIDED, HOWEVER, that if
the parties are unable to agree within two (2) business days after the
date of such event as to the investment banking firm, then the parties
shall each select one firm, and those firms shall select a third
investment banking firm, which third firm shall make such
determination; PROVIDED FURTHER, that the fees and expenses of such
investment banking firm shall be borne equally by Parent, on the one
hand, and the Stockholders, on the other hand. The determination of the
investment banking firm shall be binding upon the parties.
(d) Any payment under this Section 2 shall (i) if paid in cash, be paid by
wire transfer of same day funds to an account designated by Parent and
(ii) if paid through a transfer of securities, be paid through delivery
of such securities, suitably endorsed for transfer.
Section 3. RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Except
as contemplated by this Agreement, each Stockholder agrees not to, directly or
indirectly, (i) offer for sale, sell, transfer, tender, pledge, encumber, assign
or otherwise dispose of, or enter into any contract, option or other arrangement
or understanding with respect to, or consent to the offer for sale, transfer,
tender, pledge, encumbrance, assignment or other disposition (each, a
"DISPOSITION") of, any or all of the Shares or any interest therein; (ii) grant
any proxies or powers of attorney, deposit any Shares into a voting trust or
enter into a voting agreement with respect to any Shares; or (iii) take any
action that would make any representation or warranty of such Stockholder
contained herein untrue or incorrect, or have the effect of preventing or
disabling the Stockholder from performing the Stockholder's obligations under
this Agreement or the Company from performing the Company's obligations under
the Merger Agreement.
Section 4. RESTRICTION ON TRANSFER OF SHARES OF PARENT COMMON STOCK. Each
Stockholder agrees not to effect any Disposition during any of the first three
12-month periods (i.e., 3 years) following the Effective Time of an aggregate
number of shares of Parent Common Stock in excess of 33 1/3% of the number of
shares of Parent Common Stock received by such Stockholder in the Merger.
Notwithstanding anything to the contrary in this Agreement, a Disposition shall
not include the exercise of options, and the sale of shares issuable upon the
exercise of such options, by a Stockholder or the repayment of shares subject to
a stock loan and pledge agreement.
Section 5. NON-SOLICITATION. Each Stockholder shall comply in all respects
with the non-solicitation and other provisions of Section 5.5 of the Merger
Agreement and the other provisions of the Merger Agreement related thereto, and
shall not take any of the actions or do any of the things restricted or
otherwise prohibited thereby.
Section 6. FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of its obligations under this Agreement.
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Section 7. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and
warrants to each Stockholder as follows:
(a) This Agreement has been approved by the Board of Directors of Parent,
representing all necessary corporate action on the part of Parent for the
execution and performance hereof and thereof by Parent (no action by the
stockholders of Parent being required).
(b) This Agreement has been duly executed and delivered by a duly authorized
officer of Parent.
(c) This Agreement constitutes the valid and binding agreement of Parent,
enforceable against Parent in accordance with its terms.
(d) The execution and delivery of this Agreement by Parent does not violate
or breach, and will not give rise to any violation or breach, of Parent's
charter or bylaws, or, except as will not materially impair its ability
to effectuate, carry out or comply with all of the terms of this
Agreement or the Merger Agreement, any Law, Governmental Entity approval
or contract by which Parent or its subsidiaries or their respective
assets or properties may be bound.
Section 8. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder, as to such Stockholder only, represents and warrants to Parent as
follows:
(a) SCHEDULE I sets forth, opposite each Stockholder's name, the number and
type of Shares of which such Stockholder is the record or beneficial
owner and the number of votes per share to which the Stockholder is
entitled with respect to the Merger Agreement. Such Stockholder is the
lawful owner of such Shares, free and clear of all liens, charges,
options, rights, encumbrances, stockholders agreements, voting
agreements, agreements to transfer or otherwise dispose of such Shares
and commitments of every kind, other than this Agreement and as disclosed
in SCHEDULE II and has the sole power to vote (or cause to be voted) the
Shares as set forth in this Agreement. Except as set forth on such
SCHEDULE I, neither such Stockholder nor any of its Affiliates owns or
holds any rights to acquire any additional shares of any class of Voting
Stock or other securities of the Company or any interest therein or any
voting rights with respect to any additional shares of any class of
Voting Stock or any other securities of the Company.
(b) This Agreement has been duly executed and delivered by a duly authorized
officer of such Stockholder or, if the Stockholder is a natural person,
the Stockholder has the legal capacity to execute this Agreement.
(c) This Agreement constitutes the valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its
terms.
(d) The execution and delivery of this Agreement by such Stockholder do not
violate or breach, and will not give rise to any violation or breach, of
such Stockholder's charter, by-laws, trust instrument or partnership
agreement, to the extent applicable, or, except as will not materially
impair the ability of such Stockholder to effectuate, carry out or comply
with all of the terms of this Agreement, any Law, third party consent,
approval, filing, registration or similar requirement of any Governmental
Entity or any agreement or contract by which such Stockholder or its
assets or properties are bound.
Section 9. EFFECTIVENESS AND TERMINATION. In the event the Merger
Agreement is terminated in accordance with its terms or immediately upon the
Effective Time, this Agreement shall automatically terminate and be of no
further force or effect, except that the provisions of Section 2 hereof shall
survive any such termination. Upon such termination, except for any rights any
party may have in respect of any breach by any other party of its obligations
hereunder, none of the parties hereto shall have any further obligation or
liability hereunder other than pursuant to Section 2 hereof. This
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Agreement shall continue in full force and effect despite any amendment or other
modification of, or any consent or waiver under, the Merger Agreement; PROVIDED,
HOWEVER, (A) that any amendment by the parties to the Merger Agreement to (x)
the Exchange Ratio or the Merger Consideration (each as defined in Section
2.1(b) of the Merger Agreement), (y) Section 5.5(a) of the Merger Agreement
(including the definition of "Company Acquisition Proposal" set forth in Section
5.5(c) thereof) or (z) Article 7 of the Merger Agreement entitled "Termination;
Amendment; Waiver" or (B) the waiver on or prior to the Closing Date by the
Company of any material condition precedent set forth in Article 6 of the Merger
Agreement, shall require the written consent of the Stockholders, failing which
this Agreement may be terminated in writing by any Stockholder who has not
consented to such amendment or such waiver. In any event, if the Effective Time
shall not have occurred on or before the Termination Date, this Agreement may be
terminated in writing by any Stockholder and it shall be of no further force or
effect as to such Stockholder.
Section 10. VOTING AGREEMENT.
David Saperstein agrees that he shall enter into a voting agreement with
Infinity Broadcasting Corporation at the Effective Time pursuant to which David
Saperstein shall agree, subject to any applicable laws or regulations of the
exchange where the Parent's securities are listed, to vote all shares of capital
stock of Parent for the election of Infinity Broadcasting Corporation's
designees to the Parent's Board of Directors, to the extent such designees have
been nominated by Parent's Board of Directors or a committee thereof, for
election at such meeting.
Section 11. MISCELLANEOUS.
(a) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
cable, telegram, confirmed facsimile or telex, or by first class mail
(postage prepaid, return receipt requested), to the other party as follows:
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if to Parent, to: Westwood One, Inc.
9540 Washington Boulevard
Culver City, California 90232
Attention: Joel Hollander
Facsimile: (310) 840-4059
with a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153-0119
Attention: Howard Chatzinoff, Esq.
Facsimile: (212) 310-8007
if to any Stockholder, to: c/o Metro Networks, Inc.
2800 Oak Post Boulevard
Suite 4000
Houston, Texas 77056
Attention: David I. Saperstein
Facsimile: (713) 407-6049
with a copy to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Neil A. Torpey, Esq.
Facsimile: (212) 319-4090
</TABLE>
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or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
(b) DESCRIPTIVE HEADINGS: The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(c) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
(d) ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
constitutes the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely
to the benefit of each party hereto, and nothing in this Agreement, express
or implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
(e) WAIVER OF JURY TRIAL. Each party hereto waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury
in respect of any litigation directly or indirectly arising out of, under or
in connection with this Agreement.
(f) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware applicable to contracts
made, executed, delivered and performed wholly within such state and, in any
case, without regard to the principles or policies of conflicts of laws of
such state.
(g) SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement
shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise),
without the prior written consent of the other parties hereto and the
written undertaking of the assignee to be bound by the terms of this
Agreement, and any attempt to make any such assignment without such consent
shall be null and void. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the
parties and their respective successors and permitted assigns.
(i) SUBMISSION TO JURISDICTION; WAIVERS. Each of Parent and each
Stockholder irrevocably agrees that any legal action or proceeding with
respect to this Agreement or for recognition and enforcement of any judgment
in respect hereof brought by the other party hereto or its successors or
assigns may be brought and determined in the Chancery or other Courts of the
State of Delaware, and each of Parent and each Stockholder hereby
irrevocably submits with regard to any such action or proceeding for itself
and in respect to its property, generally and unconditionally, to the
exclusive jurisdiction of the aforesaid courts. Each of Parent and each
Stockholder hereby irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally
subject to the jurisdiction of the above-named courts for any reason other
than the failure to serve process in accordance with this Section 11(i), (b)
that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), and (c) to the
fullest extent permitted
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by applicable law, that (i) the suit, action or proceeding in any such court
is brought in an inconvenient forum, (ii) the venue of such suit, action or
proceeding is improper or (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
(j) SPECIFIC PERFORMANCE. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific
performance issued by a court of competent jurisdiction. Such remedy shall,
however, not be exclusive and, shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
(k) EXPENSES. Each of Parent and each Stockholder shall bear its own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
(l) ACTION IN STOCKHOLDER CAPACITY ONLY. No Stockholder makes any
agreement or understanding herein as a director or officer of the Company or
in any capacity other than as a stockholder of the Company. Each Stockholder
signs solely in its capacity as a record holder and beneficial owner of
Shares and nothing herein shall limit or affect any actions taken by a
representative of such Stockholder in such representative's capacity as an
officer or director of the Company.
(m) OBLIGATIONS SEVERAL. The obligations of each Stockholder under
this Agreement shall be several and not joint. No Stockholder shall have any
liability, duty or obligation arising out of or resulting from any failure
by any other Stockholder (or any Affiliate thereof) to comply with the terms
and conditions of this Agreement.
[SIGNATURES BEGIN ON NEXT PAGE]
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SIGNATURE PAGE TO COMPANY STOCKHOLDER VOTING AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed this Company Stockholder
Voting Agreement as of the date first above written.
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WESTWOOD ONE, INC.
By: /s/ FARID SULEMAN
-----------------------------------------
Name: Farid Suleman
Title: Executive Vice President,
Chief Financial Officer and
Secretary
/s/ DAVID I. SAPERSTEIN
---------------------------------------------
David I. Saperstein
/s/ CHARLES I. BORTNICK
---------------------------------------------
Charles I. Bortnick
/s/ SHANE E. COPPOLA
---------------------------------------------
Shane E. Coppola
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SCHEDULE I
OWNERSHIP OF VOTING STOCK
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<CAPTION>
NAME AND ADDRESS CLASS AND SERIES NUMBER OF SHARES NUMBER OF
OF STOCKHOLDER OF VOTING STOCK OWNED VOTES PER SHARE
- ----------------------------------- ----------------------------------------- ----------------- ---------------------
<S> <C> <C> <C>
David I. Saperstein Common Stock 7,615,610 1
Series A Convertible Preferred Stock 2,549,750 1
Charles I. Bortnick Common Stock 0 1
Shane E. Coppola Common Stock 1,000 1
</TABLE>
D-9
<PAGE>
SCHEDULE II
LIENS ON SHARES
1. Share certificates nos. 1 (1,387,064 shares of Series A Convertible
Preferred Stock), 2 (1,122,686 shares of Series A Convertible Preferred Stock)
and 11 (1,050,750 shares of common stock) are pledged under the stock loan
agreements between David Saperstein and the Company or David Saperstein and
certain trusts for the benefit of his children.
2. 350,000 shares of common stock held by Goldman Sachs & Co. are pledged to
secure a loan of $5,000,000 made by Goldman Sachs & Co. to an entity controlled
by Mr. Saperstein.
D-10
<PAGE>
ANNEX E
PARENT STOCKHOLDER VOTING AGREEMENT
PARENT STOCKHOLDER VOTING AGREEMENT, dated as of June 1, 1999 (this
"AGREEMENT"), by and among METRO NETWORKS, INC., a Delaware corporation (the
"COMPANY"), and INFINITY BROADCASTING CORPORATION, a Delaware corporation (the
"STOCKHOLDER").
WHEREAS, concurrently herewith, the Company, Copter Acquisition Corp., a
Delaware corporation ("MERGER SUB"), and Westwood One, Inc. a Delaware
corporation ("PARENT"), are entering into an Agreement and Plan of Merger (the
"MERGER AGREEMENT"; capitalized terms used without definition herein having the
meanings ascribed thereto in the Merger Agreement);
WHEREAS, among other things, the Merger Agreement provides for the merger
(the "MERGER") of Merger Sub into the Company, and the Share Issuance pursuant
thereto;
WHEREAS, the Stockholder is the record and beneficial owner of the number of
shares ("SHARES") of each class of capital stock of Parent entitled to vote
("VOTING STOCK") set forth opposite its name in SCHEDULE I hereto;
WHEREAS, approval of the Share Issuance by Parent's stockholders is required
in order to consummate the Merger;
WHEREAS, the Board of Directors of Parent has, prior to the execution of
this Agreement, duly and validly approved and adopted the Merger Agreement and
the Share Issuance, and has resolved and agreed to recommend to its stockholders
that they approve the Share Issuance, and such approval, adoption and
recommendation has not been withdrawn;
WHEREAS, the Stockholder is executing this Agreement (i) as an inducement to
the Company to enter into and execute the Merger Agreement and (ii) in reliance
upon the representations, warranties, agreements and covenants of the Company
set forth in the Merger Agreement; and
WHEREAS, certain holders of shares of the Company capital stock are
concurrently executing the Company Stockholder Voting Agreement agreeing to vote
for the Merger Agreement as an inducement to Parent to enter into and execute
the Merger Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
Section 1. AGREEMENT TO VOTE. The Stockholder agrees that, during the term
of this Agreement, such Stockholder shall, from time to time, at any meeting
(whether annual or special and whether or not an adjourned or postponed meeting)
of stockholders of Parent, however called, or in connection with any written
consent of the holders of any of the Voting Stock, in either case, prior to the
earlier of the Effective Time and the termination of this Agreement, appear at
such meeting or otherwise cause the Shares to be counted as present thereat for
purposes of establishing a quorum, and such Stockholder shall vote or consent
(or cause to be voted or consented), in person or by proxy, all Shares, and any
other voting securities of Parent (whether acquired heretofore or hereafter),
that are beneficially owned by such Stockholder or its wholly-owned Affiliates
or as to which such Stockholder has, directly or indirectly, the right to vote
or direct the voting, in favor of the approval and adoption of the Share
Issuance. The Stockholder agrees, during the period commencing on the date
hereof and ending on the earlier of the Effective Time and the termination of
this Agreement, not to, and not to permit any of its wholly-owned Affiliates to,
vote or execute any written consent in lieu of a stockholders meeting or vote of
Parent, if such consent or vote by the stockholders of Parent would be
inconsistent with or frustrate the purposes or terms of this Agreement or the
Merger Agreement.
E-1
<PAGE>
In furtherance and not in limitation of the foregoing, the Stockholder
hereby grants to, and appoints, the Company and each of Charles I. Bortnick and
Shane E. Coppola, in their respective capacities as officers of the Company, and
any individual who shall hereafter succeed to any such officer of the Company,
and any other designee of the Company, each of them individually, its
irrevocable proxy and attorney-in-fact (with full power of substitution) to vote
the Shares as indicated in this Section 1. The Stockholder intends this proxy to
be irrevocable and coupled with an interest and will take such further action
and execute such other instruments as may be necessary to effectuate the intent
of this proxy.
The Stockholder hereby revokes any and all previous proxies with respect to
its Shares or any other voting securities of Parent that may relate to the
voting of its Voting Stock in accordance with the provisions of this Section 1.
Section 2. EXERCISE OF WARRANTS. Not later than the second business day
immediately prior to the date established by the Parent Board as the record date
(the "RECORD DATE") for the Parent Stockholders Meeting, the Stockholder shall
confer with the Company with respect to the anticipated voting of shares of
Parent Common Stock with respect to the Share Issuance. If the Company has not
received irrevocable written commitments from stockholders or other evidence
satisfactory to the Company that an adequate number of shares of Parent Common
Stock to approve the Share Issuance at the Parent Stockholders Meeting, the
Company shall so advise the Stockholders in writing not later than the first
business day prior to the Record Date and the Stockholder shall, not later than
the Record Date, exercise such number of warrants to acquire Parent Common Stock
equal to the lesser of (a) such number as shall be reasonably requested by the
Company, in its good faith judgment, in order to make it reasonably likely that
the Parent Requisite Vote will be obtained and (b) the excess of 3 million MINUS
the number of shares of Parent Common Stock acquired by the Stockholder or its
affiliates between the date hereof and the day immediately preceding the Record
Date. The provisions of this Section 2 shall automatically be of no further
force or effect if holders of shares of Parent Common Stock or Parent Class B
Stock enter into one or more voting agreements in favor of the Company
substantially to the effect of this Agreement (other than this Section 2) such
that the aggregate number of votes represented by such agreements and this
Agreement is adequate to achieve the Parent Requisite Vote.
Section 3. RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Except
as contemplated by this Agreement, the Stockholder agrees not to, directly or
indirectly, (i) offer for sale, sell, transfer, tender, pledge, encumber, assign
or otherwise dispose of, or enter into any contract, option or other arrangement
or understanding with respect to, or consent to the offer for sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the Shares or any interest therein; (ii) grant any proxies or powers of
attorney, deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares; or (iii) take any action that would make
any representation or warranty of such Stockholder contained herein untrue or
incorrect, or have the effect of preventing or disabling the Stockholder from
performing the Stockholder's obligations pursuant to this Agreement or the
Company's obligations under the Merger Agreement.
Section 4. FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of its obligations under this Agreement.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Stockholder as follows:
(a) This Agreement has been approved by the Board of Directors of the
Company, representing all necessary corporate action on the part of the
Company for the execution and performance
E-2
<PAGE>
hereof and thereof by the Company (no action by the stockholders of the
Company being required).
(b) This Agreement has been duly executed and delivered by a duly authorized
officer of the Company.
(c) This Agreement constitutes the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms.
(d) The execution and delivery of this Agreement by the Company does not
violate or breach, and will not give rise to any violation or breach, of
the Company's charter or bylaws, or, except as will not materially impair
its ability to effectuate, carry out or comply with all of the terms of
this Agreement or the Merger Agreement, any Law, Governmental Entity
approval or contract by which the Company or its subsidiaries or their
respective assets or properties may be bound.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. The
Stockholder represents and warrants to the Company as follows:
(a) SCHEDULE I sets forth, opposite the Stockholder's name, the number and
type of Shares of which such Stockholder is the record or beneficial
owner and the number of votes per share that the Stockholder is entitled
to with respect to the Merger Agreement. The Stockholder is the lawful
owner of such Shares, free and clear of all liens, charges, options,
rights, encumbrances, stockholders agreements, voting agreements,
agreements to transfer or otherwise dispose of such Shares and
commitments of every kind, other than this Agreement and as disclosed in
SCHEDULE II and has the sole power to vote (or cause to be voted) the
Shares as set forth in this Agreement. Except as set forth on such
SCHEDULE I, neither the Stockholder nor any of its Affiliates owns or
holds any rights to acquire any additional shares of any class of Voting
Stock or other securities of Parent or any interest therein or any voting
rights with respect to any additional shares of Voting Stock or any other
securities of Parent.
(b) This Agreement has been duly executed and delivered by a duly authorized
officer of the Stockholder.
(c) This Agreement constitutes the valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its
terms.
(d) The execution and delivery of this Agreement by the Stockholder does not
violate or breach, and will not give rise to any violation or breach, of
such Stockholder's charter, by-laws, trust instrument or partnership
agreement, to the extent applicable or, except as will not materially
impair the ability of such Stockholder to effectuate, carry out or comply
with all of the terms of this Agreement, any Law, third party consent,
approval, filing, registration or similar requirement of any Governmental
Entity or any agreement or contract by which such Stockholder or its
assets or properties may be bound.
Section 7. EFFECTIVENESS AND TERMINATION. In the event the Merger
Agreement is terminated in accordance with its terms or immediately upon the
Effective Time, this Agreement shall automatically terminate and be of no
further force or effect. Upon such termination, except for any rights any party
may have in respect of any breach by any other party of its obligations
hereunder, none of the parties hereto shall have any further obligation or
liability hereunder. This Agreement shall continue in full force and effect
despite any amendment or other modification of, or any consent or waiver under,
the Merger Agreement; PROVIDED, HOWEVER, (A) that any amendment by the parties
to the Merger Agreement to (x) the Exchange Ratio or the Merger Consideration
(each as defined in Section 2.1(b) of the Merger Agreement), or (y) Article 7 of
the Merger Agreement entitled "TERMINATION;
E-3
<PAGE>
AMENDMENT; WAIVER" or (B) the waiver on or prior to the Closing Date by Parent
of any material condition precedent set forth in Article 6 of the Merger
Agreement, shall require the written consent of the Stockholder, failing which
this Agreement may be terminated in writing by the Stockholder. In any event, if
the Effective Time shall not have occurred on or before the Termination Date,
this Agreement may be terminated in writing by the Stockholder and it shall be
of no further force or effect as to such Stockholder.
Section 8. VOTING AGREEMENT. Stockholder agrees that it shall enter into a
voting agreement with David Saperstein at the Effective Time pursuant to which
the Stockholder shall agree, subject to any applicable laws or regulations of
the exchange where the Company's securities are listed, to vote all shares of
capital stock of the Company entitled to vote at meetings of the stockholders of
the Company for the election of David Saperstein's designees to the Company's
Board of Directors, to the extent such designees have been nominated by the
Board of Directors or a committee thereof, for election at such meeting.
Section 9. REASONABLE BEST EFFORTS. To the extent consistent with
applicable law, Stockholder agrees to use its reasonable best efforts to
cooperate with Parent to cause the Share Issuance to be approved by the
stockholders of Parent.
Section 10. MISCELLANEOUS.
(a) NOTICES. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person, by cable,
telegram, confirmed facsimile or telex, or by first class mail (postage
prepaid, return receipt requested), to the other party as follows:
<TABLE>
<S> <C>
if to the Company, Metro Networks, Inc.
to: 681 Fifth Avenue
New York, New York 10022
Attention: Gary Worobow
Facsimile: (212) 750-5393
with a copy to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York
Attention: Neil A. Torpey, Esq.
Facsimile: (212) 319-4090
if to Stockholder, Infinity Broadcasting Corporation
to: 40 West 57(th) Street
New York, New York 10019
Attention: Farid Suleman
Facsimile: (212) 314-9336
with a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153-0119
Attention: Howard Chatzinoff, Esq.
Facsimile: (212) 310-8007
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
E-4
<PAGE>
(b) DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(c) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
(d) ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
constitutes the entire agreement between the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any
other Person any right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement.
(e) WAIVER OF JURY TRIAL. Each party hereto waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in
respect of any litigation directly or indirectly arising out of, under or
in connection with this Agreement.
(f) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware applicable to contracts
made, executed, delivered and performed wholly within such state and, in
any case, without regard to the principles of conflicts of laws of such
state.
(g) SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement
shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the
prior written consent of the other parties hereto and the written
undertaking of the assignee to be bound by the terms of this Agreement,
and any attempt to make any such assignment without such consent shall be
null and void. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
(i) SUBMISSION TO JURISDICTION; WAIVERS. Each of the Company and the
Stockholder irrevocably agrees that any legal action or proceeding with
respect to this Agreement or for recognition and enforcement of any
judgment in respect hereof brought by the other party hereto or its
successors or assigns may be brought and determined in the Chancery or
other Courts of the State of Delaware, and each of the Company and the
Stockholder hereby irrevocably submits with regard to any such action or
proceeding for itself and in respect to its property, generally and
unconditionally, to the exclusive jurisdiction of the aforesaid courts.
Each of the Company and the Stockholder hereby irrevocably waives, and
agrees not to assert, by way of motion, as a defense, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement,
(a) any claim that it is not personally subject to the jurisdiction of
the above-named courts for any reason other than the failure to serve
process in accordance with this Section 10(i), (b) that it or its
property is exempt or immune from jurisdiction of any such court or from
any legal process commenced in such courts (whether through service of
notice, attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise), and (c) to the fullest
extent permitted by applicable law, that (i) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (ii)
the
E-5
<PAGE>
venue of such suit, action or proceeding is improper or (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by
such courts.
(j) SPECIFIC PERFORMANCE. The parties hereto acknowledge that irreparable
damage would result if this Agreement were not specifically enforced, and
they therefore consent that the rights and obligations of the parties
under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however,
not be exclusive and, shall be in addition to any other remedies which
any party may have under this Agreement or otherwise.
(k) EXPENSES. Each of the Company and the Stockholder shall bear its own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
(l) ACTION IN STOCKHOLDER CAPACITY ONLY. The Stockholder makes no agreement
or understanding herein as a director or officer of Parent or in any
capacity other than as a stockholder of Parent. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of Shares
and nothing herein shall limit or affect any actions taken by a
representative of such Stockholder in such representative's capacity as
an officer or director of Parent.
[SIGNATURES BEGIN ON NEXT PAGE]
E-6
<PAGE>
SIGNATURE PAGE TO PARENT STOCKHOLDER VOTING AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed this Parent Stockholder
Voting Agreement as of the date first above written.
<TABLE>
<S> <C> <C>
METRO NETWORKS, INC.
By: /s/ DAVID I. SAPERSTEIN
-----------------------------------------
Name: David I. Saperstein
Title: Chief Executive Officer
INFINITY BROADCASTING CORPORATION
By: /s/ FARID SULEMAN
-----------------------------------------
Name: Farid Suleman
Title: Senior Vice President and
Chief Financial Officer
</TABLE>
E-7
<PAGE>
SCHEDULE I
OWNERSHIP OF VOTING STOCK
<TABLE>
<CAPTION>
NAME AND ADDRESS CLASS AND SERIES NUMBER OF SHARES NUMBER OF
OF STOCKHOLDER OF VOTING STOCK OWNED VOTES PER SHARE
- ------------------------------------------------------------ ---------------- ----------------- ---------------------
<S> <C> <C> <C>
Infinity Broadcasting Corporation common stock 8,000,000(1) 1
40 West 57(th) Street
New York, New York 10019
</TABLE>
- ------------------------
(1) Includes 3,000,000 shares issuable upon the exercise of warrants to
purchase Voting Stock if required pursuant to Section 2 of this Agreement.
E-8
<PAGE>
SCHEDULE II
LIENS ON SHARES
None.
E-9
<PAGE>
ANNEX F
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of , 1999 (this
"AGREEMENT"), among WESTWOOD ONE, INC., a Delaware corporation ("PARENT"), and
the holders signatory hereto (the "STOCKHOLDERS") of common stock, par value
$.01 per share, of Parent (the "PARENT COMMON STOCK").
W I T N E S S E T H:
WHEREAS, in connection with and pursuant to Section 6.2(c) of the Agreement
and Plan of Merger, dated as of June 1, 1999 (the "MERGER AGREEMENT"), by and
among Parent, Copter Acquisition Corp., a Delaware corporation ("MERGER SUB"),
and Copter, Inc., a Delaware corporation (the "COMPANY"), Parent agreed to enter
into this Agreement for the benefit of the Stockholders;
WHEREAS, pursuant to the Merger (as defined in the Merger Agreement), Merger
Sub was merged with and into the Company, with the Company surviving the Merger
as a wholly owned subsidiary of Parent, and each share of the common stock, par
value $.001 per share, of the Company (the "COMPANY COMMON STOCK") outstanding
immediately prior to the Merger was automatically converted pursuant to the
Merger into Parent Common Stock based on the Exchange Ratio;
WHEREAS, pursuant to the Merger Agreement, Parent has agreed to grant to the
Stockholders certain registration rights with respect to shares of Parent Common
Stock issued to the Stockholders in the Merger that constitute Registrable
Securities (as hereinafter defined), as well as certain other securities to
which the Stockholders may be entitled as provided below, upon the terms and
subject to the conditions set forth herein; and
WHEREAS, it is intended by Parent that this Agreement shall become effective
immediately;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Parent, intending to be legally
bound hereby, hereby agrees as follows:
Section 1. DEFINITIONS. Capitalized terms used but not defined in this
Agreement shall have the meanings assigned to such terms in the Merger
Agreement.
Section 2. REGISTRATION RIGHTS.
(A) REGISTRATION UPON REQUEST.
(i) At any time, and from time to time, commencing with the Effective
Time and ending on October 1, 2006 (the "EFFECTIVE PERIOD"), upon the
written request (a "DEMAND") of any Qualified Holder(s) (as hereinafter
defined) requesting that Parent effect the registration for sale under the
Securities Act of 1933, as amended (the "Securities Act"), of Registrable
Securities held by such holders, Parent promptly shall use its reasonable
best efforts to register under the Securities Act (a "DEMAND REGISTRATION")
the Registrable Securities which Parent has been requested to register, all
to the extent necessary to permit the disposition of such Registrable
Securities in accordance with the methods intended by the sellers thereof;
PROVIDED that (i) each such demand shall cover at least 20% of the total
number of Registrable Securities held by the Stockholders on the date
hereof), (ii) the Qualified Holder(s) shall not be permitted to make a
demand more than once in any calendar year and (iii) Parent shall not be
required to effect more than three Demand Registrations for the Stockholders
pursuant to this Section 2(a). An exercise of a Demand Registration right
will not count as the use of such right (i) unless the registration
statement to
F-1
<PAGE>
which it relates is declared effective under the Securities Act or (ii) if
the conditions to the obligations of the underwriters to consummate the
transactions contemplated by (and as specified in) the purchase agreement or
underwriting agreement entered into in connection with an underwritten
Demand Registration are not satisfied (other than as a result of a default
or breach thereunder by the Qualified Holder). In addition, an exercise of a
Demand Registration right shall not count as the use of such right even
though the registration statement to which it relates is declared effective
if such effective registration statement is interfered with by any stop
order, injunction or other order or requirement of the Securities and
Exchange Commission (the "Commission") or of another governmental agency or
court, except that such exercise shall count as a use of such right if the
stop order, injunction or other order or requirement of the Commission or of
another governmental agency or court is due to a material misrepresentation
in or material omission from information provided in writing by a Qualified
Holder expressly for inclusion by such Qualified Holder in such registration
statement.
(ii) As used in this Agreement, the term "REGISTRABLE SECURITIES" means
any and all (A) Parent Common Stock acquired by the Qualified Holders
pursuant to the Merger or upon conversion of any other securities acquired
by the Qualified Holders pursuant to the Merger and (B) any other securities
issued or issuable with respect to any shares of Parent Common Stock
described in clause (A) of this paragraph by way of a stock dividend or
stock split or in connection with a combination, exchange, conversion,
reorganization, recapitalization or reclassification of any securities of
Parent, or pursuant to a merger, consolidation or other similar business
combination transaction involving Parent. Notwithstanding anything herein to
the contrary, Registrable Securities shall not include any Parent Common
Stock acquired upon the exercise of Company Stock Options.
(iii) As to any particular Registrable Securities, such securities
shall cease to constitute Registrable Securities when (A) a registration
statement with respect to the sale of such securities shall have been
declared effective under the Securities Act and such securities shall have
been disposed of in accordance with the plan of distribution contemplated by
the registration statement, (B) such securities shall have been sold in
satisfaction of all applicable conditions to the resale provisions of Rule
144 under the Securities Act (or any successor provision thereto), (C) such
securities shall have been transferred, sold or disposed of by a Qualified
Holder to any person that is not a Qualified Holder or (iv) such securities
shall have ceased to be issued and outstanding.
(iv) (A) The term "QUALIFIED HOLDER(S)" means any holder of Registrable
Securities and any transferee of any such holder who or which has agreed to
be bound by the terms of this Agreement and either (x) has succeeded to the
interest of such Stockholder by gift or by virtue of the laws of descent and
distribution or (y) has acquired directly from the Stockholder at least 20%
of the number of Registrable Securities held by the Stockholder on the date
hereof in one transaction.
(B) The term "MAJORITY QUALIFIED HOLDER(S)" means a majority in
interest of the Qualified Holders participating in a registration of
Registrable Securities pursuant hereto.
(v) Parent shall be required to register Parent Common Stock pursuant
to Section 2(a) only if such Parent Common Stock is to be offered and sold
in a Broad Public Distribution. For purposes hereof, "BROAD PUBLIC
DISTRIBUTION" means an underwritten distribution registered under the
Securities Act.
(vi) It is hereby further agreed that with respect to any Demand
Registration requested pursuant to this Section 2(a), Parent may defer the
filing (but not the preparation) or effectiveness of the registration
statement for a period of up to 90 days (or until such earlier time as the
transactions referred to in clauses (A) and (B) below are either (x)
consummated, (y) no longer proposed or (z) the material information referred
to at the end of this sentence has been made
F-2
<PAGE>
public and no other condition in clause (A) or (B) exists that would permit
Parent to defer such filing or effectiveness) (the "BLACKOUT PERIOD") if (A)
Parent is, at such time, working on an underwritten public offering of
Parent Common Stock and is advised by its Managing Underwriter(s) that such
offering would in such Managing Underwriter(s) opinion be adversely affected
in any material respect by such filing or (B) the Board of Directors or the
chief executive of Parent, in its good faith judgment, determines that any
such filing or the offering of any Registrable Securities would impair or
interfere in any material respect with any proposed financing, other offer
or sale of securities, acquisition, corporate reorganization or other
significant transaction involving Parent, or would require Parent to make
public disclosure of information which could have an material adverse effect
on Parent. There shall not be more than one Blackout Period in any calendar
year. Parent shall promptly notify the Qualified Holders in writing (a
"BLACKOUT NOTICE") of any decision not to effect a Demand Registration
pursuant to this Section 2(a)(vi) which notice shall set forth the reason
for such decision (but not disclosing any nonpublic material information)
and shall include an undertaking by the Parent promptly to notify the
Qualified Holders as soon as a Demand Registration may be effected.
(vii) Parent shall have the right to cause the registration of
additional securities for sale for the account of any person (including
Parent) in any registration of Registrable Securities requested by the
Qualified Holder(s) pursuant to Section 2(a); PROVIDED that Parent shall not
have the right to cause the registration of such additional securities to
the extent the Qualified Holder(s) is advised in writing (with a copy to
Parent) by the Managing Underwriter(s) (as such term is defined in Rule
12b-2 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT")) for such Demand Registration that in such firm's opinion registration
of such additional securities would impair or interfere in any material
respect with the marketing and sale of the Registrable Securities proposed
to be registered in the offering by the Qualified Holder(s) and in no event
shall any Qualified Holder be obligated to reduce the number of Registrable
Securities to be included in any offering subject to a Demand Registration
in order to accommodate the addition of any other person (including Parent).
The Qualified Holder(s) may require that any such additional securities be
included in the offering proposed by the Qualified Holder(s) on the same
terms and conditions as the Registrable Securities that are included
therein.
(viii) If the Managing Underwriter(s) for a Demand Registration
pursuant to this Section 2(a) that involves an underwritten offering shall
advise Parent or the Stockholders on whose behalf the offering is to be
effected that, in its (their) opinion, the inclusion of the amount and kind
of Registrable Securities to be sold for the account of Qualified Holders
would impair or interfere in any material respect with the marketing and
sale of the securities proposed to be registered in the offering, then the
number and kind of Registrable Securities to be sold for the account of such
Qualified Holders shall be reduced (and may be reduced to zero), PRO RATA
among all requesting Qualified Holders on the basis of the relative number
of shares of such Registrable Securities requested to be included in such
Demand Registration. If, as a result of these proration provisions, any
Qualified Holder shall not be entitled to include all Registrable Securities
in a registration pursuant to Section 2(a) that such Qualified Holder has
requested be included, such Qualified Holder may elect to withdraw its
Registrable Securities from the registration; PROVIDED, HOWEVER, that such
withdrawal election shall be irrevocable and, after making a withdrawal
election, a Qualified Holder shall no longer have any right to include
Registrable Securities in the registration as to which such withdrawal
election was made.
(ix) (A) If, at any time, (i) a Demand Registration has been requested
pursuant to Section 2 hereof, the Company shall give notice of such request to
Infinity (as defined in Section 12) or (ii) a demand registration is requested
pursuant to the Infinity Agreement (as defined in Section 12) (an "Infinity
Demand Registration"), the Company shall give notice of such request to the
Stockholders. Within fifteen (15) days of receipt of such notice by the
non-requesting party, the non-requesting party
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<PAGE>
may request a Demand Registration or an Infinity Demand Registration, as the
case may be (either, a "CONFLICTING DEMAND"). In connection with the first
Conflicting Demand, the Demand Registration shall be deemed to be the request
pursuant to which a registration statement shall be prepared and the Infinity
Demand Registration shall be deemed to be an exercise of an incidental
registration right under the Infinity Agreement and shall not count as a demand
thereunder.
(B) In the event of any Conflicting Demands subsequent to the first
Conflicting Demand, the party who last had its demand deemed to be an
exercise of an incidental registration right pursuant to this Section
2(a)(ix) shall be deemed to have made the request pursuant to which a
registration statement shall be prepared with respect to such subsequent
Conflicting Demand and the other party's demand shall be deemed to be an
exercise of an incidental registration right under such party's registration
rights agreement and shall not be counted as a demand thereunder.
(b) INCIDENTAL REGISTRATIONS.
(i) If at any time or from time to time Parent shall determine to
register any of its equity securities, either for its own account or the
account of security holders of Parent, other than a registration relating
solely to employee benefit plans or a registration on Form S-4 relating
solely to an SEC Rule 145 transaction, Parent will:
(A) promptly give the Stockholders written notice thereof (which
shall include a list of the jurisdictions in which Parent intends to
attempt to qualify such securities under the applicable "blue sky" or
other state securities laws); and
(B) include in such registration (and any related qualification
under "blue sky" laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written
request made by the Stockholders within fifteen (15) days after receipt
of such written notice from Parent, except as set forth in Section
2(b)(ii) below.
(ii) If the registration of which Parent gives notice is for a
registered public offering involving an underwriting, Parent shall so advise
the Stockholders as a part of the written notice given pursuant to Section
2(b)(i). In such event, the right of the Stockholders to registration
pursuant to this Section 2(b) shall be conditioned upon the Stockholders'
participation in such underwriting and the inclusion of the Stockholders'
Registrable Securities in the underwriting to the extent provided herein.
The Stockholder, together with Parent and the other parties distributing
their securities through such underwriting, shall enter into an underwriting
agreement in customary form with the underwriter or underwriters selected
for such underwriting by Parent, subject to Section 2(f)(iv).
Notwithstanding any other provision of this Section 2(b), if the Managing
Underwriter(s) advises Parent that marketing factors require a limitation of
the number of shares or type of securities to be sold in the underwritten
registration, then Parent may limit the number of Registrable Securities to
be included in the registration, or may exclude Registrable Securities
entirely from such registration, and shall be required to include in such
registration, to the extent of the number of securities which Parent is
advised by the Managing Underwriter(s) can be sold in the offering, (i)
first, securities that the Company proposes to issue and sell for its own
account, or the securities that the holder exercising a Demand Registration
pursuant to Section 2(a) hereof proposes to sell, as the case may be, (ii)
second, securities requested to be included in such registration pursuant to
registration rights under the Pattiz Agreement (as defined in Section 12)
and (iii) third, securities of any holder of Registrable Securities
requested pursuant to this Section 2(b) to be included in such registration,
PRO RATA with any securities requested to be included in such registration
pursuant to registration rights under the Infinity Agreement (based on the
number of Registrable Securities (as defined in each of this Agreement and
the Infinity Agreement) held by Infinity (as defined in Section 12) and such
holder as of the relevant date); PROVIDED, HOWEVER, that in the case of any
registration by Parent requested under the Infinity Agreement or the Pattiz
Agreement pursuant to demand registration rights thereunder, the rights
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of the Stockholders under this Section 2(b) also shall be subject to the
provisions thereof (which provisions shall govern as and to the extent
inconsistent with this Section 2(b) and any provisions of this Agreement
related to this Section 2(b)). No securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included in
such registration. If the Stockholders disapprove of the terms of the
underwriting with respect to any registration under this Section 2(b), they
may elect to withdraw therefrom by written notice to Parent and the
underwriter. The Registrable Securities so withdrawn shall also be withdrawn
from registration.
All requests for registration under this Section 2(b) shall be without
prejudice to the rights of the Holders to request, and shall not be counted, as
a Demand Registration under Section 2(a) above.
(c) REGISTRATION PROCEDURES. If and whenever Parent is required by the
provisions of this Agreement to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this
Agreement, Parent shall use its reasonable best efforts to:
(i) prepare and file with the Commission as soon as practicable a
registration statement on a form which is available for the sale of
Registrable Securities by the holders thereof in accordance with the
intended plan of distribution therefor (subject to Section 2(a)(v)), and
is reasonably acceptable to the Majority Qualified Holders of Registrable
Securities participating therein, and use its best efforts to cause such
registration statement to become effective as soon as practicable and
remain effective under the Securities Act for not less than a period of
90 days (unless the Registrable Securities registered thereunder have
been sold or disposed of prior to the expiration of such 90 day period);
PROVIDED, HOWEVER, that with respect to any Demand Registration made
within the period commencing 60 days next preceding the end of Parent's
fiscal year and ending 90 days after the end of Parent's fiscal year
only, if Parent is not then eligible to effect a registration under the
Securities Act by use of Form S-3 (or other comparable short-form
registration statement), Parent shall be entitled to delay such
registration until ten days after the earlier of (x) such time as Parent
receives audited financial statements for such fiscal year and (y) the
expiration of 60 days after the last day of such fiscal year;
(ii) prepare and file with the Commission such amendments,
post-effective amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for such period of time as is
necessary to complete the offering and the distribution of the securities
covered thereby (but, in no event, longer than 90 days after such
registration statement becomes effective) in each case exclusive of any
period during which the prospectus used in connection with such
registration statement shall not comply with the requirements of Section
10 of the Securities Act; and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered
by such registration statement during said 90 day period;
(iii) furnish to each seller of Registrable Securities, its counsel
and each underwriter of the securities being sold by such seller, (A)
such number of copies of such registration statement and of each such
amendment thereof and supplement thereto (including all annexes,
appendices, schedules and exhibits), (B) such number of copies of the
prospectus used in connection with such registration statement (including
each preliminary prospectus and any summary prospectus and the final
prospectus filed pursuant to Rule 424(b) under the Securities Act) and
(C) such number of copies of other documents, as such seller and
underwriter may reasonably request in order to facilitate the disposition
of Registrable Securities in accordance with the methods intended by the
sellers thereof and, in each of the foregoing cases, afford the seller a
reasonable opportunity to review and comment on drafts of each of the
foregoing documents prior to their filing or distribution, as the case
may be;
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<PAGE>
(iv) register or qualify the Registrable Securities covered by such
registration statement under the securities or "blue sky" laws of such
jurisdictions as any seller and each underwriter of the Registrable
Securities shall reasonably request, and do any and all other acts and
things which may be necessary or desirable to enable such seller and
underwriter to consummate the offering and disposition of Registrable
Securities in such jurisdictions; PROVIDED, HOWEVER, Parent shall not be
required to qualify generally to do business as a foreign corporation,
subject itself to taxation, or consent to general service of process, in
any jurisdiction wherein it would not, but for the requirements of this
Section 2(c), be obligated to be qualified;
(v) cause the Registrable Securities covered by such registration
statement to be registered with, or approved by, such other public,
governmental or regulatory authorities (including, without limitation,
the National Association of Securities Dealers ("NASD") as may be
necessary to facilitate the disposition of such Registrable Securities in
accordance with the methods of disposition intended by the sellers
thereof;
(vi) notify each seller of any Registrable Securities covered by
such registration statement and the Managing Underwriter(s), if any,
promptly and, if requested by any such person, confirm such notification
in writing, (A) when a prospectus or any prospectus supplement has been
filed with the Commission, and, with respect to a registration statement
or any post-effective amendment thereto, when the same has been declared
effective by the Commission, (B) of any request by the Commission for
amendments or supplements to a registration statement or related
prospectus, or for additional information, (C) of the issuance by the
Commission of any stop order or the initiation of any proceedings for
such or a similar purpose (and Parent shall make every reasonable effort
to obtain the withdrawal of any such order at the earliest practicable
moment), (D) of the receipt by Parent of any notification with respect to
the suspension of the qualification of any of the Registrable Securities
for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose (and Parent shall make every reasonable
effort to obtain the withdrawal of any such suspension at the earliest
practicable moment), (E) of the occurrence of any event which requires
the making of any changes to a registration statement or related
prospectus so that such documents will not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading (and Parent
shall as promptly as practicable prepare and furnish to such seller and
the Managing Underwriter(s) a reasonable number of copies of a
supplemented or amended prospectus such that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are
made, not misleading), and (F) of Parent's determination that the filing
of a post-effective amendment to the Registration Statement shall be
necessary or appropriate. Each holder of Registrable Securities agrees
that such holder will, as expeditiously as possible, notify Parent at any
time when a prospectus relating to a registration statement covering such
seller's Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event of the kind described in
this Section 2(c)(vi) as a result of any information provided by such
seller in writing specifically for inclusion in such prospectus included
in such registration statement and, at the request of Parent, promptly
prepare and furnish to it such information as may be necessary so that,
after incorporation into a supplement or amendment of such prospectus as
thereafter delivered to the purchasers of such securities, the
information provided by such seller shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. Each holder
of Registrable Securities shall be deemed to have agreed
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<PAGE>
by acquisition of such Registrable Securities that upon the receipt of
any written notice from Parent of the occurrence of any event of the kind
described in clause (E) of this Section 2(c)(vi), such holder shall
forthwith discontinue such holder's offer and disposition of Registrable
Securities pursuant to the registration statement covering such
Registrable Securities until such holder shall have received copies of a
supplemented or amended prospectus which is no longer defective as
contemplated by clause (E) of this Section 2(c)(vi) and, if so directed
by Parent, shall deliver to Parent, at Parent's expense, all copies
(other than permanent file copies) of the defective prospectus covering
such Registrable Securities which are then in such holder's possession.
In the event Parent shall provide any notice of the type referred to in
the preceding sentence, the 60 day period mentioned in Sections 2(c)(i)
and 2(c)(ii) shall be extended by the number of days from and including
the date such notice is provided, to and including the date when each
seller of any Registrable Securities covered by such registration
statement shall have received copies of the corrected prospectus
contemplated by clause (E) of this Section 2(c)(vi);
(vii) use its reasonable best efforts to comply with all applicable
rules and regulations of the Commission, as the same may hereafter be
amended, and make available to its security holders, as soon as
reasonably practicable, an earnings statement, which shall satisfy the
provisions of Section 11(a) of the Securities Act;
(viii) cause all such Registrable Securities covered by such
registration statement to be listed on each securities exchange on which
similar securities issued by Parent are then listed, if the listing of
such Registrable Securities is then permitted under the rules and
regulations of such exchange or if such listing is not permitted under
such rules and regulations, to secure designation of such securities as a
NASDAQ "national market system security" within the meaning of Rule
11Aa2-1 under the Exchange Act or, failing that, to secure NASDAQ
authorization for such Registrable Securities, and, without limiting the
foregoing, to use its reasonable best efforts to arrange for at least two
market-makers to register as such with respect to such Registrable
Securities with the NASD;
(ix) engage and provide a transfer agent (which may be an existing
transfer agent or Parent) for all Registrable Securities covered by such
registration statement no later than the effective date of such
registration statement;
(x) enter into one or more underwriting agreements (in customary
form and substance) and take all such other actions and all such other
customary selling efforts (including, without limitation, upon reasonable
notice, participate in a reasonable number of "roadshow" presentations)
as the participating holders shall reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities in
accordance with the plan of distribution intended by the sellers thereof;
it being hereby acknowledged and agreed that in all cases the selection
of any Managing Underwriter(s) shall be made by Parent with the consent
of the Majority Qualified Holders (which consent may not be unreasonably
withheld or delayed);
(xi) obtain an opinion from counsel to Parent, and a "cold comfort"
letter from an independent certified public accounting firm of national
recognition and standing who have certified Parent's financial statements
included in the registration statement or any amendment thereto, in each
case in form and substance reasonably satisfactory to the Majority
Qualified Holders, and covering such matters of the type customarily
covered by such opinions and "cold comfort" letters as the Majority
Qualified Holders shall reasonably request.
(d) CUSTODY AGREEMENT AND POWER OF ATTORNEY. Upon Parent's request,
the Qualified Holder(s) will execute and deliver a custody agreement and
power of attorney in form and substance reasonably satisfactory to Parent
and the Qualified Holder(s) with respect to the
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<PAGE>
Registrable Securities to be registered pursuant to this Section 2 (a
"CUSTODY AGREEMENT AND POWER OF ATTORNEY"). The Custody Agreement and
Power of Attorney will provide, among other things, that the Qualified
Holders will deliver to and deposit in custody with the custodian and
attorney-in-fact named therein a certificate or certificates representing
such shares of Registrable Securities (duly endorsed in blank by the
registered owner or owners thereof or accompanied by duly executed stock
powers in blank) and irrevocably appoint said custodian and
attorney-in-fact as the Qualified Holder's agent and attorney-in-fact
with full power and authority to act under the Custody Agreement and
Power of Attorney on behalf of the Qualified Holders with respect to the
matters specified therein.
(e) REGISTRATION EXPENSES. Whether or not any registration statement
prepared and filed pursuant to this Section 2 is declared effective by the
Commission, Parent shall pay (A) all applicable Commission, NYSE and NASD
registration and filing fees and expenses; (B) all listing, transfer and/or
exchange agent and registrar fees; (C) fees and expenses in connection with
the qualification of the Registrable Securities under securities or "blue
sky" laws including reasonable fees, disbursements and related charges of
counsel for the underwriters in connection therewith; (D) printing expenses;
(E) messenger and delivery expenses; (F) fees and out-of-pocket expenses of
counsel for Parent and its independent certified public accountants
(including the expenses of any audit, review and/or "cold comfort" letters)
and other persons, including special experts, retained by Parent; (G) the
reasonable fees and disbursements of counsel, other than Parent's counsel,
selected by the Majority Qualified Holders of the Registrable Securities
being registered to represent all Qualified Holders of the Registrable
Securities being registered in connection with each such registration (it
being understood that any Qualified Holder may, at its own expense, retain
separate counsel to represent it in connection with such registration); (H)
any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities; and (I) any other costs and expenses of such
registration and the disposition of the securities pursuant to the
registration statement therefor (collectively, clauses (A) through (I),
"REGISTRATION EXPENSES"); PROVIDED, HOWEVER, that Parent shall not be
required to pay, and the Qualified Holders shall pay, all transfer taxes and
all discounts, commissions or fees of underwriters, selling brokers and
dealers.
(f) INDEMNIFICATION; CONTRIBUTION.
(i) Parent shall indemnify and hold harmless, to the fullest extent
permitted by law, each holder (a "PARTICIPATING HOLDER") of Registrable
Securities registered pursuant to Section 2(a) or Section 2(b) hereof,
its officers, directors, partners, employees, agents and affiliates, if
any, from and against all losses, claims, damages, liabilities (or
actions or proceedings in respect thereof) and expenses (including the
reasonable costs of investigation and reasonable attorneys' fees,
disbursements and related charges) (under the Securities Act, common law
and otherwise) (collectively, "CLAIMS"), joint or several, which directly
or indirectly arise out of or are based upon (A) any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement, prospectus, preliminary prospectus, any amendment or
supplement thereto or any document incorporated by reference or in any
filing made in connection with the registration or qualification of the
offering under "blue sky" or other securities laws of jurisdictions in
which the Participating Holder's Registrable Securities are offered
(collectively, "SECURITY FILINGS"), or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B) any
untrue statement or alleged untrue statement of a material fact contained
in any preliminary prospectus, if used prior to the effective date of
such registration statement under which the Participating Holder's
Registrable Securities are offered (unless such statement is corrected in
the final prospectus and Parent has previously furnished copies thereof
to any Participating Holder seeking such indemnification and to the
underwriters of the registration in question), or contained in the final
prospectus therefor (as amended or
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<PAGE>
supplemented if Parent shall have filed with the Commission any amendment
thereof or supplement thereto) if used within the period during which
Parent is required to keep the registration statement to which such
prospectus relates current, or the omission or alleged omission to state
therein a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and Parent shall, and it hereby agrees to, reimburse such
holders for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such claim or proceeding;
PROVIDED, HOWEVER, that such indemnification shall not extend to any
Claims which are caused by any untrue statement or alleged untrue
statement contained in, or by any omission or alleged omission from,
information furnished in writing to Parent by any Participating Holder
expressly for use in any such Security Filing. Such indemnity shall
remain in full force and effect regardless of any investigation made by
such indemnified party and shall survive the transfer of such Registrable
Securities by such seller.
(ii) In the case of an underwritten offering in which the
registration statement covers Registrable Securities, Parent agrees to
enter into an underwriting agreement in customary form and substance with
such underwriters and to indemnify the underwriters, their officers and
directors, if any, and each person, if any, who controls such underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, to the same extent as provided in the preceding
paragraph with respect to the indemnification of the holders of
Registrable Securities; PROVIDED, HOWEVER, Parent shall not be required
to indemnify any such underwriter, or any officer or director of such
underwriter or any person who controls such underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, to the extent that the loss, claim, damage, liability (or
proceedings in respect thereof) or expense for which indemnification is
sought results from (a) such underwriter's failure to deliver or
otherwise provide a copy of the final prospectus to the person asserting
an untrue statement or omission or alleged untrue statement or omission
at or prior to the written confirmation of the sale of securities to such
person, if such statement or omission was in fact corrected in such final
prospectus or (b) an untrue statement or omission or alleged untrue
statement or omission relating to information furnished in writing by
such underwriter expressly for inclusion in any Security Filing;
(iii) Each Participating Holder shall furnish to Parent in writing
such information regarding such holder and the intended method of
distribution as shall be reasonably requested by Parent and as required
by law or the Commission for use in any Security Filing (and Parent may
exclude from registration the Registrable Securities of any such
Participating Holder if such holder fails to furnish such information
within a reasonable time alter receiving such request) and hereby
severally, not jointly, indemnifies, to the fullest extent permitted by
law, Parent, its officers, directors, partners, employees, agents or
affiliates, if any, against any Claims, joint or several, which directly
or indirectly arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact or any omission or alleged
omission of a material fact required to be stated or necessary to make
the statements in the registration statement or prospectus relating to
such Participating Holder's Registrable Securities, or any amendment
thereof or supplement thereto (in the case of any prospectus or
supplement thereto, in light of the circumstances under which they were
made) not misleading; PROVIDED, HOWEVER, (A) each such Participating
Holder shall be liable hereunder if and only to the extent that any such
Claim arises out of or is based upon any such untrue statement or
omission made in reliance upon and in conformity with information
pertaining to such holder that is furnished in writing to Parent by such
holder expressly for use in any such Security Filing and (B) no such
Participating Holder shall be liable hereunder in an amount exceeding the
gross proceeds actually received by such Participating Holder from the
sale of Registrable Securities hereunder. Such indemnity shall remain in
full force and effect regardless of any investigation made by such
indemnified party and shall survive the transfer of such Registrable
Securities by such seller.
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<PAGE>
(iv) In the case of an underwritten offering of Registrable
Securities, each Participating Holder, as a condition to its right to
participate in such offering, shall enter into an underwriting agreement
in customary form and substance with such underwriters, and agree to
indemnify such underwriters, their officers and directors, if any, and
each person, if any, who controls such underwriters within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, to
the same extent and subject to the same limitations as provided in the
preceding paragraph with respect to indemnification by such holder to
Parent, but subject to the same limitation as provided in Section
2(f)(ii) with respect to indemnification by Parent of such underwriters,
officers, directors and control persons; PROVIDED, HOWEVER, that no such
Participating Holder shall be liable hereunder in an amount exceeding the
gross proceeds actually received by such Participating Holder from the
sale of Registrable Securities hereunder;
(v) Any person seeking indemnification under the provisions of this
Section 2(f) shall, promptly after receipt by such person of notice of
the commencement of any action, suit, claim or proceeding, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof; PROVIDED, HOWEVER, the failure so to notify an
indemnifying party shall not relieve the indemnifying party from any
liability which it may have under this Section 2(f) (except to the extent
that it has been materially prejudiced by such failure) or from any
liability which the indemnifying party may otherwise have. In case any
such action, suit, claim or proceeding is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to
the extent it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified
party, to assume the defense thereof with counsel reasonably satisfactory
to such indemnified party. Notwithstanding the foregoing, the indemnified
party shall have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (A) the employment of such counsel shall have
been authorized in writing by the indemnifying party in connection with
the defense of such suit, action, claim or proceeding, (B) the
indemnifying party shall not have employed counsel (reasonably
satisfactory to the indemnified party) to take charge of the defense of
such action, suit, claim or proceeding within a reasonable time after
notice of commencement of the action, suit, claim or proceeding, or (C)
such indemnified party shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the indemnifying party which, if the indemnifying party and
the indemnified party were to be represented by the same counsel, could
result in a conflict of interest for such counsel or materially prejudice
the prosecution of the defenses available to such indemnified party. If
any of the events specified in clauses (B) or (C) of the preceding
sentence shall have occurred or shall otherwise be applicable, then the
reasonable fees, disbursements and related charges of one counsel or firm
of counsel (and one local counsel as necessary) selected by a majority in
interest of the indemnified parties shall be borne by the indemnifying
party. The indemnifying party shall have the right to direct the defense
of such action, suit, claim or proceeding on behalf of the indemnified
party whether or not the indemnified party employs separate counsel,
unless the indemnifying party has failed to perform his or its
indemnification obligations hereunder. Anything in this paragraph to the
contrary notwithstanding, an indemnifying party shall not be liable for
the settlement of any action, suit, claim or proceeding effected without
its prior written consent (which consent in the case of an action, suit,
claim or proceeding exclusively seeking monetary relief shall not be
unreasonably withheld or delayed). Such indemnification shall remain in
full force and effect irrespective of any investigation made by or on
behalf of an indemnified party.
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<PAGE>
(vi) If the indemnification from the indemnifying party as provided
in this Section 2(f) is unavailable or is otherwise insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party
shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in
such proportion as is appropriate to reflect the relative benefits
received by and the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses. The relative fault of
such indemnifying party shall be determined by reference to, among other
things, whether any action in question, including any untrue (or alleged
untrue) statement of a material fact or omission (or alleged omission) to
state a material fact, has been made, or relates to information supplied
by such indemnifying party or such indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as
a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations
set forth in Section 2(f)(v) hereof, any legal or other fees or expenses
reasonably incurred by such party in connection with any such
investigation or proceeding. Notwithstanding the foregoing, no
Participating Holder shall be liable hereunder in an amount exceeding the
gross proceeds actually received by such Participating Holder from the
sale of Registrable Securities hereunder.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2(f) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations described above. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
If, however, indemnification is available under this Section 2(f),
the indemnifying parties shall indemnify each indemnified party to the
fullest extent provided in Sections 2(f)(i) through 2(f)(v) hereof
without regard to the relative fault of said indemnifying party or
indemnified party or any other equitable consideration.
No party shall be liable for contribution under this Section 2(f)(vi)
except to the extent and under such circumstances as such party would
have been liable to indemnify under this Section 2(f) if such
indemnification were enforceable under applicable law.
(g) CERTAIN REQUIREMENTS IN CONNECTION WITH REGISTRATION RIGHTS. If the
holders of Registrable Securities initially requesting such Demand
Registration have entered into one or more underwriting agreements in
connection therewith, or if a proposed registration under Section 2(b)
involves an underwritten offering, all shares constituting Registrable
Securities to be included in such registration shall be subject to such
underwriting agreements and no person may participate in such registration
unless such person agrees to sell his or its securities on the basis
provided in the underwriting arrangements and completes all questionnaires,
powers of attorney, indemnities, underwriting agreements, "lock up" letters
and other documents which are reasonable and customary under the
circumstances.
(h) HOLDBACK AGREEMENTS.
(i) Each holder of Registrable Securities agrees not to effect any
public sale or distribution of any of its equity securities during the
7-day period prior to the effective date of a Registration Statement
filed pursuant to an underwritten offering under Section 2(a) or Section
2(b) and until either the earlier of the date on which the offering under
such Registration Statement is completed or 90 days after such effective
date (or such longer period as may be required in the reasonable judgment
of the Managing Underwriter(s))
F-11
<PAGE>
(except for public sales or distributions effected as part of such
underwritten registration, if permitted); PROVIDED that each holder of
Registrable Securities may offer and sell such securities as and to the
extent permitted under Rule 144 of the Securities Act at any time until
the first anniversary of this Agreement and any such offer or sale shall
not be deemed to violate the limitations of this clause (i).
(ii) Parent agrees (i) not to effect any public sale or distribution
of any of its equity securities (for its own account or the account of
any third party) during the 7-day period prior to the effective date of a
Registration Statement filed pursuant to an underwritten offering under
Section 2(a) or Section 2(b) and until either the earlier of the date on
which the offering under such Registration Statement is completed or 90
days after such effective date (or such longer period as may be required
in the reasonable judgment of the Managing Underwriter(s)) (except as
part of such underwritten registration or pursuant to registrations
relating solely to employee benefits plan or registrations on Form S-4
relating solely to an SEC Rule 145 transaction), and (ii) that it will
cause each holder of equity securities of Parent purchased directly from
Parent at any time after the date of this Agreement (other than in a
registered public offering) who through such purchase acquires more than
5% of the Common Stock on a fully diluted basis to agree not to effect
any public sale or public distribution of any such securities during such
period (except as part of such underwritten registration, if permitted).
Section 3. RULE 144(C)
Parent shall file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and the regulations of the
Commission thereunder so as to make available current public information to the
extent required to enable any Qualified Holder to sell Registrable Securities
without registration under the Securities Act pursuant to Rule 144 (or any
similar rule or regulation); PROVIDED, HOWEVER, that Parent's compliance with
the requirements of this Section 3 and the availability of Rule 144 for the sale
of any Qualified Holders securities shall not limit a Stockholder's rights to
request registration under this Agreement so long as such person's securities
constitute Registrable Securities within the meaning thereof under this
Agreement. Upon the reasonable request of any Qualified Holder, Parent will
promptly deliver to such Qualified Holder a written statement as to whether it
has complied with such requirements.
Section 4. NOTICES.
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, by
F-12
<PAGE>
cable, telegram, confirmed facsimile or telex, or by first class mail (postage
prepaid, return receipt requested), to the other party as follows:
<TABLE>
<S> <C>
if to Parent to: Westwood One, Inc.
9540 Washington Boulevard
Culver City, California 90232
Attention: Joel Hollander
Facsimile: (310) 840-4059
with a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Howard Chatzinoff, Esq.
Facsimile: (212) 310-8007
if to the Stockholders to: Their respective addresses set
forth in the stock records of
Parent prepared pursuant to the
Merger for purposes of the exchange
of the Company Common Stock into
Parent Common Stock, as changed
from time to time pursuant to
procedures established by Parent or
the transfer agent of Parent, as
the case may be
with a copy to: Paul, Hastings, Janofsky & Walker
LLP
399 Park Avenue
New York, New York 10022
Attention: Neil A. Torpey, Esq.
Facsimile: (212) 319-4090
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
Section 5. ENTIRE AGREEMENT. This Agreement represents the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof and supersedes any and all prior oral and written agreements,
arrangements and understandings among the parties hereto with respect to such
subject matter; and can be amended, supplemented or changed, and any provision
hereof can be waived, only by a written instrument making specific reference to
this Agreement signed by Parent, on the one hand, and the holders of a majority
of the Registrable Securities on the other hand.
Section 6. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 7. DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 8. GOVERNING LAW. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of New York, applicable to
contracts to be made, executed,
F-13
<PAGE>
delivered and performed wholly within such state and, in any case, without
regard to the conflicts of law principles and policies of such state.
Section 9. SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or unenforceable, all other provisions of this Agreement
shall remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
Section 10. NO WAIVER. The failure of any party at any time or times to
require performance of any provision hereof shall not affect the right at a
later time to enforce the same. No waiver by any party of any condition, and no
breach of any other provision, term, covenant, representation or warranty
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be construed as a further or continuing waiver of
any such condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
Section 11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same original agreement.
Section 12. NO INCONSISTENT RIGHTS. Parent will not hereafter enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
Except for any rights inconsistent with those granted by Parent pursuant to (i)
the Registration Rights Agreement dated as of March 30, 1999 between Parent and
Infinity Broadcasting Corporation, ("Infinity") as amended as of June 1, 1999
(the "Infinity Agreement"), and (ii) the Registration Rights Agreement, dated as
of October 18, 1993, by and between Parent and Norman J. Pattiz (the "Pattiz
Agreement"), Parent is not a party to any agreement, with respect to any of its
securities, granting any registration rights to any person, which agreement is
or may be inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement and is in effect on the date hereof.
Section 13. EXECUTION BY STOCKHOLDERS. The obligations of Parent under
this Agreement shall be irrevocable but the rights of any Stockholder under this
Agreement with respect thereto shall be and become effective only upon the
delivery to Parent by any Qualified Holder requesting registration under this
Agreement of a duly executed counterpart signature page to this Agreement.
[SIGNATURES BEGIN ON NEXT PAGE]
F-14
<PAGE>
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, Parent has caused this Registration Rights Agreement to
be executed and delivered by its officers thereunto duly authorized as of the
date first above written.
<TABLE>
<S> <C> <C>
WESTWOOD ONE, INC.
By: -----------------------------------------
Name:
Title:
-----------------------------------------
DAVID I. SAPERSTEIN
</TABLE>
F-15
<PAGE>
ANNEX G
COMPOSITE COPY(*)
WESTWOOD ONE, INC. 1999
STOCK INCENTIVE PLAN
Dated effective March 11, 1999
as amended on July 23, 1999
- ------------------------
* Includes change per amendment adopted by Westwood's board of directors on
July 23, 1999.
<PAGE>
1999 STOCK INCENTIVE PLAN
INDEX
<TABLE>
<CAPTION>
SECTION
-----------
<S> <C>
ARTICLE I--General Purpose
Purpose.............................................................................................. 1.1
Effective Date of Plan............................................................................... 1.2
ARTICLE II--Definitions
Board................................................................................................ 2.1
Code................................................................................................. 2.2
Committee............................................................................................ 2.3
Common Stock......................................................................................... 2.4
Company.............................................................................................. 2.5
Date of Grant........................................................................................ 2.6
Director............................................................................................. 2.7
Disability........................................................................................... 2.8
Eligible Person...................................................................................... 2.9
Exercise Price....................................................................................... 2.10
Fair Market Value.................................................................................... 2.11
Grantee.............................................................................................. 2.12
Incentive Period..................................................................................... 2.13
Incentive Stock Option............................................................................... 2.14
Non-Employee Director................................................................................ 2.15
Non-Qualified Stock Option........................................................................... 2.16
Offeree.............................................................................................. 2.17
Optionee............................................................................................. 2.18
Parent............................................................................................... 2.19
Participant.......................................................................................... 2.20
Plan................................................................................................. 2.21
Plan Administrator................................................................................... 2.22
Performance Right.................................................................................... 2.23
Purchase Right....................................................................................... 2.24
Reload Stock Option.................................................................................. 2.25
Related Stock Option................................................................................. 2.26
Retirement........................................................................................... 2.27
Rights............................................................................................... 2.28
Special Termination Event............................................................................ 2.29
Stock Appreciate Right or SAR........................................................................ 2.30
Stock Option......................................................................................... 2.31
Subsidiary........................................................................................... 2.32
Ten Percent Stockholder.............................................................................. 2.33
Window Period........................................................................................ 2.34
Voluntary Termination................................................................................ 2.35
ARTICLE III--Administration
Plan Administrator................................................................................... 3.1
ARTICLE IV--Stock Subject to Plan
Common Stock Subject to Plan......................................................................... 4.1
Unexercised Rights................................................................................... 4.2
Limitation on Number of Shares Underlying Stock Options and SARs Granted to Any One Participant...... 4.3
</TABLE>
G-i
<PAGE>
<TABLE>
<CAPTION>
SECTION
-----------
<S> <C>
ARTICLE V--Eligibility
Eligibility.......................................................................................... 5.1
ARTICLE VI--Stock Options
General.............................................................................................. 6.1
Terms and Conditions of Stock Options................................................................ 6.2
Reload Stock Options................................................................................. 6.3
ARTICLE VII--Stock Appreciation Rights
General.............................................................................................. 7.1
Stock Appreciation Rights Included in Stock Options.................................................. 7.2
Stock Appreciation Rights Not Included in Stock Options.............................................. 7.3
Termination and Exercise............................................................................. 7.4
ARTICLE VIII--Purchase Rights
General.............................................................................................. 8.1
Terms and Conditions of Purchase Rights.............................................................. 8.2
Termination of Employment............................................................................ 8.3
ARTICLE XI--Performance Rights
Performance Rights................................................................................... 9.1
ARTICLE X--Mandatory Grants to Outside Directors
Grants............................................................................................... 10.1
Amendment............................................................................................ 10.2
ARTICLE XI--Adjustments and Effect of Certain Transactions
Adjustments.......................................................................................... 11.1
Effect of Certain Transactions....................................................................... 11.2
ARTICLE XII--Amendment and Termination
General.............................................................................................. 12.1
ARTICLE XIII--General Provisions
General Restrictions................................................................................. 13.1
Other Compensation Arrangements...................................................................... 13.2
Tax Withholding...................................................................................... 13.3
Loans................................................................................................ 13.4
Termination of Employment............................................................................ 13.5
Special Terminating Events........................................................................... 13.6
Nontransferability of Rights......................................................................... 13.7
Regulatory Matters................................................................................... 13.8
Six Month Holding Period............................................................................. 13.9
Delivery............................................................................................. 13.10
Gender............................................................................................... 13.11
Headings............................................................................................. 13.12
Governing Law........................................................................................ 13.13
Written Agreement.................................................................................... 13.14
Rights as Stockholders............................................................................... 13.15
Stockholder Approval................................................................................. 13.16
ARTICLE XIV--Term of Plan
Term of Plan......................................................................................... 14.1
</TABLE>
G-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
Article I General Purpose of Plan......................................................... G-1
Section 1.1 Purpose......................................................................... G-1
Section 1.2 Effective Date of Plan.......................................................... G-1
Article II Definitions..................................................................... G-1
Article III Administration.................................................................. G-3
Section 3.1 Plan Administrator.............................................................. G-3
Article IV Stock Subject to Plan........................................................... G-4
Section 4.1 Common Stock Subject to the Plan................................................ G-4
Section 4.2 Unexercised Rights.............................................................. G-4
Section 4.3 Limitation on Number of Shares Underlying Stock Options and SARs Granted to Any
One Participant................................................................. G-4
Article V Eligibility..................................................................... G-4
Article VI Stock Options................................................................... G-5
Section 6.1 General......................................................................... G-5
Section 6.2 Terms and Conditions of Stock Options........................................... G-5
Section 6.3 Reload Stock Options............................................................ G-6
Article VII Stock Appreciation Rights....................................................... G-6
Section 7.1 General......................................................................... G-6
Section 7.2 Stock Appreciation Rights Included in Stock Options............................. G-6
Section 7.3 Stock Appreciation Rights Not Included in Stock Options......................... G-7
Section 7.4 Termination and Exercise........................................................ G-7
Article VIII Purchase Rights................................................................. G-7
Section 8.1 General......................................................................... G-7
Section 8.2 Terms and Conditions of Purchase Rights......................................... G-8
Section 8.3 Termination of Employment....................................................... G-8
Article IX Performance Rights.............................................................. G-9
Section 9.1 Performance Rights.............................................................. G-9
Article X Mandatory Grants to Outside Directors........................................... G-10
Section 10.1 Grants.......................................................................... G-10
Section 10.2 Initial Date of Grant........................................................... G-10
Section 10.3 Amendment....................................................................... G-10
Article XI Adjustments and Effect of Certain Transactions.................................. G-10
Section 11.1 Adjustments..................................................................... G-10
Section 11.2 Effect of Certain Transactions.................................................. G-11
Article XII Amendment and Termination....................................................... G-11
Section 12.1 General......................................................................... G-11
Article XIII General Provisions.............................................................. G-12
Section 13.1 General Restrictions............................................................ G-12
Section 13.2 Other Compensation Arrangements................................................. G-12
Section 13.3 Tax Withholding................................................................. G-12
Section 13.4 Loans........................................................................... G-12
Section 13.5 Termination of Employment....................................................... G-13
Section 13.6 Special Terminating Events...................................................... G-13
Section 13.7 Nontransferability of Rights.................................................... G-13
Section 13.8 Regulatory Matters.............................................................. G-13
Section 13.9 Six (6) Month Holding Period.................................................... G-13
Section 13.10 Delivery........................................................................ G-13
Section 13.11 Gender.......................................................................... G-13
Section 13.12 Headings........................................................................ G-13
Section 13.13 Governing Law................................................................... G-14
Section 13.14 Written Agreement............................................................... G-14
</TABLE>
G-iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
Section 13.15 Rights as Stockholders.......................................................... G-14
Section 13.16 Stockholder Approval............................................................ G-14
Article XIV Term of Plan.................................................................... G-14
</TABLE>
G-iv
<PAGE>
WESTWOOD ONE, INC. 1999
STOCK INCENTIVE PLAN
EFFECTIVE MARCH 11, 1999
AS AMENDED ON JULY 23, 1999
ARTICLE I
GENERAL PURPOSE OF PLAN
Section 1.1 PURPOSE. The name of this plan is the Westwood One, Inc.
1999 Stock Incentive Plan (the "Plan"). The purpose of the Plan is to enable
Westwood One, Inc. (the "Company") as well as any Parent or any Subsidiary,
to obtain and retain the services of the employees, consultants, officers
and Directors who will contribute to the Company's long term success and to
provide incentives which are linked directly to increases in share value
which will inure to the benefit of all stockholders of the Company.
Section 1.2 EFFECTIVE DATE OF PLAN. The Plan was adopted by the Board
of Directors and became effective on March 11, 1999; provided that, within
twelve (12) months of that date, the Plan is approved by the affirmative
votes of the holders of at least a majority of the shares of voting stock of
the Company cast in person or by proxy at a duly held meeting of the
stockholders of the Company. (If the provisions of the corporate charter,
by-laws or applicable state law prescribes a greater degree of stockholder
approval for this action, the approval by the holders of that percentage
will be obtained at a duly held meeting of stockholders.)
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms will be defined as set forth
below:
Section 2.1 "BOARD" means the Board of Directors of the Company.
Section 2.2 "CODE" means the Internal Revenue Code of 1986, as
amended.
Section 2.3 "COMMITTEE" means a committee of at least two (2)
Non-Employee Directors appointed by the Board to administer the Plan.
Section 2.4 "COMMON STOCK" means the Company's Common Stock par value
$0.01 per share, or in the event that the outstanding shares of Common Stock
are later changed into or exchanged for a different class of stock or
securities of the Company or another corporation, that other stock or
security.
Section 2.5 "COMPANY" means Westwood One, Inc., a corporation
organized under the laws of the State of Delaware.
Section 2.6 "DATE OF GRANT" means the date on which the Plan
Administrator adopts a resolution expressly granting a Right to a
Participant.
Section 2.7 "DIRECTOR" means a member of the Board.
Section 2.8 "DISABILITY" means the inability of an individual to
perform the services normally rendered by such individual due to any
physical or mental impairment that can be expected either to persist for a
continuous period for twelve (12) months or more or to result in death, as
determined by the Plan Administrator on the basis of appropriate medical
evidence; provided, however that with respect to an Incentive Stock Option
the term "Disability" will have the meaning set forth in Section 22(e)(3) of
the Code.
G-1
<PAGE>
Section 2.9 "ELIGIBLE PERSON" means an employee or officer or any
consultant or Director of the Company, any Parent or any Subsidiary.
Section 2.10 "EXERCISE PRICE" means the price at which shares may be
purchased.
Section 2.11 "FAIR MARKET VALUE" means the fair market value of the
Common Stock as determined by the Plan Administrator in its sole discretion;
provided, however, that: i) if the Common Stock is admitted to quotation on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") or other comparable quotation system and has been designated as a
National Market System ("NMS") security, Fair Market Value on any date will
be the last sale price reported for the Common Stock on such system on such
date or on the last day preceding such date on which a sale was reported;
ii) if the Common Stock is admitted to quotation on NASDAQ and has not been
designated an NMS security, Fair Market Value on any date will be the
average of the highest bid and lowest asked prices of the Common Stock on
such system on such date, or; iii) if the Common Stock is admitted to
trading on a national securities exchange, Fair Market Value on any date
will be the last sale price reported for the Common Stock on such exchange
on such date or on the last date preceding such date on which a sale was
reported.
Section 2.12 "GRANTEE" means a Participant who is granted Performance
Rights or Stock Appreciation Rights pursuant to the Plan.
Section 2.13 "INCENTIVE PERIOD" means the period determined by the
Plan Administrator for goals to be achieved and after which: i) payment may
be made pursuant to a Performance Right, or; ii) all (or a portion) of the
principal amount of a promissory note made in connection with a Purchase
Right may be forgiven under Section 8.3.
Section 2.14 "INCENTIVE STOCK OPTION" means a Stock Option intended to
qualify as an "incentive stock option" as that term is defined in Section
422 of the Code.
Section 2.15 "NON-EMPLOYEE DIRECTOR" shall mean a person who is a
"Non-Employee Director" 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"), a person who is an "outside director"
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.
Section 2.16 "NON-QUALIFIED STOCK OPTION" means a Stock Option
intended to not qualify as an Incentive Stock Option.
Section 2.17 "OFFEREE" means a Participant who is granted a Purchase
Right pursuant to the Plan.
Section 2.18 "OPTIONEE" means a Participant who is granted a Stock
Option pursuant to the Plan.
Section 2.19 "PARENT" means any present or future corporation which
would be a "parent corporation" as that term is defined in Section 424 of
the Code.
Section 2.20 "PARTICIPANT" means any Eligible Person selected by the
Plan Administrator, pursuant to the Plan Administrator's authority in
Article III, to receive grants of Rights.
Section 2.21 "PLAN" means the Westwood One, Inc. 1999 Stock Incentive
Plan.
Section 2.22 " PLAN ADMINISTRATOR" means either: i) the Board of
Directors of the Company, provided that each member of the Board consists of
Non-Employee Directors; or, ii) a Committee consisting of at least two (2)
Non-Employee Directors, as set froth in Article III.
G-2
<PAGE>
Section 2.23 "PERFORMANCE RIGHT" means a right awarded pursuant to
Article IX, hereof.
Section 2.24 "PURCHASE RIGHT" means a right to purchase Common Stock
pursuant to Article VIII.
Section 2.25 "RELOAD STOCK OPTION" means a Stock Option granted
pursuant to Section 6.3.
Section 2.26 "RELATED STOCK OPTION" means a Stock Option related to a
Stock Appreciation Right, as set forth in Section 7.
Section 2.27 "RETIREMENT" means the first day of the calendar month
following the individual's 65th birthday unless the normal retirement date
is defined as a different date in: i) a retirement plan for salaried
employees which the Company may hereafter put into effect, or; ii) the
individual's employment agreement.
Section 2.28 "RIGHTS" means Stock Options, Purchase Rights,
Performance Rights and Stock Appreciation Rights (SARs).
Section 2.29 "SPECIAL TERMINATING EVENT" with respect to a Participant
will mean the death or disability of that Participant.
Section 2.30 "STOCK APPRECIATION RIGHT" or "SAR"means a stock
appreciation right granted alone or in tandem with a Stock Option pursuant
to Article VII.
Section 2.31 "STOCK OPTION" means any option to purchase shares of
Common Stock granted pursuant to Article VI or Article X.
Section 2.32 "SUBSIDIARY" means any present or future corporation
which would be a "subsidiary corporation" as that term is defined in Section
424 of the Code.
Section 2.33 "TEN PERCENT STOCKHOLDER" means an Eligible Person who,
at the time an Incentive Stock Option is to be granted to him or her, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or a Parent or Subsidiary.
Section 2.34 "WINDOW PERIOD" means the period beginning on the third
business day following the date of release for publication of the quarterly
and annual summary statements of sales and earnings of the Company and
ending on the twelfth business day following such date.
Section 2.35 "VOLUNTARY TERMINATION" means termination of service by
an employee on his or her own volition.
ARTICLE III
ADMINISTRATION
Section 3.1 PLAN ADMINISTRATOR.
(a) The Plan will be administered by either: i) the Board, provided that
each member of the Board consists of Non-Employee Directors; ii) a Committee
consisting of at least two (2) Non-Employee Directors (the group that
administers the Plan is referred to as the "Plan Administrator") or iii)
otherwise in compliance with Rule 16b-3 of the Exchange Act.
(b) The Plan Administrator will have the power and authority to grant Rights
to Eligible Persons. Pursuant to the terms of the Plan the following Rights may
be granted: i) Stock Options (including Reload Stock Options); ii) Stock
Appreciation Rights; iii) Purchase Rights; iv) Performance Rights, or; v) any
combination of the foregoing.
G-3
<PAGE>
(c) All decisions made by the Plan Administrator pursuant to the provisions
of the Plan will be final and binding on the Company and the Participants.
(d) The Board may, in its sole and absolute discretion, from time to time
delegate any or all of its duties and authority with respect to the Plan to a
Committee of not less than two (2) Non-Employee Directors to be appointed by and
to serve at the pleasure of the Board. Once appointed, the Committee will
continue to serve until otherwise directed by the Board.
(e) From time to time, the Board may increase or decrease (to not less than
two (2) members) the size of the Committee. In addition, the Board may add
additional members, remove members (with or without cause), appoint new members
in substitution and fill vacancies on the Committee, subject to the requirement
that all members of the Committee must be Non-Employee Directors. Committee
action will be taken pursuant to a vote of the majority of its members, whether
present or not, or by the written consent of the majority of its members.
However, if the Committee consists of two (2) members, the Committee must act
pursuant to the unanimous vote or consent of its members. Minutes will be kept
of all of its meetings and copies of the minutes will be provided to the Board.
Subject to the limitations prescribed by the Plan and the Board, the Committee
may establish and follow rules and regulations for the conduct of its business.
ARTICLE IV
STOCK SUBJECT TO PLAN
Section 4.1 COMMON STOCK SUBJECT TO THE PLAN. The total number of
shares of Common Stock reserved and available for issuance under the Plan is
7,000,000 shares, subject to adjustment as provided in Article XI. This
number includes the shares of Common Stock previously authorized under the
Plan as originally approved by the Board. The Company will at all times
reserve and keep available the number of shares of Common Stock sufficient
to satisfy the requirements of the Plan. The reserved shares may consist, in
whole or in part, of authorized but unissued shares or treasury shares. A
maximum of 200,000 of the shares of Common Stock may be allocated to
Incentive Stock Options.
Section 4.2 UNEXERCISED RIGHTS. To the extent that any Rights expire
or are surrendered, canceled or otherwise terminated without being
exercised, the shares of Common Stock related to such Rights will again be
available for issuance in connection with future Rights under the Plan.
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.
ARTICLE V
ELIGIBILITY
Section 5.1 Officers, employees, consultants and Directors of the Company
who are responsible for or contribute to the management, growth or profitability
of the business of the Company, the Parent or any Subsidiary will be eligible to
be granted Rights, subject to limitations set forth in this Plan. The
Participants under the Plan will be selected from time to time by the Plan
Administrator, in its sole discretion, from among the Eligible Persons.
G-4
<PAGE>
ARTICLE VI
STOCK OPTIONS
Section 6.1 GENERAL. Stock Options may be granted alone or in addition
to other Rights granted under the Plan. Any Stock Option granted under the
Plan will be in such form as the Plan Administrator may from time to time
approve. The terms and conditions of Stock Option grants need not be the
same with respect to each Optionee. Stock Options granted under the Plan may
be either Incentive Stock Options or Non-Qualified Options.
Section 6.2 TERMS AND CONDITIONS OF STOCK OPTIONS. Each Stock Option
granted pursuant to the Plan will be evidenced by a written Stock Option
agreement between the Company and the Optionee. A Stock Option agreement
will contain such terms and conditions as the Plan Administrator in its sole
discretion approves, provided that the agreement complies with the Plan. Any
Stock Option agreement will be subject to the terms and conditions of the
Plan, including the following:
(a) NUMBER OF SHARES. Each Stock Option agreement will state the
number of shares of Common Stock subject to the Stock Option. The number
of such shares are subject to the limitations of Section 4.3 hereof.
(b) TYPE OF OPTION. Each Stock Option agreement will identify the
portion of the Stock Option which constitutes an Incentive Stock Option,
if any.
(c) EXERCISE PRICE. Each Stock Option agreement will state the
price at which the shares subject to the Stock Option may be purchased
(the "Exercise Price"). The Exercise Price will be not less than one
hundred percent (100%) of the Fair Market Value of the shares of Common
Stock on the Date of Grant. However, in the case of an Incentive Stock
Option granted to a Participant who is a Ten Percent Stockholder
immediately before such grant the Exercise Price will not be less than
one hundred ten percent (110%) of such Fair Market Value.
(d) VALUE OF SHARES. To the extent that the aggregate Fair Market
Value of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any Participant during any calendar
year exceeds One Hundred Thousand Dollars ($100,000) (or such other
amount as may be specified under 422(d)(1) of the Code), such Options
will be treated as Non-Qualified Stock Options.
(e) MEDIUM AND TIME OF PAYMENT. At the time of exercise, the
Exercise Price will be paid in full, in cash or cash equivalent or, with
the approval of the Plan Administrator, in shares of Common Stock which
have been held by the Optionee for a period of at least six (6) calendar
months preceding the date of surrender and which have a Fair Market Value
equal to the Exercise Price, or in a combination of cash and such shares.
At the discretion of the Plan Administrator, payment may be made in whole
or in part with monies borrowed from the Company in accordance with
Section 13.4.
(f) TERM AND EXERCISE OF STOCK OPTIONS. After completion of any
required period of employment or association specified in a particular
Stock Option agreement, Common Stock Options will be exercisable over the
exercise period specified in the related Stock Option agreement
(including provisions regarding exercise in installments). Each Common
Stock Option will be exercisable and will expire at such time as the Plan
Administrator may determine, but not later than ten (10) years from the
Date of Grant of the Stock Option. However, in the case of an Incentive
Stock Option granted to a Ten Percent Stockholder, the exercise period
will be determined by the Plan Administrator, but will not exceed five
(5) years from the Date of Grant. In addition, Stock Options will be
subject to earlier
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termination as provided in Sections 13.5 and 13.6. A Stock Option which
is currently exercisable may be exercised in full or in part, by giving
written notice of the exercise to the Company.
Section 6.3 RELOAD STOCK OPTIONS.
(a) From time to time, the Plan Administrator may grant 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 participant and being adjusted by the Reload Stock Option. The
Optionee will have the right to retain the previously granted Stock Option or to
exchange it for the Reload Stock Option. The Optionee must make this election
within forty-five (45) days from the Date of Grant of the Reload Stock Option.
The Reload Stock Option will be for the same number of shares of Common Stock
underlying the Stock Option surrendered for exchange by the Participant.
(b) The Reload Stock Option will be subject to all terms and conditions
contained in the Plan and the Stock Option agreement relating to the Stock
Option exchanged for the Reload Stock Option, provided however, that: i) the
exercise price of the Reload Stock Option will be determined with regard to the
Fair Market Value of the Common Stock at the date of grant of the Reload Stock
Option; (ii) the six (6) month holding period set forth in Section 13.9 will
commence upon the Date of Grant of the Reload Stock Option, and; (iii) the
required period of employment prior to exercisability and the vesting schedule
imposed with respect to the exchanged Stock Option will both be measured from
the Date of the Grant of the Reload Stock Option. The Plan Administrator will
have the right to determine a new vesting schedule for the Reload Stock Option.
ARTICLE VII
STOCK APPRECIATION RIGHTS
Section 7.1 GENERAL.
(a) The Plan Administrator will have the right to grant a Stock Appreciation
Right or "SAR" alone or in addition to other Rights granted under the Plan. Any
Stock Appreciation Right granted under the Plan will be in such form and will
contain such terms and conditions which are consistent with the Plan. The terms
and conditions of the grant of Stock Appreciation Rights need not be the same
with respect to each Grantee.
(b) Each Stock Appreciation Right or SAR granted pursuant to the Plan will
be evidenced by a written SAR agreement between the Company and the Grantee,
which agreement will comply with and be subject to the following terms and
conditions of this Article VII. Each agreement will state the number of SARs
granted pursuant to the agreement. The number of shares to which the SARs relate
is subject to the limitations of Section 4.3 hereof.
Section 7.2 STOCK APPRECIATION RIGHTS INCLUDED IN STOCK OPTIONS.
(a) Stock Appreciation Rights may be included in any Stock Option, thereby
enabling the Grantee to exercise either the Stock Option or the SAR, or any
combination thereof, with respect to all or a portion of the shares of Common
Stock which the Stock Option and the SAR relate. If SARs are included in Stock
Options, upon the exercise of the SAR (or a portion of it), a Grantee will
surrender the Common Stock Option (or a portion of it) which is then exercisable
and receive in exchange an amount equal to the excess of the Fair Market Value
of the Common Stock covered by the Stock Option surrendered, or a portion of it,
determined on the date prior to surrender, over the aggregate Exercise Price of
the Stock Option surrendered or portion of it.
(b) Stock Appreciation Rights included in Stock Options: i) will have a term
no later than the term of the underlying Stock Option; ii) may be for no more
than one hundred percent (100%) of the difference between the Fair Market Value
of a share of the Common Stock at the time the Stock
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Appreciation Right is exercised and the Exercise Price of the underlying Stock
Option; iii) are transferable only when the underlying Stock Options are
transferable, and under the same conditions; and, iv) may be exercised only when
the underlying Stock Option is eligible to be exercised.
Section 7.3 STOCK APPRECIATION RIGHTS NOT INCLUDED IN STOCK OPTIONS.
(a) As previously set forth, Stock Appreciation Rights may be granted
alone. The grant to a Participant of a Stock Appreciation Right that is not
included in a Stock Option will entitle the Grantee to an amount equal to the
excess of the Fair Market Value of a share of Common Stock as of the date of
exercise of the Stock Appreciation Right over the Fair Market Value of a share
of Common Stock as of the Date of Grant of the Stock Appreciation Right.
(b) The Plan Administrator will determine the term of a Stock Appreciation
Right which is not included in a Stock Option. However, the term may not exceed
ten (10) years from the Date of Grant of the Stock Appreciation Right. In its
discretion, the Plan Administrator may provide that portions of the SAR may
become exercisable at intervals throughout the term.
Section 7.4 TERMINATION AND EXERCISE.
(a) Upon the exercise of a SAR included in a Stock Option, the Stock Option
related to such SAR ("Related Stock Option") will cease to be exercisable to the
extent of the shares of Common Stock with respect to which such SAR is
exercised. However, the Stock Option will be considered to have been exercised
to that extent for purposes of determining the number of shares available for
the grant of further Rights pursuant to the Plan. Upon the exercise or
termination of a Related Stock Option, the SAR granted in tandem with such
Related Stock Option will terminate to the extent of such exercise or
termination. Any grant of Stock Appreciation Rights will be subject to earlier
termination as provided in Sections 13.5 and 13.6 of this Plan. SARs which are
currently exercisable may be exercised in whole or in part, by giving written
notice of such exercise to the Company.
(b) Upon exercise of Stock Appreciation Rights, the Plan Administrator may
pay the Participant in shares of Common Stock valued at Fair Market Value, in
cash, or partly in cash and partly in shares of Common Stock, as the Plan
Administrator determines in the exercise of its sole discretion.
(c) Notwithstanding the provisions of this Section 7, no SAR may vest in a
period shorter than six (6) months following its Date of Grant.
(d) Notwithstanding the provisions of this Section 7 or the related SAR
agreement to the contrary, any Grantee who at the date of the exercise of an SAR
(or any portion thereof) is an officer or Director of the Company within the
meaning of Section 16(b) of the Exchange Act (a "Section 16(b) Person"), may
only make an election to receive cash in complete or partial settlement of an
SAR and the related exercise of the SAR for cash during the period beginning on
the third business day following the date of release for publication of the
quarterly and annual summary statements of sales and earnings of the Company and
ending on the twelfth (12th) business day following such date (the "Window
Period"). The foregoing does not authorize the Participant to make an election
regarding the form of payment. Such election will be at the sole discretion of
the Plan Administrator, as set forth in Section 7.4(b) above.
ARTICLE VIII
PURCHASE RIGHTS
Section 8.1 GENERAL. Purchase Rights may be granted alone or in
addition to other Rights under the Plan. Purchase Rights will be exercisable
for a term determined by the Plan Administrator. However, the term may not
exceed ten (10) years from the Date of Grant. Each sale of Common Stock
under this Article VIII will be evidenced by a Stock Purchase agreement
between the Participant and the Company in the form from time to time
adopted by the Plan
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Administrator. The Stock Purchase agreement will contain such terms and
conditions which the Plan Administrator deems appropriate and which are
consistent with the Plan. The provisions of the various Common Stock
Purchase agreements entered into under the Plan need not be identical.
Section 8.2 TERMS AND CONDITIONS OF PURCHASE RIGHTS. A Stock Purchase
agreement between the Company and the Participant will contain the following
terms and conditions:
(a) NUMBER OF SHARES. Each Stock Purchase agreement will state the
number of shares of Common Stock which may be purchased pursuant to that
agreement.
(b) PURCHASE PRICE. Each Common Stock Purchase agreement will state
the price at which the Common Stock subject to such purchase agreement
may be purchased (the "Purchase Price"). However, the Purchase Price will
not be less than one hundred percent (100%) of the Fair Market Value of
the Common Stock on the Date of Grant.
(c) MEDIUM AND TIME OF PAYMENT. The Purchase Price must be paid in
full, at the time of exercise, in cash or cash equivalent. With the
approval of the Plan Administrator, payment may be made with shares of
Common Stock which have been held by the Participant for a period of at
least six (6) calendar months preceding the date of surrender and which
have a Fair Market Value equal to the Purchase Price or in a combination
of cash or cash equivalent and such shares. At the discretion of the Plan
Administrator, payment may be made in whole or in part with monies
borrowed from the Company in accordance with Section 13.4 of the Plan.
(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 the Grant. The Incentive Period
will be determined by the Plan Administrator, but 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.
Section 8.3 TERMINATION OF EMPLOYMENT. If a Participant's employment
with the Company is terminated (except for a Special Terminating Event),
liability on a promissory note payable to the Company pursuant to Section
8.2(c) will be automatically accelerated. In addition, in the event of a
Voluntary Termination which occurs during the Incentive Period, the Company
will have the option to repurchase the shares of Common Stock at the lower
of either: i) the cash price paid by Participant, or; ii) the Fair Market
Value of the Common Stock at the time of such Voluntary Termination.
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ARTICLE IX
PERFORMANCE RIGHTS
Section 9.1 PERFORMANCE RIGHTS.
(a) The Plan Administrator may award Performance Rights alone or in addition
to other Rights granted under the Plan. Each Performance Rights agreement will
specify a goal or goals for the performance of the Company or of a particular
business or management unit. 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. Such
goal or goals may differ with respect to each Grantee. The Incentive Period will
be determined by the Plan Administrator, but will be not less than two (2)
fiscal years from the Date of Grant. However, no more than one (1) Performance
Right awarded to a Grantee may become payable in a single fiscal year. No
payment may be made with respect to any Performance Right prior to the
expiration of the applicable Incentive Period. The Plan Administrator will have
sole discretion to determine whether the payment to a Grantee with respect to a
Performance Right will be made in cash, in shares of Common Stock, or by a
combination of cash and shares of Common Stock. In the event that no action is
taken by the Plan Administrator to determine the method of payment, the amount
due will be paid in shares of Common Stock.
(b) Performance Rights issued at different times may contain different types
of performance goals. 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. A Performance Right agreement will
provide for the payment to the Grantee of a specific, predetermined amount if a
particular goal or goals are achieved or based on the degree of improvement in
the performance of the Company or the applicable business or management unit. No
payment will be made to a Grantee unless the minimum level of performance
specified in a Performance Right agreement is achieved.
(c) The amount actually paid to any Grantee pursuant to any single
Performance Right, regardless of the terms of the Performance Right agreement,
may not exceed one hundred twenty-five percent (125%) of the Grantee's highest
annual base compensation for the final fiscal year in the Incentive Period.
(d) In the event that a payment is made to a Grantee pursuant to a
Performance Right (in whole or in part) in the form of shares, the shares of
Common Stock will be valued at their Fair Market Value on the last day of the
Incentive Period.
(e) Notwithstanding the provisions of this Section 9 or any Performance
Right agreement, any Grantee who is a Section 16(b) Person at the date that
payment is made with respect to a Performance Right deemed to be a "derivative
security related to an equity security" within the meaning of Rule 16b-3(e) of
the Exchange Act, may only make an election to receive cash in complete or
partial payment of such Performance Right and the related exercise of such
Performance Right during the Window Period. The foregoing does not authorize the
Participant to make an election regarding the form of payment. Such election
will be at the sole discretion of the Plan Administrator as set forth in Section
9.1(a) above.
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ARTICLE X
MANDATORY GRANTS TO OUTSIDE DIRECTORS
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 year thereafter on the date of the Company's Annual Meeting
of Shareholders, 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 that were members of the Board on June 10,
1999, the Initial Date of Grant shall mean June 10, 1999.
(ii) With respect to Directors elected or appointed to the Board after June
10, 1999, the Initial Date of Grant shall mean the date such Director is elected
or appointed to the Board.
Section 10.3 AMENDMENT. Notwithstanding any other provision of this
Plan, the provisions regarding mandatory 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.
ARTICLE XI
ADJUSTMENTS AND EFFECT OF CERTAIN TRANSACTIONS
Section 11.1 ADJUSTMENTS.
(a) The existence of outstanding Rights will not affect in any way the right
or power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights of the Common Stock,
or the dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
(b) The Company may effect a subdivision or consolidation of shares or other
capital readjustment, the payment of a stock dividend, or other increase or
reduction of the number of shares of the Common Stock outstanding, without
receiving compensation for it in cash, services or property.
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In such event, the following will apply: i) the number, class and per share
price of shares of Common Stock subject to outstanding Rights under this Plan
will be appropriately adjusted in a manner as to entitle a Participant to
receive upon exercise of a Right, for the same aggregate cash consideration, the
same total number and class or classes of shares the Participant would have
received had the Participant exercised his or her Right in full immediately
prior to the event requiring the adjustment, and; ii) the number and class of
shares then reserved for issuance under the Plan will be adjusted by
substituting for the total number and class of shares of stock then reserved the
number and class or classes of shares of stock that would have been received by
the owner of an equal number of outstanding shares of Common Stock as the result
of the event requiring the adjustment.
Section 11.2 EFFECT OF CERTAIN TRANSACTIONS.
(a) In the event that the Company merges or consolidates with another
corporation, whether or not the Company is a surviving corporation, or if the
Company is liquidated or sells or otherwise disposes of substantially all of its
assets while unexercised Rights remain outstanding under the Plan, the Plan
Administrator will have the right to make one or more of the following
adjustments: i) after the effective date of the merger, consolidation,
liquidation, sale or other disposition, as the case may be, each holder of an
outstanding Right may be entitled, upon exercise of a Right, to receive, in lieu
of shares of Common Stock, the number and class or classes of shares of stock or
other securities or property to which the holder would have been entitled if,
immediately prior to the merger, consolidation, liquidation, sale or other
disposition, the holder had been the holder of record of a number of shares of
Common Stock equal to the number of shares as to which the Right may be
exercised; ii) any limitations or vesting periods set out in or imposed pursuant
to this Plan may be waived or accelerated, so that all Rights will be
exercisable in full from and after a date specified by the Plan Administrator,
or iii) all outstanding Rights may be canceled by the Plan Administrator as of
the effective date of any merger, consolidation, liquidation, sale or other
disposition.
(b) Except as expressly provided in this Plan, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe for shares, or upon
conversion of shares or obligations of the Company convertible into shares or
other securities, will not affect the number or price of shares of Common Stock
then subject to outstanding Rights.
ARTICLE XII
AMENDMENT AND TERMINATION
Section 12.1 GENERAL.
(a) The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation will be made: i) which would impair the rights of
the Participant under any Right previously granted without such Participant's
consent, or; ii) without the approval of the stockholders of the Company as set
forth in Section 1.2 hereof, which would: (1) materially increase the total
number of shares of Common Stock reserved for the purposes of the Plan, except
as provided in Article X, (2) materially increase the benefits accruing to
Participants or Eligible Persons under the Plan, or; (3) materially modify the
requirements for eligibility under the Plan. Notwithstanding the foregoing, no
amendment which would increase the number of shares of Common Stock allocable to
Incentive Stock Options may be made without the approval of the stockholders of
the Company.
(b) Subject to the terms and conditions of the Plan, the Plan Administrator
may amend the terms of any Rights theretofore granted, prospectively or
retroactively, provided that such amendment does not impair the rights of any
holder without his or her consent.
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ARTICLE XIII
GENERAL PROVISIONS
Section 13.1 GENERAL RESTRICTIONS.
(a) The Plan Administrator may require each Participant purchasing shares of
Common Stock pursuant to the Plan to represent to, and agree with, the Company
in writing that such person is acquiring such shares without a view to
distribution thereof. The certificates for such shares may include any legend
which the Plan Administrator deems appropriate to reflect any restrictions on
transfer.
(b) All certificates for shares of Common Stock delivered under the Plan
will be subject to: i) such stop transfer orders and other restrictions as the
Plan Administrator may deem advisable under the rules; ii) regulations and other
requirements of the SEC, any stock exchange regulations upon which the Common
Stock is then listed, and; iii) any applicable federal or state securities laws.
The Plan Administrator may place a legend on any such certificates to make
appropriate reference to such restrictions.
Section 13.2 OTHER COMPENSATION ARRANGEMENTS. Nothing contained in
this Plan will prevent the Board from adopting other or additional
compensation arrangements, subject to Stockholder approval, if such approval
is required.
Section 13.3 TAX WITHHOLDING.
(a) The Plan Administrator will require the Participant to pay any sums
required by federal, state, or local tax law with respect to the grant or
exercise of a Right hereunder. If the Participant is required to pay the sum to
the Company, payment in cash or by check of such sums must be delivered within
ten (10) days after the date of exercise.
(b) As an alternative to requiring payment as set forth in Paragraph 12.3(a)
above, the Company or any Subsidiary will be entitled to deduct from the salary
or other compensation payable to a Participant such sums required by federal,
state and local tax law with respect to the grant or exercise of a Right.
(c) The Company will have no obligation upon exercise of any Right, until
payment has been received by the Company for all sums due with respect to such
exercise, including taxes. Each Participant is responsible for seeking
independent counsel regarding the existence of the tax or the amount which the
Company is required to withhold.
Section 13.4 LOANS.
(a) The Company may make loans to Grantees, as the Plan Administrator in its
discretion may determine in connection with the exercise of Stock Options and
Purchase Rights granted under the Plan. Such loans will: i) be evidenced by
promissory notes entered into by the holders in favor of the Company; ii) be
subject to the terms and conditions set forth in this Section 13.4 and such
other terms and conditions, consistent with the Plan, as the Plan Administrator
will determine; and, iii) bear interest, if any, at such rate as the Plan
Administrator determines. In no event may the principal amount of any such loan
exceed the Exercise Price or the Purchase Price less the par value of the shares
of Common Stock covered by the Stock Option or Purchase Right, or portion
thereof, exercised by the Grantees.
(b) Subject to the terms and conditions of the Plan, the Plan Administrator
will determine: i) the term of the loan; ii) the schedule of payments of
principal and interest under the loan; iii) the extent to which the loan is to
be with recourse against the holder with respect to principal and applicable
interest, and; iv) the conditions upon which the loan becomes payable in the
event of the holder's termination of employment. However, the term of the loan,
including extensions, will not exceed ten
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(10) years. Unless the Plan Administrator determines otherwise, when a loan is
made, shares of Common Stock having a Fair Market Value equal or greater to the
principal amount of the loan will be pledged by the holder to the Company as
security for payment of the unpaid balance of the loan. Such pledge will be
evidenced by a pledge agreement, the terms of which will be determined by the
Plan Administrator, in its discretion. Each loan must comply with all applicable
laws, regulations and rules of the Board of Governors of the Federal Reserve
System and any other governmental agency having jurisdiction.
Section 13.5 TERMINATION OF EMPLOYMENT. Except as provided in this
Section 13.5, no Right may be exercised unless the Rights holder is
currently a Director or Employee of the Company or any Parent or Subsidiary,
or rendering services as a consultant to the Company or any Parent or
Subsidiary, and unless he or she has remained continuously so employed since
the Date of Grant. If the employment or services of a Rights holder are
terminated (other than by reason of a Special Terminating Event), all Rights
previously granted to the Rights holder which are exercisable at the time of
such termination may be exercised for the period ending three (3) months
after such termination, or such shorter period as may be provided in the
Rights agreement. However, no Right may be exercised following the date of
its expiration. Nothing in this Plan or in any Rights agreement pursuant to
the Plan will confer upon an employee any right to continue in the employ of
the Company or any Parent or Subsidiary.
Section 13.6 SPECIAL TERMINATING EVENTS. If a Special Terminating
Event occurs, all Rights granted to such Rights holder which are exercisable
at the time that such event occurs may, unless earlier terminated in
accordance with their terms, be exercised by the Rights holder or by his or
her estate or by a person who acquired the right to exercise such Right by
bequest or inheritance or otherwise by reason of the death or Disability of
the Rights holder, at any time within one (1) year after the date of the
Special Terminating Event.
Section 13.7 NONTRANSFERABILITY OF RIGHTS. Rights granted under the
Plan will not be transferable by a Participant: i) except by will or by the
laws of descent and distribution, or; ii) pursuant to a qualified domestic
relations order as defined by the Code or Title I of ERISA, or rules
thereunder. During the lifetime of a Participant, a Right may be exercised
only by the Rights holder or by his or her guardian or legal representative.
Section 13.8 REGULATORY MATTERS. Each Rights agreement will provide
that no shares will be purchased or sold thereunder, unless and until any
then applicable requirements of the state or federal laws and regulatory
agencies have been fully complied with to the satisfaction of the Company
and its counsel.
Section 13.9 SIX (6) MONTH HOLDING PERIOD. A Participant is prohibited
from selling or otherwise disposing of shares of Common Stock received upon
the exercise of any Stock Option, Stock Appreciation Right or Purchase
Right, or upon payment pursuant to a Performance Right, within six (6)
months from the date any such Right is granted.
Section 13.10 DELIVERY. Upon exercise of a Right granted under this
Plan, the Company will issue Common Stock or pay any amount due within a
reasonable period of time thereafter. Subject to any statutory obligations
the Company may otherwise have, for purposes of this Plan, sixty (60) days
will be considered a reasonable period of time.
Section 13.11 GENDER. When used in this Plan, words of one gender will
include the other. Words used in the singular or plural will include the
other.
Section 13.12 HEADINGS. Headings of Articles and Sections are included
for convenience of reference only and do not constitute part of the Plan and
will not be used in construing the terms of the Plan.
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Section 13.13 GOVERNING LAW. The provisions of this Plan will be
construed, administered, and governed under the laws of the State of
California and, to the extent applicable, the laws of the United States.
Section 13.14 WRITTEN AGREEMENT. Each Stock Option, Stock Appreciation
Right, Purchase Right and Performance Right agreement will be subject to the
terms and conditions of this Plan. Each agreement must be signed by the
Participant and by either: i) a member of the Board (if the Board is then
serving as the Plan Administrator), or; ii) a member of the Committee (if
the Committee is then serving as the Plan Administrator), on behalf of the
Company. In the alternative, each agreement may be signed by either: i) the
President and Chief Executive Officer, ii) the Chief Financial Officer, or;
iii) the Vice President of Finance, or; iv) the Vice President of Legal and
Business Affairs on behalf of the Company, upon authorization of Plan
Administrator. Each agreement may contain other provisions that the Plan
Administrator deems advisable, as long as such provisions are consistent
with the terms and conditions of the Plan.
Section 13.15 RIGHTS AS STOCKHOLDERS. No Participant will have any
right, title or interest in or to any shares of Common Stock allocated or
reserved for this Plan or subject to any Right except as to such shares of
Common Stock, if any, as will have been previously sold, issued or
transferred to him or her.
Section 13.16 STOCKHOLDER APPROVAL. No shares of Common Stock will be
issued pursuant to Rights granted hereunder without, among other things,
compliance with the provisions of Section 1.2 regarding stockholder approval
of the Plan.
ARTICLE XIV
TERM OF PLAN
Section 14.1 No Right will be granted pursuant to the Plan on or after the
earlier to occur of: i) March 31, 2009; or, ii) the termination of the Plan by
the Board pursuant to Article XI, but Rights theretofore granted may extend
beyond that date.
G-14
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