SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998 Commission file number 0-13020
WESTWOOD ONE, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3980449
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9540 Washington Boulevard
Culver City, CA 90232
(Address of principal executive offices)
(310) 204-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of each class Which Registered
- ------------------- ----------------
Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Common Stock held by non-affiliates as of
March 1, 1999 was approximately $525 million.
As of March 1, 1999, 28,034,435 shares (excluding 6,931,595 treasury
shares) of Common Stock were outstanding and 351,733 shares of Class B Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for its annual
meeting of shareholders (which will be filed with the Commission within 120 days
of the registrant's last fiscal year end) are incorporated in Part III of this
Form 10-K.
<PAGE>
PART I
Item 1. Business
General
Westwood One, Inc. (the "Company" or "Westwood One") is a leading producer and
distributor of nationally sponsored radio programs and is the nation's largest
radio network. In addition, the Company owns and operates Westwood One
Broadcasting Services, Inc. ("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 One is managed by Infinity Broadcasting Corporation ("Infinity")
pursuant to a five-year Management Agreement which expires on March 31, 1999 (an
agreement in principal has been reached to renew the Management Agreement for an
additional five-year period).
The Company's principal source of revenue is selling radio time to advertisers
through one of its two operating divisions: the Network Division and WBS. The
Company 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. The
Company 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, CBS Radio
news, CNN Radio and Fox news, in addition to eight 24-hour satellite-delivered
continuous play music 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.
The Company's programs are broadcast in every radio market in the United States
measured by The Arbitron Ratings Company ("Arbitron"), the leading rating
service, as well as being broadcast internationally.
WBS provides radio stations and other media outlets, including television and
cable 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 One, through its Divisions, 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. The Company 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. The Company 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
One to meet their objective of attracting larger listening audiences and
increasing local advertising revenue. Westwood One, 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.
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<PAGE>
Westwood One is managed by Infinity pursuant to a Management Agreement between
the Company and Infinity. In 1999, an agreement in principal was reached to
renew the Management Agreement for an additional five year period, ending on
March 31, 2004. Pursuant to the renewed Agreement, Infinity will receive a base
fee of $2,500,000 (adjusted for inflation) and warrants to acquire 1,000,000
shares of Common Stock exercisable after the Company's Common Stock reaches
certain market prices per share.
Industry Background
Radio Broadcasting
As of January 1, 1999, there were approximately 10,300 commercial radio stations
in the United States.
A radio station selects a style of programming ("format") to attract a target
listening audience and thereby attract commercial advertising directed at that
audience. There are many formats from which a station may select, including
news, talk, sports and various types of music and entertainment programming.
The diversity in program formats has intensified competition among stations for
local advertising revenue. A radio station has two principal ways of effectively
competing for these revenues. First, it can differentiate itself in its local
market by selecting and successfully executing a format targeted at a particular
audience thus enabling advertisers to place their commercial messages on
stations aimed at audiences with certain demographic characteristics. A station
can also broadcast special programming, syndicated shows, sporting events or
national news product, such as supplied by Westwood One, not available to its
competitors within its format. National programming broadcast on an exclusive
geographic basis can help differentiate a station within its market, and thereby
enable a station to increase its audience and local advertising revenue.
Radio Advertising
Radio advertising time can be purchased on a local, regional or national basis.
Local purchases allow an advertiser to select specific radio stations in chosen
geographic markets for the broadcast of commercial messages. However, this
process can be expensive and inefficient for a national advertiser. Local and
regional purchases are typically best suited for an advertiser whose business or
ad campaign is in a specific geographic area. Advertising purchased from a radio
network is one method by which an advertiser targets its commercial messages to
a specific demographic audience, achieving national coverage on a cost efficient
basis. In addition, an advertiser can choose to emphasize its message in a
certain market or markets by supplementing a national purchase with local and/or
regional purchases.
In recent years, the increase in the number of program formats has led to more
demographically specific listening audiences making radio an attractive
alternative medium for national advertisers. In addition, nationally broadcast
news, concerts and special event programming have made radio an effective medium
of reach (size of listening audiences) as well as frequency (number of exposures
to the target audience).
To verify audience delivery and demographic composition, specific measurement
information is available to national advertisers by independent rating services
such as Arbitron and Statistical Research, Inc.'s RADAR. These rating services
provide demographic information such as the age and sex composition of the
listening audiences. Consequently, national advertisers can verify that their
advertisements are being heard by their target listening audience.
Business Strategy
Westwood One's Network Division provides targeted radio audiences and commercial
spots to national advertisers through its recognized programming and other
network products. The Company, through its various radio networks, produces and
distributes quality programming to radio stations seeking to increase their
listening audience and improve local and national advertising revenue. The
Company sells advertising time within its programs to national advertisers
desiring to reach large listening audiences nationwide with specific demographic
characteristics.
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<PAGE>
In 1996, the Company expanded its strategy to include providing local traffic,
news, sports and weather programming to radio stations and other media outlets
in selected cities across the United States. In March 1996, WBS acquired the
operating assets of New York Shadow Traffic Limited Partnership, Chicago Shadow
Traffic Limited Partnership, Los Angeles Shadow Traffic Limited Partnership, and
Philadelphia Express Traffic Limited Partnership (collectively "Shadow
Traffic"). In 1998, the Company acquired the remaining Shadow Traffic operations
in Baltimore, Boston, Dallas, Detroit, Houston, Miami, Sacramento, San Diego,
San Francisco and Washington, D.C. In addition, the Company opened offices in
Hartford and Minneapolis in 1998.
Radio Programming
The Company produces and distributes 24-hour continuous play formats, regularly
scheduled and special syndicated programs, including exclusive live concerts,
music and interview shows, national music countdowns, lifestyle short features,
news broadcasts, talk programs, sporting events, and sports features.
The Company controls most aspects of production of its programs, therefore being
able to tailor its programs to respond to current and changing listening
preferences. The Company produces regularly scheduled short-form programs
(typically 5 minutes or less), long-form programs (typically 60 minutes or
longer) and 24-hour continuous play formats. Typically, the short-form programs
are produced at the Company's in-house facilities located in Culver City,
California, New York, New York and Arlington, Virginia. The long-form programs
include shows produced entirely at the Company's in-house production facilities
and recordings of live concert performances and sports events made on location.
The 24-hour continuous play formats are produced at the Company's facilities in
Valencia, California.
Westwood One also produces and distributes special event syndicated programs. In
1998 the Company produced and distributed numerous special event programs,
including exclusive broadcasts of The Grammy Awards, the Rolling Stones, Shania
Twain, Page-Plant and Fleetwood Mac.
Westwood One obtains most of the programming for its concert series by recording
live concert performances of prominent recording artists. The agreements with
these artists often provide the exclusive right to broadcast the concerts
worldwide over the radio (whether live or pre-recorded) for a specific period of
time. The Company may also obtain interviews with the recording artist and
retain a copy of the recording of the concert and the interview for use in its
radio programs and as additions to its extensive tape library. The agreements
provide the artist with master recordings of their concerts and nationwide
exposure on affiliated radio stations. In certain cases the artists may receive
compensation.
Westwood One's syndicated programs are produced at its in-house production
facilities. The Company determines the content and style of a program based on
the target audience it wishes to reach. The Company assigns a producer, writer,
narrator or host, interviewer and other personnel to record and produce the
programs. Because Westwood One controls the production process, it can refine
the programs' content to respond to the needs of its affiliated stations and
national advertisers. In addition, the Company can alter program content in
response to current and anticipated audience demand.
The Company produces and distributes eight 24-hour continuous play formats
providing music, news and talk programming for Country, Hot Country, Adult
Contemporary, Soft AC, Oldies, Adult Standards, Adult Rock and Roll and the 70's
formats. Using its production facilities in Valencia, California, the Company
provides all the programming for stations affiliated with each of these formats.
Affiliates compensate the Company for these formats by providing the Company
with a portion of their commercial air time and, in most cases, cash fees.
The Company believes that its tape library is a valuable asset for its future
programming and revenue generating capabilities. The library contains previously
broadcast programs, live concert performances, interviews, daily news programs,
sports and entertainment features, Capitol Hill hearings and other special
events. New programs can be created and developed at a low cost by excerpting
material from the library.
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<PAGE>
Affiliated Radio Stations
The Network Division's business strategy is to provide for the programming needs
of radio stations by supplying to radio stations programs and services that
individual stations may not be able to produce on their own. The Company offers
radio stations a wide selection of regularly scheduled and special event
syndicated programming as well as 24-hour continuous play formats. These
programs and formats are completely produced by the Company and, therefore, the
stations have no production costs. Typically, each program is offered for
broadcast by the Company exclusively to one station in its geographic market,
which assists the station in competing for audience share in its local
marketplace. In addition, except for news programming, Westwood One's programs
contain available commercial air time that the stations may sell to local
advertisers. Westwood One typically distributes promotional announcements to the
stations and places advertisements in trade and consumer publications to further
promote the upcoming broadcast of its programs.
Westwood One's networks enter into affiliation agreements with radio stations.
In the case of news and current events programming, the agreements commit the
station to broadcast only the advertisements associated with these programs and
allows the station flexibility to have the news headlined by their newscasters.
The other affiliation agreements require a station to broadcast the Company's
programs and to use a portion of the program's commercial slots to air national
advertisements and any related promotional spots. With respect to the 24-hour
formats, the Company may also receive a fee from the affiliated stations for the
right to broadcast the formats. Radio stations in the top 200 national markets
may also receive compensation for airing national advertising spots.
Affiliation agreements specify the number of times and the approximate daypart
each program and advertisement may be broadcast. Westwood One requires that each
station complete and promptly return to the Company an affidavit
(proof-of-performance) that verifies the time of each broadcast. Affiliation
agreements for Westwood One's entertainment programming are non-cancelable for
26 weeks and are automatically renewed for subsequent 26-week periods, if not
canceled 30 days prior to the end of the existing contract term. Affiliation
agreements for Westwood One's news and current events programming generally run
for a period of at least one year, are automatically renewable for subsequent
periods and are cancelable by either the Company or the station upon 90 days'
notice.
The Company has a number of people responsible for station relations and
marketing its programs to radio stations. Station relationships are managed
geographically to allow the marketing staff to concentrate on specific
geographical regions. This enables the Company's staff to develop and maintain
close, professional relationships with radio station personnel and to provide
them with quick programming assistance.
National Advertisers
Westwood One provides national advertisers with a cost-effective way to
communicate their commercial messages to large listening audiences nationwide
that have specific demographic characteristics. An advertiser can obtain both
frequency (number of exposures to the target audience) and reach (size of
listening audience) by purchasing advertising time in the Company's programs. By
purchasing time in programs directed to different formats, advertisers can be
assured of obtaining high market penetration and visibility as their commercial
messages will be broadcast on several stations in the same market at the same
time. The Company supports its national sponsors with promotional announcements
and advertisements in trade and consumer publications. This support promotes the
upcoming broadcasts of Company programs and is designed to increase the
advertisers' target listening audience.
The Company sells its commercial time to advertisers either as "bulk" or
"flighted" purchases. Bulk purchases are long-term contracts (26 to 52 weeks)
that are sold "up-front" (early advertiser commitments for national broadcast
time). Flighted purchases are contracts for a specific, short-term period of
time (one to six weeks) that are sold at or above prevailing market prices.
Advertising prices vary significantly based on prevailing market conditions.
Generally, the contracts provide that advertising orders are firm and
non-cancelable. The Company's strategy for growth in advertising revenue is to
increase the amount of advertising time sold on the usually more profitable
flighted basis, to increase revenue of the non-RADAR rated programs, and to
increase audience size for news, talk and current events programming.
Local Traffic and Information Programming
In 1996, the Company expanded its business to include the production and
distribution of local traffic, news, sports and weather programming in selected
metropolitan areas (initially New York, Chicago, Los Angeles and Philadelphia).
The programming is produced in facilities rented by the Company in those
metropolitan areas. Local traffic information is obtained through the
utilization of strategically placed cameras overlooking portions of major
freeways, monitoring police radio bands, phone calls from drivers, and through
patrolling freeways with rented aircraft.
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<PAGE>
Competition
The Company operates in a very competitive environment. In marketing its
programs to national advertisers, the Company directly competes with other radio
networks as well as with independent radio syndication producers and
distributors. More recently, as a result of consolidations in the radio
industry, companies owning large groups of stations have begun to create
competing networks that has resulted in additional competition for network radio
advertising expenditures. In addition, Westwood One competes for advertising
revenue with network television, cable television, print and other forms of
communications media. The Company believes that the high quality of its
programming and the strength of its station relations and advertising sales
forces enable it to compete effectively with other forms of communication media.
Westwood One markets its programs to radio stations, including affiliates of
other radio networks, that it believes will have the largest and most desirable
listening audience for each of its programs. The Company often has different
programs airing on a number of stations in the same geographic market at the
same time. The Company believes that in comparison with any other independent
radio syndication producer and distributor or radio network it has a more
diversified selection of programming from which national advertisers and radio
stations may choose. In addition, the Company both produces and distributes
programs, thereby enabling it to respond more effectively to the demands of
advertisers and radio stations.
The increase in the number of program formats has led to increased competition
among local radio stations for audience. As stations attempt to differentiate
themselves in an increasingly competitive environment, their demand for quality
programming available from outside programming sources increases. This demand
has been intensified by high operating and production costs at local radio
stations and increased competition for local advertising revenue.
WBS, in the metropolitan areas in which it operates, competes for advertising
revenue with local print and other forms of communications media. The Company's
principal competitor providing local traffic is Metro Networks.
Government Regulation
Radio broadcasting and station ownership are regulated by the FCC. Westwood One,
as a producer and distributor of radio programs and services, is generally not
subject to regulation by the FCC. Shadow Traffic utilizes FCC regulated
frequencies pursuant to licenses issued by the FCC.
Employees
On February 13, 1999, Westwood One had 806 full-time employees, including a
domestic advertising sales force of 122 people. In addition, the Company
maintains continuing relationships with approximately 86 independent writers,
program hosts, technical personnel and producers. Certain employees at the
Mutual Broadcasting System, NBC Radio Networks, Unistar Radio Networks
("Unistar") and WBS are covered by collective bargaining agreements. The Company
believes relations with its employees and independent contractors are good.
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<PAGE>
Item 2. Properties
The Company owns a 7,600 square-foot building in Culver City, California in
which its production facilities are located and a 14,000 square-foot building
and an adjacent 10,000 square-foot building in Culver City, California which
contains administrative, sales and marketing offices, and storage space. In
addition, the Company leases offices in New York; Chicago; Baltimore; Boston;
Detroit; Dallas; Houston; Miami; Minneapolis; Philadelphia; San Diego; San
Francisco; Arlington, Virginia, Washington, D.C. and Valencia, California.
The Company believes that its facilities are adequate for its current level of
operations.
Item 3. Legal Proceedings
- None -
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of the year ended December 31, 1998.
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<PAGE>
PART II
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters
On February 13, 1999 there were approximately 220 holders of record of the
Company's Common Stock, several of which represent "street accounts" of
securities brokers. Based upon the number of proxies requested by brokers in
conjunction with its shareholders' meeting on June 16, 1998, the Company
estimates that the total number of beneficial holders of the Company's Common
Stock exceeds 4,000.
Since December 15, 1998, the Company's Common Stock has been traded on the New
York Stock Exchange ("NYSE") under the symbol "WON". From the time of its
initial public offering on April 24, 1984 through December 14, 1998 the
Company's Common Stock was traded in the over-the-counter market. The following
table sets forth the range of high and low last sales prices on the NYSE or
NASDAQ/National Market System, as reported by NASDAQ, for the Common Stock for
the calendar quarters indicated.
1998 High Low
---- ---- ---
First Quarter 35 7/8 29 3/8
Second Quarter 30 3/8 24 5/8
Third Quarter 27 7/16 15 3/4
Fourth Quarter 30 9/16 16
1997
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First Quarter 19 11/16 16 3/4
Second Quarter 32 1/4 19 1/8
Third Quarter 33 5/8 27 5/16
Fourth Quarter 37 1/8 29
No cash dividend was paid on the Company's stock during 1998 or 1997, and the
payment of dividends is restricted by the terms of its loan agreements.
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<PAGE>
Item 6. SELECTED FINANCIAL DATA
(In thousands except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
OPERATING RESULTS FOR YEAR ENDED DECEMBER 31,: ---- ---- ---- ---- ----
NET REVENUES $259,310 $240,790 $171,784 $145,729 $136,340
OPERATING AND CORPORATE COSTS, EXCLUDING DEPRECIATION AND
AMORTIZATION 206,996 191,854 132,247 112,661 112,198
DEPRECIATION AND AMORTIZATION 18,409 13,031 12,265 13,753 18,160
OPERATING INCOME 33,354 35,905 27,272 19,315 5,982
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 13,046 25,496 17,500 9,685 (2,730)
EXTRAORDINARY (LOSS) - - - - (590)
NET INCOME (LOSS) $13,046 $25,496 $17,500 $9,685 ($3,320)
INCOME (LOSS) PER SHARE:
BASIC:
Income (Loss) Before Extraordinary Item $.43 $.83 $.56 $.31 ($ .09)
Extraordinary Item - - - - ( .02)
---- ---- ---- ---- -------
Net Income (Loss) $.43 $.83 $.56 $.31 ($ .11)
==== ==== ==== ==== =======
DILUTED:
Income (Loss) Before Extraordinary Item $.39 $.74 $.51 $.28 ($ .09)
Extraordinary Item - - - - ( .02)
---- ---- ---- ---- -------
Net Income (Loss) $.39 $.74 $.51 $.28 ($ .11)
==== ==== ==== ==== =======
BALANCE SHEET DATA AT DECEMBER 31,:
CURRENT ASSETS $85,663 $77,933 $48,379 $41,885 $46,157
WORKING CAPITAL 7,111 12,180 (3,647) 6,563 7,685
TOTAL ASSETS 345,279 317,695 273,046 245,595 260,112
LONG-TERM DEBT 170,000 115,000 130,443 107,943 115,443
TOTAL SHAREHOLDERS' EQUITY 77,218 124,678 86,848 94,123 95,454
OTHER FINANCIAL DATA FOR YEAR ENDED DECEMBER 31,:
OPERATING CASH FLOW (EBITDA) $52,314 $48,936 $39,537 $32,579 $25,424
</TABLE>
Results for the year ended December 31, 1998 include the remaining Shadow
Traffic Operations from the time they were acquired in May 1998.
Results for the year ended December 31, 1997 include the CBS Radio Networks from
the effective date of the Representation Agreement in April 1997.
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.
No cash dividend was paid on the Company's Common Stock during the periods
presented above.
Operating cash flow is defined as operating income plus depreciation and
amortization and non-recurring items less capital spending for production
costs. Operating cash flow is not determined in accordance with generally
accepted accounting principles (GAAP), is not indicative of Cash Provided
by Operating Activities and should not be considered in isolation from,
or as an alternative to, other measures determined in accordance with GAAP.
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(In thousands except for per share amounts)
On May 1, 1998, the Company purchased the operating assets of the Shadow Traffic
operations in Baltimore, Boston, Dallas, Detroit, Houston, Miami, Sacramento,
San Diego, San Francisco and Washington, D.C. The results of operations for
these additional cities are included in the consolidated financial statements of
the Company from May 1, 1998. On March 31, 1997, the Company entered into a
Representation Agreement with CBS Inc. to operate the CBS Radio Networks. The
Company retains all revenue and is responsible for all expenses of the CBS Radio
Networks from the effective date of the Representation Agreement.
Results of Operations
Westwood One derives substantially all of its revenue from the sale of
advertising time to advertisers. Net revenues increased 8% to $259,310 in 1998
from $240,790 in 1997, and increased 40% in 1997 from $171,784 in 1996. The 1998
increase was primarily attributable to higher revenues from the Company's Shadow
Traffic operations including those acquired in May 1998, partially offset by
lower network revenues due to the elimination of certain programming including
Major League Baseball. The increase in 1997 net revenues was primarily due to
the inclusion of the results of the CBS Radio Networks, the 1996 acquisition
of Shadow Traffic, and higher advertising rates for the Company's
programs, partially offset by the non-recurrence of the 1996 Summer Olympics.
Operating costs and expenses excluding depreciation and amortization increased
8% to $202,138 in 1998 from $186,918 in 1997, and increased 48% in 1997 from
$126,702 in 1996. The 1998 increase was primarily attributable to the 1998
purchase of the additional Shadow Traffic operations, partially offset by the
elimination of costs related to the termination of programming. The 1997
increase was primarily attributable to the inclusion of the CBS Radio Networks,
including fees payable to CBS in connection with the Representation Agreement
and the 1996 acquisition of Shadow Traffic, partially offset by lower station
compensation expenses for the Company's network operation and the non-recurrence
of costs associated with the Company's coverage of the 1996 Summer Olympics.
Depreciation and amortization increased 41% to $18,409 in 1998 from $13,031 in
1997, and increased 6% in 1997 from $12,265 in 1996. The 1998 increase is
principally attributable to depreciation and amortization related to fixed
assets from capitalized leases and the recently acquired Shadow Traffic
operations. The 1997 increase was principally related to amortization related to
the CBS Representation Agreement.
Corporate general and administrative expenses decreased 2% to $4,858 in 1998
from $4,936 in 1997, and decreased 11% in 1997 from $5,545 in 1996. The
decreases in 1998 and 1997 are primarily attributable to lower compensation
expense.
Operating income decreased 7% to $33,354 in 1998 from $35,905 in 1997, and
increased 32% in 1997 from $27,272 in 1996. The 1998 decrease is principally
attributable to higher depreciation and amortization associated with the
recently acquired Shadow Traffic operations. The 1997 improvement is principally
attributable to higher revenue and consolidations in operations resulting from
the inclusions of the CBS Radio Networks and the Shadow Traffic acquisition,
partially offset by the non-recurrence of the 1996 Summer Olympics.
Interest expense was $10,340, $8,513 and $8,749 in 1998, 1997 and 1996,
respectively. The 1998 increase was principally attributable to higher debt
levels as a result of the Company's purchase of the additional Shadow Traffic
operations and repurchases of the Company's Common Stock. The 1997 decrease was
primarily attributable to lower debt levels as a result of the conversion to
Common Stock of the Company's 6 3/4% Convertible Subordinated Debentures (the "6
3/4% Debentures") and lower interest rates.
The income tax provisions for 1998, 1997 and 1996 were based on annual effective
tax rates of 44%, 8% and 7%, respectively. The 1998 provision is substantially
all deferred taxes as the Company has tax net operating loss deductions to
reduce cash taxes payable. The 1997 and 1996 provisions benefited from both book
and tax net operating loss carryfowards.
Net income in 1998 decreased 49% to $13,046 ($.43 per basic share and $.39 per
diluted share) from $25,496 ($.83 per basic share and $.74 per diluted share) in
1997, and increased 46% in 1997 from $17,500 ($.56 per basic share and $.51 per
diluted share) in 1996.
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<PAGE>
Weighted averages shares outstanding for purposes of computing basic earnings
per share were 30,098, 30,750 and 31,018 in 1998, 1997 and 1996, respectively.
The 1998 decrease was attributable to the Company's ongoing stock repurchase
program. The 1997 decrease was attributable to the Company's stock repurchase
program, partially offset by additional share issuances as a result of the
conversion to Common Stock of the Company's 6 3/4% Convertible Debentures and
approximately 2,036 shares of Common Stock being issued as a result of warrant
exercises. Weighted average shares outstanding for purposes of computing diluted
earnings per share were 33,434, 34,651 and 34,521 in 1998, 1997 and 1996,
respectively. The changes in weighted average shares are due principally to the
Company's stock repurchase program partially offset by the effect of stock
option grants.
Liquidity and Capital Resources
At December 31, 1998, the Company's principal sources of liquidity were its cash
and cash equivalents of $2,549 and available borrowings under its loan agreement
of $25,000.
For 1998, net cash from operating activities was $42,715, an increase of $22,784
from 1997. The increase was primarily attributable to lower working capital
requirements and higher cash flows from operations. Cash flow from operations
was principally used to fund the Company's stock buy-back program.
At December 31, 1998, the Company had an unsecured $120,000 bank revolving
credit facility and an unsecured $75,000 term loan (collectively "Revolving
Credit Facility"). At December 31, 1998, the Company had available borrowings of
$25,000 on its Revolving Credit Facility. In addition, as part of the
Representation Agreement with CBS, CBS provided a $9,000 working capital loan to
the Company which is payable on March 31, 2004.
During 1998, the Company purchased 3,375 shares of the Company's Common Stock
for a total cost of $65,438. During 1997, the Company purchased 1,377 shares of
the Company's Common Stock and 500 warrants for a total cost of $49,434. In 1999
(through March 1), the Company repurchased an additional 294 shares of Common
Stock at a cost of $7,618. The stock buybacks have been funded principally from
the Company's free cash flow and bank borrowings.
The Company believes that its cash, other liquid assets, operating cash flows
and available bank borrowings, taken together, provide adequate resources to
fund ongoing operating requirements.
Year 2000 Compliance
The Company has been working to identify and evaluate the changes necessary
to its existing computerized business systems to make those systems Year 2000
compliant. The Company's exposure to potential Year 2000 problems exists in two
areas: technological operations in the sole control of the Company and
technological operations in some way dependent on one or more third parties.
These technological operations include information technology ("IT") systems and
non-IT systems, including those with embedded technology, hardware and software.
In respect to technological operations dependent in some way on one or more
third parties the situation is much less in the Company's ability to predict or
control.
The Company has been replacing, upgrading or modifying key financial and
operating systems in the normal course of business. Remediation with respect to
technological operations in the sole control of the Company is expected to be
fully complete by mid-1999.
In addition, the Company's business is dependent on third parties that are
themselves dependent on technology. For example, systems failures in satellite
transmissions and communication systems could impact the Company and its ability
to deliver programming and provide commercial air time to its customers. To
mitigate this risk, the Company has contacted major third party vendors to
ascertain their state of readiness with respect to being Year 2000 compliant.
The Company's most significant vendors have indicated they believe they are or
will be Year 2000 compliant by mid-1999. However, no assurances can be given
that these third parties have corrected and identified all the Year 2000
problems and that such third party failure to correct or identify such problems
would not have a material adverse effect on the Company.
As the Company has been using existing resources to complete the modifications
necessary to become Year 2000 compliant, the Company believes that the related
-10-
<PAGE>
costs will not be material (approximately $500). These expenditures have been
and are expected to continue to be sourced from the Company's operating cash
flow and have not and are not expected to have a material impact on the
Company's financial statements.
In conjunction with the ongoing efforts to ensure Year 2000 compliance, the
Company is establishing alternative contingency plans. Accordingly, the
Company does not anticipate that internal system failures will result in any
material effect to its operations.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe
harbor for forward-looking statements made by or on the behalf of the Company.
All statements that express expectations and projections, including, but not
limited to, the Year 2000 remediation efforts, are forward-looking statements
within the meaning of the Act. These statements are based on management's views
and assumptions at the time the statements are made, however no assurances can
be given that management's expectations will come to pass.
Item 7A. Qualitative and Quantitative Disclosures about Market Risk
The Company is exposed to market risk related to changes in interest rates. The
Company does not use derivative financial instruments.
The interest rate on the Company's outstanding borrowings is based on the prime
rate plus an applicable margin of up to .25%, or LIBOR plus an applicable margin
of up to 1.25%, as chosen by the Company. Historically the Company has typically
chosen the LIBOR option with a three month maturity.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements and the related notes and schedules of the
Company are indexed on page F-1 of this Report, and attached hereto as pages F-1
through F-16 and by this reference incorporated herein.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
-11-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
This information is incorporated by reference to the Company's definitive
proxy statement to be filed pursuant to Regulation 14A not later than 120 days
after the end of the Company's fiscal year.
Item 11. Executive Compensation
This information is incorporated by reference to the Company's definitive
proxy statement to be filed pursuant to Regulation 14A not later than 120 days
after the end of the Company's fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is incorporated by reference to the Company's definitive
proxy statement to be filed pursuant to Regulation 14A not later than 120 days
after then end of the Company's fiscal year.
Item 13. Certain Relationships and Related Transactions
This information is incorporated by reference to the Company's definitive
proxy statement to be filed pursuant to Regulation 14A not later than 120 days
after the end of the Company's fiscal year.
-12-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this Report on Form 10-K
1. Financial statements and schedules to be filed thereunder are indexed
on page F-1 hereof.
2. Exhibits
EXHIBIT
NUMBER DESCRIPTION
3.1 Certificate of Incorporation of Registrant. (1)
3.2 Agreement of Merger. (1)
3.3 Certificate of Amendment of Certificate of Incorporation, as filed on
October 10, 1986. (2)
3.4 Certificate of Amendment of Certificate of Incorporation, as filed on
October 9, 1986. (3)
3.5 Certificate of Amendment of Certificate of Incorporation, as filed on
March 23, 1987. (3)
3.6 Certificate of Correction of Certificate of Amendment, as filed on
March 31, 1987 at 10:00 a.m. (3)
3.7 Certificate of Correction of Certificate of Amendment, as filed on
March 31, 1987 at 10:01 a.m. (3)
3.8 Bylaws of Registrant as currently in effect. (14)
*10.1 Employment Agreement, dated April 29, 1998, between Registrant and
Norman J. Pattiz.
10.2 Form of Indemnification Agreement between Registrant and its Directors
and Executive Officers. (4)
10.3 Amended and Restated Credit Agreement, dated September 30, 1996,
between Registrant and The Chase Manhattan Bank and Co-Agents. (14)
10.4 First Amendment dated September 11, 1998 to the Amended and Restated
Credit Agreement dated September 30, 1996, between Registrant and The
Chase Manhattan Bank and Co-Agents. (16)
10.5 Purchase Agreement, dated as of August 24, 1987, between Registrant and
National Broadcasting Company, Inc. (5)
10.6 Securities Purchase Agreement, dated November 4, 1993, between
Registrant and Infinity Network, Inc. (9)
*10.7 Management Agreement, dated as of February 4, 1994, between Registrant
and Infinity Broadcasting Corporation. (9)
*10.8 Voting Agreement, dated as of February 4, 1994, among Registrant,
Infinity Network, Inc., Infinity Broadcasting Corporation and Norman
J. Pattiz. (9)
10.9 Representation Agreement, dated as of March 31, 1997, between
Registrant and CBS, Inc. (15)
10.10 Asset Purchase Agreement, dated March 4, 1996, between Westwood One
Broadcasting Services, Inc. and Chicago Shadow Traffic Limited
Partnership, New York Shadow Traffic Limited Partnership, Los
Angeles Shadow Traffic Limited Partnership, Philadelphia Express
Traffic Limited Partnership, City Traffic Corp., Express Traffic Corp.
and Alan Markowitz. (12)
10.11 Westwood One, Inc. 1989 Stock Incentive Plan. (8)
10.12 Amendments to the Westwood One, Inc. Amended 1989 Stock Incentive
Plan. (10) (13)
10.13 Lease, dated July 19, 1989, between First Ball Associates Limited
Partnership and Registrant, relating to Arlington, Virginia
offices. (6)
10.14 Lease, dated June 18, 1990, between Broadway 52nd Associates and
Unistar Communications Group, Inc. relating to New York, New York
offices. (11)
10.15 Lease, dated December 18, 1991, between Valencia Paragon Associates,
Ltd., and Unistar Communications Group, Inc. relating to Valencia,
California offices. (11)
10.16 Digital Audio Transmission Service Agreement, dated June 5, 1990,
between Registrant and GE American Communications, Inc. (7)
22 List of Subsidiaries
24 Consent of Independent Accountants
27 Financial Data Schedule
**********************
* Indicates a management contract or compensatory plan.
-13-
<PAGE>
(1) Filed as an exhibit to Registrant's registration statement on Form S-1
(File Number 2-98695) and incorporated herein by reference.
(2) Filed as an exhibit to Registrant's registration statement on Form S-1
(Registration Number 33-9006) and incorporated herein by reference.
(3) Filed as an exhibit to Registrant's Form 8 dated March 1, 1988 (File
Number 0-13020), and incorporated herein by reference.
(4) Filed as part of Registrant's September 25, 1986 proxy statement (File
Number 0-13020) and incorporated herein by reference.
(5) Filed an exhibit to Registrant's current report on Form 8-K dated
September 4, 1987 (File Number 0-13020) and incorporated herein by
reference.
(6) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended November 30, 1989 (File Number 0-13020) and incorporated
herein by reference.
(7) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended November 30, 1990 (File Number 0-13020) and incorporated
herein by reference.
(8) Filed as part of Registrant's March 27, 1992 proxy statement (File
Number 0-13020) and incorporated herein by reference.
(9) Filed as part of Registrant's January 7, 1994 proxy statement (File
Number 0-13020) and incorporated herein by reference.
(10) Filed as an exhibit to Registrant's July 20, 1994 proxy statement
(File Number 0-13020) and incorporated herein by reference.
(11) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994 (File Number 0-13020) and incorporated herein
by reference.
(12) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995 (File Number 0-13020) and incorporated herein
by reference.
(13) Filed as an exhibit to Registrant's May 17, 1996 proxy statement (File
Number 0-13020) and incorporated herein by reference.
(14) Filed as an exhibit to Registrant's Quarterly report on Form 10-Q for
the quarter ended September 30, 1996 (File Number 0-13020) and incorporated
herein by reference.
(15) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997 (File Number 0-13020) and incorporated herein
by reference.
(16) Filed as an exhibit to Registrant's Quarterly report on Form 10-Q for
the quarter ended September 30, 1998 (File Number 0-13020) and incorporated
herein by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1998.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WESTWOOD ONE, INC.
March 30, 1999 By /s/FARID SULEMAN
------------------------
Farid Suleman
Director, Secretary and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
Principal Executive Officer:
/s/JOEL HOLLANDER President and March 30, 1999
- ----------------------
Joel Hollander Chief Executive Officer
Principal Financial Officer and
Chief Accounting Officer:
/s/FARID SULEMAN Director, Secretary and March 30, 1999
- ----------------------
Farid Suleman Chief Financial Officer
Additional Directors:
/s/NORMAN J. PATTIZ Chairman of the Board of March 30, 1999
- ----------------------
Norman J. Pattiz Directors
/s/DAVID L. DENNIS Director March 30, 1999
- ----------------------
David L. Dennis
/s/GERALD GREENBERG Director March 30, 1999
- ----------------------
Gerald Greenberg
/s/MEL A. KARMAZIN Director March 30, 1999
- ----------------------
Mel A. Karmazin
/s/STEVEN A. LERMAN Director March 30, 1999
- ----------------------
Steven A. Lerman
/s/PAUL KRASNOW Director March 30, 1999
- ----------------------
Paul Krasnow
/s/JOSEPH B. SMITH Director March 30, 1999
- ----------------------
Joseph B. Smith
-15-
<PAGE>
WESTWOOD ONE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
1. Consolidated Financial Statements Page
----
--Report of Independent Accountants F-2
--Consolidated Balance Sheets at December 31, 1998
and 1997 F-3
--Consolidated Statements of Operations for the years
ended December 31, 1998, 1997 and 1996 F-4
--Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1998, 1997 and 1996 F-5
--Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 F-6
--Notes to Consolidated Financial Statements F-7 - F-15
2. Financial Statement Schedules:
IX. --Short-term Borrowings F-16
All other schedules have been omitted because they are not applicable, the
required information is immaterial, or the required information is included
in the consolidated financial statements or notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Westwood One, Inc.
In our opinion, the consolidated financial statements listed in the index to
consolidated financial statements and financial statement schedules on page F-1
present fairly, in all material respects, the financial position of Westwood
One, Inc. and its subsidiaries at December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/PRICEWATERHOUSECOOPERS LLP
- -----------------------------------
PricewaterhouseCoopers LLP
Century City, California
March 17, 1999
F-2
<PAGE>
WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
December 31,
------------
1998 1997
---- ----
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,549 $ 2,763
Accounts receivable, net of allowance for doubtful accounts
of $3,720 (1998) and $2,907 (1997) 75,402 67,765
Other current assets 7,712 7,405
-------- --------
Total Current Assets 85,663 77,933
PROPERTY AND EQUIPMENT, NET 24,353 15,516
INTANGIBLE ASSETS, NET 224,242 204,339
OTHER ASSETS 11,021 19,907
-------- --------
TOTAL ASSETS $345,279 $317,695
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 19,070 $ 15,511
Income taxes payable 4,586 3,564
Other accrued expenses and liabilities 39,120 31,747
Amounts payable to affiliates 15,776 14,931
-------- --------
Total Current Liabilities 78,552 65,753
LONG-TERM DEBT 170,000 115,000
OTHER LIABILITIES 19,509 12,264
-------- --------
TOTAL LIABILITIES 268,061 193,017
-------- --------
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Preferred stock: authorized 10,000,000 shares, none outstanding - -
Common stock, $.01 par value: authorized, 117,000,000 shares;
issued and outstanding, 34,962,230 (1998) and 34,641,730 (1997) 350 347
Class B stock, $.01 par value: authorized, 3,000,000 shares:
issued and outstanding, 351,733 (1998 and 1997) 4 4
Additional paid-in capital 206,688 201,759
Accumulated earnings (deficit) 1,143 (11,903)
-------- --------
208,185 190,207
Less treasury stock, at cost; 6,647,095 (1998) and 3,272,295 (1997) shares (130,967) (65,529)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 77,218 124,678
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $345,279 $317,695
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F - 3
<PAGE>
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
<S> <C> <C> <C>
1998 1997 1996
---- ---- ----
GROSS REVENUES $298,888 $278,978 $198,988
Less Agency Commissions 39,578 38,188 27,204
-------- -------- --------
NET REVENUES 259,310 240,790 171,784
-------- -------- --------
Operating Costs and Expenses Excluding
Depreciation and Amortization 202,138 186,918 126,702
Depreciation and Amortization 18,409 13,031 12,265
Corporate General and Administrative Expenses 4,858 4,936 5,545
Non-recurring Items, Net Expense 551 - -
-------- -------- --------
225,956 204,885 144,512
-------- -------- --------
OPERATING INCOME 33,354 35,905 27,272
Interest Expense 10,340 8,513 8,749
Other Income (432) (334) (307)
-------- -------- --------
INCOME BEFORE TAXES 23,446 27,726 18,830
INCOME TAXES 10,400 2,230 1,330
-------- -------- --------
NET INCOME $13,046 $25,496 $17,500
======= ======= =======
INCOME PER SHARE:
Basic $ .43 $ .83 $ .56
Diluted $ .39 $ .74 $ .51
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 30,098 30,750 31,018
Diluted 33,434 34,651 34,521
</TABLE>
See accompanying notes to consolidated financial statements.
F - 4
<PAGE>
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stock Class B Stock Additional Accumulated Treasury Stock
------------ ------------- Paid-in Earnings --------------
Shares Amount Shares Amount Capital (Deficit) Shares Amount
------ ------ ------ ------ ------- --------- ------ ------
BALANCE AT DECEMBER 31, 1995 31,507 $315 352 $ 4 $157,547 $(54,899) 607 $ 8,844
Net income for 1996 - - - - - 17,500 - -
Issuance of common stock under
stock option plans 311 3 - - 911 - - -
Purchase and cancellation of warrant - - - - (5,750) - - -
Purchase of treasury stock - - - - - - 1,288 19,939
------ --- --- --- -------- ------- ----- ------
BALANCE AT DECEMBER 31, 1996 31,818 318 352 4 152,708 (37,399) 1,895 28,783
Net income for 1997 - - - - - 25,496 - -
Issuance of common stock under
stock option plans 164 2 - - 1,183 - - -
Issuance of common stock under
warrants 2,036 21 - - 35,093 - - -
Conversion of 6 3/4% debentures to
common stock 622 6 - - 14,896 - - -
Purchase and cancellation of warrant - - - - (12,688) - - -
Income tax benefit of option and warrant
exercises - - - - 10,567 - - -
Purchase of treasury stock - - - - - - 1,377 36,746
------ --- --- --- -------- ------ ----- ------
BALANCE AT DECEMBER 31, 1997 34,640 347 352 4 201,759 (11,903) 3,272 65,529
Net income for 1998 - - - - - 13,046 - -
Issuance of common stock under
stock option plans 322 3 - - 4,929 - - -
Purchase of treasury stock - - - - - - 3,375 65,438
------ ---- --- --- -------- ------- ----- --------
BALANCE AT DECEMBER 31, 1998 34,962 $350 352 $ 4 $206,688 $ 1,143 6,647 $130,967
====== ==== === === ======== ======= ===== ========
</TABLE>
See accompanying notes to consolidated financial statements
F - 5
<PAGE>
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
<S> <C> <C> <C>
1998 1997 1996
---- ---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $13,046 $25,496 $17,500
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 18,409 13,031 12,265
Deferred taxes 8,496 - -
Other 315 320 403
------- ------- -------
40,266 38,847 30,168
Changes in assets and liabilities:
Increase in accounts receivable (7,637) (26,440) (489)
Decrease (increase) in prepaid assets 1,104 (3,006) 310
Increase in accounts payable and accrued liabilities 8,982 10,530 3,248
------- ------- -------
Net Cash Provided By Operating Activities 42,715 19,931 33,237
------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of companies and other (CBS Radio Networks
in 1997 and Shadow Traffic in 1998 and 1996) (30,987) (13,839) (26,172)
Capital expenditures (1,945) (1,711) (1,701)
------- ------- -------
Net Cash Used For Investing Activities (32,932) (15,550) (27,873)
------- ------- -------
CASH PROVIDED BEFORE FINANCING ACTIVITIES 9,783 4,381 5,364
------- ------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Debt repayments and payments of capital lease obligations (2,758) - (1,250)
Borrowings under bank and other long-term obligations 55,000 8,862 23,750
Issuance of common stock 3,199 36,299 914
Repurchase of common stock and warrants (65,438) (49,434) (25,689)
Deferred financing costs - - (690)
------- ------- -------
NET CASH (USED FOR) FINANCING ACTIVITIES (9,997) (4,273) (2,965)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (214) 108 2,399
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,763 2,655 256
------ ------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,549 $2,763 $2,655
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
NOTE 1 - Summary of Significant Accounting Policies:
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of all wholly-owned
subsidiaries.
Revenue Recognition
- -------------------
Revenue is recognized when commercial advertisements are broadcast.
Cash Equivalents
- ----------------
The Company considers all highly liquid instruments purchased with a maturity of
less than three months to be cash equivalents. The carrying amount of cash
equivalents approximates fair value because of the short maturity of these
instruments.
Depreciation
- ------------
Depreciation is computed using the straight line method over the estimated
useful lives of the assets. Property under a capitalized lease is amortized over
the term of the lease.
Intangible Assets
- -----------------
Intangible assets are amortized over periods ranging from five to forty years.
At each balance sheet date, the Company determines whether an impairment of
Intangible Assets has occurred based upon expectations of nondiscounted
broadcast cash flow. Broadcast Cash Flow is based on the consolidated statement
of operations, calculated by subtracting from net revenue, operating costs and
expenses excluding depreciation and amortization. To date, the Company has not
experienced an impairment in any of its intangible assets. However, should such
an impairment exist, the impairment will be measured as the amount by which the
carrying amount of the asset exceeds its fair value, as defined by Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
Stock-Based Compensation
- ------------------------
Statement of Financial Accounting Standards No. 123 ("FAS 123"), "Accounting for
Stock-Based Compensation," encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25
("APB 25"), "Accounting for Stock Issued to Employees," and related
Interpretations.
Income Taxes
- ------------
The Company uses the asset and liability method of financial accounting and
reporting for income taxes required by Statement of Financial Accounting
Standards No. 109 ("FAS 109"), "Accounting for Income Taxes". Under FAS 109,
deferred income taxes reflect the tax impact of temporary differences between
the amount of assets and liabilities recognized for financial reporting purposes
and the amounts recognized for tax purposes.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and revenue and expenses during the reporting period.
Actual results may differ from those estimates.
F-7
<PAGE>
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Earnings per Share
- ------------------
Basic earnings per share excludes all dilution and is calculated using the
weighted average number of common shares outstanding in the period. Diluted
earnings per share amounts are based upon the weighted average number of common
and common equivalent shares outstanding during the year. Common equivalent
shares are related to warrants and stock options. The following number of common
equivalent shares were added to the basic weighted average shares outstanding
for each period:
1998 1997 1996
---- ---- ----
Warrants 2,649,000 3,182,000 3,029,000
Options 688,000 719,000 474,000
Common equivalent shares are excluded in periods in which they are
anti-dilutive. The following number of options and warrants were excluded from
the calculation of diluted earnings per share because the exercise price was
greater than the average market price of the Company's Common Stock for the
years presented:
1998 1997 1996
---- ---- ----
Options 1,340,000 790,000 50,000
Warrants - - 2,499,000
The per share exercise prices of the options were $26.00-$30.00 in 1998, $30.00
in 1997, and $17.50 in 1996.
Reclassification
- ----------------
Certain amounts have been reclassified to be comparable to the 1998
presentation.
NOTE 2 - Acquisitions of Businesses:
On March 1, 1996, the Company through its wholly-owned subsidiary Westwood One
Broadcasting Services Inc. acquired the operating assets of New York Shadow
Traffic Limited Partnership, Chicago Shadow Traffic Limited Partnership, Los
Angeles Shadow Traffic Limited Partnership and Philadelphia Express Traffic
Limited Partnership (collectively "Shadow Traffic") for approximately $20,000
plus expenses, subject to an adjustment based on the future cash flow of Shadow
Traffic. The acquisition was accounted for as a purchase, and accordingly,
Shadow Traffic's operating results are included with those of the Company from
the date of acquisition. The intangible assets acquired as part of the purchase
are being amortized over 20 years.
On March 31, 1997, the Company entered into a representation and management
agreement (the "Representation Agreement") with CBS Inc. ("CBS"), whereby the
Company operates the CBS Radio Networks. In accordance with the Representation
Agreement, the Company pays CBS a representation fee and reimburses CBS for
certain programming costs, including news, that CBS provides to Westwood One.
The Company retains all revenues from sales of commercial time and is
responsible for all expenses of the CBS Radio Networks. Accordingly, the
operating results of CBS Radio Network are included with those of the Company
from the effective date of the Representation Agreement.
In May 1998, the Company acquired the operating assets of the Shadow Traffic
operations in Baltimore, Boston, Dallas, Detroit, Houston, Miami, Sacramento,
San Diego, San Francisco and Washington, D.C. for approximately $20,000 plus
costs and the assumption of certain obligations, including severance obligations
and obligations to provide third parties with commercial airtime. The
acquisition was accounted for as a purchase, and accordingly, the operating
results are included with those of the Company from May 1, 1998. The purchase
price has been allocated to the assets and liabilities acquired based on
preliminary estimates of their respective fair values. The intangible assets
acquired as part of the purchase are being amortized over 20 years.
F-8
<PAGE>
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 - Property and Equipment:
Property and equipment is recorded at cost and is summarized as follows at:
December 31,
--------------------
1998 1997
---- ----
Land, buildings and improvements $11,507 $11,355
Recording and studio equipment 8,404 17,522
Capitalized leases 11,123 -
Furniture and equipment and other 9,115 7,808
------- -------
40,149 36,685
Less: Accumulated depreciation and amortization 15,796 21,169
------- -------
Property and equipment, net $24,353 $15,516
======= =======
Depreciation expense was $5,138 in 1998, $2,341 in 1997, and $2,472 in 1996.
NOTE 4 - Intangible Assets:
Intangible assets are summarized as follows at:
December 31,
--------------------
1998 1997
---- ----
Goodwill, less accumulated amortization of $38,659
(1998) and $32,166 (1997) $188,512 $164,862
Acquired station affiliation agreements, less
accumulated amortization of $9,011 (1998) and
$7,670 (1997) 14,768 16,109
Other intangible assets, less accumulated
amortization of $9,968 (1998) and $7,562 (1997) 20,962 23,368
-------- --------
Intangible assets, net $224,242 $204,339
======== ========
F-9
<PAGE>
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 - Debt:
Long-term debt consists of the following at:
December 31,
-------------------
1998 1997
---- ----
Revolving Credit Facility/Term Loan $170,000 $115,000
======== ========
The Company's amended senior loan agreement with a syndicate of banks, led by
Chase Manhattan Bank, provides for an unsecured $120,000 revolving credit
facility and an unsecured $75,000 term loan (the "Facility"). The Facility is
available until September 30, 2004. At December 31, 1998, the Company had
available borrowings under the Facility of $25,000. Interest is payable at the
prime rate plus an applicable margin of up to .25% or LIBOR plus an applicable
margin of up to 1.25%, at the Company's option. At December 31, 1998, the
applicable margin was LIBOR plus .75%. At December 31, 1998, the Company had
borrowed $95,000 under the revolving credit facility and $75,000 under the term
loan at a weighted-average interest rate of 6.0%. The Facility contains
covenants relating to dividends, liens, indebtedness, capital expenditures and
interest coverage and leverage ratios.
The aggregate maturities of long-term debt for the next five years and
thereafter, pursuant to the Company's debt agreements as in effect at December
31, 1998, are as follows:
Year
----
2000 $ 10,000
2001 21,000
2002 39,000
2003 50,000
Thereafter 50,000
--------
$170,000
========
The fair value of debt approximates its carrying value.
NOTE 6 - Shareholders' Equity:
The authorized capital stock of the Company consists of Common stock, Class B
stock and Preferred stock. Common stock is entitled to one vote per share while
Class B stock is entitled to 50 votes per share.
In connection with the Company's purchase of Unistar, the Company sold 5 million
shares of common stock and a warrant to purchase up to an additional 3 million
shares of common stock at an exercise price of $3.00 per share to a wholly-owned
subsidiary of Infinity Broadcasting Corporation for $15,000. The warrants expire
on February 4, 2004.
NOTE 7 - Stock Options:
The Company has a stock option plan established in 1989 which provides for the
granting of options to directors, officers and key employees to purchase stock
at its market value on the date the options are granted. There are 6,800,000
F-10
<PAGE>
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
shares authorized under the 1989 Plan, as amended. Options granted generally
become exercisable after one year in 20% increments per year and expire within
ten years from the date of grant.
The Company applies APB 25 and related interpretations in accounting for its
plans. Accordingly, no compensation expense has been recognized for its stock
option plans. Had compensation cost been determined in accordance with the
methodology prescribed by FAS 123, the Company's net income and earnings per
share would have been reduced by approximately $3,052 ($.10 per basic share and
$.09 per diluted share) in 1998, $2,835 ($.09 per basic share and $.08 per
diluted share) in 1997 and $795 ($.03 per basic share and $.02 per diluted
share) in 1996. The weighted average fair value of the options granted in 1998,
1997 and 1996 is estimated at $9.93, $13.46 and $6.80, respectively, on the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions:
1998 1997 1996
---- ---- ----
Weighted Average Risk Free Interest Rate 5.4% 6.3% 6.1%
Expected Life (In Years) 5 5 5
Expected Volatility 35.9% 53.9% 31.1%
Expected Dividend Yield - - -
Expected Forfeitures per Year 1% 5% 5%
Information concerning options outstanding under the Plan is as follows for the
year ended:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1998 1997 1996
---------------------- ---------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period 3,010,500 $17.48 1,732,500 $10.30 2,036,875 $ 9.02
Granted during the period 800,000 24.30 1,660,000 23.84 50,000 17.50
Exercised during the period (245,500) 8.29 (166,500) 7.24 (310,625) 3.01
Forfeited during the period (155,000) 16.80 (215,500) 16.65 (43,750) 10.61
--------- --------- ---------
Outstanding at end of period 3,410,000 $19.77 3,010,500 $17.48 1,732,500 $10.30
========= ========= =========
Available for new stock options
at end of period 882,000 1,527,000 971,500
======= ========= =======
</TABLE>
F-11
<PAGE>
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 1998, options to purchase 1,146,000 shares of common stock were
currently exercisable at a weighted average exercise price of $13.63.
The following table contains additional information with respect to options at
December 31, 1998:
Remaining
Weighted Weighted
Average Average
Number of Exercise Contractual
Options Price Life (In Years)
------- ----- ---------------
Options Outstanding at
Exercise Price Ranges of:
$ 2.00 - $ 2.75 77,000 $ 2.29 2.8
$ 5.38 - $ 9.75 688,000 $ 9.25 5.7
$12.75 - $18.25 1,305,000 $16.73 8.1
$26.00 - $30.00 1,340,000 $29.15 8.8
---------
3,410,000 $19.77 7.8
=========
NOTE 8 - Income Taxes:
As of December 31, 1998, the Company had approximately $36,000 of available U.S.
net operating loss carryforwards for tax purposes, which begin to expire in
2002. Utilization of the carryforwards is dependent upon future taxable income
and the absence of any significant changes in the stock ownership of the
Company.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities on the Company's
balance sheet and the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities follow:
December 31,
-----------------
1998 1997
---- ----
Deferred tax liabilities:
Affiliation agreements $ 6,663 $ 7,237
Purchase accruals 9,689 10,705
Other 439 213
------- -------
Total deferred tax liabilities 16,791 18,155
------- -------
Deferred tax assets:
Net operating loss 11,949 20,433
Accrued liabilities and reserves 6,501 6,986
Tax credits (AMT and ITC) 2,145 1,303
------- -------
Total deferred tax assets 20,595 28,722
------- -------
Net deferred tax assets $ 3,804 $10,567
======= =======
In 1997, as a result of its trend of positive operating results, the Company
determined that it no longer needed to maintain a valuation allowance for its
net deferred tax assets. Accordingly, the benefit of the resulting net operating
losses was credited to paid-in-capital as it was attributable to employee stock
transactions.
F-12
<PAGE>
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of the provision for income taxes follows:
Year Ended December 31,
-----------------------
Current 1998 1997 1996
---- ---- ----
Federal $ 842 $ 483 $ 520
State 1,062 1,747 810
------- ------- ------
1,904 2,230 1,330
------- ------- ------
Deferred
Federal 8,562 - -
State (66) - -
------- ------- ------
8,496 - -
------- ------- ------
Income tax expense $10,400 $ 2,230 $1,330
======= ======= ======
The reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate follows:
Year Ended December 31,
--------------------------
1998 1997 1996
---- ---- ----
Federal statutory rate 35.0% 35.0% 35.0%
State taxes net of federal benefit 4.4 6.3 4.3
Nondeductible amortization of 5.4 4.5 7.0
intangible assets
Net operating loss deduction - (37.8) (39.2)
Other, net (.4) - -
----- ------ ------
Effective tax rate 44.4% 8.0% 7.1%
===== ====== ======
In 1998, $1,733 of income tax benefits attributable to employee stock
transactions were allocated to shareholders' equity.
NOTE 9 - Non-recurring Items:
Non-recurring items include amounts attributable to the consolidation of the
Company's news operations and one-time costs associated with evaluating various
strategic alternatives to enhance shareholder value partially offset by a
settlement with a satellite carrier whereby the Company received a refund for
past services, resulting in a gain of approximately $2,494. The costs associated
with the consolidation of the news operations were comprised of the following:
Expense Unpaid at
Accrued Paid 12/31/98
------- ---- --------
Severance costs $1,166 $1,166 -
Abandoned leases 696 120 $576
Other 413 413 -
------ ------ ----
$2,275 $1,699 $576
====== ====== ====
NOTE 10 - Related Party Transactions:
In connection with the acquisition of Unistar, the Company entered into a
Management Agreement with Infinity Broadcasting Corporation ("Infinity").
Pursuant to the Management Agreement, the Company paid or accrued expenses
aggregating $2,226 to Infinity in 1998 ($2,713 in 1997 and $2,825 in 1996). As
F-13
<PAGE>
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
part of the Management Agreement, Infinity was given 1,500,000 warrants to
acquire shares of Common Stock after the Company's Common Stock reached certain
market prices per share.
On March 31, 1997, the Company entered into a Representation Agreement with CBS.
In addition, many of Infinity's radio stations are affiliated with the Company's
radio networks and the Company purchases several programs from Infinity. During
1998 the Company incurred expenses aggregating approximately $67,612 for the
Representation Agreement and Infinity affiliations and programs ($61,564 in 1997
and $22,886 in 1996).
NOTE 11 - Commitments and Contingencies:
The Company has various non-cancelable, long-term operating leases for office
space and equipment. In addition, the Company is committed under various
contractual agreements to pay for talent, broadcast rights, research, the CBS
Representation Agreement and the Management Agreement with Infinity. The
approximate aggregate future minimum obligations under such operating leases and
contractual agreements for the five years after December 31, 1998, are set forth
below (See also Note 14 - Subsequent Event):
Year
----
1999 $30,789
2000 18,546
2001 10,692
2002 14,113
2003 5,077
-------
$79,217
=======
NOTE 12 - Supplemental Cash Flow Information:
Supplemental Information on cash flows, is summarized as follows:
Year Ended December 31,
--------------------------------
1998 1997 1996
---- ---- ----
Cash paid for:
Interest $10,119 $8,245 $6,837
Income taxes 883 1,174 754
The Company had certain non-cash investing and financing activities in 1998 and
1997. During 1998, $11,430 of lease assets and obligations were capitalized. In
1997, $15,293 principal amount of the Company's 6 3/4 % Convertible Subordinated
Debentures were converted into approximately 622 shares of the Company's Common
Stock.
F-14
<PAGE>
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13 - Quarterly Results of Operations (unaudited):
The following is a tabulation of the unaudited quarterly results of operations.
The quarterly results are presented for the years ended December 31, 1998 and
1997.
(In thousands, except per share data)
First Second Third Fourth For the
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- -------
1998
----
Net revenues $53,340 $63,487 $66,669 $75,814 $259,310
Operating income 1,982 9,596 9,695 12,081 33,354
Net income 49 4,078 3,876 5,043 13,046
Net income per share:
Basic $ 0.00 $ 0.13 $ 0.14 $ 0.18 $ 0.43
Diluted 0.00 0.12 0.12 0.16 0.39
1997
----
Net revenues $41,461 $66,117 $63,373 $69,839 $240,790
Operating income 2,758 11,960 10,778 10,409 35,905
Net income 504 8,983 7,866 8,143 25,496
Net income per share:
Basic $ 0.02 $ 0.30 $ 0.25 $ 0.26 $ 0.83
Diluted 0.02 0.26 0.23 0.23 0.74
NOTE 14 - Subsequent Event:
The Company has reached an agreement in principal to renew the Management
Agreement with Infinity through March 31, 2004. Pursuant to the agreement in
principal, Infinity will receive a base fee of $2,500 (adjusted for inflation)
and warrants to acquire 1,000,000 shares of Common Stock exercisable after the
Company's Common Stock reaches certain market prices per share. In addition, the
Company has also reached an agreement in principal to renew the Representation
Agreement with CBS through March 31, 2004. Under the terms of the agreement in
principal, the Company will pay CBS an annual representation fee of $12,000.
F-15
<PAGE>
WESTWOOD ONE, INC.
SCHEDULE IX
CONSOLIDATED SHORT-TERM BORROWINGS
(In thousands)
MAXIMUM AVERAGE WEIGHTED
AMOUNT AMOUNT AVERAGE
CATEGORY OF BALANCE WEIGHTED OUT- OUT- INTEREST
AGGREGATE AT AVERAGE STANDING STANDING RATE
SHORT-TERM END OF INTEREST DURING THE DURING THE DURING THE
BORROWINGS PERIOD RATE PERIOD PERIOD PERIOD
- ---------- ------- -------- ---------- ---------- ----------
Year ended
December 31,
1996:
Notes payable $ - - $10,000 $1,760 6.4 %
Notes: Short-term borrowings during the years covered by this schedule consist
of loans made under various established credit lines. The average amount
outstanding during each period was computed by dividing the average outstanding
principal balance by 365 days. The weighted average interest rate during each
period was computed by dividing the actual interest expense on such borrowings
by the average amount outstanding during that period. The Company did not have
any short-term borrowings in 1998 and 1997.
F-16
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This employment agreement (the "Agreement") is made as of April 29,
1998 and amends and restates in its entirety the employment agreement, as
amended, dated as of October 18, 1993 (the "Prior Agreement"), by and between
Westwood One, Inc., a Delaware corporation, having its principal offices at 9540
Washington Boulevard, Culver City, California 90232-2689 (the "Company"), acting
through the Compensation Committee of its Board of Directors pursuant to the
authorization of the Board of Directors, and Norman J. Pattiz (the "Employee").
W I T N E S E T H
WHEREAS, Employee founded the Company and is now serving as its
Chairman of the Board of Directors and Executive Producer;
WHEREAS, Company wishes to assure itself of the continued services of
Employee in such capacities for an additional five (5) years from December 1,
1998 through November 30, 2003 upon the terms and conditions set forth herein;
and
WHEREAS, Employee is willing to enter into this Agreement upon the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties agree as follows:
1. Employment.
Company shall employ Employee, and Employee shall serve, as the sole
Chairman of the Board during the term hereof. Employee shall have all powers and
authority necessary to enable him to discharge his duties in the offices which
he holds as well as all powers and authority which are commonly incident to the
offices of Chairman of the Board of a company which is a major producer and
distributor of programs in broadcast and telecast media. Employee shall report
only and directly to the Board of Directors, Company shall use its best efforts
to keep Employee a member of the Board of Directors throughout the term,
including placing Employee on management's slate of nominees for election as a
director at every shareholders' meeting at which his term as a director would
otherwise expire. Employee shall, subject to his election or appointment as
such, serve as a member of such committees of the Board of Directors as the
Board of Directors deems appropriate. If the Board of Directors shall establish
an executive committee (or its equivalent), Employee shall be a member of such
committee. Employee shall render his services at the Company's headquarters in
the greater Los Angeles metropolitan area, Employee shall engage in reasonable
travel on behalf of the Company but shall not be required to relocate. Employee
shall have the office, executive assistant and parking place of his choice, and
Employee's office shall be furnished and equipped as Employee chooses generally
consistent with the state of Employee's office immediately prior to the
execution of this Agreement, but upgraded as required. No change shall be made
in Employee's duties, functions, responsibilities, powers or authority, all of
which shall remain as immediately prior to the execution of this Agreement.
Employee shall retain all of the foregoing positions, duties, functions, powers,
responsibilities and authority in any successor company by reason of merger,
combination, consolidation, acquisition, organization or otherwise.
2. Extension of Employment.
Upon the expiration of the Prior Agreement, Employee shall be employed
for a term of five (5) years beginning December 1, 1998.
3. Compensation and Other Benefits.
3.1. Salary.
The Company shall pay to Employee during the term hereof a base salary
at the annual rates set forth on Schedule 1 attached hereto and incorporated
herein by this reference. Such salary shall be payable in equal bi-monthly
installments during the term hereof. In addition, within ninety (90) days after
the end of each year of the term of this Agreement, the Board of Directors
(excluding Employee) shall meet and discuss whether any other cash bonus based
upon Employee's performance would be appropriate and shall award Employee such
cash bonuses as it may deem to be appropriate in the exercise of its business
judgment. The evaluation of Employee's performance shall include such areas as
creativity, leadership, decision-making and overall management.
<PAGE>
3.2. Other Benefits.
(a) During the term hereof, Employee (and his dependents where
applicable) shall be entitled to participate and shall be
included in any employee benefit plans, including but not
limited to, any group health and life insurance, disability
insurance, pension, profit-sharing, deferred compensation or
similar plans of Company now existing or established
hereafter, on a basis which is no less favorable than the
participation made available to the most senior executive
officer of the Company.
(b) During the term hereof, Employee shall be entitled to the
stock option benefits described in Section 4 hereof.
(c) During the term hereof, Employee shall be entitled to six
(6) weeks of vacation each contract year during which time his
compensation shall be paid in full.
(d) During the term hereof, Company shall provide
Employee with an automobile of Employee's choice and shall pay
for all expenses in connection therewith, including but not
limited to all insurance, repairs, maintenance, gas, oil and
mobile telephone. Employee may, at his election, purchase the
automobile from Company at the automobile's fair market value,
which fair market value shall be deemed to be the value set
forth in the Kelly Blue Book. Company, however, shall pay for
such automobile expenses whether Employee or Company owns the
automobile.
(e) During the term hereof, Company shall pay all
expenses incurred in connection with the performance of
Employee's duties hereunder or in promoting the business of
the Company, including without limitation business-related
entertainment expenses. Further, Company shall reimburse
Employee for all other out-of-pocket expenses, including air
and ground transportation, lodging and other travel expenses,
incurred by Employee in connection with the performance of
Employee's duties hereunder or to promote the business of the
Company on the same basis and to the same extent as provided
to Employee immediately prior to the execution of this
Agreement.
(f) Company and Employee hereby reaffirm the Registration
Rights Agreement, dated October 18, 1993, pursuant to which
the Company grants Employee full "piggy back registration
rights" and limited demand registration rights with respect to
any and all of the Common Stock of the Company ("Common
Stock") owned by the Employee.
(g) Company shall pay all expenses of Employee (including
without limitation all legal, accounting and financial
planning fees and expenses) in connection with this Agreement.
(h) During the term hereof, Employee shall receive, at his
election, an "Executive Producer" credit (equal in all
respects to best producer or similar credit provided any other
individual) on each entertainment or talk-oriented programming
produced or co-produced by Company consistent with past
practices.
Employee is required to pay any amounts required by
Federal, state or local tax law with respect to the benefits paid to Employee
pursuant to this Section 3.2 and the Company may withhold such amounts from the
salary or other cash compensation payable to Employee hereunder; provided,
however, that, at the election of Employee, such amounts may be paid in
shares of Common Stock which have been registered under the Securities Act
of 1933 (the "Act") or, in the opinion of counsel to the Company, may otherwise
be freely traded.
3.3. Salary and Benefit Continuation.
The Company will continue Employee's compensation (base salary and cash
incentive compensation) at the full rate and in bi-monthly installments for a
period of twelve (12) months after Employee is declared permanently and totally
disabled (including by reason of Employee's death) and unable to perform the
duties of Chairman of the Board of the Company. Thereafter the Company will pay
to Employee seventy-five percent (75%) of Employee's annual salary, payable in
<PAGE>
bimonthly installments, for the remainder of the term of this Agreement (i.e.,
through November 30, 2003). Furthermore, in the event of such permanent and
total disability (including by reason of Employee's death), only the benefits
described in Section 3.2(a), 3.2(b), and 3.2(f) shall continue for the balance
of the term of this Agreement; the benefits described in Section 3.2(f) shall
continue in accordance with the terms of the document described therein.
For purposes of this Section, the determination of whether or not
Employee is declared permanently and totally disabled shall be made by
Employee's physician, by written notice to the Board of Directors. In the event
the Board of Directors disagrees with the determination by Employee's physician,
the Board of Directors shall appoint, at Company's expense, another physician to
make such determination. If the physician so appointed by the Board of Directors
disagrees with the determination made by Employee's physician, then the two
physicians shall appoint a mutually acceptable third physician, at Company's
expense, to make the final determination of whether Employee is permanently and
totally disabled, which determination shall be binding upon all parties hereto.
3.4. Limitation on Annual Compensation.
Notwithstanding any provision herein to the contrary, the payment of
any remuneration (within the meaning of Internal Revenue Code Section 162(m)) in
excess of $1,000,000 in any taxable year of Employee during the term hereof
which would otherwise be payable to Employee pursuant to this Agreement in the
absence of this Section 3.4 ("Excess Remuneration") shall be deferred until the
first taxable year that the payment of such Excess Remuneration would not result
in the payment by Company to Employee in such year of remuneration in excess of
$1,000,000.
4. Stock Options.
Effective as of the date hereof (the "Date of Grant"), and in addition
to options granted to Employee under the Prior Agreement (the "Prior Options"),
the Company grants to Employee a non-qualified option to purchase all or any
part of 500,000 shares of Common Stock (the "Option Shares") under the Company's
1989 Stock Incentive Plan, as amended (the "Plan"), upon the terms and subject
to the conditions set forth below and in the Plan.
<PAGE>
4.1. Term Of Option.
Such option shall expire ten (10) years after the Date of Grant, unless
such option shall have been terminated earlier in accordance with the provisions
hereof.
4.2. Exercisability of Option.
Such option shall become exercisable as to 100,000 of the Option Shares
(an "Exercise Increment") on each anniversary of the date hereof through and
including November 30, 2003, and shall remain exercisable for the term provided
in Section 4.1.
Option Shares as to which such option becomes exercisable pursuant to
the foregoing provisions may be purchased at any time thereafter prior to the
expiration or termination of the option.
If a Partial Event of Change or an Event of Change occurs (as defined
in Section 8 hereof), the option shall become exercisable at the election of
Employee in accordance with Sections 8.4 or 8.5 hereof.
4.3. Exercise Price.
The exercise price for each Option Share shall be 100% of the Fair
Market Value (as defined in the Plan) of a share of Common Stock on the Date of
Grant. Employee shall be offered Reload Stock options (as defined in the Plan)
if and to the extent that any holder of options granted pursuant to the Plan is
offered Reload Stock Options.
4.4. Manner of Exercise.
All or any portion of each Exercise Increment may be exercised by
written notice delivered to the Company stating the number of Option Shares with
respect to which the option is being exercised, together with cash or a check in
the amount of the purchase price of such shares, or, at the election of
Employee, shares of Common Stock held at least six (6) months having an
aggregate Fair Market Value equal to such purchase price.
<PAGE>
4.5. Termination of Employment.
If Employee's employment with the Company terminates for any reason
other than death or disability, all Option Shares and all Option Shares under
the Prior Options which are then exercisable may be exercised during the period
ending three (3) months after such termination.
If Employee's employment is terminated by death or disability of Employee,
Option Shares an all Option Shares under the Prior Options which have become
exercisable will expire to the extent not exercised by Employee or his
authorized representative (in the event of disability) or the executor or
appropriate representative of Employee's estate (in the event of death) within
one (1) year from the date of such death or disability. Notwithstanding any
provision herein to the contrary, no Option Share shall be exercisable following
the expiration of the term of the option. For purposes of this Section 4.5,
"disability" shall have the meaning specified in Section 2.6 of the Plan. In the
event the Plan is amended to allow more favorable treatment with respect to the
periods during which options may be exercised, the Prior Options and the options
granted herein shall automatically be amended to provide for such more favorable
treatment.
The Company's obligation in Section 4.9 to include any Option Shares in
any registration statement then currently used to register the resale of shares
of Common Stock received by other employees pursuant to the exercise of options
granted under the Plan, shall remain in full force and effect until such time as
Employee or his estate has sold the Option Shares pursuant to any such
registration statement.
4.6. Assignment or Transfer.
The option granted hereunder is personal to Employee. Except
for transfers by will or the laws of descent or distribution, or as otherwise
permitted by the Plan, the option may not be transferred, in whole or in part,
to any Person, whether by gift or otherwise. If transferred by will or the laws
of descent or distribution, the option must be exercised by Employee's executor
or other personal representative within the time specified in Section 4.5
hereof.
4.7. No Rights as Shareholder.
Promptly upon receipt of the notice and payment described in Section
4.4 hereof, the Company will instruct its transfer agent to issue forthwith a
stock certificate reflecting the number of Option Shares purchased by Employee.
Employee shall have no rights as a shareholder with respect to the Option Shares
until the date of the issuance of a stock certificate or stock certificates. No
adjustment will be made for dividends or other rights for which the record date
is prior to the date such stock certificate or certificates are issued.
4.8. Adjustments Upon Changes in Capitalization.
The option and the Option Shares shall be subject to adjustment in the
event of certain corporate transactions, including the merger, consolidation or
liquidation of the Company, and certain changes in the Company's capitalization,
including changes resulting from any stock dividend, subdivision or
consolidation of the Common Stock, pursuant to the terms of Article XI of the
Plan; provided, however, in no event will the option or the Option Shares be
cancelled, in whole or in part, pursuant to Section 11.2(a)(iii) of the Plan.
4.9. Securities Act of 1933.
The Option Shares have been registered with the Securities and Exchange
Commission pursuant to a registration statement on Form S-8 and the Company will
use its best efforts to keep such registration statement current. Further, the
Company agrees to include any Option Shares received upon exercise of the option
in any registration statement then currently used to register the resale of
shares of Common Stock received by other employees pursuant to the exercise of
options granted under the Plan, and to use its best efforts to keep any such
registration statement current.
Employee represents and agrees that if Employee exercises the option in
whole or in part at a time when there is not in effect under the Act (the "Act")
a registration statement relating to the Option Shares and available for
delivery to Employee a prospectus meeting the requirements of Section 10 (a) (3)
of the Act, Employee will acquire the Option Shares upon such exercise not with
a view to their resale or distribution and that, upon, each such exercise of the
option, Employee will furnish to the Company a written statement to such effect
on such form as the Company may request.
<PAGE>
5. Non-Competition/Unfair Competition.
5.1. Non-Competition .
During the term of this Agreement, Employee shall not knowingly,
directly or indirectly, engage or participate in any business that is in
competition with the business of the Company. The foregoing obligation of
Employee not to compete with the Company shall not prohibit Employee from owning
or purchasing any corporate securities of any corporation that are regularly
traded on a recognized stock exchange or over-the-counter market so long as
Employee does not own, in the aggregate, five percent (5%) or more of the voting
equity securities of any such corporation. Notwithstanding the foregoing, with
the consent of the Board of Directors (which consent shall not be unreasonably
withheld), Employee may engage or participate in outside business activities
which do not significantly interfere with the services required of Employee to
the Company hereunder.
5.2. Unfair Competition.
The Company treats certain information, including but not limited to,
information about its affiliated radio stations, marketing programs, or radio
programs, as confidential information (the "Confidential Information"). Employee
acknowledges and agrees that, during the term of this Agreement, the sale or
unauthorized use or disclosure of any Confidential Information obtained by
Employee during his employment with the Company constitutes unfair competition.
Employee promises and agrees not to engage in unfair competition with the
Company during the term of this Agreement.
6. Termination Provisions.
6.1. Termination by Company.
If Employee is not elected to the Board of Directors by the
stockholders of the Company, such failure shall not constitute grounds for the
Company to terminate this Agreement. This Agreement may be terminated by Company
only as provided in this Section and for no other cause or reason:
(a) Upon ninety (90) days' advance written notice, Company may
terminate this Agreement by a two-thirds vote of the Board of
Directors (excluding Employee) for "Cause" defined only as
follows: willful commission by Employee of a material act
(which action first occurs during the term of this Agreement)
of fraud or gross misconduct having a material adverse effect
upon the business of the Company, or competition by Employee
with the Company in violation of Section 5 hereof, which is
not cured or ceased by Employee within such 90-day period.
(b) Except as otherwise provided herein, this Agreement
shall terminate upon the death of Employee.
(c) Except as otherwise provide herein, this Agreement shall
terminate as of the date Employee is declared permanently and
totally disabled and unable to perform the duties of Chairman
of the Board and Chief Executive officer of the Company.
6.2. Termination by Employee.
This Agreement may be terminated by Employee as follows:
(a) Upon thirty (30) days' advance written notice, Employee may
terminate this Agreement if it is materially breached by the
Company.
(b) Except for the foregoing, Employee may terminate this
Agreement by ninety (90) days'advance written notice.
(c) Pursuant to Section 11.7 hereof.
7. Indemnity.
Company hereby agrees to indemnify, defend and hold harmless Employee
to the maximum extent permitted by Delaware law, on the terms and conditions set
forth in numbered paragraphs 3 through 15, inclusive of the form entitled
"Indemnification Agreement" attached hereto as Schedule 4 (with "Indemnified
Party" as used therein deemed to refer to Employee), which paragraphs are
incorporated by reference herein as though set forth in full. The indemnity
provided for herein shall not be deemed exclusive of, or dependent or
<PAGE>
conditional upon, any other indemnity obligations running to Employee, nor shall
any other indemnity obligations running to Employee (including without
limitation any indemnity obligations which may arise if Company and Employee
enter into a separate Indemnity Agreement in the form attached hereto as
Schedule 4 or otherwise) be deemed exclusive of, or dependent or conditional
upon, the indemnity obligations contained in this Agreement. The indemnity
obligations contained herein shall survive the termination of employment of
Employee or expiration of this Agreement for any reason whatsoever, and shall,
where appropriate, inure to the benefit of and cover Employee's estate.
8. Change of Control.
8.1. Partial Event of Change Defined.
For the purposes of this Agreement, a Partial Event of Change shall be
deemed to have occurred as of the date when there is a reduction in the per
share voting power of the Company's Class B Stock held by Employee, which
reduction is not caused by Employee, or directly or indirectly agreed to by
Employee as a member of the Board of Directors of the Company; provided, that if
such reduction occurs as a result of the passage, adoption or amendment of any
Federal or State legislation, rules or regulations, or the adoption or amendment
of any rules or regulations of the National Association of Securities Dealers,
Inc., the Partial Event of Change shall be deemed to occur (or to have occurred)
ten (10) business days prior to the effective date of the legislation, rule or
regulation.
8.2. Event of Change Defined.
For purposes of this Agreement, an Event of Change shall be deemed to
occur upon the happening of any of the following events:
(a) Company becomes a Participant in any transaction or
event that contemplates the dissolution or liquidation of the
Company or a substantial reduction in the business operations
of the Company;
(b) Company becomes a Participant in any merger,
consolidation, acquisition or transfer of property or assets
other than one in which it will be the acquirer both in form
and substance;
(c) Company becomes a Participant in any transaction
whereby all or substantially all of the property or assets of
the Company are proposed to be sold or transferred to one or
more Third Parties;
(d) Assuming the prior or contemporaneous occurrence of a
Partial Event of Change and further assuming no direct or
indirect encouragement or involvement by the Company or
Employee,
(i) Any Third Party acquires, whether in one transaction or more than one
transaction, or by conversion of non-voting securities, beneficial ownership
(whether voting or investment or both) of a number of the voting securities of
Company which, when added to the shares (if any) of voting securities of Company
already beneficially owned by said Third Party and/or the affiliates of such
Third Party, would comprise twenty-five percent or more of the voting power of
Company's outstanding securities;
(ii) Any Third Party commences a tender or exchange offer (whether for cash,
securities or other consideration) for voting securities of Company which, when
added to the shares (if any) of voting securities of Company beneficially owned
by such Third Party and/or the affiliates of such Third Party, would comprise
twenty-five percent or more of the voting power of Company's outstanding
securities;
(iii) Any Third Party commences a tender or exchange offer (whether for cash
securities or other consideration) for nonvoting securities of Company which are
convertible into voting securities and which, if they were converted and if the
voting securities received thereby were added to the shares (if any) of voting
securities of Company beneficially owned by such Third Party and/or the
affiliates of such Third Party, would result in an amount comprising twenty-five
percent or more of the voting power of Company's outstanding securities;
(iv) Any Third Party solicits proxies or consents to remove a majority of the
Directors of the Company and/or to elect a majority of the Directors of the
Company at any meeting of the Company's stockholders or by written consent.
(a) Any one or more of the events described in Section
8.2(d)(i) through (iv), inclusive, occur without the prior or
contemporaneous occurrence of a Partial Event of Change, and
subsequently a Partial Event of Change occurs.
<PAGE>
8.3. Other Definitions.
(a) "Person" as used herein means a natural person,
corporation, unincorporated entity, trust or any other entity
capable of holding an equity interest in a business;
(b) "Group of Persons" as used herein means two or more
Persons who agree to act together for the purpose of
acquiring, holding, voting or disposing of any securities of a
company;
(c) "Third Party" as used herein means any Person or
Group of Persons other than Employee, his immediate family or
the Company;
(d) Company becomes a "Participant" as used herein upon
the happening of the earlier of the following events:
(i) Without the approval of Employee, Company enters into an agreement
providing for the liquidation, dissolution, substantial reduction in business
operations, merger, consolidation, acquisition, or transfer or sale of property
or assets;
(ii) Without the approval of Employee, Company's Board of Directors votes to
approve, or to submit to shareholders for approval, any agreement, plan,
resolution, article, certificate, bylaw, or motion providing for, or approving
any agreement for, liquidation, dissolution, substantial reduction in business
operations, merger, consolidation, acquisition, or transfer or sale of property
or assets; or
(iii) Without the approval of Employee, Company or any Third Party announces, by
press release or any filing pursuant to Federal or State law, rule or
regulations, that it intends to enter into an agreement providing for the
liquidation, dissolution, substantial reduction in business operations, merger,
consolidation, acquisition or transfer or sale of property or assets.
8.4. Rights Upon Partial Event of Change.
If a Partial Event of Change occurs, immediately at the election of
Employee, the option granted pursuant to Section 4 shall become exercisable as
to one half of the Option Shares as to which such option has not yet become
exercisable.
8.5. Rights Upon Event of Change.
(a) Upon the occurrence of an Event of Change, immediately at
the election of Employee, the option granted pursuant to
Section 4 shall become exercisable as to the Option Shares as
to which such option has not yet become exercisable; provided,
however, that for the purpose of this Section 8.5 the
transaction contemplated by the Letter of Intent dated October
10, 1993 among Employee, Infinity Broadcasting Corporation and
the Company shall not constitute an Event of Change.
If any of the events constituting an Event of Change
is not in fact finally consummated or otherwise fails for any
reason (including, but not limited to, any affirmative action
to counter such event taken personally by Employee), Employee
agrees that the exercise schedule for the Option Shares shall
automatically revert to the schedule described in Section 4.2
hereof, except to the extent that Employee has already
exercised his option to purchase some or all of the Option
Shares.
(b) If after the occurrence of any Event of Change,
Company terminates this Agreement or terminates the employment
of Employee, Employee (or his estate) shall continue to
receive, (in addition to the rights described in Section
8.5(a) above and without waiver or prejudice to any other
rights or remedies Employee may have by virtue of any improper
termination), the salary compensation (base salary and cash
incentive compensation) Employee would have been entitled to
receive for the remaining term of this Agreement if it had
continued in force for the full period set forth in Section 2
of this Agreement and if Employee had rendered services during
said period.
<PAGE>
9. No Mitigation.
In the event of a breach of this Agreement by Company, Employee shall
have no duty or obligation to mitigate damages. Any income and any other
employment benefits received by Employee before or after the breach, expiration
or termination of this Agreement shall in no way reduce or otherwise affect
Company's obligation to make payments and afford benefits hereunder or Company's
liability for damages by virtue of any breach hereof.
10. Representations and Warranties.
Company represents and warrants that:
(a) it has the requisite corporate power and authority to
enter into this Agreement and to perform its obligations
hereunder;
(b) the execution and delivery of this Agreement by the
Company and the consummation of the transactions contemplated
hereby have been duly authorized by the Compensation Committee
of the Board of Directors of Company;
(c) the execution and delivery of this Agreement by the
Company and the consummation of the transactions contemplated
hereby, including without limitation the issuance, grant and
delivery of the option and the Option Shares hereunder and the
conveyance of rights in connection therewith, are not in
violation of or in conflict with, and will not result in a
breach of the charter or bylaws of the Company or any material
note, bond, mortgage, indenture, deed of trust, license,
lease, judgement, order, decree, statute, rule, regulation,
agreement or other instrument or obligation to which the
Company or any of its properties or assets are or may be
subject.
The Company shall indemnify, defend and hold harmless Employee
from any and all liabilities, claims, actions, judgments, costs, penalties and
expenses (including without limitation legal fees) resulting from or relating to
any breach of the foregoing representations and warranties.
11. Miscellaneous Provisions.
11.1. Notices.
All notices, requests, demands and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or sent by prepaid telegram or first
class mail, postage prepaid, registered or certified, as follows:
If to Employee: Norman J. Pattiz
Westwood One, Inc.
8966 Washington Blvd.
Culver City, California 90232
With Copy to: Terry Christensen
Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP
2121 Avenue of the Stars
Suite 1800
Los Angeles, California 90067
If to Company: Chief Financial Officer
Westwood One, Inc.
8966 Washington Blvd.
Culver City, California 90232
Either party may change the address to which such
communications are to be delivered by giving written notice to the other party.
Any notice personally given shall be deemed received upon delivery to the
address designated; any notice by mail as provided in this Section shall be
deemed given on the third business day following such mailing; and any notice
given by telegram as provided herein shall be deemed delivered the business day
following the delivery of such notice to the telegraph company for transmission.
<PAGE>
11.2. Entire Agreement.
This Agreement contains all of the terms and conditions agreed upon by
the parties hereto with reference to the subject matter hereof and, upon its
effectiveness, supersedes any and all prior written or verbal employment
agreements. This Agreement may not be modified except by a written instrument
executed by both parties or their permitted successors in interest, if any.
11.3. Assignment.
Except as expressly provided herein, this Agreement shall not be
assignable by any party hereto without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors and assigns and upon any successor to the Company, whether by merger,
combination, consolidation, acquisition, reorganization or otherwise, as fully
as if such successor were a signatory hereto and the Company shall cause such
successor to, and such successor shall, expressly assume Company's obligations
hereunder. The term "Company", as used in this Agreement shall include all such
successors. Whenever this Agreement provides for any payment to Employee, such
payment may be made instead to Employee's estate (in the event of Employee's
death) or to such beneficiary or beneficiaries as Employee may have designated
in a writing filed with the Company. Employee shall have the right to revoke any
such designation and to redesignate a beneficiary or beneficiaries by written
notice to Company (and to any applicable insurance company) to such effect.
11.4. Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
same instrument. This Agreement shall be effective as of the date first above
written despite the fact that various dates of execution by the parties hereto
may differ therefrom.
11.5. Waiver.
No action taken pursuant to this Agreement shall be deemed to
constitute a waiver by the party taking such action of complete compliance with
the representations, warranties, covenants and agreements contained herein. No
waiver shall be binding unless in writing and signed by the person making the
waiver. A waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach. Any party or parties may waive or modify performance of any act which is
intended solely for their benefit as long as the party for whom such act is
intended to benefit consents to such waiver or modification in writing. 1.1.
Applicable Law and Jurisdiction.
The formation, construction and performance of this Agreement shall be
construed in accordance with the laws of the State of California, except to the
extent that the indemnification provisions set forth in Schedule 4 hereof are
governed by the law of the State of Delaware.
11.6. Severability.
Employee and Company acknowledge that they believe all terms of this
Agreement to be valid, binding and enforceable. However, if any term(s) or
provision(s) of this Agreement or the application thereof to any person or
circumstances shall be held invalid or unenforceable to any extent, the
remainder of this Agreement or the application of such term(s) or provision(s)
to persons or circumstances, other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each and every term of this
Agreement shall be valid and enforced to the fullest extent permitted by law.
Notwithstanding the foregoing, if any material right or benefit of Employee, or
obligation owing to Employee, under Sections 4 or 8, or Sections 3.11 3.2(b) or
(f) is held to be invalid or unenforceable to any extent, Employee may, at his
sole option, by written notice to Company, advise Company that he wishes to
renegotiate some or all of the terms of this Agreement. If within fifteen (15)
business days after receipt of said notice, Company and Employee have not been
able to renegotiate this Agreement to the satisfaction of Employee, Employee may
either declare the Agreement at an end as though it had expired in accordance
with its terms, or reaffirm the Agreement (except those terms declared to be
invalid or unenforceable) in which case Company and Employee shall continue to
render performances hereunder.
11.7. Attorneys' Fees.
In the event of any legal action or other proceeding or arbitration is
brought for enforcement of this Agreement, the prevailing party will be entitled
to recover from the other party reasonable attorneys' fees and other costs
<PAGE>
incurred in connection with that action or proceeding, and in any petitions for
appeal or appeals therefrom, in addition to any other relief to which such party
may be entitled.
11.8. Arbitration.
Any dispute or claim in connection with the interpretation, performance
or breach of this Agreement, including any claim based on contract, tort or
statute, shall be settled, at the request of Employee, in his sole and absolute
discretion, by arbitration conducted in Los Angeles California in accordance
with the then existing Rules for Commercial Arbitration of the American
Arbitration Association, and judgment upon any award rendered by the arbitrator
may be entered by any State or Federal court having jurisdiction thereof. The
sole arbitrator shall be a retired or former judge of the Los Angeles Superior
Court. Any controversy concerning whether a dispute is an arbitrable dispute
shall be determined by the arbitrator. The provisions of California Code of
Civil Procedure Section 1283.05 are incorporated into and made applicable to
this Agreement. Depositions may be taken and discovery may be obtained in any
arbitration under this Agreement in accordance with Section 1283.05. In any
award, the arbitrator shall allocate against the losing parties all costs of
arbitration, including without limitation the fees of the arbitrator, and
reasonable attorneys' fees, costs and expert witness expenses of the parties and
all costs and expenses in connection with enforcing any arbitration award. The
parties intend that this agreement to arbitrate be valid, enforceable and
irrevocable; provided, however that if Employee does not elect to proceed by
arbitration, then any dispute or claim shall be resolved by judicial proceeding
solely and exclusively in Superior Court for the County of Los Angeles,
California or the Federal District Court of the Central District of California.
11.9. Effectiveness.
This Agreement is effective immediately, except that Section 3 of the
Prior Agreement shall remain in effect through November 30, 1998.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
_______________________________ WESTWOOD ONE, INC.
Norman J. Pattiz
(the "Employee")
By: ____________________________
Chairman,
Compensation Committee
<PAGE>
SCHEDULE 1
BASE SALARY
Contract Year Amount
First $500,000
Second $500,000
Third $500,000
Fourth $500,000
Fifth $500,000
EXHIBIT 10.1
WESTWOOD ONE, INC.
LIST OF SUBSIDIARIES
WESTWOOD ONE RADIO, INC.
MUTUAL BROADCASTING SYSTEM, INC.
WESTWOOD ONE RADIO NETWORKS, INC.
WESTWOOD NATIONAL RADIO CORPORATION, INC.
NATIONAL RADIO NETWORK, INC.
THE SOURECE, INC.
TALKNET, INC.
WESTWOOD ONE SATELLITE SYSTEMS, INC.
KM RECORDS, INC.
WESTWOOD ONE STATIONS GROUP, INC.
WESTWOOD ONE STATIONS - L.A., INC.
WESTWOOD ONE STATIONS - NYC, INC.
WESTWOOD ONE BROADCASTING SERVICES, INC.
EXHIBIT 22
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (No. 33-57637, No.
33-28849, No. 33-64666 and No. 333-68785) of Westwood One, Inc., of our report
dated March 17, 1999 appearing on page F-2 of this Form 10-K.
/s/PRICEWATERHOUSECOOPERS LLP
- ------------------------------------
PricewaterhouseCoopers LLP
Century City, California
March 30, 1999
EXHIBIT 24
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,549
<SECURITIES> 0
<RECEIVABLES> 75,402<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 85,663
<PP&E> 24,353<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 345,279
<CURRENT-LIABILITIES> 78,552
<BONDS> 170,000
0
0
<COMMON> 354<F3>
<OTHER-SE> 76,864
<TOTAL-LIABILITY-AND-EQUITY> 345,279
<SALES> 0
<TOTAL-REVENUES> 259,310<F4>
<CGS> 0
<TOTAL-COSTS> 202,138<F5>
<OTHER-EXPENSES> 23,267<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,340
<INCOME-PRETAX> 23,446
<INCOME-TAX> 10,400
<INCOME-CONTINUING> 13,046
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,046
<EPS-PRIMARY> .43
<EPS-DILUTED> .39
<FN>
<F1>REFLECTED NET OF THE ALLOWANCE FOR DOUBTFUL ACCOUNTS.
<F2>REFLECTED NET OF ACCUMULATED DEPRECIATION AND AMORTIZATION.
<F3>COMPRISED OF COMMON STOCK AND CLASS B STOCK.
<F4>COMPRISED OF NET REVENUES.
<F5>COMPRISED OF OPERATING COSTS AND EXPENSES EXCLUDING DEPRECIATION AND
AMORTIZATION.
<F6>COMPRISED OF DEPRECIATION AND AMORTIZATION, AND CORPORATE GENERAL AND
ADMINISTRATIVE EXPENSES.
</FN>
</TABLE>
