SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
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Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or 14a-12
WESTWOOD ONE, INC.
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(Name of Registrant as Specified In Its Charter)
N/A
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WESTWOOD ONE
Dear Shareholders:
Enclosed with this letter is a Proxy Statement and proxy card for the
Annual Meeting of Shareholders of Westwood One, Inc. (the "Company") to be held
on May 19, 2005 at 10:00 a.m., Pacific Time, in the Salon Royal II Meeting Room
of the Wyndham Bel Age, 1020 North San Vicente Boulevard, West Hollywood,
California 90069. A copy of the Company's Annual Report on Form 10-K for the
year ended December 31, 2004, which report contains consolidated financial
statements and other information of interest with respect to the Company and its
shareholders is also included with this mailing.
The purpose of the Annual Meeting is to elect four directors, to ratify the
appointment of the Company's independent accountants, to approve the 2005 Equity
Compensation Plan and to conduct such other business as may properly come before
the meeting. At the Annual Meeting, the holders of Common Stock, voting alone,
will elect two independent members of the Company's Board of Directors. Holders
of Common Stock and Class B Stock, voting together, will elect two
non-independent members of the Company's Board of Directors, ratify the
appointment of the Company's independent accountants, and conduct such other
business as may properly come before the meeting
IT IS IMPORTANT THAT YOU MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD IN THE PROVIDED POSTAGE-PAID ENVELOPE IF YOU DO NOT INTEND TO BE PRESENT AT
THE MEETING. IF YOU DO LATER DECIDE TO ATTEND, YOUR PROXY WILL AUTOMATICALLY BE
REVOKED IF YOU VOTE IN PERSON. ACCORDINGLY, YOU ARE URGED TO MARK, SIGN, DATE
AND RETURN THE PROXY CARD NOW IN ORDER TO ENSURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING.
We appreciate your continued support.
Sincerely,
WESTWOOD ONE, INC.
/S/ NORMAN J. PATTIZ
--------------------
Norman J. Pattiz
Chairman of the Board
April 29, 2005
WESTWOOD ONE
40 West 57th Street, 5th Floor
New York, NY 10019
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 19, 2005
To Our Shareholders:
The Annual Meeting of the Shareholders of Westwood One, Inc. (the
"Company") will be held in the Salon Royal II Meeting Room of the Wyndham Bel
Age, 1020 North San Vicente Boulevard, West Hollywood, California 90069 on May
19, 2005 at 10:00 a.m., Pacific Time for the following purposes:
(1) To elect four members of the Company's Board of Directors;
(2) To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending December 31, 2005;
(3) To approve the 2005 Equity Compensation Plan; and
(4) To consider and act upon such other business as may properly come
before the meeting.
Shareholders of record at the close of business on April 19, 2005 will be
entitled to notice of and to vote at the Annual Meeting, and a list of such
shareholders will be available for examination during ordinary business hours at
least ten days prior to the Annual Meeting by any shareholder, for any purpose
germane to the Annual Meeting, at the Company's offices at 9540 Washington
Boulevard, Culver City, California 90232 (telephone [310] 204-5000).
Whether or not you intend to be present at the meeting, please mark, date,
sign and mail the enclosed proxy in the provided postage-paid envelope as
promptly as possible. You are cordially invited to attend the Annual Meeting and
your proxy will be revoked if you are present and vote in person.
By Order of the Board of Directors
/S/ DAVID HILLMAN
-----------------
David Hillman
Assistant Secretary
Apri1 29, 2005
WESTWOOD ONE
40 West 57th Street
New York, NY 10019
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Proxy Statement
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GENERAL
This proxy statement (first mailed to shareholders on or about April 29,
2005) is furnished in connection with the solicitation of proxies by Westwood
One, Inc., a Delaware corporation (the "Company" or "Westwood"), for use at the
Annual Meeting of Shareholders of the Company to be held on May 19, 2005 at
10:00 a.m., Pacific Time, in the Salon Royal II Meeting Room of the Wyndham Bel
Age, 1020 North San Vicente Boulevard, West Hollywood, California 90069, and any
adjournments thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders.
The Company's Annual Report on Form 10-K for the year ended December 31,
2004, including consolidated financial statements and other information,
accompanies this Proxy Statement but does not form a part of the proxy
soliciting material.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At our annual meeting, shareholders will act upon the matters outlined in
the Notice of Annual Meeting of Shareholders accompanying this proxy statement,
including the election of directors, the ratification of the selection of the
Company's independent accountants, approval of the 2005 Equity Compensation Plan
and such other business as may properly come before the meeting. In addition,
management will report on the performance of the Company during 2004 and respond
to questions from shareholders.
Who is entitled to vote at the meeting?
Only shareholders of record at the close of business on April 19, 2005, the
record date for the meeting, are entitled to receive notice of and to
participate in the annual meeting. If you were a shareholder of record on that
date, you will be entitled to vote all of the shares that you held on that date
at the meeting, or any postponements or adjournments of the meeting. As of the
record date, there were 92,333,315 shares of Common Stock of the Company
("Common Stock") outstanding, excluding treasury shares, and 291,796 shares of
Class B Stock of the Company ("Class B Stock") outstanding.
What are the voting rights of holders of the Company's Common Stock and Class B
Stock?
Under the Company's certificate of incorporation, each holder of
outstanding Common Stock is entitled to cast one (1) vote for each share of
Common Stock held by such holder and each holder of Class B Stock is entitled to
cast fifty (50) votes for each share of Class B Stock held by such holder. Only
the Common Stock is publicly traded.
Who can attend the meeting?
All shareholders as of the record date, or their duly appointed proxies,
may attend the meeting. If you attend, please note that cameras, recording
devices and other electronic devices will not be permitted at the meeting.
Please also note that if you hold your shares in "street name" (that is,
through a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date in order to gain
entrance.
1
What constitutes a quorum?
With respect to the election of the directors to be elected by the holders
of the Common Stock voting alone, the presence at the meeting, in person or by
proxy, of the holders of at least one-third of the shares of Common Stock
outstanding on the record date and the presence at the meeting, in person or by
proxy, of the holders of a majority of the aggregate voting power of the Common
Stock and the Class B Stock outstanding on the record date will constitute a
quorum, permitting the holders of Common Stock to take action on that matter.
With respect to all other matters to be voted on at the meeting, the presence at
the meeting, in person or by proxy, of the holders of a majority of the
aggregate voting power of the Common Stock and the Class B Stock outstanding on
the record date will constitute a quorum, permitting the shareholders to take
action on those matters.
Proxies received but marked as abstentions and broker non-votes will be
included in the calculation of the number of votes considered to be present at
the meeting for purposes of determining a quorum.
How do I vote?
If you complete and properly sign and date the accompanying proxy card and
return it to the Company, it will be voted as you direct. If you are a
registered shareholder and attend the meeting, you may deliver your completed
proxy card in person. "Street name" shareholders who wish to vote at the meeting
will need to obtain a proxy form from the institution that holds their shares.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of the
Company either a notice of revocation or a duly executed proxy bearing a later
date. In addition, the powers of the proxy holders will be suspended if you
attend the meeting in person and vote, although attendance at the meeting will
not by itself revoke a previously granted proxy.
What are the Board's recommendations?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors of the Company (the "Board" or the "Board of
Directors"). The Board's recommendation is set forth together with the
description of each item in this proxy statement. In summary, the Board
recommends a vote:
o FOR the election of the nominated directors;
o FOR the ratification of the appointment of PricewaterhouseCoopers LLP
as the Company's independent accountants for fiscal 2005; and
o FOR the approval of the 2005 Equity Compensation Plan.
Management is not aware of any matters, other than those specified above,
that will be presented for action at the annual meeting, but if any other
matters do properly come before the meeting, the proxy holders will vote as
recommended by the Board of Directors or, if no recommendation is given, at
their discretion.
What vote is required to approve each item?
With respect to each matter to be voted on, the affirmative vote of a
majority of the votes entitled to be cast and represented in person or by proxy
at the meeting will be required to approve each such matter. Other than with
respect to the election of Mr. Greenberg and Mr. Herdman, the Common Stock and
the Class B Stock vote together as a class on all matters proposed. With respect
to the election of Mr. Greenberg and Mr. Herdman, the Common Stock votes
separately as a class and the Class B Stock is not entitled to vote. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of one
or more directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether there
2
is a quorum. A properly executed proxy marked "ABSTAIN" with respect to any such
matter will not be voted, although it will be counted for purposes of
determining whether there is a quorum. Accordingly, an abstention will have the
effect of a negative vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some or all of the matters to be acted upon. Thus, if you do not give
your broker or nominee specific instructions, your shares may not be voted on
those matters and will not be counted in determining the number of shares
necessary for approval. Shares represented by such "broker non-votes" will,
however, be counted in determining whether there is a quorum.
What is beneficial ownership?
Beneficial ownership has been determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Under Rule 13d-3, certain shares may be deemed to be beneficially owned by more
than one person (such as where persons share voting power or investment power).
In addition, shares are deemed to be beneficially owned by a person if the
person has the right to acquire the shares (for example, upon exercise of an
option) within 60 days of the date as of which the information is provided. In
computing the percentage of ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned by such
person (and only such person) by reason of such acquisition rights. As a result,
the percentage of outstanding shares of any person as shown in the following
table does not necessarily reflect the person's actual voting power at any
particular date.
How much stock do the Company's largest shareholders and directors and executive
officers own?
The following table shows the amount of the Common Stock and Class B Stock
beneficially owned (unless otherwise indicated) by our largest shareholders
(those who own more than 5% of the outstanding class of shares), our directors,
the executive officers named in the Executive Compensation Summary Table below
and those directors and executive officers as a group. Except as otherwise
indicated, all information is as of April 19, 2005. At April 19, 2005, there
were 92,333,315 shares of Common Stock outstanding and 291,796 shares of Class B
Stock outstanding.
Aggregate Number of Shares Beneficially Owned (1)
-----------------------------------------------------
Common Stock Class B Stock
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Number Percent Number Percent
------ ------- ------ -------
Infinity Network, Inc., a subsidiary of
Infinity Broadcasting Corporation (2) 16,000,000(3) 17.3% - -
40 West 57th Street
New York, NY 10019
Goldman Sachs Asset Management (2) 8,239,763(5) 8.9% - -
One New York Plaza
New York, NY 10004Massachusetts
Lazard Asset Management LLC (2) 6,117,583(6) 6.6% - -
30 Rockefeller Plaza
New York, NY 10112
AXA Financial, Inc. (2) 6,084,237(7) 6.6% - -
1290 Avenue of the Americas
New York, NY 10104
Massachusetts Financial Services Company (2) 5,115,940(8) 5.5% - -
500 Boylston Street, 15th Floor
Boston, MA 02116
Norman J. Pattiz (3) 772,000(9) * 291,710 99.9%
9540 Washington Blvd.
Culver City, CA 90232
Shane Coppola 280,000(10) * - -
David L. Dennis 183,210(11) * - -
Gerald Greenberg 35,000(10) * - -
Robert K. Herdman 4,000(10) * - -
3
Joel Hollander 351,200(12) * - -
Dennis F. Holt 84,000(13) * - -
Maria D. Hummer 39,000(14) * - -
Leslie Moonves - - - -
Steven A. Lerman 74,000(10) * - -
George L. Miles, Jr. 10,000(10) * - -
Joseph B. Smith 62,000(13) * - -
Farid Suleman 1,362,000(15) 1.5% - -
Charles I. Bortnick 215,000(10) * - -
Peter Kosann 127,000(10) * - -
Andrew Zaref 10,000(10) * - -
All Current Directors and Executive 3,608,410(16) 3.9% 291,710 99.9%
Officers as a Group (15 persons)
---------------------
* Represents less than one percent (1%) of the Company's outstanding shares
of Common Stock.
(1) The persons in the table have sole voting and investment power with
respects to all shares of Common Stock and Class B Stock, unless otherwise
indicated.
(2) Tabular information and footnotes 5, 6, 7, 8 and 9 are based on information
contained in the most recent Schedule 13D/13G filings and other information
made available to the Company.
(3) These shares are owned by Infinity Network, Inc., a wholly-owned subsidiary
of Infinity Media Corporation, which in turn is a wholly-owned subsidiary
of Infinity Broadcasting Corporation ("Infinity"), a wholly-owned
subsidiary of Viacom Inc. ("Viacom"), but may also be deemed to be
beneficially owned by: (a) NAIRI, Inc. ("NAIRI"), which owns approximately
71% of Viacom's voting stock, (b) NAIRI's parent corporation, National
Amusements, Inc. ("NAI"), and (c) Sumner M. Redstone, who is the
controlling shareholder of NAI.
(4) Mr. Pattiz owns Common Stock and Class B Stock representing approximately
16.6% of the total voting power of the Company.
(5) As of December 31, 2004, Goldman Sachs Asset Management has sole voting
power with respect to 6,425,130 shares, shared voting power with respect to
635,743 shares, sole dispositive power with respect to 7,604,020 shares and
shared dispositive power with respect to 635,743 shares.
(6) As of December 31, 2004, Lazard Asset Management LLC has sole voting power
with respect to 5,275,745 shares and sole dispositive power with respect to
6,117,583 shares.
(7) As of December 31, 2004, AXA Financial Inc. has sole voting power with
respect to 1,972,069 shares, shared voting power with respect to 3,899,050
shares and sole dispositive power with respect to 6,084,237 shares.
(8) As of December 31, 2004, Massachusetts Financial Services Company has sole
voting power with respect to 5,015,210 shares and sole dispositive power
with respect to 5,115,940.
(9) Includes stock options for 322,000 shares granted under the Company 1999
Stock Incentive Plan (the "1999 Plan").
(10) Represents stock options granted under the 1999 Plan.
(11) Includes stock options for 134,000 shares granted under the Company 1989
Stock Incentive Plan (the "1989 Plan") and the 1999 Plan (collectively, the
"Stock Incentive Plans").
(12) Includes stock options for 322,000 shares granted under the 1999 Plan.
(13) Represents stock options granted under the Stock Incentive Plans.
(14) Includes stock options for 34,000 shares granted under the 1999 Plan.
(15) Includes stock options for 1,262,000 shares granted under the Stock
Incentive Plans.
(16) Includes stock options for 2,985,000 shares granted under the Stock
Incentive Plans.
4
How is the Board of Directors structured and what are their terms?
The Board of Directors is divided into three classes (Class I, II, and
III), each class serving for three-year terms, which terms are staggered. The
Board of Directors currently is comprised of thirteen individuals. Only one
class of directors is elected at each annual meeting. At least 33 1/3% of
directors must be independent outside directors. Such independent directors are
elected by holders of Common Stock voting alone as a class. Pursuant to the
Company's certificate of incorporation, holders of Common Stock, voting alone,
have the right to elect 20% of the Board of Directors, which is currently three
directors. At least one of the independent directors will be elected each year,
as set forth below. The remaining members of the Board are elected by all
shareholders voting together as a single class.
How many Board members are Independent under the listing standards of the New
York Stock Exchange?
Pursuant to our Corporate Governance Guidelines, a copy of which is
available on our website (www.westwoodone.com - under the caption "Investor
Relations"), the Board of Directors is required to affirmatively determine that
a majority of the directors is independent under the listing standards of the
New York Stock Exchange (the "NYSE"). In accordance with the Guidelines, the
Board of Directors undertakes an annual review of director independence. During
this review, the Board considers all transactions and relationships between each
director or any member of his immediate family and the Company and its
affiliates. The purpose of this review is to determine whether any such
relationships or transactions is considered a "material relationship" that would
be inconsistent with a determination that a director is independent. The Board
has not adopted any "categorical standards" for assessing independence,
preferring instead to consider and disclose existing relationships with the
non-management directors and the Company. The Board observes all criteria for
independence established by the NYSE and other governing laws and regulations.
As a result of this review, the Board of Directors affirmatively determined
that seven directors, representing a majority of the Board members, are
"independent" under the listing standards of the NYSE. The independent directors
are Messrs. Dennis, Greenberg, Herdman, Holt, Miles and Smith and Ms. Hummer. In
determining that these seven directors are independent, the Board reviewed the
NYSE corporate governance rules and also determined that the following
relationship is not a material relationship and therefore does not affect the
independence determination: Mr. Holt has been the Chairman, Chief Executive
Officer and owner (along with his spouse) of U.S. International Media LLC and
Chairman, Chief Executive Officer and owner (along with his spouse) of Patriot
Communications LLC, which purchased approximately $89,983 and $183,900,
respectively, of advertising time from the Company on behalf of its clients for
2004. The Board determined that this relationship is not material based upon the
fact that the value of the advertising time purchased is immaterial financially
to either the Company, on the one hand, or U.S. International Media LLC and
Patriot Communications LLC (either combined or separately), on the other hand.
How does the Board select nominees for the Board?
The Nominating and Governance Committee, which consists solely of
independent directors, considers candidates for Board membership suggested by
its members and other Board members, as well as management and shareholders. A
shareholder who wishes to recommend a prospective nominee for the Board should
notify the Company's Secretary or any member of the Nominating and Governance
Committee in writing and include supporting materials the shareholder considers
relevant to the potential candidate's qualifications.
Once a prospective nominee has been identified, the Nominating and
Governance Committee, either with or without Board input, determines whether to
conduct a full evaluation of the candidate. The preliminary determination is
primarily based on the need for additional Board members to fill vacancies or to
expand the size of the Board as well as a result of its review of the
composition of the Board in light of the characteristics of independence,
diversity, age, skills, experience, availability of service to Westwood One and
other Board needs, including but not limited to audit committee financial
expertise. After completing their evaluation, the Nominating and Governance
Committee makes a recommendation to the full Board as to who should be nominated
and the Board determines the nominee.
5
Who are the current Board members, what Board Committees do they serve on and
what are their backgrounds and qualifications?
The continuing directors and nominees for director of the Company are:
Committee Assignments
----------------------------------------------
Nominating
Director Term Audit Compensation and Governance
Name Age Since Class Expires Committee Committee Committee
---- --- -------- ----- ------- --------- ------------ --------------
Norman J. Pattiz 62 1974 I 2007
Leslie Moonves 55 2004 I 2007
Joseph B. Smith (Independent) 77 1994 I 2007 * *
Dennis F. Holt (Independent) 68 1999 I 2007 *
Shane Coppola 39 2003 I 2007
Farid Suleman 53 1994 II 2006
David L. Dennis (Independent) 56 1994 II 2006 ** * *
Maria D. Hummer (Independent) 60 2000 II 2006 *
George L. Miles, Jr. (Independent) 63 2002 II 2006 *
Gerald Greenberg (Independent) 62 1994 III 2005 ** *
Steven A. Lerman 58 1995 III 2005
Joel Hollander 49 1999 III 2005
Robert K. Herdman (Independent) 56 2003 III 2005 * **
*Member
**Chair
The principal occupations of the four director nominees (Messrs. Greenberg,
Lerman, Hollander and Herdman) and each of the other nine continuing directors
are as follows:
Mr. Greenberg - has been a director of the Company since May 24, 1994.
Since February 2001, Mr. Greenberg has been President of Mirage Music
Entertainment, a company which owns the Mirage Record label. From April 1993 to
January 2001, Mr. Greenberg served as President of MJJ Music, a Michael
Jackson/Sony owned record label.
Mr. Lerman - has been a director of the Company since April 19, 1995. Since
1986, Mr. Lerman has been a member of the Washington, D.C. law firm of
Leventhal, Senter and Lerman, PLLC and is currently the manager of that firm.
Mr. Lerman, while not an employee of Infinity, serves as the General Counsel of
Infinity. Mr. Lerman was a director of Infinity from February 1992 through
December 1996. Mr. Lerman is a member of the Board of Directors and the Vice
President-Development of the Mid-Atlantic Regional Advisory Board of the
University of Pennsylvania. Mr. Lerman is also a member of the University
Committee for Undergraduate Financial Aid of the University of Pennsylvania.
Mr. Hollander - has been a director of the Company since September 22,
1999. Mr. Hollander has been the Chairman and Chief Executive Officer of
Infinity since January 2005. Mr. Hollander was the Chief Operating Officer of
Infinity from June 2003 to December 2004. Mr. Hollander was the Company's
President and Chief Executive Officer from October 1998 to June 2003. Mr.
Hollander was Vice President and General Manager of Infinity's New York radio
station WFAN from April 1992 to October 1998. Mr. Hollander is Chairman of the
CJ Foundation for SIDS and a member of the Board of Directors of Tomorrow's
Childrens Fund.
Mr. Herdman - was appointed to the Board of Directors of the Company on
October 1, 2003. Mr. Herdman has been a Managing Director of Kalorama Partners
LLC (a Washington, D.C. consulting firm) since June 2003. Mr. Herdman was the
Chief Accountant of the U.S. Securities and Exchange Commission ("SEC") from
October 2001 until November 2002. Mr. Herdman was a Vice Chairman of Ernst &
Young LLP ("E&Y") from 1989 through September 2001, and was E&Y's senior
technical partner. Mr. Herdman was on the AICPA's SEC Practice Section Executive
Committee from 1995- 2001 and was a member of the AICPA's Board of Directors
from 2001 - 2002. Mr. Herdman is a director and chairs the Audit Committees of
HSBC Finance Corporation (formerly Household International, Inc.) and of HSBC
North American Holdings, Inc. and is a member of the Board of Advisors of EPG,
Inc., a family-owned business in Aurora, Ohio and of Stadia Capital LLC, a New
York hedge fund.
6
Mr. Pattiz - founded the Company in 1974 and has held the position of
Chairman of the Board since that time. He was also the Company's Chief Executive
Officer until February 3, 1994. In May of 2000, Mr. Pattiz was appointed by
President Clinton and reappointed in 2002 by President Bush to serve on the
Broadcasting Board of Governors of the United States of America, which oversees
all U.S. non-military international broadcast services. Mr. Pattiz was
responsible for conceiving and launching Radio Sawa and Alhurra Television, the
U.S. Government's Arabic-language radio and TV services to the 22 countries of
the Middle East. Mr. Pattiz serves as a Regent of the University of California.
He also serves on the Board of the Annenberg School of Communication at the
University of Southern California, the Board of Trustees of the Museum of
Television & Radio and is past president of the Broadcast Education Association.
He is a member of the Council on Foreign Relations and the Pacific Council on
International Policy.
Mr. Moonves - has been a director of the Company since October 5, 2004. Mr.
Moonves has been Co-President and Co-Chief Operating Officer of Viacom since
June 2004, overseeing all of Viacom's domestic and international broadcast
television operations, its radio division and its outdoor advertising
operations. In addition, Mr. Moonves continues to serve as Chairman of CBS. He
was promoted to Chairman and Chief Executive Officer of CBS in 2003, and prior
to that, was President and Chief Executive Officer, CBS Television, a position
he was elevated to in April 1998. He joined CBS in July 1995 as President of CBS
Entertainment. Prior to that, Mr. Moonves was President of Warner Bros.
Television from July 1993.
Mr. Smith - has been a director of the Company since May 24, 1994. He was
previously a director of the Company from February 1984 until February 3, 1994.
Since April 1993, Mr. Smith has been the President of Unison Productions, Inc.,
through which he serves as an industry consultant involved in a number of
projects in the entertainment business.
Mr. Holt - has been a Director of the Company since September 22, 1999. Mr.
Holt was a director of Metro Networks, Inc. from October 1996 through September
22, 1999. Mr. Holt has been the Chairman and Chief Executive Officer of Patriot
Communications LLC since March 1999. Patriot Communications LLC is one of the
largest telecommunications service bureaus in the United States. Mr. Holt was
also the Chairman and Founder of Initiative Media (formerly Western
International Media Corporation) since from the Company's founding in 1970
through January 2002. In March 2004, Mr. Holt founded US International Media, a
media buying service. Mr. Holt is a director of United Online (a member of its
Compensation Committee); USC Annenberg School for Communication; USC School of
Policy, Planning and Development; St. John's Hospital; and the Los Angeles
Police Foundation. Mr. Holt also serves as a member of Skull and Dagger, the
Silver Shield Foundation and the SKIRBALL Cultural Center. Mr. Holt is an
associate of the California Institute of Technology. Mr. Holt was also awarded
the Horatio Alger Association award in 1998.
Mr. Coppola - was appointed to the Board of Directors of the Company on
October 1, 2003. Mr. Coppola became President and Chief Executive Officer of
Westwood One in May 2003. From May 2002 to May 2003, Mr. Coppola was the
Managing Partner of Columbus Capital Partners, LLC, which he founded. From
September 1999 to May 2002, Mr. Coppola served as Executive Vice President of
the Company's Metro and Shadow Broadcasting operations. From 1992 to September
1999, Mr. Coppola was a Director and Executive Vice President of Metro.
Mr. Suleman - has been a director of the Company since February 1994 and
was the Company's Executive Vice President and Chief Financial Officer from
February 1994 to March 2002. Mr. Suleman has been a Special Limited Partner with
Forstmann Little & Co. since March 2002 and Chairman of the Board and Chief
Executive Officer of Citadel Broadcasting Corp. ("Citadel") since March 2002. He
was President and Chief Executive Officer of Infinity from February 2001 to
March 2002. He was Executive Vice President, Chief Financial Officer, Treasurer
and a director of Infinity from September 1998 to February 2001 when Infinity
was acquired by Viacom. Mr. Suleman was named the Senior Vice President, Finance
of CBS in August 1998 and Senior Vice President and Chief Financial Officer of
the CBS Station Group in June 1997. Mr. Suleman is a director of McLeod USA
Incorporated.
Mr. Dennis - has been a director of the Company since May 24, 1994. Mr.
Dennis has been a Managing Director of Pacific Venture Group, a healthcare
venture capital firm, since November 2004. Mr. Dennis was a private investor and
consultant from December 2002 to November 2004. Mr. Dennis served as Vice
Chairman, Office of the President, Chief Corporate Officer and Chief Financial
Officer of Tenet Healthcare, a hospital owner and healthcare provider, from
March 2000 through November 2002. Mr. Dennis served as Managing Director,
Investment Banking for Donaldson, Lufkin & Jenrette Securities Corporation from
April 1989 to February 2000.
7
Ms. Hummer - has been a director of the Company since March 29, 2000. Ms.
Hummer has been Of Counsel to Manatt, Phelps & Phillips, LLP ("Manatt, Phelps"),
a law firm with offices in Los Angeles, Orange County, Palo Alto, Sacramento,
New York and Washington D.C., since January 1999. Prior to January 1999, Ms.
Hummer was a partner with Manatt, Phelps holding the positions of Chairman of
the Management Committee and Co-Managing Partner. Ms. Hummer is currently on the
Board of Directors, Los Angeles World Affairs Council; Board of Directors, The
Blue Ribbon (a support group of The Music Center of Los Angeles County); Board
of Directors, The Music Center of Los Angeles County; Board of Trustees,
UCLA/Armand Hammer Museum of Art and Cultural Center; Board of Trustees, Mount
St. Mary's College; Board of Directors, Children's Institute International; and
Board of Directors, The Regency Club. Ms. Hummer is also a member of The
Committee of 200 and the National Women's Forum.
Mr. Miles - has been a director of the Company since December 9, 2002. Mr.
Miles has been President and Chief Executive Officer of WQED Multimedia since
1994. Mr. Miles is a CPA and is on the Board of Directors of WESCO
International, Inc. (Chairman of the Governance Committee); Equitable Resources
(Chairman of Governance Committee); Harley-Davidson, Inc. (serves on Governance
and Audit Committees); Citizen's Financial Group, Inc.; ATS-Chester, Inc.;
University of Pittsburgh; Allegheny Conference on Community Development; and the
UPMC Health System. Mr. Miles is also on the Pittsburgh Symphony Orchestra Board
of Advisers and serves as a director of the Mt. Ararat Community Activity
Center's Executive Board.
What committees has the Board established and what are the roles of the
Committees?
The Board of Directors has an Audit Committee, Nominating and Governance
Committee and Compensation Committee. The Board has adopted a written charter
for each of these committees. The full text of each charter and the Company's
Corporate Governance guidelines are available on the Company's website at
www.westwoodone.com and are available in print to any shareholder upon request.
Committee membership is composed entirely of non-employee, independent members
of the Board of Directors. Under their respective Charters, each of these
committees is authorized and assured of appropriate funding to retain and
consult with external advisors, consultants and counsel.
The Audit Committee
The current members of the Audit Committee are Messrs. Dennis (Chair),
Herdman, Miles and Smith. Pursuant to the Sarbanes-Oxley Act of 2002 (the "Act")
and the NYSE listing standards, Messrs. Dennis, Herdman, Miles and Smith meet
the requirements of independence proscribed thereunder. In addition, the Board
has determined that Messrs. Dennis, Herdman and Miles are "audit committee
financial experts" pursuant to the Act and the NYSE listing standards. For
further information concerning each of the foregoing members' qualifications as
"audit committee financial experts", see "Who are the current Board members,
what Board Committees do they serve on and what are their backgrounds and
qualifications?" above.
The Audit Committee is responsible for, among other things, the
appointment, compensation, retention and oversight of the Company's independent
auditor; reviewing with the independent auditor the scope of the audit plan and
audit fees; and reviewing the Company's financial statements and related
disclosures. The Audit Committee meets separately with senior management of the
Company, the Company's General Counsel, the Company's director of internal audit
and its independent auditor on a regular basis. For additional information on
the Audit Committee's role and its oversight of the independent auditor during
2004, see "Report of the Audit Committee". There were eight meetings of the
Audit Committee during fiscal 2004.
The Nominating and Governance Committee
The current members of the Nominating and Governance Committee are Messrs.
Herdman (Chair), Dennis, Greenberg, and Holt and Ms. Hummer. Each member of the
Nominating and Governance Committee meets the independence requirements of the
NYSE. The Nominating and Governance Committee is responsible for overseeing the
development and implementation of the Company's policies and practices with
regard to corporate governance. The Nominating and Governance Committee is
charged with recommending possible qualified candidates to the Board for
election as directors of the Company and to recommend a slate of directors that
the Board proposes for election by shareholders at the annual meeting. The
Nominating and Governance Committee will also consider, at meetings of the
Nominating and Governance Committee, those recommendations by shareholders which
are submitted, along with biographical and business experience information, to
the Nominating and Governance Company at its principal executive office. There
were two meetings of the Committee in 2004.
8
The Compensation Committee
The current members of the Compensation Committee are Messrs. Greenberg
(Chair), Dennis and Smith. Each member of the Compensation Committee meets the
independence requirements of the NYSE. The Compensation Committee establishes,
oversees and recommends to the Board the implementation of overall compensation
policies for senior executive officers as well as for compensation provided to
officers pursuant to the Management Agreement and the Chairman of the Board;
reviews and approves corporate goals and objectives relative to the compensation
of senior executive officers; reviews the results of and procedures for the
evaluation of other executive officers by the Chief Executive Officer; at the
direction of the Board, establishes compensation for the Company's non-employee
directors; and oversees the administration of all qualified and non-qualified
employee compensation and benefit plans, including the Stock Incentive Plans
There were four meetings of the Compensation Committee in 2004.
The Board may from time to time, establish or maintain additional
committees as necessary or appropriate.
How often did the Board meet during 2004?
The Board met four times during 2004. Each director attended more than 75%
of the total number of meetings of the Board and Committees on which he or she
served. The Board also meets in non-management executive sessions and has
selected Mr. Herdman as presiding director for the non-management executive
sessions. All directors are expected to attend the Company's Annual Meeting of
Shareholders, and 11 of the 13 then-current directors were present at the 2004
Annual Meeting of Shareholders. The Company does not have a written policy with
regard to attendance of directors at the Annual Meeting of Shareholders.
How are directors compensated?
Cash Compensation: Directors of the Company who are not officers received
$3,750 per meeting attended for their services as directors and $1,875 per
meeting attended for their services as committee members. The directors of the
Company who served as Chair of the Compensation Committee (Mr. Greenberg),
Nomination and Governance Committee (Mr. Herdman) and Audit Committee (Mr.
Dennis) received $5,000, $5,000 and $10,000, respectively, for their services as
the Chairs of such committees in 2004. For 2005, the Directors of the Company
who serve as Chairs of the Compensation Committee, Nomination and Governance
Committee and Audit Committee shall receive $7,500, $7,500 and $15,000,
respectively, for their services as the Chairs of such committees during 2005.
During 2004, Messrs. Dennis, Greenberg, Herdman, Holt, Lerman, Miles, Smith,
Suleman and Ms. Hummer received $51,250, $31,250, $38,750, $18,750, $22,500,
$30,000, $35,625, $15,000 and $18,750, respectively, in Board and Board
Committee fees. Mr. Moonves has elected not to receive cash compensation for his
services as a director.
Equity Compensation: Under the Company's 1999 Stock Incentive Plan,
Directors of the Company who are not officers receive a mandatory grant of stock
options to acquire 10,000 shares of Common Stock each year. Each grant is made
on the date of the Company's annual shareholder meeting or on the date they are
appointed to the Board. Mr. Moonves has elected not to receive mandatory grants
of stock options normally provided to non-officer directors. This mandatory
grant of stock options shall cease contingent and effective upon the approval of
the proposed 2005 Equity Compensation Plan by Company shareholders. Under the
terms of the proposed 2005 Equity Compensation Plan, a copy of which appears at
the end of this Proxy Statement as Annex A, the Board will determine the terms
and conditions of any award of equity compensation to non-employee Directors.
The proposed 2005 Equity Compensation Plan does not provide for any mandatory
grant of equity compensation to non-employee Directors.
Does the Company have a Code of Ethics?
Yes. The Company has a Code of Ethics that is applicable to all employees,
officers and directors of the Company. In addition to its Code of Ethics, the
Company has a Supplemental Code of Ethics for its Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and Executive Vice President-Finance.
Both the Code of Ethics and the Supplemental Code of Ethics are available on the
Company's website (www.westwoodone.com).
9
Shareholder Communications with Directors
The Board has established a process to receive communications from
shareholders by email or regular mail. Shareholders may contact any of the
non-management directors as a group, any Board committee or any chair of any
such committee. To communicate with the Board, any individual directors or any
group or committee of directors, correspondence should be addressed to the Board
or any such individual directors or group or committee of directors by either
name or title. All such correspondence should be sent by email to
nonmanagdir@westwoodone.com or by regular mail to Westwood One, Inc., 40 West
57th Street, New York, NY 10019, Attention: Non-Management Directors - 15th
Floor. The directors' contact information also is available on the Company's
website (www.westwoodone.com).
10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Moonves, Hollander and Coppola are officers or employees of
Infinity, which beneficially owns 16.5% of the Common Stock of the Company.
Infinity manages the business and operations of the Company pursuant to the
terms of a Management Agreement ("Management Agreement"). Through the Management
Agreement, Infinity currently provides to the Company the services of a chief
executive officer. The Management Agreement was entered into in March 1999 and
was subsequently amended to, among other things, extend the Management Agreement
until March 31, 2009. Pursuant to the Management Agreement, the Company is
obligated to pay to Infinity an annual base fee subject to an annual increase by
a percentage amount equal to the increase based on a specified consumer price
index. The fee paid to Infinity in 2004 aggregated to $2,959,000. Effective
April 1, 2004, the Company became obligated to pay to Infinity an annual base
fee in the amount of $3,000,000 subject to an annual increase for each year
thereafter by a percentage amount equal to the increase in a specified consumer
price index for the prior year.
In addition, the Company pays to Infinity incentive bonus compensation in
an amount equal to 10% of the amount by which the Company's operating cash flow
exceeds a target amount for the applicable year, subject to certain adjustments.
The Company must also reimburse Infinity for certain out-of-pocket expenses
incurred by Infinity in performing the services contemplated by the Management
Agreement consistent with past practice. Infinity did not earn an incentive
bonus in fiscal 2004. As additional compensation to Infinity under the
Management Agreement, Infinity was granted seven warrants to purchase an
aggregate 4,500,000 shares of the Company's Common Stock (comprised of two
warrants to purchase 1,000,000 Common shares per warrant and five warrants to
purchase 500,000 Common shares per warrant). Of the seven warrants issued, the
two one million share warrants have an exercise price of $43.11 and $48.36,
respectively, and become exercisable if the average price of the Company's
Common Stock reaches a price of $64.67 and $77.38, respectively, for at least 20
out of 30 consecutive trading days for any period throughout the ten year term
of the warrants.
The exercise price for each of the five remaining warrants is equal to
$38.87, $44.70, $51.40, $59.11 and $67.98, respectively. These warrants each
have a term of 10 years and become exercisable on January 2, 2005, 2006, 2007,
2008, and 2009, respectively, subject to a trading price condition. The trading
price condition specifies the average price of the Company's Common Stock for
each of the 15 trading days prior to January 2 of the applicable year
(commencing on January 2, 2005 with respect to the first 500,000 warrant tranche
and each January 2 thereafter for each of the remaining four warrants) must be
at least equal to both the exercise price of the warrant and 120% of the
corresponding prior year 15 day trading average. In the case of the $38.87
warrants, the Company's average stock price for the 15 trading days prior to
January 2, 2005 must equal or exceed $40.56 for the warrants to become
exercisable. The Company's stock did not equal or exceed $40.56 for the 15
trading days prior to January 2, 2005 and, therefore, the first of the five
warrants to purchase 500,000 common shares did not become exercisable and is no
longer eligible to become exercisable.
The Company and Infinity have also entered into a registration rights
agreement with respect to the shares of Common Stock issuable upon exercise of
the warrants pursuant to which the Company granted to Infinity specified demand
and registration rights.
The Management Agreement provides that all transactions (other than the
Management Agreement and Representation Agreement (as described below) to
operate the CBS Radio Networks which were ratified by the Company's
shareholders) between the Company and Infinity or its affiliates will be on a
basis that is at least as favorable to the Company as if the transaction were
entered into with an independent third party. In addition, subject to specified
exceptions, all agreements between the Company and Infinity or any of its
affiliates must be approved by the Company's Board of Directors.
The Company has a Representation Agreement with Infinity to operate the CBS
Radio Networks until March 31, 2009. The Company retains all revenue and is
responsible for all expenses of the CBS Radio Networks. In addition, a number of
Infinity's radio stations are affiliated with the Company's radio networks and
the Company purchases several programs from Infinity. During 2003, the Company
incurred expenses aggregating approximately $84,338,000 under the Representation
Agreement and for Infinity affiliations and programs.
Mr. Suleman has been Chairman of the Board and Chief Executive Officer of
Citadel since April 2002. Many of the radio stations owned by Citadel have been
broadcasting programming produced by the Company both before and after Mr.
Suleman became an officer of Citadel. During 2004, the Company paid Citadel
11
owned stations approximately $3,854,000 pursuant to the terms of the stations'
affiliation agreements with the Company. In addition, the Company paid $14,000
to Aviation 1 LLC, a company owned by Forstmann Little, for aviation services.
Mr. Lerman has been a member of the Washington, D.C. law firm of Leventhal,
Senter and Lerman, PLLC since 1986. From time to time, the Company engages
Leventhal, Senter and Lerman, PLLC in certain matters. The fees associated with
those engagements aggregated approximately $26,000 in 2004. In addition,
Leventhal, Senter and Lerman PLLC provides services to Infinity and Mr. Lerman
serves as Infinity's General Counsel.
Mr. Holt has been the Chairman and Chief Executive Officer of U.S.
International Media LLC since March 2004 and the Chairman and Chief Executive
Officer of Patriot Communications LLC since March 1999. Mr. Holt, along with his
spouse, owns 100% of Patriot Communications LLC and U.S. International Media
LLC. U.S. International Media LLC is a media buying service that purchased
approximately $89,983 of advertising time from the Company on behalf of its
clients for 2004. Patriot Communications LLC is a provider of telecommunications
services that purchased approximately $183,900 of advertising time from the
Company on behalf of its clients for 2004.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Executive officers, directors and more than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from its directors and executive officers, the Company
believes that during 2004 its executive officers, directors and more than ten
percent beneficial owners complied with all SEC filing requirements applicable
to them, with the exception of Messrs. Bortnick, Coppola, Kosann and Zaref, each
of whom failed to timely file one report (disclosing a stock option grant on
October 5, 2004). These transactions on behalf of the aforementioned have
subsequently been reported.
Report of the Audit Committee
The Audit Committee operates pursuant to its Charter, which was revised and
approved by the Board of Directors and is available on the Company's website
(www.westwoodone.com). The Charter, which complies with applicable SEC
regulations, and NYSE rules, addresses five broad areas of responsibility of the
Audit Committee:
1) Reviewing and discussing the preparation of quarterly and annual
financial reports with the Company's management and its independent
auditors;
2) Supervising the relationship between the Company and its independent
accountants, including discussing the matters required by SAS 61
(Codification of Statements on Auditing Standards) with its
independent auditors, evaluating the independence of the auditors in
accordance with Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and recommending
their appointment or removal and reviewing the scope of their audit
and non-audit services and related fees;
3) Overseeing management's implementation of effective systems of
internal controls;
4) Reviewing and approving the internal corporate audit staff functions;
and
5) Reviewing and investigating any matters pertaining to the integrity of
management, including conflicts of interest, or adherence to standards
of business conduct.
The Audit Committee or its Chair has reviewed and discussed, with both
management and its independent auditors all financial statements prior to their
filing with the SEC. Management advised the Audit Committee in each case that
all financial statements were prepared in accordance with generally accepted
accounting principles, and reviewed significant issues with the Audit Committee.
The Audit Committee also held discussions with the Company's independent
auditors concerning the matters required to be discussed by SAS 61 (codification
of Statements on Auditing Standards AU ss. 380) as may be modified or
supplemented.
The Audit Committee appointed PricewaterhouseCoopers LLP ("PWC") as the
Company's independent auditors for the year ended December 31, 2004 and reviewed
with the Company's financial managers, the independent auditors and the director
of internal audit, PWC's overall audit scopes and plans.
12
The Audit Committee also discussed with PWC their independence and received
from PWC the written disclosures and the letter from PWC required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees). In addition, the Audit Committee pre-approved PWC'S audit and audit
related fees and has determined that the provision of non-audit services by PWC
is compatible with maintaining their independence.
The Audit Committee also has discussed with the Company's independent
auditors, with and without management present, their recommendations regarding
the Company's internal accounting controls and the overall quality of the
Company's financial reporting and disclosures.
The Audit Committee frequently met in private session separately with the
senior members of the Company, the Company's director of internal audit, the
Company's General Counsel and the Company's independent auditors. Based on its
reviews and discussions referred to above, the Audit Committee recommended to
the Board of Directors that it approve the inclusion of the Company's audited
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2004 filed with the SEC. The Audit Committee also recommended
to the Board the approval of the Company's independent auditors for the year
ending December 31, 2005.
Fees to Independent Auditors
The following table presents fees for professional services rendered by PWC
for the audit of the Company's financial statements for fiscal 2004 and 2003 as
well as fees billed for audit-related services, tax services and all other
services rendered by PWC for 2004 and 2003.
(in thousands) 2004 2003
---- ----
(1) Audit Fees $830 $391
(2) Audit-Related Fees (a) 35 225
(3) Tax Fees - -
(4) All Other Services - -
(a) Such services included employee benefit plan audits, audits required
by state municipalities, internal control reviews and consultations
regarding financial accounting and reporting standards.
As discussed above, all audit-related services were approved by the Audit
Committee, which concluded that the provision of such services by PWC did not
impair that firm's independence in the conduct of the audit.
Audit Committee Pre-Approval Policies and Procedures
All audit and non-audit services provided to the Company by PWC in 2004
were pre-approved by the Audit Committee. Under the Company's pre-approval
policies and procedures, the Chair of the Audit Committee is authorized to
pre-approve the engagement of PWC to provide certain specified audit and
non-audit services, and the engagement of any accounting firm to provide certain
specified audit services.
Submitted by the Audit Committee
David L. Dennis, Chair of the Audit Committee
Robert K. Herdman
George L. Miles, Jr.
Joseph B. Smith
EXECUTIVE COMPENSATION
Report of the Compensation Committee
What are the duties and responsibilities of the Compensation Committee in
establishing compensation?
The Compensation Committee has the following responsibilities pursuant to
its Charter (a copy of which is available on the Company's website at
www.westwoodone.com):
13
-- Establish, oversee and recommend to the Board the implementation of
overall compensation policies for senior executive officers as well as
for compensation provided to officers pursuant to the Management
Agreement and the Chairman of the Board;
-- Review and approve corporate goals and objectives relative to the
compensation of senior executive officers;
-- Review the results of and procedures for the evaluation of other
executive officers by the Chief Executive Officer;
-- At the direction of the Board, establish compensation for the
Company's non-employee directors; and
-- Oversee the administration of all qualified and non-qualified employee
compensation and benefit plans, including Stock Incentive Plans.
Each of the members of the Compensation Committee is independent with the
meaning of the Company's Corporate Governance Guidelines and the listing
standards of the NYSE.
In carrying out its responsibilities, the Compensation Committee is
authorized to engage outside advisors to consult with the Committee as it deems
appropriate.
What are the objectives of the Company's executive compensation policy?
The objective of the Company's executive compensation policy is to attract,
retain and motivate management in a manner that is in the best interests of the
Company's shareholders. To meet that objective, compensation for senior
executive Officers and other management is comprised of three components: a base
salary, an annual incentive bonus and periodic grants of equity-based awards.
The Compensation Committee believes the granting of equity-based awards more
closely aligns the interest of executives and management to the interests of the
Company's shareholders.
Tax Deductibility Under Section 162(M). Current U.S. tax law has a
$1,000,000 annual tax deduction limit on compensation the Company pays to the
Chief Executive Officer ("CEO") and the four other most highly compensated
executive officers. The limit does not apply to "performance-based" compensation
(as defined under the Internal Revenue Code of 1986, as amended and related
regulations (the "Code"). In general, compensation is performance-based only if
payment is contingent upon attainment of pre-established objective performance
goals that are set by the Compensation Committee. The Compensation Committee may
use its discretion to set actual compensation below the maximum amount
calculated by application of the Company performance criteria. The Committee's
general policy is to structure compensation programs that allow the Company to
fully deduct the compensation under Section 162(M) requirements. The
Compensation Committee also believes that the Company needs flexibility to meet
its incentive and retention objectives, even if the Company may not deduct all
of the compensation.
How is the compensation of the Company's Chief Executive Officer determined?
The services of the Company's CEO are provided by Infinity pursuant to the
terms of the Management Agreement, which was approved by the Company's
shareholders. In consultation with Infinity, the Compensation Committee
determines the base salary and incentive bonus payable to the CEO. Additionally,
the Compensation Committee determines the size and frequency of any stock-based
compensation provided to the CEO. In making that determination, the Compensation
Committee considered past practices, experience and the Company's overall
financial performance.
How were the base salaries, bonuses and levels of stock option grants determined
for the Chairman of the Board and other executive officers?
Compensation for the Chairman of the Board
Mr. Pattiz, in his role as Chairman of the Board of Westwood, has continued
to emphasize the Company's values and assist the Company in its endeavors
throughout 2004. The Board is pleased with Mr. Pattiz' leadership, and
accordingly, in 2003 the Compensation Committee together with the full Board
extended Mr. Pattiz' existing contract for an additional five (5) years,
commencing December 1, 2003 and continuing through November 30, 2008. Mr.
Pattiz' base salary is $400,000 per annum. In addition Mr. Pattiz is entitled to
a grant of 50,000 stock options per year under the Company's stock option plan.
14
Compensation of the Other Executive Officers
Executive officers receive annual compensation (excluding employee
benefits), which is comprised of base salary and incentive compensation.
Incentive compensation consists of a cash bonus and equity based awards. In
awarding compensation, we consider the financial results of the Company and
individual managerial performance as well as an individual's performance in
achieving strategic business objectives. We believe the compensation of our
executives is sufficient to motivate our executives to enable the Company to be
competitive to both attract and retain executives, which we believe is critical
to the Company's long term success and the creation of shareholder value.
In determining base salary, we consider an individual's performance,
experience and responsibilities. Base salary creates a secure base of cash
compensation, which is competitive in the industry. With regard to individual
performance, we rely to a large extent on the CEO's evaluation of an individual
executive officer's performance. Incentive compensation, consisting of both cash
incentives and long-term incentives (equity), reflects overall Company
performance and operating group performance, where appropriate. Long-term
incentives previously provided in the form of stock options vest over a period
of five years. We believe that equity based compensation, the value of which
depends on the Company's future performance and stock price, provides a
continuous incentive to executive officers and aligns their interests to our
shareholders.
Why is the Company proposing to adopt the 2005 Equity Compensation Plan?
The Company is seeking shareholder approval of the 2005 Plan because the
1999 Plan, while not expiring until March 31, 2009, has only limited shares
available under it. As a result, the 2005 Plan will replace the 1999 Plan,
subject to the approval of Company shareholders. Upon approval of the 2005 Plan,
no additional grants will be made under the 1999 Plan other than shares that
become available for issuance if an award granted thereunder expires, is
canceled or otherwise terminates without being exercised.
The purpose of the 2005 Plan is to enable Westwood to offer employees,
consultants, officers and non-employee directors equity based and cash awards.
The Company believes this will help the Company attract, retain and reward our
employees, officers, consultants and non-employee directors, and strengthen the
mutuality of interests between such individuals and Westwood's shareholders.
A complete summary of the material provisions of the 2005 Plan appears
later in this proxy statement beginning on page 23 and the text of the 2005 Plan
appears at the end of this proxy statement as Annex A.
Summary
-------
We believe that attracting and retaining talented and motivated executives
and employees is important in creating shareholder value. We will continue to
evaluate and update our compensation programs and policies to assure that they
enable the Company to be competitive and retain the best talent. It is our
intention to reward Company employees and keep them performance driven as well
as foster equity ownership. We believe our 2004 program met those objectives.
The Compensation Committee
The Compensation Committee consists of the following individuals:
Gerald Greenberg, Chair of the Compensation Committee
David L. Dennis
Joseph B. Smith
15
Compensation Committee Interlocks and Insider Participation
As stated above, the Company's Compensation Committee is comprised solely
of independent outside directors. The Compensation Committee consists of Mr.
Greenberg, Mr. Dennis and Mr. Smith. The Company has no interlocking
relationships or other transactions involving any of our Compensation Committee
members that are required to be reported pursuant to applicable SEC rules.
EXECUTIVE OFFICERS
The following is a list of the Company's executive officers:
Norman J. Pattiz....... The Company's Chairman of the Board.
Shane Coppola.......... The Company's CEO and President.
Charles I. Bortnick.... The Company's Co-Chief Operating Officer.
Andrew Zaref........... The Company's Executive Vice President and
Chief Financial Officer.
Peter Kosann........... The Company's Co-Chief Operating Officer and
President, Sales.
The professional background of the executive officers who are not also
directors of the Company follows:
Charles I. Bortnick
Charles I. Bortnick (age 51) has been Chief Operating Officer one of the
Company since August 2002. From September 1999 to July 2002, Mr. Bortnick served
as Chief Operating Officer/President of Westwood's Metro Networks/Shadow
Broadcasting Services. From 1996 until the Westwood One/Metro Networks merger in
September 1999, Mr. Bortnick served as President of Metro Networks. Mr. Bortnick
is a board member of the Radio Advertising Bureau and the March of Dimes AIR
Awards.
Andrew Zaref
Andrew Zaref (age 39) serves as the Chief Financial Officer of the Company
and is responsible for the Company's financial affairs and shareholder relations
activities. Prior to joining the Company in January 2004, Mr. Zaref served as an
Audit Partner in the Information, Communications, and Entertainment practice of
KPMG LLP. While at KPMG, Mr. Zaref played a key role in advising numerous high
profile media and technology clients. Mr. Zaref is a CPA licensed in New York
State.
Peter Kosann
Peter Kosann (age 35) has been President, Sales at Westwood One since May
2003 and Co-Chief Operating Officer since April 2005. Mr. Kosann was the
Company's Executive Vice President - Network Advertising Sales from January 2001
to May 2003; Senior Vice President - Affiliate Sales and New Media from December
1999 to January 2001 and Vice President - Affiliate Sales from May 1999 to
December 1999. Mr. Kosann was employed by Bloomberg Financial Markets from
November 1992 to May 1999 in several media sales and business development
capacities.
Employment Agreements
The Company has a written employment agreement with Mr. Pattiz, effective
October 27, 2003, pursuant to which Mr. Pattiz is to serve as Chairman of the
Board of the Company for a five-year term ending November 30, 2008 at an annual
salary of $400,000. The agreement also provides that Mr. Pattiz will receive an
annual stock option grant to acquire 50,000 shares on December 1st of each
contract year and provides additional benefits which are standard for executives
in the industry. The agreement generally will be terminable by Mr. Pattiz upon
ninety days' written notice to the Company; it will be terminable by the Company
only in the event of death, permanent and total disability, or for "cause." In
the event of permanent and total disability, Mr. Pattiz will receive his base
16
salary for the following twelve months and 75% of his base salary for the
remainder of the term of the agreement. In the event of a "change of control,"
as defined in the agreement, any unvested options granted pursuant to this
agreement will become immediately exercisable and Mr. Pattiz will continue to
receive any base compensation he would have otherwise been entitled to receive
for the remaining term of the agreement. In addition, Mr. Pattiz has full "piggy
back registration rights" and limited demand registration rights with respect to
any and all of the Common Stock owned by Mr. Pattiz.
The Company has a written employment agreement with Mr. Bortnick through
December 31, 2006, pursuant to which Mr. Bortnick is to serve as the Company's
Chief Operating Officer. Mr. Bortnick's agreement provides for an annual salary
of $450,000, $475,000 and $500,000, respectively, and a bonus potential of
$325,000, $350,000, and $350,000, in 2004, 2005 and 2006, respectively. In
addition, the agreement provides additional benefits which are standard for
executives in the industry, including participation in the Company's stock
option plan. If the agreement is not renewed, Mr. Bortnick is entitled to a
payment equivalent to ninety days' base pay. The agreement generally will be
terminable by Mr. Bortnick upon ninety days' written notice to the Company; it
will be terminable by the Company only in the event of death, permanent and
total disability, or for "cause".
The Company has a written employment agreement with Mr. Zaref effective
January 1, 2004, pursuant to which Mr. Zaref is to serve as the Chief Financial
Officer for a three-year term ending December 31, 2006 at an initial annual
salary of $350,000. Mr. Zaref's salary increases 7% each January 1 during the
contract term. In addition to his salary Mr. Zaref is eligible for a potential
initial annual bonus of $150,000 and stock option grants as determined by the
Compensation Committee of the Board of Directors. In addition, the Agreement
provides additional benefits standard for executives in the industry. The
Agreement is terminable by the Company in the event of death, permanent and
total disability or for "cause".
The Company has a written employment agreement with Mr. Kosann, effective
May 1, 2003, pursuant to which Mr. Kosann is to serve as the President of Sales
for a three-year term ending April 30, 2006 at an initial annual salary of
$425,000. Mr. Kosann's annual salary increases 3% each January 1 during the
contract term. In addition to his salary, Mr. Kosann is eligible for a potential
annual bonus of $575,000 and stock option grants, as determined by the
Compensation Committee of the Board of Directors. In addition, the agreement
provides additional benefits which are standard for executives in the industry.
The agreement generally will be terminable by the Company only in the event of
death, permanent and total disability, or for "cause".
17
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth the compensation received by each of the
Company's Chief Executive Officer and each of Company's other executive officers
(the "Named Executive Officers") for the years ending December 31, 2004, 2003
and 2002.
Annual Compensation
----------------------------------------------------------------------------------------------
Long-Term
Compensation
Securities
Name and Fiscal Other Annual Underlying All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($) Options (#) Compensation ($)
------------------ ---- ---------- --------- ---------------- ---------- ----------------
(1)
Norman J. Pattiz 2004 $400,000 -- -- 50,000 --
Chairman of the Board 2003 492,000 -- -- 50,000 --
2002 500,000 -- -- -- --
Shane Coppola (2) 2004 -- -- $18,000 (3) 175,000 --
CEO and President 2003 -- -- 6,000 (3) 250,000 --
Charles I. Bortnick (4) 2004 $459,000 $50,000 -- 75,000 $3,000 (7)
Co-Chief Operating Officer 2003 425,000 -- -- 75,000 3,000 (7)
2002 420,000 150,000 $70,000 50,000 2,569 (7)
Andrew Zaref (5) 2004 $350,000 $150,000 -- 125,000 --
Chief Financial Officer
Peter Kosann (6) 2004 $450,000 200,000 -- 75,000 3,000 (7)
Co-Chief Operating Officer 2003 399,000 $ 60,000 -- 75,000 3,000 (7)
and President, Sales
---------------------------------
(1) This column includes the aggregate cost to the Company (if such amount
exceeded the lesser of $50,000 or 10% of such officer's salary and bonus)
of providing various prerequisites and other personal benefits.
(2) Mr. Coppola assumed his position effective May 14, 2003 pursuant to the
terms of the Management Agreement between the Company and Infinity. Except
as set forth below, Mr. Coppola does not receive any cash compensation from
the Company for serving as its CEO and President and received the following
compensation from Infinity for 2003 and 2004: (a) for 2004, $581,000 in
salary, $582,000 in bonus compensation and $4,000 in other compensation;
and (b) for 2003, $342,000 in salary, $100,000 in bonus compensation and
$2,000 in other compensation. Mr. Coppola was granted 250,000 options to
purchase Common Stock in 2003 and 175,000 options in 2004.
(3) All Other Compensation consists of an automobile allowance of $1,500 per
month from the Company.
(4) Appointed Chief Operating Officer of the Company in July, 2002.
(5) Mr. Zaref was appointed Chief Financial Officer of the Company on January
1, 2004.
(6) Appointed President, Sales in May 2003 and Co-Chief Operating Officer in
April 2005.
(7) All Other Compensation consisted of Company contributions to the employee
Savings and Profit-Sharing Plan.
18
The following two tables provide information on stock option grants made to
the Named Executive Officers in 2004, options exercised during 2004 and options
outstanding on December 31, 2004.
OPTION GRANTS IN FISCAL YEAR 2004
Individual Grants
----------------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of Stock
Securities % of Total Price Appreciation for Option
Underlying Options Granted Exercise or Term
Options to Employees in Base Price Expiration ------------------------------
Name Granted (#) Fiscal Year (3) ($/Share) Date 5% ($) 10% ($)
---- ------------ --------------- ----------- ---------- ------------------------------
Norman J. Pattiz 50,000 3.6% 23.16 12/01/14 $ 728,260 $ 1,845,554
Shane Coppola 175,000(1) 12.8% 20.50 10/05/14 2,256,159 5,717,551
Andrew Zaref 50,000(2) 3.6% 30.97 4/05/14 973,843 2,467,910
Andrew Zaref 75,000(1) 5.5% 20.50 10/05/14 966,925 2,450,379
Charles I. Bortnick 75,000(1) 5.5% 20.50 10/05/14 966,925 2,450,379
Peter Kosann 75,000(1) 5.5% 20.50 10/05/14 966,925 2,450,379
---------------------------
(1) These options were granted under the 1999 Plan on October 5, 2004 and
become exercisable 20% per year on each anniversary date between 2005 and
2009.
(2) These options were granted under the 1999 Plan on April 5, 2004 and become
exercisable 20% per year on each anniversary date between 2005 and 2009.
(3) Percentage calculations exclude the impact of a mandatory grant of 100,000
options at $26.96 per share on May 13, 2004 (10,000 each to Messrs. Dennis,
Greenberg, Herdman, Hollander, Holt, Lerman, Miles, Smith and Suleman and
Ms. Hummer) which in accordance with the terms of the 1999 Plan, become
exercisable 20% per year on each May 13 between 2005 and 2009.
AGGREGATED OPTION EXERCISES IN FISCAL 2004
AND FISCAL YEAR END OPTION VALUES
Number of Securities
Shares Underlying Value of Unexercised,
Acquired Value Unexercised Options In-the-Money Options
Name On Exercise (#) Realized ($) at Fiscal Year End (#) at Fiscal Year End ($) (1)
---- --------------- ------------ ------------------------------ ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Norman J. Pattiz -- -- 322,000 90,000 4,019,380 188,500
Shane Coppola -- -- 230,000 420,000 939,600 1,389,550
Charles I. Bortnick -- -- 215,000 210,000 939,600 746,550
Peter Kosann -- -- 117,000 192,000 219,740 581,290
Andrew Zaref -- -- -- 125,000 -- 482,250
(1) On December 31, 2004, the closing per share price for the Company's Common
Stock on the NYSE was $26.93.
19
Equity Compensation Plan Information
The following table contains information regarding equity compensation
plans and warrants issued to Infinity under the Management Agreement as of
December 31, 2004:
Number of securities to be
issued upon exercise of Weighted average exercise Number of securities
outstanding options, price of outstanding remaining available for
Plan Category warrants and rights options, warrants and rights future issuance
------------- ------------------- ---------------------------- ---------------
Equity compensation plans
approved by security holders
Options (1) 7,996,018 $24.90 600,345
Warrants (2) 4,500,000 49.44 N/A
Equity compensation plans not
approved by security holders - - -
---------- -------
Total 12,496,018 600,345
========== =======
(1) Options included herein were granted or are available for grant as part of
the Company's 1989 Plan and/or 1999 Plan that were approved by shareholders
of the Company. The Company's 1999 Plan provides for mandatory grants of
options to members of the Company's Board of Directors on an annual basis.
The Compensation Committee of the Board of Directors approves periodic
option grants to executive officers and other employees based on their
contributions to the operations of the Company.
(2) Warrants included herein were granted to Infinity in conjunction with the
Management Agreement, and were approved by shareholders of the Company on
May 29, 2002. None of the warrants included herein constitute compensation
to individual employees, directors, consultants or officers of the Company.
Of the seven warrants issued, two warrants to purchase an aggregate of
2,000,000 shares of Common Stock each have an exercise price of $43.11 and
$48.36, respectively, and become exercisable only if the average price of
the Company's Common Stock reaches a price of $64.67 and $77.38,
respectively, for at least 20 out of 30 consecutive trading days for any
period throughout the ten year term of the warrants. Of the remaining five
warrants to purchase an aggregate of 2,500,000 shares of Common Stock, the
exercise price for each of the five warrants is equal to $38.87, $44.70,
$51.40, $59.11 and $67.98, respectively. The five warrants have a term of
10 years (only if they become exercisable) and become exercisable on
January 2, 2005, 2006, 2007, 2008 and 2009, respectively. However, in order
for the warrants to become exercisable, the average price of the Company's
Common Stock for each of the 15 trading days prior to January 2 of such
year (commencing on January 2, 2005 with respect to the first 500,000
warrant tranche and each January 2 thereafter for each of the remaining
four warrants) must be at least equal to both the exercise price of the
warrant and 120% of the corresponding prior year 15 day trading average. In
the case of the $38.87 warrants, the Company's average stock price for the
15 trading days prior to January 2, 2005 must equal or exceed $40.56 for
the warrants to become exercisable. The average stock price for the 15
trading days prior to January 2, 2005 did not equal or exceed $40.56, and
therefore, this warrant did not become exercisable.
20
SHAREHOLDER RETURN PERFORMANCE GRAPH
The performance graph below compares the performance of the Company's
Common Stock to the Dow Jones Equity Market Index and the Dow Jones Media
Industry Index for the Company's last five and ten calendar years. The graph
assumes that $100 was invested in the Company's Common Stock and each index on
December 31, 1999 and December 31, 1994.
The following tables set forth the closing price of the Company's Common
Stock at the end of each of the last five and ten calendar years.
FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
CUMULATIVE TOTAL RETURN
-----------------------
Base Year 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
Westwood One $100 $51 $79 $98 $90 $71
DJ Equity Market $100 $91 $80 $62 $81 $91
DJ Media Industry $100 $71 $65 $44 $58 $59
Westwood One Closing Stock Price $38.00 $19.31 $30.05 $37.36 $34.21 $26.93
21
TEN-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
CUMULATIVE TOTAL RETURN
-----------------------
Base Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Westwood One $100 $145 $171 $381 $313 $779 $396 $616 $766 $702 $552
DJ Equity Market $100 $137 $167 $220 $274 $337 $306 $269 $210 $274 $307
DJ Media Industry $100 $129 $146 $228 $294 $468 $330 $304 $208 $273 $278
Westwood One Closing
Stock Price $4.88 $7.06 $8.31 $18.56 $15.25 $38.00 $19.31 $30.05 $37.36 $34.21 $26.93
22
PROPOSAL 1 - ELECTION OF DIRECTORS
----------------------------------
At the annual meeting, holders of Common Stock, voting alone, will elect
the independent Class III directors and holders of Common Stock and Class B
Stock, voting together, will elect the other Class III directors, for three-year
terms, until their successors are elected and qualified. The Board of Directors
has nominated Gerald Greenberg (independent director), Steven A. Lerman, Joel
Hollander and Robert K. Herdman (independent director) to serve three-year terms
ending in 2008. All nominees currently serve as Class III directors of the
Company. Unless otherwise indicated on any proxy, the persons named as proxy
voters on the enclosed proxy card intend to vote the stock represented by each
proxy to elect these nominees. The nominees are willing to serve as directors,
but should any or all refuse to or be unable to serve, the named proxy holders
will vote for one or more other persons nominated by the Board of Directors.
The election of Messrs. Greenberg, Lerman, Hollander and Herdman will
require the affirmative vote of a majority of the votes entitled to be cast and
represented in person or by proxy at the meeting. With respect to the election
of Messrs. Lerman and Hollander, the Common Stock and the Class B Stock vote
together as a class. With respect to the election of Mr. Greenberg and Mr.
Herdman, the Common Stock votes separately as a class and the Class B Stock is
not entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
OF GERALD GREENBERG, STEVEN A. LERMAN, JOEL HOLLANDER AND ROBERT K. HERDMAN AS
CLASS III DIRECTORS.
PROPOSAL 2 - SELECTION OF INDEPENDENT ACCOUNTANTS
-------------------------------------------------
Action will be taken at the annual meeting to ratify the selection of
PricewaterhouseCoopers LLP as independent accountants of the Company for the
fiscal year ending December 31, 2004. PricewaterhouseCoopers LLP has been the
independent accountants of the Company since 1984. The Company knows of no
direct or material indirect financial interest of PricewaterhouseCoopers LLP in
the Company or of any connection of that firm with the Company in the capacity
of promoter, underwriter, voting trustee, officer or employee.
Representation of Independent Accountants at Annual Meeting
A representative of PricewaterhouseCoopers LLP will be present at the
annual meeting, will have an opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
The affirmative vote of a majority of the Common Stock and Class B Stock,
voting together as a single class, represented in person or by proxy at the
annual meeting is required to ratify the selection of PricewaterhouseCoopers
LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO RATIFY THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP.
PROPOSAL 3 - APPROVAL OF THE WESTWOOD ONE, INC. 2005 EQUITY COMPENSATION PLAN
-----------------------------------------------------------------------------
The Board of Directors of the Company unanimously has approved and is
submitting for shareholder approval the Westwood One, Inc. 2005 Equity
Compensation Plan (the "2005 Plan"). The text of the 2005 Plan appears at the
end of this proxy statement as Annex A. The following description of the 2005
Plan should be read in conjunction with, and is qualified in its entirety by
reference to, the full text of the 2005 Plan.
On March 15, 2005, the Board of Directors approved the 2005 Plan, subject
to shareholder approval. The following description of the 2005 Plan is a summary
of its material provisions and is qualified in its entirety by reference to the
2005 Plan.
Under this proposal, the Company is seeking shareholder approval of the
2005 Plan because the 1999 Plan, while not expiring until March 31, 2009, has
only limited shares available under it. As a result, the Board of Directors
approved the 2005 Plan to replace the 1999 Plan, subject to the approval of our
shareholders. Upon approval of the 2005 Plan, no additional grants will be made
under the 1999 Plan other than shares that become available for issuance if an
award granted thereunder expires, is canceled or otherwise terminates without
being exercised.
23
The purpose of the 2005 Plan is to enable Westwood to offer employees,
consultants, officers and non-employee directors equity based and cash awards.
We believe this will help us attract, retain and reward our employees,
consultants, officers and non-employee directors, and strengthen the mutuality
of interests between such individuals and Westwood's shareholders.
Administration
The 2005 Plan will be administered by the Compensation Committee (or such
other committee or subcommittee to which the Compensation Committee has
delegated any authority), which consists of two or more non-employee directors,
each of whom is intended to be a non-employee director under Rule 16b-3 under
the Exchange Act, an outside director under Section 162(m) of the Code and an
independent director for purposes of the NYSE rules (the "Committee"). With
respect to the application of the 2005 Plan to non-employee directors, the
Committee is the Board of Directors.
The Committee has the authority to establish the terms and conditions of
individual awards, which will be set forth in written agreements consistent with
the 2005 Plan. Awards under the 2005 Plan may not be made on or after the 10year
anniversary of the date the 2005 Plan is approved by shareholders, but awards
granted prior to such date may extend beyond that date.
Eligibility and Types of Awards
Under the 2005 Plan, employees, consultants, officers and non-employee
directors of Westwood and its affiliates are eligible to receive the following
types of discretionary awards: stock options (incentive and non-qualified),
stock appreciation rights, restricted stock, restricted stock units,
performance-based awards and any other rights or interests relating to Westwood
common stock (including deferred stock units and dividend equivalent rights).
Eligibility for awards under the 2005 Plan is determined by the Committee, in
its sole discretion.
Available Shares
A maximum of 9,200,000 shares of Common Stock may be issued or used for
reference purposes under the 2005 Plan. For purposes of this limit, each share
of Common Stock issued pursuant to an award of restricted stock,
performance-based awards, restricted stock units or deferred stock units will
count as three shares.
The maximum number of shares subject to an option, stock appreciation right
or any equity-based award that is intended to be "performance-based
compensation" within the meaning of Section 162(m) of the Code that may be
granted to an individual during any three year period cannot exceed 1,500,000,
of which up to 500,000 may be used for restricted stock, restricted stock units
and equity-based performance awards that are intended to be "performance-based
compensation." With respect to non-equity based performance awards settled in
cash that are intended to be "performance-based compensation," the maximum
amount that may be paid to a participant during each fiscal year with respect to
such awards is $5,000,000.
The Committee may, in accordance with the terms of the 2005 Plan, make
appropriate adjustments to the number of shares available for the grant of
awards and the terms of outstanding awards to reflect any merger,
reorganization, consolidation, recapitalization, stock dividend, stock split,
reverse stock split, spin-off or similar transaction or other change in
corporate structure.
Awards under the 2005 Plan
Stock Options. Options may be in the form of incentive stock options
("ISOs") or non-qualified stock options, but options granted to non-employee
directors and employees of its subsidiaries that do not qualify as a "subsidiary
corporation" (within the meaning of Section 424 of the Code) may only be
non-qualified stock options. The Committee will determine the number of shares
subject to each option, the term of each option (which may not exceed 10 years,
or five years in the case of an ISO granted to a 10% shareholder), the exercise
price, and the other material terms of each option. No option may have an
exercise price less than the fair market value of Common Stock at the time of
grant (or, in the case of an ISO granted to a 10% shareholder, 110% of fair
market value).
24
Unless otherwise determined at grant, options granted to an employee or
consultant are subject to the following terms: (i) the options vest in
accordance with the vesting schedule determined by the Committee; and (ii) all
then vested options remain exercisable as follows, subject to the original
stated term of the option: (1) three years in the event of retirement; (2) one
year in the event of death (in which case the participant's estate or legal
representative may exercise such option); or (3) three months for any other
termination (other than for cause).
Unless otherwise determined at grant, options granted to a non-employee
director are subject to the following terms: (i) options vest one-third on each
anniversary of the grant date if the participant remains a director on each
applicable vesting date; (ii) all outstanding options immediately vest upon
retirement, failure to be re-elected or death; and (iii) all then vested options
remain exercisable as follows, subject to the original stated term of the
option: (1) five years in the event of retirement; or (2) one year in the event
of death (in which case the participant's estate or legal representative may
exercise such option), voluntary resignation that is not considered retirement
or failure to be re-elected.
Upon a participant's termination for cause, all outstanding options
(whether vested or unvested) terminate.
Upon the exercise of an option, the optionholder must make payment of the
full exercise price, either: (i) in cash, check, bank draft or money order; (ii)
to the extent permitted by law and the Committee, through the delivery of
irrevocable instructions to a broker reasonably acceptable to Westwood to
deliver promptly an amount equal to the aggregate purchase price; or (iii) on
such other terms and conditions as may be acceptable to the Committee (including
the relinquishment of options or payment in shares of Westwood stock that have
been owned by the optionholder for a period of time as may be required by
applicable accounting standards to avoid a charge to Westwood's earnings).
Stock Appreciation Rights ("SARs"). A SAR is a right to receive a payment
either in cash, Common Stock and/or other property equal in value to the excess
of the fair market value of one share of Common Stock on the date of exercise
over the exercise price per share of the SAR. The Committee will determine the
terms and conditions of SARs at the time of grant, but, generally, SARs will be
subject to the same terms and conditions as stock options (as described above).
Restricted Stock. Restricted stock may vest over time, based on performance
criteria or other factors (including, without limitation, performance goals that
are intended to comply with the performance-based compensation exception under
Section 162(m) of the Code), as determined by the Committee at grant. Restricted
stock may also be granted based upon the attainment of performance goals.
Restricted stock may be granted for no cash consideration or for such minimum
consideration as may be required by applicable law. Unless otherwise determined
by the Committee at grant, upon a participant's termination all unvested
restricted stock will be forfeited.
Restricted Stock Units. A restricted stock unit is a unit of measurement
equivalent to one share of Common Stock that becomes nonforfeitable upon
satisfying certain terms and conditions, as determined by the Committee. A
restricted stock unit does not have any of the attendant rights of a
shareholder, except it may have certain dividend rights as specified in the
grant. A restricted stock unit may be distributed in Common Stock, cash and/or
other property as determined by the Committee. Restricted stock units may vest
over time, based on performance criteria or other factors (including, without
limitation, performance goals that are intended to comply with the
performance-based compensation exception under Section 162(m) of the Code), as
determined by the Committee at grant. Restricted stock units may also be granted
based upon the attainment of performance goals and may be granted for no cash
consideration or for such minimum consideration as may be required by applicable
law. Unless otherwise determined by the Committee at grant, restricted stock
units will have a vesting period of not less than one year.
To the extent permitted by the Committee, a participant may elect to defer
the payment of restricted stock units in a manner that complies with Section
409A of the Code.
Performance Awards. A performance award is a right to receive Common Stock,
cash and/or other property based upon the attainment of performance goals
(including, without limitation, performance goals that are intended to comply
with the performance-based compensation exception under Section 162(m) of the
Code), as determined by the Committee.
Unless otherwise determined by the Committee, the grant, vesting and/or
exercisablity of performance awards is subject to the attainment of performance
goals. The Committee may adjust the performance goals as a result of certain
corporate events or changes in accounting standards.
25
Other Awards. The 2005 Plan authorizes the Committee to grant other rights
or interests relating to shares of Common Stock (including, deferred stock units
and dividend equivalent rights).
Deferrals. The Committee may permit any participant under the 2005 Plan to
defer the payment or vesting of any award subject to the terms and conditions
imposed by the Committee. The Committee may also permit non-employee directors
to defer all or a portion of their compensation in the form of deferred shares
under the 2005 Plan. To the extent applicable, any such deferral will be
structured in a manner to comply with Section 409A of the Code.
Performance Goals
As noted above, performance-based awards granted under the 2005 Plan that
are intended to satisfy the performance-based compensation exception under
Section 162(m) of the Code will be granted or vest based on attainment of
specified performance goals established by the Committee. These performance
goals will be based on one or more of the following criteria selected by the
Committee: (i) enterprise value or value creation targets; (ii) operating income
before depreciation and amortization; (iii) operating income; (iv) free cash
flow; (v) net income; (vi) net income per share; (vii) revenues; (viii) earnings
per share; (ix) total shareholder return; (x) return on equity; (xi) share
price; (xii) return in excess of cost of capital; (xiii) profit in excess of
cost of capital; (xiv) return on assets; (xv) return on invested capital; or
(xvi) operating margin, or any combination thereof, or in reference to other
companies or indices.
Change in Control
Unless otherwise determined by the Committee at grant, upon a termination
of employment or consultancy without "cause" within 24 months after a change in
control of Westwood (as defined in the 2005 Plan), all vesting and forfeiture
conditions, restrictions and limitations in effect with respect to any
outstanding award will immediately lapse and any unvested awards will
automatically become fully vested and immediately exercisable in their entirety.
Unless otherwise determined by the Committee at grant, any outstanding awards
granted to a non-employee director will immediately vest upon a change in
control without regard to a termination of directorship.
In its sole discretion, the Committee may provide that each option or SAR
will, upon the change in control, be cancelled in exchange for a cash payment
equal to the amount by which the per share price paid in the applicable
transaction for Westwood common stock exceeds the purchase price per award.
In the event of a merger or consolidation in which Westwood is not the
surviving corporation or in the event of a transaction that results in the
acquisition of substantially all of Westwood's common stock or assets, the
Committee may elect to terminate all outstanding and unexercised awards;
provided, that during the period from notification of such termination to the
date of consummation of the relevant transaction (which must be at least 20
days) each such participant will have the right to exercise all of his or her
awards in full (without regard to any restrictions on exercisability).
Amendment and Termination
The Committee may amend, suspend or terminate the 2005 Plan at any time,
provided that no such action will be made in certain circumstances when
shareholder approval or participant consent is required as provided in the Plan.
Nontransferability
Awards granted under the 2005 Plan are not transferable by a participant
other than by will or by the laws of descent and distribution, except that the
Committee may permit transferability on a general or specific basis.
Material U.S. Federal Income Tax Consequences
The following discussion of the principal U.S. federal income tax
consequences with respect to options under the 2005 Plan is based on statutory
authority and judicial and administrative interpretations as of the date of this
proxy statement, which are subject to change at any time (possibly with
retroactive effect) and may vary in individual circumstances. Therefore, the
26
following is designed to provide a general understanding of the federal income
tax consequences (state, local and other tax consequences are not addressed
below). This discussion is limited to the U.S. federal income tax consequences
to individuals who are citizens or residents of the U.S., other than those
individuals who are taxed on a residence basis in a foreign country.
THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND
DOES NOT PURPORT TO ADDRESS ALL THE TAX CONSIDERATIONS THAT MAY BE RELEVANT.
EACH RECIPIENT OF A GRANT IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO
THE SPECIFIC TAX CONSEQUENCES TO SUCH RECIPIENT OF THE GRANT AND THE DISPOSITION
OF COMMON STOCK.
Incentive Stock Options. Under current federal income tax laws, the grant
or exercise of an ISO generally has no income tax consequences for the optionee
or Westwood. However, the amount by which the fair market value of the common
stock acquired pursuant to the exercise of an ISO exceeds the exercise price is
an adjustment item for purposes of alternative minimum tax.
The aggregate fair market value of common stock (determined at the time of
grant) with respect to which ISOs can be exercisable for the first time by an
optionee during any calendar year cannot exceed $100,000. Any excess will be
treated as a non-qualified stock option.
The sale of common stock received pursuant to the exercise of an option
that satisfied all of the ISO requirements, as well as the holding period
requirement described below, will result in a long-term capital gain or loss
equal to the difference between the amount realized on the sale and the exercise
price. To receive ISO treatment, an optionee must be an employee of Westwood (or
certain affiliates) at all times during the period beginning on the date of the
grant of the ISO and ending on the day three months before the date of exercise,
and the optionee must not dispose of the common stock purchased pursuant to the
exercise of an option either (i) within two years after the option is granted,
or (ii) within one year after the date of exercise. Any gain or loss realized on
a subsequent disposition of the shares will be treated as long-term capital gain
or loss (depending on the applicable holding period). Westwood will not be
entitled to a tax deduction upon the exercise of an ISO, nor upon a subsequent
disposition of the shares, unless the disposition occurs prior to the expiration
of the holding period described above.
In general, if the optionee does not satisfy these holding period
requirements, any gain equal to the difference between the exercise price and
the fair market value of the common stock at exercise (or, if a lesser amount,
the amount realized on disposition over the exercise price) will constitute
ordinary income. In the event of such a disposition before the expiration of
either holding period described above, Westwood will be entitled to a deduction
at that time equal to the amount of ordinary income recognized by the optionee.
Any gain in excess of the amount recognized by the optionee as ordinary income
would be taxed to the optionee as short-term or long-term capital gain
(depending on the applicable holding period).
Non-Qualified Stock Options. In general, an optionee will recognize no
taxable income upon the grant of a non-qualified stock option and Westwood will
not receive a deduction at the time of such grant. Upon exercise of a
non-qualified stock option, an optionee generally will recognize ordinary income
in an amount equal to the excess of the fair market value of the common stock on
the date of exercise over the exercise price. Upon a subsequent sale of the
common stock by the optionee, the optionee will recognize short-term or
long-term capital gain or loss, depending upon his holding period for the common
stock. Westwood will generally be allowed a deduction equal to the amount
recognized by the optionee as ordinary income.
Section 162(m) of the Code. Section 162(m) of the Code denies a deduction
to any publicly held corporation for compensation paid to certain "covered
employees" in its taxable year to the extent that such compensation exceeds
$1,000,000. "Covered employees" are a company's chief executive officer on the
last day of the taxable year and any other individual whose compensation is
required to be reported to shareholders in its proxy statement under the
Exchange Act. Compensation paid under certain qualified performance-based
compensation arrangements, which (among other things) provide for compensation
based on preestablished performance goals established by a compensation
committee that is comprised solely of two or more "outside directors", is not
considered in determining whether a "covered employee's" compensation exceeds
$l,000,000. It is intended that certain awards under the 2005 Plan will satisfy
these requirements so that the income recognized in connection with awards will
not be included in a "covered employee's" compensation for the purpose of
determining whether such individual's compensation exceeds $1,000,000.
27
Parachute Payments. In the event that the payment of any award under the
2005 Plan is accelerated because of a change in ownership (as defined in Code
Section 280G(b)(2)) and such payment of an award, either alone or together with
any other payments made to certain participants, constitute parachute payments
under Section 280G of the Code, then subject to certain exceptions, a portion of
such payments would be nondeductible to Westwood and the participant would be
subject to a 20% excise tax on such portion of the payment.
Future Plan Awards
Because future awards under the 2005 Plan will be based upon prospective
factors including the nature of services to be rendered and a recipient's
potential contributions to the success of Westwood, actual awards cannot be
determined at this time.
The last reported sales price for Common Stock as reported on the NYSE on
April 19, 2005 was $19.71 per share.
Vote Required
The affirmative vote of a majority of the votes cast by Westwood's shareholders
in person or represented by proxy and entitled to vote on the 2005 Plan at the
Westwood annual meeting is required to approve this Proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE 2005 EQUITY COMPENSATION PLAN.
OTHER MATTERS
The Board of Directors does not intend to bring other matters before the meeting
except items required to conduct the meeting. In addition, the Company has not
received notice from any shareholder of an intent to present a proposal at the
meeting. On any matter properly brought before the meeting by the Board or by
others, the persons named as proxies in the accompanying proxy, or their
substitutes will vote in accordance with their best judgment.
28
SOLICITATION
The cost of preparing, assembling, printing and mailing this proxy
statement and the accompanying proxy card will be borne by the Company. The
Company has requested banks and brokers to solicit their customers who are
beneficial owners of Common Stock listed of record in the names of the banks and
brokers, and will reimburse these banks and brokers for the reasonable
out-of-pocket expenses of their solicitations. The original solicitation of
proxies by mail may be supplemented by telephone, telegram and personal
solicitation by officers and other regular employees of the Company, but no
additional compensation will be paid on account of these additional activities.
MacKenzie Partners may solicit proxies by mail, telephone, telegraph and
personal solicitation, and will request banks, brokers and other nominees,
fiduciaries and custodians nominally holding shares of Common Stock of record to
forward proxy soliciting material to the beneficial owners of such shares. For
these services, the Company will pay MacKenzie Partners a fee estimated not to
exceed $3,500, plus reimbursement for expenses.
SHAREHOLDER PROPOSALS FOR 2006
Under the rules of the SEC, any shareholder proposal intended for inclusion
in the proxy material for the Annual Meeting of Shareholders to be held in 2006
must be received by the Company by December 31, 2005 to be eligible for
inclusion in such proxy material. Proposals should be addressed to Andrew Zaref,
Executive Vice President and Chief Financial Officer, Westwood One, Inc., 40
West 57th Street, 5th Floor, New York, NY 10019. Proposals must comply with the
proxy rules of the SEC relating to shareholder proposals in order to be included
in the proxy materials. Additionally, the Company's proxy holders for the
Company's 2006 Annual Meeting of Shareholders will have discretionary authority
to vote on any shareholder proposal that is presented at such annual meeting but
that is not included in the Company's proxy materials, unless notice of such
proposal is received by the Secretary of the Company on or before March 30,
2006.
By Order of the Board of Directors
/S/ DAVID HILLMAN
-----------------
David Hillman
Assistant Secretary
New York, New York
April 29, 2005
Westwood One, Inc. 2005 Equity Compensation Plan
SECTION 1. PURPOSE The purpose of the Westwood One, Inc. 2005 Equity
Compensation Plan (the "Plan") is to furnish a material incentive to Employees,
officers, Consultants and Directors of the Company or an Affiliate and by making
available to them the benefits of common stock ownership in the Company through
stock options and other awards. It is believed that these increased incentives
stimulate the efforts and continued success of the Company and its affiliates,
as well as assist in the recruitment of Employees, Consultants, Directors and
officers of the Company or an Affiliate.
SECTION 2. DEFINITIONS As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Affiliate" shall mean each of the following: (a) any Subsidiary; (b) any
Parent; (c) any corporation, trade or business (including, without
limitation, a partnership or limited liability company) which is directly
or indirectly controlled 50% or more (whether by ownership of stock, assets
or an equivalent ownership interest or voting interest) by the Company or
one of its Affiliates; and (d) any other entity in which the Company or any
of its Affiliates has a material equity interest and which is designated as
an "Affiliate" by resolution of the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock
Award, Performance Award, Restricted Stock Unit, or any other right,
interest or option relating to Shares (including, without limitation,
deferred stock units and dividend equivalent rights), as determined by the
Committee. The Committee may, in its discretion, permit a Participant to
defer the payment or vesting of any Award solely to the extent permitted by
Section 409A of the Code.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted by the Committee
hereunder, which in the sole and absolute discretion of the Committee may,
but need not, be signed or acknowledged by the Company and the Participant.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Cause" shall mean with respect to a Participant's Termination of
Employment or Termination of Consultancy, the following: (a) in the case
where there is no employment agreement, consulting agreement, change in
control agreement or similar agreement in effect between the Company or an
Affiliate and the Participant at the time of the grant of the Award (or
where there is such an agreement but it does not define "cause" (or words
of like import)), termination due to a Participant's dishonesty, fraud,
moral turpitude or willful misconduct, as determined by the Committee in
its sole discretion; or (b) in the case where there is an employment
agreement, consulting agreement, change in control agreement or similar
agreement in effect between the Company or an Affiliate and the Participant
at the time of the grant of the Award that defines "cause" (or words of
like import), "cause" as defined under such agreement; provided, however,
that with regard to any agreement under which the definition of "cause"
only applies on occurrence of a change in control, such definition of
"cause" shall not apply until a change in control actually takes place and
then only with regard to a termination thereafter. With respect to a
Participant's Termination of Directorship, "cause" means an act or failure
to act that constitutes cause for removal of a director under applicable
Delaware law.
(f) "Change in Control" shall mean the occurrence of any of the following:(i)
the acquisition by any Person (as hereinafter defined) of 35% or more of
the outstanding Shares (the "Outstanding Company Stock") (other than an
acquisition by the Company or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Person that controls, is
controlled by or is under common control within the Company or other than a
Non-Qualifying Business Combination (as defined below)); (ii) individuals
who, as of the Effective Date constitute the Board (the "Incumbent Board"),
cease for any reason to constitute at least a majority of the Board
provided that, for purposes of this Section, any individual who becomes a
director subsequent to the Effective Date whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual who initially assumes office as a
result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board;
(iii) consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company
or the acquisition of assets or stock of another corporation (a "Business
Combination"), in each case, unless, following such Business Combination,
the Persons who had Beneficial Ownership (as defined below) of the
Outstanding Company Stock immediately prior to such Business Combination
have Beneficial Ownership immediately following the consummation of such
Business Combination, directly or indirectly, of more than 50% of the
combined voting power of the then outstanding securities entitled to vote
generally in the election of directors of the corporation resulting or
surviving from such Business Combination, including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries (the "Surviving Entity"), in substantially the same
proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Stock (a Business Combination that
satisfies this exception shall be a "Non-Qualifying Business Combination");
(iv) approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company; or (v) the consummation of any other
transaction involving a significant issuance of the Company's securities, a
change in the composition of the Board or other material event that the
Board determines to be a Change in Control for purposes of this Section.
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Notwithstanding the foregoing provisions of this definition, unless
otherwise determined by the Board, no Change in Control shall be deemed to
have occurred if (1) a Participant is a member of a group that first
announces a proposal which, if successful, would result in a Change in
Control and which proposal (including any modifications thereof) is
ultimately successful, (2) the Participant acquires a two percent (2%) or
more equity interest in the entity which ultimately acquires the Company
pursuant to the transaction described in clause (1) above; or (3) to the
extent Section 409A of the Code is applicable, such event is not considered
to be a "Change in Control Event" for purposes of Section 409A of the Code.
For purposes of this definition of Change in Control, "Person" means an
individual, partnership, joint venture corporation, trust, unincorporated
organization, government or agency or political subdivision thereof), group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) or
any other entity, and "Beneficial Ownership" means beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
(h) "Committee" shall mean the Compensation Committee of the Board or such
other persons or committee (or subcommittee) to which it has delegated any
authority under this Plan, as may be appropriate. The Committee shall
consist of two or more directors each of whom shall qualify as: (i) a
"non-employee director" for purposes of Rule 16b-3 under the Exchange Act;
(ii) an "outside director" for purposes of Section 162(m) of the Code; and
(iii) an "independent director" for purposes of Section 303A of the New
York Stock Exchange Listed Company Manual or such other applicable stock
exchange rules. Notwithstanding anything herein, the Board shall act as the
Committee under this Plan with respect to any grants of Awards to
Directors.
(i) "Consultant" means any natural person who provides bona fide consulting or
advisory services to the Company or an Affiliate, which are not in
connection with the offer and sale of securities in a capital-raising
transaction.
(j) "Company" shall mean Westwood One, Inc., a Delaware corporation.
(k) "Covered Employee" shall mean a "covered employee" within the meaning of
Section 162(m)(3) of the Code, or any successor provision thereto.
(l) "Director" shall mean a member of the Board of the Company or any of its
Affiliates who is not an employee of the Company or any Affiliate.
(m) "Effective Date" shall mean the date the Plan is approved by the Company's
stockholders in accordance with applicable law. (n) "Employee" shall mean
any employee of the Company or any Affiliate. For any and all purposes
under this Plan, the term "Employee" shall not include a person hired as an
independent contractor, leased employee, consultant or a person otherwise
designated by the Committee, at the time of hire as not eligible to
participate in or receive benefits under the Plan or not on the payroll,
even if such ineligible person is subsequently determined to be a common
law employee of the Company.
(o) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(p) "Fair Market Value" shall mean, with respect to Shares, as of any date, the
last sales price reported for the Shares on the applicable date as reported
on the New York Stock Exchange for that date or, if no prices are reported
for that date, the last sales price reported on the next date for which
such prices were reported, unless otherwise determined by the Committee.
For purposes of the exercise of any Stock Appreciation Right the applicable
date shall be the date a notice of exercise is received by the Committee
or, if not a day on which the New York Stock Exchange is open, the last
sales price reported on the next date for which such prices were reported.
(q) "Incentive Stock Option" shall mean an Option granted under Section 6 that
is intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.
(r) "Nonqualified Stock Option" shall mean either an Option granted under
Section 6 that is not intended to be an Incentive Stock Option or an
Incentive Stock Option that has been disqualified.
(s) "Option" shall mean any right granted to a Participant under the Plan
allowing such Participant to purchase Shares at such price or prices and
during such period or periods as the Committee shall determine.
(t) "Parent" shall mean any parent corporation of the Company within the
meaning of Section 424(e) of the Code. (u) "Participant" shall mean an
Employee, an officer of the Company or an Affiliate, Consultant or Director
who is selected by the Committee from time to time in their sole discretion
to receive an Award under the Plan.
(v) "Performance Award" shall mean any Award of Performance Shares granted
under the Plan which has performance criteria. (w) "Performance Goal" shall
have the meaning set forth in Section 11.
(x) "Performance Period" shall mean that period established by the Committee at
the time any Performance Award is granted or at any time thereafter during
which any Performance Goals specified by the Committee with respect to such
Award are to be measured.
(y) "Performance Share" shall mean any grant pursuant to Section 11 of a unit
valued by reference to a designated number of Shares, which value may be
paid to the Participant by delivery of such property as the Committee shall
determine, including, without limitation, cash, Shares, other property, or
any combination thereof, upon achievement of such Performance Goals during
the Performance Period as the Committee shall establish at the time of such
grant or thereafter.
(z) "Person" shall mean any individual, corporation, partnership, association,
limited liability company, joint-stock company, trust, unincorporated
organization or government or political subdivision thereof.
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(aa) "Retirement" shall mean: (i) with respect to an Employee or an officer of
the Company or an Affiliate, any combination of an Employee's or officer's
age and years of continuous service with the Company or an Affiliate that
is greater than 70 or such other date as approved by the Committee; or (ii)
with respect to a Director, the failure to stand for reelection or the
failure to be reelected after a Director has attained age 75 or five years
of continuous service or such other date as approved by the Committee.
(bb) "Restricted Stock" shall mean any Share issued with the restriction that
the holder may not sell, transfer, pledge or assign such Share and with
such other restrictions as the Committee, in its sole discretion, may
impose (including, without limitation, any restriction on the right to vote
such Share, and the right to receive any cash dividends or performance
restriction), which restrictions may lapse separately or in combination at
such time or times, in installments or otherwise, as the Committee may deem
appropriate.
(cc) "Restricted Stock Award" shall mean an award of Restricted Stock under
Section 7. (dd) "Restricted Stock Unit" shall mean an award under Section
9. (ee) "Section 162(m) Performance Goals" shall have the meaning set forth
in Section 11. (ff) "Shares" shall mean the shares of common stock of the
Company.
(dd) "Restricted Stock Unit" shall mean an award under Section 9.
(ee) "Section 162(m) Performance Goals" shall have the meaning set forth in
Section 11.
(ff) "Shares" shall mean the shares of common stock of the Company.
(gg) "Stock Appreciation Right" shall mean any right granted to a Participant
pursuant to Section 8 to receive, upon exercise by the Participant, the
excess of (i) the Fair Market Value of one Share on the date of exercise
or, if the Committee shall so determine in the case of any such right other
than one related to any Incentive Stock Option, at any time during a
specified period before the date of exercise over (ii) the grant price of
the right on the date of grant, or if granted in connection with an
outstanding Option on the date of grant of the related Option, as specified
by the Committee in its sole discretion, which, except in connection with
an adjustment provided in Section 4, shall not be less than the Fair Market
Value of one Share on such date of grant of the right or the related
Option, as the case may be. Any payment by the Company in respect of such
right may be made in cash, Shares, other property, or any combination
thereof, as the Committee, in its sole discretion, shall determine.
(hh) "Subsidiary" shall mean any subsidiary corporation of the Company within
the meaning of Section 424(f) of the Code.
(ii) "Ten Percent Stockholder" shall mean a person owning stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or its Subsidiaries or its Parent.
(jj) "Termination" shall mean a Termination of Consultancy, Termination of
Directorship or Termination of Employment, as applicable. Notwithstanding
the foregoing, the Committee may otherwise define Termination in the Award
Agreement or, if no rights of a Participant are reduced, may otherwise
define Termination thereafter.
(kk) "Termination of Consultancy" shall mean that the Consultant is no longer
acting as a consultant to the Company or an Affiliate, except that if the
Consultant becomes an Employee, a Director or officer of the Company or an
Affiliate upon the termination of his or her consultancy, unless otherwise
determined by the Committee, no Termination of Consultancy shall be deemed
to occur until such time as such Consultant is no longer a Consultant, an
Employee, a Director or officer of the Company or an Affiliate.
(ll) "Termination of Directorship" shall mean that the Director is no longer
acting as a director of the Company or an Affiliate; except that if the
Director becomes an Employee, officer of the Company or an Affiliate or a
Consultant upon the termination of his or her directorship, unless
otherwise determined by the Committee, no Termination of Directorship shall
be deemed to occur until such time as such Consultant is no longer a
Consultant, an Employee, officer of the Company or an Affiliate or a
Director.
(mm) "Termination of Employment" shall mean a termination of employment (for
reasons other than a military or personal leave of absence granted by the
Company) of a Participant from the Company and its Affiliates, except that
if the Employee becomes a Consultant, an officer of the Company or an
Affiliate or a Director upon the termination of his or her employment,
unless otherwise determined by the Committee, no Termination of Employment
shall be deemed to occur until such time as Eligible Employee is no longer
an Employee, officer of the Company or an Affiliate, a Consultant or a
Director.
SECTION 3. ADMINISTRATION
The Committee shall administer the Plan. The Committee shall have full power and
authority, subject to such orders or resolutions not inconsistent with the
provisions of the Plan as may from time to time be adopted by the Board, to (a)
select the Employees, officers of the Company or an Affiliate, Consultants and
Directors to whom Awards may from time to time be granted hereunder; (b)
determine the type or types of Award to be granted to each Participant
hereunder; (c) determine the number of Shares to be covered by or relating to
each Award granted hereunder; (d) determine the terms and conditions, not
inconsistent with the provisions of the Plan, of any Award granted hereunder;
(e) determine whether, to what extent and under what circumstances Awards may be
A-3
settled in cash, Shares or other property or canceled or suspended; (f)
determine whether, to what extent, and under what circumstances payment of cash,
Shares, other property and other amounts payable with respect to an Award made
under the Plan shall be deferred either automatically or at the election of the
Participant in accordance with Code Section 409A; (g) interpret and administer
the Plan and any instrument or agreement entered into under the Plan; (h)
establish such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (i) make any other
determination and take any other action that the Committee deems necessary or
desirable for administration of the Plan. The Committee may, in its sole and
absolute discretion, and subject to the provisions of the Plan, from time to
time delegate any or all of its authority to administer the Plan to any other
persons or committee as it deems necessary or appropriate for the proper
administration of the Plan, except that no such delegation shall be made in the
case of Awards intended to be qualified under Section 162(m) of the Code or
Awards granted to Participants who are subject to Section 16 of the Exchange
Act. The decisions of the Committee shall be final, conclusive and binding with
respect to the interpretation and administration of the Plan and any grant made
under it. The Committee shall make, in its sole discretion, all determinations
arising in the administration, construction or interpretation of the Plan and
Awards under the Plan, including the right to construe disputed or doubtful Plan
or Award terms and provisions, and any such determination shall be conclusive
and binding on all persons, except as otherwise provided by law. A majority of
the members of the Committee may determine its actions and fix the time and
place of its meetings.
The Committee shall be authorized to make adjustments in Awards in recognition
of unusual or nonrecurring events affecting the Company or its financial
statements or changes in applicable laws, regulations or accounting principles.
Except as provided in Section 11, the Committee shall be authorized to make
adjustments in Performance Award criteria or in the terms and conditions of
other Awards in recognition of unusual or nonrecurring events affecting the
Company or its financial statements or changes in applicable laws, regulations
or accounting principles. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem desirable to carry it into effect. In the event
that the Company shall assume outstanding employee benefit awards or the right
or obligation to make future such awards in connection with the acquisition of
or combination with another corporation or business entity, the Committee may,
in its discretion, make such adjustments in the terms of Awards under the Plan
as it shall deem appropriate.
To the extent applicable, this Plan is intended to comply with the applicable
requirements of Rule 16b-3 of the Exchange Act and Sections 162(m) and 409A of
the Code and, and this Plan shall be limited, construed and interpreted in a
manner so as to comply therewith.
The Committee may include in any Award Agreement restrictions and conditions
that provide for the forfeiture of any Award or permits the Company to recover
amounts from Participants who engage in detrimental activity (as defined in the
Award Agreement).
SECTION 4. SHARES SUBJECT TO THE PLAN
Subject to adjustment, 9,200,000 Shares shall be authorized for issuance of
Awards granted under the Plan. For purposes of determining the Share reserve
under this Section 4, each Share issued pursuant to an Award of Restricted
Stock, Performance Awards, Restricted Stock Units or deferred stock units shall
count as three Shares.
Any Shares issued hereunder may consist, in whole or in part, of authorized and
unissued Shares, treasury Shares or Shares purchased in the open market or
otherwise.
The maximum number of Shares subject to any Option, Stock Appreciation Right or
any equity-based Award that is intended to be "performance-based compensation"
within the meaning of Section 162(m)(4)(C) of the Code that may be granted to
each Participant shall not exceed 1,500,000 Shares (subject to adjustment as
provided below) during any three year period, of which up to 500,000 (subject to
adjustment as provided below) may be used for Restricted Stock, Restricted Stock
Units, deferred stock units and equity-based Performance Awards that are
intended to be "performance-based compensation" within the meaning of Section
162(m)(4)(C) of the Code. With respect to non-equity based Performance Awards
settled in cash that are intended to be "performance-based compensation" within
the meaning of Section 162(m)(4)(C) of the Code, the maximum amount that may be
paid to each Participant during each fiscal year of the Company with respect to
such Awards is $5,000,000.
In the event of any merger, reorganization, consolidation, recapitalization,
stock dividend, stock split, reverse stock split, spin-off or similar
transaction or other change in corporate structure affecting the Shares, such
adjustments and other substitutions shall be made to the Plan and to Awards as
the Committee, in its sole discretion, deems equitable or appropriate,
including, without limitation, such adjustments in the aggregate number, class
and kind of securities that may be delivered under the Plan, in the aggregate or
to any one Participant, in the number, class, kind and option or exercise price
of securities subject to outstanding Awards granted under the Plan (including,
if the Committee deems appropriate, the substitution of similar options to
purchase the shares of, or other awards denominated in the shares of, another
company) as the Committee may determine to be appropriate in its sole
discretion; provided, however, that the number of Shares subject to any Award
shall always be a whole number and further provided that in no event may any
change be made to an Incentive Stock Option which would constitute a
modification within the meaning of Section 424(h)(3) of the Code.
If an Award should expire, become forfeited or become unexercisable for any
reason without having been exercised or nonforfeitable in full, the unpurchased
shares that are subject thereto shall, unless the Plan shall have been
terminated, become available for future grant under the Plan.
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SECTION 5. ELIGIBILITY
Awards may be granted to eligible Employees, officers of the Company or an
Affiliate, Consultants and Directors, as determined by the Committee in its sole
discretion. Incentive Stock Options may be granted only to Employees or officers
of the Company, the Parent or a Subsidiary.
Each Option shall be designated in the Award Agreement either an Incentive Stock
Option or a Nonqualified Stock Option. However, notwithstanding such
designations, to the extent that the aggregate Fair Market Value (determined as
of the time of grant) of Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year (under all plans of the Company) exceeds $100,000, such
excess shall be treated as a separate Nonqualified Stock Option.
The Plan shall not confer upon any Participant any right with respect to
continuation of employment, consulting or directorship relationship with the
Company, nor shall it interfere in any way with such Participant's right or the
Company's right to terminate his or her employment, consulting or director
relationship at any time, with or without cause.
Awards shall not be granted in a manner which would be considered a repricing
without stockholder approval.
SECTION 6. STOCK OPTIONS
Options may be granted hereunder to any Participant, either alone or in addition
to other Awards granted under the Plan and shall be subject to the following
terms and conditions:
The Option price per Share shall be determined by the Committee on the date of
grant, but shall not be not less than the Fair Market Value of the Shares on the
date the Option is granted; provided, however, if an Incentive Stock Option is
granted to a Ten Percent Stockholder, the Option price per Share shall be no
less than 110% of the Fair Market Value of the Shares on the date the Option is
granted. The Award Agreement shall state the number of Shares subject to the
Option and the vesting term, as determined by the Committee. The exercisability
period for Incentive Stock Options shall not exceed ten years from the grant
date, provided, however, the term of an Incentive Stock Option granted to a Ten
Percent Stockholder may not exceed five years. A Nonqualified Stock Option may
be exercisable for a period of up to ten years. Subject to Section 11, the
Committee may in its discretion make any Options exercisable.
All Options shall terminate upon their expiration, their surrender, upon breach
by the Participant of any provisions of the Option, or in accordance with any
other rules and procedures incorporated into the terms and conditions governing
the Options as the Committee shall deem advisable or appropriate. The Option
shall contain a provision that all the applicable terms and conditions of this
Plan are incorporated by reference therein.
Options shall be exercisable only to the extent the Participant is vested
therein, subject to any restriction that the Committee shall determine and be
specified in the Award Agreement. Unless otherwise determined by the Committee,
an Option will be deemed exercised by the Participant, or in the event of death,
an option shall be deemed exercised by the estate of the Participant, or by a
person who acquired the right to exercise such option by bequest or inheritance,
upon delivery of (i) a written notice of exercise to the Company or its
representative, or by using other methods of notice as the Committee shall
adopt, and (ii) accompanying payment of the Option price as follows: (1) in cash
or by check, bank draft or money order payable to the order of the Company; (2)
solely to the extent permitted by applicable law, if the Common Stock is traded
on the New York Stock Exchange, any other national securities exchange, the
Nasdaq Stock Market or quoted on a national quotation system sponsored by the
National Association of Securities Dealers, and the Committee authorizes,
through a procedure whereby the Participant delivers irrevocable instructions to
a broker reasonably acceptable to the Committee to deliver promptly to the
Company an amount equal to the purchase price; or (3) on such other terms and
conditions as may be acceptable to the Committee (including, without limitation,
the relinquishment of Options or by payment in full or in part in the form of
Shares owned by the Participant for a period of at least six months or such
other period necessary to avoid a charge, for accounting purposes, against the
Company's earnings as reported in the Company's financial statements (and for
which the Participant has good title free and clear of any liens and
encumbrances) based on the Fair Market Value of the Shares on the payment date
as determined by the Committee). No Shares shall be issued until payment
therefor, as provided herein, has been made or provided for in accordance with
any restrictions as the Committee shall adopt. The notice of exercise, once
delivered, shall be irrevocable.
Except as otherwise provided herein or unless otherwise determined by the
Committee at grant, Options that are not vested as of the date of a
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Participant's Termination for any reason shall terminate and expire as of the
date of such Termination. The Option shall also be subject to such other terms
and conditions, as the Committee shall deem advisable or appropriate, consistent
with the provisions of the Plan as herein set forth. In addition, Incentive
Stock Options shall contain such other provisions as may be necessary to meet
the requirements of the Code and the Treasury Department rulings and regulations
issued hereunder with respect to Incentive Stock Options.
Unless otherwise determined by the Committee at grant, all Options granted to a
Participant (other than a Director) will vest in accordance with the vesting
schedule provided in the Award Agreement, and upon such Participant's
Termination, all then vested Options will remain exercisable as follows, subject
to the original stated term of the Option (i) three years in the event of
Retirement; (ii) one year in the event of the Participant's death (in which case
the Participant's estate or legal representative may exercise such Option); or
(iii) three months for any other Termination (other than for Cause).
Unless otherwise determined by the Committee at grant, all Options granted to a
Director shall vest as follows: (i) one-third on each anniversary of the grant
date, provided that the Participant remains a Director on each applicable
vesting date; and (ii) all outstanding Options shall immediately vest upon
Retirement, failure to be re-elected or death.
Unless otherwise determined by the Committee at grant, upon a Director's
Termination all then vested Options shall remain exercisable as follows, subject
to the original stated term of the Option: (i) five years in the event of the
Retirement of a Director; or (ii) one year in the event of the Participant's
death (in which case the Participant's estate or legal representative may
exercise such Option), voluntary resignation that is not considered Retirement
or failure to be re-elected.
To the extent that the Participant was not entitled to exercise the Option at
the date of such Termination, or if Participant does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.
Unless otherwise determined by the Committee at grant, in the event of a
Termination for Cause, all outstanding Options (whether vested or unvested)
shall immediately terminate upon such Termination.
SECTION 7. RESTRICTED STOCK
A Restricted Stock Award shall be subject to restrictions (if any) imposed by
the Committee at the time of grant for a period of time specified by the
Committee (the "Restriction Period"). Restricted Stock Awards may be issued
hereunder to Participants for no cash consideration or for such minimum
consideration as may be required by applicable law, either alone or in addition
to other Awards granted under the Plan. Any Restricted Stock grant shall also be
subject to such other terms and conditions, as the Committee shall deem
advisable or appropriate, consistent with the provisions of the Plan as herein
set forth.
Any Restricted Stock issued hereunder may be evidenced in such manner, as the
Committee, in its sole discretion, shall deem appropriate, including, without
limitation, book entry registration or issuance of a stock certificate or
certificates. In the event any stock certificates are issued in respect of
Shares of Restricted Stock awarded under the Plan, such certificates shall be
registered in the name of the Participant and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such Award.
Except as otherwise provided in an Award Agreement, the Participant shall
possess all incidents of ownership with respect to Shares of Restricted Stock
during the Restriction Period, including the right to receive or reinvest
dividends with respect to such Shares (which may be subject to the same
restrictions as the Restricted Stock) and to vote such Shares. Certificates for
unrestricted Shares shall be delivered to the Participant promptly after, and
only after, the Restriction Period shall expire without forfeiture in respect of
such Awards of Restricted Stock except as the Committee, in its sole discretion,
shall otherwise determine to use another system, such as book entries by the
transfer agent, as evidencing ownership of shares of Restricted Stock.
During the Restriction Period, the recipient of such Award shall not be
permitted to sell, transfer, pledge, hypothecate or assign shares of Restricted
Stock awarded under the Plan except by will or the laws of descent and
distribution. Any attempt to dispose of any Restricted Stock in contravention of
any such restrictions shall be null and void and without effect.
The Restricted Stock Award Agreement shall contain such other terms, provisions
and conditions, not inconsistent with the Plan as may be determined by the
Committee in its sole discretion. In addition, the provisions of Restricted
Stock Award Agreement need not be the same with respect to each purchaser
The Committee shall establish the vesting schedule (if any) applicable to
Restricted Stock granted hereunder, which vesting schedule shall specify the
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period of time, the increments in which a Participant shall vest in the
Restricted Stock and/or any applicable Performance Goal (as defined in Section
11) requirements, subject to any restrictions that the Committee shall determine
and specify in the applicable Award Agreement. The Committee may also condition
the grant of Restricted Stock upon the attainment of Performance Goals. Any
Restricted Stock Award that is intended to comply with the "performance-based
compensation" within the meaning of Section 162(m)(4)(C) of the Code shall vest,
or be granted, subject to the attainment of Section 162(m) Performance Goals and
Sections 11 and 13 hereof.
Unless otherwise determined by the Committee at grant, upon a Participant's
Termination for any reason during the Restriction Period, all unvested
Restricted Stock shall be forfeited.
SECTION 8. STOCK APPRECIATION RIGHTS
Stock Appreciation Rights may be granted hereunder to any Participant, either
alone ("freestanding") or in addition to other Awards granted under the Plan and
may, but need not, relate to a specific Option granted under Section 6. The
provisions of Stock Appreciation Rights need not be the same with respect to
each recipient. Any Stock Appreciation Right related to a Nonqualified Stock
Option may be granted at the same time such Option is granted or at any time
thereafter before exercise or expiration of such Option. Any Stock Appreciation
Right related to an Incentive Stock Option must be granted at the same time such
Option is granted. In the case of any Stock Appreciation Right related to any
Option, the Stock Appreciation Right or applicable portion thereof shall be
exercisable only at such time and to the extent of the related Option and shall
terminate and no longer be exercisable upon the Termination or exercise of the
related Option, except that a Stock Appreciation Right granted with respect to
less than the full number of Shares covered by a related Option shall not be
reduced until and then only to the extent the exercise or termination of the
related Option exceeds the number of Shares not covered by the Stock
Appreciation Right. The Committee may impose such terms and conditions or
restrictions on the grant of any Stock Appreciation Right, as it shall deem
advisable or appropriate; provided that a freestanding Stock Appreciation Right
shall not have an exercise price less than Fair Market Value of a Share on the
date of grant or a term of greater than ten years. Any Stock Appreciation Right
that is settled in any form other than Shares shall comply with Section 409A of
the Code.
SECTION 9. RESTRICTED STOCK UNITS
Restricted Stock Units may be issued either alone, in addition to, or in tandem
with other Awards granted under the Plan and/or cash awards made outside of the
Plan. After the Committee determines that it will grant Restricted Stock Units
under the Plan, it shall determine the conditions and restrictions related to
the Award, including the Restricted Unit Period (as defined below) applicable to
the Award, the imposition, if any, of any performance--based condition
(including attainment of Performance Goals) or other restriction on the Award,
the number of Restricted Stock Units, which shall be set forth in an Award
Agreement.
With respect to an Award of Restricted Stock Units, which becomes nonforfeitable
due to the lapse of time, the Committee shall prescribe in the Award Agreement,
the period in which such Restricted Stock Unit becomes nonforfeitable (the
"Restricted Unit Period"). Notwithstanding any provision to the contrary, the
Restricted Stock Unit, which becomes nonforfeitable due to the satisfaction of
certain pre-established performance-based objectives or any other conditions
imposed by the Committee, the measurement date of whether such performance-based
objectives or other conditions have been satisfied shall be a date no earlier
than the first anniversary of the date of the award.
The Committee may also condition the grant of Restricted Stock Units upon the
attainment of Performance Goals. Any Restricted Stock Unit Award that is
intended to comply with the "performance-based compensation" within the meaning
of Section 162(m)(4)(C) of the Code shall vest, or be granted, subject to the
attainment of Section 162(m) Performance Goals and Sections 11 and 13 hereof.
A Participant who is awarded Restricted Stock Units shall possess no incidents
of ownership with respect to such Awards provided that the Award Agreement may
provide for payments in lieu of dividends to such Participant.
Awards that are valued by reference to, or are otherwise based on, Shares may be
granted hereunder to Participants, either alone or in addition to other Awards
granted under the Plan, and Restricted Stock Units shall also be available as a
form of payment in the settlement of other Awards granted under the Plan.
Restricted Stock Units may be paid in Shares, cash or any other form of
property, as the Committee shall determine. Subject to the provisions of the
Plan, the Committee shall have sole and complete authority to determine the
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Employees, officers of the Company or an Affiliate, Directors or Consultants to
whom and the time or times at which such Awards shall be made, the number of
Shares to be granted pursuant to such Awards, and all other conditions of the
Awards. Any Restricted Stock Unit Awards shall be subject to such other terms
and conditions as the Committee shall deem advisable or appropriate, consistent
with the provisions of the Plan as herein set forth. Unless the Committee
determines otherwise to address specific considerations, Restricted Stock Unit
Awards granted under the Plan shall have a vesting period of not less than one
year.
Solely to the extent permitted by the Committee and pursuant to Section 409A of
the Code, a Participant may elect to defer the payment of Restricted Stock Units
in a manner that complies with Section 409A of the Code, as determined by the
Committee in its sole discretion.
Shares subject to Awards granted under this Section 9 may be issued for no cash
consideration or for such minimum consideration as may be required by applicable
law. To the extent applicable, Restricted Stock Units shall comply with Section
409A of the Code.
SECTION 10. FURTHER ELECTIONS
Each Director may elect to have all or any portion of their director
compensation (as determined by the Committee) to be received in the form of
deferred Shares at the discretion of the Committee. Such election must be made
in writing subject to the rules prescribed by the Committee, which shall comply
with Section 409A of the Code. If a Participant elects to receive deferred
Shares, the Company on account will hold such Shares for the Participant and the
deferred Shares will be maintained on behalf of the Director until Termination
or such other period the Participant may have elected in accordance with Section
409A of the Code. The period of deferral will be for a minimum of one year.
During the deferral period, the Participant will have no right to transfer any
rights under his or her deferred Shares and will have no other rights of
ownership therein. Any election that does not comply with Section 409A of the
Code shall be deemed to be amended to comply with Section 409A of the Code as
determined by the Committee and to the extent such provision cannot be amended
to comply therewith, such provision shall be null and void.
SECTION 11. PERFORMANCE AWARDS
Performance Awards may be paid in cash, Shares, other property, or any
combination thereof, and may be subject to such other terms and conditions as
the Committee shall deem advisable or appropriate, consistent with the
provisions of the Plan as set forth, in the sole discretion of the Committee at
the time of payment. The performance levels to be achieved for each Performance
Period and the amount of the Award to be distributed shall be conclusively
determined by the Committee. Performance Awards may be paid in a lump sum or in
installments following the close of the Performance Period or, in accordance
with procedures established by the Committee, on a deferred basis. The Committee
may designate whether any Performance Award, either alone or in addition to
other Awards granted under the Plan, being granted to any Employee or officer of
the Company or an Affiliate is intended to be "performance-based compensation"
as that term is used in Section 162(m) of the Code. Any such awards designated
to be "performance-based compensation" shall be conditioned on the achievement
of one or more performance measures, to the extent required by Code Section
162(m), and shall be issued in accordance with Section 13.
Unless otherwise determined by the Committee, the grant, vesting and/or
exercisability of Performance Awards shall be conditioned, in whole or in part,
on the attainment of performance targets, in whole or in part, related to one or
more performance goals over a Performance Period. For any such Performance
Awards that are intended to qualify as "performance-based compensation" within
the meaning of Section 162(m)(4)(C) of the Code, the performance targets on
which the grant, vesting and/or exercisability are conditioned shall be selected
by the Committee from among the following goals (the "Section 162(m) Performance
Goals"): enterprise value or value creation targets of the Company, Operating
Income before Depreciation and Amortization, Operating Income, Free Cash Flow,
Net Income, Net Income Per Share, Revenues, earnings per share, total
shareholder return, return on equity, share price, return in excess of cost of
capital, profit in excess of cost of capital, return on assets, return on
invested capital, operating margin, or any combination thereof, or in reference
to other companies or indices. In addition, for any Awards not intended to
qualify as "performance-based compensation" within the meaning of Section
162(m)(4)(C) of the Code, the Committee may establish performance targets based
on other performance goals as it deems appropriate (together with the Section
162(m) Performance Goals, the "Performance Goals"). The Performance Goals may be
described in terms of objectives that are related to the individual Participant
or objectives that are Company-wide measured on an absolute or cumulative basis
or on the basis of percentage of improvement over time, or measured relative to
selected peer companies or a market index.
The Committee retains the right to reduce any Award below the maximum amount
that could be paid based on the degree to which the Performance Goals related to
such Award were attained. The Committee may not increase any Award intended to
qualify as "performance-based compensation" within the meaning of Section
162(m)(4)(C) of the Code in any manner that would adversely affect the treatment
of such Award.
In the event that, during any Performance Period, any recapitalization,
reorganization, merger, acquisition, divestiture, consolidation, spin-off,
combination, liquidation, dissolution, sale of assets or other similar corporate
transaction or event, or any other extraordinary event or circumstance occurs
which has the effect, as determined by the Committee, in its sole and absolute
discretion, of distorting the applicable performance criteria involving the
Company, including, without limitation, changes in accounting standards, the
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Committee may adjust or modify, as determined by the Committee, in its sole and
absolute discretion, the calculation of the Performance Goals, to the extent
necessary to prevent reduction or enlargement of the Participant's Awards under
the Plan for such Performance Period attributable to such transaction,
circumstance or event. All determinations that the Committee makes pursuant to
this Section shall be conclusive and binding on all persons for all purposes.
SECTION 12. CHANGE IN CONTROL PROVISIONS
Unless the Committee shall determine otherwise at the time of grant with respect
to a particular Award, and notwithstanding any other provision of the Plan to
the contrary, upon a Termination of a Participant (other than a Director)
without Cause during the 24-month period following a Change in Control and upon
a Change in Control with respect to a Participant who is a Director:
(i) any Options and Stock Appreciation Rights outstanding, and which are not
then exercisable and vested, shall become immediately fully vested and
exercisable;
(ii) the restrictions and deferral limitations applicable to any Restricted
Stock shall lapse, and such Restricted Stock shall immediately become free
of all restrictions and limitations and become fully vested and
transferable to the full extent of the original grant;
(iii)all Performance Awards shall be considered to be earned and payable in
full, based on the applicable performance criteria or, if not determinable,
at the target level and any deferral or other restriction shall lapse and
such Performance Awards shall be immediately settled or distributed; and
(iv) the restrictions and deferral limitations and other conditions applicable
to any Restricted Stock Units or other Awards shall immediately lapse, and
any such Restricted Stock Units or other Awards shall become free of all
restrictions, limitations or conditions and become fully vested and
transferable to the full extent of the original grant.
Notwithstanding any other provision of the Plan, in the event of a Change in
Control, the Committee may, in its discretion, provide that each Option or Stock
Appreciation Right shall, upon the occurrence of a Change in Control, be
cancelled in exchange for a cash payment to be made within 60 days of the Change
in Control in an amount equal to the amount by which the per share price paid in
the applicable transaction for the Shares exceeds the purchase price per Award.
Notwithstanding any other provision of the Plan, in the event of a merger or
consolidation in which the Company is not the surviving entity or in the event
of any transaction that results in the acquisition of substantially all of the
Company's outstanding Shares by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of all or substantially all of the Company's assets (all of the
foregoing being referred to as an "Acquisition Event"), then the Committee may,
in its sole discretion, terminate all outstanding and unexercised Awards
effective as of the date of the Acquisition Event, by delivering notice of
termination to each Participant at least 20 days prior to the date of
consummation of the Acquisition Event, in which case during the period from the
date on which such notice of termination is delivered to the consummation of the
Acquisition Event, each such Participant shall have the right to exercise in
full all of his or her Awards that are then outstanding (without regard to any
limitations on exercisability otherwise contained in the Award Agreements), but
any such exercise shall be contingent on the occurrence of the Acquisition
Event, and, provided that, if the Acquisition Event does not take place within a
specified period after giving such notice for any reason whatsoever, the notice
and exercise pursuant thereto shall be null and void. If an Acquisition Event
occurs but the Committee does not terminate the outstanding Awards pursuant to
this paragraph, then the other provisions of this Section 12 shall apply, as
determined by the Committee.
SECTION 13. CODE SECTION 162(m) PROVISIONS
Notwithstanding any other provision of the Plan, if the Committee determines at
the time, a Performance Award is granted to a Participant who is then an officer
that such Participant is, or is likely to be as of the end of the tax year in
which the Company would ordinarily claim a tax deduction in connection with such
Award, a Covered Employee, then the Committee may provide that this Section 13
is applicable to such Award.
If a Performance Award is subject to this Section 13, then the lapsing of
restrictions thereon and the distribution of cash, Shares or other property
pursuant thereto, as applicable, shall be subject to the achievement of one or
more Section 162(m) Performance Goals.
The Committee shall have the power to impose such other restrictions on Awards
subject to this Section 13, as it may deem necessary or appropriate to ensure
that such Awards qualify as "performance-based compensation" within the meaning
of Section 162(m)(4)(C) of the Code
Notwithstanding the foregoing, if any Award is intended to comply with the
"performance based" compensation exception under Section 162(m)(4)(C) of the
Code and if the grant of such Award or the lapse of restrictions is based on the
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attainment of Section 162(m) Performance Goals, the Committee shall establish
such goals and the applicable number of Awards to be granted or the applicable
vesting percentage of the Award applicable to each Participant or class of
Participants in writing prior to the beginning of the applicable fiscal year or
at such later date as otherwise determined by the Committee and while the
outcome of the Section 162(m)Performance Goals are substantially uncertain in
accordance with Section 162(m) of the Code.
SECTION 14. AMENDMENTS AND TERMINATION
The Board or the Committee may amend, alter, suspend, discontinue or terminate
the Plan or any portion thereof at any time; provided, however, that no such
amendment, alteration, suspension, discontinuation or termination shall be made
without (a) stockholder approval if such approval is necessary to qualify for or
comply with applicable law or stock exchange rules (including without
limitation, Section 162(m) of the Code, Section 422 of the Code with respect to
Incentive Stock Options and New York Stock Exchange Rules), (b) the consent of
the affected Participant, if such action would materially impair the rights of
such Participant under any outstanding Award or (c) approval of the holders of
at least a majority of the outstanding Shares with respect to any alteration or
amendment to the Plan which increases the maximum number of Shares which may be
issued under the Plan or the number of Shares which may be issued to any one
Participant, extends the term of the Plan or of Awards granted hereunder,
changes the eligibility criteria in Section 5, or reduces the exercise or
purchase price of Awards below that is now provided for in the Plan.
Notwithstanding the foregoing, the Committee may amend this Plan and any Award
Agreement to comply with applicable law, including, without limitation, Section
409A of the Code and may amend any Award Agreement at any time without a
Participant's consent.
The Committee may delegate to another committee (or subcommittee), as it may
appoint, the authority to take any action consistent with the terms of the Plan,
either before or after an Award has been granted, which such other committee (or
subcommittee) deems necessary or advisable to comply with any government laws or
regulatory requirements of a foreign country, including but not limited to,
granting Awards, modifying or amending the terms and conditions governing any
Awards, or establishing any local country plans as sub-plans to this Plan. In
addition, under all circumstances, the Committee may make non-substantive
administrative changes to the Plan as to conform with or take advantage of
governmental requirements, statutes or regulations.
SECTION 15. DIVIDENDS
Subject to the provisions of the Plan and any Award Agreement, the recipient of
an Award (including, without limitation, any deferred Award) may, if so
determined by the Committee, be entitled to receive, currently or on a deferred
basis, cash or stock dividends, or cash payments in amounts equivalent to cash
or stock dividends on Shares ("dividend equivalents") with respect to the number
of Shares covered by the Award, as determined by the Committee, in its sole
discretion, and the Committee may provide that such amounts (if any) shall be
deemed to have been reinvested in additional Shares or otherwise reinvested.
SECTION 16. GENERAL PROVISIONS
(a) The Committee shall determine and set forth in an Award Agreement the terms
and conditions of each Award. Each Agreement (i) shall state the date of
grant and the name of the Participant, (ii) shall specify the terms of the
Award, (iii) shall be signed by a person designated by the Committee and,
if so required by the Committee, by the Participant, (iv) shall incorporate
the Plan by reference and (v) shall be delivered or otherwise made
available to the Participant. The Agreement shall contain such other terms
and conditions as are required by the Plan and, in addition, such other
terms not inconsistent with the Plan as the Committee may deem advisable.
The Committee shall have the authority to adjust the terms of the Award
Agreements relating to an Award in a jurisdiction outside of the United
States (i) to comply with the laws or such jurisdiction or (ii) to obtain
more favorable tax treatment for the Company and/or any Subsidiary, as
applicable, and/or for the Participants in such jurisdiction. Such
authority shall be notwithstanding the fact that the requirements of the
local jurisdiction may be more restrictive than the terms set forth in the
Plan.
(b) An Award may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Participant,
only by the Participant; provided that the Committee, in its sole
discretion, may permit the donative transfer of any award under the Plan,
other than an Incentive Stock Option, by the Participant subject to such
terms and conditions as the Committee may establish.
(c) No Participant shall have the right to be selected to receive an Option or
other Award under this Plan or, having been so selected, to be selected to
receive a future Award grant or Option. The Awards under this Plan are not
intended to be treated as compensation for any purpose under any other
Company plan.
(d) No Participant shall have any claim to be granted any Award under the Plan,
and there is no obligation for uniformity of treatment of Employees or
Participants under the Plan.
(e) The prospective recipient of any Award under the Plan shall not, with
respect to such Award, be deemed to have become a Participant, or to have
any rights with respect to such Award, until and unless such recipient
shall have accepted any Award Agreement or other instrument evidencing the
Award.
(f) Nothing in the Plan or any Award granted under the Plan shall be deemed to
constitute an employment or service contract or confer or be deemed to
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confer on any Participant any right to continue in the employ or service
of, or to continue any other relationship with, the Company or any
Affiliate or limit in any way the right of the Company or any Affiliate to
terminate a Participant's service at any time, with or without cause.
(g) All certificates for Shares delivered under the Plan pursuant to any Award
shall be subject to such stock-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Shares are then listed, and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such
restrictions.
(h) No Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless
and until the Committee in its sole discretion has determined that any such
offer, if made, would comply with all applicable requirements of the U.S.
federal securities laws and any other laws to which such offer, if made,
would be subject.
(i) This Plan is intended to constitute an "unfunded" plan and nothing
contained herein shall give any such Participant any rights that are
greater than those of a general unsecured creditor of the Company.
(j) The Company shall be authorized to withhold from any Award granted or
payment due under the Plan the amount of withholding taxes due in respect
of an Award or payment hereunder and to take such other action as may be
necessary in the opinion of the Company or Affiliate to satisfy all
obligations for the payment of such taxes. The Committee shall be
authorized to establish procedures for election by Participants to satisfy
such obligation for the payment of such taxes by delivery of or transfer of
Shares to the Company (to the extent the Participant has owned the
surrendered shares for more than six months if such a limitation is
necessary to avoid a charge to the Company for financial reporting
purposes), or by directing the Company to retain Shares (up to the
employee's minimum required tax withholding rate) otherwise deliverable in
connection with the Award.
(k) Nothing contained in the Plan shall prevent the Committee or the Board from
adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
(l) Any Award shall contain a provision that it may not be exercised at a time
when the exercise thereof or the issuance of shares thereunder would
constitute a violation of any federal or state law or listing requirements
of the New York Stock Exchange for such shares or a violation of any
foreign jurisdiction where Awards are or will be granted under the Plan.
The provisions of the Plan shall be construed, regulated and administered
according to the laws of the State of New York without giving effect to
principles of conflicts of law, except to the extent superseded by any
controlling Federal statute.
(m) If any provision of the Plan is or becomes or is deemed invalid, illegal or
unenforceable in any jurisdiction, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to applicable laws or if it
cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan, it shall be stricken
and the remainder of the Plan shall remain in full force and effect.
(n) Awards may be granted to Participants who are foreign nationals or employed
outside the United States, or both, on such terms and conditions different
from those applicable to Awards to Employees or officers of the Company or
an Affiliate employed in the United States as may, in the judgment of the
Committee, be necessary or desirable in order to recognize differences in
local law or tax policy. The Committee also may impose conditions on the
exercise or vesting of Awards in order to minimize the Company's obligation
with respect to tax equalization for Employees or officers of the Company
or an Affiliate on assignments outside their home country.
(o) If approved by the Committee in its sole discretion, an absence or leave of
an Employee (or officer of the Company or an Affiliate) because of military
or governmental service, disability or other reason shall not be considered
an interruption of service for any purpose under the Plan.
SECTION 17. TERM OF PLAN
The Plan shall terminate on the tenth anniversary of the Effective Date, unless
sooner terminated by the Board pursuant to Section 14, provided that Awards
granted prior to such anniversary may extend beyond such date.
SECTION 18. COMPLIANCE WITH SECTION 16
With respect to Participants subject to Section 16 of the Exchange Act
("Members"), transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent that compliance with any Plan provision applicable solely to such
Members that is included solely for purposes of complying with Rule 16b-3 is not
required in order to bring a transaction by such Member in compliance with Rule
16b-3, it shall be deemed null and void as to such transaction, to the extent
permitted by law and deemed advisable by the Committee. To the extent any
provision in the Plan or action by the Committee involving such Members is
deemed not to comply with an applicable condition of Rule 16b-3, it shall be
deemed null and void as to such Members, to the extent permitted by law and
deemed advisable by the Committee.
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PROXY
WESTWOOD ONE, INC.
Proxy for 2005 Annual Meeting of Shareholders for Holders of Common Stock
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
WESTWOOD ONE, INC.
The undersigned shareholder of Westwood One, Inc., a Delaware corporation
(the "Company"), hereby appoints Andrew Zaref and David Hillman as the
undersigned's attorneys, agents and proxies, each with full power of
substitution to attend and act for the undersigned at the 2005 Annual Meeting of
Shareholders of the Company to be held on May 19, 2005 at 10:00 a.m., Pacific
Time, in The Salon Royal II Meeting Room of the Wyndham Bel Age, 1020 North San
Vicente Boulevard, West Hollywood, California 90069 and any adjournments
thereof, and to represent and vote as designated on the reverse side all of the
shares of Common Stock of the Company that the undersigned would be entitled to
vote if personally present at the 2005 Annual Meeting.
If no choice is specified on the reverse side, the proxy will be voted as to all
shares of the undersigned FOR the election of all nominees for directorship
listed on the reverse side and FOR proposals 2 and 3.
The proxies, and each of them, shall have all the powers that the
undersigned would have if acting in person. The undersigned hereby revokes any
other proxy to vote at the Annual Meeting and hereby ratifies and confirms all
that the proxies, and each of them, may lawfully do by virtue hereof. With
respect to matters not known at the time of the solicitation of this proxy, the
proxies are authorized to vote in accordance with their discretion.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
----------- -----------
SIDE SIDE
X Please mark votes as in this example.
-----
The proxies present at the Annual Meeting, either in person or by substitute (or
if only one shall be present and act, then that one), shall vote the shares
represented by this proxy in the manner indicated below by the shareholder. IF
NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED ON THIS PROXY, IT WILL BE VOTED
FOR ITEMS 1, 2 and 3 SHOWN BELOW. The Board of Directors recommends a vote FOR
all nominees in Item 1, FOR Item 2 AND FOR Item 3.
1. Election of Class III Directors. Nominees: (01) Gerald Greenberg, (02)
Steven A. Lerman, (03) Joel Hollander and (04) Robert K. Herdman
----- FOR ALL NOMINEES ----- WITHHELD FROM ALL NOMINEES
----- FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
2. Ratification of the selection of PricewaterhouseCoopers LLP as the
independent accountants of the Company for the fiscal year ending December
31, 2005.
FOR AGAINST ABSTAIN
----- ----- -----
3. Approval of the 2005 Equity Compensation Plan.
FOR AGAINST ABSTAIN
----- ----- -----
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
-----
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
IMPORTANT: In signing this proxy, please sign your name or names
on the signature line in the same way as indicated on this proxy.
When signing as an attorney, executor, administrator, trustee or
guardian, please give your full title as such. EACH JOINT OWNER
MUST SIG
Signature: Date: Signature: Date:
------------- ------- ------------- -------
PROXY
WESTWOOD ONE, INC.
Proxy for 2005 Annual Meeting of Shareholders for Holders of Class B Stock
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
WESTWOOD ONE, INC.
The undersigned shareholder of Westwood One, Inc., a Delaware corporation
(the "Company"), hereby appoints Andrew Zaref and David Hillman as the
undersigned's attorneys, agents and proxies, each with full power of
substitution to attend and act for the undersigned at the 2005 Annual Meeting of
Shareholders of the Company to be held on May 19, 2005 at 10:00 a.m., Pacific
Time, in The Salon Royal II Meeting Room of the Wyndham Bel Age, 1020 North San
Vicente Boulevard, West Hollywood, California 90069 and any adjournments
thereof, and to represent and vote as designated on the reverse side all of the
shares of Class B Stock of the Company that the undersigned would be entitled to
vote if personally present at the 2005 Annual Meeting.
If no choice is specified on the reverse side, the proxy will be voted as to all
shares of the undersigned FOR the election of all nominees for directorship
listed on the reverse side and FOR proposals 2 and 3.
The proxies, and each of them, shall have all the powers that the
undersigned would have if acting in person. The undersigned hereby revokes any
other proxy to vote at the Annual Meeting and hereby ratifies and confirms all
that the proxies, and each of them, may lawfully do by virtue hereof. With
respect to matters not known at the time of the solicitation of this proxy, the
proxies are authorized to vote in accordance with their discretion.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
----------- -----------
SIDE SIDE
X Please mark votes as in this example.
-----
The proxies present at the Annual Meeting, either in person or by substitute (or
if only one shall be present and act, then that one), shall vote the shares
represented by this proxy in the manner indicated below by the shareholder. IF
NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED ON THIS PROXY, IT WILL BE VOTED
FOR ITEMS 1, 2 AND 3 SHOWN BELOW. The Board of Directors recommends a vote FOR
all nominees in Item 1, FOR Item 2 AND FOR Item 3.
1. Election of Class III Directors.
Nominee: (01) Steven A. Lerman and (02) Joel Hollander
----- FOR THE NOMINEE ----- WITHHELD FROM THE NOMINEE
2. Ratification of the selection of PricewaterhouseCoopers LLP as the
independent accountants of the Company for the fiscal year ending December
31, 2005.
FOR AGAINST ABSTAIN
----- ----- -----
3. Approval of the 2005 Equity Compensation Plan.
FOR AGAINST ABSTAIN
----- ----- -----
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
-----
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
IMPORTANT: In signing this proxy, please sign your name or names
on the signature line in the same way as indicated on this proxy.
When signing as an attorney, executor, administrator, trustee or
guardian, please give your full title as such. EACH JOINT OWNER
MUST SIGN.
Signature: Date: Signature: Date:
------------- ------- ------------- -------