-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AnCS+15mCjVn9RoEZZFkq4D0U51eIPZBwBIN1jnY7VGCTmLhO0WH1838YP5DJi0k zdHwoCJmAKbydMymhWkISA== 0000771950-04-000015.txt : 20040315 0000771950-04-000015.hdr.sgml : 20040315 20040315173137 ACCESSION NUMBER: 0000771950-04-000015 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTWOOD ONE INC /DE/ CENTRAL INDEX KEY: 0000771950 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] IRS NUMBER: 953980449 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14691 FILM NUMBER: 04670660 BUSINESS ADDRESS: STREET 1: 40 WEST 57TH STREET STREET 2: 5TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2126412063 MAIL ADDRESS: STREET 1: 40 WEST 57TH STREET STREET 2: 5TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: WESTWOOD ONE DELAWARE INC /CA/ DATE OF NAME CHANGE: 19860408 10-K 1 wwo10k2003.txt WESTWOOD ONE, INC. 2003 10K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to ______ Commission file number 0-13020 WESTWOOD ONE, INC. (Exact name of registrant as specified in its charter) Delaware 95-3980449 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 40 West 57th Street 10019 New York, NY (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (212) 641-2000 Securities Registered Pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value [$0.01] New York Stock Exchange per share Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No ___ The aggregate market value of Common Stock held by non-affiliates of the registrant was approximately $2.88 billion based on the last reported sales price of the registrant's Common Stock on June 30, 2003 and assuming solely for the purpose of this calculation that all directors and officers of the registrant are "affiliates." The determination of affiliate status is not necessarily a conclusive determination for other purposes. As of March 1, 2004, 98,559,367 shares (excluding treasury shares) of Common Stock, par value $0.01 per share, were outstanding and 703,466 shares of Class B Stock, par value $0.01 per share, were outstanding. Documents Incorporated By Reference Portions of the registrant's definitive proxy statement for its annual meeting of shareholders (which will be filed with the Commission within 120 days of the registrant's last fiscal year end) are incorporated by reference in Part III of this Form 10-K. PART I Item 1. Business In this report, "Westwood One," "Company," "registrant," "we," "us" and "our" refer to Westwood One, Inc. General Westwood One supplies radio and television stations with information services and programming. The Company is the largest domestic outsource provider of traffic reporting services and the nation's largest radio network, producing and distributing national news, sports, talk, music and special event programs, in addition to local news, sports, weather, video news and other information programming. The Company derives substantially all of its revenues from the sale of :10 second, :30 second and :60 second commercial airtime to advertisers. The Company obtains the commercial airtime it sells to advertisers from radio and television affiliates in exchange for the programming it provides to them and in some cases, for cash compensation. That commercial airtime is sold to local/regional advertisers (typically :10 second commercial airtime) and to national advertisers (typically :30 or :60 second commercial airtime). By purchasing commercial airtime from the Company, advertisers are able to have their commercial messages broadcast on radio and television stations throughout the United States, reaching demographically defined listening audiences. The Company provides local traffic and information broadcast reports in over 95 Metro Survey Area markets (referred to herein as MSA markets) in the United States. The Company also offers radio stations traditional news services, including CBS Radio news and CNN Radio news, in addition to seven 24-hour satellite-delivered continuous play music formats ("24/7 Formats") and weekday and weekend news and entertainment features and programs. These programs include: major sporting events, including the National Football League, Notre Dame football and other college football and basketball games, the National Hockey League, the Masters and the Olympics, live, personality intensive talk shows, live concert broadcasts, countdown shows, music and interview programs; and exclusive satellite simulcasts with cable networks. Westwood One is managed by Infinity Broadcasting Corporation ("Infinity"), a wholly-owned subsidiary of Viacom Inc, pursuant to a management agreement between the Company and Infinity which expires on March 31, 2009 (the "Agreement" or "Management Agreement"). Industry Background Radio Broadcasting There are approximately 10,300 commercial radio stations in the United States. A radio station selects a style of programming ("format") to attract a target listening audience and thereby attracts advertisers that are targeting that audience demographic. There are many formats from which a station may select, including news, talk, sports and various types of music and entertainment programming. A radio station has two principal ways of effectively competing for revenues. First, it can differentiate itself in its local market by selecting and successfully executing a format targeted at a particular audience thus enabling advertisers to place their commercial messages on stations aimed at audiences with certain demographic characteristics. A station can also broadcast special programming, syndicated shows, sporting events or national news products, such as those supplied by Westwood One, not available to its competitors within its format. National programming broadcast on an exclusive geographic basis can help differentiate a station within its market, and thereby enable a station to increase its audience and advertising revenue. Radio Advertising Radio advertising time can be purchased on a local, regional or national basis. Local and regional purchases allow an advertiser to select specific radio stations in chosen geographic markets for the broadcast of commercial messages. Local and regional purchases are typically best suited for an advertiser whose business or ad campaign is in a specific geographic area. Advertising purchased -1- from a radio network allows an advertiser to target its commercial messages to a specific demographic audience, nationally on a cost-efficient basis. In addition, an advertiser can choose to emphasize its message in a certain market or markets by supplementing a national purchase with local and/or regional purchases. To verify its network audience delivery and demographic composition, specific measurement information is available to advertisers from independent rating services such as Arbitron and their RADAR rating service. The rating service provides demographic information such as the age and gender composition of the listening audiences. Consequently, advertisers can verify that their advertisements are being heard by their target listening audience. Business Strategy/Services The Company's business strategy is to provide for the programming needs of radio stations by supplying to radio stations programs and services that individual stations may not be able to produce on their own on a cost effective basis. The Company offers radio stations traffic and news information as well as a wide selection of regularly scheduled and special event syndicated programming and 24/7 Formats. The information, programs and formats are produced by the Company and, therefore, the stations typically have virtually no production costs. With respect to the Company's programs and formats, each program or format is offered for broadcast by the Company exclusively to one station in its geographic market, which assists the station in competing for audience share in its local marketplace. In addition, except for news programming, Westwood One's programs contain available commercial airtime that the stations may sell to local advertisers. Westwood One typically distributes promotional announcements to the stations and occasionally places advertisements in trade and consumer publications to further promote the upcoming broadcast of its programs. In 1996, the Company expanded its product offerings to include providing local traffic, news, sports and weather programming to radio stations and other media outlets in selected cities across the United States. This expansion gave the Company's advertisers the ability to easily supplement their national purchases with local and regional purchases from the Company. It also allowed the Company to develop relationships with local and regional advertisers. In 1996 and 1998, the Company acquired the operating assets of Shadow Traffic in a total of 14 major metropolitan markets (4 in 1996 and 10 in 1998). In 1999, Westwood One significantly expanded its local and regional reach through its merger with the country's largest traffic service provider, Metro, which broadcast information reports in 67 of the 75 largest MSA markets in the United States. Since then, the Company has expanded its reach to more than 95 of the largest MSA markets. In late 2000, the Company continued its expansion of products with its acquisition of the operating assets of SmartRoute Systems, Inc. ("SmartRoute"), a company which collects, organizes and distributes a database of advanced traveller information through various electronic media and telecommunications. Westwood One enters into affiliation agreements with radio stations which require the affiliate to provide the Company with a specific number of commercial positions which it aggregates by similar day and time periods and resells to its advertisers. Some affiliation agreements also require a station to broadcast the Company's programs and to use a portion of the program's commercial slots to air national advertisements and any related promotional spots. With respect to 24/7 Formats, the Company typically receives a portion of the commercial airtime and a cash fee from the affiliated stations in exchange for the stations receiving the right to broadcast the formats. Radio stations in the top 200 national markets typically also receive compensation for airing national advertising spots. Affiliation agreements specify the number of times and the approximate daypart each program and advertisement may be broadcast. Westwood One requires that each station complete and promptly return to the Company an affidavit (proof-of-performance) that verifies the time of each broadcast. Affiliation agreements generally run for a period of at least one year, are automatically renewable for subsequent periods and are cancelable by either the Company or the station upon 90 days' notice. The Company has personnel responsible for station sales and marketing its programs to radio stations. The Company's staff develops and maintains close, professional relationships with radio station personnel to provide them with quick programming assistance. Local Traffic and Information Programming The Company, through its Traffic and Information Division, provides traffic reports and local news, weather and sports information programming to radio and television affiliates. The Company gathers traffic and other data utilizing the Company's information-gathering infrastructure, which includes aircraft (helicopters and -2- airplanes), broadcast-quality remote camera systems positioned at strategically located fixed positions and on aircraft, mobile units and wireless systems, and by accessing various government-based traffic tracking systems. The Company also gathers information from various third-party news and information services. The information is processed, converted into broadcast copy and entered into the Company's computer systems by the Company's local writers and producers. This permits the Company to easily resell the information to third parties for distribution through the internet, wireless devices or personnel digital assistants ("PDA") and various other media systems. The Company's professional announcers read the customized reports on the air. The Company's information reports (including the length of report, content of report, specific geographic coverage area, time of broadcast, number of reports aired per day, broadcaster's style, etc.) are customized to meet each individual affiliate's requirements. The Company typically works closely with the program directors, news directors and general managers of its affiliates to ensure that the Company's services meet its affiliates' goals and standards. The Company and its affiliates jointly select the on-air talent to ensure that each on-air talent's style is appropriate for the station's format. The Company's on-air talent often become integral "personalities" on such affiliate stations as a result of their significant on-air presence and interaction with the stations' on-air personnel. In order to realize operating efficiencies, the Company endeavors to utilize its professional on-air talent on multiple affiliate stations within a particular market. The Company believes that its extensive fleet of aircraft and other information-gathering technology and broadcast equipment have allowed the Company to provide high quality programming, enabling it to retain and expand its affiliate base. In the aggregate, the Company utilizes approximately: 125 helicopters and fixed-wing aircraft; 30 mobile units; 30 airborne camera systems; 125 fixed-position camera systems; 70 broadcast studios; and 1,400 broadcasters and producers. The Company also maintains a staff of computer programmers and graphics experts to supply customized graphics and other visual programming elements to television station affiliates. In addition, the Company's operations centers and broadcast studios have sophisticated computer technology, video and broadcast equipment and cellular and wireless technology, which enables the Company's on-air talent to deliver reports to its affiliates. The infrastructure and resources dedicated to a specific market by the Company are determined by the size of the market, the number of affiliates the Company serves in the market and the type of services being provided. The Company generally does not require its affiliates to identify the Company as the supplier of its information reports. This provides the Company's affiliates with a high degree of customization and flexibility, as each affiliate has the right to present the information reports provided by the Company as if the affiliate had generated the reports with its own resources. As a result of its extensive network of operations and talent, the Company regularly reports breaking and important news stories and provides its affiliates with live coverage of these stories. The Company is able to customize and personalize its reports of breaking stories using its individual affiliates' call letters from the scene of news events. Past examples have included, among others, providing live airborne coverage of the September 11 terrorist attack on the World Trade Center and the Seattle earthquake. By using our news helicopters, the Company feeds live video to television affiliates around the country. Moreover, by leveraging our infrastructure, the same reporters provide live customized airborne reports for the Company's radio affiliates via the Company's Metro Source service, which is described below. The Company believes that it is the only radio network news organization that has local studio operations that cover in excess of 95 markets and that is able to provide customized reports to these markets. Metro Source, an information service available to subscribing affiliates, is an information system and digital audio workstation that allows the Company's news affiliates to receive via satellite and view, write, edit and report the latest news, features and show preparation material. With this product, the Company provides continuously updated and breaking news, weather, sports, business and entertainment information to its affiliate stations which have subscribed to the service. Information and content for Metro Source is primarily generated from the Company's staff of news bureau chiefs, state correspondents and professional news writers and reporters. Local, regional and national news and information stories are fed to the Company's national news operations center in Phoenix, Arizona where the information is verified, edited, produced and disseminated via satellite to the Company's internal Metro Source workstations located in each of its operations centers and to workstations located at affiliate radio stations nationwide. Metro Source includes proprietary software that allows for customizing reports and editing in both audio and text formats. The benefit to stations is that Metro Source allows them to substantially reduce time and cost from the news gathering and editing process at the station level, while providing greater volume and quality news and information coverage from a single source. -3- Television Programming Services The Company supplies Television Traffic Services ("MetroTV Services") to over 200 television stations. Similar to its radio programming services, with its MetroTV Services the Company supplies customized information reports which are generally delivered on air by its reporters to its television station affiliates. In addition, the Company supplies customized graphics and other visual programming elements to its television station affiliates. The Company utilizes live studio cameras in order to enable its traffic reporters to provide its Video News Services on television from the Company's local broadcast studios. In addition, the Company provides its Video News Services from its aircraft and fixed-position based camera systems. The Video News Services include: (i) live video coverage from strategically located fixed-position camera systems; (ii) live video news feeds from the Company's aircraft; and (iii) full-service, 24 hours per day/7 days per week video coverage from the Company's camera crews using broadcast quality camera equipment and news vehicles. Information Services The Company's Information Services ("IS") develops non-broadcast traffic information. IS develops innovative techniques for gathering local traffic and transportation information, as well as new methods of distributing such information to the public. The Company believes that in order to remain competitive and to continue to provide an information product of the highest quality to its affiliates, it is necessary to invest in and participate in the development of new technology. Accordingly, in 2000 the Company acquired the operating assets of SmartRoute. The Company is currently working with several public and private entities across the United States to improve dissemination of traffic and transportation information. The Company is a supplier of information to the wireless telephone industry, providing customized traffic information, direction services, and other local information to wireless subscribers via the Company's STAR JAM (TM) and STAR FIND (TM)services. IS revenues are not presently a significant source of revenues to the Company. The Company, through SmartRoute, collects, organizes and distributes a database of advanced traveler information to automobiles, homes and offices through various electronic media and telecommunications. The Company delivers its information under the SmartTraveler brand name. In addition, the Company has participated in a number of federally funded Intelligent Transportation Systems Field Operational tests and Model Deployment Initiatives including the AZTech Model Deployment in Phoenix, the Smart Trek Model Deployment in Seattle, TravInfo, TransCal, St. Louis, Salt Lake City, the Atlanta Olympics Technology Showcase, Partners in Motion in the Washington DC area, Advanced Regional Traffic Interactive Management and Information System Program in Ohio, Kentucky and Indianapolis, ORION City Model deployment with Minnesota DOT and Traffic Wise in Indianapolis, and Advanced Traveler Information System in Massachusetts, Connecticut, Pennsylvania and New Jersey. The Company has been working with a variety of private companies to deploy commercial products and services involving traveler information. These relationships allow for the provision of information on a personalized basis through numerous delivery mechanisms, including the internet, paging, FM subcarrier, traditional cellular and newly-developed and evolving wireless systems. Information can be delivered to a wide array of devices including pagers, computers, and in-vehicle navigation and information systems. National Radio Programming The Company produces and distributes 24/7 Formats, regularly scheduled and special syndicated programs, including exclusive live concerts, music and interview shows, national music countdowns, lifestyle short features, news broadcasts, talk programs, sporting events, and sports features. The Company controls most aspects of the production of its programs, thereby being able to tailor its programs to respond to current and changing listening preferences. The Company produces regularly scheduled short-form programs (typically five minutes or less), long-form programs (typically 60 minutes or longer) and 24/7 Formats. Typically, the short-form programs are produced at the Company's in-house facilities located in Culver City, California, and New York, New York. The long-form programs include shows produced primarily at the Company's in-house production facilities and recordings of live concert performances and sports events made on location. The 24/7 Formats are produced at the Company's facilities in Valencia, California. Westwood One also produces and distributes special event syndicated programs. In 2003, the Company produced and distributed numerous special event programs, -4- including exclusive radio broadcasts of The Grammy Awards, VH-1's 2003 Rock & Roll Hall of Fame Induction, the Academy of Country Music Award, MTV Music Awards and the BET Awards, among others. Westwood One obtains most of the programming for its concert series by recording live concert performances of prominent recording artists. The agreements with these artists often provide the exclusive right to broadcast the concerts worldwide over the radio (whether live or pre-recorded) for a specific period of time. The Company may also obtain interviews with the recording artist and retain a copy of the recording of the concert and the interview for use in its radio programs and as additions to its extensive tape library. The agreements provide the artist with master recordings of their concerts and nationwide exposure on affiliated radio stations. In certain cases, the artists may receive compensation. Westwood One's syndicated programs are primarily produced at its in-house production facilities. The Company determines the content and style of a program based on the target audience it wishes to reach. The Company assigns a producer, writer, narrator or host, interviewer and other personnel to record and produce the programs. Because Westwood One controls the production process, it can refine the programs' content to respond to the needs of its affiliated stations and national advertisers. In addition, the Company can alter program content in response to current and anticipated audience demand. The Company produces and distributes seven 24/7 Formats providing music, news and talk programming for Country, Hot Country, Adult Contemporary, Soft AC, Oldies, Adult Standards, and the Adult Rock and Roll formats. Using its production facilities in Valencia, California, the Company provides all the programming for stations affiliated with each of these formats. Affiliates compensate the Company for these formats by providing the Company with a portion of their commercial air time and, in most cases, cash fees. The Company believes that its tape library is a valuable asset for its future programming and revenue generating capabilities. The library contains previously broadcast programs, live concert performances, interviews, daily news programs, sports and entertainment features, Capitol Hill hearings and other special events. New programs can be created and developed at a low cost by excerpting material from the library. Advertising Sales and Marketing The Company packages its radio commercial airtime on a network basis, covering all affiliates in relevant markets, either locally, regionally or nationally. This packaged airtime typically appeals to advertisers seeking a broad demographic reach. Because the Company generally sells its commercial airtime on a network basis rather than station-by-station, the Company does not compete for advertising dollars with its local radio station affiliates. The Company believes that this is a key factor in maintaining its affiliate relationships. The Company packages its television commercial airtime on a local regional and national network basis. The Company has developed a separate sales force to sell its television commercial airtime and to optimize the efforts of the Company's national internal structure of sales representatives. The Company's advertising sales force is comprised of approximately 300 sales representatives. In most of the markets in which the Traffic and Information Division conducts operations, the Company maintains an advertising sales office as part of its operations center. The Company's advertising sales force is able to sell available commercial airtime in any and all of the Company's markets in addition to selling such airtime in each local market, which the Company believes affords its sales representatives an advantage over certain of its competitors. For example, an airline advertiser can purchase sponsorship advertising packages in multiple markets from the Company's local sales representative in the city in which the airline is headquartered. The Company's typical radio advertisement for traffic and information programming consists of an opening announcement and a ten-second commercial message presented immediately prior to, in the middle of, or immediately following a regularly scheduled information report. Because the Company has numerous radio station affiliates in each of its markets (averaging approximately 25 affiliates per market), the Company believes that its traffic and information broadcasts reach more people, more often, in a higher impact manner than can be achieved using any other advertising medium. The Company combines its commercial airtime into multiple "sponsorship" packages which it then sells as an information sponsorship package to advertisers throughout its networks on a local, regional or national basis, primarily during morning and afternoon drive periods. The Company generally does not allow an advertiser to select individual stations from its networks on which to run its advertising campaign. The Company believes that the positioning of advertisements within or adjacent to its information reports appeals to advertisers because the advertisers' messages are broadcast along with regularly scheduled programming during peak -5- morning and afternoon drive times when a majority of the radio audience is listening. Radio advertisements broadcast during these times typically generate premium rates. Moreover, surveys commissioned by the Company demonstrate that because the Company's customized information reports are related to topics of significant interest to listeners, listeners often seek out the Company's information reports. Since advertisers' messages are embedded in the Company's information reports, such messages have a high degree of impact on listeners and generally will not be "pre-empted" (i.e., moved by the radio station to another time slot). Most of the Company's advertisements are read live by the Company's on-air talent, providing the Company's advertisers with the added benefit of an implied endorsement for their product. Westwood One's Network Division provides national advertisers with a cost-effective way to communicate their commercial messages to large listening audiences nationwide through purchases of commercial airtime in its national radio networks and programs. An advertiser can obtain both frequency (number of exposures to the target audience) and reach (size of listening audience) by purchasing advertising time from the Company. By purchasing time in networks or programs directed to different formats, advertisers can be assured of obtaining high market penetration and visibility as their commercial messages will be broadcast on several stations in the same market at the same time. The Company, on occasion, supports its national sponsors with promotional announcements and advertisements in trade and consumer publications. This support promotes the upcoming broadcasts of Company programs and is designed to increase the advertisers' target listening audience. Generally, the Company provides its MetroTV Services to television stations in exchange for thirty-second commercial airtime that the Company packages and sells on a regional and national basis. The amount and placement of the commercial airtime that the Company receives from television stations varies by market and the type of service provided by the Company. As the Company has provided enhanced television video services, it has been able to acquire more valuable commercial airtime. The Company believes that it offers advertisers significant benefits because, unlike traditional television networks, the Company often delivers more than one station in major markets and advertisers may select specific markets. The Company has established a morning TV news network for its advertisers' commercials to air during local news programming and local news breaks from 5:30 a.m. to 9:00 a.m. Because the Company has affiliated a large number of network television stations in major markets, its morning news network delivers a significant national household rating in an efficient and compelling local news environment. As the Company continues to expand its service offerings for local television affiliates, it plans to create additional news networks to leverage its television news gathering infrastructure. Competition In the MSA markets in which it operates, the Company competes for advertising revenue with local print and other forms of communications media including magazines, outdoor advertising, network radio and network television advertising, transit advertising, direct response advertising, yellow page directories, internet/new media and point-of-sale advertising. Although the Company is significantly larger than the next largest provider of traffic and local information services, there are several multi-market operations providing local radio and television programming services in various markets. In addition, the recent consolidation of the radio industry has created opportunities for large radio groups, such as Clear Channel Communications, to gather information on their own. In marketing its programs to national advertisers, the Company directly competes with other radio networks as well as with independent radio syndication producers and distributors. More recently, as a result of consolidation in the radio industry, companies owning large groups of stations have begun to create competing networks that have resulted in additional competition for network radio advertising expenditures. In addition, the Company competes for advertising revenue with network television, cable television, print and other forms of communications media. The Company believes that the quality of its programming and the strength of its station relations and advertising sales forces enable it to compete effectively with other forms of communication media. Westwood One markets its programs to radio stations, including affiliates of other radio networks, that it believes will have the largest and most desirable listening audience for each of its programs. The Company often has different programs airing on a number of stations in the same geographic market at the same time. The Company believes that in comparison with any other independent radio syndication producer and distributor or radio network it has a more diversified selection of programming from which national advertisers and radio stations may choose. In addition, the Company both produces and distributes programs, thereby enabling it to respond more effectively to the demands of advertisers and radio stations. The increase in the number of program formats has led to increased competition among local radio stations for audience. As stations attempt to differentiate themselves in an increasingly competitive environment, their demand for quality programming available from outside programming sources increases. This demand -6- has been intensified by high operating and production costs at local radio stations and increased competition for local advertising revenue. Government Regulation Radio broadcasting and station ownership are regulated by the Federal Communications Commission (the "FCC"). Westwood One, as a producer and distributor of radio programs and information services, is generally not subject to regulation by the FCC. The Traffic and Information Division utilizes FCC regulated two-way radio frequencies pursuant to licenses issued by the FCC. Employees On February 1, 2004, Westwood One had approximately 2,500 employees, including an advertising sales force of approximately 300 people and 800 part-time employees. In addition, the Company maintains continuing relationships with approximately 175 independent writers, program hosts, technical personnel and producers. Approximately 600 of the Company's employees are covered by collective bargaining agreements. The Company believes relations with its employees, unions, and independent contractors are satisfactory. Available Information We are a Delaware corporation. We re-incorporated in Delaware on June 21, 1985. Our current and periodic reports filed with the Securities and Exchange Commission, including amendments to those reports, may be obtained through our internet website at www.westwoodone.com free of charge as soon as reasonably practicable after we file these reports with the SEC. Item 2. Properties The Company owns a 7,600 square-foot building in Culver City, California, which houses the syndicated program production facilities and a 14,000 square-foot building in Culver City, California, which contains administrative, and sales and marketing offices. The Company also owns a 10,000 square-foot building adjacent to its administrative and sales and marketing offices, which it subleases. In addition, the Company leases operation centers/broadcast studios and marketing and administrative offices across the United States consisting of over 275,000 square feet in the aggregate, pursuant to the terms of various lease agreements. The Company believes that its facilities are adequate for its current level of operations. Item 3. Legal Proceedings None. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of the Company's shareholders during the fourth quarter of the year ended December 31, 2003. -7- PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters On March 1, 2004 there were approximately 219 holders of record of the Company's Common Stock, several of which represent "street accounts" of securities brokers. Based upon the number of proxies requested by brokers in conjunction with its 2003 shareholders' meeting, the Company estimates that the total number of beneficial holders of the Company's Common Stock exceeds 5,000. Since December 15, 1998, the Company's Common Stock has been traded on the New York Stock Exchange ("NYSE") under the symbol "WON". The following table sets forth the range of high and low last sales prices on the NYSE for the Common Stock for the calendar quarters indicated. 2003 High Low ---- ---- --- First Quarter $39.15 $29.60 Second Quarter 35.56 31.05 Third Quarter 33.73 29.30 Fourth Quarter 34.40 29.60 2002 ---- First Quarter $40.00 $28.80 Second Quarter 39.73 32.46 Third Quarter 37.04 25.66 Fourth Quarter 38.98 31.72 The last sales price for our Common Stock on the NYSE on March 10, 2004 was $29.76. The Company does not intend to pay cash dividends. No cash dividend was paid on the Company's stock during 2003 or 2002, and the payment of dividends may be restricted by the terms of its loan agreements. There is no established public trading market for our Class B Stock. However, the Class B Stock is convertible to Common Stock on a share-for-share basis. Equity Compensation Plan Information The following table contains information regarding equity compensation plans and warrants issued to Infinity as of December 31, 2003:
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 Options (1) 10,319,549 $21.27 1,653,600 Warrants (2) 4,500,000 49.44 N/A Equity compensation plans not Total 14,819,549 1,653,600
(1) - Options included herein were granted or are available for grant as part of the Company's 1989 and/or 1999 stock option plans that were approved by shareholders of the Company. The Company's 1999 stock option 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 Infinity Management Agreement, and were approved by shareholders of the Company on May 29, 2002. Of the seven warrants issued, two warrants to -8- 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. Item 6. Selected Financial Data (In thousands except per share data)
2003 (1) 2002 (1) 2001 2000 1999 (2) ---- ---- ---- ---- ---- OPERATING RESULTS FOR YEAR ENDED DECEMBER 31: Net Revenues $539,226 $550,751 $515,940 $553,693 $358,305 Operating and Corporate Costs, Excluding Depreciation and Amortization 357,688 360,390 349,936 388,095 267,294 Depreciation and Amortization 11,513 11,464 67,611 62,104 30,214 Operating Income 170,025 178,897 98,393 103,494 60,797 Net Income $100,039 $109,115 $43,195 $42,283 $23,887 Income Per Basic Share $.99 $ 1.03 $.40 $.38 $.33 Income Per Diluted Share $.97 $ 1.00 $.38 $.36 $.30 BALANCE SHEET DATA AT DECEMBER 31: Current Assets $165,495 $153,628 $140,527 $ 153,881 $167,848 Working Capital 85,622 63,542 35,012 15,679 39,843 Total Assets 1,262,034 1,266,312 1,210,017 1,285,556 1,333,153 Long-Term Debt 300,366 232,135 152,000 168,000 158,000 Total Shareholders' Equity 835,950 903,040 915,371 949,892 1,019,775
(1) Results for the years ended December 31, 2003 and 2002 include the effects of adopting Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142"). Retroactive application prior to January 1, 2002 was prohibited. (2) Results for the year ended December 31, 1999 include the results of Metro from the date of the merger on September 22, 1999. - -- No cash dividend was paid on the Company's Common Stock during the periods presented above. -9- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (In thousands except for share and per share amounts) EXECUTIVE OVERVIEW Westwood One supplies radio and television stations with information services and programming. The Company is the largest domestic outsource provider of traffic reporting services and the nation's largest radio network, producing and distributing national news, sports, talk, music and special event programs, in addition to local news, sports, weather, video news and other information programming. The commercial airtime that we sell to our advertisers is acquired from radio and television affiliates in exchange for our programming, content, information, and in certain circumstances, cash compensation. The radio broadcasting industry has experienced a significant amount of consolidation in recent years. As a result, certain major radio station groups, including Infinity and Clear Channel Communications, have emerged as powerful forces in the industry. Westwood One is managed by Infinity under a Management Agreement, which expires on March 31, 2009. While Westwood One provides programming to all major radio station groups, the Company has affiliation agreements with most of Infinity's owned and operated radio stations, which in the aggregate, provide the Company with a significant portion of the audience that it sells to advertisers. Accordingly, the Company's operating performance could be materially adversely impacted by its inability to continue to renew its affiliate agreements with Infinity stations. The Company derives substantially all of its revenues from the sale of :10 second, :30 second and :60 second commercial airtime to advertisers. Our advertisers who target local/regional audiences generally find the most effective method is to purchase shorter duration :10 second advertisements, which are principally correlated to traffic and information related programming and content. Our advertisers who target national audiences generally find the most cost effective method is to purchase longer :30 or :60 second advertisements, which are principally correlated to news, talk, sports and music and entertainment related programming and content. Generally, the greater amount of programming we provide our affiliates the greater amount of commercial airtime is available for the Company to sell. Additionally, over an extended period of time an increase in the listening audience results in our ability to generate more revenues. Our goal is to maximize the yield of our available commercial airtime to optimize revenues. In managing our business, we develop programming and exploit the commercial airtime by concurrently taking into consideration the demands of our advertisers on both a market specific and national basis, the demands of the owners and management of our radio station affiliates, and the demands of our programming partners and talent. Our continued success and prospects for growth are dependent upon our ability to manage the aforementioned factors in a cost effective manner. Our results may also be impacted by overall economic conditions, trends in demand for radio related advertising, competition, and risks inherent in our customer base, including customer attrition and our ability to generate new business opportunities to offset any attrition. There are a variety of factors that influence the Company's revenues on a periodic basis including but not limited to: (i) economic conditions and the relative strength or weakness in the United States economy, (ii) advertiser spending patterns and the timing of the broadcasting of our programming, principally the seasonal nature of sports programming, (iii) advertiser demand on a local/regional or national basis for radio related advertising products, (iv) increases or decreases in our portfolio of program offerings and related audiences, including changes in the demographic composition of our audience base and (v) competitive and alternative programs and advertising mediums. Our ability to specifically isolate the relative historical aggregate impact of price and volume is not practical as commercial airtime is sold and managed on an order-by-order basis. It should be noted, however, that the Company closely monitors advertiser commitments for the current calendar year, with particular emphasis placed on the next three month period. Factors impacting the pricing of commercial airtime include, but are not limited to: (i) the dollar value, length and breadth of the order, (ii) the desired reach and audience demographic, (iii) the level of commercial airtime available for the desired demographic requested by the advertiser for sale at the time their order is negotiated; and (iv) the proximity of the date of the order placement to the desired broadcast date of the commercial airtime. Our commercial airtime is perishable, and accordingly, our revenues are significantly impacted by the commercial airtime available at the time we enter into an arrangement with an advertiser. The principal critical components of our operating expenses are programming, production and distribution costs (including affiliate compensation and broadcast rights fees), selling expenses (including bad debt expenses, commissions and promotional expenses), depreciation and amortization, and -10- corporate, general and administrative expenses. Corporate general and administrative expenses are primarily comprised of costs associated with the Infinity Management Agreement, personnel costs and other administrative expenses, including those associated with new corporate governance regulations. We consider the Company's operating cost structure to be predominantly fixed in nature, and as a result, the Company needs at least several months lead-time to make reductions in its cost structure to react to what it believes are more than temporary declines in advertiser demand. This factor is important in predicting the Company's performance in periods when advertiser revenues are increasing or decreasing. In periods where advertiser revenues are increasing, the fixed nature of a substantial portion of our costs means that Operating Income will grow faster than the related growth in revenue. Conversely, in a period of declining revenue Operating Income will decrease by a greater percentage than the decline in revenue because of the lead-time needed to reduce the Company's operating cost structure. Furthermore, if the Company perceives a decline in revenue to be temporary, it may choose not to reduce its fixed costs, or may even increase its fixed costs, so as to not limit its future growth potential when the advertising marketplace rebounds. Revenues Revenues presented by type of commercial advertisements are as follows for the years ending December 31,:
2003 2002 2001 ---- ---- ---- $ % of Total $ % of Total $ % of Total - ---------- - ---------- - ---------- Local/Regional $283,687 53% $302,554 55% $290,760 56% National 255,539 47% 248,197 45% 225,180 44% -------- ---- -------- ---- -------- ---- Total (1) $539,226 100% $550,751 100% $515,940 100% ======== ==== ======== ==== ======== ====
(1) As described above, the Company currently aggregates revenue data based on the type of commercial airtime sold. A number of advertisers purchase both local/regional and national commercial airtime. Accordingly, this factor should be considered in evaluating the relative revenues generated on a local/regional versus national basis. Our objective is to optimize total revenues from those advertisers. Revenues for the year ended December 31, 2003 decreased $11,525, or 2%, compared with the year ended December 31, 2002. The decrease was due principally to the absence of approximately $6,000 of revenues recorded in the prior year from the Company's exclusive 2002 Winter Olympics radio broadcast, an overall reduction in advertiser demand for our products immediately prior to and concurrent with the commencement of the war with Iraq, weaker relative demand in certain local/regional markets, reduced fee based traffic information revenues of approximately $1,000 due to the expiration of certain contracts, partially offset by approximately $7,000 of incremental revenues attributable to new programming developed to reach national audiences. During the year ended December 31, 2003, revenues aggregated from the sale of local/regional airtime declined approximately 6%, or approximately $18,900, while national based revenues increased approximately 3%, or $7,300. The decrease in local/regional revenue was greatest in the northeast and Texas regions, while revenue in the western region increased. Despite the decrease in local/regional revenues, the Company continued to invest in new traffic and information markets. In 2003, the increase in our aggregated national based revenues was accomplished through attaining higher revenues in the news and sports programming categories through adding new sports programming and effective management of our commercial airtime partially offset by the absence of revenues from the 2002 Winter Olympics. Revenues for the year ended December 31, 2002 increased $34,811, or 7%, compared with the year ended December 31, 2001. The increase in revenue was attributable to higher advertiser demand and a better economic climate compared with 2001 where the 2001 annual results were adversely affected by the September 11, 2001 terrorist attacks. During the year ended December 31, 2002, revenues derived from the sale of local/regional and national airtime increased by approximately 4%, or $11,800, and 10%, or $23,000, respectively. During 2002, the Company invested in new traffic and information markets which contributed to revenue growth on a local/regional level. -11- In 2002, the increase in our national based revenues was attributable to the addition of new programming (approximately $14,600) including the radio broadcast of the 2002 Winter Olympics as well as a result of the overall improvement in economic conditions as further discussed above. We expect our revenues in 2004 to increase compared with 2003, resulting primarily from an anticipated overall increase in demand for our product offerings due to higher audience delivery, the Company's exclusive U.S. radio broadcast of the 2004 Summer Olympics, inventory management initiatives, and the development of new distribution alternatives for our content. Operating Costs Operating costs for the years ended December 31, 2003, 2002 and 2001 were as follows:
2003 2002 2001 ---- ---- ---- $ % of total $ % of total $ % of total - ---------- - ---------- - ---------- Programming, production and distribution expenses $227,141 65% $218,646 62% $208,759 61% Selling expenses 43,059 12% 47,829 14% 45,457 13% Other operating expenses 80,382 23% 85,910 24% 88,904 26% -------- ---- -------- ---- -------- ---- $350,582 100% $352,385 100% $343,120 100% ======== ==== ======== ==== ======== ====
Operating costs decreased 1% to $350,582 in 2003 from $352,385 in 2002, and increased 3% in 2002 from $343,120 in 2001. The 2003 decrease was principally attributable to approximately $3,200 of proceeds from an insurance settlement related to claims resulting from the September 11, 2001 terrorist attacks (included in Other operating expenses in the table above). Excluding this item, operating costs increased approximately $1,400, or less than 1% in 2003. The net increase is primarily attributable to: (i) increases in programming, production and distribution expenses resulting from costs related to the development of new or expanded program offerings, new traffic and information markets, higher sports rights fees resulting from both new programming and contractual rate increases with respect to existing program commitments and additional news costs to cover the war with Iraq, partially offset by the absence of costs associated with the Company's broadcast of the 2002 Winter Olympics, (ii) lower Selling expenses including lower bad debt expense (approximately $2,800), resulting from the absence of a significant customer's bankruptcy in 2002, and lower employee related expenses, principally resulting from lower commissions earned by the Company's sales personnel due to lower revenues and (iii) lower Other operating expenses due principally to the insurance settlement discussed above. The 2002 increase in Operating costs was principally attributable to: (i) an increase in programming, production and distribution expenses resulting from expenses associated with our radio broadcast of the 2002 Winter Olympics, higher sports rights fees and the opening of new traffic and information markets, partially offset by reductions in affiliate compensation and personnel costs, (ii) higher bad debt expenses resulting from a significant customer's bankruptcy (approximately $4,400), and lower personnel costs resulting from reductions and/or changes in sales related staffing levels and commission rates and (iii) lower other operating expenses due principally to reductions in personnel costs. We currently anticipate that operating costs will increase in 2004 compared with 2003 due to expenses attributable with the Company's broadcast of the 2004 Summer Olympics, additional investments in our national network audiences and programs and normal recurring contractual cost increases. In addition, we expect to make certain continued investments in our sales support functions to support our planned growth in revenues. Depreciation and Amortization Depreciation and amortization increased nominally to $11,513 in 2003 from $11,464 in 2002, and decreased 83% in 2002 from $67,611 in 2001. The decrease in 2002 was principally attributable to the Company's adoption of SFAS 142, which prohibits the Company from continuing to amortize goodwill and lower depreciation expense resulting from a change in useful lives surrounding certain studio and broadcasting equipment as well as a result of certain assets becoming fully depreciated. As a result of the extension of the Management Agreement with Viacom - approved by Shareholders on May 29, 2002, starting with the second quarter of 2004 and through the first quarter of 2009, the Company's quarterly amortization expense will increase by approximately $2,100. The increase will result from the higher amortization attributable to the fair market value of the warrants issued to Infinity as part of the extension of the Management Agreement. Corporate General and Administrative Expenses Corporate general and administrative expenses decreased 11% to $7,106 in 2003 from $8,005 in 2002, and increased 17% in 2002 from $6,816 in 2001. The 2003 decrease was principally attributable to lower compensation expense to Infinity -12- as no incentive bonus was earned, partially offset by higher expenses associated with our corporate governance activities, including fees incurred for professional services. The 2002 increase was principally attributable to a higher incentive bonus earned by Infinity pursuant to the terms of the Management Agreement and higher insurance costs. We expect our corporate general and administrative costs to increase in 2004 compared with 2003. We expect to incur increased expenses relating to our compliance and corporate governance activities. Further, we note that our incentive bonus arrangement with Infinity is variable, contingent upon our performance. Operating Income Operating income decreased 5% to $170,025 in 2003 from $178,897 in 2002, and increased 82% in 2002 from $98,393 in 2001. The 2003 decrease was principally attributable to the decline in revenues. The 2002 increase was primarily attributable to higher net revenue and lower depreciation and amortization expense resulting from the adoption of SFAS 142. On a pro forma basis, assuming the Company had adopted the provisions of SFAS 142 on January 1, 2001, the Company's operating income would have increased by approximately 24% in 2002. Interest Expense Interest expense was $10,132, $6,955 and $8,705 in 2003, 2002 and 2001, respectively. The 2003 increase was attributable to higher outstanding debt in 2003 and higher average interest rates as a result of the Company's issuance of $200,000 in a combination of 7 and 10-year fixed rate Senior Unsecured Notes in the fourth quarter of 2002. The 2002 decrease was attributable to lower interest rates, partially offset by higher debt levels resulting from increased share repurchases. Our average effective interest rate for 2003, 2002 and 2001 was 3.1%, 2.9% and 4.9%, respectively. The increase in the 2003 and 2002 debt levels results from share and warrant repurchases pursuant to the Company's stock repurchase program, which is further described below. We expect that our interest expense will increase in 2004 commensurate with our anticipated higher average debt levels. Provision for income taxes The income tax provisions for 2003, 2002 and 2001 are based on annual effective tax rates of 37.5%, 36.6% and 51.3%, respectively, resulting in income tax expense of $59,906, $62,937 and $45,564 in 2003, 2002 and 2001, respectively. The Company's effective income tax rate in 2003 was slightly higher than in 2002 principally as a result of higher state taxes resulting from recently enacted tax law changes in the states in which we operate. Both the Company's effective income tax rates and reported income tax expense in 2002 were affected by the Company's adoption of SFAS 142. On a pro forma basis, assuming the Company had adopted the provisions of SFAS 142 on January 1, 2001, the Company's effective income tax rate would have been approximately 35% in 2001. For the years ended December 31, 2003, 2002 and 2001 a portion of the Company's income tax expense is non-cash as a result of tax deductions related to stock option exercises and warrant purchases of $3,911, $39,245 and $32,901 respectively, which are credited directly to additional paid in capital. Net income Net income in 2003 decreased 8% to $100,039 ($.99 per basic share and $.97 per diluted share) from $109,115 ($1.03 per basic share and $1.00 per diluted share) in 2002 and increased 153% in 2002 from $43,195 ($.40 per basic share and $.38 per diluted share) in 2001. On a pro forma basis, assuming the Company had adopted the provisions of SFAS 142 on January 1, 2001, the Company's net income, net income per basic share and net income per diluted share would have increased by approximately 24%, 26% and 28%, respectively, in 2002. Earnings per share Weighted averages shares outstanding for purposes of computing basic earnings per share were 101,243,000, 105,992,000 and 107,551,000 in 2003, 2002 and 2001, respectively. The decreases in 2003 and 2002 were primarily attributable to Common Stock repurchases under the Company's stock repurchase program partially offset by additional share issuances as a result of stock option exercises. Weighted average shares outstanding for purposes of computing diluted earnings per share were 103,625,000, 109,101,000 and 112,265,000 in 2003, 2002 and 2001, respectively. The changes in weighted average diluted shares are due principally to the decrease in basic shares and the reduction in the dilutive effect of warrants issued pursuant to the Management Agreement due to the warrant repurchases in 2002 and 2001. -13- Liquidity and Capital Resources The Company continually projects anticipated cash requirements, which include share repurchases, acquisitions, capital expenditures, and principal and interest payments on its outstanding indebtedness. Funding requirements are financed through cash flow from operations and the issuance of short-term borrowings and/or long-term debt. At December 31, 2003, the Company's principal sources of liquidity were its cash and cash equivalents of $8,665 and available borrowings under its bank facility which is further described below. The Company has and continues to expect to generate significant cash flows from operating activities. For the years ended December 31, 2003, 2002 and 2001, net cash provided by operating activities were $107,870, $147,618 and $145,673, respectively. For 2003, net cash from operating activities decreased $39,748 from 2002. The reduction is primarily attributable to an increase in cash taxes paid resulting from lower tax benefits from the exercise of stock options and warrants. At December 31, 2003, the Company had an unsecured $205,000 bank revolving credit facility (the "Facility"), $50,000 in senior unsecured notes due in 2009 and $150,000 in senior unsecured notes due in 2012 (collectively the "Notes"). At December 31, 2003, the Company had available borrowings of $105,000 under its Facility ($205,000 at December 31, 2002). The amount of the Facility was scheduled to be reduced by $10,000 at the end of each quarter during 2004 until it matured on September 30, 2004. In March 2004, the Company refinanced its existing Facility, obtaining a five-year $120,000 term loan, which was fully borrowed on the closing date and the proceeds of which were used to repay outstanding borrowings under the Facility, and a five-year $180,000 revolving credit facility (collectively the "New Facility"). The terms of the New Facility are substantially the same as those contained in the Company's existing Facility, with the exception that the New Facility does not contain any provisions with respect to mandatory reductions. In addition, the Company has entered into, fixed to floating interest rate swap agreements for 50% of the notional amount of the Notes. The New Facility and/or Notes contain covenants relating to dividends, liens, indebtedness, and interest coverage and leverage ratios. None of these covenants are expected to have an impact on the Company's ability to operate and manage its business. In conjunction with the Company's objective of enhancing shareholder value, the Company's Board of Directors has authorized a stock repurchase program. In 2003, the Company purchased 5,534,000 shares of the Company's Common Stock for a total cost of $180,412. In 2002, the Company purchased approximately 7,414,000 shares of the Company's Common Stock and warrants for a total cost of $239,407 and in 2001, purchased approximately 6,152,000 shares of the Company's Common Stock and warrants for a total cost of $146,278. In 2004 (through February 2004), the Company repurchased an additional 855,000 shares of Common Stock at a cost of $26,888. The Company expects to continue to use its cash flow to repurchase its Common Stock. At the end of February 2004, the Company had authorization to repurchase up to an additional $351,753 of its Common Stock. The Company's business does not require, and is not expected to require, significant cash outlays for capital expenditures. The Company believes that its cash, other liquid assets, operating cash flows and available bank borrowings, taken together, provide adequate resources to fund ongoing operating requirements. Contractual Obligations and Commitments The following table lists the Company's future contractual obligations and commitments as of December 31, 2003:
Payments due by Period ------------------------ Contractual Obligations Total Less Than 1 Year 1 - 3 years 3 - 5 years More Than 5 years ----------------------- ----- ---------------- ----------- ----------- ----------------- Long-term Debt (1) $300,000 - - - $300,000 Capital Lease Obligations 7,360 $ 960 $ 1,920 $1,920 2,560 Operating Leases 37,512 6,921 12,077 9,895 8,619 Other Long-term Obligations 275,745 75,490 96,886 78,149 25,220 -------- ------- -------- ------- -------- Total Contractual Obligations $620,617 $83,371 $110,883 $89,964 $336,399 ======== ======= ======== ======= ========
(1) In March 2004, the Company refinanced its existing Facility, obtaining a five-year $120,000 term loan and a five-year $180,000 revolving credit facility. -14- The Company has long-term noncancelable operating lease commitments for office space and equipment. The Company has also entered into capital leases for satellite transponders. Included in Other Long-term Obligations enumerated in the table above, are various contractual agreements to pay for talent, broadcast rights, research and various related party arrangements, including $154,533 of payments due under the Management and Representation Agreements. See Related Parties below and Note 2 to the consolidated financial statements for further discussion. Related Parties Infinity holds a common equity position in the Company and provides ongoing management services to the Company under the terms of the Management Agreement. In return for receiving services under the Management Agreement, the Company compensates Infinity via an annual base fee and provides Infinity the opportunity to earn an incentive bonus if the Company exceeds pre-determined targeted cash flows. For the year ended December 31, 2003, 2002 and 2001, Infinity earned cash compensation of $2,793, $5,012 and $3,983, respectively. In addition to the base fee and incentive compensation described above, the Company granted to Infinity two vested and non-forfeitable warrants to purchase 4,000,000 shares in the aggregate (one warrant with an exercise price of $10.00 per share and the other warrant with an exercise price of $12.50 per share - each warrant represents 2,000,000 shares of Common Stock) in connection with extending the term of the Management Agreement in March 1999 for an additional term of five years commencing April 1, 1999. Such warrants were only exercisable to the extent the Company's Common Stock reached certain market prices, which have subsequently been achieved. In 2002 Infinity sold its $12.50 warrants, representing 2 million shares of Common Stock, to the Company receiving net proceeds aggregating $51,070. In 2001, Infinity sold its $10.00 warrants, representing 2 million shares of Common Stock, to the Company receiving net proceeds aggregating $41,350. The repurchase of the Infinity warrants for cash consideration has been reflected as a reduction to additional paid in capital during 2002 and 2001. On May 29, 2002, the Company's shareholders ratified an extension of the Management Agreement for an additional five-year term, which commences April 1, 2004 and expires on March 31, 2009. In return for receiving services under the Management Agreement, the Company will continue to compensate Infinity via an annual base fee and an opportunity to earn an annual incentive bonus provided certain performance objectives are met. Additionally, the Company granted to Infinity seven warrants convertible into 4,500,000 fully vested and nonforfeitable shares (comprised of two warrants to purchase 1,000,000 Common shares per warrant and five warrants to purchase 500,000 Common shares per warrant) to purchase Company Common Stock. For additional information on these warrants see Note 2 to our consolidated financial statements. In addition to the Management Agreement described above, the Company also enters into other transactions with Infinity in the normal course of business. Such arrangements include a representation agreement (including a related news programming agreement, a license agreement and a technical services agreement with an affiliate of Infinity - the "Representation Agreement") to operate the CBS Radio Networks, affiliation agreements with many of Infinity's radio stations and the purchase of programming rights from Infinity and affiliates of Infinity. The Management Agreement provides that all transactions, other than the Management Agreement and Representation Agreement to operate the CBS Radio Networks which were ratified by the Company's shareholders, between the Company and Infinity or its affiliates must 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. During 2003, the Company incurred expenses aggregating approximately $80,659 for the Representation Agreement, affiliation agreements and the purchase of programming rights from Infinity and affiliates ($77,566 in 2002 and $77,444 in 2001). Critical Accounting Policies and Estimates Westwood One's financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. Management continually evaluates its estimates and judgments including those related to allowances for doubtful accounts, useful lives of property, plant and equipment and intangible assets, and other contingencies. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that of our -15- significant accounting policies, the following may involve a higher degree of judgment or complexity. Allowances for doubtful accounts - we maintain allowances for doubtful accounts for estimated losses which may result from the inability of our customers to make required payments. We base our allowances on the likelihood of recoverability of accounts receivable by aging category, based on past experience and taking into account current collection trends that are expected to continue. If economic or specific industry trends worsen beyond our estimates, we would be required to increase our allowances for doubtful accounts. Alternatively, if trends improve beyond our estimates, we would be required to decrease our allowance for doubtful accounts. Our estimates are reviewed periodically, and adjustments are reflected through bad debt expense in the period they become known. Our bad debt expense approximated $3,600, or .7% of revenue, in 2003, $6,400, or 1.2% of revenue, in 2002, and $2,000, or .4% of revenue, in 2001 and changes in our bad debt experience can materially affect our results of operations. Our allowance for bad debts requires us to consider anticipated collection trends and requires a high degree of judgment. In addition, as fully described herein, our results in any reporting period could be impacted by relatively few significant bad debts. Estimated useful lives of property, plant and equipment and intangible assets - we estimate the useful lives of property, plant and equipment and intangible assets in order to determine the amount of depreciation and amortization expense to be recorded during any reporting period. The useful lives, which are disclosed in Note 1 of the consolidated financial statements, are estimated at the time the asset is acquired and are based on historical experience with similar assets as well as taking into account anticipated technological or other changes. If technological changes were to occur more rapidly than anticipated or in a different form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation and amortization expense in future periods. During 2002, the Company changed the useful lives of certain studio and broadcasting equipment. Alternately, these types of technological changes could result in the recognition of an impairment charge to reflect the write-down in value of the asset. We review these types of assets for impairment annually, or when events or circumstances indicate that the carrying amount may not be recoverable over the remaining lives of the assets. If an event occurs which would cause us to revise our estimates and assumptions used in analyzing the value of our goodwill or other intangibles, such revision could result in an impairment charge that could have a material impact on our financial results. Beginning January 1, 2002, in accordance with the provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), we no longer amortize goodwill but review at least annually for impairment. Valuation of stock options and warrants -- For purposes of computing the value of stock options and warrants, various valuation methods and assumptions can be used. The selection of a different valuation method or use of different assumptions may result in a value that is significantly different from that computed by the Company. In certain circumstances, usually depending on the complexity of the calculation, we may employ the services of a valuation expert. Recent Accounting Pronouncements Affecting Future Results In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" which was replaced in December 2003 by the issuance of FIN 46R ("FIN 46R"). FIN 46R explains how to identify variable interest entities ("VIEs") and how a company should assess its interests in a variable interest entity to decide whether to consolidate that entity. FIN 46R requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. The provisions of FIN 46R are effective for special purpose entities as of December 31, 2003. The Company has completed its review of its special purpose entities under FIN 46R and has determined that the application of FIN 46R did not impact the Company's consolidated financial position, results of operations or cash flows. The provisions of FIN 46R must be applied to VIEs as of March 31, 2004. The Company has determined that the adoption of the remaining provisions of FIN 46R will not have an impact on the Company. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." In general, SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS 149 did not have any impact on the Company's financial position, results of operations or cash flows. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." In accordance -16- with SFAS 150, financial instruments that embody obligations for the issuer are required to be classified as liabilities. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003, except for the provisions relating to mandatorily redeemable financial instruments which have been deferred indefinitely. The adoption of SFAS 150 did not have any impact on the Company's financial position. On December 17, 2003, the Staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 104 ("SAB 104"), Revenue Recognition, which supercedes SAB 101, Revenue Recognition in Financial Statements. SAB 104's primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superceded as a result of the issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." The adoption of SAB 104 did not have a material impact on the Company's financial position, results of operations or cash flows. Forward-Looking Statements and Factors Affecting Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on the behalf of the Company. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These statements are based on management's views and assumptions at the time the statements are made, however no assurances can be given that management's expectations will come to pass. The forward-looking statements included in this document are only made as of the date of this document and the Company does not have any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances. Factors That May Affect Forward-Looking Statements A wide range of factors could materially affect future developments and performance including the following: -- The Company is managed by Infinity under the terms of the Management Agreement, which expires in 2009. In addition, the Company has extensive business dealings with Infinity and its affiliates in its normal course of business. The Company's business prospects could be adversely affected by its inability to retain Infinity's services under the Management Agreement beyond the contractual term. -- The Company competes in a highly competitive business. Its radio programming competes for audiences and advertising revenues directly with radio and television stations and other syndicated programming, as well as with such other media as newspapers, magazines, cable television, outdoor advertising and direct mail. Audience ratings and revenue shares are subject to change and any adverse change in a particular geographic area could have a material and adverse effect on the Company's ability to attract not only advertisers in that region, but national advertisers as well. Future operations are further subject to many factors which could have an adverse effect upon the Company's financial performance. These factors include: - economic conditions, both generally and relative to the broadcasting industry; - shifts in population and other demographics; - the level of competition for advertising dollars; - fluctuations in programming costs; - technological changes and innovations; - changes in labor conditions; and - changes in governmental regulations and policies and actions of federal regulatory bodies. Although the Company believes that its radio programming will be able to compete effectively and will continue to attract audiences and advertisers, there can be no assurance that the Company will be able to maintain or increase the current audience ratings and advertising revenues. -- The radio broadcasting industry has experienced a significant amount of consolidation in recent years. As a result, certain major station groups, including Infinity and Clear Channel Communications, have emerged as powerful forces in the industry. Given the size and financial resources of these station groups, they may be able to develop their own programming as a substitute to that offered by the Company. Alternatively, they could seek to obtain programming from the Company's competitors. Any such occurrences, or merely the threat of such occurrences, could adversely affect the Company's ability to negotiate favorable terms with its station affiliates, to attract audiences and to attract advertisers. -17- -- Changes in U.S. financial and equity markets, including market disruptions and significant interest rate fluctuations, could impede the Company's access to, or increase the cost of, external financing for its operations and investments. -- Changes in tax rates may adversely affect the Company's profitability. -- The Company believes relations with its employees and independent contractors are satisfactory. However, the Company may be adversely affected by future labor disputes, which may lead to increased costs or disruption of operations in any of the Company's business units. This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative, but by no means all inclusive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Item 7A. Qualitative and Quantitative Disclosures about Market Risk In the normal course of business, the Company employs established policies and procedures to manage its exposure to changes in interest rates using financial instruments. The Company uses derivative financial instruments (fixed-to-floating interest rate swap agreements) for the purpose of hedging specific exposures and holds all derivatives for purposes other than trading. All derivative financial instruments held reduce the risk of the underlying hedged item and are designated at inception as hedges with respect to the underlying hedged item. Hedges of fair value exposure are entered into in order to hedge the fair value of a recognized asset, liability, or a firm commitment. In order to achieve a desired proportion of variable and fixed rate debt, in December 2002, the Company entered into a seven year interest rate swap agreement covering $25 million notional value of its outstanding borrowing to effectively float the interest rate at three-month LIBOR plus 74 basis points and two ten year interest rate swap agreements covering $75 million notional value of its outstanding borrowing to effectively float the interest rate at three-month LIBOR plus 80 basis points. These swap transactions allow the Company to benefit from short-term declines in interest rates. The instruments meet all of the criteria of a fair-value hedge. The Company has the appropriate documentation, including the risk management objective and strategy for undertaking the hedge, identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the hedging instrument's effectiveness offsets the exposure to changes in the hedged item's fair value or variability in cash flows attributable to the hedged risk. With respect to the borrowings pursuant to the Company's revolving credit facility, the interest rate on the borrowings is based on the prime rate plus an applicable margin of up to .25%, or LIBOR plus an applicable margin of up to 1.25%, as chosen by the Company. Historically, the Company has typically chosen the LIBOR option with a three month maturity. Every .25% change in interest rates has the effect of increasing or decreasing our annual interest expense by $5,000 for every $2 million of outstanding debt. The Company continually monitors its positions with, and the credit quality of, the financial institutions that are counterparties to its financial instruments, and does not anticipate nonperformance by the counterparties. The Company's receivables do not represent a significant concentration of credit risk due to the wide variety of customers and markets in which the Company operates. Item 8. Financial Statements and Supplementary Data The Consolidated Financial Statements and the related notes and schedules were prepared by and are the responsibility of management. The financial statements and related notes were prepared in conformity with generally accepted accounting principles and include amounts based upon management's best estimates and judgments. All financial information in this annual report is consistent with the consolidated financial statements. The Company maintains internal accounting control systems and related policies and procedures designed to provide reasonable assurance that assets are ' authorization and properly recorded, and that accounting records may be relied -18- upon for the preparation of consolidated financial statements and other financial information. The design, monitoring, and revision of internal accounting control systems involve, among other things, management's judgment with respect to the relative cost and expected benefits of specific control measures. Westwood One's consolidated financial statements have been audited by PricewaterhouseCoopers LLP, independent accountants, who have expressed their opinion with respect to the presentation of these statements. The Audit Committee of the Board of Directors, which is comprised solely of directors who are not employees of the Company, meets periodically with the independent auditors, as well as with management, to review accounting, auditing, internal accounting controls and financial reporting matters. The Audit Committee, pursuant to its Charter, is also responsible for retaining the Company's independent accountants. The independent accountants have full and free access to the Audit Committee with and without management's presence. Further, as a result of changes in the listing standards for the New York Stock Exchange and as a result of the Sarbanes-Oxley Act of 2002, members of the Audit Committee will be required to meet stringent independence standards and at least one member must have financial expertise. The majority of our Audit Committee members satisfy the new independence standards and, the Audit Committee also has at least one member with financial expertise. The Consolidated Financial Statements and the related notes and schedules of the Company are indexed on page F-1 of this Report, and attached hereto as pages F-1 through F-18 and by this reference incorporated herein. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Our management carried out an evaluation of the effectiveness of our disclosure controls and procedures within the 90-day period prior to the filing of this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of the Company have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities Exchange Commission rules and forms. Subsequent to the date of our evaluation, there were no significant changes in our internal controls or in other factors that could significantly affect our controls and procedures. -19- PART III Item 10. Directors and Executive Officers of the Registrant This information is incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after the end of the Company's fiscal year. Item 11. Executive Compensation This information is incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after the end of the Company's fiscal year. Item 12. Security Ownership of Certain Beneficial Owners and Management This information is incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after then end of the Company's fiscal year. Item 13. Certain Relationships and Related Transactions This information is incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after the end of the Company's fiscal year. Item 14. Principal Accounting Fees and Services This information is incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after the end of the Company's fiscal year. -20- PART IV Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Documents filed as part of this Report on Form 10-K 1. Financial statements and schedules to be filed hereunder are indexed on page F-1 hereof. 2. Exhibits EXHIBIT NUMBER DESCRIPTION 3.1 Restated Certificate of Incorporation, as filed on October 25, 2002. (14) 3.2 Bylaws of Registrant as currently in effect. (6) 4.1 Note Purchase Agreement, dated December 3, 2002, between Registrant and the Purchasers. (15) *10.1 Employment Agreement, dated April 29, 1998, between Registrant and Norman J. Pattiz. (8) *10.2 Amendment to Employment Agreement, dated October 27, 2003, between Registrant and Norman J. Pattiz. 10.3 Form of Indemnification Agreement between Registrant and its Directors and Executive Officers. (1) 10.4 Credit Agreement, dated March 2, 2004, between Registrant and The Lenders and JPMorgan Chase Bank as Administrative Agent 10.5 Purchase Agreement, dated as of August 24, 1987, between Registrant and National Broadcasting Company, Inc. (2) 10.6 Agreement and Plan of Merger among Registrant, Copter Acquisition Corp. and Metro Networks, Inc. dated of June 1, 1999 (9) *10.7 Amendment No. 1 to the Agreement and Plan Merger, dated as of August 20, 1999, by and among Registrant, Copter Acquisition Corp. and Metro Networks, Inc. (10) 10.8 Management Agreement, dated as of March 30, 1999, and amended on April 15, 2002 between Registrant and Infinity Broadcasting Corporation. (9) (13) 10.9 Representation Agreement, dated as of March 31, 1997, between Registrant and CBS, Inc. (7) (13) 10.10 Westwood One Amended 1999 Stock Incentive Plan. (9) 10.11 Westwood One, Inc. 1989 Stock Incentive Plan. (3) 10.12 Amendments to the Westwood One, Inc. Amended 1989 Stock Incentive Plan. (4) (5) 10.13 Leases, dated August 9, 1999, between Lefrak SBN LP and Westwood One, Inc. and between Infinity and Westwood One, Inc. relating to New York, New York offices. (11) 21 List of Subsidiaries 23 Consent of Independent Auditors 31.a Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.b Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.a Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.b Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K No Report on Form 8-K were filed during the fourth quarter of 2003. A Form 8-K was furnished on October 29, 2003 in connection with the Company's disclosure of certain earnings information. ********************************* *Indicates a management contract or compensatory plan -21- (1) Filed as part of Registrant's September 25, 1986 proxy statement and incorporated herein by reference. (2) Filed an exhibit to Registrant's current report on Form 8-K dated September 4, 1987 and incorporated herein by reference. (3) Filed as part of Registrant's March 27, 1992 proxy statement and incorporated herein by reference. (4) Filed as an exhibit to Registrant's July 20, 1994 proxy statement and incorporated herein by reference. (5) Filed as an exhibit to Registrant's May 17, 1996 proxy statement and incorporated herein by reference. (6) Filed as an exhibit to Registrant's Quarterly report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference. (7) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference. (8) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference. (9) Filed as an exhibit to Registrant's August 24, 1999 proxy statement and incorporated herein by reference. (10) Filed as an exhibit to Registrant's current report on Form 8-K dated October 1, 1999 and incorporated herein by reference. (11) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference. (12) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference. (13) Filed as an exhibit to Registrant's April 29, 2002 proxy statement and incorporated herein by reference. (14) Filed as an exhibit to Registrant's Quarterly report on Form 10-Q for the quarter ended September 30, 2002 and incorporated herein by reference. (15) Filed as an exhibit to Registrant's current report on Form 8-K dated December 3, 2002 and incorporated herein by reference. -22- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WESTWOOD ONE, INC. Date: March 15, 2004 By /S/ ANDREW ZAREF -------------------- Andrew Zaref Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /S/ SHANE COPPOLA Director, President and March 15, 2004 - ----------------- Shane Coppola Chief Executive Officer (Principal Executive Officer) /S/ ANDREW ZAREF Chief Financial Officer March 15, 2004 - ---------------- Andrew Zaref (Principal Financial Officer and Chief Accounting Officer) /S/ NORMAN J. PATTIZ Chairman of the Board of March 15, 2004 - -------------------- Directors Norman J. Pattiz /S/ DAVID L. DENNIS Director March 15, 2004 - ------------------- David L. Dennis /S/ GERALD GREENBERG Director March 15, 2004 - --------------------- Gerald Greenberg /S/ ROBERT K. HERDMAN Director March 15, 2004 - --------------------- Robert K. Herdman /S/ JOEL HOLLANDER Director March 15, 2004 - ------------------- Joel Hollander /S/ DENNIS HOLT Director March 15, 2004 - ---------------- Dennis Holt /S/ MARIA D. HUMMER Director March 15, 2004 - -------------------- Maria D. Hummer /S/ MEL A. KARMAZIN Director March 15, 2004 - -------------------- Mel A. Karmazin /S/ STEVEN A. LERMAN Director March 15, 2004 - --------------------- Steven A. Lerman /S/ GEORGE MILES Director March 15, 2004 - ---------------- George Miles /S/ JOSEPH B. SMITH Director March 15, 2004 - -------------------- Joseph B. Smith /S/ FARID SULEMAN Director March 15, 2004 - ----------------- Farid Suleman -23- EXHIBIT 31.a CHIEF EXECUTIVE OFFICER CERTIFICATION I, Shane Coppola, Chief Executive Officer of the Company, certify that: 1) I have reviewed this annual report on Form 10-K of Westwood One, Inc.; 2) Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3) Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have; (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures; and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and; 5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. /S/ Shane Coppola - ----------------- Shane Coppola Chief Executive Officer March 15, 2004 -24- EXHIBIT 31.b CHIEF FINANCIAL OFFICER CERTIFICATION I, Andrew Zaref, Chief Financial Officer of the Company, certify that: 1) I have reviewed this annual report on Form 10-K of Westwood One, Inc.; 2) Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3) Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have; (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures; and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and; 5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. /S/ Andrew Zaref - ---------------- Andrew Zaref Chief Financial Officer March 15, 2004 -25- EXHIBIT 32.a CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 0F THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Westwood One, Inc. (the "Company") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission (the "Report"), I, Shane Coppola, Chief" Executive Officer of the Company, certify that to my knowledge: 1. the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /S/ Shane Coppola - ----------------- Shane Coppola March 15, 2004 This statement is being furnished to the Securities and Exchange Commission as an exhibit to this Annual Report on Form 10-K. -26- EXHIBIT 32.b CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 0F THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Westwood One, Inc. (the "Company") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission (the "Report"), I, Andrew Zaref, Chief Financial Officer of the Company, certify that to my knowledge: 1. the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /S/ Andrew Zaref - ---------------- Andrew Zaref March 15, 2004 This statement is being furnished to the Securities and Exchange Commission as an exhibit to this Annual Report on Form 10-K. -27- WESTWOOD ONE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES 1. Consolidated Financial Statements Page ---- --Report of Independent Auditors F-2 --Consolidated Balance Sheets at December 31, 2003 and 2002 F-3 --Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001 F-4 --Consolidated Statements of Shareholders' Equity for the years ended December 31, 2003, 2002 and 2001 F-5 --Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001 F-6 --Notes to Consolidated Financial Statements F-7 - F-17 2. Financial Statement Schedules: II. -Valuation and Qualifying Accounts F-18 All other schedules have been omitted because they are not applicable, the required information is immaterial, or the required information is included in the consolidated financial statements or notes thereto. F-1 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of Westwood One, Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Westwood One, Inc. and it subsidiaries ("the Company") at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 1, effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards No. 141, "Business Combinations" and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." /S/ PRICEWATERHOUSECOOPERS LLP - ----------------------------------------------------- New York, New York February 17, 2004, except for Notes 5 and 13, as to which the date is March 3, 2004 F-2 WESTWOOD ONE, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
December 31, ------------ 2003 2002 ---- ---- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 8,665 $ 7,371 Accounts receivable, net of allowance for doubtful accounts of $4,334 (2003) and $11,757 (2002) 135,720 131,676 Prepaid and other assets 21,110 14,581 ---------- ---------- Total Current Assets 165,495 153,628 PROPERTY AND EQUIPMENT, NET 50,562 53,699 INTANGIBLE ASSETS, NET 7,626 9,647 GOODWILL 990,472 990,192 OTHER ASSETS 47,879 59,146 ---------- ---------- TOTAL ASSETS $1,262,034 $1,266,312 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $13,136 $13,715 Amounts payable to related parties 18,680 17,047 Deferred revenue 12,215 12,740 Income taxes payable 3,760 7,544 Accrued expenses and other liabilities 32,082 39,040 ---------- ---------- Total Current Liabilities 79,873 90,086 LONG-TERM DEBT 300,366 232,135 DEFERRED INCOME TAXES 36,902 30,733 OTHER LIABILITIES 8,943 10,318 ---------- ---------- TOTAL LIABILITIES 426,084 363,272 ---------- ---------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock: authorized 10,000,000 shares, none outstanding - - Common stock, $.01 par value: authorized, 263,323,250 shares; issued and outstanding, 99,056,659 (2003) and 103,988,678 (2002) 991 1,040 Class B stock, $.01 par value: authorized, 3,000,000 shares: issued and outstanding, 703,466 (2003 and 2002) 7 7 Additional paid-in capital 517,132 684,311 Retained earnings 319,020 218,981 ---------- ---------- 837,150 904,339 Less treasury stock, at cost; 35,000 (2003 and 2002) shares -1,200 -1,299 ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 835,950 903,040 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,262,034 $1,266,312 ========== ==========
See accompanying notes to consolidated financial statements. F - 3 WESTWOOD ONE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
Year Ended December 31, ------------------------------------ 2003 2002 2001 ---- ---- ---- REVENUES $539,226 $550,751 $515,940 -------- -------- -------- Operating Costs (includes related party expenses of $80,659, $77,566, and $77,444, respectively) 350,582 352,385 343,120 Depreciation and Amortization (includes related party warrant amortization of $1,352 in each period) 11,513 11,464 67,611 Corporate General and Administrative Expenses (includes related party expenses of $2,793, $5,012, and $3,983, respectively) 7,106 8,005 6,816 -------- -------- -------- 369,201 371,854 417,547 -------- -------- -------- OPERATING INCOME 170,025 178,897 98,393 Interest Expense 10,132 6,955 8,705 Other (Income) Expense (52) (110) 929 -------- -------- -------- INCOME BEFORE TAXES 159,945 172,052 88,759 INCOME TAXES 59,906 62,937 45,564 -------- -------- -------- NET INCOME $100,039 $109,115 $43,195 ======== ======== ======= INCOME PER SHARE: Basic $ .99 $1.03 $ .40 Diluted $ .97 $1.00 $ .38 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 101,243 105,992 107,551 Diluted 103,625 109,101 112,265
See accompanying notes to consolidated financial statements F-4 WESTWOOD ONE, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands)
Accumul'd Preferred Other Treasury Stock Common Stock Class B Stock Add'l Comp Stock Total --------- ------------ -------------Paid-in Retained Income ----- Shareholders' Shares Amount Shares Amount Shares Amount Capital Earnings (Loss) Shares Amount Equity ------ ------ ------ ------ ------ ------ ------- -------- ------ ------ ------ ------ BALANCE AT DECEMBER 31, 2000 - - 129,300 $1,293 704 $7 $1,194,118 $ 66,671 ($3,635) 21,612 $308,562 $949,892 Components of comprehensive income: Net income for 2001 - - - - - - - 43,195 - - - 43,195 Unrealized holding gain (loss) in equity securities net of tax - - - - - - - - 3,635 - - 3,635 ------ ------ ------- ------ ------ ---- --------- --------- ------- ------- -------- ------- Total comprehensive income - - - - - - - 43,195 3,635 - - 46,830 Issuance of common stock under stock option plans - - 3,326 34 - - 64,893 - - - - 64,927 Purchase and cancellation of warrants from related party - - - - - - (41,350) - - - - (41,350) Purchase of treasury stock - - - - - - - - - 4,152 104,928 (104,928) Retirement of treasury stock - - (25,764) (258) - - (413,232) - - (25,764)(413,490) 0 ------ ------ ------- ------ ------ ---- --------- --------- ------- ------- -------- ------- BALANCE AT DECEMBER 31, 2001 - - 106,862 1,069 704 7 804,429 109,866 - - - 915,371 Net income for 2002 - - - - - - - 109,115 - - - 109,115 Issuance of common stock under stock option plans - - 2,506 25 - - 69,406 - - - - 69,431 Issuance of warrants to related party - - - - - - 48,530 - - - - 48,530 Purchase and cancellation of warrants from related party - - - - - - (51,070) - - - - (51,070) Purchase of treasury stock - - - - - - - - - 5,414 188,337 (188,337) Retirement of treasury stock - - (5,379) (54) - - (186,984) - - (5,379)(187,038) 0 ----- ----- ------- ------ ------ ---- --------- --------- ------- ------- -------- ------ BALANCE AT DECEMBER 31, 2002 - - 103,989 1,040 704 7 684,311 218,981 - 35 1,299 903,040 Net income for 2003 - - - - - - - 100,039 - - - 100,039 Issuance of common stock under stock option plans - - 602 6 - - 13,277 - - - - 13,283 Purchase of treasury stock - - - - - - - - - 5,534 180,412 (180,412) Retirement of treasury stock - - (5,534) (55) - - (180,456) - - (5,534)(180,511) 0 ----- ----- ------- ------ ------ ---- --------- --------- ------- ------- -------- ------- BALANCE AT DECEMBER 31, 2003 - - 99,057 $991 704 $7 $517,132 $319,020 - 35 $1,200 $835,950 ===== ===== ======= ====== ===== ==== ========= ======== ======= ======= ======== =======
See accompanying notes to consolidated financial statements. F-5 WESTWOOD ONE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Year Ended December 31, --------------------------------- 2003 2002 2001 ---- ---- ---- CASH FLOW FROM OPERATING ACTIVITIES: Net income $100,039 $109,115 $43,195 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,513 11,464 67,611 Deferred taxes 5,331 6,355 5,555 Other 635 562 1,802 -------- ------- ------- 117,518 127,496 118,163 Changes in assets and liabilities: (Increase) decrease in accounts receivable (4,044) (7,943) 11,817 (Increase) decrease in prepaid and other assets (1,186) (839) 1,334 (Decrease) in deferred revenue (525) (968) (4,586) Increase in income taxes payable 2,822 45,098 33,936 (Decrease) increase in accounts payable and accrued and other liabilities (8,348) (5,958) (14,764) Increase (decrease) in amounts payable to related parties 1,633 (9,268) (227) -------- ------- ------- Net Cash Provided By Operating Activities 107,870 147,618 145,673 -------- -------- ------- CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditures (4,370) (4,252) (6,828) Acquisition of companies and other (602) (808) (6,218) -------- -------- ------- Net Cash Used For Investing Activities (4,972) (5,060) (13,046) -------- -------- ------- CASH FLOW FROM FINANCING ACTIVITIES: Debt repayments and payments of capital lease obligations (564) (129,883) (20,623) Borrowings under bank and other long-term obligations 70,000 200,000 - Issuance of common stock 9,372 30,186 32,026 Repurchase of common stock (180,412) (188,337) (104,928) Repurchase of warrants from related party - (51,070) (41,350) Deferred financing costs - (592) - -------- -------- ------- Net Cash Used For Financing Activities (101,604) (139,696) (134,875) -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,294 2,862 (2,248) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,371 4,509 6,757 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $8,665 $7,371 $4,509 ======= ======= =======
See accompanying notes to consolidated financial statements. F-6 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) NOTE 1 - Summary of Significant Accounting Policies: Nature of Business Westwood One, Inc. and subsidiaries (the "Company") supplies radio and television station affiliates with a broad range of programming and information services. The Company is the largest domestic outsource provider of traffic reporting services and the nation's largest radio network, producing and distributing national news, sports, talk, music and special event programs, in addition to local news, sports, weather, video news and other information programming. Westwood One is managed by Infinity Broadcasting Corporation ("Infinity"), a wholly-owned subsidiary of Viacom Inc, pursuant to a management agreement between the Company and Infinity which expires on March 31, 2009 (the "Agreement" or "Management Agreement"). Principles of Consolidation The consolidated financial statements include the accounts of all majority and wholly-owned subsidiaries. Revenue Recognition Revenue is recognized when earned which is at the time commercial advertisements are broadcast. Payments received in advance are deferred until earned and such amounts are included as a component of 'Accrued expenses and other liabilities' on the accompanying balance sheet. Barter transactions represent the exchange of commercial announcements for merchandise or services. These transactions are generally recorded at the fair market value of the commercial announcements relinquished or the fair value of the merchandise and services received. Revenue is recognized on barter transactions when the advertisements are broadcast. Expenses are recorded when the merchandise or service is utilized. Barter revenue of $22,441, $19,595 and $13,103 has been recognized for the years ended December 31, 2003, 2002 and 2001, respectively and barter expenses of $ 20,885, $18,886 and $12,453 have been recognized for the years ended December 31, 2003, 2002 and 2001, respectively. Program Rights Program rights are stated at the lower of cost, less accumulated amortization, or net realizable value. Program rights and the related liabilities are recorded when the license period begins and the program is available for use and are charged to expense when the event is broadcast. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. Management continually evaluates its estimates and judgments including those related to allowances for doubtful accounts, useful lives of property, plant and equipment and intangible assets, income taxes and other contingencies. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable in the circumstances. Actual results may differ from those estimates under different assumptions or conditions. Cash Equivalents The Company considers all highly liquid instruments purchased with a maturity of less than three months to be cash equivalents. The carrying amount of cash equivalents approximates fair value because of the short maturity of these instruments. Financial Instruments The Company uses derivative financial instruments (fixed-to-floating interest rate swap agreements) for the purpose of hedging specific exposures and holds all derivatives for purposes other than trading. All derivative financial instruments held reduce the risk of the underlying hedged item and are designated at inception as hedges with respect to the underlying hedged item. Hedges of fair value exposure are entered into in order to hedge the fair value of a recognized asset, liability, or a firm commitment. Derivative contracts are entered into with major creditworthy institutions to minimize the risk of credit loss and are structured to be 100% effective. F-7 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Depreciation Depreciation is computed using the straight line method over the estimated useful lives of the assets, as follows: Buildings and improvements 40 years Recording and studio equipment 5 - 10 years Capitalized leases Term of lease Furniture and equipment and other 3 - 10 years Goodwill and Intangible Assets Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141") and Statement of Financial Accounting Standards No. 142 ("SFAS 142") "Goodwill and Other Intangible Assets". The Statements require all business combinations to be accounted for under the purchase method and prohibits the amortization of goodwill and indefinite-lived intangible assets, requires that goodwill and indefinite-lived intangible assets be tested annually for impairment (and in interim periods if events occur indicating that the carrying value of goodwill and/or indefinite-lived intangible assets may be impaired), requires that reporting units be identified for the purpose of assessing potential future impairments of goodwill, and removes the forty-year limitation on the amortization period of intangible assets that have finite lives. Goodwill represents the excess of cost over fair value of assets of businesses acquired. In accordance with SFAS 142, the value assigned to goodwill and indefinite lived intangible assets is not amortized to expense, but rather the fair value of the reporting unit is compared to its carrying amount on an annual basis to determine if there is a potential impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill and intangible assets is less than their carrying value, determined based on discounted cash flows, market multiples or appraised values as appropriate. The Company has determined that there was no impairment of goodwill or intangible assets as a result of completing impairment reviews. Intangible assets subject to amortization primarily consist of affiliation agreements that were acquired in prior years. Such affiliate contracts, when aggregated, create a nationwide audience that is sold to national advertisers. The intangible asset values assigned to the affiliate agreements for each acquisition were determined based upon the expected discounted aggregate cash flows to be derived over the life of the affiliate relationship. The method of amortizing the intangible asset values reflects, based upon the Company's historical experience, an accelerated rate of attrition in the affiliate base over the expected life of the affiliate relationships. Accordingly, the Company amortizes the value assigned to affiliate agreements on an accelerated basis (periods ranging from 4 to 20 years with a weighted-average amortization period of approximately 8 years)consistent with the pattern of cash flows which are expected to be derived. Stock-Based Compensation Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees," and related Interpretations. Income Taxes The Company uses the asset and liability method of financial accounting and reporting for income taxes required by Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes". Under SFAS 109, deferred income taxes reflect the tax impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes. F-8 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Earnings per Share Basic earnings per share excludes all dilution and is calculated using the weighted average number of common shares outstanding in the period. Diluted earnings per share amounts are based upon the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares are related to warrants and stock options. The following number of common equivalent shares were added to the basic weighted average shares outstanding for each period: 2003 2002 2001 ---- ---- ---- Options 2,382,000 2,967,000 3,476,000 Warrants - 142,000 1,238,000 Common equivalent shares are excluded in periods in which they are anti-dilutive. The following options were excluded from the calculation of diluted earnings per share because the exercise price was greater than the average market price of the Company's Common Stock for the years presented: 2003 2002 2001 ---- ---- ---- Options 1,904,382 390,000 1,380,000 The per share exercise prices of the options were $32.90-$38.34 in 2003, $37.00-$38.34 in 2002, and $30.30-$40.70 in 2001. Also excluded were 4,500,000 warrants issued in May 2002 in conjunction with extending the terms of the Company's management agreement with a related party. See Note 2 for a further discussion of the warrant terms. Recent Accounting Pronouncements In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" which was replaced in December 2003 by the issuance of FIN 46R ("FIN 46R"). FIN 46R explains how to identify variable interest entities ("VIEs") and how a company should assess its interests in a variable interest entity to decide whether to consolidate that entity. FIN 46R requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. The provisions of FIN 46R are effective for special purpose entities as of December 31, 2003. The Company has completed its review of its special purpose entities under FIN 46R and has determined that the application of FIN 46R did not impact the Company's consolidated financial position, results of operations or cash flows. The provisions of FIN 46R must be applied to VIEs as of March 31, 2004. The Company has determined that the adoption of the remaining provisions of FIN 46R will not impact the Company's consolidated financial position, results of operations or cash flows. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." In general, SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS 149 did not have any impact on the Company's financial position, results of operations or cash flows. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". In accordance with SFAS 150, financial instruments that embody obligations for the issuer are required to be classified as liabilities. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003, except for the provisions relating to mandatorily redeemable financial instruments which have been deferred indefinitely. The adoption of SFAS 150 did not have any impact on the Company's financial position. On December 17, 2003, the Staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 104 ("SAB 104"), Revenue Recognition, which supercedes SAB 101, Revenue Recognition in Financial Statements. SAB 104's primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superceded as a result of the issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." The adoption of SAB 104 did not have a material impact on the Company's financial position, results of operations or cash flows. F-9 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Reclassification Certain amounts reported in prior years have been reclassified to conform to the current year presentation. NOTE 2 - Related Party Transactions: In return for receiving services under the Management Agreement, the Company compensates Infinity via an annual base fee and provides Infinity the opportunity to earn an incentive bonus if the Company exceeds pre-determined targeted cash flows. For the year ended December 31, 2003, 2002 and 2001, Infinity earned cash compensation of $2,793, $5,012 and $3,983, respectively. In addition to the base fee and incentive compensation described above, the Company granted to Infinity two fully vested and non-forfeitable warrants to purchase 4,000,000 shares of the Company's Common Stock in the aggregate (one warrant with an exercise price of $10.00 per share and the other warrant with an exercise price of $12.50 per share - each warrant represents 2,000,000 shares of Common Stock) in connection with extending the term of the Management Agreement in March 1999 for an additional term of five years commencing April 1, 1999. Such warrants were only exercisable to the extent the Company's Common Stock reached certain market prices, which have subsequently been achieved. In 2002 Infinity sold its $12.50 warrants, representing 2,000,000 shares of Common Stock, to the Company receiving net proceeds aggregating $51,070. In 2001, Infinity sold its $10.00 warrants, representing 2,000,000 shares of Common Stock, to the Company receiving net proceeds aggregating $41,350. The repurchase of the Infinity warrants for cash consideration has been reflected as a reduction to additional paid in capital during 2002 and 2001. On May 29, 2002, the Company's shareholders ratified an extension of the Management Agreement for an additional five-year term, which commences April 1, 2004 and expires on March 31, 2009. In return for receiving services under the Management Agreement, the Company will continue to compensate Infinity via an annual base fee and an opportunity to earn an annual incentive bonus provided certain performance objectives are met. Additionally, the Company granted to Infinity seven warrants convertible into 4,500,000 fully vested and nonforfeitable shares (comprised of two warrants to purchase 1,000,000 Common shares per warrant and five warrants to purchase 500,000 Common shares per warrant) to purchase Company Common Stock. 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 prices for 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. In connection with the issuance of warrants to Infinity for management services to be provided to the Company in the future, the Company has reflected the fair value of the warrant issuance of $48,530 as a component of Other Assets with a corresponding increase to additional paid in capital in the accompanying balance sheet. Upon commencement of the term of the service period to which the warrants relate (April 1, 2004), the Company will amortize the cost of the warrants issued to operations ratably over the five-year service period. In addition to the Management Agreement described above, the Company also enters into other transactions with Infinity in the normal course of business. Such arrangements include a representation agreement (including a related news programming agreement, a license agreement and a technical services agreement with an affiliate of Infinity - the "Representation Agreement") to operate the CBS Radio Networks, affiliation agreements with many of Infinity's radio stations and the purchase of programming rights from Infinity and affiliates of Infinity. The Management Agreement provides that all transactions, other than the Management Agreement and Representation Agreement to operate the CBS Radio Networks which were ratified by the Company's shareholders, between the Company and Infinity or its affiliates must 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. F-10 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The Company incurred the following expenses relating to transactions with Infinity or its affiliates for the following years: Nature 2003 2002 2001 ------ ------- ------- ------- Representation Agreement $24,575 $23,309 $22,925 Programming and Affiliations 56,084 54,257 54,519 Management Agreement (excluding warrant amortization) 2,793 5,012 3,983 Warrant Amortization 1,352 1,352 1,352 ------- ------- ------- $84,804 $83,930 $82,779 ======= ======= ======= Expenses incurred for the Representation Agreement and programming and affiliate arrangements are included as a component of Operating Costs in the accompanying Consolidated Statement of Operations. Expenses incurred for the Management Agreement (excluding warrant amortization) and amortization of the warrants granted to Infinity under the Management Agreement are included as a component of Corporate General and Administrative expenses and Depreciation and Amortization, respectively in the accompanying Consolidated Statement of Operations. NOTE 3 - Property and Equipment: Property and equipment is recorded at cost and is summarized as follows at:
December 31, ---------------------- 2003 2002 ------- ------- Land, buildings and improvements................. $14,088 $12,859 Recording and studio equipment................... 57,511 53,961 Capitalized leases............................... 6,723 6,723 Furniture and equipment and other................ 15,567 16,430 ------- ------ 93,889 89,973 Less: Accumulated depreciation and amortization. 43,327 36,274 ------- ------- Property and equipment, net.............. $50,562 $53,699 ======= =======
Depreciation expense was $7,898 in 2003, $7,711 in 2002, and $17,223 in 2001. NOTE 4 - Goodwill and Intangible Assets: The following table provides a reconciliation of reported net income for 2001 to net income that would have been reported had SFAS 142 been applied as of January 2001: Year Ended December 31, ----------------------- 2001 ---- Reported net income............................. $43,195 Add back goodwill amortization, net of tax...... 44,460 ------- Adjusted net income............................. $87,655 ======= Net income per share: Basic - As reported................................... $.40 Goodwill amortization, net of tax............. .42 ---- As adjusted................................... $.82 ==== Diluted - As reported.................................... $.38 Goodwill amortization, net of tax.............. .40 ---- As adjusted.................................... $.78 ==== F-11 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The changes in the carrying amount of goodwill for the years ended December 31, 2003 and 2002 follows: 2003 2002 -------- -------- Balance at January 1, $990,192 $991,289 Goodwill acquired during the period 280 - Acquisition purchase price adjustments - (1,097) -------- --------- $990,472 $990,192 ======== ======== At December 31, 2003, the Company's amortizable intangible assets gross value was approximately $28,780 with accumulated amortization of approximately $21,154 ($28,538 and $18,891, respectively at December 31, 2002). Amortization expense for fiscal 2003 was $2,263 ($2,401 and $3,158 in 2002 and 2001, respectively). The Company's estimated aggregate amortization expense for intangibles for fiscal year 2004, 2005, 2006, 2007 and 2008 are $1,448, $1,169, $623, $623 and $604, respectively. NOTE 5 - Debt: Long-term debt consists of the following at: December 31, ---------------------- 2003 2002 ---- ----- Revolving Credit Facility/Term Loan......... $100,000 $30,000 4.64% Senior Unsecured Notes due on November 30, 2009.................. 50,000 50,000 5.26% Senior Unsecured Notes due on November 30, 2012.................. 150,000 150,000 Fair market value of Swap (a)............... 366 2,135 ------- ------- $300,366 $232,135 ======== ======== (a) write-up due to market value adjustments for debt with qualifying hedges that are recorded as debt on the balance sheet at December 31, 2003 and 2002. The Company's amended senior loan agreement with a syndicate of banks, led by JP Morgan Chase Bank, provides for an unsecured $205,000 revolving credit facility (the "Facility"). The Facility is available until September 30, 2004, however, the facility contains provisions which require mandatory reductions in the amount of the facility starting in September 1999 ($10,000 per quarter in 2004). As more fully discussed in Note 13, the Company refinanced the Facility on March 3, 2004. Accordingly, the outstanding borrowings under the Facility have been classified as long-term debt at December 31, 2003 in the accompanying Consolidated Balance Sheet. At December 31, 2003, the Company had available borrowings under the Facility of $105,000 ($205,000 at December 31, 2002). Interest is payable at the prime rate plus an applicable margin of up to .25% or LIBOR plus an applicable margin of up to 1.25%, at the Company's option. At December 31, 2003, the applicable margin was LIBOR plus .50%-.625%. At December 31, 2003, the Company had borrowed $100,000 under the revolving credit facility at a weighted-average interest rate of 1.8% (including the applicable margin). At December 31, 2002, the Company had borrowed $30,000 under the revolving credit facility at a weighted-average interest rate of 1.91% (including the applicable margin). The Facility contains covenants relating to dividends, liens, indebtedness, capital expenditures and interest coverage and leverage ratios. On December 3, 2002, the Company issued, through a private placement, $150,000 of ten-year Senior Unsecured Notes dues November 30, 2012 and $ 50,000 of seven-year Senior Unsecured Notes due November 30, 2009 (collectively the "Notes"). Interest on the Notes is payable semi-annually in May and November. The Notes, which are unsecured, contain covenants relating to indebtedness and interest coverage ratios that are identical to those contained in the Company's Facility. The Notes may be prepaid at the option of the Company upon providing proper notice and by paying principal, interest and an early payment penalty. F-12 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) The aggregate maturities of debt for the next five years (See Note 13) and thereafter, pursuant to the Company's debt agreements as in effect at December 31, 2003, are as follows (excludes market value adjustments): Year 2004................... $ - 2005................... - 2006................... - 2007................... - 2008................... - 2009 and thereafter.... 300,000 ------- $300,000 ======== NOTE 6 - Financial Instruments: Interest Rate Risk Management In order to achieve a desired proportion of variable and fixed rate debt, the Company entered into fixed-to-floating interest rate swap agreements covering one-half of the notional amounts of the Notes. These swap transactions allow the Company to benefit from short-term declines in interest rates while having the long-term stability of fairly low fixed rates. The instruments meet all of the criteria of a fair-value hedge. The Company has the appropriate documentation, including the risk management objective and strategy for undertaking the hedge, identification of the hedged instrument, the hedge item, the nature of the risk being hedged, and how the hedging instrument's effectiveness offsets the exposure to changes in the hedged item's fair value or variability in cash flows attributable to the hedge risk. At December 31, 2003 and 2002, the Company had the following interest rate swaps:
Interest Rate ----------------------- Maturity Dates Notional Principal Amount Paid (1) Received Variable Rate Index - -------------- ------------------------- -------- -------- ------------------- November 2009 $25,000 1.173% 3.907% 3 Month LIBOR November 2012 $25,000 1.173% 4.410% 3 Month LIBOR November 2012 $50,000 1.173% 4.535% 3 Month LIBOR
(1) The interest rate paid at December 31, 2002 was 1.4225%. The estimated fair value of the Company's interest rate swaps at December 31, 2003 and 2002 were $366 and $2,135, respectively. Fair Value of Financial Instruments The Company's financial instruments included cash, cash equivalents, receivables, accounts payable, borrowings and interest rate contracts. At December 31, 2003 and 2002, the fair values of cash and cash equivalents, receivables and accounts payable approximated carrying values because of the short-term nature of these instruments. The estimated fair values of other financial instruments subject to fair value disclosures, determined based on broker quotes or quoted market prices or rates for the same or similar instruments, and the related carrying amounts are as follows:
December 31, 2003 December 31, 2002 ------------------- ------------------- Carrying Fair Carrying Fair Amount Value Amount Value --------- --------- --------- --------- Borrowings (Short and Long Term) $ 300,000 $ 300,732 $ 230,000 $ 234,270 Risk management contracts: Interest rate swaps 366 366 2,135 2,135
Credit Concentrations The Company continually monitors its positions with, and the credit quality of, the financial institutions that are counterparties to its financial instruments, and does not anticipate nonperformance by the counterparties. The Company's receivables do not represent a significant concentration of credit risk at December 31, 2003, due to the wide variety of customers and markets in which the Company operates. F-13 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) NOTE 7 - Shareholders' Equity: The authorized capital stock of the Company consists of Common Stock, Class B Stock and Preferred Stock. Common Stock is entitled to one vote per share while Class B Stock is entitled to 50 votes per share. Class B Stock is convertible to Common Stock on a share-for-share basis. As further discussed in Note 2, in conjunction with the renewal and extension of the Company's Management Agreement with Infinity in May 2002, the Company granted to Infinity fully vested and nonforfeitable warrants to purchase up to 4,500,000 shares of Company Common Stock. The Company has reflected the fair value of the warrants issued of $48,530 as a component of additional paid in capital. During 2002, Infinity sold their $12.50 warrants to the Company for cash consideration of $51,070. During 2001, Infinity sold their $10.00 warrants to the Company for cash consideration of $41,350. The purchase of the warrants during 2002 resulted in a reduction to additional paid in capital equal to the amount of cash consideration paid. The aforementioned warrants were granted to Infinity in connection with the extension of the Management Agreement in March 1999 (see Note 2). The Company's Board of Directors has approved plans to purchase shares of the Company's Common Stock to enhance shareholder value. The Company purchased 5,534,000 shares in 2003 for approximately $180,412, 5,414,000 shares in 2002 for approximately $188,337, and 4,152,000 shares in 2001 for approximately $104,928. NOTE 8 - Stock Options: The Company has stock option plans established in 1989 and 1999 (collectively "the Plan") which provide for the granting of options to directors, officers and key employees to purchase stock at its market value on the date the options are granted. Under the 1989 Plan, 12,600,000 shares were reserved for grant through March 1999. This plan expired, but certain previous grants remain outstanding at December 31, 2003. On September 22, 1999, the stockholders ratified the Company's 1999 stock incentive plan which authorized the grant of up to 8,000,000 shares of Common Stock. Options granted generally become exercisable after one year in 20% increments per year and expire within ten years from the date of grant. The Company applies APB 25 and related interpretations in accounting for its plans. Accordingly, no compensation expense has been recognized for its stock option plans. Had compensation cost been determined in accordance with the methodology prescribed by SFAS 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
2003 2002 2001 -------- -------- ------- Net Income as Reported $100,039 $109,115 $43,195 Deduct: Total stock based compensation expense determined under fair- value based method, net of tax 8,809 8,444 7,168 ------- ------- ------ Pro Forma Net Income $91,230 $100,671 $ 36,027 ======= ======== ======== Net Income Per Share: Basic - As Reported $.99 $1.03 $.40 ==== ===== ==== Basic - Pro Forma $.90 $.95 $.33 ==== ==== ==== Diluted - As Reported $.97 $1.00 $.38 ==== ===== ==== Diluted - Pro Forma $.88 $.92 $.32 ==== ==== ====
The weighted average fair value of the options granted in 2003, 2002 and 2001 is estimated at $10.09, $11.46 and $12.56, respectively, on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
2003 2002 2001 ---- ---- ---- Weighted Average Risk Free Interest Rate 3.3% 3.4% 6.0% Expected Life (In Years)................... 5 5 5 Expected Volatility........................ 29.6% 29.0% 61.9% Expected Dividend Yield.................... - - -
F-14 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Information concerning options outstanding under the Plan is as follows for:
2003 2002 2001 ---- ---- ---- Weighted Weighted Weighted Average Average Average Exercised Exercised Exercised Shares Price Shares Price Shares Price ------ --------- ------ --------- ------ --------- Outstanding at beginning of period....................... 9,442,330 $19.40 11,089,934 $16.01 13,522,288 $14.03 Granted during the period......... 1,568,500 $31.32 1,272,500 $35.79 1,181,500 $22.30 Exercised during the period....... (602,381) $15.56 (2,505,674) $12.21 (3,325,718) $ 9.81 Forfeited during the period....... (88,900) $36.79 (414,430) $23.43 (288,136) $20.21 ---------- ----------- ----------- Outstanding at end of period...... 10,319,549 $21.27 9,442,330 $19.40 11,089,934 $16.01 ========== ========== ========== Available for stock option issuance at end of period....................... 1,653,600 3,133,200 4,002,500 ========= ========= =========
At December 31, 2003, options to purchase 6,281,149 shares of Common Stock were currently exercisable at a weighted average exercise price of $15.86. The following table contains additional information with respect to options at December 31, 2003:
Remaining Weighted Weighted Average Average Number of Exercise Contractual Options Price Life (In Years) --------- -------- --------------- Options Outstanding at Exercise Price Ranges of: $1.07-$5.34 .................... 946,160 $5.13 .9 $7.25-$11.55.................... 974,742 $8.78 3.4 $12.54-$15.75................... 2,756,747 $14.18 4.1 $17.25-$22.57................... 1,653,000 $21.44 6.6 $30.19-$38.34................... 3,988,900 $32.98 8.3 10,319,549 $21.27 5.8
NOTE 9 - Income Taxes: The components of the provision for income taxes follows: Year Ended December 31, --------------------------------------- Current 2003 2002 2001 ---- ---- ---- Federal............ $49,138 $52,982 $40,490 State.............. 5,437 3,600 (481) ------ ------ ------ 54,575 56,582 40,009 ------ ------ ------ Deferred Federal............ 4,842 5,705 5,107 State.............. 489 650 448 ----- ----- ----- 5,331 6,355 5,555 ----- ----- ----- Income Tax............ $59,906 $62,937 $45,564 ======= ======= ======= F-15 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities on the Company's balance sheet and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities follow:
December 31, -------------------- 2003 2002 ------- ------- Deferred tax liabilities: Goodwill, intangibles and other....................... $32,755 $31,246 Property and equipment................................ 4,783 2,100 Other................................................. 126 619 ------- ------- Total deferred tax liabilities........................ 37,664 33,965 ------- ------- Deferred tax assets: Allowance for doubtful accounts....................... 1,394 4,121 Accrued expenses and other............................ 1,013 2,613 ----- ----- Total deferred tax assets............................. 2,407 6,734 ----- ----- Net deferred tax liabilities.............................. 35,257 27,231 Net deferred tax asset - current.......................... 1,645 3,502 ------ ------ Net deferred tax liability - long-term.................... $36,902 $30,733 ======= =======
The reconciliation of the federal statutory income tax rate to the Company's effective income tax rate follows:
Year Ended December 31, ------------------------- 2003 2002 2001 ---- ---- ---- Federal statutory rate............... 35.0% 35.0% 35.0% State taxes net of federal benefit... 2.5 1.6 - Nondeductible amortization of intangible assets................... - - 16.3 ---- ---- ---- Effective tax rate................... 37.5% 36.6% 51.3% ===== ===== =====
In 2003, 2002 and 2001, $3,911, $39,245 and $32,901 respectively, of income tax benefits attributable to employee stock and warrant transactions were allocated to shareholders' equity. NOTE 10 - Commitments and Contingencies: The Company has various non-cancelable, long-term operating leases for office space and equipment. In addition, the Company is committed under various contractual agreements to pay for talent, broadcast rights, research, the CBS Representation Agreement and the Management Agreement with Infinity. The approximate aggregate future minimum obligations under such operating leases and contractual agreements for the five years after December 31, 2003 and thereafter, are set forth below:
Leases -------------------------------- Year Capital Operating Other Total ------- --------- ----- ----- 2004.................. $960 $6,921 $75,490 $83,371 2005.................. 960 6,141 51,050 58,151 2006.................. 960 5,936 45,836 52,732 2007.................. 960 5,388 39,594 45,942 2008.................. 960 4,507 38,555 44,022 Thereafter............ 2,560 8,619 25,220 36,399 ------ ------- -------- -------- $7,360 $37,512 $275,745 $320,617 ====== ======= ======== ========
The present value of net minimum payments under capital leases was $5,388 at December 31, 2003. Included in Other in the table above is $154,533 of commitments due to Infinity pursuant to the Representation and Management Agreements. F-16 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts NOTE 11 - Supplemental Cash Flow and Other Information: Supplemental information on cash flows, is summarized as follows:
Year Ended December 31, ------------------------------ 2003 2002 2001 ---- ---- ---- Cash paid for: Interest......................................... $12,047 $5,687 $8,473 Income taxes..................................... 51,755 8,561 8,403
The Company had certain non-cash investing and financing activities in 2003 and 2002. During 2002, the Company issued warrants to purchase up to 4,500,000 shares of its Common Stock to Infinity with a value of $48,530. During 2001, $6,723 of lease assets and obligations were capitalized. Insurance Claim The Company has insurance policies that cover business interruption related to September 11, 2001 terrorist attacks. For the year ended December 31, 2003, the Company recorded $3,200 as a reduction to operating costs in the accompanying Consolidated Statements of Operations, reflecting the settlement of its business interruption insurance claim. NOTE 12 - Quarterly Results of Operations (unaudited): The following is a tabulation of the unaudited quarterly results of operations. The quarterly results are presented for the years ended December 31, 2003 and 2002. (In thousands, except per share data)
First Second Third Fourth For the Quarter Quarter Quarter Quarter Year ------- ------- ------- ------- ------- 2003 ---- Net revenues................................... $125,795 $132,675 $134,680 $146,076 $539,226 Operating income............................... 29,219 41,664 46,782 52,360 170,025 Net income..................................... 16,914 24,336 27,710 31,079 100,039 Net income per share: Basic..................................... $.16 $.24 $.28 $.31 $.99 Diluted .................................. .16 .23 .27 .31 .97 2002 ---- Net revenues................................... $126,296 $140,812 $133,829 $149,814 $550,751 Operating income............................... 29,323 49,736 43,480 56,358 178,897 Net income..................................... 17,443 30,474 26,702 34,496 109,115 Net income per share: Basic..................................... $.16 $.29 $.25 $.33 $1.03 Diluted................................... .16 .28 .25 .32 1.00
NOTE 13 - Subsequent Event: On March 3, 2004, the Company refinanced its existing senior loan agreement with a syndicate of banks led by JP Morgan Chase Bank and Bank of America. The new facility is comprised of a five-year $120,000 term and a five-year $180,000 revolving credit facility (collectively the "New Facility"). In connection with the closing of the facility, the Company borrowed the full amount of the term loan, the proceeds of which were used to repay the outstanding borrowings under the Facility. Interest on the New Facility is payable at the prime rate plus an applicable margin of up to .25% or LIBOR plus an applicable margin of up to 1.25%, at the Company's option. The New Facility contains covenants relating to dividends, liens, indebtedness and interest coverage and leverage ratios. F-17 WESTWOOD ONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts) Schedule II - Valuation and Qualifying Accounts Allowance for Doubtful Accounts
Additions Deductions Balance at --------------------------------- ----------------- Balance at Beginning of Charged to Costs Charged to Write-offs and End of Period And Expenses Other Accounts Other Adjustments Period ------------ --------------------------------- ----------------- ---------- 2003 $11,757 $3,624 - $(11,047) $4,334 2002 9,282 6,379 - (3,904) 11,757 2001 9,356 1,968 - (2,042) 9,282
F-18 EX-10 4 wwo10k2003exhibit102.txt WESTWOOD ONE, INC. 2003 10K EXHIBIT 10.2 EXHIBIT 10.2 AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN WESTWOOD ONE, INC. AND NORMAN J. PATTIZ The following, upon execution by the parties hereto shall constitute an amendment to the Employment Agreement entered into by and between Westwood One, Inc. (the "Company") and Norman J. Pattiz ("Employee"), made as of April 29, 1998 (the "Agreement"). 1. Section 2 of the Agreement shall be amended to extend the term of employment for an additional term of five (5) years beginning December 1, 2003 and continuing through November 30, 2008 (the "Extended Term"). In the event the Agreement expires effective November 30, 2008 and the Company determines not to renew the Agreement, the Agreement will be deemed terminated; provided, however, that the Company will continue to engage Employee as a part-time employee and/or consultant (at Company's option) for a period of six (6) years through November 30, 2015 (the "Continued Engagement Period"). During the Continued Engagement Period: (i) only the terms and conditions contained in Section 5 of the Agreement shall continue to apply to Employee; the remainder of the Agreement shall no longer be of any force and effect. (ii) Employee will neither employ nor offer to employ nor solicit employment, directly or indirectly, of any employee or consultant of the Company or its related entities; (iii) Employee will not, directly or indirectly, solicit any customer, advertiser, client and/or sponsor of the Company or its related entities or solicit, divert or attempt to divert any business, patronage or customer of the Company; and (iv) Employee's Option Shares as set forth in Section 4 of the Agreement will continue to vest until the end of the Continued Engagement Period. 2. Sections 4 through 4.9 of the Agreement shall be deleted in their entirety and replaced with the following: "4. Stock Options. Beginning on December 1, 2003 and on each subsequent December 1 during the Extended Term (each, a "Grant Date"), the Company shall grant to Employee a non-qualified option to purchase 50,000 shares of common stock (each, the "Option Shares") under the Company's 1999 Stock Incentive Plan, as amended (the "Plan"). Employee may exercise, in whole or in part, 20% of each Option Shares on each of the five (5) anniversary dates subsequent to the Grant Date of the respective Option Shares. Notwithstanding the foregoing: (i) any Option Shares granted to you shall be subject to the terms and conditions set forth in any stock option agreement between you and the Company and the Plan, including, but not limited to, termination dates, restrictions and expirations set forth therein; and (ii) in the event the current Plan is amended or superceded to provide terms and conditions regarding vesting of Option Shares granted to Company Directors that are more favorable than the terms contained herein, the more favorable terms shall apply to future Option Shares to be granted hereunder. In such event the Continued Engagement Period will no longer apply. If a Partial Event of Change or an Event of Change occurs (as defined in Section 8 of the Agreement hereof), the Option Shares shall become exercisable at the election of Employee in accordance with Sections 8.4 or 8.5 hereof." 3. Schedule 1 shall be amended to reflect a base salary at the annual rate of $400,000 for each contract year during the Extended Term. 4. All other provisions of the Agreement shall remain unmodified and in full force and effect. 5. The effective date of this Amendment shall be the date of execution set forth below. IN WITNESS WHEREOF, this Amendment is EXECUTED as of the 27th day of October, 2003. WESTWOOD ONE, INC. By:/S/ SHANE COPPOLA - -------------------- Shane Coppola EMPLOYEE /S/ NORMAN J. PATTZ - ------------------- Norman J. Pattiz EX-10 5 wwo10k2003exhibit104.txt WESTWOOD ONE, INC. 2003 10K EXHIBIT 10.4 EXHIBIT 10.4 CREDIT AGREEMENT dated as of March 3, 2004 between WESTWOOD ONE, INC. The SUBSIDIARY GUARANTORS Party Hereto The LENDERS Party Hereto and JPMORGAN CHASE BANK, as Administrative Agent _______________ BANK OF AMERICA as Syndication Agent _______________ J.P. Morgan Securities Inc. BANC OF AMERICA SECURITIES LLC as Joint Lead Arrangers and Joint Bookrunners _______________ BANK OF TOKYO-MITSUBISHI TRUST COMPANY HARRIS NESBITT FINANCING, INC. NATIONAL AUSTRALIA BANK LIMITED as Co-Documentation Agents _________________ $300,000,000 _________________ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms.........................................1 SECTION 1.02. Terms Generally......................................19 SECTION 1.03. Definitions Apply to Notes, Etc......................20 SECTION 1.04. Accounting Terms.....................................20 ARTICLE II THE CREDITS SECTION 2.01. The Commitments......................................20 SECTION 2.02. Loans and Borrowings.................................20 SECTION 2.03. Requests for Borrowings..............................21 SECTION 2.04. Funding of Borrowings................................22 SECTION 2.05. Interest Elections...................................23 SECTION 2.06. Termination and Reduction of the Commitments.........24 SECTION 2.07. Repayment of Loans; Evidence of Debt.................25 SECTION 2.08. Prepayment of Loans..................................26 SECTION 2.09. Fees.................................................28 SECTION 2.10. Interest.............................................28 SECTION 2.11. Alternate Rate of Interest...........................29 SECTION 2.12. Increased Costs......................................30 SECTION 2.13. Break Funding Payments...............................31 SECTION 2.14. Taxes................................................31 SECTION 2.15. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.............................................32 SECTION 2.16. Mitigation Obligations; Replacement of Lenders.......34 ARTICLE III GUARANTEE SECTION 3.01. The Guarantee........................................35 SECTION 3.02. Obligations Unconditional............................36 SECTION 3.03. Reinstatement........................................37 SECTION 3.04. Subrogation..........................................37 SECTION 3.05. Remedies.............................................37 SECTION 3.06. Instrument for the Payment of Money..................37 SECTION 3.07. Continuing Guarantee.................................38 SECTION 3.08. Rights of Contribution...............................38 SECTION 3.09. General Limitation on Guarantee Obligations..........38 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Financial Condition...................................39 SECTION 4.02. No Change.............................................40 SECTION 4.03. Corporate Existence; Compliance with Law..............40 SECTION 4.04. Corporate Power; Authorization; Enforceable Obligations...........................................40 SECTION 4.05. No Legal Bar..........................................40 SECTION 4.06. No Material Litigation................................41 Section 4.07. No Default............................................41 Section 4.08. Ownership of Property; Liens..........................41 Section 4.09. Intellectual Property.................................41 Section 4.10. Taxes 41 Section 4.11. Federal Regulations...................................42 Section 4.12. ERISA 42.............................................42 Section 4.13. Investment Company Act; Other Regulations.............42 Section 4.14. Subsidiaries..........................................42 Section 4.15. Purpose of Loans......................................42 Section 4.16. Environmental Matters.................................42 Section 4.17. Certain Documents.....................................43 ARTICLE V CONDITIONS SECTION 5.01. Effective Date........................................43 SECTION 5.02. Each Credit Event.....................................45 ARTICLE VI AFFIRMATIVE COVENANTS SECTION 6.01. Financial Statements and Other Information............45 SECTION 6.02. Payment of Obligations................................46 SECTION 6.03. Conduct of Business and Maintenance of Existence......47 SECTION 6.04. Maintenance of Property; Insurance....................47 SECTION 6.05. Inspection of Property; Books and Records; Discussions...........................................47 SECTION 6.06. Notices...............................................47 SECTION 6.07. Unrestricted Subsidiaries; Maintenance of Separate Corporate Identity....................................48 SECTION 6.08. Certain Obligations Respecting Subsidiaries...........49 ARTICLE VII NEGATIVE COVENANTS SECTION 7.01. Financial Condition Covenants.........................50 SECTION 7.02. Limitation on Indebtedness............................50 SECTION 7.03. Limitation on Liens...................................51 SECTION 7.04. Limitation on Guarantee Obligations...................52 SECTION 7.05. Limitation on Fundamental Changes.....................53 SECTION 7.06. Limitation on Sale of Assets..........................53 SECTION 7.07. Limitation on Restricted Payments.....................54 SECTION 7.08. Limitation on Investments, Loans and Advances.........55 SECTION 7.09. Limitation on Modifications of the Management Agreement.............................................56 SECTION 7.10. Limitation on Sale or Discount of Receivables.........56 SECTION 7.11. Limitation on Transactions with Affiliates............56 SECTION 7.12. Limitation on Changes in Fiscal Year..................56 SECTION 7.13. Limitation on Negative Pledge Clauses.................56 SECTION 7.14. Limitation on Lines of Business.......................57 SECTION 7.15. Repayments of Indebtedness............................57 SECTION 7.16. Hedging Agreements....................................57 ARTICLE VIII EVENTS OF DEFAULT............................57 ARTICLE IX THE ADMINISTRATIVE AGENT.........................60 ARTICLE X MISCELLANEOUS SECTION 10.01. Notices..............................................63 SECTION 10.02. Waivers; Amendments..................................63 SECTION 10.03. Expenses; Indemnity; Damage Waiver...................65 SECTION 10.04. Successors and Assigns...............................66 SECTION 10.05. Survival.............................................70 SECTION 10.06. Counterparts; Integration; Effectiveness.............70 SECTION 10.07. Severability.........................................70 SECTION 10.08. Right of Set-off.....................................70 SECTION 10.09. Governing Law; Jurisdiction; Etc.....................71 SECTION 10.10. WAIVER OF JURY TRIAL.................................71 SECTION 10.11. Headings.............................................72 SECTION 10.12. Treatment of Certain Information; Confidentiality....72 SCHEDULE I - Commitments SCHEDULE II - Material Agreements and Liens SCHEDULE III - Guarantee Obligations SCHEDULE IV - Subsidiaries and Investments SCHEDULE V - Transactions With Affiliates EXHIBIT A - Form of Assignment and Acceptance EXHIBIT B - Form of Guarantee Assumption Agreement EXHIBIT C - Form of Opinion of Counsel to the Obligors EXHIBIT D - Form of Opinion of Special New York Counsel to JPMCB EXHIBIT E - Form of Tax Allocation Agreement. CREDIT AGREEMENT dated as of March 3, 2004, between WESTWOOD ONE, INC., the SUBSIDIARY GUARANTORS party hereto, the LENDERS party hereto, and JPMORGAN CHASE BANK, as Administrative Agent. The Borrower (as hereinafter defined) has requested that the Lenders (as so defined) make loans to it, under the guarantee of the Subsidiary Guarantors (as so defined), in an aggregate principal amount not exceeding $300,000,000, to finance the operations of the Obligors (as so defined), to refinance certain existing indebtedness of the Obligors, and for other general corporate purposes of the Obligors. The Lenders are prepared to make such loans upon the terms and conditions hereof, and, accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Adjusted LIBO Rate" means, for the Interest Period for any Eurodollar Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate for such Interest Period. "Administrative Agent" means JPMCB, in its capacity as administrative agent for the Lenders hereunder. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, as to any Person, any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. "Alternate Base Rate" means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate for such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, as the case may be. "Annualized Consolidated Corporate Overhead" means, for any period, corporate general and administrative expenses of the Borrower and its Restricted Subsidiaries for such period as shown on the consolidated financial statements of the Borrower and its Restricted Subsidiaries for such period delivered to the Administrative Agent pursuant to Section 6.01(a) or 6.01(b); provided that there shall be excluded from "Annualized Consolidated Corporate Overhead" (a) all non-cash charges and (b) all corporate general and administrative expenses of the Borrower incurred on behalf of, or otherwise attributable to, Unrestricted Subsidiaries or in connection with management and other services and activities performed by the Borrower for Unrestricted Subsidiaries. "Annualized Consolidated Operating Cash Flow" means, for any period, the aggregate amount (determined on a consolidated basis without duplication in accordance with GAAP), for the Borrower and its Restricted Subsidiaries, of (a) the sum of (i) net revenues of the Borrower and its Restricted Subsidiaries for such period (calculated before taxes and excluding (A) any net gain or loss arising from the sale of capital assets during such period; (B) any gain arising from any write-up of assets during such period; (C) net earnings for such period of any Person in which the Borrower or any of its Restricted Subsidiaries has an ownership interest unless such net earnings shall have actually been received by the Borrower or such Restricted Subsidiary in the form of cash distributions (other than cash distributions received by the Borrower from an Unrestricted Subsidiary); (D) any portion of the net earnings of any Restricted Subsidiary of the Borrower or any of its Restricted Subsidiaries for such period which for any reason is unavailable for payment of dividends to the Borrower or any other such Restricted Subsidiary; (E) any gain realized during such period arising from the acquisition of any securities of the Borrower or any of its Restricted Subsidiaries; (F) any "extraordinary", "unusual" or "non-recurring" earnings or "extraordinary", "unusual" or "non-recurring" losses for such period as such terms are interpreted under GAAP; and (G) any interest income of the Borrower and its Restricted Subsidiaries realized during such period) minus (ii) operating expenses of the Borrower and its Restricted Subsidiaries for such period (excluding depreciation, amortization, interest expense and other non-cash charges accrued, and income taxes paid or accrued (other than any such taxes attributable to the revenues of Unrestricted Subsidiaries for which the Borrower has not been or is not entitled to be reimbursed, or in respect of which the Borrower has not received or is not entitled to receive a credit, pursuant to the terms of any Tax Allocation Agreement), for such period by the Borrower and its Restricted Subsidiaries) minus (b) Annualized Consolidated Corporate Overhead for such period; provided that for purposes of calculating Annualized Consolidated Operating Cash Flow when such term is used in determining the Total Debt Ratio, if the Borrower or any of its Restricted Subsidiaries shall have acquired or disposed of one or more businesses (or any part thereof) during such period, Annualized Consolidated Operating Cash Flow for such period shall be computed as if (in the case of an acquisition) such business (or part thereof) had been owned by the Borrower or such Restricted Subsidiary for the whole of such period or (in the case of a disposition) such business (or part thereof) had been disposed of prior to the first day of such period. "Applicable Margin" means, with respect to Loans of any Type during any Interest Accrual Period, the respective rates indicated below for such Loans of such Type opposite the applicable Total Debt Ratio indicated below for such Interest Accrual Period:
------------------------------ --------------------------------------------------------- Applicable Margin ------------------------------ --------------------------------------------------------- ------------------------------ ---------------------------- ---------------------------- Total Debt Ratio Eurodollar Loans Base Rate Loans ------------------------------ ---------------------------- ---------------------------- ------------------------------ ---------------------------- ---------------------------- Greater than or equal to 1.125% 0.125% 3.00 to 1 ------------------------------ ---------------------------- ---------------------------- ------------------------------ ---------------------------- ---------------------------- Less than 3.00 to 1 and 0.875% 0.000% ------------------------------ ---------------------------- ---------------------------- ------------------------------ ---------------------------- ---------------------------- Less than 2.00 to 1 0.625% 0.000% ------------------------------ ---------------------------- ----------------------------
The Total Debt Ratio for any Interest Accrual Period after the initial Interest Accrual Period shall be determined on the basis of a certificate of a Responsible Officer, or any other senior officer setting forth a calculation of the Total Debt Ratio as at the last day of the fiscal quarter ending immediately prior to the first day of such Interest Accrual Period, each of which certificates shall be delivered together with the financial statements for the fiscal quarter on which such calculation is based. Anything in this Agreement to the contrary notwithstanding, the Applicable Margin shall be, (i) 0.000% with respect to Base Rate Loans and 0.625% with respect to Eurodollar Loans until the Interest Accrual Period commencing on the third Business Day following the receipt by the Administrative Agent of the certificate referred to in the immediately preceding paragraph setting forth the calculation of the Total Debt Ratio as at the fiscal year ended December 31, 2003 and (ii) the highest rates set forth in the schedule above during any period when an Event of Default shall have occurred and be continuing, or during any period during which the Borrower shall be in default in the delivery of any financial statements pursuant to Section 6.01(a) or 6.01(b). "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments or Loans of both Classes hereunder represented by the aggregate amount of such Lender's Commitments or Loans of both Classes hereunder. "Approved Fund" means, with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means Westwood One, Inc., a Delaware corporation. "Borrowing" means (a) all ABR Loans of the same Class made, converted or continued on the same date or (b) all Eurodollar Loans of the same Class that have the same Interest Period. "Borrowing Request" means a request by the Borrower for a Borrowing in accordance with Section 2.03. "Business Day" means any day (a) that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed and (b) if such day relates to a borrowing of, a payment or prepayment of principal of or interest on, a continuation or conversion of or into, or the Interest Period for, a Eurodollar Borrowing, or to a notice by the Borrower with respect to any such borrowing, payment, prepayment, continuation, conversion, or Interest Period, that is also a day on which dealings in Dollar deposits are carried out in the London interbank market. "Capital Expenditures" means, for any period, expenditures (including the aggregate amount of obligations under Financing Leases (excluding any such obligations relating to the acquisition of satellite time or capacity in an aggregate amount not to exceed $20,000,000) incurred during such period) made by the Borrower or any of its Restricted Subsidiaries to acquire or construct fixed assets, plant and equipment (including renewals, improvements and replacements, but excluding repairs) during such period computed in accordance with GAAP. "Capital Stock" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Cash Equivalents" means (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-2 by Standard and Poor's Ratings Services ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), (e) debt securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any Person which are rated at least A by S&P or A by Moody's, (f) debt securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition, (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition or (h) securities similar in nature and maturity to those described in the foregoing clauses (a) through (g) denominated in foreign currencies and owned by a Foreign Subsidiary. "Casualty Event" means, with respect to any property of any Person, any loss of or damage to, or any condemnation or other taking of, such property for which such Person or any of its Subsidiaries receives insurance proceeds, or proceeds of a condemnation award or other compensation. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.12(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are Revolving Credit Loans or Term Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Credit Commitment or Term Loan Commitment. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commitment" means a Revolving Credit Commitment or Term Loan Commitment, or any combination thereof (as the context requires). "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Dollars" or "$" refers to lawful money of the United States of America. "Domestic Subsidiary" means any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States. "Effective Date" means the date on which the conditions specified in Section 5.01 are satisfied (or waived in accordance with Section 10.02). "Environmental Laws" means any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Materials of Environmental Concern, (c) exposure to any Materials of Environmental Concern, (d) the release or threatened release of any Materials of Environmental Concern into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Environmental Permits" means any and all permits, licenses, registrations, notifications, exemptions and any other authorization required under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Event of Default" has the meaning assigned to such term in Article VIII. "Excess Cash Flow" means, for any fiscal year, the amount (if any) by which (a) the sum of (i) Annualized Consolidated Operating Cash Flow for such fiscal year plus (ii) any interest income realized in cash of the Borrower and its Restricted Subsidiaries during such fiscal year exceeds (b) the sum of (i) Total Debt Service for such fiscal year plus (ii) the aggregate amount of Capital Expenditures made by the Borrower and its Restricted Subsidiaries during such fiscal year (net of long-term Indebtedness, if any, incurred by the Borrower and its Restricted Subsidiaries during such fiscal year) plus (iii) the aggregate amount of income taxes paid or payable by the Borrower (excluding any such taxes attributable to the revenues of Unrestricted Subsidiaries for which the Borrower has been or is entitled to be reimbursed, or has received or is entitled to receive a credit, pursuant to the terms of any Tax Allocation Agreement) and its Restricted Subsidiaries during such fiscal year. "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.16(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement or is attributable to such Foreign Lender's failure or inability (other than as a result of a Change in Law) to comply with Section 2.14(e), except to the extent that such Foreign Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.14(a). "Existing Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of November 17, 2000 among the Borrower, the Lenders party thereto, Fleet National Bank, Bank Of Montreal and Bank of America, N.A., as co-agents for the Lenders thereunder, and JPMCB (as successor to The Chase Manhattan Bank), as Administrative Agent. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financing Lease" means any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "Foreign Subsidiary" means any Subsidiary of the Borrower organized under the laws of any jurisdiction outside the United States. "GAAP" means generally accepted accounting principles in the United States consistent with those utilized in preparing the audited financial statements referred to in Section 4.01. "Governmental Authority" means the government of the United States of America, or of any other nation, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee Assumption Agreement" means a Guarantee Assumption Agreement substantially in the form of Exhibit B by an entity that, pursuant to Section 6.08, is required to become a "Subsidiary Guarantor" hereunder in favor of the Administrative Agent. "Guarantee Obligation" means as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "Indebtedness" of any Person at any date means, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person contingent or otherwise in respect of banker's acceptances or similar instruments issued or created for the account of such Person, (e) all obligations, contingent or otherwise, of such Person as an account party under acceptance, letter of credit or similar facilities and (f) all liabilities of the type described in clauses (a) through (e) above secured by any Lien on any property owned by such Person (not to exceed the value of such property) even though such Person has not assumed or otherwise become liable for the payment thereof. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Infinity" means Infinity Broadcasting Corporation, a Delaware corporation. "INI" means (a) Infinity Network Inc., a Delaware corporation that, on the date hereof, is a wholly owned Subsidiary of Infinity, or (b) any other wholly owned Subsidiary of Infinity that owns Capital Stock or other ownership interests of the Borrower; provided that Infinity shall have notified the Administrative Agent of the name of such other Subsidiary and the amount of such ownership interests owned by such Subsidiary. "Insolvent" means pertaining to a condition of Insolvency. "Interest Accrual Period" means the period commencing during any fiscal quarter on the date (the "Change Date") that is the third Business Day following the receipt by the Administrative Agent of the certificate referred to in the next to the last paragraph in the definition of "Applicable Margin", to but not including the Change Date in the immediately following fiscal quarter. "Interest Election Request" means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.05. "Interest Payment Date" means (a) with respect to any ABR Loan, each Quarterly Date and (b) with respect to any Eurodollar Loan, the last day of each Interest Period therefor and, in the case of any Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at three-month intervals after the first day of such Interest Period. "Interest Period" means, for any Eurodollar Loan or Borrowing, the period commencing on the date of such Loan or Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as specified in the applicable Borrowing Request or Interest Election Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Loan initially shall be the date on which such Loan is made and thereafter shall be the effective date of the most recent conversion or continuation of such Loan, and the date of a Borrowing comprising Loans that have been converted or continued shall be the effective date of the most recent conversion or continuation of such Loans. "Investment" has the meaning assigned to such term in Section 7.08. "JPMCB" means JPMorgan Chase Bank. "Lenders" means the Persons listed on Schedule I and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, for the Interest Period for any Eurodollar Borrowing, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for the offering of Dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the LIBO Rate for such Interest Period shall be the rate at which Dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan Documents" means, collectively, this Agreement and the Notes. "Loans" means the loans made by the Lenders to the Borrower pursuant to this Agreement. "Management Agreement" means the Management Agreement dated as of March 30, 1999, as amended by an amendment dated April 15, 2002, between the Borrower and Infinity. "Management Fees" means, for any period, fees and cash incentive bonuses payable to Infinity under the Management Agreement during such period for administrative, management and other services performed for the Borrower and its Subsidiaries. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, property, assets, liabilities or condition (financial or otherwise) of the Borrower and its Restricted Subsidiaries taken as a whole or (b) the validity or enforceability of this or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder. "Material Environmental Amount" means an amount finally determined to be payable by the Borrower and/or its Subsidiaries in excess of $1,000,000 for remedial costs, compliance costs, compensatory damages, punitive damages, fines, penalties or any combination thereof. "Materials of Environmental Concern" means any gasoline or petroleum (including, without limitation, crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Notes" means the collective reference to any promissory notes evidencing Loans of either Class pursuant to Section 2.07(f). "Obligor" means the Borrower and each Subsidiary Guarantor. "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Permitted Additional Indebtedness" means Indebtedness incurred by the Borrower which is (i) unsecured, (ii) no portion of the principal of which is required to be repaid, repurchased or retired prior to June 30, 2009 (other than upon a change of control of the Borrower) and (iii) has other terms and conditions (other than those relating to interest rate, fees and premiums) which, taken as a whole, are no more restrictive on the Borrower (as determined in good faith by the Board of Directors of the Borrower in the exercise of its reasonable discretion) than the terms and conditions of this Agreement, as in effect on the date of incurrence of such Indebtedness, provided, that, prior to and after giving effect to such incurrence, there shall exist no Default or Event of Default hereunder. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by JPMCB as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Properties" means the facilities and properties owned, leased or operated by the Borrower or any of its Subsidiaries. "Quarterly Dates" means the last Business Day of February, May, August and November in each year, the first of which shall be the first such day after the date hereof. "Register" has the meaning set forth in Section 10.04. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Required Lenders" means, at any time, subject to the last paragraph of Section 10.02(b), Lenders having Revolving Credit Exposures, outstanding Term Loans and unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures, outstanding Term Loans and unused Commitments at such time. The "Required Lenders" of a particular Class of Loans means Lenders having Revolving Credit Exposures, outstanding Term Loans and unused Commitments of such Class representing more than 50% of the total Revolving Credit Exposures, outstanding Term Loans and unused Commitments of such Class at such time. "Requirement of Law" means as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" means the Chairman of the Board, the Co-Chairman of the Board, the chief executive officer, the president, the chief financial officer or the senior vice president of financial operations of the Borrower. "Restricted Payment" shall have the meaning assigned to such term in Section 7.07. "Restricted Subsidiary" means each Subsidiary of the Borrower other than an Unrestricted Subsidiary. "Revolving Credit", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are made pursuant to Section 2.01(a). "Revolving Credit Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Revolving Credit Commitment Termination Date and the date of termination of the Revolving Credit Commitments. "Revolving Credit Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Credit Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.06 or 2.08(b) and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Revolving Credit Commitment is set forth on Schedule I, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Revolving Credit Commitment, as applicable. The initial aggregate amount of the Lenders' Revolving Credit Commitments is $180,000,000. "Revolving Credit Commitment Termination Date" means the Quarterly Date falling on or nearest to February 28, 2009. "Revolving Credit Exposure" means, with respect to any Lender at any time, the aggregate outstanding principal amount of such Lender's Revolving Credit Loans at such time. "Revolving Credit Lender" means a Lender with a Revolving Credit Commitment or, if the Revolving Credit Commitments have terminated or expired, a Lender with Revolving Credit Exposure. "Statutory Reserve Rate" means, for the Interest Period for any Eurodollar Borrowing, a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the arithmetic mean, taken over each day in such Interest Period, of the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Subsidiary" means, as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Guarantor" means each of the Subsidiaries of the Borrower identified under the caption "SUBSIDIARY GUARANTORS" on the signature pages hereto and each Subsidiary of the Borrower that becomes a "Subsidiary Guarantor" after the date hereof pursuant to Section 6.08. "Tax Allocation Agreements" means each Tax Allocation Agreement substantially in the form of Exhibit E hereto, each between the Borrower and an Unrestricted Subsidiary. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Term", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are made pursuant to Section 2.01(b). "Term Loan Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make one or more Term Loans hereunder on the Effective Date, expressed as an amount representing the maximum aggregate principal amount of the Term Loans to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.06 or 2.08(b) and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Term Loan Commitment is set forth on Schedule I, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Term Loan Commitment, as applicable. The initial aggregate amount of the Lenders' Term Loan Commitments is $120,000,000. "Term Loan Lender" means a Lender with a Term Loan Commitment or an outstanding Term Loan. "Term Loan Maturity Date" means the Quarterly Date falling on or nearest to February 28, 2009. "Total Debt" means the sum of, without duplication, (a) all Indebtedness (other than Indebtedness in respect of the undrawn amount of any letters of credit) of the Borrower and its Restricted Subsidiaries, determined on a consolidated basis and (b) all Indebtedness (other than Indebtedness in respect of the undrawn amount of any letters of credit) of others for which a Guarantee Obligation has been given by the Borrower or any Restricted Subsidiary. "Total Debt Ratio" means, as of any date of determination thereof, the ratio of (a) Total Debt outstanding as of such date to (b) Annualized Consolidated Operating Cash Flow for the period of the four fiscal quarters of the Borrower ended on, or most recently ended prior to, such date for which financial statements have been, or are required to have been, provided to the Lenders pursuant to Section 6.01. "Total Debt Service" means, as at the last day of any fiscal year of the Borrower, the sum (calculated without duplication) of all payments of principal of and interest on Indebtedness of the Borrower and its Restricted Subsidiaries made or scheduled to be made during such fiscal year (other than payments of principal which may be reborrowed), provided that, for any fiscal year ending on or prior to the Revolving Credit Commitment Termination Date, "Total Debt Service" shall include all mandatory reductions of the Revolving Credit Commitments pursuant to Section 2.08(b) effected during such fiscal year. "Total Interest" means, for any period, all interest, whether paid in cash or accrued as a liability, on all Indebtedness (including imputed interest on Financing Leases) of the Borrower and its Restricted Subsidiaries, determined on a consolidated basis, during such period. "Total Interest Coverage Ratio" means, as of any date of determination thereof, the ratio of (a) Annualized Consolidated Operating Cash Flow for the period of four fiscal quarters of the Borrower ended on, or most recently ended prior to, such date to (b) Total Interest for such period. "Transactions" means the execution, delivery and performance by each Obligor of this Agreement and the other Loan Documents to which such Obligor is intended to be a party, the borrowing of Loans and the use of the proceeds thereof. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans constituting such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "2002 Notes" means the Borrower's Senior Guaranteed Notes, Series A, due November 2009, and the Borrower's Senior Guaranteed Notes, Series B, due November 2012 in an aggregate principal amount up to but not exceeding, $200,000,000. "2002 Notes Guarantee" means the guarantee by the Guarantors of the 2002 Notes pursuant to the 2002 Notes Note Purchase Agreement. "2002 Notes Note Purchase Agreement" means the Note Purchase Agreement dated as of December 3, 2002 among the Borrower and the Purchasers referred to therein pursuant to which the 2002 Notes have been issued. "Unrestricted Investment Basket" means, at any time, an amount equal to the sum of the following: (a) any Excess Cash Flow of the Borrower and its Restricted Subsidiaries for any fiscal year commencing with the fiscal year ending on December 31, 2002 plus (b) the aggregate net cash proceeds received by the Borrower subsequent to the Effective Date from the issuance of shares of its Capital Stock. "Unrestricted Subsidiary" means any Subsidiary of the Borrower which has been organized or acquired after the date hereof and designated by the Board of Directors of the Borrower as an "Unrestricted Subsidiary", provided, in each case, that at the time any such other Subsidiary is so organized or acquired and at all times thereafter: (a) none of the issued and outstanding capital stock of such Subsidiary (or any Subsidiary of such Subsidiary) is owned by any Restricted Subsidiary; (b) except as permitted by Section 7.08(g), no proceeds of any Loan hereunder are used to finance or pay any cost or expense related to the organization of, or acquisition of the assets or properties of, such Subsidiary (or any Subsidiary of such Subsidiary); (c) except as permitted by Section 7.08(g), neither the Borrower nor any Restricted Subsidiary is at the time such Subsidiary (or any Subsidiary of such Subsidiary) is organized or acquired or at any time thereafter (x) directly or indirectly liable (contingently or otherwise), or provides or is obligated to provide any credit support, for any Indebtedness (including, without limitation, any undertaking, agreement or instrument evidencing such Indebtedness) or other obligation of such Subsidiary (or any Subsidiary of such Subsidiary), (y) obligated to contribute any funds or other property to such Subsidiary (or any Subsidiary of such Subsidiary) or (z) otherwise directly or indirectly obligated to any other Person on account of the Indebtedness, other obligations or financial condition of such Subsidiary (or any Subsidiary of such Subsidiary) except to the extent of a pledge or security interest in the Capital Stock owned by the Borrower of such Subsidiary as collateral security for obligations of such Subsidiary (or any Subsidiary of such Subsidiary); (d) no agreements, instruments or other documents governing or evidencing any Indebtedness of such Subsidiary (or any Subsidiary of such Subsidiary) contains a cross-default or cross-acceleration clause or other "event of default" or similar event the occurrence of which (with or without notice or lapse of time or both) causes or would permit the holder(s) thereof to cause such Indebtedness to become due or to be required to be purchased or redeemed by such Subsidiary or any of its Affiliates prior to its stated maturity or to take enforcement action against such Subsidiary (or any Subsidiary of such Subsidiary) solely by reason of (x) the occurrence of a Default or Event of Default hereunder, (y) the occurrence of any default or other event or condition in respect of any other Indebtedness of the Borrower or any of its Restricted Subsidiaries (including, without limitation, subordinated debt) or (z) the occurrence of any event or condition with respect to the Borrower or any of its Restricted Subsidiaries other than any event or condition described in Section 8(f) with respect to the Borrower; (e) the Borrower and such Subsidiary (or another Unrestricted Subsidiary of which such Subsidiary is a Subsidiary), acting on its own behalf and on behalf of its Subsidiaries, have entered into a Tax Allocation Agreement, which Agreement shall be in full force and effect at the time such Subsidiary is organized or acquired and at all times thereafter, and (f) the Borrower has notified the Lenders as to the organization or acquisition of such Subsidiary as required by Section 6.07 and the Borrower is in compliance with its other obligations set forth in Section 6.07. Notwithstanding the foregoing, no Subsidiary that is a Restricted Subsidiary under the 2002 Notes Note Purchase Agreement may be an Unrestricted Subsidiary hereunder. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.03. Definitions Apply to Notes, Etc. Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Notes or any certificate or other document made or delivered pursuant hereto. SECTION 1.04. Accounting Terms. As used herein and in any Notes, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in Section 1.01 and accounting terms partly defined in Section 1.01, to the extent not defined, shall have the respective meanings given to them under GAAP. ARTICLE II THE CREDITS SECTION 2.01. The Commitments. (a) Revolving Credit Loans. Subject to the terms and conditions set forth herein, each Revolving Credit Lender agrees to make Revolving Credit Loans to the Borrower from time to time during the Revolving Credit Availability Period in an aggregate principal amount that will not result in (i) such Lender's Revolving Credit Exposure exceeding such Lender's Revolving Credit Commitment or (ii) the total Revolving Credit Exposures exceeding the total Revolving Credit Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Credit Loans. (b) Term Loans. Subject to the terms and conditions set forth herein, each Term Loan Lender agrees to make one or more Term Loans to the Borrower on the Effective Date in a principal amount not exceeding its Term Loan Commitment. Amounts prepaid or repaid in respect of Term Loans may not be reborrowed. SECTION 2.02. Loans and Borrowings. (a) Obligations of Lenders. Each Loan shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Type of Loans. Subject to Section 2.11, each Borrowing shall be constituted entirely of ABR Loans or of Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) Minimum Amounts; Limitation on Number of Borrowings. Each Eurodollar Borrowing shall be in an aggregate amount of $5,000,000 or a larger multiple of $1,000,000. Each ABR Borrowing shall be in an aggregate amount equal to $2,000,000 or a larger multiple of $500,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments of the applicable Class. Borrowings of more than one Class and Type may be outstanding at the same time; provided that there shall not at any time be more than a total of six Eurodollar Borrowings outstanding. (d) Limitations on Interest Periods. Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request (or to elect to convert to or continue as a Eurodollar Borrowing): (i) any Revolving Credit Borrowing if the Interest Period requested therefor would end after the Revolving Credit Commitment Termination Date; or (ii) any Term Borrowing if the Interest Period requested therefor would end after the Term Loan Maturity Date. SECTION 2.03. Requests for Borrowings. (a) Notice by the Borrower. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (i) in the case of a Eurodollar Borrowing, not later than 10:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (ii) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. (b) Content of Borrowing Requests. Each telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) whether the requested Borrowing is to be a Revolving Credit Borrowing or Term Borrowing; (ii) the aggregate amount of the requested Borrowing; (iii) the date of such Borrowing, which shall be a Business Day; (iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (v) in the case of a Eurodollar Borrowing, the Interest Period therefor, which shall be a period contemplated by the definition of the term "Interest Period" and permitted under Section 2.02(d); and (vi) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.04. (c) Notice by the Administrative Agent to the Lenders. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. (d) Failure to Elect. If no election as to the Type of a Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the requested Borrowing shall be made instead as an ABR Borrowing. SECTION 2.04. Funding of Borrowings. (a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City and designated by the Borrower in the applicable Borrowing Request. (b) Presumption by the Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.05. Interest Elections. (a) Elections by the Borrower. The Loans constituting each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have the Interest Period specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a Borrowing of a different Type or to continue such Borrowing as a Borrowing of the same Type and, in the case of a Eurodollar Borrowing, may elect the Interest Period therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans constituting such Borrowing, and the Loans constituting each such portion shall be considered a separate Borrowing. (b) Notice of Elections. To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Content of Interest Election Requests. Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) of this paragraph shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period therefor after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period" and permitted under Section 2.02(d). (d) Notice by the Administrative Agent to the Lenders. Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) Failure to Elect; Events of Default. If the Borrower fails to deliver a timely and complete Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period therefor, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period therefor. SECTION 2.06. Termination and Reduction of the Commitments. (a) Scheduled Termination. Unless previously terminated, (i) the Term Loan Commitments shall terminate at 5:00 p.m., New York City time, on the Effective Date, and (ii) the Revolving Credit Commitments shall terminate on the Revolving Credit Commitment Termination Date. (b) Voluntary Termination or Reduction. The Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class; provided that (i) each reduction of the Commitments of any Class pursuant to this Section shall be in an amount that is $5,000,000 or a larger multiple of $1,000,000 and (ii) the Borrower shall not terminate or reduce the Revolving Credit Commitments if, after giving effect to any concurrent prepayment of the Revolving Credit Loans in accordance with Section 2.08, the total Revolving Credit Exposures would exceed the total Revolving Credit Commitments. (c) Notice of Voluntary Termination or Reduction. The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments of any Class under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Credit Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. (d) Effect of Termination or Reduction. Any termination or reduction of the Commitments of either Class shall be permanent. Each reduction of the Commitments of either Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class. SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) Repayment. The Borrower hereby unconditionally promises to pay the Loans as follows: (i) to the Administrative Agent for account of the Revolving Credit Lenders the outstanding principal amount of the Revolving Credit Loans on the Revolving Credit Commitment Termination Date, and (ii) to the Administrative Agent for account of the Term Loan Lenders the outstanding principal amount of the Term Loans on the Term Loan Maturity Date. (b) Manner of Payment. Prior to any repayment or prepayment of any Borrowings of either Class hereunder, the Borrower shall select the Borrowing or Borrowings of the applicable Class to be paid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 11:00 a.m., New York City time, three Business Days before the scheduled date of such repayment; provided that each repayment of Borrowings of either Class shall be applied to repay any outstanding ABR Borrowings of such Class before any other Borrowings of such Class. If the Borrower fails to make a timely selection of the Borrowing or Borrowings to be repaid or prepaid, such payment shall be applied, first, to pay any outstanding ABR Borrowings of the applicable Class and, second, to other Borrowings of such Class in the order of the remaining duration of their respective Interest Periods (the Borrowing with the shortest remaining Interest Period to be repaid first). Each payment of a Borrowing shall be applied ratably to the Loans included in such Borrowing. (c) Maintenance of Records by Lenders. Each Lender shall maintain in accordance with its usual practice records evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (d) Maintenance of Records by the Administrative Agent. The Administrative Agent shall maintain records in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and each Interest Period therefor, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for account of the Lenders and each Lender's share thereof. (e) Effect of Entries. The entries made in the records maintained pursuant to paragraph (c) or (d) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such records or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (f) Promissory Notes. Any Lender may request that Loans of either Class made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.08. Prepayment of Loans. (a) Optional Prepayments. The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section. (b) Mandatory Prepayments. The Borrower will prepay the Loans, and/or the Commitments shall be subject to automatic reduction, as follows: (i) Dispositions. If the Borrower or any of its Restricted Subsidiaries shall receive any net cash proceeds from the sale or other disposition of property, businesses or assets (except for (i) sales or other dispositions of obsolete or worn out property and (ii) sales of inventory or other property in the ordinary course of business) and such proceeds are not used to purchase other assets within 12 months of receipt thereof, the Borrower shall apply an amount equal to 100% of the portion of such net cash proceeds not so used to the prepayment of the Loans and to the permanent reduction of the Revolving Credit Commitments in the manner and to the extent specified in clause (iii) of this paragraph. (ii) Casualty Events. If the Borrower or any of its Restricted Subsidiaries shall receive any proceeds from any insurance on the property of the Borrower or its Restricted Subsidiaries (other than business interruption insurance), then the Borrower shall apply 100% of such proceeds, to the extent they are not reasonably promptly applied to the repair or replacement of the affected property to which such proceeds relate (or to the payment of taxes or other expenses related to such property or the repayment of any Indebtedness secured thereby), to the prepayment of the Loans and to the permanent reduction of the Revolving Credit Commitments in the manner and to the extent specified in clause (iii) of this paragraph. (iii) Application. Prepayments and/or reductions of Commitments pursuant to this paragraph shall be applied as follows: first, (A) if such prepayment and/or reduction of Commitments is required to be made before the Term Loan Commitments have terminated, to reduce the aggregate amount of the Term Loan Commitments, and (B) if such prepayment and/or reduction of Commitments is required to be made after the Term Loan Commitments have terminated, to prepay the Term Loans, and second, after the payment in full of the Term Loans and the termination of the Term Loan Commitments, to reduce the aggregate amount of the Revolving Credit Commitments (and to the extent that, after giving effect to such reduction, the total Revolving Credit Exposures would exceed the Revolving Credit Commitments, the Borrower shall prepay Loans in an aggregate amount equal to such excess). (c) Notices, Etc. The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Revolving Credit Commitments as contemplated by Section 2.06, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.06. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the relevant Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.10 and shall be made in the manner specified in Section 2.07(b). SECTION 2.09. Fees. (a) Commitment Fee. The Borrower agrees to pay to the Administrative Agent for account of each Lender a commitment fee, which shall accrue at a rate per annum equal to 1/4 of 1% on the average daily unused amount of the Revolving Credit Commitment of such Lender during the period from and including the date hereof to but excluding the earlier of the date such Revolving Credit Commitment terminates and the Revolving Credit Commitment Termination Date. Accrued commitment fees shall be payable on each Quarterly Date and on the earlier of the date the Revolving Credit Commitments terminate and the Revolving Credit Commitment Termination Date, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) Administrative Agent Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (c) Payment of Fees. All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of facility fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances. SECTION 2.10. Interest. (a) ABR Loans. The Loans constituting each ABR Borrowing shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin. (b) Eurodollar Loans. The Loans constituting each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period for such Borrowing plus the Applicable Margin. (c) Default Interest. Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration, by mandatory prepayment or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided above or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (d) Payment of Interest. Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Credit Loans, upon termination of the Revolving Credit Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of a Revolving Credit Loan that is an ABR Loan prior to the Revolving Credit Commitment Termination Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Borrowing prior to the end of the Interest Period therefor, accrued interest on such Borrowing shall be payable on the effective date of such conversion. (e) Computation. All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.11. Alternate Rate of Interest. If prior to the commencement of the Interest Period for any Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (b) if such Borrowing is of a particular Class of Loans, the Administrative Agent is advised by the Required Lenders of such Class that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their respective Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or the continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and such Borrowing (unless prepaid) shall be continued as, or converted to, an ABR Borrowing and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.12. Increased Costs. (a) Increased Costs Generally. If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lenders of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) Capital Requirements. If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) Certificates from Lenders. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than six months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.13. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period therefor (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of an Interest Period therefor, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.08(c) and is revoked in accordance herewith), or (d) the assignment as a result of a request by the Borrower pursuant to Section 2.16(b) of any Eurodollar Loan other than on the last day of an Interest Period therefor, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, the loss to any Lender attributable to any such event shall be deemed to include an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for Dollar deposits from other banks in the eurodollar market at the commencement of such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.14. Taxes. (a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) Payment of Other Taxes by the Borrower. In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent and such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Foreign Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. SECTION 2.15. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Payments by the Obligors. Each Obligor shall make each payment required to be made by it hereunder (whether of principal, interest or fees, or under Section 2.12, 2.13 or 2.14, or otherwise) or under any other Loan Document (except to the extent otherwise provided therein) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, N.Y., 10017, except as otherwise expressly provided in the relevant Loan Document and except payments pursuant to Sections 2.12, 2.13, 2.14 and 10.03, which shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder or under any other Loan Document (except to the extent otherwise provided therein) shall be made in Dollars. (b) Application of Insufficient Payments. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay principal and then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) Pro Rata Treatment. Except to the extent otherwise provided herein: (i) each Borrowing of a particular Class shall be made from the relevant Lenders, each payment of commitment fee under Section 2.09 shall be made for account of the relevant Lenders, and each termination or reduction of the amount of the Commitments of a particular Class under Section 2.06 shall be applied to the respective Commitments of such Class of the relevant Lenders, pro rata according to the amounts of their respective Commitments of such Class; (ii) each Borrowing of any Class shall be allocated pro rata among the relevant Lenders according to the amounts of their respective Commitments of such Class (in the case of the making of Loans) or their respective Loans of such Class that are to be included in such Borrowing (in the case of conversions and continuations of Loans); (iii) each payment or prepayment of principal of Revolving Credit Loans and Term Loans by the Borrower shall be made for account of the relevant Lenders pro rata in accordance with the respective unpaid principal amounts of the Loans of such Class held by them; and (iv) each payment of interest on Revolving Credit Loans and Term Loans by the Borrower shall be made for account of the relevant Lenders pro rata in accordance with the amounts of interest on such Loans then due and payable to the respective Lenders. (d) Sharing of Payments by Lenders. If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon then due than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by any Obligor pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Obligor consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Obligor rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Obligor in the amount of such participation. (e) Presumptions of Payment. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Federal Funds Effective Rate. (f) Certain Deductions by the Administrative Agent. If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b) or 2.15(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.16. Mitigation Obligations; Replacement of Lenders. (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Section 2.14, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.12 or 2.14, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) Replacement of Lenders. If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Section 2.14, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.12 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE III GUARANTEE SECTION 3.01. The Guarantee. The Subsidiary Guarantors hereby jointly and severally guarantee to each Lender and the Administrative Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Loans made by the Lenders to the Borrower and all other amounts from time to time owing to the Lenders or the Administrative Agent by the Borrower under this Agreement and by any Obligor under any of the other Loan Documents, and all obligations of the Borrower or any of its Subsidiaries to any Lender (or any affiliate of any Lender) in respect of any Hedging Agreement, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "Guaranteed Obligations"). The Subsidiary Guarantors hereby further jointly and severally agree that if the Borrower shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Subsidiary Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. For purposes hereof, it is understood that any Guaranteed Obligations to any Person arising under a Hedging Agreement entered into at a time such Person (or an affiliate thereof) is party hereto as a Lender (to the extent the same has been designated as a "Hedging Agreement" for purposes of this Article III in a written notice delivered from the Borrower to the Administrative Agent) shall continue to constitute Guaranteed Obligations, notwithstanding that such Person (or its affiliate) has ceased to be a Lender party hereto (by assigning all of its Commitments, Loans and other interests herein) at the time a claim is to be made in respect of such Guaranteed Obligations. SECTION 3.02. Obligations Unconditional. The obligations of the Subsidiary Guarantors under Section 3.01 are absolute and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Borrower under this Agreement or any other agreement or instrument referred to herein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section that the obligations of the Subsidiary Guarantors hereunder shall be absolute and unconditional, joint and several, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Subsidiary Guarantors hereunder, which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Subsidiary Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of this Agreement or any other agreement or instrument referred to herein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or any other agreement or instrument referred to herein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or (iv) any lien or security interest granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Guaranteed Obligations shall fail to be perfected. The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against the Borrower under this Agreement or any other agreement or instrument referred to herein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. SECTION 3.03. Reinstatement. The obligations of the Subsidiary Guarantors under this Article shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and the Subsidiary Guarantors jointly and severally agree that they will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including fees of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. SECTION 3.04. Subrogation. The Subsidiary Guarantors hereby jointly and severally agree that until the payment and satisfaction in full of all Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement they shall not exercise any right or remedy arising by reason of any performance by them of their guarantee in Section 3.01, whether by subrogation or otherwise, against the Borrower or any other guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. SECTION 3.05. Remedies. The Subsidiary Guarantors jointly and severally agree that, as between the Subsidiary Guarantors and the Lenders, the obligations of the Borrower under this Agreement may be declared to be forthwith due and payable as provided in Article VIII (and shall be deemed to have become automatically due and payable in the circumstances provided in Article VIII) for purposes of Section 3.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Subsidiary Guarantors for purposes of Section 3.01. SECTION 3.06. Instrument for the Payment of Money. Each Subsidiary Guarantor hereby acknowledges that the guarantee in this Article constitutes an instrument for the payment of money, and consents and agrees that any Lender or the Administrative Agent, at its sole option, in the event of a dispute by such Subsidiary Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. SECTION 3.07. Continuing Guarantee. The guarantee in this Article is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. SECTION 3.08. Rights of Contribution. The Subsidiary Guarantors hereby agree, as between themselves, that if any Subsidiary Guarantor shall become an Excess Funding Guarantor (as defined below) by reason of the payment by such Subsidiary Guarantor of any Guaranteed Obligations, each other Subsidiary Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the next sentence), pay to such Excess Funding Guarantor an amount equal to such Subsidiary Guarantor's Pro Rata Share (as defined below and determined, for this purpose, without reference to the properties, debts and liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of such Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to any Excess Funding Guarantor under this Section shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Subsidiary Guarantor under the other provisions of this Article and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations. For purposes of this Section, (i) "Excess Funding Guarantor" means, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that has paid an amount in excess of its Pro Rata Share of such Guaranteed Obligations, (ii) "Excess Payment" means, in respect of any Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share" means, for any Subsidiary Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the aggregate present fair saleable value of all properties of such Subsidiary Guarantor (excluding any shares of stock of any other Subsidiary Guarantor) exceeds the amount of all the debts and liabilities of such Subsidiary Guarantor (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of such Subsidiary Guarantor hereunder and any obligations of any other Subsidiary Guarantor that have been guaranteed by such Subsidiary Guarantor) to (y) the amount by which the aggregate fair saleable value of all properties of all of the Subsidiary Guarantors exceeds the amount of all the debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of the Borrower and the Subsidiary Guarantors hereunder and under the other Loan Documents) of all of the Subsidiary Guarantors, determined (A) with respect to any Subsidiary Guarantor that is a party hereto on the Effective Date, as of the Effective Date, and (B) with respect to any other Subsidiary Guarantor, as of the date such Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder. SECTION 3.09. General Limitation on Guarantee Obligations. In any action or proceeding involving any state corporate law, or any state or Federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Subsidiary Guarantor under Section 3.01 would otherwise, taking into account the provisions of Section 3.08, be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 3.01, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by such Subsidiary Guarantor, any Lender, the Administrative Agent or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders that: SECTION 4.01. Financial Condition. The audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 2002 and the related audited consolidated statements of income and of cash flows for the fiscal year ended on such date, reported on by PricewaterhouseCoopers LLP, copies of which have heretofore been furnished to each Lender, present fairly in all material respects the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at September 30, 2003 and the related unaudited consolidated statements of income and of cash flows for the nine-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, present fairly in all material respects the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the nine-month period then ended (subject to normal year-end audit adjustments and footnote disclosure). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Neither the Borrower nor any of its consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto. SECTION 4.02. No Change. Since December 31, 2002 there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. SECTION 4.03. Corporate Existence; Compliance with Law. Each of the Borrower and its Restricted Subsidiaries (a) is duly organized and validly existing under the laws of the jurisdiction of its organization, (b) has the requisite corporate or other power and authority and the legal right to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law, except to the extent that the inaccuracy of any of the statements set forth in this subsection could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 4.04. Corporate Power; Authorization; Enforceable Obligations. The Borrower has the corporate power and authority and the legal right to make, deliver and perform the Loan Documents to which it is a party and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and any Notes and to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents to which the Borrower is a party, except for filings of appropriate counterparts of this Agreement and other information with the Securities and Exchange Commission as required by applicable law. This Agreement has been, and each other Loan Document to which it is a party will be, duly executed and delivered on behalf of the Borrower. This Agreement constitutes, and each other Loan Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. SECTION 4.05. No Legal Bar. The execution, delivery and performance of the Loan Documents to which the Borrower is a party, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of the Borrower or of any of its Restricted Subsidiaries, except for any such violation that could not reasonably be expected to have a Material Adverse Effect, and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. SECTION 4.06. No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Restricted Subsidiaries or against any of its or their respective properties or revenues (a) which is pending or threatened prior to the Effective Date with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. Section 4.07. No Default. Neither the Borrower nor any of its Restricted Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. Section 4.08. Ownership of Property; Liens. Each of the Borrower and its Restricted Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 7.03. Section 4.09. Intellectual Property. The Borrower and each of its Restricted Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "Intellectual Property"). No claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property which could reasonably be expected to have a Material Adverse Effect. To the knowledge of the Borrower, the use of such Intellectual Property by the Borrower and its Restricted Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 4.10. Taxes. Each of the Borrower and its Restricted Subsidiaries has filed or caused to be filed all tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any taxes, fees or other charges the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Restricted Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. Section 4.11. Federal Regulations. No part of the proceeds of any Loans will be used for any purpose that would result in a violation of Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. Section 4.12. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. Each of (i) the present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) and (ii) the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87), did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plans by an amount that could reasonably be expected to result in a Material Adverse Effect. Section 4.13. Investment Company Act; Other Regulations. The Borrower is not an "investment company", or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. Section 4.14. Subsidiaries. All of the Restricted Subsidiaries of the Borrower in existence on the date hereof are listed on Part A-1 of Schedule IV, and all of the Unrestricted Subsidiaries of the Borrower in existence on the date hereof are listed on Part A-2 of Schedule IV. Section 4.15. Purpose of Loans. The proceeds of the Term Loans shall be used by the Borrower to refinance Indebtedness under the Existing Credit Agreement and for general corporate purposes. The proceeds of the Revolving Credit Loans shall be used for general corporate purposes of the Borrower and its Subsidiaries in the ordinary course of business. Section 4.16. Environmental Matters. Other than exceptions to any of the following that could not, individually or in any aggregation, reasonably be expected to give rise to a Material Adverse Effect: the Borrower and its Restricted Subsidiaries comply and have complied with all applicable Environmental Laws, and possess and comply with and have possessed and complied with all Environmental Permits required under such laws; there are no past, present or anticipated future events, conditions, circumstances, practices, plans or legal requirements that, to its knowledge, could prevent or materially increase the burden on the Borrower and its Restricted Subsidiaries of compliance with applicable Environmental Laws or of obtaining, renewing or complying with all Environmental Permits required under such laws; the Borrower and its Restricted Subsidiaries have received no notice of any violation of, or potential liability under, any Environmental Law; and there are and have been no Materials of Environmental Concern or other conditions at any property owned, operated, or otherwise used by the Borrower or any of its Restricted Subsidiaries now or, to its knowledge, in the past, or at any other location, that could give rise to liability of the Borrower or any of its Restricted Subsidiaries under any Environmental Law. Section 4.17. Certain Documents. The Borrower has delivered to each Lender a complete, correct and current copy of the Management Agreement, the 2002 Notes Note Purchase Agreement, the 2002 Notes Guarantee and any other document the Administrative Agent shall reasonably request. ARTICLE V CONDITIONS SECTION 5.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which the Administrative Agent shall have received each of the following documents, each of which shall be satisfactory to the Administrative Agent (and to the extent specified below, to each Lender) in form and substance (or such condition shall have been waived in accordance with Section 10.02): (a) Executed Counterparts. From each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page to this Agreement) that such party has signed a counterpart of this Agreement. (b) Opinion of Counsel to the Obligors. A favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Weil, Gotshal & Manges LLP, counsel for the Obligors, substantially in the form of Exhibit C, and covering such other matters relating to the Borrower, this Agreement or the Transactions as the Administrative Agent shall reasonably request (and each Obligor hereby instructs such counsel to deliver such opinion to the Lenders and the Administrative Agent). (c) Opinion of Special New York Counsel to JPMCB. An opinion, dated the Effective Date, of Milbank, Tweed, Hadley & McCloy, LLP, special New York counsel to JPMCB, substantially in the form of Exhibit D (and JPMCB hereby instructs such counsel to deliver such opinion to the Lenders). (d) Corporate Documents. Such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Obligor, the authorization of the Transactions and any other legal matters relating to the Obligors, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (e) Officer's Certificate. A certificate, dated the Effective Date and signed by a Responsible Officer of the Borrower, confirming compliance with the conditions set forth in the lettered clauses of the first sentence of Section 5.02. (f) Repayment of Existing Credit Agreement. Evidence that the principal of and interest on, and all other amounts owing in respect of, the Loans outstanding under the Existing Credit Agreement shall have been (or shall be simultaneously) paid in full, that any commitments to extend credit under the Existing Credit Agreement shall have been canceled or terminated and that all guarantees in respect of, and all Liens securing, any obligations under the Existing Credit Agreement shall have been released (or arrangements for such release satisfactory to the Administrative Agent shall have been made). (g) Other Documents. Such other documents as the Administrative Agent or any Lender or special New York counsel to JPMCB may reasonably request. The obligation of each Lender to make its initial Loan hereunder is also subject to the payment by the Borrower of such fees as the Borrower shall have agreed to pay to any Lender or the Administrative Agent in connection herewith, including the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, LLP, special New York counsel to JPMCB, in connection with the negotiation, preparation, execution and delivery of this Agreement and the other Loan Documents and the Loans hereunder (to the extent that statements for such fees and expenses have been delivered to the Borrower). The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.02) on or prior to 3:00 p.m., New York City time, on March 3, 2004 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 5.02. Each Credit Event. The obligation of each Lender to make any Loan, is additionally subject to the satisfaction of the following conditions: (a) the representations and warranties of the Borrower set forth in this Agreement, and of each Obligor in each of the other Loan Documents to which it is a party, shall be true and correct on and as of the date of such Loan; and (b) at the time of and immediately after giving effect to such Loan, no Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in the preceding sentence. ARTICLE VI AFFIRMATIVE COVENANTS The Borrower hereby agrees that, until the Commitments have expired or been terminated and the principal and interest on each Loan and all fees payable hereunder shall have been paid in full, the Borrower shall, and shall cause each of its Restricted Subsidiaries to: SECTION 6.01. Financial Statements and Other Information. Furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year of the Borrower, the audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Borrower and its Subsidiaries as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 45 days after the end of each fiscal quarter of each fiscal year of the Borrower, the unaudited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Borrower and its Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for (or, in the case of the balance sheet, as of the end of) the corresponding period or periods of the previous fiscal year, all certified by a Responsible Officer of the Borrower as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clause (a) or (b) of this Section, a certificate of a Responsible Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Sections 7.01, 7.02, 7.03, 7.04, 7.06 and 7.07 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 4.01 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with any delivery of financial statements under clause (a) of this Section, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines); (e) not later than sixty days after the end of each fiscal year of the Borrower, a copy of the operating budget and cash flow budget of the Borrower and its Restricted Subsidiaries for the succeeding fiscal year; (f) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any of its Subsidiaries with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally or to holders of its Indebtedness generally, as the case may be; and (g) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any of its Subsidiaries, or compliance with the terms of this Agreement and the other Loan Documents, as the Administrative Agent or any Lender may reasonably request. SECTION 6.02. Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be, or except where the failure to pay, discharge or otherwise satisfy such obligations could not be reasonably expected to have a Material Adverse Effect. SECTION 6.03. Conduct of Business and Maintenance of Existence. Continue to engage in business of the same general type as now conducted by the Borrower and its Restricted Subsidiaries and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all material rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to Section 7.05; comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect. SECTION 6.04. Maintenance of Property; Insurance. Keep all property useful and necessary in its business in good working order and condition (ordinary wear and tear expected); maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to each Lender, upon written request, full information as to the insurance carried. SECTION 6.05. Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and upon reasonable advance notice and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries. SECTION 6.06. Notices. Promptly give notice to the Administrative Agent and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries of which the Borrower or such Subsidiary has knowledge or (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect; (d) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $1,000,000; (e) the assertion of any environmental matter by any Person against, or with respect to the activities of, the Borrower or any of its Subsidiaries and any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations, other than any environmental matter or alleged violation that, if adversely determined, would not (either individually or in the aggregate) have a Material Adverse Effect; and (f) any Person becoming a Restricted Subsidiary; and (g) any development or event which has had or could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. SECTION 6.07. Unrestricted Subsidiaries; Maintenance of Separate Corporate Identity. (a) Acquisition or Formation of Unrestricted Subsidiaries. The Borrower will deliver to the Administrative Agent (with sufficient copies for each of the Lenders) a notice as to the organization or acquisition of each Unrestricted Subsidiary promptly following such organization or acquisition together with a certificate of a Responsible Officer of the Borrower certifying that attached thereto are true copies of (i) the resolutions duly adopted by the Board of Directors of the Borrower designating such Subsidiary as an Unrestricted Subsidiary and (ii) all agreements, instruments and other documents relating to the organization or acquisition of such Unrestricted Subsidiary. (b) Indebtedness of Unrestricted Subsidiaries. The Borrower will, promptly upon receipt thereof by the Borrower or any of its Subsidiaries, deliver to the Administrative Agent (with sufficient copies for each of the Lenders) a true and complete copy of each agreement, instrument or other document evidencing Indebtedness or other material obligations of each Unrestricted Subsidiary and each other material agreement, instrument or other document (including, without limitation, agreements, instruments and other documents in respect of acquisitions) entered into by each Unrestricted Subsidiary. (c) Transactions with Unrestricted Subsidiaries. The Borrower will cause the management, business and affairs of each of the Borrower and its Subsidiaries to be conducted in such a manner so that each of the Borrower and its Subsidiaries will be perceived and treated as a legal entity separate and distinct from each other. Without in any way limiting the other provisions of this subsection, the Borrower will not permit any Restricted Subsidiary to, directly or indirectly: (i) make any Investment in an Unrestricted Subsidiary, (ii) dispose of any of its Properties to an Unrestricted Subsidiary, (iii) merge into or consolidate with or purchase or acquire any Properties from an Unrestricted Subsidiary or (iv) enter into any other transaction directly or indirectly with or for the benefit of an Unrestricted Subsidiary (including, without limitation, guarantees and assumptions of obligations of an Unrestricted Subsidiary); provided that it is understood that the Borrower as the "common parent" of its Restricted Subsidiaries and Unrestricted Subsidiaries may file a consolidated tax return on behalf of itself and its Subsidiaries and such filing shall not be deemed to violate the provisions of this subsection. (d) Treatment of Certain Overhead Expenses, Etc. The Borrower will allocate corporate general and administrative expenses between it, the Restricted Subsidiaries and the Unrestricted Subsidiaries in accordance with customary and reasonable business practices and GAAP consistently applied. Without in any way limiting the other provisions of this subsection, the Borrower will not permit any Restricted Subsidiary to, directly or indirectly, pay or incur any corporate general and administrative expenses on behalf of any Unrestricted Subsidiary. SECTION 6.08. Certain Obligations with respect to Subsidiaries. The Borrower will take such action, and will cause each of its Restricted Subsidiaries to take such action, from time to time as shall be necessary to ensure that all Restricted Subsidiaries of the Borrower (other than Foreign Subsidiaries) are "Subsidiary Guarantors" hereunder. Without limiting the generality of the foregoing, in the event that the Borrower or any of its Subsidiaries shall form or acquire any new Subsidiary that shall constitute a Restricted Subsidiary hereunder, the Borrower and its Subsidiaries will cause such new Restricted Subsidiary to: (i) become a "Subsidiary Guarantor" hereunder pursuant to a Guarantee Assumption Agreement, and (ii) deliver such proof of corporate action, incumbency of officers, opinions of counsel and other documents as is consistent with those delivered by each Obligor pursuant to Section 5.01 on the Effective Date or as the Administrative Agent shall have requested. ARTICLE VII NEGATIVE COVENANTS The Borrower hereby agrees that, until the Commitments have expired or been terminated and the principal and interest on each Loan, the Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: SECTION 7.01. Financial Condition Covenants. (a) Maintenance of Total Debt Ratio. Permit the Total Debt Ratio at any time to be greater than 3.50 to 1. (b) Maintenance of Total Interest Coverage Ratio. Permit the Total Interest Coverage Ratio at any time to be less than 2.00 to 1. SECTION 7.02. Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness of the Borrower under this Agreement; (b) Indebtedness of the Borrower to any Restricted Subsidiary and of any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary; (c) Indebtedness of the Borrower and any of its Restricted Subsidiaries incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) not exceeding $25,000,000 in aggregate principal amount at any one time outstanding and any refinancings, refundings, renewals or extensions thereof (provided that the principal amount of such Indebtedness shall at no time exceed 100% of the original acquisition cost of such assets plus any costs associated with the financing or refinancing thereof); (d) Indebtedness outstanding on the date hereof and listed on Schedule II and any refinancings, refundings, renewals or extensions thereof (provided that the principal amount of such Indebtedness is not increased by an amount greater than costs associated with any such refinancing, refundings, renewals or extensions); (e) Indebtedness of a Person which becomes a Restricted Subsidiary after the date hereof and any refinancings, refundings, renewals or extensions thereof, provided that (i) such Indebtedness existed at the time such Person became a Restricted Subsidiary (or, if later, at the time it acquired the assets of a business pursuant to Section 7.08(c)) and was not created in anticipation thereof and (ii) immediately after giving effect to the acquisition of such Person by the Borrower no Default or Event of Default shall have occurred and be continuing; (f) Permitted Additional Indebtedness; and (g) additional Indebtedness not exceeding $35,000,000 in aggregate principal amount at any one time outstanding. SECTION 7.03. Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet subject to penalties for non-payment or which are being contested in good faith by appropriate proceedings, provided that, if contested, adequate reserves with respect thereto are maintained on the books of the Borrower or its Restricted Subsidiaries, as the case may be, in conformity with GAAP (or, in the case of Foreign Subsidiaries, generally accepted accounting principles in effect from time to time in their respective jurisdictions of incorporation); (b) Liens imposed by law, such as landlords', carriers', warehousemen's, materialmen's and mechanics' liens, or Liens arising out of judgments or awards against the Borrower or any of its Restricted Subsidiaries with respect to which the Borrower or such Restricted Subsidiary at the time shall currently be prosecuting an appeal or proceedings for review in good faith and by proper proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business taken as a whole of the Borrower or such Restricted Subsidiary; (f) Liens securing Indebtedness of the Borrower and its Restricted Subsidiaries permitted by Section 7.02(c) incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such property at the time it was acquired plus any financing or refinancing costs; (g) Liens in existence on the date hereof listed on Schedule II, securing Indebtedness permitted by Section 7.02(d), provided that no such Lien is spread to cover any additional property after the Effective Date and that the amount of Indebtedness secured thereby is not increased except as permitted by Section 7.02(d); (h) Liens on assets acquired by a Restricted Subsidiary after the date hereof or on the property or assets of a Person which becomes a Restricted Subsidiary after the date hereof securing Indebtedness permitted by Section 7.02(c) or 7.02(e), respectively, provided that (i) such Liens exist at the time such assets are acquired or at the time such Person becomes a Restricted Subsidiary, as the case may be, and are not created in anticipation thereof, (ii) any such Lien is not spread to cover any property or assets of such Person after the time such Person becomes a Restricted Subsidiary or such assets are acquired, and (iii) the amount of Indebtedness secured thereby is not increased; (i) Liens on the Capital Stock of Unrestricted Subsidiaries securing obligations of Unrestricted Subsidiaries; and (j) Liens (not otherwise permitted hereunder) so long as the greater of (i) the aggregate outstanding principal amount of the obligations secured thereby and (ii) the aggregate fair market value of the assets subject thereto does not exceed $5,000,000 at any one time. SECTION 7.04. Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations in existence on the date hereof and listed on Schedule III; (b) Guarantee Obligations of a Person which becomes a Restricted Subsidiary after the date hereof, provided that such Guarantee Obligations exist at the time such Person becomes a Restricted Subsidiary (or, if later, at the time it acquired the assets of a business pursuant to Section 7.08(c)) and are not created in anticipation thereof, (c) Guarantee Obligations entered into in the ordinary course of its business by the Borrower or any Restricted Subsidiary of obligations of any of the Borrower or its Restricted Subsidiaries, which obligations are not prohibited by this Agreement; (d) the obligations of the Subsidiary Guarantors under Article III and the 2002 Notes Guarantee; and (e) additional Guarantee Obligations in respect of obligations not exceeding $10,000,000 in aggregate principal amount at any one time outstanding. SECTION 7.05. Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, except: (a) any Restricted Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Restricted Subsidiaries of the Borrower (provided that the wholly owned Restricted Subsidiary or Restricted Subsidiaries shall be the continuing or surviving Person); (b) any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any wholly owned Restricted Subsidiary of the Borrower; (c) the Borrower or any of its Restricted Subsidiaries may enter into a merger with any Person engaged in the commercial radio business (which shall be deemed to include, without limitation, programming, production and distribution) or any other business related to the foregoing, provided that the Borrower or a Restricted Subsidiary, as the case may be, shall be the surviving corporation and that both prior to and after giving effect to such merger there shall exist no Default or Event of Default hereunder and the Borrower shall have delivered a certificate (with such supporting detail and calculations as may be reasonably requested by the Administrative Agent) from a Responsible Officer so stating to the Administrative Agent; and (d) as permitted by Section 7.06. SECTION 7.06. Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Restricted Subsidiary, issue or sell any shares of such Restricted Subsidiary's Capital Stock to any Person other than the Borrower or any wholly owned Restricted Subsidiary, except: (a) the sale or other disposition of any property in the ordinary course of business; (b) any sale, assignment, transfer or other disposition of Capital Stock of any Unrestricted Subsidiary; (c) the sale or other disposition of any other property, business or asset with an aggregate fair market value not to exceed $5,000,000 so long as (i) the consideration received shall be an amount at least equal to the fair market value thereof; (ii) at least 90% of the consideration received shall be cash; (iii) the proceeds of such sale or other disposition are applied as required by Section 2.08(b); and (iv) no Default or Event of Default shall have occurred and be continuing or would result therefrom; and (d) as permitted by Section 7.05(b). SECTION 7.07. Limitation on Restricted Payments. Declare or pay any dividend (other than dividends payable solely in Capital Stock of the Borrower) on, or make any payment or prepayment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any Restricted Subsidiary or any warrants or options to purchase any such Capital Stock, or make any payment of management or similar fees (including, without limitation, Management Fees, but excluding all expenses payable to Infinity, in its capacity as "Manager", under Section 1.6 of the Management Agreement) to Infinity or any other Affiliate of the Borrower (other than to any employee, officer or director of the Borrower or its Subsidiaries in connection with the performance of such employee's, officer's or director's duties in such capacity), whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Restricted Subsidiary (such declarations, payments, setting apart, purchases, redemptions, defeasances, retirements, acquisitions and distributions being herein called "Restricted Payments"), except that: (a) any Restricted Subsidiary may make Restricted Payments to the Borrower, (b) the Borrower may make Restricted Payments for the purpose of cashing out any fractional shares of Capital Stock following the payment of a dividend payable in Capital Stock of the Borrower, (c) provided that, both prior to and after giving effect to each such payment, no Event of Default pursuant to Sections 8(a), (c) (solely in the case of an Event of Default pursuant to Section 7.01, and, in such case, only if the Required Lenders following such an Event of Default shall determine in their sole discretion to prohibit any payment provided for in clause (x) or (y) below) or (f) shall have occurred and be continuing, the Borrower may (x) make cash payments of Management Fees to Infinity at the times and in the amounts provided for by Section 2.1 of the Management Agreement in respect of each fiscal year and (y) make a cash payment of Management Fees to Infinity at the times and in the amounts provided for by Section 2.2 of the Management Agreement; and (d) the Borrower and its Restricted Subsidiaries may make Restricted Payments of the type described, and in addition to those permitted, in the foregoing clauses (a) and (b); provided that prior to and after giving effect to each such Restricted Payment, there shall exist no Default or Event of Default hereunder (it being understood that, in no event, shall this clause (d) be applicable to Restricted Payments of the type described in the foregoing clause (c)). SECTION 7.08. Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in (each, an "Investment") any Person, except: (a) extensions of trade credit in the ordinary course of business; (b) investments in Cash Equivalents; (c) purchases of shares of the Capital Stock of any Person engaged in the commercial radio business (which shall be deemed to include, without limitation, programming, production and distribution) or any other business related to the foregoing or purchases of the assets constituting all or any portion of any such business owned by any other Person, provided that, prior to and after giving effect to such purchase, there shall exist no Default or Event of Default and the Borrower shall have delivered a certificate (with such supporting detail and calculations as may be reasonably requested by the Administrative Agent) from a Responsible Officer so stating and provided further, that any such Person which shall constitute a Subsidiary following such Investment shall be a Restricted Subsidiary or, as the case may be, the assets so purchased shall be owned by a Restricted Subsidiary; (d) loans and advances to officers and employees of the Borrower or its Restricted Subsidiaries for travel, entertainment and relocation expenses and other purposes in the ordinary course of business; (e) Investments by the Borrower in its Restricted Subsidiaries and Investments by such Restricted Subsidiaries in the Borrower and in other Restricted Subsidiaries; (f) Investments set forth on Schedule IV; and (g) (i) Investments in Unrestricted Subsidiaries as of the Effective Date, (ii) Investments in Unrestricted Subsidiaries the consideration for which shall consist solely of shares of the Capital Stock of the Borrower and (iii) additional Investments in Unrestricted Subsidiaries during the period from and including December 31, 2002 to and including the Revolving Credit Commitment Termination Date in an aggregate amount which is not in excess of the Unrestricted Investment Basket. SECTION 7.09. Limitation on Modifications of the Management Agreement. Amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms of the Management Agreement (in any manner that could have a material adverse effect on the Lenders, provided that the Borrower shall inform the Lenders of any material amendment, modification or change to the Management Agreement within 30 days after the Borrower agrees to such amendment, modification or change). SECTION 7.10. Limitation on Sale or Discount of Receivables. The Borrower shall not and shall not permit any of its Restricted Subsidiaries to, discount or sell with recourse, or sell for less than the greater of the face value or market value thereof, any of its notes receivable or accounts receivable. SECTION 7.11. Limitation on Transactions with Affiliates. Except as set forth on Schedule V, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted or not prohibited under this Agreement and (b) upon fair and reasonable terms no less favorable to the Borrower or such Restricted Subsidiary, as the case may be, than it would obtain in a comparable arm's-length transaction with a Person which is not an Affiliate. SECTION 7.12. Limitation on Changes in Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than December 31. SECTION 7.13. Limitation on Negative Pledge Clauses. Enter into with any Person any agreement, other than (a) this Agreement and (b) any industrial revenue bonds, purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby), which prohibits or limits the ability of the Borrower or any of its Restricted Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired unless the prohibitions or limitations contained in such agreement would only restrict such Liens if they were not also made to secure the obligations of the Borrower or a Restricted Subsidiary under such agreement or a related agreement equally and ratably with the obligations which such Liens were created to secure. Notwithstanding the foregoing, the Borrower and its Restricted Subsidiaries may enter into the 2002 Notes Note Purchase Agreement, and the 2002 Notes Note Purchase Agreement may prohibit or limit the ability of the Borrower or any of its Restricted Subsidiaries from creating, incurring, assuming or suffering to exist any Lien upon any of its property, assets or revenues, so long as such prohibition or limitation, as applied to Liens in favor of the Administrative Agent and the Lenders hereunder, shall prohibit or limit such Liens in favor of the Administrative Agent and the Lenders only to the extent that such Liens do not effectively provide that the 2002 Notes are equally and ratably secured thereby. SECTION 7.14. Limitation on Lines of Business. Enter into any business, either directly or through any Restricted Subsidiary, except for the commercial broadcast business (which shall be deemed to include, without limitation, programming, production and distribution) and businesses related thereto. SECTION 7.15. Repayments of Indebtedness. The Borrower will not, nor will it permit any of its Subsidiaries to, purchase, redeem, retire or otherwise acquire for value, or set apart any money for a sinking, defeasance or other analogous fund for the purchase, redemption, retirement or other acquisition of, or make any voluntary payment or prepayment of the principal of or interest on, or any other amount owing in respect of, the 2002 Notes or any Permitted Additional Indebtedness incurred after the date hereof, except for regularly scheduled payments, prepayments or redemptions of principal and interest in respect thereof required pursuant to the instruments evidencing the 2002 Notes or such Permitted Additional Indebtedness. SECTION 7.16. Hedging Agreements. Enter into any Hedging Agreement unless such Hedging Agreement is entered into in the ordinary course of business and not for speculative purposes. ARTICLE VIII EVENTS OF DEFAULT If any of the following events ("Events of Default") shall occur and be continuing: (a) the Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or (b) any representation or warranty made or deemed made by the Borrower or any other Obligor herein or in any other Loan Document or which is contained in any certificate furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) the Borrower shall default in the observance or performance of any agreement contained in Article 7 (except that defaults under Sections 7.03 shall not become Events of Default unless they have been unremedied for a period of 15 days); or (d) the Borrower or any other Obligor shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Article), and such default shall continue unremedied for a period of 30 days after the Borrower or such Obligor, as the case may be, obtains actual knowledge thereof or after notice thereof to the Borrower by the Administrative Agent or any Lender (through the Administrative Agent); or (e) the Borrower or any of its Restricted Subsidiaries shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Loans) or in the payment of any Guarantee Obligation, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or the obligations that are the subject of such Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; provided, however, that no Default or Event of Default shall exist under this paragraph unless the aggregate amount of Indebtedness and/or Guarantee Obligations in respect of which any default or other event or condition referred to in this paragraph shall have occurred shall be equal to at least $1,000,000; or (f) (i) the Borrower or any of its Restricted Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Restricted Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Restricted Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any of its Restricted Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any of its Restricted Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) the Borrower or any of its Restricted Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; or (h) one or more judgments or decrees shall be entered against the Borrower or any of its Restricted Subsidiaries involving in the aggregate a liability (to the extent not paid or covered by insurance) of $1,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (i) the obligations of the Subsidiary Guarantors under Article III shall cease, for any reason, to be in full force and effect with respect to any Guarantor or any Guarantor shall so assert; or (j) the Management Agreement shall be terminated or otherwise cease to be in full force and effect, or the Borrower is or becomes entitled to terminate the Management Agreement under Section 3.2(b)(ii) thereof; or (k) (i) any Person or group (within the meaning of the Exchange Act and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), other than INI or any of its Subsidiaries shall (x) acquire or own, directly or indirectly, beneficially or of record, shares representing more than 35% of the ordinary voting power represented by the issued and outstanding voting capital stock of the Borrower, or (y) acquire direct or indirect control of the Borrower; or (ii) a majority of the seats (other than vacant seats) on the board of directors of the Borrower shall be occupied by Persons who were neither (x) nominated by the board of directors of the Borrower nor (y) appointed by directors so nominated; or (l) a Default of the type described in paragraph (e) above shall have occurred and be continuing with respect to the Indebtedness of an Unrestricted Subsidiary and as a result thereof the Borrower or any of its Restricted Subsidiaries shall become liable for such Indebtedness, in each case, whether by operation of law, pursuant to contract or otherwise, or any holder or holders of such Indebtedness shall so assert in writing in any proceeding before a court or other adjudicatory body of competent jurisdiction and the Required Lenders shall determine, in the exercise of their reasonable judgment, that the Borrower and/or any of its Restricted Subsidiaries is reasonably likely to incur a liability as a result thereof which would constitute a Material Adverse Effect; or (m) the Borrower or any of its Restricted Subsidiaries shall incur any liability (not paid or fully covered by insurance) under any Environmental Law in an amount which constitutes a Material Environmental Amount; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Article with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Article, to the extent permitted by applicable law, presentment, demand, protest and all other notices of any kind are hereby expressly waived. ARTICLE IX THE ADMINISTRATIVE AGENT Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such Person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders, and (c) except as expressly set forth herein and in the other Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article V or elsewhere herein or therein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for an Obligor), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent's resignation shall nonetheless become effective and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and (2) the Required Lenders shall perform the duties of the Administrative Agent (and all payments and communications provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly) until such time as the Required Lenders appoint a successor agent as provided for above in this paragraph. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder (if not already discharged therefrom as provided above in this paragraph). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. Except as otherwise provided in Section 10.02(b) with respect to this Agreement, the Administrative Agent may, with the prior consent of the Required Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the Loan Documents. ARTICLE X MISCELLANEOUS SECTION 10.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower or any Subsidiary Guarantor, to it at 40 West 57th Street, 15th Floor, New York, New York 10019, Attention of Gary Yusko (Telecopy No. (212) 641-2163; Telephone No. (212) 641-2063), with a copy Attention of Tina Haut, Esq. (Telecopy No. (212) 641-2198; Telephone No.(212) 641-2081), with an additional copy to Weil Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153 (Telecopy No. (212) 310-8007, Telephone No. (212) 310-8340), Attention of Howard Chatzinoff, Esq.; (b) if to the Administrative Agent, to JPMorgan Chase Bank, 1111 Fannin, 10th Floor, Houston, Texas 77002, Attention of Pearl Esparza (Telecopy No. (713) 750-2378; Telephone No. (713) 750-7923), with a copy to JPMorgan Chase Bank, 270 Park Avenue, 4th Floor, New York, New York 10017, Attention of James Stone (Telecopy No. (212) 270-4584; Telephone No. (212) 270-3096); and (c) if to a Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto (or, in the case of any such change by a Lender, by notice to the Borrower and the Administrative Agent). All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 10.02. Waivers; Amendments. (a) No Deemed Waivers; Remedies Cumulative. No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Obligor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Amendments. Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase any Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.15(d) without the consent of each Lender affected thereby, (v) change any of the provisions of this Section or the percentage in the definition of the term "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, or (vi) release all or substantially all of the Guarantors from their guarantee obligations under Article III without the written consent of each Lender; and provided further that (x) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent, and (y) that any modification or supplement of Article III shall require the consent of each Subsidiary Guarantor. Anything in this Agreement to the contrary notwithstanding, no waiver or modification of any provision of this Agreement that has the effect (either immediately or at some later time) of enabling the Borrower to satisfy a condition precedent to the making of a Loan of any Class shall be effective against the Lenders of such Class for purposes of the Commitments of such Class unless the Required Lenders of such Class shall have concurred with such waiver or modification, and no waiver or modification of any provision of this Agreement or any other Loan Document that could reasonably be expected to adversely affect the Lenders of any Class in a manner that does not affect all Classes equally shall be effective against the Lenders of such Class unless the Required Lenders of such Class shall have concurred with such waiver or modification. SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents, including its rights under this Section, or in connection with the Loans made hereunder, including in connection with any workout, restructuring or negotiations in respect thereof. (b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Materials of Environmental Concern on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) Reimbursement by Lenders. To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such. (d) Waiver of Consequential Damages, Etc. To the extent permitted by applicable law, no Obligor shall assert, and each Obligor hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (e) Payments. All amounts due under this Section shall be payable promptly after written demand therefor. SECTION 10.04. Successors and Assigns. (a) Assignments Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the affiliates, directors, officers, employees, attorneys and agents of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Assignments by Lenders. (i) Assignments Generally. Subject to the conditions set forth in clause (ii) below, any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Credit Commitment, and the Loans, at the time held by it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of: (A) the Borrower, provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default shall have occurred and is continuing, any other assignee; and (B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for (x) an assignment of any Term Loans or (y) an assignment of any Revolving Credit Loans or Revolving Credit Commitments to an assignee that is a Lender with a Revolving Credit Commitment immediately prior to giving effect to such assignment. (ii) Certain Conditions to Assignments. Assignments shall be subject to the following additional conditions: (A) except in the case of an assignment to a Lender or an Affiliate of a Lender, or an assignment of the entire remaining amount of the assigning Lender's Revolving Credit Commitment (together with all Revolving Credit Loans) or Term Loans, the amount of the Revolving Credit Commitment or Term Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than U.S. $5,000,000 (or less than $1,000,000 in the case of any assignment of Term Loans) unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing; (B) each partial assignment of any Revolving Credit Commitment or Term Loans shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement in respect of such Commitment (together with a proportionate part of the outstanding Revolving Credit Loans) and Term Loans; (C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance in substantially the form of Exhibit A, together with a processing and recordation fee of U.S. $3,500; and (D) the assignee, if it shall not already be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. (iii) Effectiveness of Assignments. Subject to acceptance and recording thereof pursuant to paragraph (c) below, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the rights referred to in Sections 2.12, 2.13, 2.14 and 10.05). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) below. (c) Maintenance of Register by the Administrative Agent. The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in New York City a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Revolving Credit Commitment of, and principal amount of the Loans held by, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Acceptance of Assignments by Administrative Agent. Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and any written consent to such assignment required by said paragraph (b), the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph (d). (e) Participations. Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Revolving Credit Commitments and the Loans held by it); provided that (i) such Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such Participant. Subject to paragraph (f) below, the Borrower agrees that each Participant shall be entitled to the benefits of Section 2.12, 2.13 and 2.14 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) above. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 2.15(d) as though it were a Lender, provided such Participant agrees to be subject to Section 2.15(d) as though it were a Lender hereunder. (f) Limitations on Rights of Participants. A Participant shall not be entitled to receive any greater payment under Section 2.12 or 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.14 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.14(e) as though it were a Lender. (g) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto. (h) Disclosure of Certain Information. A Lender may furnish any information concerning the Borrower or any of its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants), subject, however, to the provisions of Section 10.12(b). (i) No Assignments to the Borrower or Affiliates. Anything in this Section to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan held by it hereunder to the Borrower or any of its Affiliates or Subsidiaries without the prior consent of each Lender. SECTION 10.05. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.12, 2.13, 2.14, 3.03 and 10.03 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract between and among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 5.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page to this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 10.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 10.08. Right of Set-off. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of any Obligor against any of and all the obligations of any Obligor now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of set-off) which such Lender may have. SECTION 10.09. Governing Law; Jurisdiction; Etc. (a) Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) Submission to Jurisdiction. Each Obligor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Obligor or its properties in the courts of any jurisdiction. (c) Waiver of Venue. Each Obligor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Service of Process. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 10.12. Treatment of Certain Information; Confidentiality. (a) Treatment of Certain Information. The Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Borrower or one or more of its Subsidiaries (in connection with this Agreement or otherwise) by any Lender or by one or more subsidiaries or affiliates of such Lender and the Borrower hereby authorizes each Lender to share any information delivered to such Lender by the Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such subsidiary or affiliate, it being understood that any such subsidiary or affiliate receiving such information shall be bound by the provisions of paragraph (b) of this Section as if it were a Lender hereunder. Such authorization shall survive the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. (b) Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates' respective partners, directors, officers, employees, agents, advisors and other representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower. For purposes of this Section, "Information" means all information received from the Borrower or any of its Subsidiaries relating to the Borrower or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the Issuing Bank on a nonconfidential basis prior to disclosure by the Borrower or any of its Subsidiaries, provided that, in the case of information received from the Borrower or any of its Subsidiaries after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. WESTWOOD ONE, INC. By_________________________ Name: Title: SUBSIDIARY GUARANTORS METRO NETWORKS COMMUNICATIONS, INC. By_________________________ Name: Title: METRO NETWORKS COMMUNICATIONS, LIMITED PARTNERSHIP By: METRO NETWORKS COMMUNICATIONS, INC., as General Partner By_________________________ Name: Title: METRO NETWORKS, INC. By_________________________ Name: Title: METRO NETWORKS SERVICES, INC. By_________________________ Name: Title: SMARTROUTE SYSTEMS, INC. By_________________________ Name: Title: WESTWOOD NATIONAL RADIO CORPORATION By_________________________ Name: Title: WESTWOOD ONE PROPERTIES, INC. By_________________________ Name: Title: WESTWOOD ONE RADIO, INC. By_________________________ Name: Title: WESTWOOD ONE RADIO NETWORKS, INC. By_________________________ Name: Title: WESTWOOD ONE STATIONS-NYC, INC. By_________________________ Name: Title: LENDERS JPMORGAN CHASE BANK, individually and as Administrative Agent By_________________________ Name: Title: BANK OF AMERICA, N.A., individually and as Syndication Agent By_________________________ Name: Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY, individually and as Co-Documentation Agent By_________________________ Name: Title: HARRIS NESBITT FINANCING, INC., individually and as Co-Documentation Agent By_________________________ Name: Title: NATIONAL AUSTRALIA BANK LIMITED, individually and as Co-Documentation Agent By_________________________ Name: Title: FIRST COMMERCIAL BANK, NEW YORK AGENCY By_________________________ Name: Title: SUMITOMO MITSUI BANKING CORPORATION By_________________________ Name: Title: SUNTRUST BANK By_________________________ Name: Title: E.SUN COMMERCIAL BANK, LTD., LOS ANGELES BRANCH By_________________________ Name: Title: FLEET NATIONAL BANK By_________________________ Name: Title: MIZUHO CORPORATE BANK, LTD. By_________________________ Name: Title: THE BANK OF NEW YORK By_________________________ Name: Title: THE NORINCHUKIN BANK By_________________________ Name: Title: UNION BANK OF CALIFORNIA By_________________________ Name: Title: CHIAO TUNG BANK CO. LTD. NEW YORK AGENCY By_________________________ Name: Title: HUA NAN COMMERCIAL BANK, LTD., NEW YORK AGENCY By_________________________ Name: Title: THE INTERNATIONAL COMMERCIAL BANK OF CHINA NEW YORK AGENCY By_________________________ Name: Title: BANK OF COMMUNICATIONS, NEW YORK BRANCH By_________________________ Name: Title: EX-21 6 wwo10k2003exhibit21.txt WESTWOOD ONE, INC. 2003 10K EXHIBIT 21 EXHIBIT 21 WESTWOOD ONE, INC. LIST OF SUBSIDIARIES WESTWOOD ONE RADIO, INC. WESTWOOD ONE RADIO NETWORKS, INC. WESTWOOD NATIONAL RADIO CORPORATIONS, INC. WESTWOOD ONE STATIONS - NYC, INC. WESTWOOD ONE PROPERTIES, INC. SMARTROUTE SYSTEMS, INC. METRO NETWORKS, INC. METRO NETWORKS COMMUNICATIONS, INC. METRO NETWORKS SERVICES, INC. METRO NETWORKS COMMUNICATIONS, LIMITED PARTNERSHIP EX-23 7 wwo10k2003exhibit23.txt WESTWOOD ONE, INC. 2003 10K EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-68785, No. 333-89595 and No. 333-85609) of Westwood One, Inc. of our report dated February 17, 2004, except for Notes 5 and 13, as to which the date is March 3, 2004, relating to the financial statements and financial statement schedule, which appear in this Form 10-K. New York, New York March 15, 2004 -----END PRIVACY-ENHANCED MESSAGE-----