Acquisitions

We entered into the following business combinations during 2011 and 2010 to complement our existing lines of Radio business. Transaction costs associated with these business combinations are included in operating expenses in the consolidated statements of operations.

Westwood One, Inc.

On October 21, 2011, we announced the Merger contemplated by the Merger Agreement, dated as of July 30, 2011, by and among Westwood, Radio Network Holdings, LLC, a Delaware corporation (since renamed Verge Media Companies LLC, "Merger Sub"), and Verge. Verge merged with and into Merger Sub, with Merger Sub continuing as the surviving company.

Pursuant to the Merger Agreement and in connection with the Merger, each issued and outstanding share of previously existing Westwood common stock (22,667,591 shares) was reclassified and automatically converted into one share of Class A Common Stock without any further action on the part of the holders of Westwood common stock. In connection with the Merger, each outstanding share of common stock of Verge was automatically converted into and exchanged for the right to receive approximately 6.838 shares of Class B Common Stock. Westwood issued 34,237,638 shares of Class B Common Stock to Verge stockholders, representing approximately 59% of the issued and outstanding shares of common stock of Westwood on a fully diluted basis. In connection with the Merger, Westwood also issued 9,691.374 shares of Series A Preferred Stock (the “Series A Preferred Stock") to Verge stockholders, in accordance with the Merger Agreement. The consideration exchanged for the Merger totaled $102,379, which is comprised of the market value as of the Merger Date of Westwood's Class A Common Stock of $81,830, the market value of Series A Preferred Stock of $9,691 (calculated by multiplying the number of such preferred shares by the liquidation preference of $1,000 per share), the fair value of the assumed Westwood stock options and RSUs of $1,178 and the purchase accounting consideration exchanged in Verge's purchase of the 24/7 Formats business ("24/7 Formats") of $9,680 (see chart below).

In addition, Westwood, Gores and Triton entered into the Indemnity and Contribution Agreement, dated as of July 30, 2011 and amended on October 21, 2011, whereby under certain circumstances and subject to certain limitations, Triton Media agreed to indemnify Westwood if Westwood suffers any losses arising from or directly related to the Digital Services business, and Gores agreed to indemnify Triton Media if Westwood suffers any losses arising from or directly related to Westwood's sale of its Metro Traffic Business.

The goodwill recorded represents the future economic benefits expected to arise that could not be identified and separately recognized. The goodwill is not deductible for tax purposes.

As part of the Merger, the pre-Merger debt of Westwood and Verge was paid and we, as borrower and guarantor, entered into new credit facilities (described in Note 9 — Debt) that included term loans, revolving credit facilities and paid-in-kind ("PIK") notes.

On July 29, 2011, just prior to the announcement of the Merger, Verge exercised an option it held to purchase the 24/7 Formats that it had previously managed and operated pursuant to a Management Agreement with Westwood. Verge paid $4,730 for the 24/7 Formats. This pre-existing relationship is subject to ASC 805 - Business Combinations and to the extent such amount is representative of a favorable or unfavorable settlement of a pre-existing relationship, we would recognize a gain or loss as of the date of the Merger. As such, we recognized a gain of $4,950 related to the 24/7 Formats purchase.

As a result of the Merger, our operating results include the operations of the Westwood business from the closing date of the Merger to December 31, 2011. The Westwood business contributed $36,735 and $4,277 in revenue and operating loss for the year ended December 31, 2011, respectively.



Consideration Transferred
Westwood closing price per share on October 21, 2011	3.61

Fair value of 22,667,591 shares of common stock of Westwood	$	81,830
Fair value of prior service for assumed stock options and RSUs	1,178
Fair value of Series A Preferred Stock issued	9,691
Fair value of 24/7 Formats acquisition (including $4,950 gain from the 24/7 Formats purchase)	9,680
	$	102,379

The preliminary purchase price for Westwood was allocated as follows:



Cash and cash equivalents	$	3,112
Accounts receivable	39,500
Prepaid and other assets	5,613
Property and equipment	22,938
Other assets	5,780
Long-term debt	(45,146		)
Accounts payable	(5,820		)
Accrued and other current liabilities	(27,233		)
Other liabilities	(19,528		)
Deferred tax liability	(32,158		)
Fair value of net assets acquired	(52,942		)
Intangible assets	69,177
Goodwill	86,144
Total Purchase Price	$	102,379

Included in the Merger related property and equipment and other liabilities are land, building and debt related to a sale leaseback transaction that did not qualify for sales recognition of our Culver City properties. Pursuant to the lease, the remaining term of the lease is nine years with two five year renewal options. We are responsible for required repairs, replacements and improvements and have issued a letter of credit for $219 (the equivalent of three months base rent) in lieu of a security deposit. The building is depreciated over its estimated remaining economic life of 35 years and the debt principal is reduced by the monthly rental payments using the effective interest method whereby a portion of the lease payment is recorded to interest expense and the remaining to reduce the principal. The preliminary purchase accounting allocations have been recorded in the accompanying consolidated financial statements as of, and for the period subsequent to the Merger Date. The valuation of the net assets acquired and allocation of the consideration transferred will be finalized within a year of the Merger Date.

The following unaudited pro forma financial summary for the years ended December 31, 2011 and 2010 gives effect to the Merger and the resultant acquisition accounting and assume the Merger had occurred as of January 1, 2011 and 2010. The adjustments include amortization expense associated with acquired identifiable intangible assets, interest expense associated with bank borrowings to fund the acquisitions and elimination of transactions costs incurred in fiscal years 2011 and 2010 that are directly related to the transactions and do not have a continuing impact on operating results. The pro forma information does not purport to be indicative of what the financial condition or results of operations would have been had the Merger been completed on the dates set forth in the pro forma financial information.



	Unaudited Pro Forma
	Years Ended December 31,
	2011			2010
Revenue	$	275,463		$	288,595
Operating loss	(12,448		)	(2,802		)
Loss from continuing operations	(30,885		)	(25,224		)
Net loss per basic and diluted share	$	(0.54	)	$	(0.44	)

Radio Voodoo

In June 2010, Verge purchased assets of VoodooVox, Inc. (“Voodoo”). Voodoo provides services that enable radio and television broadcasts to convert call-in lines into voice data collection services which enhance Verge's product offerings to its radio station clients. The assets acquired primarily include all of the related tangible and intangible assets to operate Voodoo's business operations. $1,500 of the purchase price was paid at closing, with two contingent payments to be paid to the sellers on or before March 31, and September 30, 2011. The contingent payments will be equal to 65% of revenues for the period from July 1, 2010 through June 30, 2011. If these payments are less than $2,000, we will pay the sellers an amount equal to 65% of revenues earned from July 1, 2011 through June 30, 2012 that exceed revenues earned from July 1, 2010 through June 30, 2011. Total purchase price cannot exceed $3,500.

The fair value of the estimated contingent payments as of of December 31, 2011 and 2010, was $105 and $1,000, respectively. We made a payment of $895 in 2011 related to these contingent payments. The remaining liability of $105 is expected to be paid in the first half of 2012. No other liabilities were assumed in the acquisition.

In addition, Verge simultaneously (in June 2010) entered into a consulting agreement with the President and the CEO of Voodoo for a period of two years.

The purchase price for Voodoo was allocated as follows:



Property and equipment	$	16
Customer relationships	400
Technology	410
Trade names	150
Goodwill	1,524
	$	2,500

Discontinued Operations

Verge entered into the following business combinations for its Digital Services business discontinued operations during 2010. Transaction costs associated with these business combinations are included in loss from discontinued operations in the consolidated statements of operations.

StreamTheWorld

On May 28, 2010, Verge entered into a Share Purchase Agreement and acquired the remaining outstanding common and preferred shares of StreamTheWorld for approximately $30,400. StreamTheWorld provides online streaming services to its customers, and this acquisition augments the Digital Services business platform, providing online streaming services to StreamTheWorld's customer base that were previously outsourced. The pre-existing equity interest in StreamTheWorld was re-measured at fair value on May 28, 2010. The carrying value of the equity interest in StreamTheWorld as of the date of acquisition was $1,800. The fair value of Verge's equity interest in StreamTheWorld immediately before the acquisition was approximately $7,400. A gain from re-measurement of the investment of $5,573 is included in loss from discontinued operations in the consolidated statement of operations for the year ended December 31, 2010. Verge consolidated StreamTheWorld in its consolidated financial statements beginning with the acquisition of the controlling interest in StreamTheWorld and it is included in the assets and liabilities of discontinued operations in the consolidated balance sheet.

The purchase price for StreamTheWorld was allocated to the related assets acquired and liabilities assumed, and the excess of the consideration exchanged was allocated to goodwill of approximately $24,300.

Transaction costs related to the acquisition amounted to approximately $1,300, which is included in loss from discontinued operations as an operating expense in the consolidated statement of operations in the year ended December 31, 2010.

In order to fund the purchase of StreamTheWorld, Verge received $15,000 under its senior notes from its equity investors, and obtained $20,000 under a term loan.

The purchase price after the re-measurement for StreamTheWorld was allocated as follows:



Cash	$	568
Accounts receivable	1,353
Prepaid expenses and other current assets	1,039
Property and equipment	1,238
Goodwill	26,217
Technology	8,900
Customer relationships	2,700
Trade names	270
Accounts payable	(571		)
Accrued expenses and other current liabilities	(1,854		)
Deferred tax liability	(1,900		)
Long-term debt	(211		)
	$	37,749