-----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, DMWIf3LK0sP4UK3xEFgfaclvbIJ3FiPCOdgOnZCNCNyuaZWrwtoUeFEOuPh9svyd vyFmusiAfqSmZsVTpJ31MA== 0000893220-99-001126.txt : 20000211 0000893220-99-001126.hdr.sgml : 20000211 ACCESSION NUMBER: 0000893220-99-001126 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 19990930 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERCOM COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001067837 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 231701044 STATE OF INCORPORATION: PA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-86843 FILM NUMBER: 99720894 BUSINESS ADDRESS: STREET 1: 401 CITY AVENUE STREET 2: SUITE 409 CITY: BALA CYNWYD STATE: PA ZIP: 19004 BUSINESS PHONE: 6106605610 MAIL ADDRESS: STREET 1: 401 CITY AVENUE STREET 2: SUITE 409 CITY: BALA CYNWYD STATE: PA ZIP: 19004 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERCOM COMMUNICATIONS CAPITAL TRUST CENTRAL INDEX KEY: 0001094681 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] STATE OF INCORPORATION: PA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-86843-01 FILM NUMBER: 99720895 BUSINESS ADDRESS: STREET 1: 401 CITY AVENUE STREET 2: SUITE 409 CITY: BALA CYNWYD STATE: PA ZIP: 19004 BUSINESS PHONE: 6106605610 MAIL ADDRESS: STREET 1: 401 CITY AVENUE STREET 2: SUITE 409 CITY: BALA CYNWYD STATE: PA ZIP: 19004 S-1/A 1 FORM S-1 AMENDMENT 2 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1999 REGISTRATION NO. 333-86843 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 2 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ ENTERCOM COMMUNICATIONS CORP. PENNSYLVANIA 4832 23-1701044 ENTERCOM COMMUNICATIONS CAPITAL TRUST DELAWARE 4832 TO BE APPLIED FOR (Exact Name of Registrant as Specified (State or Other (Primary (I.R.S. Employer in its Charter) Jurisdiction of Standard Identification Incorporation or Industrial Number) Organization) Classification Code Number)
401 CITY AVENUE, SUITE 409 BALA CYNWYD, PENNSYLVANIA 19004 (610) 660-5610 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES) JOSEPH M. FIELD CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER ENTERCOM COMMUNICATIONS CORP. 401 CITY AVENUE, SUITE 409 BALA CYNWYD, PENNSYLVANIA 19004 (610) 660-5610 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES TO: JOHN D. WATSON, JR., ESQ. JOHN C. DONLEVIE, ESQ. JEREMY W. DICKENS, ESQ. LATHAM & WATKINS EXECUTIVE VICE PRESIDENT, WEIL, GOTSHAL & MANGES LLP 1001 PENNSYLVANIA AVE., N.W. SECRETARY AND GENERAL COUNSEL 767 FIFTH AVENUE SUITE 1300 ENTERCOM COMMUNICATIONS CORP. NEW YORK, NEW YORK 10153 WASHINGTON, D.C. 20004 401 CITY AVENUE, SUITE 409 (212) 310-8000 (202) 637-2200 BALA CYNWYD, PENNSYLVANIA 19004 (610) 660-5610
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after this registration statement becomes effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1999 3,000,000 TIDES(SM) ENTERCOM COMMUNICATIONS CAPITAL TRUST % Convertible Preferred Securities Term Income Deferrable Equity Securities (TIDES)(SM*) (liquidation amount $50 per each of the TIDES) guaranteed to the extent described herein by, and convertible into Class A common stock of, [ENTERCOM LOGO] ENTERCOM COMMUNICATIONS CORP. ------------------ The % Convertible Preferred Securities, Term Income Deferrable Equity Securities (TIDES)(SM) or TIDES(SM) represent undivided preferred beneficial ownership interests in the assets of Entercom Communications Capital Trust. Subject to the deferral provisions described in this prospectus, the trust will pay distributions on the TIDES on each March 31, June 30, September 30 and December 31. The trust will make the first distribution on December 31, 1999. Entercom Communications Corp. may redeem the TIDES at any time after October 3, 2002. Entercom will own all the common securities issued by the trust. The trust exists for the sole purpose of issuing the common securities and the TIDES and using the proceeds to purchase the % Convertible Subordinated Debentures due 2014 from Entercom. Each TIDES is initially convertible into shares of Entercom's Class A common stock at the rate of shares of Class A common stock for each of the TIDES (equivalent to an initial conversion price of $ per share of Class A common stock). Entercom's Class A common stock is traded on The New York Stock Exchange under the symbol "ETM." On September 29, 1999, the last reported sale price of the Class A common stock was $40.13 per share. The underwriters have an option to purchase a maximum of 450,000 additional TIDES to cover over-allotments of TIDES. We do not intend to list the TIDES on a national securities exchange or automated interdealer quotation system. Concurrently with this offering, Entercom is selling up to 8,000,000 shares of Class A common stock, and selling shareholders are selling up to 1,500,000 shares of Class A common stock, by means of a separate prospectus. The underwriters of the Class A common stock offering have an option to purchase from us up to 1,000,000 additional shares of Class A common stock, and from some of our shareholders, up to 425,000 additional shares of Class A common stock, in each case to cover over-allotments of shares. This offering and the Class A common stock offering are not contingent on each other. INVESTING IN THE TIDES INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 16.
PROCEEDS PRICE TO UNDERWRITING TO THE PUBLIC(1) COMMISSIONS TRUST(1) ---------------- ---------------- ---------------- Per each of the TIDES................................ $50 (2) $50 Total................................................ $150,000,000 (2) $150,000,000
(1) Plus accrued distributions, if any, from , 1999. (2) Entercom has agreed to pay a commission to the underwriters of $ per each of the TIDES, or $ in the aggregate. Delivery of the TIDES will be made on or about , 1999. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. * The terms Term Income Deferrable Equity Securities (TIDES)(SM) and TIDES(SM) are registered service marks of Credit Suisse First Boston Corporation. CREDIT SUISSE FIRST BOSTON BANC OF AMERICA SECURITIES LLC DEUTSCHE BANC ALEX. BROWN The date of this prospectus is , 1999. 3 [Map of the United States, identifying the cities in which we have stations and the stations within those cities.] 4 ------------------ TABLE OF CONTENTS
Page ---- SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS..... ii PROSPECTUS SUMMARY............... 1 RISK FACTORS..................... 16 USE OF PROCEEDS.................. 28 DIVIDEND POLICY.................. 28 PRICE RANGE OF OUR CLASS A COMMON STOCK.......................... 29 CAPITALIZATION................... 30 ACCOUNTING TREATMENT............. 31 RATIO OF EARNINGS TO FIXED CHARGES........................ 31 COMPLETED AND PENDING TRANSACTIONS................... 32 UNAUDITED PRO FORMA FINANCIAL INFORMATION.................... 34 SELECTED HISTORICAL FINANCIAL DATA........................... 46 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...... 49 INFORMATION ABOUT STATION AND MARKET DATA.................... 62 BUSINESS......................... 63 THE SINCLAIR ACQUISITION......... 80 MANAGEMENT....................... 83
Page ---- CERTAIN TRANSACTIONS............. 89 PRINCIPAL AND SELLING SHAREHOLDERS................... 90 ENTERCOM COMMUNICATIONS CAPITAL TRUST.......................... 93 DESCRIPTION OF TIDES............. 94 DESCRIPTION OF CONVERTIBLE SUBORDINATED DEBENTURES........ 116 DESCRIPTION OF GUARANTEE......... 128 RELATIONSHIP AMONG THE TIDES, THE CONVERTIBLE SUBORDINATED DEBENTURES AND THE GUARANTEE... 131 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES................... 133 DESCRIPTION OF CAPITAL STOCK..... 137 CERTAIN ERISA CONSIDERATIONS..... 142 SHARES ELIGIBLE FOR FUTURE SALE.. 144 UNDERWRITING..................... 145 NOTICE TO CANADIAN RESIDENTS..... 147 LEGAL MATTERS.................... 149 EXPERTS.......................... 149 WHERE YOU CAN FIND MORE INFORMATION.................... 150 INDEX TO FINANCIAL STATEMENTS..................... F-1
------------------ YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT. i 5 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Information included in this prospectus may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning future results and events. We use the words "believes," "expects," "intends," "plans," "anticipates," "likely," "will" and similar expressions to identify forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors, some of which are beyond our control, that could cause actual results to differ materially from those forecast or anticipated in such forward-looking statements. These risks, uncertainties and factors include, but are not limited to: - the possibility that our acquisition of the 46 radio stations from various subsidiaries of Sinclair Broadcast Group, Inc. will not be consummated; - the risks associated with our acquisition strategy generally; - the highly competitive nature of, and uncertain effect of new technologies on, the radio broadcasting industry; - our continued control by Joseph M. Field and members of his immediate family; - our vulnerability to changes in federal legislation or regulatory policy; - the trust's inability to make distributions on the TIDES if we are unable to make interest payments on the convertible subordinated debentures due to a default on our secured senior debt or otherwise; - our structure as a holding company, which limits our ability to access the cash flows and assets of our subsidiaires; - the possibility that you may have to pay taxes on interest prior to your receipt of distributions from the trust; and - the other factors described in "Risk Factors." You should not place undue reliance on these forward-looking statements, which reflect our view only as of the date of this prospectus. We undertake no obligation to update these statements or publicly release the result of any revisions to these statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events. ii 6 PROSPECTUS SUMMARY This summary only highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully. Unless we indicate otherwise, information in this prospectus assumes the underwriters will not exercise their over-allotment option. You should refer to the introductions to "-- Summary Historical Financial Data" and "Selected Historical Financial Data" for the meanings of some of the financial terms used in this prospectus. You should also refer to the introduction to "Unaudited Pro Forma Financial Information" for a description of the assumptions and adjustments used in the calculation of pro forma financial information. Unless the context requires otherwise, "Entercom," "We," "Us," "Our" or similar terms refer to Entercom Communications Corp. and its consolidated subsidiaries, excluding Entercom Communications Capital Trust. However, in the descriptions of the TIDES, the debentures, the guarantee, the trust and related matters, these terms refer solely to Entercom Communications Corp. and not the trust or any of our other consolidated subsidiaries. ENTERCOM COMMUNICATIONS CORP. We are the fifth largest radio broadcasting company in the United States based on pro forma 1998 gross revenues. We have assembled, after giving effect to our pending acquisition of 46 stations from various subsidiaries of Sinclair Broadcast Group, Inc., a nationwide portfolio of 88 owned or operated stations. This portfolio consists of 56 FM and 32 AM stations in 16 markets, including 12 of the country's top 50 markets. Our station groups rank among the three largest clusters, based on gross revenues, in 15 of our 16 markets. On a pro forma basis, we would have had net revenues of $301.9 million, operating income of $51.2 million and pro forma income before extraordinary item of $1.2 million for the twelve months ended June 30, 1999. In addition, pro forma broadcast cash flow during the same period would have been $107.7 million. Our net revenues and broadcast cash flow have grown significantly on both a total and same station basis. Net revenues grew at a compound annual rate of 96.8% from an actual $35.9 million in fiscal 1995 to a pro forma $273.8 million in fiscal 1998. Broadcast cash flow grew at a compound annual rate of 98.0% from an actual $11.8 million in fiscal 1995 to a pro forma $91.6 million in fiscal 1998. During this same period, our same station net revenues and broadcast cash flow grew at average annual rates of 15.0% and 36.4%, respectively. In addition, our pro forma after-tax cash flow grew at a compound annual rate of 127.2% from an actual $4.5 million in fiscal 1995 to a pro forma $52.8 million in fiscal 1998. SINCLAIR ACQUISITION In August 1999, we agreed with Sinclair to purchase 46 radio stations, 15 AM and 31 FM, in nine markets, including seven of the country's top 50 markets. The purchase price for the Sinclair acquisition is $824.5 million. In connection with the Sinclair acquisition, federal broadcasting regulations will require us to divest three stations in the Kansas City market, where we already own seven stations and Sinclair owns four stations. To comply with these regulations, we plan to swap three Kansas City stations for stations in other markets, or if we are unable to do so, we will sell three stations for cash or pursue a combination of swaps and sales. As a result of the required Kansas City dispositions, our portfolio of stations could be reduced to 85. We expect to consummate the Sinclair acquisition in the last quarter of 1999; however, we cannot assure you that we will be able to do so. As a result of the Sinclair acquisition, we will serve eight new markets, six of which are new top 50 markets. These eight new markets will complement our current station portfolio by greatly increasing its diversity and national reach. Due to this increased diversity, we will have reduced significantly our reliance on any single market. Furthermore, we believe that many of the Sinclair radio stations are underdeveloped and offer substantial growth potential. 1 7 OUR STATION PORTFOLIO Our current portfolio of stations includes a significant number of recently acquired stations that we believe are underdeveloped. We believe that these underdeveloped stations offer the opportunity for substantial broadcast cash flow growth. In the aggregate, the 33 stations which we commenced operating on or after January 1, 1997 operated at a broadcast cash flow margin of 27.4% during the twelve months ended June 30, 1999. By comparison, in the aggregate, the nine stations which we commenced operating prior to 1997 operated at a broadcast cash flow margin of 48.2% during the twelve months ended June 30, 1999. The following table sets forth selected information about the markets where we operate and where we expect to operate following the Sinclair acquisition. The Sinclair markets are denoted with an asterisk (*), except for the Kansas City market where we expect to acquire four additional stations from Sinclair. However, the table does not give effect to the required disposition of three stations in Kansas City which we are seeking to swap for stations in other markets; therefore, we have not listed 1998 Entercom Market Revenue Share for Kansas City. Giving effect to this disposition, which will leave us with a total of eight stations in Kansas City, 1998 Entercom Market Revenue Share in Kansas City will decline, although we believe that our 1998 Entercom Market Revenue Rank will remain unchanged. You should refer to the "Business" section for further information about our station portfolio.
1998 1998 MARKET RANK ENTERCOM -------------------- 1993-1998 ENTERCOM MARKET RADIO MARKET STATIONS REVENUE METRO RADIO AVERAGE ---------- ------------ MARKET POPULATION REVENUE REVENUE GROWTH FM AM SHARE RANK - ------ ---------- ------- -------------- --- --- ----- ---- Boston, MA.............. 8 10 14.1% 2 3 17.3% 3 Seattle, WA............. 14 13 11.9 5 3 37.8 1 Portland, OR............ 25 20 13.3 4 3 26.5 3 Sacramento, CA.......... 28 28 5.9 4 1 18.1 3 Kansas City, MO......... 30 29 12.5 7 4 -- 1 Milwaukee, WI*.......... 31 33 8.3 2 1 8.7 5 Norfolk, VA*............ 36 44 4.0 4 0 26.8 1 New Orleans, LA*........ 41 39 8.9 4 2 41.9 1 Greensboro, NC*......... 42 50 10.9 3 1 24.2 2 Buffalo, NY*............ 43 41 9.0 2 4 38.8 1 Memphis, TN*............ 46 40 10.1 2 1 20.1 2 Rochester, NY........... 50 55 8.9 3 1 21.4 3 Greenville/Spartanburg, SC*................... 58 61 7.9 4 3 23.8 3 Wilkes-Barre/Scranton, PA*................... 64 69 7.7 6 3 38.6 1 Gainesville/Ocala, FL... 98 124 7.5 2 0 20.8 2 Longview/Kelso, WA...... n/a n/a n/a 2 2 n/a n/a --- --- All Markets........... 56 32
2 8 OUR ACQUISITION STRATEGY Since October 1, 1996, in over 20 transactions including the Sinclair acquisition, which we expect to consummate in the last quarter of 1999, we have acquired or agreed to acquire 83 radio stations and have divested or will divest, for strategic or regulatory reasons, 14 radio stations. Through our disciplined acquisition strategy, we seek to (1) build top-three station clusters principally in large growth markets and (2) acquire underdeveloped properties that offer the potential for significant improvements in revenues and broadcast cash flow through the application of our operational, administrative and engineering expertise. Although our focus has been on radio stations in top 50 markets, we also consider acquiring stations in top 75 markets to the extent we believe we can apply our acquisition strategy in those markets. OUR OPERATING STRATEGY The principal components of our operating strategy are to: - DEVELOP MARKET LEADING STATION CLUSTERS. To enhance our competitive position, we strategically align our stations' formats and sales efforts within each market in an effort to optimize their performance, both individually and collectively. We seek to maximize the ratings, revenue and broadcast cash flow of our radio stations by tailoring their programming to optimize aggregate audience delivery. - ACQUIRE AND DEVELOP UNDERPERFORMING STATIONS. We seek to acquire and develop underperforming stations, which has enabled us to build a long-term track record of achieving superior same station revenue and broadcast cash flow growth. - BUILD STRONGLY-BRANDED FRANCHISES. We analyze market research and competitive factors to identify the format opportunity, music selection and rotation, presentation and other key programming attributes that we believe will best position each station to develop a distinctive identity and to strengthen the stations' local "brand" or "franchise" value. - LEVERAGE STATION CLUSTERS TO CAPTURE GREATER SHARE OF ADVERTISING REVENUE. We believe radio will continue to gain revenue share from other media as a result of deregulation in the broadcasting industry, which allows broadcasters to create larger clusters in their markets and offers advertisers a means to cost-effectively reach larger audiences. We have begun to capitalize on this opportunity by developing specialized teams in many of our markets to work with non-traditional radio advertisers to create and develop marketing programs and solutions. - MAXIMIZE TECHNICAL CAPABILITIES. We seek to operate stations with the strongest signals in their respective markets. In addition, on various occasions we have identified opportunities to upgrade low-powered or out-of-market stations and transform them into competitive signals, thus increasing their value significantly. For example, in 1998 we sold our two Tampa FM stations, which we had purchased for an aggregate of $4.9 million, for $75.0 million after upgrading their license classes. - RECRUIT, DEVELOP, MOTIVATE AND RETAIN SUPERIOR EMPLOYEES. We believe that station operators differentiate themselves from their peers primarily through their ability to recruit, develop, motivate and retain superior management, programming and sales talent. Accordingly, we strive to establish a compelling corporate culture that is attractive to superior performers. 3 9 OTHER FINANCINGS Concurrently with this offering, we are selling 8,000,000 shares of Class A common stock, and selling shareholders are selling 1,500,000 shares of Class A common stock, by means of a separate prospectus. In addition, the underwriters have an over-allotment option to purchase from us a maximum of 1,000,000 additional shares of Class A common stock, and from some of our shareholders, a maximum of 425,000 additional shares of Class A common stock. This offering and the Class A common stock offering are not contingent on each other. In addition, we are seeking to replace or amend our current credit facility to permit consummation of the Sinclair acquisition and to significantly expand our borrowing capacity. Entercom Communications Corp., the parent company, is currently the borrower under our current credit facility, and our subsidiaries guarantee Entercom's obligations. When we enter into an amended or replacement credit facility, we expect that a newly formed subsidiary will become the borrower under this facility and that all of our station-operating subsidiaries will become subsidiaries of this entity and guarantee its obligations. We also expect that Entercom will guarantee those obligations on a senior secured basis. We intend to use the net proceeds from this offering and the Class A common stock offering, together with cash on hand and proceeds from our amended or replacement credit facility, to finance the Sinclair acquisition. THE TRUST Entercom Communications Capital Trust is a recently created Delaware business trust. The trust will issue TIDES to the public and common securities to us. The trust will use the proceeds of those issuances to buy Entercom's % Convertible Subordinated Debentures due 2014. We will, on a subordinated basis, irrevocably guarantee payments on the TIDES to the limited extent set forth in this prospectus. For financial reporting purposes, we will treat the trust as one of our subsidiaries. Accordingly, we will include the accounts of the trust in our consolidated financial statements. We will present the TIDES as a separate line item in our consolidated balance sheet entitled "Entercom-obligated mandatorily redeemable convertible preferred securities of Entercom Communications Capital Trust," and we will include appropriate disclosures about the TIDES in the notes to our consolidated financial statements. For financial reporting purposes, we will record distributions payable on the TIDES as a financing charge to earnings in our consolidated statement of income. OUR PRINCIPAL EXECUTIVE OFFICES Our principal executive offices are located at 401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004. Our telephone number is (610) 660-5610, and our internet website address on the world wide web is www.entercom.com. The contents of our website are not part of this prospectus. The trust's place of business and telephone number are the principal executive offices and telephone number of Entercom. 4 10 THE OFFERING Issuer.......................... Entercom Communications Capital Trust. Substantially all of the assets of the trust will consist of Entercom's % Convertible Subordinated Debentures due 2014. We will own 100% of the outstanding common securities of the trust. Securities Offered.............. 3,000,000 TIDES. Additionally, we and the trust have granted the underwriters an option for 30 days after the date of this prospectus to purchase up to an additional 450,000 TIDES at the initial offering price plus accrued distributions. Distributions................... If you purchase the TIDES, the trust will pay you, subject to the deferral provisions described below, cumulative cash distributions at an annual rate of % of the stated liquidation amount of $50 per each of the TIDES. Distributions will accrue from the date the trust issues the TIDES, and subject to the distribution deferral provisions described below, the trust will pay those distributions quarterly in arrears on each March 31, June 30, September 30 and December 31, commencing December 31, 1999. Because distributions on the TIDES constitute interest for United States federal income tax purposes, corporate holders of the TIDES will not be entitled to a dividends-received deduction. The term "distribution" as used herein shall include quarterly distributions, additional distributions on quarterly distributions not paid on the applicable distribution dates and special distributions upon certain tax events. Distribution Deferral Provisions...................... We can, on one or more occasions, defer the interest payments due on the debentures for up to 20 consecutive quarters unless an event of default under the debentures has occurred and is continuing. However, we cannot defer interest payments beyond the maturity date of the debentures, which is September 30, 2014. If we defer interest payments on the debentures, the trust will also defer distributions on the TIDES. The trust will be able to pay distributions on the TIDES only if and to the extent it receives interest payments from us on the debentures. During any deferral period, distributions will continue to accumulate quarterly at an annual rate of % of the liquidation amount of $50 per TIDES. Also, the deferred distributions will themselves accrue additional distributions at an annual rate of %, to the extent permitted by law. The trust will send you 5 11 written notice of a deferral of distributions on the TIDES not later than ten days prior to the record date for the related TIDES distribution. During any period in which we defer interest payments on the debentures, in general we cannot: - declare or pay any dividend or distribution on our capital stock; - redeem, purchase, acquire or make a liquidation payment on any of our capital stock; - make any interest, principal or premium payment on, or repurchase or redeem, any of our debt securities that rank equally with or junior to the debentures; or - make any payment on any guarantee by Entercom of the debt securities of any of our subsidiaries if the guarantee ranks equal or junior to the debentures. If an interest payment deferral occurs, you will continue to recognize interest income for United States federal income tax purposes in advance of your receipt of any corresponding cash distribution. If you convert your TIDES during any interest payment deferral period, you will not receive any cash payment for any deferred distributions. Conversion into Class A common stock......................... You may convert each TIDES into shares of Class A common stock of Entercom at the initial rate of shares of Class A common stock for each TIDES (equivalent to an initial conversion price of $ per share of Class A common stock). The last reported sale price of Entercom's Class A common stock on The New York Stock Exchange on September 29, 1999 was $40.13 per share. In connection with any conversion of the TIDES, the property trustee of the trust will exchange those TIDES for debentures having a principal amount equal to the stated liquidation amount of $50 per TIDES exchanged. The property trustee will then immediately convert the debentures into Entercom's Class A common stock. We will not issue any fractional shares of Class A common stock as a result of the conversion. Instead, we will pay the fractional interest in cash based on the then current market value of our Class A common stock. Also, we will not issue any 6 12 additional shares of our Class A common stock upon conversion of the TIDES to pay for any accrued but unpaid distributions on the TIDES at the time of conversion. Liquidation Amount.............. We, as the holder of all the common securities of the trust, have the right at any time to dissolve the trust. If we liquidate the trust, you will receive, after satisfaction of liabilities of creditors of the trust, debentures having a principal amount equal to the liquidation amount of the TIDES you hold. Maturity........................ The TIDES do not have a stated maturity. However, the trust must redeem the TIDES upon the repayment or redemption, in whole or in part, of the debentures. The debentures will mature on September 30, 2014, unless earlier redeemed. Upon redemption of the debentures on September 30, 2014, the trust will redeem the TIDES at their liquidation amounts plus any accrued and unpaid distributions. Optional Redemption............. We may redeem the debentures in whole or in part, at any time after October 3, 2002 at a redemption price equal to % of the principal amount of the debentures, declining ratably to 100% of the principal amount of the debentures after September 30, 2006, plus any accrued and unpaid interest. Tax Event or Investment Company Event Redemption or Distribution.................. Upon the occurrence of specified tax changes affecting the trust's taxable status or the deductibility of interest on the debentures or changes in the law causing the trust to be considered an investment company, we will cause the trustees to dissolve and liquidate the trust and, after satisfaction of liabilities of creditors of the trust, distribute the debentures to you. In limited circumstances, with respect to tax changes only, we may redeem the debentures in whole, but not in part, at a price equal to the principal amount of the debentures plus accrued and unpaid interest, in lieu of distributing the debentures. Upon the occurrence of certain changes in the tax laws, we may also cause the TIDES to remain outstanding and pay additional amounts due on the debentures as a result of the change. Effect of Redemption............ Upon the repayment or redemption of any debentures, other than following the distribution of the debentures to you or holders of the trust's common 7 13 securities, the trust will concurrently redeem, on a pro rata basis, the TIDES and common securities having a liquidation amount equal to the principal amount of the repaid or redeemed debentures. If an event of default exists under the debentures or the declaration of trust that governs the trust, the TIDES will receive a preference over the trust's common securities. Guarantee....................... We will irrevocably guarantee, on a subordinated basis and to the extent set forth in this prospectus, the payment in full of the following: - distributions on the TIDES to the extent of available trust funds; - the amount payable upon redemption of the TIDES to the extent of available trust funds; and - generally, the liquidation amount of the TIDES to the extent of trust funds available for distribution to you. The guarantee will be unsecured and subordinate to all of our secured senior debt, including our obligations as borrower under our current credit facility and our obligations as guarantor under the amended or replacement credit facility that we are seeking to obtain. In addition, we are principally a holding company with substantially no assets other than equity interests of our subsidiaries and with minimal operations. Accordingly, we will depend on dividends and other distributions from our subsidiaries in order to make the interest payments on the debentures. Our guarantee is effectively junior to the debt and other liabilities of our subsidiaries, and as a result, funds may not be available for payment under the guarantee. Effectively, we have, through the guarantee, the debentures, the indenture governing the debentures and the trust's declaration of trust, taken together, fully, irrevocably and unconditionally guaranteed all of the trust's obligations under the TIDES. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes a full guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the trust's obligations under the TIDES. 8 14 Liquidation of the Trust........ We, as the holder of the trust's common securities, have the right at any time to dissolve the trust, subject to specified conditions. If we dissolve the trust, after satisfaction of liabilities to creditors of the trust, we will distribute to you debentures having a principal amount equal to the liquidation amount of the TIDES you hold or, in limited circumstances, an amount equal to the liquidation amount per TIDES or common security plus accumulated and unpaid distributions to the date of payment. Voting Rights................... Except as required by law, you do not have any voting rights, unless an event of default with respect to the debentures occurs and is continuing or we default under the guarantee with respect to the TIDES, in which case, you will be entitled, by majority vote, to appoint an additional trustee of the trust. Ranking......................... Generally, the trust will make payments on the TIDES pro rata with its common securities. The debentures will be unsecured and subordinate and junior in right of payment to all of our secured senior indebtedness, including our obligations as borrower under our current facility and our obligations as guarantor under the amended or replacement credit facility we are seeking to obtain. The debentures will rank equally with our unsecured indebtedness and other liabilities, including our trade payables. At June 30, 1999, we had a $4.9 million letter of credit outstanding and approximately $166.3 million of secured senior indebtedness on a consolidated basis. On a pro forma basis at June 30, 1999, we would have had a $4.9 million letter of credit outstanding and approximately $538.9 million of consolidated secured senior indebtedness. In addition, we are principally a holding company and the debentures are effectively subordinated to all existing and future liabilities of our subsidiaries. Our subsidiaries are separate legal entities and have no obligations to pay, or make funds available for the payment of, any amounts due on the debentures, the TIDES or the guarantee. Form of TIDES................... The TIDES will be represented by a global certificate registered in the name of Cede & Co., as nominee for The Depository Trust Company. Use of Proceeds................. The trust will use the gross proceeds from this offering and from the issuance of the trust's 9 15 common securities to purchase the debentures. We intend to use the net proceeds from the sale of the debentures to the trust to fund a portion of the total purchase price for the Sinclair acquisition. Absence of Market for the TIDES........................... The TIDES are new securities for which there is currently no market. We do not intend to list the TIDES on a national securities exchange or automated interdealer quotation system. Although one or more of the underwriters intend to make a secondary market for the TIDES, they are not obligated to do so, and they may discontinue making a secondary market for the TIDES at any time without notice. Accordingly, we cannot assure you as to the development or liquidity of any market for the TIDES. 10 16 SUMMARY HISTORICAL FINANCIAL DATA We have derived the summary operating data shown below for the years ended September 30, 1996, 1997 and 1998 and the balance sheet data shown below as of September 30, 1997 and 1998 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the balance sheet data shown below as of September 30, 1996 from our audited financial statements, which are not included in this prospectus. We have derived the summary operating data shown below for the three months ended December 31, 1997, the three month transition period ended December 31, 1998 and the six months ended June 30, 1998 and 1999 and the balance sheet data shown below as of December 31, 1998 and June 30, 1999 from our unaudited financial statements included elsewhere in this prospectus. We have derived the balance sheet data shown below as of December 31, 1997 and June 30, 1998 from our unaudited financial statements, which are not included in this prospectus. As you review the information contained in the following table and throughout this prospectus, you should note the following: - Historically, we operated with an October 1st to September 30th fiscal year. Effective January 1, 1999, we changed for financial reporting purposes from a fiscal year ending September 30th to a fiscal year ending December 31st. Accordingly, the summary historical financial data includes information as of, and for the three month transition period ended, December 31, 1998 and the three months ended December 31, 1997. - We retroactively restated our fiscal 1997 and 1998 consolidated financial statements to reflect a $25.0 million convertible subordinated promissory note held by an affiliate of Chase Capital Partners as an indexed debt instrument. We determined the adjustment as of the end of each relevant period by subtracting the sum of principal and accrued interest on the note from the fair value of the shares of our common stock into which the note was convertible. Immediately prior to our initial public offering in January 1999, Chase Capital converted the note in its entirety into 2,327,500 shares of our Class A common stock and 1,995,669 shares of our Class C common stock. Accordingly, this note is no longer outstanding. - Before completing our initial public offering, we were a Subchapter S corporation under the Internal Revenue Code, and accordingly, we were not liable for federal and certain state corporate income taxes. Instead, our shareholders included our taxable income or loss in their federal and those state income tax returns. Immediately before our initial public offering, we became a C corporation, and accordingly, we are now subject to federal and state corporate income taxes. The pro forma amounts shown in the table reflect provisions for state and federal income taxes, applied to income before income taxes and extraordinary item, as if we had been taxed as a C corporation. These pro forma amounts do not include the effect of the adjustment to reflect indexing of the Chase Capital convertible subordinated note because the amount of this adjustment is not tax deductible. - As a result of our becoming a C corporation immediately prior to our initial public offering, generally accepted accounting principles required us to provide for deferred income taxes of $79.8 million to reflect the cumulative temporary differences between book and income tax bases of our assets and liabilities. - For purposes of our historical financial statements, the term "pro forma" refers solely to the adjustments necessary to reflect our status as a C corporation rather 11 17 than an S corporation. It does not refer to any of the other adjustments described under "Summary Pro Forma Financial Information" and "Unaudited Pro Forma Financial Information." - All per share data gives effect to our recapitalization, which we consummated immediately prior to our initial public offering. In the recapitalization, we effected a 185 for one stock split and the exchange of our prior common stock for Class A common stock and Class B common stock. - Broadcast cash flow consists of operating income before depreciation and amortization, corporate general and administrative expenses and net expense (income) from time brokerage agreement fees. - Broadcast cash flow margin represents broadcast cash flow as a percentage of net revenues. - EBITDA before net expense (income) from time brokerage agreement fees consists of operating income before depreciation and amortization, non-cash compensation expense (which is included in corporate general and administration expenses) and net expense (income) from time brokerage agreement fees. - Pro forma after-tax cash flow consists of pro forma income before extraordinary item minus gains on sale of assets (net of tax) plus the following: depreciation and amortization, non-cash compensation expense (which is included in corporate general and administrative expenses), adjustment to reflect indexing of the convertible subordinated note and deferred tax provision (or minus deferred tax benefit). Although broadcast cash flow, EBITDA before net expense (income) from time brokerage agreement fees and pro forma after-tax cash flow are not measures of performance or liquidity calculated in accordance with generally accepted accounting principles, we believe that these measures are useful to an investor in evaluating our performance because they are widely used in the broadcast industry to measure a radio company's operating performance. However, you should not consider broadcast cash flow, EBITDA before net expense (income) from time brokerage agreement fees and pro forma after-tax cash flow in isolation or as substitutes for operating income, cash flows from operating activities or any other measure for determining our operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. In addition, because broadcast cash flow, EBITDA before net expense (income) from time brokerage agreement fees and pro forma after-tax cash flow are not calculated in accordance with generally accepted accounting principles, they are not necessarily comparable to similarly titled measures employed by other companies. The comparability of the historical financial data reflected below has been significantly impacted by acquisitions and dispositions. You should read the summary financial data together with "Selected Historical Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus. 12 18
FISCAL YEAR ENDED THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30, DECEMBER 31, JUNE 30, ---------------------------------- ------------------- -------------------- 1996 1997 1998 1997 1998 1998 1999 -------- ---------- ---------- -------- -------- --------- -------- (RESTATED) (RESTATED) (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING DATA: Net revenues...................... $ 48,675 $ 93,862 $ 132,998 $ 28,399 $ 47,363 $ 63,687 $ 95,545 Operating expenses: Station operating expenses...... 31,659 61,280 88,599 18,868 29,990 42,749 64,296 Depreciation and amortization... 2,960 7,685 13,066 2,880 4,358 6,079 10,019 Corporate general and administrative expenses....... 2,872 3,249 4,527 849 1,850 2,193 3,454 Net expense (income) from time brokerage agreement fees...... (879) (476) 2,399 -- 1,236 2,273 652 -------- --------- --------- -------- -------- --------- -------- Total operating expenses...... 36,612 71,738 108,591 22,597 37,434 53,294 78,421 -------- --------- --------- -------- -------- --------- -------- Operating income.................. 12,063 22,124 24,407 5,802 9,929 10,393 17,124 Other expense (income): Interest expense................ 5,196 11,388 14,663 2,996 5,732 6,179 6,246 Adjustment to reflect indexing of the convertible subordinated note............. -- 29,070 8,841 14,903 29,503 5,693 -- (Gains) on sale of assets....... (119) (197,097) (8,661) (43) (69,648) (8,748) (467) Other non-operating expense (income)...................... (67) 1,504 (328) (102) 577 (123) (599) -------- --------- --------- -------- -------- --------- -------- Total other expense (income).................... 5,010 (155,135) 14,515 17,754 (33,836) 3,001 5,180 -------- --------- --------- -------- -------- --------- -------- Income (loss) before income taxes and extraordinary item.......... 7,053 177,259 9,892 (11,952) 43,765 7,392 11,944 Pro forma income taxes............ 2,680 78,405 7,119 1,121 27,842 4,972 4,539 Pro forma income (loss) before extraordinary item.............. 4,373 98,854 2,773 (13,073) 15,923 2,420 7,405 Extraordinary item, net of tax benefit......................... 348 -- 1,488 -- -- 1,489 -- -------- --------- --------- -------- -------- --------- -------- Pro forma net income (loss)....... $ 4,025 $ 98,854 $ 1,285 $(13,073) $ 15,923 $ 931 $ 7,405 ======== ========= ========= ======== ======== ========= ======== Pro forma earnings (loss) per share before extraordinary item............................ $ 0.20 $ 4.59 $ 0.12 $ (0.61) $ 0.64 $ 0.11 $ 0.21 Pro forma diluted earnings (loss) per share before extraordinary item............................ 0.20 4.59 0.12 (0.61) 0.64 0.11 0.21 Weighted average common shares outstanding -- basic............ 21,534 21,534 22,239 21,534 24,742 21,534 34,836 Weighted average common shares outstanding -- diluted.......... 21,534 21,534 22,239 21,534 24,742 21,534 35,251 BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents......... $ 5,292 $ 3,626 $ 6,666 $ 3,497 $ 6,469 $ 6,094 $ 8,713 Intangibles and other assets...... 119,269 300,029 428,763 313,889 505,825 428,543 556,501 Total assets...................... 150,575 364,743 522,945 378,138 681,034 513,445 671,627 Senior debt, including current portion......................... 111,000 117,000 253,784 127,000 330,281 251,785 166,276 Total shareholders' equity........ 5,079 179,019 182,970 166,986 225,467 169,509 396,886 OTHER DATA: Broadcast cash flow............... $ 17,016 $ 32,582 $ 44,399 $ 9,531 $ 17,373 $ 20,938 $ 31,249 Broadcast cash flow margin........ 35.0% 34.7% 33.4% 33.6% 36.6% 32.9% 32.7% EBITDA before net expense (income) from time brokerage agreement fees............................ $ 14,144 $ 29,333 $ 39,872 $ 8,682 $ 15,523 $ 18,745 $ 28,012 Pro forma after-tax cash flow..... 7,311 16,590 21,028 5,003 7,985 9,563 20,215 Cash flows related to: Operating activities.......... 12,773 8,859 23,019 7,341 11,158 5,778 8,204 Investing activities.......... (96,502) (13,695) (153,651) (17,470) (86,894) (125,565) 10,001 Financing activities.......... 87,457 3,170 133,672 10,000 75,539 122,384 (15,961)
13 19 SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION The following table contains summary pro forma financial information derived from the unaudited pro forma financial information set forth under "Unaudited Pro Forma Financial Information." You should read this table in conjunction with "Unaudited Pro Forma Financial Information" and the financial statements included elsewhere in this prospectus.
FISCAL YEAR ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED SEPTEMBER 30, 1998 JUNE 30, 1999 JUNE 30, 1999 ---------------------- ------------------------ ------------------------ HISTORICAL PRO FORMA HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ----------- ---------- ----------- ---------- (RESTATED) (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING DATA: Net revenues.................... $132,998 $273,755 $ 95,545 $ 148,182 $183,820 $ 301,852 Operating expenses: Station operating expenses.... 88,599 182,173 64,296 97,666 121,488 194,133 Depreciation and amortization................ 13,066 42,524 10,019 20,996 18,484 43,872 Corporate general and administrative expenses..... 4,527 12,354 3,454 5,080 6,569 12,694 Net expense (income) from time brokerage agreement fees.... 2,399 -- 652 -- 2,014 -- -------- -------- -------- ---------- -------- ---------- Total operating expenses............. 108,591 237,051 78,421 123,742 148,555 250,699 -------- -------- -------- ---------- -------- ---------- Operating income................ 24,407 36,704 17,124 24,440 35,265 51,153 Other expense (income): Interest expense.............. 14,663 40,597 6,246 20,215 17,466 40,422 Financing cost of Entercom - obligated mandatorily redeemable convertible preferred securities of Entercom Communications Capital Trust............... -- 9,375 -- 4,688 -- 9,375 Adjustment to reflect indexing of the convertible subordinated note........... 8,841 -- -- -- 17,748 -- (Gains) on sale of assets..... (8,661) (161) (467) (467) (69,985) (467) Other non-operating expense (income).................... (328) (262) (599) (599) (125) (125) -------- -------- -------- ---------- -------- ---------- Total other expense (income)............. 14,515 49,549 5,180 23,837 (34,896) 49,205 -------- -------- -------- ---------- -------- ---------- Income (loss) before income taxes and extraordinary item.......................... 9,892 (12,845) 11,944 603 70,161 1,948 Pro forma income taxes.......... 7,119 (5,138) 4,539 241 33,405 779 -------- -------- -------- ---------- -------- ---------- Pro forma income (loss) before extraordinary item............ $ 2,773 $ (7,707) $ 7,405 $ 362 $ 36,756 $ 1,169 ======== ======== ======== ========== ======== ========== Pro forma earnings (loss) per share before extraordinary item.......................... $ 0.12 $ (0.17) $ 0.21 $ 0.01 $ 1.31 $ 0.03 Weighted average common shares outstanding -- basic.......... 22,239 45,168 34,836 45,168 28,130 45,168
14 20
FISCAL YEAR ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED SEPTEMBER 30, 1998 JUNE 30, 1999 JUNE 30, 1999 ---------------------- ------------------------ ------------------------ HISTORICAL PRO FORMA HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ----------- ---------- ----------- ---------- (RESTATED) (IN THOUSANDS, EXCEPT PER SHARE DATA) BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents....... $ 6,666 $ 8,713 $ 8,713 $ 8,713 $ 8,713 Intangibles and other assets, net........................... 428,763 556,501 1,332,119 556,501 1,332,119 Total assets.................... 522,945 671,627 1,499,495 671,627 1,499,495 Senior debt, including current portion....................... 253,784 166,276 538,876 166,276 538,871 Total shareholders' equity...... 182,970 396,886 698,412 396,886 698,412 OTHER DATA: Broadcast cash flow............. $ 44,399 $ 91,582 $ 31,249 $ 50,516 $ 62,551 $ 107,719 Broadcast cash flow margin...... 33.4% 33.5% 32.7% 34.1% 34.0% 35.7% EBITDA before net expense (income) from time brokerage agreement fees................ $ 39,872 $ 79,228 $ 28,012 $ 45,653 $ 56,199 $ 95,242 Pro forma after-tax cash flow... 21,028 52,768 20,215 31,174 34,662 63,186
15 21 RISK FACTORS Investing in the TIDES involves risk. You should consider carefully the following risk factors, in addition to the other information contained in this prospectus, before purchasing the TIDES in this offering. The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may impair our business operations. If any of these risks actually occur, our business, results of operations and financial condition could be materially and adversely affected, the trading prices of the TIDES and our Class A common stock could decline and you might lose all or part of your investment. RISKS RELATING TO ENTERCOM IF WE ARE UNABLE TO CONSUMMATE THE SINCLAIR ACQUISITION, THE ADVERSE EFFECT ON OUR BUSINESS, ON OUR MARKET DIVERSITY AND ON THE VALUE OF YOUR INVESTMENT COULD BE MATERIAL. The closing of this offering is not contingent on the consummation of the Sinclair acquisition, and we cannot assure you that the Sinclair acquisition will be consummated. The Sinclair acquisition is subject to a number of important conditions, including approval from the FCC and clearance by federal antitrust authorities. We expect that this offering will close in advance -- perhaps by several months or more -- of satisfaction of these conditions, and it is possible that one or more of these conditions will never be satisfied. Moreover, as described in greater detail below, we presently do not have financing sufficient to consummate the Sinclair acquisition. For all of these reasons, we cannot assure you that we will be able to consummate the Sinclair acquisition. If we are unable to consummate the Sinclair acquisition, the adverse effect on our business, on our market diversity and on the value of your investment could be material. For example, we expect that the consummation of the Sinclair acquisition will greatly increase the diversity and national reach of our station portfolio, and we would not achieve these benefits -- at least in the near term -- if the transaction does not close. In particular, on a pro forma basis for completed transactions but excluding Sinclair, the radio stations we own or operate in Seattle would have generated approximately 47.2% of our net revenues and approximately 52.7% of our broadcast cash flow for the fiscal year ended September 30, 1998 and these percentages would have been approximately 35.2% and 43.3%, respectively, for the six months ended June 30, 1999. Even on a pro forma basis for completed transactions and including Sinclair, the radio stations we own or operate in Seattle would have generated approximately 23.0% of our net revenues and approximately 25.5% of our broadcast cash flow for the fiscal year ended September 30, 1998 and these percentages would have been approximately 22.7% and 26.8%, respectively, for the six months ended June 30, 1999. Accordingly, we have greater exposure to any operating difficulties that may arise at our Seattle stations or to adverse events or conditions that affect the Seattle economy than if we were more geographically diverse, and our exposure will be increased if we are unable to consummate the Sinclair acquisition. WE PRESENTLY DO NOT HAVE SUFFICIENT COMMITTED FINANCING TO CONSUMMATE THE SINCLAIR ACQUISITION, AND OUR ABILITY TO OBTAIN THE NECESSARY FINANCING IS UNCERTAIN. Of the $824.5 million in cash required to fund the Sinclair acquisition, we expect to pay approximately $145.0 million from the net proceeds of this offering. Concurrently with this offering, we are also pursuing the Class A common stock offering from which we expect to realize net proceeds of approximately $306.9 million, assuming a public offering 16 22 price of $40.00 per share, to be applied toward the Sinclair acquisition. However, even assuming the closing of both offerings, we will be required to raise an additional $372.6 million to fund the balance of the Sinclair purchase price. We will not be able to use our current credit facility to fund this amount because we would exceed the committed amount under the facility. Accordingly, we are actively engaged in discussions with various potential lenders about amending or replacing our present credit facility in order to obtain the additional financing. We cannot assure you that these discussions will be successful. If they are not successful, we cannot assure you that we will be able to obtain from other sources the financing necessary to close the Sinclair acquisition, or what the terms of any alternative financing might be. Moreover, this offering is not contingent on the closing of the Class A common stock offering. As a result, if this offering closes, but the Class A common stock offering does not, the financing that we would need from an amended or replacement credit facility or other potential source would correspondingly increase. The terms and availability of this additional financing is also uncertain. THE SINCLAIR ACQUISITION AGREEMENTS IMPOSE SIGNIFICANT FINANCIAL PENALTIES ON US IF WE ARE UNABLE TO CLOSE THE TRANSACTION BY SPECIFIED DATES, AND WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO DO SO. Our arrangement with Sinclair consists of two separate asset purchase agreements -- one for Sinclair's four Kansas City stations, for which the purchase price is $122.0 million, and one for the remaining 42 stations in eight other markets and other assets that we are acquiring, for which the purchase price is $702.5 million. The multi-market agreement allocates the purchase price, and allows for closings on a market by market basis. If Sinclair rightfully terminates the multi-market agreement, it may be entitled to receive liquidated damages from us in the maximum amount of approximately $43.0 million. After we have acquired assets having an aggregate value of 45% of the total purchase price, these liquidated damages are subject to pro rata downward adjustment based on the value of markets that have already closed. If Sinclair rightfully terminates the Kansas City agreement, it may be entitled to receive liquidated damages from us in the maximum amount of approximately $7.0 million. In addition, 135 days after public notice that the applications for consent to assignment of the station licenses have been accepted for filing by the FCC, the purchase price of all markets not yet closed under the multi-market agreement will increase 0.75% if all of the markets under that agreement have not closed due to the failure to receive any required regulatory consent as a result of facts relating to us or our affiliates. The purchase price will continue to increase 0.75% at the end of each 30 day period thereafter. Similarly, 150 days after the same public notice for the Kansas City stations, the purchase price for the Kansas City market will increase 0.75% if the Kansas City market has not closed due to the failure to receive any required regulatory consent as a result of facts relating to us or our affiliates. The purchase price will continue to increase 0.75% at the end of each 30 day period thereafter. We cannot assure you that we will be able to obtain the necessary regulatory approvals in time to avoid these financial penalties, or at all. 17 23 WE MAY NOT BE SUCCESSFUL IN IDENTIFYING AND CONSUMMATING FUTURE ACQUISITIONS, WHICH IS AN IMPORTANT ELEMENT OF OUR BUSINESS STRATEGY. We pursue growth, in part, through the acquisition of individual radio stations and groups of radio stations. Our consummation of all future acquisitions, including Sinclair, will be subject to various conditions, including FCC and other regulatory approvals. The FCC must approve any transfer of control or assignment of broadcast licenses. In addition, acquisitions may encounter intense scrutiny under federal and state antitrust laws. Our acquisition of the Sinclair stations is, and many of our future acquisitions may be, subject to notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and to a waiting period and possible review by the Department of Justice and the Federal Trade Commission. On September 24, 1999, we received a "second request" from the Department of Justice with respect to the Sinclair Kansas City agreement and therefore the Department of Justice is currently conducting a more detailed investigation of our acquisition of the four stations from Sinclair in the Kansas City market. Although we believe that the concerns of the Department of Justice will be resolved by our disposition of three stations in the Kansas City market that we are required to make in order to comply with FCC rules, we cannot assure you that this will be the case. The applicable waiting period for the multi-market agreement expired on September 27, 1999. Any delays, injunctions, conditions or modifications by any of these federal agencies could have a negative effect on us and result in the abandonment of all or part of the Sinclair acquisition or other attractive acquisition opportunities. We cannot predict whether we will be successful in identifying future acquisition opportunities or consummating these acquisitions or what the consequences of any acquisitions will be. Depending on the nature, size and timing of future acquisitions, we may require additional financing. We cannot assure you that additional financing will be available to us on acceptable terms. Radio broadcasting is a rapidly consolidating industry, with many companies seeking to consummate acquisitions and increase their market share. In this environment, we compete and will continue to compete with many other buyers for the acquisition of radio stations. Some of those competitors may be able to outbid us for acquisitions because they have greater financial resources. As a result of these and other factors, our ability to identify and consummate future acquisitions is uncertain. INTEGRATING ACQUISITIONS IS DIFFICULT. We will have acquired 83 radio stations since October 1, 1996, including our anticipated consummation of the Sinclair acquisition in the last quarter of 1999, and we expect to make acquisitions of other stations and station groups in the future. The integration of acquisitions involves numerous risks, including: - difficulties in the integration of operations and systems and the management of a large and geographically diverse group of stations; - the diversion of management's attention from other business concerns; and - the potential loss of key employees of acquired stations. We cannot assure you that we will be able to integrate successfully any operations, systems or management that might be acquired in the future, including the operations, systems or management acquired in the Sinclair acquisition. Consummation of the Sinclair acquisition will require us to manage a significantly larger radio station portfolio than 18 24 historically has been the case. Our failure to integrate and manage newly acquired stations successfully could have a material adverse effect on our business and operating results. In addition, in the event that the operations of a new business do not meet expectations, we may restructure or write-off the value of some or all of the assets of the new business. WE MUST RESPOND TO THE RAPID CHANGES IN TECHNOLOGY, SERVICES AND STANDARDS THAT CHARACTERIZE OUR INDUSTRY IN ORDER TO REMAIN COMPETITIVE. The radio broadcasting industry is subject to rapid technological change, evolving industry standards and the emergence of new media technologies and services. We cannot assure you that we will have the resources to acquire new technologies or to introduce new services that could compete with these new technologies. Several new media technologies and services are being developed or introduced, including the following: - satellite delivered audio radio service, which could result in the introduction of new satellite radio services with sound quality equivalent to that of compact discs; - audio programming by cable systems, direct broadcast satellite systems, personal communications systems, Internet content providers and other digital audio broadcast formats; - in-band on-channel digital radio, which could provide multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services; and - microbroadcasting stations (low powered, limited coverage radio stations), about which the FCC is considering proposals. We cannot predict the effect, if any, that competition arising from new technologies or regulatory change may have on the radio broadcasting industry or on our company. WE EXPECT TO INCUR SUBSTANTIAL ADDITIONAL INDEBTEDNESS TO CONSUMMATE THE SINCLAIR ACQUISITION, AND THIS INCREASED LEVERAGE COULD HAVE IMPORTANT CONSEQUENCES TO YOU. To consummate the Sinclair acquisition, we expect to incur indebtedness that will be substantial in relation to our shareholders' equity. Assuming that we successfully amend or replace our credit facility and that we borrow under the facility to help fund the Sinclair acquisition, upon consummation of the Sinclair acquisition we would have had $538.9 million in long-term indebtedness on a pro forma basis at June 30, 1999, compared to our actual long-term indebtedness of $166.3 million at June 30, 1999. Our leverage will increase further to the extent that we do not complete the Class A common stock offering and instead incur additional debt under an amended or replacement credit facility or otherwise to finance the Sinclair acquisition. Moreover, in addition to our obligations on our long-term indebtedness and a $4.9 million letter of credit, we will have quarterly interest obligations on the debentures held by the trust that fund distributions on the TIDES. These obligations will be substantial in amount and could have a substantial impact on you. For example, these obligations could: - require us to dedicate a substantial portion of our cash flow from operations to debt service and other financing costs, thereby reducing the availability of cash flow for other purposes, including funding future expansion and ongoing capital expenditures; - impair our ability to obtain additional financing for working capital, capital expenditures, acquisitions and general corporate or other purposes; - limit our ability to compete, expand and make capital improvements; 19 25 - increase our vulnerability to economic downturns, limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions; and - limit our ability to pay interest on the debentures, which in turn would limit the trust's ability to make distributions to you. THE COVENANTS IN OUR EXISTING CREDIT FACILITY RESTRICT OUR FINANCIAL AND OPERATIONAL FLEXIBILITY, AND IT IS LIKELY THAT ANY AMENDED OR REPLACEMENT CREDIT FACILITY WILL CONTAIN SIMILAR OR MORE RESTRICTIVE COVENANTS. Our existing credit facility contains covenants that restrict, among other things, our ability to borrow money, make particular types of investments or other restricted payments, swap or sell assets, or merge or consolidate. An event of default under our credit facility could allow the lenders to declare all amounts outstanding to be immediately due and payable. We have pledged substantially all of our consolidated assets and the stock of our subsidiaries to secure the debt under our credit facility. If the amounts outstanding under the credit facility were accelerated, the lenders could proceed against our consolidated assets and the stock of our subsidiaries. Any event of default, therefore, could have a material adverse effect on our business. Our credit facility also requires us to maintain specified financial ratios. Our ability to meet these financial ratios can be affected by events beyond our control, and we cannot assure you that we will meet those ratios. To consummate the Sinclair acquisition, we expect to amend or replace our credit facility. It is likely that any amended or replacement credit facility will contain similar or more restrictive covenants. We also may incur future debt obligations which might subject us to restrictive covenants that could affect our financial and operational flexibility or subject us to other events of default. BECAUSE OF OUR HOLDING COMPANY STRUCTURE, WE DEPEND ON OUR SUBSIDIARIES FOR CASH FLOW, AND OUR ACCESS TO THIS CASH FLOW IS RESTRICTED. We operate as a holding company. All of our radio stations are currently owned and operated by our subsidiaries. When we enter into an amended or replacement credit facility, we expect that a newly formed subsidiary will become the borrower and all of our station-operating subsidiaries will become subsidiaries of this newly formed subsidiary. We also expect that we will guarantee the borrower's obligations on a secured senior basis. Our obligations on the debentures will be subordinated to our obligations on this guarantee. As a holding company, our only source of cash to pay our obligations, including corporate overhead and other trade payables, is distributions from our subsidiaries of their net earnings and cash flow. We currently expect that the net earnings and cash flow of our subsidiaries will be retained and used by them in their operations, including servicing their debt obligations, before distributions are made to us. Although our current credit facility would allow us to make payments on the debentures and TIDES, other than if an event of default has occurred and is continuing, we cannot assure you that even if our subsidiaries elect to make distributions to us, applicable state law and contractual restrictions would permit such dividends or distributions. Based on discussions with the lenders under our current credit facility, we expect that the lenders under an amended or replacement credit facility will permit our subsidiaries to make upstream distributions to us in amounts sufficient to pay interest on the debentures so long as no default has occurred under the credit facility. However, we cannot assure you that this will be the case. 20 26 WE FACE MANY UNPREDICTABLE BUSINESS RISKS, BOTH GENERAL AND SPECIFIC TO THE RADIO BROADCASTING INDUSTRY, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FUTURE OPERATIONS. Our future operations are subject to many business risks, including those risks that specifically influence the radio broadcasting industry, which could have a material adverse effect on our business including: - economic conditions, both generally and relative to the radio broadcasting industry; - shifts in population, demographics or audience tastes; - the level of competition for advertising revenues with other radio stations, television stations and other entertainment and communications media; - priorities of advertisers; - fluctuations in operating costs; - technological changes and innovations; - changes in labor conditions; - new laws, including proposals to eliminate the tax deductibility of certain expenses incurred by advertisers; and - changes in governmental regulations and policies and actions of federal regulatory bodies, including the United States Department of Justice, the Federal Trade Commission and the FCC. Given the inherent unpredictability of these variables, we cannot with any degree of certainty predict what effect, if any, these variables will have on our future operations. Generally, advertising tends to decline during economic recession or downturn. Consequently, our advertising revenue is likely to be adversely affected by a recession or downturn in the United States economy, the economy of an individual geographic market in which we own or operate radio stations or other events or circumstances that adversely affect advertising activity. OUR CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER EFFECTIVELY CONTROLS OUR COMPANY, AND MEMBERS OF HIS IMMEDIATE FAMILY ALSO OWN A SUBSTANTIAL EQUITY INTEREST IN US. THEIR INTERESTS MAY CONFLICT WITH YOURS. Upon completion of the Class A common stock offering, Joseph M. Field, our Chairman of the Board and Chief Executive Officer, will beneficially own 1,788,305 shares of our Class A common stock and 9,782,555 shares of our Class B common stock, representing approximately 72.0% of the total voting power of all of our outstanding common stock. David J. Field, our President, Chief Operating Officer, one of our directors and the son of Joseph M. Field, will beneficially own 2,374,994 shares of our Class A common stock and 749,250 shares of our outstanding Class B common stock, representing approximately 7.1% of the total voting power of all of our outstanding common stock. If the underwriters exercise their over-allotment options related to the Class A common stock offering in full, Joseph M. Field's and David J. Field's shares of our common stock will represent 71.3% and 7.0% of the total voting power of all of our outstanding common stock, respectively. Collectively, Joseph M. Field and David J. Field beneficially own all of our outstanding Class B common stock. Other members of the Field family also own shares of Class A common stock. 21 27 Shares of Class B common stock are transferable only to Joseph M. Field, David J. Field, certain of their family members or trusts for any of their benefit. Upon any other transfer, shares of our Class B common stock convert automatically into shares of our Class A common stock on a share-for-share basis. Shares of our Class B common stock are entitled to ten votes only when they are voted by Joseph M. Field or David J. Field, subject to certain exceptions where they are restricted to one vote. Joseph M. Field generally is able to control the vote on all matters submitted to the vote of shareholders and, therefore, is able to direct our management and policies, except with respect to those matters where the shares of our Class B common stock are only entitled to one vote and those matters requiring a class vote under the provisions of our articles of incorporation, bylaws or applicable law, including, without limitation, the election of the two Class A directors. Without the approval of Joseph M. Field, we will be unable to consummate transactions involving an actual or potential change of control, including transactions in which holders of Class A common stock might otherwise receive a premium for their shares over then current market prices. WE ARE DEPENDENT ON FEDERALLY-ISSUED LICENSES TO OPERATE OUR RADIO STATIONS AND ARE SUBJECT TO EXTENSIVE FEDERAL REGULATION. The radio broadcasting industry is subject to extensive regulation by the FCC under the Communications Act of 1934. We are required to obtain licenses from the FCC to operate our radio stations. Licenses are normally granted for a term of eight years and are renewable. Although the vast majority of FCC radio station licenses are routinely renewed, we cannot assure you that the FCC will approve our future renewal applications or that the renewals will not include conditions or qualifications. The non-renewal, or renewal with substantial conditions or modifications, of one or more of our licenses could have a material adverse effect on us. We must comply with extensive FCC regulations and policies in the ownership and operation of our radio stations. FCC regulations limit the number of radio stations that a licensee can own in a market, which could restrict our ability to consummate future transactions and in certain circumstances could require us to divest some radio stations. For example, in connection with the Sinclair acquisition we will be required to dispose of three radio stations in Kansas City, and the timing and terms of these dispositions are both unknown. The FCC also requires radio stations to comply with certain technical requirements to limit interference between two or more radio stations. If the FCC relaxes these technical requirements, it could impair the signals transmitted by our radio stations and could have a material adverse effect on us. Moreover, these FCC regulations and others may change over time and we cannot assure you that those changes would not have a material adverse effect on us. OUR RADIO STATIONS MAY NOT BE ABLE TO COMPETE EFFECTIVELY IN THEIR RESPECTIVE MARKETS FOR ADVERTISING REVENUES. Our radio broadcasting stations are in a highly competitive business. Our radio stations compete for audiences and advertising revenues within their respective markets directly with other radio stations, as well as with other media, such as newspapers, magazines, network and cable television, outdoor advertising and direct mail. Audience ratings and market shares are subject to change, and any change in a particular market could have a material adverse effect on the revenue of our stations located in that market. While we already compete in some of our markets with other stations with similar programming formats, if another radio station in a market were to convert its programming 22 28 format to a format similar to one of our stations, if a new station were to adopt a comparable format or if an existing competitor were to strengthen its operations, our stations could suffer a reduction in ratings and/or advertising revenue and could incur increased promotional and other expenses. Other radio broadcasting companies may enter into the markets in which we operate or may operate in the future. These companies may be larger and have more financial resources than we have. We cannot assure you that any of our stations will be able to maintain or increase their current audience ratings and advertising revenues. THE LOSS OF KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS. Our business depends upon the continued efforts, abilities and expertise of our executive officers and other key executives, including Joseph M. Field, our Chairman of the Board and Chief Executive Officer, David J. Field, our President and Chief Operating Officer, John C. Donlevie, Esq., our Executive Vice President, Secretary and General Counsel, and Stephen F. Fisher, our Senior Vice President and Chief Financial Officer. We believe that the loss of one or more of these individuals could have a material adverse effect on our business. THE MARKET PRICE OF OUR STOCK COULD DECLINE DUE TO THE LARGE NUMBER OF SHARES ELIGIBLE FOR PUBLIC SALE UPON CONSUMMATION OF THE CLASS A COMMON STOCK OFFERING. Upon completion of the Class A common stock offering, we will have 32,944,267 shares of Class A common stock, 10,531,805 shares of Class B common stock and 1,695,669 shares of Class C common stock issued and outstanding, assuming no exercise of the underwriters' over-allotment option. Of these shares, the 9,500,000 shares of Class A common stock being sold in the Class A common stock offering (plus any shares issued upon exercise of the underwriters' over-allotment option), the 13,627,500 shares sold in our initial public offering in January 1999 and approximately 300,000 shares of Class A common stock sold into the public market since the initial public offering and approximately 100,000 shares of unrestricted Class A common stock will be freely transferable without restriction in the public market, except to the extent that these shares have been acquired by our affiliates; resales of shares acquired by affiliates are subject to restrictions under Rule 144 of the Securities Act. In addition, upon conversion of the TIDES, the shares of Class A common stock into which the TIDES are convertible will be freely transferable without restriction in the public market, except to the extent that those shares are acquired by our affiliates and are therefore subject to restrictions under Rule 144. The remaining shares of Class A common stock and all shares of Class B common stock and Class C common stock were issued in reliance on exemptions from the registration requirements of the Securities Act, and these shares are "restricted" securities under Rule 144. The number of "restricted" shares available for sale in the public market is limited by restrictions under Rule 144, although as to shares held by persons who are not our affiliates, many of these restrictions do not apply. In connection with the Class A common stock offering, our directors, members of senior management and selling and other shareholders, including Chase Capital, have agreed pursuant to lock-up agreements not to sell or otherwise dispose of shares representing approximately 10,500,000 shares of Class A common stock, 10,531,805 shares of Class B common stock and 1,695,669 shares of Class C common stock, other than shares sold in the Class A common stock offering, for a period of 90 days after the date of the Class A common stock offering prospectus without the prior written consent of Credit Suisse First Boston Corporation. 23 29 The market price of our Class A common stock could decline as a result of future sales of substantial amounts of Class A common stock, or the perception that substantial sales could occur. ANTI-TAKEOVER PROVISIONS COULD ADVERSELY AFFECT THE PRICE OF OUR CLASS A COMMON STOCK. Certain provisions of our articles of incorporation, by-laws and Pennsylvania law could make it more difficult for a third party to acquire control of us, even if a change of control could be beneficial to you. These provisions could adversely affect the price of our Class A common stock. OUR FAILURE OR THE FAILURE OF THIRD PARTIES WITH WHICH WE INTERACT TO ADDRESS ISSUES RELATED TO THE YEAR 2000 COULD ADVERSELY AFFECT OUR OPERATIONS. We rely, directly and indirectly, on information technology systems to operate our radio stations, provide our radio stations with programming, up-to-date news and other information and perform a variety of administrative services including accounting, financial reporting, advertiser spot scheduling, payroll and invoicing. We also use non-information technology systems, such as microchips, for dating and other automated functions. Information and non-information technology systems that do not properly recognize and process date sensitive information when the year changes to "2000" or "00" could generate erroneous data or cause such systems to fail. As a result, year 2000 issues could have a material adverse effect on our operations. In order to minimize the risk of year 2000 related losses, we are conducting a comprehensive assessment of our year 2000 issues. However, we cannot assure you that we will resolve our year 2000 issues prior to the year 2000, or that the cost of remedying any year 2000 issues will not have a material adverse effect on our business. Furthermore, we cannot assure you that the systems of other companies with which our systems interact will be timely converted and, if not timely converted, would not have a material adverse effect on our financial condition, results of operation or cash flow. RISKS RELATING TO THE TIDES THE TRUST MAY NOT BE ABLE TO MAKE DISTRIBUTIONS ON THE TIDES IF WE DEFAULT ON OUR SECURED SENIOR DEBT BECAUSE OUR OBLIGATIONS TO PAY ON THE DEBENTURES AND THE GUARANTEE ARE SUBORDINATED TO OUR PAYMENT OBLIGATIONS UNDER OUR SECURED SENIOR DEBT. Because of the subordinated nature of the guarantee and the debentures, we: - will not be permitted to make any payments of principal, including redemption payments, or interest on the debentures if we default on our secured senior debt; - will not be permitted to make payments on the guarantee if we default on any of our secured senior debt; and - must pay all our secured senior debt before we make payments on the guarantee or the debentures if we become bankrupt, liquidate or dissolve. The TIDES, the guarantee and the debentures do not limit our ability or the ability of our subsidiaries to incur additional indebtedness, including indebtedness that ranks senior to the debentures and the guarantee. At June 30, 1999, we had a $4.9 million letter of credit, approximately $166.3 million of secured senior debt on a consolidated basis and, on a pro forma basis, we would have had a $4.9 million letter of credit and a $538.9 million of consolidated secured senior debt. Because the trust will be able to pay amounts due on 24 30 the TIDES only if we make payments on the debentures, your ability to receive interest may be affected by our indebtedness. THE DEBENTURES WILL BE EFFECTIVELY SUBORDINATED TO OBLIGATIONS OF OUR SUBSIDIARIES. Because we operate as a holding company, our right to participate in any distribution of assets of any subsidiary upon that subsidiary's dissolution, winding-up, liquidation or reorganization or otherwise (and thus the ability of the holders of the TIDES to benefit indirectly from the distribution) is subject to the prior claims of the creditors of that subsidiary, except to the extent that we are a creditor of the subsidiary and our claims are recognized. Therefore, the debentures will be effectively subordinated to all indebtedness and other obligations of our subsidiaries. Our subsidiaries are separate legal entities and have no obligations to pay, or make funds available for the payment of, any amounts due on the debentures, the TIDES or the guarantee. THE DEFERRAL OF INTEREST PAYMENTS MAY HAVE AN ADVERSE EFFECT ON THE TRADING PRICE OF THE TIDES. If no event of default under the debentures has occurred and is continuing, we may defer the payment of interest on the debentures for a period not exceeding 20 consecutive quarters. If we defer interest payments on the debentures, the trust will defer quarterly distributions on the TIDES. However, distributions will still accumulate quarterly and the deferred distributions will themselves accrue additional distributions at the annual rate of %, to the extent permitted by law. There is no limitation on the number of times that we may elect to defer interest payments. We have no current intention of deferring interest payments on the debentures. However, the lenders under our current credit facility have required, and we expect that the lenders under the amended or replacement credit facility we are seeking to obtain will require, that we exercise our right to defer interest payments on the debentures in the event a default occurs under the credit facility. Subject to the 20-quarter limitation described above, the lenders would require this deferral to remain in effect until the default is cured or waived and for a period of two complete consecutive quarters after any and all defaults have been cured or waived. However, if we exercise our right in the future, the TIDES may trade at a price that does not fully reflect the value of deferred interest on the debentures. If you sell your TIDES during an interest deferral period, you may not receive the same return on your investment as a holder who continues to hold TIDES. In addition, our right to defer interest payments on the debentures may mean that the market price of the TIDES may be more volatile than the market prices of other securities that do not have these rights. YOU MAY HAVE TO PAY TAXES ON INTEREST PAYMENTS PRIOR TO YOUR RECEIPT OF THOSE PAYMENTS. Because we have the option to defer interest payments on the debentures, the debentures will be considered to have been issued with original issue discount. As a result, you must accrue interest income, as original issue discount, for United States federal income tax purposes. As a result, you will have to include your pro rata share of original issue discount in gross income as it accrues whether or not received currently in cash. In addition, if you sell the TIDES prior to the record date relating to distributions, you will not receive the cash distributions from the trust related to any accrued and unpaid interest even though you will be required to recognize the interest in income for United States federal income tax purposes. 25 31 If you dispose of your TIDES between record dates for payments of distributions on your TIDES, you will be required to include original issue discount on the debentures through the date of disposition in income as ordinary income and to add that amount to your adjusted tax basis. To the extent the selling price of your TIDES is less than your adjusted tax basis, you will recognize a capital loss. Subject to some exceptions, you cannot apply capital losses to offset ordinary income for United States federal income tax purposes. THE TRUST MAY REDEEM THE TIDES WITHOUT YOUR CONSENT IF SPECIFIED TAX CHANGES OCCUR. Upon the occurrence of specified tax changes affecting the trust's taxable status or the deductibility of interest on the debentures, we may either dissolve and liquidate the trust and, after satisfaction of liabilities of creditors of the trust, distribute the debentures to you or we may redeem all of the debentures. If we redeem the debentures, the trust will use the cash it receives from that redemption to redeem the TIDES and the trust's common securities. WE MAY CAUSE THE TIDES TO BE REDEEMED ON OR AFTER OCTOBER 3, 2002 WITHOUT YOUR CONSENT. We may redeem all or some of the debentures at our option at any time on or after October 3, 2002. The redemption price initially includes a premium declining over time to 100% of the principal amount to be redeemed plus any accrued and unpaid interest. You should assume that we will exercise our redemption option if we are able to refinance the debentures at a lower interest rate or if we conclude it is otherwise in our interest to redeem the debentures. The trust will use the cash it receives from the redemption of the debentures to redeem an equivalent amount of TIDES and its common securities on a pro rata basis. DISTRIBUTION OF THE DEBENTURES TO YOU MAY HAVE ADVERSE TAX CONSEQUENCES FOR YOU. We may dissolve and liquidate the trust at any time. If that happens, the trust will redeem the TIDES and its common securities by distributing, after satisfaction of liabilities of creditors of the trust, the debentures to you and us, as the holder of the trust's common securities, on a pro rata basis. Under current United States federal tax laws, a distribution of debentures on the dissolution of the trust would not be a taxable event to you. However, if there is a change in the law and, for example, the trust is characterized for United States federal income tax purposes as an association taxable as a corporation at the time of its dissolution, the distribution of debentures would likely constitute a taxable event to you. THE DISTRIBUTION OF DEBENTURES UPON LIQUIDATION OF THE TRUST MAY HAVE AN ADVERSE EFFECT ON TRADING PRICES. We have the right to dissolve and liquidate the trust. Although we have no current intention of doing so, we anticipate that we would consider exercising this right if the expenses associated with maintaining the trust are substantially greater than we expect or for other business reasons. If we exercise our right to dissolve and liquidate the trust, the trust will redeem the TIDES and its common securities by distributing, after satisfaction of liabilities of creditors of the trust, the debentures to you and to us on a pro rata basis, unless an event of default under the debentures has occurred and is continuing, in which case you will have priority over us. 26 32 We cannot predict the market prices for the debentures that the trust may distribute to you. Accordingly the debentures that you receive on a distribution, or the TIDES you hold pending a distribution, may trade at a discount to the price that you paid to purchase the TIDES. Because you may receive debentures, you should make an investment decision with regard to the debentures in addition to the TIDES. You should carefully review all the information regarding the debentures contained in this prospectus. WE GUARANTEE PAYMENTS ON THE TIDES ONLY IF THE TRUST HAS CASH AVAILABLE. If we fail to make payments on the debentures, the trust will not be able to pay distributions, the redemption price or the liquidation amount of each TIDES. In those circumstances, you will not be able to rely upon the guarantee for payment of these amounts. Instead, if we are in default under the debentures, you may: - rely on the property trustee for the trust to enforce the trust's rights under the debentures; or - directly sue us or seek other remedies to collect your share of payments owed. YOU HAVE LIMITED VOTING RIGHTS. You will have limited voting rights relating generally to: - the modification of the TIDES and our guarantee of the TIDES; and - the exercise of the trust's rights as holder of debentures. You are not entitled to appoint, remove or replace the property trustee of the trust or the statutory trustee of the trust except upon the occurrence of certain events. The property trustee, and the holders of all of the trust's common securities may, subject to certain conditions, amend the declaration of trust without your consent to: - cure any ambiguity; - make provisions of the declaration of trust not inconsistent with other provisions of the declaration of trust; - ensure that the trust will not be classified for United States federal income tax purposes as an association subject to taxation as a corporation; or - ensure that the trust will be classified as a grantor trust. THE TIDES AND THE DEBENTURES DO NOT HAVE AN ESTABLISHED MARKET. Prior to this offering, there has been no public market for the TIDES. We do not intend to list the TIDES on a national securities exchange or automated interdealer quotation system. One or more of the underwriters intend to make a secondary market for the TIDES. However, they are not obligated to do so and may discontinue making a secondary market for the TIDES at any time without notice and for any reason. Accordingly, we cannot assure you that an active trading market for the TIDES will develop or be sustained. If a market were to develop, the TIDES could trade at prices that may be higher or lower than their offering price depending upon many factors, including: - prevailing interest rates; - Entercom's operating results; and - the market for similar securities. 27 33 USE OF PROCEEDS We estimate that the gross proceeds from the sale of the TIDES will be $150.0 million. The trust will use these proceeds, together with the proceeds from the issuance of the trust's common securities, to purchase debentures from us. After deducting the underwriting commissions which we have agreed to pay on behalf of the trust, and the other offering expenses we will pay, we estimate that we will receive net proceeds of $145.0 million from the sale of the debentures to the trust, or $166.8 million if the underwriters' overallotment option is exercised in full. We intend to use the net proceeds from this offering and the Class A common stock offering, together with cash on hand and proceeds from the amended or replacement credit facility we expect to negotiate, to finance the Sinclair acquisition. Pending the closing of the Sinclair acquisition, we intend to use the net proceeds from this offering to pay down the balance of our revolving indebtedness under our current credit facility, if any, and the remaining net proceeds will be invested in short-term securities. If the Sinclair acquisition is not consummated, we intend to use the net proceeds from this offering for general corporate purposes, including repayment of revolving indebtedness, future acquisitions and working capital. DIVIDEND POLICY Since becoming a public company in January 1999, we have not declared any dividends on our common stock. We have no plans to declare or pay cash dividends in the foreseeable future because we intend to retain our earnings, if any, to finance the expansion of our business and for general corporate purposes. Any payment of future dividends will be at the discretion of the board of directors and will depend upon, among other factors, our earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions, including the provisions of our credit facility and provisions applicable to the TIDES, and other considerations that the board of directors deems relevant. 28 34 PRICE RANGE OF OUR CLASS A COMMON STOCK Our Class A common stock is listed on The New York Stock Exchange under the symbol "ETM." The table below shows, for the quarters indicated, the reported high and low trading prices of our Class A common stock on The New York Stock Exchange.
PRICE RANGE ---------------- HIGH LOW ------ ------ Calendar Year 1999 First Quarter (beginning January 29)............... $35.38 $28.31 Second Quarter..................................... 42.75 31.75 Third Quarter (through September 29, 1999)......... 41.88 35.06
The initial public offering of our Class A common stock was priced on January 28, 1999 at a price of $22.50 per share. On September 29, 1999, the last reported sale price of our Class A common stock on The New York Stock Exchange was $40.13. 29 35 CAPITALIZATION The following table sets forth as of June 30, 1999: - our actual capitalization; - our unaudited pro forma capitalization after giving effect to this offering and the Class A common stock offering at an assumed public offering price of $40.00 per share; and - our unaudited pro forma capitalization as adjusted to give effect to the offerings and the Sinclair acquisition, including additional borrowings under our amended or replacement credit facility. This table should be read in conjunction with the consolidated financial statements and the unaudited pro forma financial information and, in each case, the related notes included elsewhere in this prospectus. In the event that we elect not to proceed with the Class A common stock offering to consummate the Sinclair acquisition, we will be required to incur additional debt under our amended or replacement credit facility or otherwise.
AS OF JUNE 30, 1999 ------------------------------------------ PRO FORMA AS ADJUSTED FOR THE OFFERINGS AND THE PRO FORMA FOR SINCLAIR ACTUAL THE OFFERINGS ACQUISITION -------- --------------- ------------- (IN THOUSANDS) Cash and cash equivalents:..................... $ 8,713 $294,613 $ 8,713 ======== ======== ========== Short-term debt and current portion of long-term debt............................... $ 10 $ 10 $ 10 Long-term debt, less current portion: Credit facility.............................. 166,000 -- 538,600 Other........................................ 266 266 266 -------- -------- ---------- Total long-term debt...................... 166,266 266 538,866 Entercom-obligated mandatorily redeemable convertible preferred securities of Entercom Communications Capital Trust................. -- 150,000 150,000 Shareholders' equity: Preferred stock.............................. -- -- -- Class A common stock......................... 249 329 329 Class B common stock......................... 105 105 105 Class C common stock......................... 17 17 17 Additional paid-in capital................... 468,239 775,059 775,059 Unearned compensation........................ (223) (223) (223) Retained earnings (deficit).................. (71,501) (71,501) (76,875) -------- -------- ---------- Total shareholders' equity................ 396,886 703,786 698,412 -------- -------- ---------- Total capitalization................. $563,162 $854,062 $1,387,288 ======== ======== ==========
30 36 ACCOUNTING TREATMENT For financial reporting purposes, we will treat the trust as one of our subsidiaries. Accordingly, we will include the accounts of the trust in our consolidated financial statements. We will present the TIDES as a separate line item in our consolidated balance sheet entitled "Entercom-obligated mandatorily redeemable convertible preferred securities of Entercom Communications Capital Trust," and we will include appropriate disclosures about the TIDES in the notes to our consolidated financial statements. For financial reporting purposes, we will record distributions payable on the TIDES as a financing charge to earnings in our consolidated statement of income. We have not included separate financial statements of the trust because we do not consider those financial statements material to you because: - Entercom, a reporting company under the Exchange Act, will own, directly or indirectly all of the voting securities of the trust; - the trust has no independent operations but exists for the sole purpose of issuing securities representing undivided beneficial interests in the trust's assets and investing the proceeds in the debentures; and - we will fully and unconditionally guarantee the obligations of the trust under the TIDES and the common securities to the extent that the trust has funds available to meet such obligations. RATIO OF EARNINGS TO FIXED CHARGES The following table contains our consolidated ratio of earnings to fixed charges for the periods indicated.
SIX MONTHS YEAR ENDED SEPTEMBER 30, ENDED -------------------------------- JUNE 30, 1994 1995 1996 1997 1998 1999. ---- ---- ---- ---- ---- -------- Ratio of earnings to fixed charges............. 12.3 3.1 2.2 15.0 1.6 2.7
For purposes of computing the ratios of earnings to fixed charges: - earnings consist of income before provision for income taxes and extraordinary item plus fixed charges; and - fixed charges consist of interest expense, amortization of debt discount and expense relating to indebtedness and the portion of rental expense we consider representative of the interest factor attributable to leases for rental property. 31 37 COMPLETED AND PENDING TRANSACTIONS COMPLETED TRANSACTIONS In October 1997, we exchanged the broadcast frequency and transmission facilities of our Kansas City station, KCMO-AM, for those of Kanza Inc.'s Kansas City station, WHB-AM. Each party retained its call letters, formats and studio facilities. We accounted for the transaction as a nonmonetary exchange of similar productive assets, and no gain or loss was recognized. We recorded the assets received at the historical cost of the assets surrendered. In November 1997, we acquired KSSJ-FM (formerly KBYA-FM) in Sacramento from Susquehanna Radio Corp for $15.9 million. In January 1998, we acquired WDAF-AM and KUDL-FM in Kansas City plus $7.1 million from American Radio Systems in exchange for our sole station in St. Louis, KLOU-FM. In January 1998, we acquired KCTC-AM in Sacramento from American Radio Systems for $4.0 million. In May 1998, we acquired WSKY-FM (formerly WRRX-FM) in the Gainesville/ Ocala market from Gator Broadcasting, Inc. for $2.0 million, plus an additional payment of up to $1.0 million payable once the authorized upgrade of the station from a Class A license to a Class C-2 license becomes final. In May 1998, we sold our rights to participate in an FCC licensing proceeding in the Vancouver, Washington radio market to Jacor Communications, Inc. for $10.0 million, resulting in a gain of $8.5 million. In May 1998, we acquired KBAM-AM and KRQT-FM in the Longview/Kelso market from Armak Broadcasters, Inc. for $1.0 million. In June 1998, we acquired three stations, KRSK-FM (formerly KKRH-FM), KKSN-FM and KKSN-AM in Portland, and four stations, WBEE-FM, WBBF-FM (formerly WKLX-FM), WEZO-AM (formerly WBBF-AM) and WQRV-FM in Rochester, from Sinclair Broadcast Group, Inc. for $126.5 million. We had operated these stations under a time brokerage agreement since March 1998. In August 1998, we acquired from Capital Broadcasting, Inc. the assets and rental leases used in connection with the operation of a tower facility serving the Kansas City market for $2.0 million. In September 1998, we completed a transaction with American Radio Systems to exchange certain assets used in the operation of radio stations serving the Sacramento radio market. American Radio Systems transferred KRAK-FM's license and transmission facility to us in exchange for KRXQ-FM's license and transmission facility and $4.5 million. Each of the stations retained its own call letters, programming format and studio and office property and equipment, and the parties provided each other with reciprocal covenants against programming competition on the respective frequencies for a period of two years. American Radio Systems also transferred its intellectual property in the smooth jazz program format for our use on our recently acquired KSSJ-FM (formerly KBYA- FM) in that market. The transactions were accounted for as nonmonetary exchanges of similar productive assets, and no gain or loss was recognized. The assets received were 32 38 recorded at the historical cost of the assets surrendered plus the $4.5 million paid to American Radio Systems. In December 1998, we acquired KSLM-AM, a radio station serving the Salem, Oregon portion of the Portland radio market, from Willamette Broadcasting Co. for $0.6 million. In December 1998, we acquired the assets of WRKO-AM and WEEI-AM, serving the Boston radio market, from CBS Radio, Inc. for $82.0 million. We had operated these stations under a time brokerage agreement since September 1998. We also sold the assets of WLLD-FM and WYUU-FM, serving the Tampa, Florida radio market to CBS for $75.0 million, resulting in a gain of approximately $69.6 million. In February 1999, we purchased the assets of radio stations WEGQ-FM, WWTM-AM and WAAF-FM in Boston from CBS for $58.0 million in cash. We had operated these stations under a time brokerage agreement since September 1998. In June 1999, we acquired KKGM-AM (formerly WREN-AM), a radio station serving Kansas City, Kansas, from Mortenson Broadcasting Company of Canton, LLC for the sum of $2.8 million. PENDING TRANSACTIONS In February 1996, we entered into a preliminary agreement with Royce International Broadcasting Corporation to acquire the assets of radio station KWOD-FM, Sacramento, California, subject to approval by the FCC, for a purchase price of $25.0 million. Notwithstanding our efforts to pursue this transaction, the seller was nonresponsive. On July 28, 1999, we commenced a legal action seeking to enforce this agreement, and subsequently the seller filed a cross-complaint against us asking for damages and filed a separate action against our president asking for treble damages, an injunction, attorney's fees and costs. Our by-laws provide for us to indemnify our president for this claim. We intend to pursue our legal action against the seller and seek dismissal of the claims filed by the seller. Accordingly, we cannot determine if or when the transaction might occur. In June 1999, we entered into a non-binding letter of intent with the Wichita Stations Trust, a trust formed for the benefit of Capstar Broadcasting Corporation as required by federal broadcasting regulations, to purchase five radio stations in Wichita for $8.0 million. We are presently engaged in negotiations with the trust to reach a definitive agreement regarding this transaction. We are also pursuing the acquisition of other stations in the Wichita market. We are not including KWOD-FM, Sacramento or the Wichita stations described above in our station portfolio or pro forma financial information since we cannot predict when, if ever, we will be successful in acquiring these stations. In August 1999, we entered into asset purchase agreements with various subsidiaries of Sinclair Broadcast Group, Inc. to purchase 46 radio stations in nine markets. As part of the transaction, we are also acquiring 300,000 shares of common stock, at $5.00 per share, in USA Digital Radio, Inc. The total purchase price for the Sinclair acquisition is $824.5 million. You should refer to "The Sinclair Acquisition" for more information regarding this transaction. 33 39 UNAUDITED PRO FORMA FINANCIAL INFORMATION The unaudited pro forma financial information is based on our historical consolidated financial statements and the financial statements of those businesses that we have acquired or expect to acquire, as described in greater detail below. The unaudited pro forma financial information should be read in conjunction with the financial statements of the following entities and the related notes included elsewhere in this prospectus: - Entercom Communications Corp.; - The Portland, Oregon and Rochester, New York Radio Groups of Heritage Media Services, Inc. -- Broadcasting Segment; - The Boston Radio Market of CBS Radio, Inc.; - Sinclair Broadcast Group, Inc. and Subsidiaries -- Radio Division; and - Heritage Media Services, Inc. -- Radio Broadcasting Segment -- a Division of Heritage Media Corporation. All acquisitions included in the pro forma information are accounted for using the purchase method of accounting. The aggregate purchase price of each transaction is allocated to the tangible and intangible assets acquired and liabilities assumed based on their respective fair values. The allocation of the aggregate purchase price reflected in the pro forma information is preliminary for transactions to be closed subsequent to June 30, 1999. The final allocation of the purchase price is contingent upon the receipt of final appraisals of the acquired assets and the revision of other estimates. We do not expect final allocations to differ materially from the preliminary allocation. The unaudited pro forma information is presented for illustrative purposes only and does not indicate the operating results or financial position that would have occurred if the transactions described above had been completed on the dates indicated, nor is it indicative of our future operating results or financial position if we complete the transactions described above. We cannot predict whether the completion of the pending transactions will conform to the assumptions used in the preparation of the unaudited pro forma information. For a discussion of our radio station acquisitions and dispositions completed since October 1, 1997 and our pending acquisitions and dispositions, see the "Completed and Pending Transactions" and "The Sinclair Acquisition" sections. We presently do not have a definitive agreement with respect to the amended or replacement credit facility. In the event that we do not proceed with the Class A common stock offering, we will be required to incur additional indebtedness under our amended or replacement credit facility or otherwise to consummate the Sinclair acquisition. 34 40 SEPTEMBER 30, 1998 UNAUDITED PRO FORMA INFORMATION The unaudited pro forma statement of income for the year ended September 30, 1998 has been prepared to illustrate the effects of the following, as if each transaction had occurred on October 1, 1997: - the completed transactions described under "Completed and Pending Transactions" which were entered into subsequent to the beginning of the period covered by the pro forma financial information; - our conversion from an S corporation to a C corporation and the related $88.1 million distribution to our S corporation shareholders which represents the estimate of the undistributed balance of our taxable income as of the date we ceased to be an S corporation; - the conversion of the Chase Capital convertible subordinated note into Class A and Class C common stock; - the completion of our initial public offering; - the amended or replacement credit facility that we are currently pursuing; - this offering and the concurrent offering of Class A common stock at an assumed public offering price of $40.00 per share; and - the pending Sinclair acquisition. We have shown the continued inclusion of the station operating results of each of the 11 Kansas City stations, although federal regulations require us to divest three stations in the Kansas City market. This is because we are seeking to swap three Kansas City stations for stations in other markets, and we are assuming for purposes of preparing the unaudited pro forma financial information that the stations we acquire in these swaps will collectively have comparable operating results. However, if we were to sell any of the three Kansas City stations for cash, we would not include that station's operating results going forward. Furthermore, we would use any cash proceeds from these sales to pay down the outstanding indebtedness under our amended or replacement credit facility. JUNE 30, 1999 UNAUDITED PRO FORMA INFORMATION The unaudited pro forma statements of income for the six month and twelve month periods ended June 30, 1999 have been prepared to illustrate the effects of the transactions listed above, as if each transaction had occurred on January 1, 1999 and July 1, 1998, respectively. The unaudited pro forma balance sheet data as of June 30, 1999 gives effect to the transactions listed above not yet consummated on that date as if each had occurred on that date. 35 41 UNAUDITED PRO FORMA STATEMENT OF INCOME FOR THE YEAR ENDED SEPTEMBER 30, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
ADJUSTMENTS ADJUSTMENTS FOR THE FOR THE OFFERINGS COMPLETED COMPLETED SINCLAIR AND SINCLAIR TOTAL ACTUAL TRANSACTIONS(A) TRANSACTIONS ACQUISITION(B) ACQUISITION PRO FORMA -------- --------------- ------------ -------------- ----------------- --------- Net revenues.................. $132,998 $38,417 $ 91,581 $ 10,759(C) $273,755 Operating expenses: Station operating expenses.................. 88,599 29,662 56,663 7,621(C) 182,173 (372)(D) Depreciation and amortization.............. 13,066 7,601 $(1,396)(E) 16,117 7,112(F) 42,524 24(G) Corporate general and administrative expenses... 4,527 4,362 3,465 12,354(H) Net expense (income) from time brokerage agreement fees...................... 2,399 45 (2,444)(I) -------- ------- ------- -------- -------- -------- Total operating expenses............. 108,591 41,670 (3,816) 76,245 14,361 237,051 -------- ------- ------- -------- -------- -------- Operating income (loss)....... 24,407 (3,253) 3,816 15,336 (3,602) 36,704 Other expense (income): Interest expense............ 14,663 14 (2,025)(J) 16,659 11,286 40,597 Financing cost of Entercom- obligated mandatorily redeemable convertible preferred securities of Entercom Communications Capital Trust............. 9,375(L) 9,375 Adjustment to reflect indexing of the convertible subordinated note...................... 8,841 (8,841)(M) (Gains) loss on sale of assets.................... (8,661) 8 (8)(N) (10,780) 10,780(O) (161) 8,500(P) Other non-operating expense (income).................. (328) 147 (82)(Q) 1 (262) -------- ------- ------- -------- -------- -------- Total other expense (income)............. 14,515 169 (2,456) 5,880 31,441 49,549 -------- ------- ------- -------- -------- -------- Income (loss) before income taxes and extraordinary item........................ 9,892 (3,422) 6,272 9,456 (35,043) (12,845) Income taxes (benefit)........ 453 (1,300) (453)(R) 4,200 (4,200)(S) (5,138) 6,142(T) (9,980)(U) -------- ------- ------- -------- -------- -------- Income (loss) before extraordinary item.......... $ 9,439 $(2,122) $ 583 $ 5,256 $(20,863) $ (7,707) ======== ======= ======= ======== ======== ======== Income before income taxes and extraordinary item.......... $ 9,892 Pro forma income taxes........ 7,119 -------- Pro forma income before extraordinary item.......... $ 2,773 ======== Pro forma earnings (loss) per share before extraordinary item........................ $ 0.12 $ (0.17) ======== ======== Weighted average common shares outstanding -- basic........ 22,239 14,929(V) 8,000(W) 45,168
See accompanying notes to pro forma financial information. 36 42 UNAUDITED PRO FORMA STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
ADJUSTMENTS ADJUSTMENTS FOR FOR THE THE OFFERINGS COMPLETED SINCLAIR AND SINCLAIR TOTAL ACTUAL TRANSACTIONS ACQUISITION(X) ACQUISITION PRO FORMA -------- ------------ -------------- --------------- --------- Net revenues........................................ $ 95,545 $52,637 $148,182 Operating expenses: Station operating expenses........................ 64,296 33,618 $ (248)(D) 97,666 Depreciation and amortization..................... 10,019 8,896 2,081(Y) 20,996 Corporate general and administrative expenses..... 3,454 1,626 5,080(H) Net expense (income) from time brokerage agreement fees............................................ 652 $ (652)(I) -------- -------- ------- -------- -------- Total operating expenses........................ 78,421 (652) 44,140 1,833 123,742 -------- -------- ------- -------- -------- Operating income (loss)............................. 17,124 652 8,497 (1,833) 24,440 Other expense (income): Interest expense.................................. 6,246 (4)(Z) 9,738 4,235 20,215 Financing cost of Entercom-obligated mandatorily redeemable convertible preferred securities of Entercom Communications Capital Trust........... 4,688(L) 4,688 (Gains) loss on sale of assets.................... (467) 30 (30)(BB) (467) Other non-operating expense (income).............. (599) (61) 61(CC) (599) -------- -------- ------- -------- -------- Total other expense (income).................... 5,180 (4) 9,707 8,954 23,837 -------- -------- ------- -------- -------- Income (loss) before income taxes and extraordinary item.............................................. 11,944 656 (1,210) (10,787) 603 Income taxes (benefit).............................. 5,374 (125)(R) (76) 76(S) 241 (5,008)(U) Deferred income taxes for conversion from an S to a C Corporation..................................... 79,845 (79,845)(DD) -------- -------- ------- -------- -------- Income (loss) before extraordinary item............. $(73,275) $ 80,626 $(1,134) $ (5,855) $ 362 ======== ======== ======= ======== ======== Income before income taxes and extraordinary item... $ 11,944 Pro forma income taxes.............................. 4,539 -------- Pro forma income before extraordinary item.......... $ 7,405 ======== Pro forma earnings (loss) per share before extraordinary item................................ $ 0.21 $ 0.01 ======== ======== Weighted average common shares outstanding -- basic.............................. 34,836 2,332(EE) 8,000(W) 45,168
See accompanying notes to pro forma financial information. 37 43 UNAUDITED PRO FORMA STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED JUNE 30, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
ADJUSTMENTS ADJUSTMENTS FOR THE FOR THE OFFERINGS COMPLETED COMPLETED SINCLAIR AND SINCLAIR TOTAL ACTUAL TRANSACTIONS(FF) TRANSACTIONS ACQUISITION(X) ACQUISITION PRO FORMA -------- ---------------- ------------ -------------- ------------ --------- Net revenues...................... $183,820 $ 7,285 $110,747 $301,852 Operating expenses: Station operating expenses...... 121,488 3,960 69,177 $ (492)(D) 194,133 Depreciation and amortization... 18,484 680 $ (395)(GG) 17,991 7,112(F) 43,872 Corporate general and administrative expenses....... 6,569 2,545 3,580 12,694(H) Net expense (income) from time brokerage agreement fees...... 2,014 45 (2,059)(I) -------- -------- -------- -------- -------- -------- Total operating expenses............... 148,555 7,230 (2,454) 90,748 6,620 250,699 -------- -------- -------- -------- -------- -------- Operating income (loss)........... 35,265 55 2,454 19,999 (6,620) 51,153 Other expense (income): Interest expense................ 17,466 (4,989)(HH) 18,141 9,804 40,422 Financing cost of Entercom- obligated mandatorily redeemable convertible preferred securities of Entercom Communications Capital Trust................. 9,375(L) 9,375 Adjustment to reflect indexing of the convertible subordinated note............. 17,748 (17,748)(M) (Gains) loss on sale of assets........................ (69,985) 69,518(JJ) (5,525) 5,525(O) (467) Other non-operating expense (income)...................... (125) (38) 38(CC) (125) -------- -------- -------- -------- -------- -------- Total other expense (income)............... (34,896) 46,781 12,578 24,742 49,205 -------- -------- -------- -------- -------- -------- Income (loss) before income taxes and extraordinary item.......... 70,161 55 (44,327) 7,421 (31,362) 1,948 Income taxes (benefit)............ 5,964 21 (736)(R) 3,754 (3,754)(S) 779 (4,470)(U) Deferred income taxes for conversion from an S to a C Corporation..................... 79,845 (79,845)(DD) -------- -------- -------- -------- -------- -------- Income (loss) before extraordinary item............................ $(15,648) $ 79,879 $(43,591) $ 3,667 $(23,138) $ 1,169 ======== ======== ======== ======== ======== ======== Income before income taxes and extraordinary item.............. $ 70,161 Pro forma income taxes............ 33,405 -------- Pro forma income before extraordinary item.............. $ 36,756 ======== Pro forma earnings per share before extraordinary item....... $ 1.31 $ 0.03 ======== ======== Weighted average common shares outstanding -- basic............ 28,130 9,038(EE) 8,000(W) 45,168
See accompanying notes to pro forma financial information. 38 44 UNAUDITED PRO FORMA BALANCE SHEET AS OF JUNE 30, 1999 (IN THOUSANDS)
ADJUSTMENTS FOR THE OFFERINGS SINCLAIR AND SINCLAIR TOTAL PRO ACTUAL ACQUISITION(KK) ACQUISITION FORMA -------- --------------- ----------------- ---------- ASSETS Current assets: Cash and cash equivalents.................... $ 8,713 $ 1,133 $ (1,133)(LL) $ 8,713 Accounts receivable, net..................... 45,160 21,501 (21,501)(LL) 45,160 Prepaid expenses and other................... 6,402 899 (899)(LL) 6,402 Other current assets......................... 2,091 2,784 (2,784)(LL) 2,091 -------- -------- --------- ---------- Total current assets...................... 62,366 26,317 (26,317) 62,366 Property and equipment, net.................... 52,760 31,971 20,279(MM) 105,010 Intangible and other assets, net............... 556,501 374,872 397,378(MM) 1,332,119 5,000(NN) (1,632)(OO) -------- -------- --------- ---------- Total assets.............................. $671,627 $433,160 $ 394,708 $1,499,495 ======== ======== ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and other accrued expenses.................................. $ 24,949 $ 8,219 $ (8,219)(LL) $ 24,949 Current portion of long-term debt............ 10 10 -------- -------- --------- ---------- Total current liabilities.................... 24,959 8,219 (8,219) 24,959 Senior debt.................................... 166,266 331,325 (331,325)(LL) 538,866 372,600(NN) Other long-term liabilities.................... 83,516 9,020 (9,020)(LL) 87,258 (653)(OO) 4,395(PP) -------- -------- --------- ---------- Total liabilities......................... 274,741 348,564 27,778 651,083 Entercom-obligated mandatorily redeemable convertible preferred securities of Entercom Communications Capital Trust................. 150,000(NN) 150,000 Shareholders' equity: Common Stock -- Class A...................... 249 80(NN) 329 Common Stock -- Class B...................... 105 105 Common Stock -- Class C...................... 17 17 Additional Paid-in Capital................... 468,239 90,000 306,820 775,059 (90,000)(LL) Retained Earnings............................ (71,501) (5,404) (4,395)(PP) (76,875) (979)(OO) 5,404(LL) Unearned compensation........................ (223) (223) -------- -------- --------- ---------- Total shareholders' equity................ 396,886 84,596 216,930 698,412 -------- -------- --------- ---------- Total liabilities and shareholders' equity............................... $671,627 $433,160 $ 394,708 $1,499,495 ======== ======== ========= ==========
See accompanying notes to pro forma financial information. 39 45 NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION (IN THOUSANDS) (A) The column represents (1) the results of operations of KFXX-AM, KKSN-FM and KRSK-FM in Portland and WBBF-FM, WBEE-FM, WQRV-FM and WEZO-AM in Rochester from October 1, 1997 through February 28, 1998, when we began operating the stations under time brokerage agreements, (2) the results of operations of WDAF-AM and KUDL-FM in Kansas City and KCTC-AM in Sacramento from October 1, 1997 through December 31, 1997, when we acquired the stations, (3) the results of operations of WSKY-FM in Gainesville, KSSJ-FM in Sacramento and KBAM-AM and KRQT-FM in Longview/Kelso from October 1, 1997 through May 7, 1998, when we acquired these stations, (4) the disposition of KLOU-FM in St. Louis, (5) the exchange of broadcast frequency and transmission facilities of our Kansas City station, KCMO-AM, for those of another Kansas City station, WHB-AM, (6) the exchange of certain assets of our Sacramento station, KRXQ-FM, for those of KRAK-FM, another Sacramento station, (7) the results of operations of WEEI-AM and WRKO-AM in Boston from October 1, 1997 through September 20, 1998, when we began operating the stations under time brokerage agreements, (8) the results of operations of WQSX-FM, WAAF-FM and WWTM-AM in Boston from October 1, 1997 through September 22, 1998, when we began operating the stations under time brokerage agreements, and (9) the disposition of WYUU-FM and WLLD-FM in Tampa. (B) The column represents the results of operations of the Sinclair stations for the year ended December 31, 1998. (C) The adjustment reflects the operations of Max Media for the nine months ended June 30, 1998, and Heritage Media Services, Inc. for the five months ended February 28, 1998, which are not included in the historical Sinclair operations, net of the operations of divested stations which are included in the historical Sinclair operations. (D) The adjustment reflects the elimination of time brokerage agreement fees paid in connection with the operation of radio stations in New Orleans and Greenville/ Spartanburg. (E) The adjustment reflects the change in depreciation and amortization arising from an increase in property, equipment, FCC licenses and intangibles, as a result of the completed transactions, offset by a decrease in those assets as a result of various dispositions and the establishment of new estimated useful lives of the acquired assets. Under our standard accounting policies, property and equipment are depreciated over periods of five to twenty years, and FCC licenses and intangibles are amortized over forty years. The adjustment consists of a decrease of $1,501 in depreciation related to property and equipment, an increase of $212 in amortization related to intangibles and a decrease of $107 in amortization related to other intangibles. (F) The adjustment reflects the change in depreciation and amortization arising from an increase in property, equipment, FCC licensee and intangibles, as a result of the Sinclair acquisition, offset by a decrease in those assets as a result of various dispositions and the establishment of new estimated useful lives of the acquired assets. Under our standard accounting policies, property and equipment are 40 46 depreciated over periods of five to twenty years, and FCC licenses and intangibles are amortized over forty years. The adjustment consists of a decrease of $1,141 in depreciation related to property and equipment, an increase of $9,114 in amortization related to intangibles and a decrease of $861 in amortization related to other intangibles. (G) The adjustment reflects additional amortization arising as a result of our purchase for $3.4 million of the remaining 1% limited partnership interest in ECI License Company, L.P. (H) These amounts represent, in aggregate, our actual corporate general and administrative expenses, plus the historical corporate general and administrative expenses allocated by the respective sellers to (1) the stations included in the completed transactions, and (2) the portfolio of stations we are purchasing in the Sinclair acquisition. However, in such completed transactions we did not and in the Sinclair acquisition we will not assume the corporate general and administrative expenses relating to personnel, assets or obligations of the respective sellers. We believe that due to operating efficiencies, our incremental corporate general and administrative expenses relating to the operation of the acquired stations prior to the respective dates of acquisition would have been less than the amounts reported by the respective sellers. (I) The adjustment reflects the elimination of net expense (income) from time brokerage agreement fees related to the operations of the stations under time brokerage agreements pending the consummation of purchase or sale. (J) The adjustment reflects interest expense, based on an assumed rate of 7.50%, as if the completed transactions, the S corporation conversion and our distribution to our S corporation shareholders, the conversion of the Chase Capital convertible subordinated note and our initial public offering were completed on October 1, 1997, net of historical interest expense. The calculation of interest assumes an outstanding indebtedness under the amended or replacement credit facility of $168,500 consisting of (1) $253,500 of previously incurred indebtedness, less (2) net proceeds of $236,200 from our initial public offering, plus (3) $135,000 in additional indebtedness incurred to fund the Boston transactions, less (4) $75,000 reduction in indebtedness following the application of proceeds from the sale of WYUU-FM and WLLD-FM in Tampa, plus (5) $88,100 in additional indebtedness to fund the distribution to our S corporation shareholders, plus (6) $3,100 in additional indebtedness to fund the purchase of the remaining 1% limited partnership interest in ECI License Company, L.P. A change in interest rates of 1/8% will change interest expense by $211. The net adjustment is computed as follows: Credit facility............................................. $12,637 Other indebtedness.......................................... 15 ------- Pro forma interest expense................................ 12,652 Historical interest expense................................. (14,677) ------- Net adjustment............................................ $(2,025) =======
41 47 (K) The adjustment reflects interest expense, based on an assumed rate of 7.50% as if the offerings and the Sinclair acquisition were completed on October 1, 1997, net of historical interest expense. The calculation of interest assumes additional outstanding indebtedness under the amended or replacement credit facility of $372,600 after using the proceeds of $145,000 from this offering, net of estimated fees and expenses, and $306,900 from the issuance of Class A common stock in the concurrent offering, net of estimated fees and expenses. A change in interest rates of 1/8% will change interest expense by $466. The net adjustment is computed as follows: Credit facility pro forma interest expense............ $ 27,945 Historical interest expense........................... (16,659) -------- Net adjustment...................................... $ 11,286 ========
(L) The adjustment reflects the financing cost at an assumed rate of 6.25% on the TIDES issued in this offering. (M) The adjustment reflects the elimination of the adjustment to reflect indexing of the convertible subordinated note due to the conversion of the note. (N) The adjustment reflects the elimination of the historical loss on asset sale recorded by CBS. (O) The adjustment reflects the elimination of the historical gain on asset sale recorded by Sinclair. (P) The adjustment reflects the elimination of the gain on the sale of the Vancouver license rights. (Q) The adjustment reflects the elimination of the minority interest in the income of ECI License Company, LP, as a result of the purchase of the 1% interest in that limited partnership. (R) The adjustment reflects the elimination of state taxes incurred while we were an S corporation. (S) The adjustment reflects the elimination of Sinclair's income tax expense. (T) The adjustment reflects our income tax expense as if we were a C corporation with an effective tax rate of 38%. (U) The adjustment reflects the effect of the increase in our effective tax rate from 38% to 40% as a result of the Sinclair acquisition. (V) The adjustment reflects (1) an increase of 11,300 in the number of shares of common stock due to the initial public offering and 4,323 due to the conversion of the Chase Capital convertible subordinated note into common stock and (2) a decrease of 694 in the incremental number of shares of common stock attributable to the amount of capital in excess of current year earnings proposed to be distributed to the S corporation shareholders. (W) The adjustment reflects the increase in number of shares of common stock issued for the concurrent Class A common stock offering. 42 48 (X) The column reflects the results of operations of the Sinclair stations for the periods ended June 30, 1999. (Y) The adjustment reflects the change in depreciation and amortization arising from an increase in property, equipment, FCC licenses and intangibles, as a result of the Sinclair acquisition, offset by a decrease in those assets as a result of various dispositions and the establishment of new estimated useful lives of the acquired assets. Under our standard accounting policies, property and equipment are depreciated over periods of five to twenty years, and FCC licenses and intangibles are amortized over forty years. The adjustment consists of a decrease of $571 in depreciation related to property and equipment, an increase of $4,557 in amortization related to intangibles and a decrease of $1,905 in amortization related to other intangibles. (Z) The adjustment reflects interest expense, based on an assumed rate of 7.50%, as if the completed transactions, the S corporation conversion and our distribution to our S corporation shareholders, the conversion of the Chase Capital convertible subordinated note and our initial public offering were completed on January 1, 1999, net of historical interest expense. The calculation of interest assumes an outstanding indebtedness under the amended or replacement credit facility of $166,266. A change in interest rates of 1/8% will change interest expense by $104. The net adjustment is computed as follows: Credit facility............................................. $ 6,235 Other indebtedness.......................................... 7 ------- Pro forma interest expense........................... 6,242 Historical interest expense................................. (6,246) ------- Net adjustment....................................... $ (4) =======
(AA) The adjustment reflects interest expense, based on an assumed rate of 7.50% as if the offerings and the Sinclair acquisition were completed on January 1, 1999, net of historical interest expense. The calculation of interest assumes additional outstanding indebtedness under the amended or replacement credit facility of $372,600 after using the proceeds of $145,000 from this offering, net of estimated fees and expenses, and $306,900 from the issuance of Class A common stock in the concurrent offering, net of estimated fees and expenses. A change in interest rates of 1/8% will change interest expense by $233. The net adjustment is computed as follows: Credit facility pro forma interest expense.................. 13,973 Historical interest expense................................. (9,738) ------- Net adjustment............................................ 4,235 =======
(BB) The adjustment reflects the elimination of the historical loss on asset sale recorded by Sinclair. (CC) The adjustment reflects the elimination of the historical other non-operating expense (income) recorded by Sinclair. 43 49 (DD) The adjustment reflects the elimination of deferred income taxes which were recognized as a result of our conversion from an S corporation to a C corporation. (EE) The adjustment reflects the number of weighted average common shares outstanding as if the shares were outstanding during the entire period presented. (FF) The column reflects (1) the exchange of broadcast frequency and transmission facilities of our Kansas City station, KCMO-AM, for those of another Kansas City station, WHB-AM, (2) the exchange of certain assets of our Sacramento station, KRXQ-FM, for those of KRAK-FM, (3) the results of operations of WEEI-AM, and WRKO-AM in Boston from July 1, 1998 through September 20, 1998, when we began operating the stations under time brokerage agreements, (4) the results of operations of WQSX-FM, WAAF-FM and WWTM-AM in Boston from July 1, 1998 through September 22, 1998, when we began operating the stations under time brokerage agreements and (5) the disposition of WYUU-FM and WLLD-FM in Tampa. (GG) The adjustment reflects the change in depreciation and amortization arising from an increase in property, equipment, FCC licenses and intangibles, as a result of the completed transactions, offset by a decrease in those assets as a result of various dispositions and the establishment of new estimated useful lives of the acquired assets. Under our standard accounting policies, property and equipment are depreciated over periods of five to twenty years, and FCC licenses and intangibles are amortized over forty years. The adjustment consists of a decrease of $425 in depreciation related to property and equipment, an increase of $60 in amortization related to intangibles and a decrease of $30 in amortization related to other intangibles. (HH) The adjustment reflects interest expense, based on an assumed rate of 7.50%, as if the completed transactions, the S corporation conversion and our distribution to our S corporation shareholders, the conversion of the Chase Capital convertible subordinated note and our initial public offering were completed on July 1, 1998, net of historical interest expense. The calculation of interest assumes an outstanding indebtedness of $166,266 under the amended or replacement credit facility. A change in interest rates of 1/8% will change interest expense by $208. The net adjustment is computed as follows: Credit facility........................................ $ 12,470 Other indebtedness..................................... 7 -------- Pro forma interest expense..................... 12,477 Historical interest expense............................ (17,466) -------- Net adjustment................................. $ (4,989) ========
(II) The adjustment reflects interest expense under the current credit facility, based on an assumed rate of 7.50%, as if the offerings and the Sinclair acquisition were completed on July 1, 1998, net of historical interest expense. The calculation of interest assumes additional outstanding indebtedness under the amended or replacement credit facility of $372,600 after using the proceeds of $145,000 from this offering, net of estimated fees and expenses, and $306,900 from the issuance of Class A common stock in the concurrent offering, net of estimated fees and 44 50 expenses. A change in interest rates of 1/8% will change interest expense by $466. The net adjustment is computed as follows: Credit facility pro forma interest expense............. $ 27,945 Historical interest expense............................ (18,141) -------- Net adjustment................................. $ 9,804 ========
(JJ) The adjustment reflects the elimination of the historical gain on the Tampa transaction. (KK) The column reflects the balance sheets of the Sinclair stations as of June 30, 1999. (LL) The adjustment reflects the elimination of certain historical balances which are not being purchased or assumed by us in the Sinclair acquisition. (MM) The adjustment reflects the estimated allocation of the purchase price of the Sinclair acquisition to the assets acquired resulting in adjustments to the property and equipment and intangibles and other assets to their estimated fair values associated with the acquisition as follows:
ESTIMATED ALLOCATION OF CARRYING PURCHASE PRICE VALUE ADJUSTMENTS -------------- -------- ----------- Property and equipment, net........ $ 52,250 $ 31,971 $ 20,279 Intangibles and other assets, net.............................. 772,250 374,872 397,378 -------- -------- -------- Total purchase price.......... $824,500 $406,843 $417,657 ======== ======== ========
(NN) The adjustment represents the increase in debt necessary to fund the Sinclair acquisition after using the net proceeds of $145,000 from this offering, net of estimated fees and expenses, and $306,900 from the issuance of Class A common stock in the concurrent offering, net of estimated fees and expenses. (OO) The adjustment reflects the write-off of deferred financing costs related to the current credit facility. (PP) The adjustment reflects the effect of the increase in our effective tax rate from 38% to 40% as a result of the Sinclair acquisition. 45 51 SELECTED HISTORICAL FINANCIAL DATA We have derived the selected operating data shown below for the years ended September 30, 1996, 1997 and 1998 and the balance sheet data shown below as of September 30, 1997 and 1998 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the selected operating data shown below for the years ended September 30, 1994 and 1995 and the balance sheet data shown below as of September 30, 1994, 1995 and 1996 from our audited financial statements, which are not included in this prospectus. We have derived the selected operating data shown below for the three months ended December 31, 1997, the three month transition period ended December 31, 1998 and the six months ended June 30, 1998 and 1999 and the balance sheet data shown below as of December 31, 1998 and June 30, 1999 from our unaudited financial statements included elsewhere in this prospectus. We have derived the balance sheet data shown below as of December 31, 1997 and June 30, 1998 from our unaudited financial statements, which are not included in this prospectus. - Historically, we operated with an October 1st to September 30th fiscal year. Effective January 1, 1999, we changed for financial reporting purposes from a fiscal year ending September 30th to a fiscal year ending December 31st. Accordingly, the selected historical financial data includes information as of, and for the three month transition period ended, December 31, 1998 and the three months ended December 31, 1997. - We retroactively restated our fiscal 1997 and 1998 consolidated financial statements to reflect the Chase Capital convertible subordinated note as an indexed debt instrument. We determined the adjustment as of the end of each relevant period by subtracting the sum of principal and accrued interest on the note from the fair value of the shares of our common stock into which the note was convertible. Immediately prior to our initial public offering, Chase Capital converted the note into 2,327,500 shares of our Class A common stock and 1,995,669 shares of our Class C common stock. The Chase Capital convertible subordinated note has been retired and we have no further obligation with respect to the note. - Before completing our initial public offering, we were an S corporation, and accordingly, we were not liable for federal and certain state corporate income taxes. Instead, our shareholders included our taxable income or loss in their federal and those state income tax returns. Immediately before our initial public offering, we became a C corporation, and accordingly, we are now subject to federal and state corporate income taxes. The pro forma amounts shown in the table reflect provisions for state and federal income taxes, applied to income before income taxes and extraordinary item, as if we had been taxed as a C corporation. These pro forma amounts exclude the effect of the adjustment to reflect indexing of the Chase Capital convertible subordinated note because the amount of this adjustment is not tax deductible. - As a result of our becoming a C corporation immediately prior to our initial public offering, generally accepted accounting principles required us to provide for deferred income taxes of $79.8 million to reflect the cumulative temporary differences between book and income tax bases of our assets and liabilities. - For purposes of our historical financial statements, the term "pro forma" refers solely to the adjustments arising from our conversion from an S corporation to a 46 52 C corporation. It does not refer to any of the other adjustments described under "Prospectus Summary -- Summary Pro Forma Financial Information" and "Unaudited Pro Forma Financial Information." - All per share data gives effect to our recapitalization, which we consummated immediately prior to our initial public offering. In the recapitalization, we effected a 185 for one stock split and the exchange of our prior common stock for Class A common stock and Class B common stock. - Broadcast cash flow consists of operating income before depreciation and amortization, corporate general and administrative expenses and net expense (income) from time brokerage agreement fees. - Broadcast cash flow margin represents broadcast cash flow as a percentage of net revenue. - EBITDA before net expense (income) from time brokerage agreement fees consists of operating income before depreciation and amortization, non-cash compensation expense (which is included in corporate general and administrative expenses) and net expense (income) from time brokerage agreement fees. - Pro forma after-tax cash flow consists of pro forma income before extraordinary item minus gains on sale of assets (net of tax) plus the following: depreciation and amortization, non-cash compensation expense (which is included in corporate general and administrative expense), adjustment to reflect indexing of the convertible subordinated note and deferred tax provision (or minus deferred tax benefit). Although broadcast cash flow, EBITDA before net expense (income) from time brokerage agreement fees and pro forma after-tax cash flow are not measures of performance or liquidity calculated in accordance with generally accepted accounting principles, we believe that these measures are useful to an investor in evaluating our performance because they are widely used in the broadcast industry to measure a radio company's operating performance. However, you should not consider broadcast cash flow, EBITDA before net expense (income) from time brokerage agreement fees and pro forma after-tax cash flow in isolation or as substitutes for operating income, cash flows from operating activities or any other measure for determining our operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. In addition, because broadcast cash flow, EBITDA before net expense (income) from time brokerage agreement fees and pro forma after-tax cash flow are not calculated in accordance with generally accepted accounting principles, they are not necessarily comparable to similarly titled measures employed by other companies. The comparability of the historical financial data reflected below has been significantly impacted by acquisitions and dispositions. You should read "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus. 47 53 The comparability of the following selected historical financial data has been significantly impacted by acquisitions and dispositions. You should read the selected financial data together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus.
FISCAL YEAR ENDED THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30, DECEMBER 31, JUNE 30, ------------------------------------------------------ ------------------- ------------------- 1994 1995 1996 1997 1998 1997 1998 1998 1999 -------- ------- ------- ---------- ---------- -------- -------- --------- ------- (RESTATED) (RESTATED) (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING DATA: Net revenues................. $ 29,137 $35,893 $48,675 $ 93,862 $132,998 $ 28,399 $ 47,363 $ 63,687 $95,545 Operating expenses: Station operating expenses................. 21,520 24,061 31,659 61,280 88,599 18,868 29,990 42,749 64,296 Depreciation and amortization............. 2,248 2,225 2,960 7,685 13,066 2,880 4,358 6,079 10,019 Corporate general and administrative expenses................. 2,300 2,535 2,872 3,249 4,527 849 1,850 2,193 3,454 Net expense (income) from time brokerage agreement fees..................... -- 603 (879) (476) 2,399 -- 1,236 2,273 652 -------- ------- ------- --------- -------- -------- -------- --------- ------- Total operating expenses............... 26,068 29,424 36,612 71,738 108,591 22,597 37,434 53,294 78,421 -------- ------- ------- --------- -------- -------- -------- --------- ------- Operating income............. 3,069 6,469 12,063 22,124 24,407 5,802 9,929 10,393 17,124 Other expense (income): Interest expense........... 1,648 1,992 5,196 11,388 14,663 2,996 5,732 6,179 6,246 Adjustment to reflect indexing of the convertible subordinated note..................... -- -- -- 29,070 8,841 14,903 29,503 5,693 -- (Gains) on sale of assets................... (20,545) (228) (119) (197,097) (8,661) (43) (69,648) (8,748) (467) Other non-operating expense (income)................. 52 (100) (67) 1,504 (328) (102) 577 (123) (599) -------- ------- ------- --------- -------- -------- -------- --------- ------- Total other expense (income)............... (18,845) 1,664 5,010 (155,135) 14,515 17,754 (33,836) 3,001 5,180 -------- ------- ------- --------- -------- -------- -------- --------- ------- Income (loss) before income taxes and extraordinary item....................... 21,914 4,805 7,053 177,259 9,892 (11,952) 43,765 7,392 11,944 Pro forma income taxes....... 8,327 1,826 2,680 78,405 7,119 1,121 27,842 4,972 4,539 Pro forma income (loss) before extraordinary item....................... 13,587 2,979 4,373 98,854 2,773 (13,073) 15,923 2,420 7,405 Extraordinary item, net of tax benefit................ -- 219 348 -- 1,488 -- -- 1,489 -- -------- ------- ------- --------- -------- -------- -------- --------- ------- Pro forma net income (loss)..................... $ 13,587 $ 2,760 $ 4,025 $ 98,854 $ 1,285 $(13,073) $ 15,923 $ 931 $ 7,405 ======== ======= ======= ========= ======== ======== ======== ========= ======= Pro forma earnings (loss) per share before extraordinary item....................... $ 0.62 $ 0.14 $ 0.20 $ 4.59 $ 0.12 $ (0.61) $ 0.64 $ 0.11 $ 0.21 Pro forma diluted earnings (loss) per share before extraordinary items........ 0.62 0.14 0.20 4.59 0.12 (0.61) 0.64 0.11 0.21 Weighted average common shares outstanding -- basic....... 21,534 21,534 21,534 21,534 22,239 21,534 24,742 21,534 34,836 Weighted average common shares outstanding -- diluted..... 21,534 21,534 21,534 21,534 22,239 21,534 24,742 21,534 35,251 BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents.... $ 1,513 $ 1,564 $ 5,292 $ 3,626 $ 6,666 $ 3,497 $ 6,469 $ 6,094 $ 8,713 Intangibles and other assets..................... 5,552 29,548 119,269 300,029 428,763 313,889 505,825 428,543 556,501 Total assets................. 19,368 52,209 150,575 364,743 522,945 378,138 681,034 513,445 671,627 Senior debt, including current portion............ 15,250 46,554 111,000 117,000 253,784 127,000 330,281 251,785 166,276 Total shareholders' equity... 427 828 5,079 179,019 182,970 166,986 225,467 169,509 396,886 OTHER DATA: Broadcast cash flow.......... $ 7,617 $11,832 $17,016 $ 32,582 $ 44,399 $ 9,531 $ 17,373 $ 20,938 $31,249 Broadcast cash flow margin... 26.1% 33.0% 35.0% 34.7% 33.4% 33.6% 36.6% 32.9% 32.7% EBITDA before net expense (income) from time brokerage agreement fees... $ 5,317 $ 9,297 $14,144 $ 29,333 $ 39,872 $ 8,682 $ 15,523 $ 18,745 $28,012 Pro forma after-tax cash flow....................... 2,678 4,526 7,311 16,590 21,028 5,003 7,985 9,563 20,215 Cash flows related to: Operating activities....... 3,950 1,182 12,773 8,859 23,019 7,341 11,158 5,778 8,204 Investing activities....... 23,787 (28,636) (96,502) (13,695) (153,651) (17,470) (86,894) (125,565) 10,001 Financing activities....... (27,161) 27,505 87,457 3,170 133,672 10,000 75,539 122,384 (15,961)
48 54 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion together with the financial statements and related notes included elsewhere in this prospectus. The results discussed below are not necessarily indicative of the results to be expected in any future periods. This discussion contains forward-looking statements. See "Special Note Regarding Forward-Looking Statements" for further information about forward-looking statements. GENERAL A radio broadcasting company derives its revenues primarily from the sale of broadcasting time to local and national advertisers. The advertising rates that a radio station is able to charge and the number of advertisements that can be broadcast without jeopardizing listener levels largely determine those revenues. Advertising rates are primarily based on three factors: - a station's audience share in the demographic groups targeted by advertisers, as measured principally by quarterly reports issued by The Arbitron Ratings Company; - the number of radio stations in the market competing for the same demographic groups; and - the supply of and demand for radio advertising time. In fiscal 1998, we generated 76.2% of our revenues from local advertising, which is sold primarily by each individual local radio station's sales staff, and 22.6% from national spot advertising, which is sold by independent advertising sales representatives. We generated the balance of our 1998 revenues principally from network advertising and rental income from tower sites. We include revenues recognized under a time brokerage agreement or similar sales agreement for stations operated by us prior to acquiring the stations in net revenues, while we reflect operating expenses associated with these stations in station operating expenses. Consequently, there is no difference in the method of revenue and operating expense recognition between a station operated by us under a time brokerage agreement or similar sales agreement and a station owned and operated by us. Several factors may adversely affect a radio broadcasting company's performance in any given period. In the radio broadcasting industry, seasonal revenue fluctuations are common and are due primarily to variations in advertising expenditures by local and national advertisers. Typically, revenues are lowest in the first calendar quarter of the year. We generally incur advertising and promotional expenses to increase "listenership" and Arbitron ratings. However, because Arbitron reports ratings quarterly, any increased ratings and therefore increased advertising revenues tend to lag behind the incurrence of advertising and promotional spending. In the broadcasting industry, radio stations often utilize trade or barter agreements to reduce expenses by exchanging advertising time for goods or services. In order to maximize cash revenue from our spot inventory, we minimize our use of trade agreements and during the past five years have held barter revenues under 2.0% of our gross revenues and barter related broadcast cash flow under 0.4% of our broadcast cash flow. 49 55 We calculate "same station" growth by (1) comparing the performance of stations operated by us throughout a relevant quarter to the performance of those same stations (whether or not operated by us) in the prior year's corresponding quarter, excluding the effect of barter revenues and expenses and discontinued operations and (2) averaging those growth rates for the period presented. "Same station broadcast cash flow margin" is the broadcast cash flow margin of the stations included in our same station calculations. For purposes of the following discussion, pro forma net income represents historical income before income taxes and extraordinary item adjusted as if we were treated as a C corporation during all relevant periods at an effective tax rate of 38%, applied to income before income taxes and extraordinary item, excluding the adjustment to reflect indexing of the convertible subordinated note (as that adjustment is not tax-deductible), and excluding extraordinary item, net of pro forma taxes. Our net revenues and broadcast cash flow have grown significantly on both a total and same station basis. Net revenues grew at a compound annual rate of 96.8% from an actual $35.9 million in fiscal 1995 to a pro forma $273.8 million in fiscal 1998. Broadcast cash flow grew at a compound annual rate of 98.0% from an actual $11.8 million in fiscal 1995 to a pro forma $91.6 million in fiscal 1998. During this same period, we grew our same station net revenues and broadcast cash flow at average annual rates of 15.0% and 36.4%, respectively. In addition, our pro forma after-tax cash flow grew at a compound annual rate of 127.2% from an actual $4.5 million in fiscal 1995 to a pro forma $52.8 million in fiscal 1998. Because of our significant acquisition and divestiture activities, our pro forma 1998 and 1999 results differ materially from our actual 1998 and 1999 results. RESULTS OF OPERATIONS Historically, we operated with an October 1st to September 30th fiscal year. Effective January 1, 1999, we changed for financial reporting purposes from a fiscal year ending September 30th to a fiscal year ending December 31st. Accordingly, the following results of operations includes a discussion of the three month transition period ended December 31, 1998 compared to the three months ended December 31, 1997. SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998 NET REVENUES. Net revenues increased 50.0% to $95.5 million for the six months ended June 30, 1999 from $63.7 million for the six months ended June 30, 1998. Of the increase, $25.8 million is attributable to stations that we acquired or that we were in the process of acquiring since January 1, 1998, offset by $2.3 million for stations that we divested or that we were in the process of divesting during the same period. On a same station basis, net revenues increased 15.5% to $94.5 million from $81.9 million. Same station revenue growth was led by increases in Boston, Seattle and Kansas City due to improved selling efforts and Sacramento due to our strategic realignment of our station formats. STATION OPERATING EXPENSES. Station operating expenses increased 50.4% to $64.3 million for the six months ended June 30, 1999 from $42.7 million for the six months ended June 30, 1998. Of the increase, $20.4 million is attributable to stations that we acquired or that we were in the process of acquiring since January 1, 1998, offset by $1.8 million for stations that we divested or that we were in the process of divesting during the 50 56 same period. On a same station basis, station operating expenses increased 6.4% to $63.3 million from $59.6 million. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 64.8% to $10.0 million for the six months ended June 30, 1999 from $6.1 million for the six months ended June 30, 1998. The increase was mainly attributable to our acquisitions net of divestitures since January 1, 1998. CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and administrative expenses increased 57.5% to $3.5 million for the six months ended June 30, 1999 from $2.2 million for the six months ended June 30, 1998. The increase was mainly attributable to higher administrative expenses associated with supporting our growth and increasing staff and expenses to operate as a public company. Also included in the current period is $0.2 million in non-cash stock-based compensation expense. INTEREST EXPENSE. Interest expense increased 1.1% to $6.3 million for the six months ended June 30, 1999 from $6.2 million for the six months ended June 30, 1998. The increase was mainly attributable to indebtedness that we incurred in connection with our acquisitions offset by the proceeds from our initial public offering, which were used to reduce debt. INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Income before income taxes and extraordinary item increased 61.6% to $11.9 million for the six months ended June 30, 1999 from $7.4 million for the six months ended June 30, 1998. The net change is caused by (1) a decrease in income of $8.3 million due to a decrease in gains on sale of assets; (2) an increase in income of $5.7 million due to a decrease in expense because the convertible subordinated note was converted and therefore there was no adjustment during the 1999 period to reflect indexing; (3) an increase in income of $5.1 million due to increases in revenues from existing stations and improved revenues and expense management from newly acquired stations; and (4) an increase in income of $1.6 million due to a decrease in net expense (income) from time brokerage agreement fees. EXTRAORDINARY ITEM, NET OF TAX BENEFIT. The extraordinary item for the six months ended June 30, 1998 resulted from the write-off of $1.5 million of unamortized finance charges due to the early extinguishment of debt, which resulted from the refinancing of our credit facility. PRO FORMA NET INCOME. As a result of the factors described above, pro forma net income increased to $7.4 million for the six months ended June 30, 1999 from $0.9 million for the six months ended June 30, 1998. The net change is caused by (1) an increase in income of $3.2 million, net of tax, primarily attributable to an improvement in operating income due to increases in revenues from existing stations and improved revenues and expense management from newly acquired stations; (2) an increase in income of $0.6 million due to the difference between a $5.7 million decrease in the expense for the adjustment to reflect indexing of the convertible subordinated note and a $5.1 million, net of tax, decrease in gains on sale of assets; (3) an increase in income of $1.5 million, net of tax, due to a decrease in the extraordinary item; and (4) an increase in income of $1.0 million, net of tax, due to a decrease in net expense (income) from time brokerage agreement fees. BROADCAST CASH FLOW. Broadcast cash flow increased 49.2% to $31.3 million for the six months ended June 30, 1999 from $20.9 million for the six months ended June 30, 1998. Of the increase, $5.4 million is attributable to stations that we acquired or that we 51 57 were in the process of acquiring since January 1, 1998, offset by $0.5 million for stations that we divested or that we were in the process of divesting during the same period. On a same station basis, broadcast cash flow increased 39.9% to $31.2 million from $22.3 million. Our broadcast cash flow margin declined to 32.7% for the six months ended June 30, 1999 from 32.9% for the six months ended June 30, 1998. The decrease is attributable to lower margins associated with newly acquired stations. On a same station basis, broadcast cash flow margin increased to 33.0% from 27.2%. PRO FORMA AFTER-TAX CASH FLOW. Pro forma after-tax cash flow increased 111.4% to $20.2 million for the six months ended June 30, 1999 from $9.6 million for the six months ended June 30, 1998. The increase is attributable to improved operations of existing stations and the net effect of newly acquired properties, taking into consideration pro forma income taxes as though we had reported as a C corporation during the periods presented, respectively. The amount of the deferred pro forma income tax expense, excluding the amount of the current pro forma income tax expenses, was $3.0 million and $3.2 million for the six months ended June 30, 1999 and 1998, respectively. THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 1997 NET REVENUES. Net revenues increased 66.8% to $47.4 million for the three months ended December 31, 1998 from $28.4 million for the three months ended December 31, 1997. Of the increase, $17.9 million is attributable to stations that we acquired or that we were in the process of acquiring since October 1, 1997, offset by $2.7 million for stations that we divested or that we were in the process of divesting during the same period. On a same station basis, net revenues increased 16.5% to $46.9 million from $40.3 million. Same station revenue growth was led by increases in Boston, Seattle, Kansas City and Portland due to improved selling efforts. STATION OPERATING EXPENSES. Station operating expenses increased 58.9% to $30.0 million for the three months ended December 31, 1998 from $18.9 million for the three months ended December 31, 1997. Of the increase, $11.3 million is attributable to stations that we acquired or that we were in the process of acquiring since October 1, 1997, offset by $1.6 million for stations that we divested or that we were in the process of divesting during the same period. On a same station basis, station operating expenses increased 3.4% to $29.4 million from $28.4 million. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 51.3% to $4.4 million for the three months ended December 31, 1998 from $2.9 million for the three months ended December 31, 1997. The increase was mainly attributable to our acquisitions net of divestitures since October 1, 1997. CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and administrative expenses increased 117.9% to $1.9 million for the three months ended December 31, 1998 from $0.8 million for the three months ended December 31, 1997. The increase was mainly attributable to higher administrative expenses associated with supporting our growth and increasing staff and expenses to operate as a public company. INTEREST EXPENSE. Interest expense increased 91.3% to $5.7 million for the three months ended December 31, 1998 from $3.0 million for the three months ended 52 58 December 31, 1997. The increase was mainly attributable to indebtedness that we incurred in connection with our acquisitions. INCOME (LOSS) BEFORE INCOME TAXES. Income (loss) before income taxes increased to $43.8 million for the three months ended December 31, 1998 from a loss of $12.0 million for the three months ended December 31, 1997. Of the increase, $69.6 million is attributable to gains on the sale of assets from our disposition of stations in the Tampa radio market during the three months ended December 31, 1998, offset by $14.6 million which is attributable to an increase in expense resulting from an adjustment to reflect indexing of the convertible subordinated note. We do not expect to recognize such significant gains on the sale of assets in the future. BROADCAST CASH FLOW. Broadcast cash flow increased 82.3% to $17.4 million for the three months ended December 31, 1998 from $9.5 million for the three months ended December 31, 1997. Of the increase, $6.9 million is attributable to stations that we acquired or that we were in the process of acquiring since October 1, 1997, offset by $1.1 million for stations that we divested or that we were in the process of divesting during the same period. On a same station basis, broadcast cash flow increased 48.0% to $17.5 million from $11.8 million. Our broadcast cash flow margin increased to 36.6% for the three months ended December 31, 1998 from 33.6% for the three months ended December 31, 1997. The increase is attributable to improved revenues and expense management associated with newly acquired stations. On a same station basis, broadcast cash flow margin increased to 37.4% from 29.4%. PRO FORMA AFTER-TAX CASH FLOW. Pro forma after-tax cash flow increased 59.6% to $8.0 million for the three months ended December 30, 1998 from $5.0 million for the three months ended December 31, 1997. The increase is attributable to improved operations of existing stations and the net effect of newly acquired properties, taking into consideration pro forma income taxes as though we had reported as a C corporation. FISCAL YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 1997 NET REVENUES. Net revenues increased 41.7% to $133.0 million for the year ended September 30, 1998 from $93.9 million for the year ended September 30, 1997. Of the increase, $20.3 million is attributable to stations that we acquired or that we were in the process of acquiring since October 1, 1997, offset by $5.8 million for stations that we divested or that we were in the process of divesting during the same period. On a same station basis, net revenues increased 16.3% to $128.5 million from $110.5 million, largely due to stronger selling efforts and radio advertising market growth. Same station revenue growth was led by substantial increases in Seattle, Kansas City and Portland. STATION OPERATING EXPENSES. Station operating expenses increased 44.6% to $88.6 million for the year ended September 30, 1998 from $61.3 million for the year ended September 30, 1997. Of the increase, $13.2 million is attributable to stations that we acquired or that we were in the process of acquiring since October 1, 1997, offset by $4.4 million for stations that we divested or that we were in the process of divesting during the same period. On a same station basis, station operating expenses increased 11.2% to $84.7 million from $76.2 million. 53 59 Two of the broadcast contracts with sports teams which we acquired in connection with the December 1998 Boston transaction had an unfavorable impact. This unfavorable impact was estimated to be $5.0 million. Pursuant to the purchase agreement, CBS paid us $5.0 million in cash to offset the unfavorable impact of these contracts. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 70.0% to $13.1 million for the year ended September 30, 1998 from $7.7 million for the year ended September 30, 1997. This increase was primarily attributable to our acquisitions during 1997 and 1998. CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and administrative expenses increased 39.3% to $4.5 million for the year ended September 30, 1998 from $3.3 million for the year ended September 30, 1997. This increase was primarily attributable to higher administrative expenses associated with supporting our growth. We anticipate recording a non-cash compensation expense of approximately $0.4 million in fiscal year 1999 and in each of the following three fiscal years in connection with our issuance of 11,112 shares of restricted stock and 275,562 options, at an exercise price of $18.00. INTEREST EXPENSE AND THE ADJUSTMENT TO REFLECT INDEXING OF THE CONVERTIBLE SUBORDINATED NOTE. Interest expense increased 28.8% to $14.7 million for the year ended September 30, 1998 from $11.4 million for the year ended September 30, 1997. The increase was primarily attributable to indebtedness that we incurred in connection with our acquisitions. We determined the adjustment to reflect indexing of the convertible subordinated note as of the end of each relevant period by subtracting the sum of principal and accrued interest on the note from the fair value of the shares of our common stock into which the note was convertible using multiples of broadcast cash flow of comparable publicly held radio broadcast companies. The adjustment to reflect indexing of the note was $29.1 million and $8.8 million for the years ended September 30, 1997 and 1998, respectively. The decrease in the adjustment from 1997 to 1998 is due to a reduced broadcast cash flow growth rate from 91.5% in 1997 to 36.3% in 1998 (primarily due to the timing of acquisitions) and a lower multiple in 1998 due to the overall market condition for public radio broadcast companies at September 30, 1998 relative to September 30, 1997. INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Income before income taxes and extraordinary item decreased to $9.9 million, including $8.7 million from the gains on sale of assets, for the year ended September 30, 1998 from $177.3 million, including $197.1 million from the gains on sale of assets, for the year ended September 30, 1997. The gain on the assets in 1997 is primarily attributable to our disposition of stations in the Houston, San Francisco and Pittsburgh radio markets. We do not expect such significant gains on the sale of assets to continue in the future. EXTRAORDINARY ITEM, NET OF TAX BENEFIT. The extraordinary item for the year ended September 30, 1998 resulted from the write-off of $1.5 million of unamortized finance charges due to the early extinguishment of debt, which resulted from the refinancing of our credit facility. There were no extraordinary items in 1997. PRO FORMA NET INCOME. As a result of the factors described above, pro forma net income decreased to $1.3 million for the year ended September 30, 1998, which included the impact of the recognition of $8.8 million for the adjustment to reflect indexing of the convertible subordinated note, offset by a gain of $5.4 million, net of taxes, on the sale of 54 60 assets. This compares to pro forma net income of $98.9 million for the year ended September 30, 1997, which included the impact of the recognition of $29.1 million for the adjustment to reflect indexing of the convertible subordinated note, offset by a gain of $122.2 million, net of taxes, on the sale of assets. The decrease is primarily attributable to our disposition of stations in the Houston, San Francisco and Pittsburgh radio markets during the year ended September 30, 1997. We used the proceeds from these dispositions to acquire stations in markets where we believed there was greater potential for establishing market leading station clusters. We do not expect such significant gains on the sale of assets to continue in the future. BROADCAST CASH FLOW. As a result of the factors described above, broadcast cash flow increased 36.3% to $44.4 million for the year ended September 30, 1998 from $32.6 million for the year ended September 30, 1997. On a same station basis, broadcast cash flow increased 27.7% to $43.8 million from $34.3 million. Our broadcast cash flow margin declined to 33.4% for the year ended September 30, 1998 from 34.7% for the year ended September 30, 1997. The decrease is primarily attributable to our exchange in 1997 of relatively mature stations in San Francisco and Houston, which operated at higher broadcast cash flow margins but were located in markets where we believed there were limited growth and clustering opportunities, for less developed properties in Seattle, Kansas City and Sacramento, which collectively operated with lower broadcast cash flow margins but offered stronger growth and clustering opportunities. On a same station basis, broadcast cash flow margin increased to 34.1% from 31.1%. PRO FORMA AFTER-TAX CASH FLOW. Pro forma after-tax cash flow increased 26.8% to $21.0 million for the year ended September 30, 1998 from $16.6 million for the year ended September 30, 1997. The increase is attributable to improved operations of existing stations and the net effect of newly acquired properties, taking into consideration pro forma income taxes as though we had reported as a C corporation. FISCAL YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 1996 NET REVENUES. Net revenues increased 92.8% to $93.9 million for the year ended September 30, 1997 from $48.7 million for the year ended September 30, 1996. Of the increase, $38.8 million is attributable to stations that we acquired since October 1, 1996, offset by $9.9 million for stations that we divested during the same period. On a same station basis, net revenues increased 14.2% to $86.6 million from $75.8 million. Same station revenue growth was led by substantial increases in Seattle, Kansas City, Portland, Houston and St. Louis. STATION OPERATING EXPENSE. Station operating expenses increased 93.6% to $61.3 million for the year ended September 30, 1997 from $31.7 million for the year ended September 30, 1996. Of the increase, $20.0 million is attributable to stations that we acquired since October 1, 1996, offset by $5.7 million for stations that we divested during the same period. On a same station basis, station operating expenses decreased 0.4% to $55.0 million from $55.2 million. This decrease was attributable to cost savings measures that we implemented in connection with our acquisitions. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 159.6% to $7.7 million for the year ended September 30, 1997 from $3.0 million for the year ended 55 61 September 30, 1996. This increase was primarily attributable to our 1996 and 1997 acquisitions and was partially offset by the net effect of stations sold during the same period. CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and administrative expenses increased 13.1% to $3.3 million for the year ended September 30, 1997 from $2.9 million for the year ended September 30, 1996. This increase was primarily attributable to higher administrative expenses associated with supporting our growth. INTEREST EXPENSE AND THE ADJUSTMENT TO REFLECT INDEXING OF THE CONVERTIBLE SUBORDINATED NOTE. Interest expense increased 119.2% to $11.4 million for the year ended September 30, 1997 from $5.2 million for the year ended September 30, 1996. The increase was primarily attributable to indebtedness that we incurred in connection with our acquisitions. We determined the adjustment to reflect the indexing of the convertible subordinated note as of the end of each relevant period by subtracting the sum of principal and accrued interest on the note from the fair value of the shares of our common stock into which the note was convertible using multiples of broadcast cash flow of comparable publicly held radio broadcast companies. There was no adjustment to reflect indexing of the note as of September 30, 1996 as the face amount of the note plus 7% stated interest approximated the market value of the note on that date. The amount of the adjustment to reflect indexing of the note increased from $0.0 to $29.1 million for the years ended September 30, 1996 and 1997, respectively. The adjustment for 1997 is due primarily to a 91.5% increase in broadcast cash flow. INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Income before income taxes and extraordinary item increased 2397.2% to $177.3 million for the year ended September 30, 1997, including a gain of $197.1 million from the sale of assets and $29.1 million for the adjustment to reflect indexing of the convertible subordinated note, compared to $7.1 million for the year ended September 30, 1996, which includes a gain of $0.1 million and no adjustment to reflect indexing of the note. The increase in gain on the sale of assets is primarily attributable to our disposition of stations in the Houston, San Francisco and Pittsburgh radio markets. We used the proceeds from these dispositions to acquire stations in markets where we believed there was greater potential for establishing market leading station clusters. We do not expect such significant gains on the sale of assets to continue in the future. EXTRAORDINARY ITEM, NET OF TAX BENEFIT. There was no extraordinary item in 1997. The extraordinary item for the year ended September 30, 1996 resulted from the write-off of $0.4 million of unamortized finance charges due to the early extinguishment of debt, which resulted from the refinancing of our credit facility. BROADCAST CASH FLOW. As a result of the factors described above, broadcast cash flow increased 91.5% to $32.6 million for the year ended September 30, 1997 from $17.0 million for the year ended September 30, 1996. On a same station basis, broadcast cash flow increased 53.3% to $31.6 million from $20.6 million. Our broadcast cash flow margin declined to 34.7% for the year ended September 30, 1997 from 35.0% for the year ended September 30, 1996. The decrease is primarily attributable to our exchange in fiscal 1997 of relatively mature stations in San Francisco and Houston, which operated at higher broadcast cash flow margins but were located in markets where management believed there were limited growth and clustering opportuni- 56 62 ties, for less developed properties in Seattle, Kansas City and Sacramento, which collectively operated with lower broadcast cash flow margins, but offered stronger growth and clustering opportunities. On a same station basis, broadcast cash flow margins increased to 31.1% for the year ended September 30, 1997 from 27.2% for the year ended September 30, 1996. PRO FORMA AFTER-TAX CASH FLOW. Pro forma after-tax cash flow increased 127.4% to $16.6 million for the year ended September 30, 1997 from $7.3 million for the year ended September 30, 1996. The increase is attributable to improved operations of existing stations and the net effect of newly acquired properties, taking into consideration pro forma income taxes as though we had reported as a C corporation. LIQUIDITY AND CAPITAL RESOURCES We use a significant portion of our capital resources to consummate acquisitions. Historically, these acquisitions were funded from one or a combination of the following sources: (1) our credit facility, (2) the swapping of our radio stations in transactions which qualify as "like-kind" exchanges under sec.1031 of the Internal Revenue Code and (3) internally-generated cash flow. For the Sinclair acquisition, we expect to use net proceeds from this offering and the Class A common stock offering, together with cash on hand and proceeds from an amended or replacement credit facility, to finance the purchase price for the Sinclair acquisition. Net cash flows provided by operating activities were $8.2 million and $5.8 million for the six months ended June 30, 1999 and 1998, respectively. Changes in our net cash flows provided by operating activities are primarily a result of changes in advertising revenues and station operating expenses, which are affected by the acquisition and disposition of stations during those periods. Net cash flows provided by investing activities were $10.0 million for the six months ended June 30, 1999 and net cash flows used by investing activities were $125.6 million for the six months ended June 30, 1998. Net cash flows used by financing activities were $16.0 million for the six months ended June 30, 1999 and net cash flows provided by financing activities were $122.4 million for the six months ended June 30, 1998. The cash flows for the six months ended June 30, 1999 reflect (1) completed transactions consummated in the period and the related borrowings and (2) proceeds from our initial public offering and the related payment of long-term debt and corporate obligations. The cash flows for the six months ended June 30, 1998 reflect refinancing of our credit facility and acquisitions consummated in the period together with the related borrowings. Net cash flows provided by operating activities were $11.2 million and $7.3 million for the three months ended December 31, 1998 and 1997, respectively. Changes in our net cash flows from operating activities are primarily a result of changes in advertising revenues and station operating expenses which are affected by the acquisition and disposition of stations during those periods. Net cash flows used in investing activities were $86.9 million and $17.5 million for the three months ended December 31, 1998 and 1997, respectively. Net cash flows provided by financing activities were $75.5 million and $10.0 million for the three months ended December 31, 1998 and 1997, respectively. These cash flows reflect the acquisitions that we consummated in the relevant periods and the related borrowings. Net cash flows provided by operating activities were $23.0 million, $8.9 million and $12.8 million for the years ended September 30, 1998, 1997 and 1996, respectively. Changes in our net cash flow from operating activities are primarily a result of changes in 57 63 advertising revenues and station operating expenses which are affected by the acquisition and disposition of stations during those periods. Net cash flows used in investing activities were $153.7 million, $13.7 million and $96.5 million for the years ended September 30, 1998, 1997 and 1996, respectively. Net cash flows provided by financing activities were $133.7 million, $3.2 million and $87.5 million for the years ended September 30, 1998, 1997 and 1996, respectively. These cash flows reflect the acquisitions consummated in the relevant periods and the related borrowings. On February 3, 1999, upon the consummation of our initial public offering, we received net proceeds of $236.2 million, after deducting expenses, underwriting discounts and commissions. We used these proceeds to reduce outstanding indebtedness under our credit facility and to pay other corporate obligations. Shortly after reducing indebtedness under the credit facility, in February 1999 we reborrowed approximately $58.0 million to purchase three Boston radio stations from CBS. In addition to debt service and quarterly distributions under the TIDES, which could be substantial in amount, our principal liquidity requirements will be for working capital and general corporate purposes, including capital expenditures, and acquisitions of additional radio stations, including the Sinclair acquisition. For calendar 1999, we estimate that maintenance capital expenditures will be approximately $1.5 million and that total capital expenditures will be between $10.0 million and $11.5 million. These estimates do not include the incremental capital expenditures that may be incurred in connection with the Sinclair acquisition. These estimates include studio consolidations in many of our markets, providing us with operational improvements from which we will receive long-term benefits. We believe that cash flow from operating activities, together with revolving borrowings under our existing credit facility, should be sufficient to permit us to fund our capital expenditures and on-going operations, exclusive of the Sinclair acquisition. In order to fund the $824.5 million in cash required to consummate the Sinclair acquisition, we expect to pay approximately $145.0 million from the net proceeds of this offering, and approximately $306.9 million from the net proceeds of the Class A common stock offering, assuming a public offering price of $40.00 per share. However, even assuming the closing of both offerings, we will be required to raise an additional $372.6 million through borrowing to fund the balance of the Sinclair purchase price. Our existing credit facility would provide approximately $179.1 million of this amount, but we will need to amend or replace the facility to increase funds available under it by approximately $193.5 million. Accordingly, we are engaged in discussions with various potential lenders about amending or replacing our present credit facility in order to obtain the additional financing. Moreover, if this offering closes, but the Class A common stock offering does not, the financing that we would need from an amended or replacement credit facility or other potential sources would correspondingly increase. We entered into a loan agreement, dated as of February 13, 1998, as amended on October 8, 1998 and as further amended on July 20, 1999, with several banks, including Key Corporate Capital Inc. and Bank of America NT&SA, for a $350.0 million revolving credit facility. The credit facility was established to refinance our existing indebtedness, provide working capital and fund acquisitions. As discussed above, we must amend or replace this credit facility to fund the purchase price for the Sinclair acquisition. Under our current credit facility, at our election, interest on any outstanding principal accrues at a rate based on either LIBOR plus a spread which ranges from 0.5% to 2.125% 58 64 or on KeyBank N.A.'s base rate plus a spread of up to 0.875%, depending on our leverage ratio. Although we may borrow, repay and reborrow under our current credit facility, the aggregate maximum amount that we can have outstanding at any one time is reduced on a quarterly basis beginning on June 30, 2000. The final maturity date for our credit facility is February 13, 2006. As of June 30, 1999, we had approximately $166.0 million of borrowings and a $4.9 million letter of credit outstanding under our credit facility. We are prohibited under our current credit facility from maintaining a total leverage ratio (defined as the ratio of our total debt to operating cash flow) greater than 6.5 to 1.0, at any time through March 31, 2000, which reduces over subsequent periods. In addition, we are prohibited under our current credit facility from maintaining a senior leverage ratio (defined as the ratio of the principal amount outstanding under our current credit facility to operating cash flow) greater than 6.0 to 1.0, at any time through March 31, 2000, which reduces over subsequent periods. Currently, we are in compliance with each of these total and senior leverage ratio obligations. We are also required by our current credit facility to (1) maintain a fixed charge coverage ratio (defined as the ratio of operating cash flow to the sum of our debt service, capital expenditures, taxes and capital distributions, over any four quarter period) greater than 1.05 to 1.00 and (2) maintain an interest coverage ratio (defined as the ratio of operating cash flow to interest expense over any four quarter period) greater than 2.0 to 1.0. Currently, we are in compliance with each of these financial ratio obligations. As part of the consent we received from our lenders to consummate this offering, we and the lenders have agreed that we will include the financing cost of the TIDES as part of interest expense for purposes of the fixed charge coverage ratio and the interest coverage ratio and that we will exclude the principal amount of the debentures from the calculation of our total debt. However, the amount of any deferred interest on the debentures will be included in the total debt calculation. Our current credit facility requires us to protect ourselves from interest rate fluctuations through the use of derivative rate hedging instruments. As a result, we have entered into various convertible rate cap and interest rate swap transactions with various banks designed to mitigate our exposure to significantly higher floating interest rates. A rate cap agreement establishes an upper limit or "cap" for the base LIBOR rate. Swap agreements require that we pay a fixed rate of interest on the notional amount to a bank and the bank pay to us a variable rate equal to three-month LIBOR. Some of the swap agreements grant the bank the option to terminate the transaction prior to its respective expiration date in certain limited circumstances. In the future, we expect to continue executing rate hedging transactions only to the extent required by our lenders and do not anticipate holding derivative securities for speculative or investment purposes. The following table sets forth certain information regarding the rate hedging transactions which we had entered into as of September 30, 1996, 1997 and 1998. 59 65
UNRECOGNIZED GAINS (LOSSES) AS OF CONVERTIBLE SWAP SEPTEMBER 30, CAP INTEREST INTEREST EXPIRATION ----------------------------------- NOTIONAL AMOUNT RATE RATE DATE 1996 1997 1998 - --------------- ------------ -------- ----------------- --------- --------- ----------- $20,000,000........... -- 6.77% May 16, 2000 $(208,000) $(351,000) $ (652,000) 25,000,000(1)........ -- 5.89 July 29, 2003 (117,000) (212,000) (1,057,000) 25,000,000........... 7.50% 6.05 August 8, 2000 15,000 (103,000) (1,069,000) 15,000,000........... -- 5.61 January 10, 2005 -- -- (525,000) 14,000,000........... -- 5.86 January 10, 2005 -- -- (705,000) 30,000,000........... -- 5.77 February 27, 2008 -- -- (1,793,000)
- ------------------------- (1) This cap was converted by the bank into an interest rate swap effective October 29, 1998. No gains or losses have been recognized by us during the periods indicated. RECENT PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133 entitled "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as "derivatives"), and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. In June 1999, the FASB issued SFAS No. 137 which extends the effective date of SFAS No. 133 to fiscal quarters of fiscal years beginning after June 15, 2000 and should not be applied retroactively to financial statements of prior periods. Management has not yet determined what effect, if any, this statement will have on us. IMPACT OF YEAR 2000 ISSUES We rely, directly and indirectly, on information technology systems to operate our radio stations, provide our radio stations with programming, up-to-date news and other information and perform a variety of administrative services including accounting, financial reporting, advertiser spot scheduling, payroll and invoicing. Most of these information technology systems, such as Marketron, Columbine, Ultipro, Solomon, NT and Novell, are standard commercial software products used both throughout the radio broadcasting industry and in other industries. We also use non-information technology systems, such as microchips for dating and other automated functions. All of these technology systems could potentially be affected by year 2000 issues. In order to minimize the risk of year 2000 related losses, we are conducting a comprehensive assessment of our year 2000 issues. This assessment consists of (1) an analysis of all of the information and non-information technology systems that we use, including the circulation of year 2000 compliance questionnaires to the chief engineers of each of our stations, requiring them to evaluate their respective station's preparedness for year 2000 issues and (2) an inquiry as to the year 2000 status of third parties material to our operations, including the transmission of letters to all key service providers requesting written confirmation of their year 2000 readiness. Although we are still in the process of assessment, we have determined that the bulk of the technology systems we use internally are year 2000 compliant. We have received 60 66 confirmation from each supplier that provided or manufactured a material information or non-information technology system used by us that the system is either year 2000 compliant or that the supplier will, within a short period of time, provide software aides, supplements or replacements that will make the system year 2000 compliant. Due to: - the preventive measures being taken in response to our assessment; - the relatively small degree to which the radio broadcasting industry, as compared to other industries, depends on older large computer systems or interfaces with third party computer systems; - the fact that most of our automated administrative services can, if needed, be performed manually; and - the fact that most of our radio stations are equipped with emergency power systems, we believe that, while difficult to fully assess, year 2000 issues should not have a material adverse effect on our broadcast operations. We believe that it is difficult to fully assess the risks of the year 2000 problem due to the numerous uncertainties surrounding the issue. We believe that the primary risks are external to us and relate to the year 2000 readiness of our third party suppliers. The inability of third party suppliers to adequately address the year 2000 issues on a timely basis could result in a material financial risk, including loss of revenue, substantial unanticipated costs and service interruptions. We plan to continue our efforts to survey all work with third party suppliers to address all significant year 2000 issues in a timely manner. We are currently completing our year 2000 remediation efforts and we are developing a contingency plan for dealing with year 2000 issues caused by systems external to us. Since most of the year 2000 compliance achieved by us to date has been done through the normal upgrading process, separate costs have not been allocated to the year 2000 issue. Based on our experience to date, we estimate that the remaining costs to respond to the year 2000 issues will not exceed $250,000. All of these costs will be expensed as incurred. 61 67 INFORMATION ABOUT STATION AND MARKET DATA For this prospectus: - We obtained the following data from Duncan's Radio Market Guide (1999 ed.): - 1998 market rank by metro population; - 1998 market rank by radio revenue; - 1998 Entercom market revenue share; and - 1998 Entercom market revenue rank. - Our market revenue rank in the radio broadcasting industry is derived from Duncan's, as adjusted to reflect our completed transactions and our expected consummation of the Sinclair acquisition in the fourth quarter of 1999. - We derived audience share and audience rank in target demographic data from surveys of persons, listening Monday through Sunday, 6 a.m. to 12 midnight, in the indicated demographic, as set forth in the Spring 1999 Radio Market Report published by The Arbitron Ratings Company. - We present radio station data assuming the completion of the Sinclair acquisition. 62 68 BUSINESS OVERVIEW We are the fifth largest radio broadcasting company in the United States based on pro forma 1998 gross revenues. We have assembled, after giving effect to our pending acquisition of 46 stations from various subsidiaries of Sinclair Broadcast Group, Inc., a nationwide portfolio of 88 owned or operated stations. This portfolio consists of 56 FM and 32 AM stations in 16 markets, including 12 of the country's top 50 markets. Our station groups rank among the three largest clusters in 15 of our 16 markets. On a pro forma basis, we would have had net revenues of $301.9 million, operating income of $51.2 million and a pro forma income before extraordinary item of $1.2 million for the twelve months ended June 30, 1999. In addition, pro forma broadcast cash flow during the same period would have been $107.7 million. Our net revenues and broadcast cash flow have grown significantly on both a total and same station basis. Net revenues grew at a compound annual rate of 96.8% from an actual $35.9 million in fiscal 1995 to a pro forma $273.8 million in fiscal 1998. Broadcast cash flow grew at a compound annual rate of 98.0% from an actual $11.8 million in fiscal 1995 to a pro forma $91.6 million in fiscal 1998. During this same period, our same station net revenues and broadcast cash flow grew at average annual rates of 15.0% and 36.4%, respectively. In addition, our pro forma after-tax cash flow grew at a compound annual rate of 127.2% from an actual $4.5 million in fiscal 1995 to a pro forma $52.8 million in fiscal 1998. OUR CORPORATE HISTORY Throughout our more than 30 year history of operations, we have experienced sustained growth by adapting our acquisition and operating strategies to capitalize on changes occurring in the radio broadcasting industry. Our Chairman of the Board and Chief Executive Officer, Joseph M. Field, founded Entercom in 1968 on the conviction that FM broadcasting, then in its infancy, would surpass AM broadcasting as the leading aural medium. Our strategy from inception through the 1970s was to acquire FM stations in the top 20 markets at a fraction of prevailing prices for AM stations and to operate those stations economically and profitably by utilizing niche formats not being offered by major AM stations. We continued this strategy until FM's technical superiority and the availability of inexpensive AM/FM receivers drove FM's penetration of the radio market to critical mass and FM stations began to compete successfully with the dominant AM stations of the time for control of mass market audiences. As part of our strategy, we also purchased technically underdeveloped FM stations and upgraded them so that they could become competitive stations in their markets. In the mid-1980's, with FM at critical mass, we adjusted our strategic plan and began a deliberate multi-year effort to enhance our operations at both the corporate and station levels by changing or adjusting program formats to appeal to mainstream audiences in order to compete for greater shares of audience and advertising dollars in our markets. With the advent of the duopoly rules in 1992, which permitted expansion of ownership in a market from one to two stations in each radio medium, we began to "double up" in our markets. Since the passage of the Telecommunications Act of 1996, which permitted ownership of up to eight radio stations in most major markets, we have pursued a creative acquisition and development strategy by which we have swapped developed stand-alone 63 69 FM stations in various markets in exchange for clusters of underdeveloped stations in other large growth markets where there was greater opportunity to develop market leading clusters. OUR ACQUISITION STRATEGY Since October 1, 1996, in over 20 transactions including the Sinclair acquisition, which we expect to consummate in the last quarter of 1999, we have acquired or agreed to acquire 83 radio stations and have divested or will divest, for strategic or regulatory reasons, 14 radio stations. Through our disciplined acquisition strategy, we seek to (1) build top-three station clusters principally in large growth markets and (2) acquire underdeveloped properties that offer the potential for significant improvements in revenues and broadcast cash flow through the application of our operational, administrative and engineering expertise. Although our focus has been on radio stations in top 50 markets, we also consider acquiring stations in top 75 markets to the extent we believe we can apply our acquisition strategy in those markets. OUR OPERATING STRATEGY The principal components of our operating strategy are to: - DEVELOP MARKET LEADING STATION CLUSTERS. We are among the three largest clusters, based on gross revenues, in 15 of our 16 markets, after giving effect to the Sinclair acquisition. To enhance our competitive position, we strategically align our stations' formats and sales efforts within each market to optimize their performance, both individually and collectively. We seek to maximize the ratings, revenue and broadcast cash flow of our radio stations by tailoring their programming to optimize aggregate audience delivery. - ACQUIRE AND DEVELOP, UNDERPERFORMING STATIONS. We seek to acquire and develop underperforming stations, which has enabled us to build a long-term track record of achieving superior same station revenue and broadcast cash flow growth. We utilize a variety of techniques to develop underachieving properties. These techniques include: strategic market research and analysis; management enhancements; expenditure reductions; improved sales training and techniques; technical upgrades; programming and marketing enhancements; and facility consolidations. - BUILD STRONGLY-BRANDED FRANCHISES. We analyze market research and competitive factors to identify the format opportunity, music selection and rotation, presentation and other key programming attributes that we believe will best position each station to develop a distinctive identity and to strengthen the stations' local "brand" or "franchise" value. We believe that this will enable us to maximize our audience share and consequently, our revenues and broadcast cash flow. - LEVERAGE STATION CLUSTERS TO CAPTURE GREATER SHARE OF ADVERTISING REVENUE. We believe radio will continue to gain revenue share from other media as a result of deregulation in the broadcasting industry, which allows broadcasters to create larger clusters in their markets and offers advertisers a means to cost-effectively reach larger audiences. As a result of deregulation in the radio broadcasting industry, operators can now create radio station clusters that have the critical mass of audience reach and marketing resources necessary to pursue incremental advertising and promotional revenues more aggressively. We have begun to capitalize on this opportunity by developing specialized teams in many of our markets to work with 64 70 non-traditional radio advertisers to create and develop marketing programs and solutions. - MAXIMIZE TECHNICAL CAPABILITIES. We seek to operate stations with the strongest signals in their respective markets. In addition, on various occasions we have identified opportunities to acquire and upgrade low-powered or out-of-market stations and transform them into competitive signals, thus increasing their value significantly. For example, in 1998 we sold our two Tampa FM stations, which we had purchased for an aggregate of $4.9 million, for $75.0 million after upgrading their license classes. - RECRUIT, DEVELOP, MOTIVATE AND RETAIN SUPERIOR EMPLOYEES. We believe that station operators differentiate themselves from their peers primarily through their ability to recruit, develop, motivate and retain superior management, programming and sales talent. Accordingly, we strive to establish a compelling corporate culture that is attractive to superior performers. We encourage our stations to build strong community bonds through local and company-wide community service programs, which facilitate strong local business relationships and provide employees with opportunities for enhanced job fulfillment. We offer competitive pay packages with performance-based incentives for our key employees. In addition, we provide employees with opportunities for personal growth and advancement through extensive training, seminars and other educational programs. OUR STATION PORTFOLIO We have built a highly consolidated portfolio of radio stations concentrated primarily in top 50 markets with above average growth characteristics. Upon consummation of the Sinclair acquisition, and prior to our required divestiture of three stations in Kansas City, 66 of our 88 radio stations will be in 12 of the top 50 markets. We generated 92.9% of our pro forma 1998 net revenues from the 12 top 50 markets in which we operate. Radio advertising revenues in these 12 markets have grown at a revenue weighted compound annual growth rate of 11.2% from 1993 to 1998, which exceeded both the revenue weighted compound annual growth rate of the top 50 markets and the average annual growth rate of the aggregate radio industry. Our current portfolio of stations includes a significant number of recently acquired stations that we believe are underdeveloped. We believe that the underdeveloped stations offer the opportunity for substantial broadcast cash flow growth. In the aggregate, the 33 stations which we commenced operating on or after January 1, 1997 operated at a broadcast cash flow margin of 27.4% during the twelve months ended June 30, 1999. By comparison, in the aggregate, the nine stations which we commenced operating prior to 1997 operated at a broadcast cash flow margin of 48.2% during the twelve months ended June 30, 1999. Our portfolio of radio stations is geographically diverse and offers a wide variety of programming formats. We believe that geographic diversity will reduce the effect of economic downturn in specific markets, while our wide range of programming formats lessens the impact of changes in listening preferences. Furthermore, because of the size of our station portfolio, we are not overly dependent on the performance of any one station. The following table sets forth selected information about our portfolio of radio stations and gives effect to the consummation of the Sinclair acquisition. It does not give effect to the required disposition of three stations in Kansas City, which we are seeking to swap for stations in other markets. If we cannot arrange suitable swaps, we will sell these stations for cash. 65 71
1998 MARKET RANK AUDIENCE AUDIENCE -------------------- SHARE IN RANK IN TARGET TARGET TARGET METRO RADIO YEAR DEMO- DEMO- DEMO- MARKET(1)/STATION POPULATION REVENUE ACQUIRED FORMAT GRAPHIC GRAPHIC GRAPHIC - ----------------- ---------- ------- --------- ------------------ ----------- -------- -------- BOSTON, MA.............. 8 10 WEEI-AM 1998 Sports Talk Men 25-54 7.2 2(tie) WRKO-AM 1998 Talk Adults 2.6 16 25-54 WAAF-FM 1999 Active Rock Men 18-34 11.2 2 WQSX-FM 1999 Rhythmic AC Women 25-54 4.5 5 WWTM-AM(4) 1999 Sports Talk Men 25-54 n/a n/a SEATTLE, WA............. 14 13 KBSG-AM/FM 1996 Oldies Adults 4.1 9 25-54 KIRO-AM 1997 News/Talk/Sports Men 25-54 6.4 1(tie) KQBZ-FM 1997 Talk Adults 2.4 19 25-54 KISW-FM 1997 Active Rock Men 18-34 10.0 1 KMTT-FM 1973 Adult Rock Adults 4.2 8 25-54 KNWX-AM 1997 Business Adults 1.9 21 35-64 KNDD-FM 1996 Modern Rock Men 18-34 12.3 1 PORTLAND, OR............ 25 20 KFXX-AM 1998 Sports Talk Men 25-54 2.4 16 KGON-FM 1995 Classic Rock Men 25-54 9.7 1 KKSN-AM 1995 Nostalgia Adults 1.1 19 35-64 KKSN-FM 1998 Oldies Adults 5.6 6 25-54 KNRK-FM 1995 Modern Rock Men 18-34 6.0 5 KRSK-FM 1998 Hot Adult Women 18-34 5.6 6(tie) Contemporary KSLM-AM 1998 Sports Talk Men 25-54 n/a(6) n/a(6) SACRAMENTO, CA.......... 28 28 KCTC-AM 1998 Nostalgia Adults 3.2 9 35-64 KRXQ-FM 1997 Active Rock Men 18-34 14.8 1 KSEG-FM 1997 Classic Rock Men 24-54 9.0 1 KSSJ-FM 1997 Smooth Jazz Adults 6.0 2 25-54 KDND-FM 1997 Contemporary Hit Women 18-34 7.6 4 Radio KANSAS CITY, MO......... 30 29 KCMO-AM 1997 Talk Adults 2.2 16 25-54 KCMO-FM 1997 Oldies Adults 5.7 6 25-54 KMBZ-AM 1997 News/Talk/Sports Men 25-54 7.2 4 KUDL-FM 1998 Adult Contemporary Women 25-54 8.8 2 KYYS-FM 1997 Album Oriented Men 25-54 8.1 2 Rock WDAF-AM 1998 Country Adults 5.5 5 35-64 KKGM-AM 1999 Sports Talk Men 25-54 n/a n/a KCFX-FM(8) (pending) Classic Hits Adults 6.5 3 25-54 KQRC-FM(8) (pending) Active Rock Men 18-34 24.5 1 KCIY-FM(8) (pending) Smooth Jazz Adults 3.8 12 25-54 KXTR-FM(8) (pending) Classical Adults 2.7 15 25-54 MILWAUKEE, WI(9)........ 31 33 WEMP-AM (pending) Religious Adults n/a n/a 35-64 WMYX-FM (pending) Adult Contemporary Women 25-54 8.8 1 WXSS-FM (pending) Contemporary Hit Women 18-34 12.1 2 Radio 1998 ENTERCOM MARKET REVENUE ------------------- MARKET(1)/STATION SHARE(2) RANK(3) - ----------------- -------- -------- BOSTON, MA.............. 17.3% 3 WEEI-AM WRKO-AM WAAF-FM WQSX-FM WWTM-AM(4) SEATTLE, WA............. 37.8%(5) 1 KBSG-AM/FM KIRO-AM KQBZ-FM KISW-FM KMTT-FM KNWX-AM KNDD-FM PORTLAND, OR............ 26.5% 3 KFXX-AM KGON-FM KKSN-AM KKSN-FM KNRK-FM KRSK-FM KSLM-AM SACRAMENTO, CA.......... 18.1% 3 KCTC-AM KRXQ-FM KSEG-FM KSSJ-FM KDND-FM KANSAS CITY, MO......... 1(7) KCMO-AM KCMO-FM KMBZ-AM KUDL-FM KYYS-FM WDAF-AM KKGM-AM KCFX-FM(8) KQRC-FM(8) KCIY-FM(8) KXTR-FM(8) MILWAUKEE, WI(9)........ 8.7% 5 WEMP-AM WMYX-FM WXSS-FM
66 72
1998 MARKET RANK AUDIENCE AUDIENCE -------------------- SHARE IN RANK IN TARGET TARGET TARGET METRO RADIO YEAR DEMO- DEMO- DEMO- MARKET(1)/STATION POPULATION REVENUE ACQUIRED FORMAT GRAPHIC GRAPHIC GRAPHIC - ----------------- ---------- ------- --------- ------------------ ----------- -------- -------- NORFOLK, VA(9).......... 36 44 WPTE-FM (pending) Modern Adult Adults 7.8 4 Contemporary 18-34 WWDE-FM (pending) Adult Contemporary Women 25-54 8.3 2 WVKL-FM (pending) Oldies Adults 5.3 7 25-54 WNVZ-FM (pending) Contemporary Hit Women 18-34 9.1 2 Radio NEW ORLEANS, LA(9)...... 41 39 WSMB-AM (pending) Talk/Sports Men 25-54 .9 16(tie) WWL-AM (pending) News/Talk/Sports Men 25-54 6.7 6(tie) WEZB-FM (pending) Contemporary Hit Women 18-34 6.2 6 Radio WLMG-FM (pending) Adult Contemporary Women 25-54 6.1 7 WLTS-FM(10) (pending) Adult Contemporary Women 25-54 7.9 3 WTKL-FM(10) (pending) Oldies Adults 5.9 6 25-54 GREENSBORO, NC(9)....... 42 50 WMQX-FM (pending) Oldies Adults 6.9 5 25-54 WJMH-FM (pending) Urban Adults 14.0 1 18-34 WEAL-AM (pending) Gospel Adults 2.5 11 35-64 WQMG-FM (pending) Urban Adult Adults 7.1 4 Contemporary 25-54 BUFFALO, NY(9).......... 43 41 WBEN-AM (pending) News/Talk/Sports Men 25-54 5.3 6 WMJQ-FM (pending) Adult Contemporary Women 25-54 7.8 6 WWKB-AM (pending) Sports Adults .8 17(tie) 35-64 WKSE-FM (pending) Contemporary Hit Women 18-34 18.9 1 Radio WGR-AM (pending) News/Talk Adults 3.8 10 25-54 WWWS-AM (pending) Urban Oldies Adults 2.4 12 25-54 MEMPHIS, TN(9).......... 46 40 WOGY-FM (pending) Country Adults 3.8 9(tie) 25-54 WJCE-AM (pending) Urban Oldies Women 25-54 .6 19(tie) WRVR-FM (pending) Soft Adult Women 25-54 8.0 4 Contemporary ROCHESTER, NY........... 50 55 WBBF-FM 1998 Oldies Adults 6.9 5 25-54 WBEE-FM 1998 Country Adults 8.6 2 25-54 WEZO-AM 1998 Nostalgia Adults 2.4 10 35-64 WQRV-FM 1998 Classic Hits Adults 3.1 11 25-54 GREENVILLE/SPARTANBURG, SC(9)................. 58 61 WFBC-FM (pending) Contemporary Hit Women 18-49 14.2 1 Radio WSPA-FM (pending) Soft Adult Women 25-54 8.1 5(tie) Contemporary WYRD-AM(11) (pending) News/Talk Adults 1.1 14 25-54 WORD-AM(11) (pending) News/Talk Adults .8 15 25-54 WSPA-AM (pending) Full Service/Talk Adults 6.4 7 25-54 WOLI-FM(12) (pending) Oldies Adults 2.4 9 25-54 WOLT-FM(12) (pending) Oldies Adults 2.2 11 25-54 1998 ENTERCOM MARKET REVENUE ------------------- MARKET(1)/STATION SHARE(2) RANK(3) - ----------------- -------- -------- NORFOLK, VA(9).......... 26.8% 1 WPTE-FM WWDE-FM WVKL-FM WNVZ-FM NEW ORLEANS, LA(9)...... 41.9% 1 WSMB-AM WWL-AM WEZB-FM WLMG-FM WLTS-FM(10) WTKL-FM(10) GREENSBORO, NC(9)....... 24.2% 2 WMQX-FM WJMH-FM WEAL-AM WQMG-FM BUFFALO, NY(9).......... 38.8% 1 WBEN-AM WMJQ-FM WWKB-AM WKSE-FM WGR-AM WWWS-AM MEMPHIS, TN(9).......... 20.1% 2 WOGY-FM WJCE-AM WRVR-FM ROCHESTER, NY........... 21.4% 3 WBBF-FM WBEE-FM WEZO-AM WQRV-FM GREENVILLE/SPARTANBURG, SC(9)................. 23.8% 3 WFBC-FM WSPA-FM WYRD-AM(11) WORD-AM(11) WSPA-AM WOLI-FM(12) WOLT-FM(12)
67 73
1998 MARKET RANK AUDIENCE AUDIENCE -------------------- SHARE IN RANK IN TARGET TARGET TARGET METRO RADIO YEAR DEMO- DEMO- DEMO- MARKET(1)/STATION POPULATION REVENUE ACQUIRED FORMAT GRAPHIC GRAPHIC GRAPHIC - ----------------- ---------- ------- --------- ------------------ ----------- -------- -------- WILKES-BARRE/ SCRANTON, PA(9)................. 64 69 WGBI-AM (pending) News/Talk/Sports Adults .2 25 35-64 WGGI-FM (pending) Country Adults .2 24(tie) 25-54 WKRZ-FM (pending) Contemporary Hit Adults 14.1 1 Radio 18-49 WWFH-FM (pending) Soft Hits Women 25-54 .8 16(tie) WILP-AM (pending) News/Talk/Sports Adults n/a n/a 35-64 WKRF-FM (pending) Contemporary Hit Adults .5 18(tie) Radio 18-49 WSHG-FM (pending) Soft Hits Women 25-54 1.6 11(tie) WILK-AM (pending) News/Talk/Sports Adults 2.5 8(tie) 35-64 WGGY-FM (pending) Country Adults 10.2 3 25-54 GAINESVILLE/OCALA, FL... 98 124 WKTK-FM 1986 Adult Contemporary Women 25-54 11.8 1 WSKY-FM 1998 News Talk Adults 2.9 9 25-54 LONGVIEW/KELSO, WA...... N/A N/A KBAM-AM 1998 Country Adults n/a n/a 25-54 KEDO-AM 1997 Oldies Adults n/a n/a 25-54 KLYK-FM 1997 Adult Contemporary Women 25-54 n/a n/a KRQT-FM 1998 Classic Rock Men 25-54 n/a n/a 1998 ENTERCOM MARKET REVENUE ------------------- MARKET(1)/STATION SHARE(2) RANK(3) - ----------------- -------- -------- WILKES-BARRE/ SCRANTON, PA(9)................. 38.6% 1 WGBI-AM WGGI-FM WKRZ-FM WWFH-FM WILP-AM WKRF-FM WSHG-FM WILK-AM WGGY-FM GAINESVILLE/OCALA, FL... 20.8% 2 WKTK-FM WSKY-FM LONGVIEW/KELSO, WA...... N/A N/A KBAM-AM KEDO-AM KLYK-FM KRQT-FM
- ------------------ (1) Our stations are in some instances licensed to communities other than the named principal community for the market. (2) We derived the 1998 Entercom Market Revenue Share for each market by adding the 1998 market revenue share of each of our stations in that market. (3) 1998 Entercom Market Revenue Rank for each market is the ranking, by 1998 market revenue, of our group of radio stations in that market among all other groups of radio stations in that market. (4) Station competes in the adjacent community of Worcester, Massachusetts and simulcasts virtually all of the programming of WEEI-AM. (5) We also sell substantially all of the advertising time of a sixth FM station in the Seattle market under a joint sales agreement. The revenues from these sales are included in 1998 Entercom Market Revenue Share. (6) KLSM-AM is licensed to Salem, Oregon, within the Portland market and simulcasts KFXX-AM programming. (7) 1998 Entercom Market Revenue Share for the Kansas City market is a combination of Entercom's existing cluster and the Sinclair cluster that we expect to acquire. Because we must divest three stations in the Kansas City market, 1998 Market Revenue Share in Kansas City will decline, although we believe that 1998 Entercom Market Revenue Rank will remain unchanged. (8) Station to be acquired upon consummation of Sinclair acquisition. (9) All stations in this market to be acquired upon consummation of the Sinclair acquisition. (10) Time brokerage agreement commenced in 1997. Sinclair has exercised an option to acquire this station. We expect to either acquire this station directly in the Sinclair acquisition or assume Sinclair's option to acquire it. (11) WYRD-AM and WORD-AM simulcast their programming. (12) Operated under joint sales agreement. In April 1996, Sinclair exercised an option to acquire this station. We expect to either acquire this station directly in the Sinclair acquisition or assume Sinclair's option to acquire it. 68 74 COMPETITION; CHANGES IN BROADCASTING INDUSTRY The radio broadcasting industry is highly competitive. The success of each of our stations depends largely upon its audience ratings and its share of the overall advertising revenue within its market. Our stations compete for listeners and advertising revenue directly with other radio stations within their respective markets. Radio stations compete for listeners primarily on the basis of program content that appeals to a particular demographic group. By building a strong listener base consisting of a specific demographic group in each of our markets, we are able to attract advertisers seeking to reach those listeners. The following are some of the factors that are important to a radio station's competitive position: - management experience; - the station's local audience rank in its market; - transmitter power; - assigned frequency; - audience characteristics; - local program acceptance; and - the number and characteristics of other radio stations and other advertising media in the market area. In addition, we attempt to improve our competitive position with promotional campaigns aimed at the demographic groups targeted by our stations and by sales efforts designed to attract advertisers. Recent changes in the Communications Act and the FCC's policies and rules permit increased ownership and operation of multiple local radio stations. Despite the competitiveness within the radio broadcasting industry, some barriers to entry exist. The operation of a radio broadcast station requires a license from the FCC. The number of radio stations that can operate in a given market is limited by strict AM interference criteria and the availability of FM radio frequencies allotted by the FCC to communities in that market. The number of stations that a single entity may operate in a market is further limited by the FCC's multiple ownership rules that regulate the number of stations serving the same area that may be owned and controlled by a single entity. Our stations also compete for audiences and advertising revenues within their respective markets directly with other radio stations, as well as with other media such as newspapers, magazines, network and cable television, outdoor advertising and direct mail. In addition, the radio broadcasting industry is subject to competition from new media technologies that are being developed or introduced such as (1) satellite delivered audio radio service, which could result in the introduction of new satellite radio services with sound quality equivalent to that of compact discs; (2) audio programming by cable systems, direct broadcast satellite systems, Internet content providers, personal communications services and other digital audio broadcast formats; and (3) in-band on-channel digital radio, which could provide multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services. The FCC is also considering proposals for the establishment of "microbroadcasting" stations, low-powered FM stations that would be designed to serve small localized areas. The radio broadcasting 69 75 industry historically has grown despite the introduction of new technologies for the delivery of entertainment and information, such as television broadcasting, cable television, audio tapes and compact discs. A growing population and greater availability of radios, particularly car and portable radios, have contributed to this growth. We cannot assure you, however, that this historical growth will continue or that the development or introduction in the future of any new media technology will not have an adverse effect on the radio broadcasting industry. The FCC has adopted licensing and operating rules for satellite delivered audio and in April 1997 awarded two licenses for this service. Satellite delivered audio may provide a medium for the delivery by satellite or terrestrial means of multiple new audio programming formats to local and/or national audiences. Digital technology also may be used in the future by terrestrial radio broadcast stations either on existing or alternate broadcasting frequencies, and the FCC has stated that it will consider making changes to its rules to permit AM and FM radio stations to offer digital sound following industry analysis of technical standards. In addition, the FCC has authorized an additional 100 kHz of bandwidth for the AM band and has allotted frequencies in this new band to certain existing AM station licensees that applied for migration to the expanded AM band, subject to the requirement that at the end of a transition period, those licensees return to the FCC either the license for their existing AM band station or the license for the expanded AM band station. We cannot predict what other matters might be considered in the future by the FCC, nor can we assess in advance what impact, if any, the implementation of any of these proposals or changes might have on our business. We employ a number of on-air personalities and generally enter into employment agreements with these personalities to protect our interests in those relationships that we believe to be valuable. The loss of some of these personalities could result in a short-term loss of audience share, but we do not believe that the loss would have a material adverse effect on our business. FEDERAL REGULATION OF RADIO BROADCASTING The radio broadcasting industry is subject to extensive and changing regulation of, among other things, program content, advertising content, technical operations and business and employment practices. The ownership, operation and sale of radio stations are subject to the jurisdiction of the FCC. Among other things, the FCC: - assigns frequency bands for broadcasting; - determines the particular frequencies, locations and operating power of stations; - issues, renews, revokes and modifies station licenses; - determines whether to approve changes in ownership or control of station licenses; - regulates equipment used by stations; and - adopts and implements regulations and policies that directly affect the ownership, operation and employment practices of stations. The FCC has the power to impose penalties for violations of its rules or the Communications Act, including the imposition of monetary forfeitures, the issuance of 70 76 short-term licenses, the imposition of a condition on the renewal of a license, and the revocation of operating authority. The following is a brief summary of certain provisions of the Communications Act and of specific FCC regulations and policies. The summary is not a comprehensive listing of all of the regulations and policies affecting radio stations. Reference should be made to the Communications Act, FCC rules, and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of radio stations. FCC LICENSES. Radio stations operate pursuant to renewable broadcasting licenses that are ordinarily granted by the FCC for maximum terms of eight years. The FCC licenses for our stations are held by some of our subsidiaries. During the periods when renewal applications are pending, petitions to deny license renewals can be filed by interested parties, including members of the public. The FCC is required to hold hearings on a station's renewal application if a substantial or material question of fact exists as to whether the station has served the public interest, convenience and necessity. If, as a result of an evidentiary hearing, the FCC determines that the licensee has failed to meet certain requirements and that no mitigating factors justify the imposition of a lesser sanction, then the FCC may deny a license renewal application. Historically, FCC licenses have generally been renewed. We have no reason to believe that our licenses will not be renewed in the ordinary course, although there can be no assurance to that effect. The non-renewal of one or more of our licenses could have a material adverse effect on our business. The following table sets forth the market, call letters, FCC license classification, antenna height above average terrain ("HAAT"), power, frequency and FCC license expiration date (a station may continue to operate beyond the expiration date if a timely filed license renewal application is pending) of each of the stations that we will own or operate upon the consummation of the Sinclair acquisition. The table does not give effect to the required divestiture of three Kansas City stations.
FCC HAAT POWER IN EXPIRATION DATE MARKET(1) STATION CLASS (IN METERS) FREQUENCY KILOWATTS(2) OF FCC LICENSE - --------- ---------- ----- ----------- --------- ------------ --------------- Boston, MA.................. WEEI-AM B * 850 kHz 50 April 1, 2006 WRKO-AM B * 680 kHz 50 April 1, 2006 WAAF-FM B 239 107.3 MHz 20 April 1, 2006 WQSX-FM B 179 93.7 MHz 34 April 1, 2006 WWTM-AM B * 1440 kHz 5 April 1, 2006 Seattle, WA................. KBSG-AM B * 1210 kHz 27.5-D February 1, 2006 10.0-N KBSG-FM C 729 97.3 MHz 55 February 1, 2006 KIRO-AM A * 710 kHz 50 February 1, 2006 KISW-FM C 350 99.9 MHz 100 February 1, 2006 KMTT-FM C 714 103.7 MHz 58 February 1, 2006 KQBZ-FM C 714 100.7 MHz 58 February 1, 2006 KNWX-AM B * 770 kHz 50-D February 1, 2006 5-N KNDD-FM C 714 107.7 MHz 58 February 1, 2006 Portland, OR................ KFXX-AM B * 910 kHz 5 February 1, 2006 KGON-FM C 386 92.3 MHz 100 February 1, 2006 KKSN-AM B * 1520 kHz 50-D February 1, 2006 15-N KKSN- FM C 386 97.1 MHz 100 February 1, 2006 KNRK-FM C2 259 94.7 MHz 17 February 1, 2006 KRSK-FM C 561 105.1 MHz 100 February 1, 2006 KSLM-AM B * 1390 kHz 5-D February 1, 2006 0.69-N
71 77
FCC HAAT POWER IN EXPIRATION DATE MARKET(1) STATION CLASS (IN METERS) FREQUENCY KILOWATTS(2) OF FCC LICENSE - --------- ---------- ----- ----------- --------- ------------ --------------- Sacramento, CA.............. KCTC-AM B * 1320 kHz 5 December 1, 2005 KRXQ-FM B 151 98.5 MHz 50 December 1, 2005 KSEG-FM B 152 96.9 MHz 50 December 1, 2005 KSSJ-FM B1 99 94.7 MHz 25 December 1, 2005 KDND-FM B 123 107.9 MHz 50 December 1, 2005 Kansas City, MO............. KCMO-AM B * 710 kHz 10-D February 1, 2005 5-N KCMO-FM C 322 94.9 MHz 100 February 1, 2005 KMBZ-AM B * 980 kHz 5 February 1, 2005 KUDL-FM C 303 98.1 MHz 100 June 1, 2005 KYYS-FM C 308 99.7 MHz 100 February 1, 2005 WDAF-AM B * 610 kHz 5 February 1, 2005 KKGM-AM(3) B * 1250 kHz 25-D June 1, 2005 3.7-N KCFX-FM(4) C1 303 101.1 MHz 87.0 February 1, 2005 KQRC-FM(4) C 322 98.9 MHz 100.0 February 1, 2005 KCIY-FM(4) C1 299 101 MHz 100.0 February 1, 2005 KXTR-FM(4) C 300 96.5 MHz 99.0 February 1, 2005 Milwaukee, WI(5)............ WEMP-AM B * 1250 kHz 5.0 December 1, 2003 WMYX-FM B 137 99.1 MHz 50.0 December 1, 2003 WXSS-FM B 256 103.7 MHz 19.5 December 1, 2003 Norfolk, VA(5).............. WPTE-FM B 152 94.9 MHz 50.0 October 1, 2003 WWDE-FM B 152 101.3 MHz 50.0 October 1, 2003 WVKL-FM B 268 95.7 MHz 40.0 October 1, 2003 WNVZ-FM B 146 104.5 MHz 49.0 December 1, 2003 New Orleans, LA(5).......... WSMB-AM B * 1350 kHz 5.0 June 1, 2004 WWL-AM A * 870 kHz 50.0 June 1, 2004 WEZB-FM C 300 97.1 MHz 100.0 June 1, 2004 WLMG-FM C 300 101.9 MHz 100.0 June 1, 2004 WLTS-FM C1 275 105.3 MHz 100.0 June 1, 2004 WTKL-FM C 300 95.7 MHz 100.0 June 1, 2004 Greensboro, NC(5)........... WMQX-FM C 335 93.1 MHz 99.0 December 1, 2003 WJMH-FM C 483 101.9 MHz 99.0 December 1, 2003 WEAL-AM D * 1500 kHz 1.0 December 1, 2003 WQMG-FM C 376 97.1 MHz 99.0 December 1, 2003 Buffalo, NY(5).............. WBEN-AM B * 930 kHz 5.0 June 1, 2006 WMJQ-FM B 408 102.5 MHz 110.0 June 1, 2006 WWKB-AM A * 1520 kHz 50.0 June 1, 2006 WKSE-FM B 128 98.8 MHz 46.0 June 1, 2006 WGR-AM B * 550 kHz 5.0 June 1, 2006 WWWS-AM C * 1400 kHz 1.0 June 1, 2006 Memphis, TN(5).............. WOGY-FM C2 141 94.1 MHz 50.0 August 1, 2004 WJCE-AM B * 680 kHz 10.0 August 1, 2004 WRVR-FM C1 229 104.5 MHz 100.0 August 1, 2004 Rochester, NY............... WBBF-FM B 172 98.9 MHz 37 June 1, 2006 WBEE-FM B 152 92.5 MHz 50 June 1, 2006 WEZO-AM B * 950 kHz 1 June 1, 2006 WQRV-FM A 119 93.3 MHz 4 June 1, 2006 Greenville/Spartanburg, SC(5)..................... WFBC-FM C 564 93.7 MHz 100.0 December 1, 2003 WSPA-FM C 580 98.9 MHz 100.0 December 1, 2003 WYRD-AM B 184 1330 kHz 5.0 December 1, 2003 WORD-AM B * 910 kHz 3.6 December 1, 2003 WSPA-AM B * 950 kHz 5.0 December 1, 2003 WOLI-FM A 100 103.9 MHz 6 December 1, 2003 WOLT-FM A 151 103.3 MHz 2.7 December 1, 2003
72 78
FCC HAAT POWER IN EXPIRATION DATE MARKET(1) STATION CLASS (IN METERS) FREQUENCY KILOWATTS(2) OF FCC LICENSE - --------- ---------- ----- ----------- --------- ------------ --------------- Wilkes-Barre/Scranton, PA(5)..................... WGBI-AM B * 910 kHz 1.0-D .5-N August 1, 2006 WGGI-FM A 100 95.9 MHz 6.0 August 1, 2006 WKRZ-FM B 357 98.5 MHz 8.7 August 1, 2006 WWFH-FM A 207 103.1 MHz .73 August 1, 2006 WILP-AM B * 1300 kHz 5.0 August 1, 2006 WKRF-FM A 267 107.9 MHz .84 August 1, 2006 WSHG-FM A 22 102.3 MHz 5.8 August 1, 2006 WILK-AM B * 980 kHz 5.0 August 1, 2006 WGGY-FM B 338 101.3 MHz 7.0 August 1, 2006 Gainesville/Ocala, FL....... WKTK-FM C1 299 98.5 MHz 100 February 1, 2004 WSKY-FM(6) C2 289 97.3 MHz 13.5 February 1, 2004 Longview/Kelso, OR.......... KBAM-AM D * 1270 kHz 5-D February 1, 2006 0.083-N KEDO-AM C * 1400 kHz 1 February 1, 2006 KLYK-FM A 262 105.5 MHz 0.7 February 1, 2006 KRQT-FM C3 528 107.1 MHz 0.74 February 1, 2006
- ------------------ * Not applicable for AM transmission facilities. (1) Metropolitan market served; city of license may differ. (2) Pursuant to FCC rules and regulations, many AM radio stations are licensed to operate at a reduced power during the nighttime broadcasting hours, which results in reducing the radio station's coverage during the nighttime hours of operation. Both power ratings are shown, where applicable. For FM stations, the maximum effective radiated power in the main lobe is given. (3) KKGM-AM also has a construction permit to broadcast with call letters KBJC-AM at 1660 kHz in the expanded AM band with 10 kw-D and 1 kw-N. The FCC rules require that at the end of a five year transition period we must elect to operate on either the 1250 kHz frequency or the 1660 kHz frequency and surrender the other frequency to the FCC. (4) Station to be acquired upon consummation of the Sinclair acquisition. (5) All stations in this market to be acquired upon consummation of the Sinclair acquisition. (6) WSKY-FM has operated since June 1998 with the facilities shown. A license application for these facilities has been filed with the FCC. TRANSFERS OR ASSIGNMENT OF LICENSES. The Communications Act prohibits the assignment of broadcast licenses or the transfer of control of broadcast licensee without the prior approval of the FCC. In determining whether to grant such approval, the FCC considers a number of factors pertaining to the licensee (and proposed licensee), including: - compliance with the various rules limiting common ownership of media properties in a given market; - the "character" of the licensee and those persons holding "attributable" interests in the licensee; and - compliance with the Communications Act's limitations on alien ownership as well as compliance with other FCC regulations and policies. To obtain FCC consent to assign or transfer control of a broadcast license, appropriate applications must be filed with the FCC. If the application involves a "substantial change" in ownership or control, the application must be placed on public notice for not less than 30 days during which time petitions to deny or other objections against the application may be filed by interested parties, including members of the public. If the application does not involve a "substantial change" in ownership or control, it is a "pro forma" application. The "pro forma" application is nevertheless subject to having informal objections filed against it. When passing on an assignment or transfer application, the FCC is prohibited from considering whether the public interest might be served by an assignment or transfer of the 73 79 broadcast license to any party other than the assignee or transferee specified in the application. MULTIPLE OWNERSHIP RULES. The Communications Act and FCC rules impose specific limits on the number of commercial radio stations an entity can own in a single market. These rules preclude us from acquiring certain stations we might otherwise seek to acquire, including the acquisition of more than one additional radio station in Kansas City, where we already own seven stations. The rules also effectively prevent us from selling stations in a market to a buyer that has reached its ownership limit in the market. The local radio ownership rules are as follows: - in markets with 45 or more commercial radio stations, ownership is limited to eight commercial stations, no more than five of which can be either AM or FM; - in markets with 30 to 44 commercial radio stations, ownership is limited to seven commercial stations, no more than four of which can be either AM or FM; - in markets with 15 to 29 commercial radio stations, ownership is limited to six commercial stations, no more than four of which can be either AM or FM; and - in markets with 14 or fewer commercial radio stations, ownership is limited to five commercial stations or no more than 50% of the market's total, whichever is lower, and no more than three of which can be either AM or FM. The FCC is also reportedly considering proposing a policy that would give special review to a proposed transaction if it would enable a single owner to attain a high degree of revenue concentration in a market. In addition to the limits on the number of radio stations that a single owner may own, the FCC's radio/television cross-ownership rule prohibits, absent a waiver, the same owner from owning a radio broadcast station and a television broadcast station in the same geographic market, and the FCC's broadcast/newspaper cross-ownership rule prohibits the same owner from owning a broadcast station and a daily newspaper in the same geographic market. The FCC recently revised its radio/television cross-ownership rule to allow for greater common ownership of television and radio stations. The revised rule is not yet in effect. When it is effective, the revised radio/television cross-ownership rule will permit a single owner to own up to two television stations, consistent with the FCC's rules on common ownership of television stations, together with one radio station in all markets. In addition, an owner will be permitted to own additional radio stations, not to exceed the local ownership limits for the market, as follows: - in markets where 20 media voices will remain, an owner may own an additional 5 radio stations, or, if the owner only has one television station, an additional 6 radio stations; and - in markets where 10 media voices will remain, an owner may own an additional 3 radio stations. A "media voice" includes each independently-owned, full power television and radio station and each daily newspaper, plus one voice for all cable television systems operating in the market. The FCC generally applies its ownership limits to "attributable" interests held by an individual, corporation, partnership or other association. In the case of corporations directly 74 80 or indirectly controlling broadcast licenses, the interests of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the corporation's voting stock are generally attributable. In addition, certain passive investors are attributable if they hold 10% or more of the corporation's voting stock, although recent FCC rule changes, when they go into effect, will increase the threshold for these passive investors to 20%. If a single individual or entity controls more than 50% of a corporation's voting stock, however, the interests of other shareholders are generally not attributable unless the shareholders are also officers or directors of the corporation. David J. Berkman, one of our directors, is an officer and director of a corporation that owns five radio stations which serve markets in Ohio and West Virginia, and his interest in these radio stations constitutes an attributable interest under the FCC rules. The FCC recently adopted a new rule, known as the equity-debt-plus or EDP rule that causes certain creditors or investors to be attributable owners of a station, regardless of whether there is a single majority shareholder. Under this new rule, a major programming supplier or a same-market owner will be an attributable owner of a station if the supplier or owner holds debt or equity, or both, in the station that is greater than 33% of the value of the station's total debt plus equity. A major programming supplier includes any programming supplier that provides more than 15% of the station's weekly programming hours. A same-market owner includes any attributable owner of a media company, including broadcast stations, cable television and newspapers, located in the same market as the station, but only if the owner is attributable under an FCC attribution rule other than the EDP rule. Both the current and the revised attribution rules limit the number of radio stations we may acquire or own in any market. The Communications Act prohibits the issuance or holding of broadcast licenses by aliens, including any corporation if more than 20% of its capital stock is owned or voted by aliens. In addition, the FCC may prohibit any corporation from holding a broadcast license if the corporation is directly or indirectly controlled by any other corporation of which more than 25% of the capital stock is owned of record or voted by aliens, if the FCC finds that the prohibition is in the public interest. Our articles of incorporation prohibit the ownership, voting and transfer of our capital stock in violation of the FCC restrictions, and prohibit the issuance of capital stock or the voting rights such capital stock represents to or for the account of aliens or corporations otherwise subject to domination or control by aliens in excess of the FCC limits. The articles of incorporation authorize our board of directors to enforce these prohibitions. In addition, the articles of incorporation provide that shares of our capital stock determined by our board of directors to be owned beneficially by an alien or an entity directly or indirectly owned by aliens in whole or in part shall be subject to redemption by us by action of the board of directors to the extent necessary, in the judgment of the board of directors, to comply with these alien ownership restrictions. TIME BROKERAGE AGREEMENTS. Over the past few years, a number of radio stations have entered into what have commonly been referred to as time brokerage agreements. While these agreements may take varying forms, under a typical time brokerage agreement, separately owned and licensed radio stations agree to enter into cooperative arrangements of varying sorts, subject to compliance with the requirements of antitrust laws and with FCC's rules and policies. Under these arrangements, separately-owned stations could agree to function cooperatively in programming, advertising sales and similar matters, subject to the requirement that the licensee of each station maintain independent control over the programming and operations of its own station. One typical type of time 75 81 brokerage agreement is a programming agreement between two separately-owned radio stations serving a common service area, whereby the licensee of one station provides substantial portions of the broadcast programming for airing on the other licensee's station, subject to ultimate editorial and other controls being exercised by the latter licensee, and sells advertising time during those program segments. The FCC's rules provide that a radio station that brokers more than 15% of the weekly broadcast time on another station serving the same market will be considered to have an attributable ownership interest in the brokered station for purposes of FCC's local radio ownership limits. As a result, in a market where we own a radio station, we would not be permitted to enter into a time brokerage agreement with another radio station in the same market if we could not own the brokered station under the local ownership rules, unless our programming on the brokered station constituted 15% or less of the brokered station's programming time on a weekly basis. The FCC has recently revised this rule so that, when the revised rule takes effect, the attribution for radio time brokerage agreements will apply for all of the FCC's multiple ownership rules, as well as its local radio ownership rules. FCC rules also prohibit a broadcast station from duplicating more than 25% of its programming on another station in the same broadcast service (i.e., AM-AM or FM-FM) through a time brokerage agreement where the brokered and brokering stations which it owns or programs serve substantially the same area. PROGRAMMING AND OPERATION. The Communications Act requires broadcasters to serve the "public interest." The FCC gradually has relaxed or eliminated many of the more formalized procedures it had developed in the past to promote the broadcast of certain types of programming responsive to the needs of a station's community of license. A licensee continues to be required, however, to present programming that is responsive to issues of the station's community of license and to maintain records demonstrating this responsiveness. Complaints from listeners concerning a station's programming often will be considered by the FCC when it evaluates renewal applications of a licensee, although listener complaints may be filed at any time, are required to be maintained in the station's public file and generally may be considered by the FCC at any time. Stations also must pay regulatory and application fees and follow various rules promulgated under the Communications Act that regulate, among other things, political advertising, sponsorship identifications, the advertisement of contests and lotteries, obscene and indecent broadcasts, and technical operations, including limits on human exposure to radio frequency radiation. In addition, the FCC rules formerly required that licensees develop and implement programs designed to promote equal employment opportunities and submit reports to the FCC with respect to these matters on an annual basis and in connection with a renewal application. The U.S. Court of Appeals for the District of Columbia has declared some of these employment rules unconstitutional. The FCC recently initiated a rulemaking proceeding to reestablish its employment regulations. PROPOSED AND RECENT CHANGES. Congress and the FCC may in the future consider and adopt new laws, regulations and policies regarding a wide variety of matters that could (1) affect, directly or indirectly, the operation, ownership and profitability of our radio stations, (2) result in the loss of audience share and advertising revenues for our radio stations, and (3) affect our ability to acquire additional radio stations or to finance those acquisitions. Such matters may include: - regulatory fees, spectrum use fees, or other fees on FCC licenses; - foreign ownership of broadcast licenses; 76 82 - restatement in revised form of FCC's equal employment opportunity rules and revisions to the FCC's rules relating to political broadcasting; - technical and frequency allocation matters; - proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages on radio; and - changes in the FCC's cross-interest, multiple ownership and attribution policies. The FCC currently is considering authorizing the use of In-Band On-Channel(TM) technology for FM radio stations. In-Band On-Channel technology would permit an FM station to transmit radio programming in both analog and digital formats, or in digital only formats, using the bandwidth that the radio station is currently licensed to use. It is unclear what regulations the FCC will adopt regarding In-Band On-Channel technology and what effect such regulations would have on our business or the operations of its radio stations. The FCC is considering a proposal to authorize the operation of low power radio and "microradio" within the existing FM band. Low power radio and microradio would operate at power levels below that of full power FM radio stations, such as those we own. The FCC has proposed that low power radio and microradio stations not be subject to the same level of regulation to which full power radio stations are subject. We cannot predict the outcome of this FCC proceeding or what effect, including interference effect, that low power radio and microradio would have on the operations of our radio stations or on our ability to engage in digital transmission of our radio programming. Finally, the FCC has adopted procedures for the auction of broadcast spectrum in circumstances where two or more parties have filed for new or major change applications which are mutually exclusive. Such procedures may limit our efforts to modify or expand the broadcast signals of our stations. We cannot predict what other matters might be considered in the future by the FCC or Congress, nor can we judge in advance what impact, if any, the implementation of any of these proposals or changes might have on our business. FEDERAL ANTITRUST LAWS. The agencies responsible for enforcing the federal antitrust laws, the Federal Trade Commission or the Department of Justice, may investigate certain acquisitions. We cannot predict the outcome of any specific Department of Justice or Federal Trade Commission investigation. Any decision by the Federal Trade Commission or the Department of Justice to challenge a proposed acquisition could affect our ability to consummate the acquisition or to consummate it on the proposed terms. For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino Act requires the parties to file Notification and Report Forms with the Federal Trade Commission and the Department of Justice and to observe specified waiting period requirements before consummating the acquisition. If the investigating agency raises substantive issues in connection with a proposed transaction, then the parties frequently engage in lengthy discussions or negotiations with the investigating agency concerning possible means of addressing those issues, including restructuring the proposed acquisition or divesting assets. In addition, the investigating agency could file suit in federal court to enjoin the acquisition or to require the divestiture of assets, among other remedies. Acquisitions that are not required to be reported under the Hart-Scott-Rodino Act may be investigated by the Federal Trade Commission or the Department of Justice under the antitrust laws before or 77 83 after consummation. In addition, private parties may under certain circumstances bring legal action to challenge an acquisition under the antitrust laws. The consummation of the Sinclair acquisition is subject to the notification filing requirements and applicable waiting periods of the Department of Justice and the Federal Trade Commission, and we have filed the applicable Hart-Scott-Rodino notices. On September 27, 1999, the applicable waiting period for the multi-market agreement expired. However, on September 24, 1999, we received a "second request" from the Department of Justice with respect to the Sinclair Kansas City agreement and therefore the Department of Justice is currently conducting a more detailed investigation of our acquisition of the four stations from Sinclair in the Kansas City market. Although we believe that the concerns of the Department of Justice will be resolved by our disposition of three stations in the Kansas City market that we are required to make in order to comply with FCC rules, we cannot assure you that this will be the case. As part of its increased scrutiny of radio station acquisitions, the Department of Justice has stated publicly that it believes that local marketing agreements, joint sales agreements, time brokerage agreements and other similar agreements customarily entered into in connection with radio station transfers could violate the Hart-Scott-Rodino Act if such agreements take effect prior to the expiration of the waiting period under the Hart-Scott-Rodino Act. Furthermore, the Department of Justice has noted that joint sales agreements may raise antitrust concerns under Section 1 of the Sherman Act and has challenged joint sales agreements in certain locations. The Department of Justice also has stated publicly that it has established certain revenue and audience share concentration benchmarks with respect to radio station acquisitions, above which a transaction may receive additional antitrust scrutiny. However, to date, the Department of Justice has also investigated transactions that do not meet or exceed these benchmarks, and has cleared transactions that do exceed these benchmarks. There can be no assurance of what action the Department of Justice may take with respect to our acquisition of four stations from Sinclair in the Kansas City market. EMPLOYEES On August 31, 1999, we had a staff of 838 full-time employees and 370 part-time employees. We are a party to collective bargaining agreements with the American Federation of Television and Radio Artists, which we call AFTRA, which apply to some of our programming personnel and with the International Brotherhood of Electrical Workers which applies to some of our engineering personnel. These collective bargaining agreements expire at various times over the next three years. Our Boston AFTRA collective bargaining agreement, as extended, expired on September 14, 1999. We are currently renegotiating this agreement. However, we cannot predict the outcome of these negotiations. We believe that our relations with our employees are good. ENVIRONMENTAL As the owner, lessee or operator of various real properties and facilities, we are subject to various federal, state and local environmental laws and regulations. Historically, compliance with these laws and regulations has not had a material adverse effect on our business. There can be no assurance, however, that compliance with existing or new environmental laws and regulations will not require us to make significant expenditures of funds. 78 84 SEASONALITY Seasonal revenue fluctuations are common in the radio broadcasting industry and are due primarily to fluctuations in advertising expenditures by retailers. Our revenues and broadcast cash flows are typically lowest in the first calendar quarter. PROPERTIES AND FACILITIES The types of properties required to support each of our radio stations include offices, studios and transmitter/antenna sites. We typically lease our studio and office space with lease terms that expire in five to ten years, although we do own some of our facilities. A station's studios are generally housed with its offices in downtown or business districts. We generally consider our facilities to be suitable and of adequate size for our current and intended purposes. We own a majority of our main transmitter and antenna sites and lease the remainder of our transmitter/antenna sites with lease terms that expire, including renewal options, in periods generally ranging up to twenty years. The transmitter/antenna site for each station is generally located so as to provide maximum market coverage, consistent with the station's FCC license. In general, we do not anticipate difficulties in renewing facility or transmitter/antenna site leases or in leasing additional space or sites if required. We own substantially all of our other equipment, consisting principally of transmitting antennae, transmitters, studio equipment and general office equipment. The towers, antennae and other transmission equipment used by our stations are generally in good condition, although opportunities to upgrade facilities are continuously reviewed. Substantially all of the property that we own secures our borrowings under our credit facility. LEGAL PROCEEDINGS We currently and from time to time are involved in litigation incidental to the conduct of our business, but we are not a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on us. We entered into a preliminary agreement on February 6, 1996, to acquire the assets of radio station KWOD-FM, Sacramento, California, from Royce International Broadcasting Corporation, subject to approval by the FCC, for a purchase price of $25.0 million. Notwithstanding our efforts to pursue this transaction, the seller was nonresponsive. On July 28, 1999, we commenced a legal action seeking to enforce this agreement, and subsequently the seller filed a cross-complaint against us asking for damages and filed a separate action against our president asking for treble damages, an injunction, attorney's fees and costs. Our by-laws provide for us to indemnify our president for this claim. We intend to pursue our legal action against the seller and seek dismissal of the claims filed by the seller. Accordingly, we cannot determine if and when the transaction might occur. 79 85 THE SINCLAIR ACQUISITION OVERVIEW In August 1999, we agreed to purchase 46 radio stations from various subsidiaries of Sinclair Broadcast Group, Inc. for a total purchase price of $824.5 million. Our arrangement with Sinclair consists of two separate asset purchase agreements -- one for Sinclair's four Kansas City stations, for which the purchase price is $122.0 million, and one for the remaining 42 stations in eight other markets and other assets that we are acquiring, for which the purchase price is $702.5 million. The asset purchase agreements contain various representations and warranties of the parties, including representations and warranties regarding FCC and other government licenses or consents. We have placed a $50.0 million letter of credit in favor of Sinclair in escrow with First Union National Bank to secure our obligations under these agreements. However, in the event of our default, our total exposure under both agreements is limited to the $50.0 million letter of credit, approximately $7.0 million of which is allocated to the Kansas City agreement. In conjunction with the Sinclair acquisition, federal regulations require us to divest three stations in the Kansas City market, where we already own seven stations and Sinclair owns four stations. We are seeking to swap three Kansas City stations for stations in other markets, or if we are unable to consummate a swap, we may sell these stations for cash or pursue a combination of swaps and sales. We have not yet determined which Kansas City stations we will divest. In order to comply with federal regulations, we may put these stations into a trust for our benefit with an independent trustee until the stations are conveyed to a third party. As part of the multi-market agreement, we are acquiring 300,000 shares of common stock, at $5.00 per share, in USA Digital Radio, Inc., a developer of digital audio broadcasting technology, which will increase our total holdings in this company to 500,000 shares of common stock. CLOSING CONDITIONS Completion of the acquisitions is subject to various conditions including (1) the receipt of FCC consent to the assignment of the station licenses to Entercom, (2) the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Act and (3) the receipt of consents to the assignment of certain contracts relating to the stations to Entercom. An application seeking FCC approval was filed on August 27, 1999, and we filed the applicable Hart-Scott-Rodino notices with the Federal Trade Commission and the Department of Justice on August 27, 1999. On September 27, 1999, the applicable waiting period for the multi-market agreement expired. However, on September 24, 1999, we received a "second request" from the Department of Justice with respect to the Kansas City agreement and therefore the Department of Justice is currently conducting a more detailed investigation of our acquisition of the four stations from Sinclair in the Kansas City market. Although we believe that the concerns of the Department of Justice will be resolved by our disposition of three stations in the Kansas City market that we are required to make in order to comply with FCC rules, we cannot assure you that this will be the case. The multi-market agreement allocates the purchase price on a market by market basis and provides that a closing with respect to one market may occur, regardless of whether the closing conditions for one or more other markets have been met. Therefore, it is possible that one or more markets may close in a series of separate transactions, 80 86 although we do not expect that this will be the case for any market other than Kansas City. INDEMNIFICATION The agreements provide for standard provisions regarding indemnification of the parties to the agreement, including a threshold of $1.0 million that must be satisfied before Sinclair is obligated to make indemnification payments to us for our losses in excess of $500,000. Sinclair's indemnity obligations under the agreements are capped at $50.0 million. Sinclair's representations and warranties generally survive for a period of 12 months after closing, and we must make a claim for a breach of a representation or warranty during this survival period. PURCHASE PRICE ADJUSTMENTS Sinclair operates two New Orleans stations, WLTS-FM and WTKL-FM, pursuant to a time brokerage agreement with Phase II Broadcasting, Inc., which commenced in November 1997. Sinclair has entered into an agreement with Phase II to acquire the assets of these stations for $29.0 million plus an amount determined by a formula not to exceed $500,000. If Sinclair has not acquired the Phase II stations prior to the closing of the New Orleans market, the purchase price of the Sinclair acquisition will be decreased by the purchase price that we would be required to pay to acquire the Phase II stations, subject to adjustment, and we will assume Sinclair's rights and obligations under the acquisition agreement with Phase II. Sinclair provides sales and marketing services to two Greenville/Spartanburg stations, WOLI-FM and WOLT-FM, pursuant to a joint services agreement with Palm Broadcasting, Inc. Sinclair has exercised an option to acquire these stations in exchange for an amount equal to the outstanding amount of principal and interest due under a loan agreement between Palm Broadcasting and River City Broadcasting Company, L.P. As of June 30, 1999, the principal amount of the loan was $3.0 million plus accrued interest. If Sinclair has not acquired the Palm stations prior to the closing of the Greenville market, the purchase price of the Sinclair acquisition will be decreased by the purchase price that we would be required to pay to acquire the Palm stations, subject to adjustment, and we will assume Sinclair's rights and obligations under the acquisition agreement with Palm. We have agreed to spend a maximum of $2.0 million in addition to the purchase price on capital expenditures that Sinclair incurs in connection with the build-out of certain studio/office space in Buffalo. We have also agreed to purchase $5.0 million of advertising time on television stations owned and/or programmed by Sinclair and its affiliates at prevailing rates over the next five years. EMPLOYMENT MATTERS Generally, we have agreed to offer employment to the employees of the Sinclair stations. Sinclair has agreed generally not to hire any of its former employees for a period of 12 months after they are hired by us. FINANCIAL PENALTIES Pursuant to the multi-market agreement, if the closing on all stations has not occurred within 135 days after public notice that the applications for consent to assignment of the Sinclair licenses have been accepted for filing by the FCC, the purchase price with respect 81 87 to the stations which have not closed shall increase 0.75% if the closing has not occurred due to the failure to receive any required regulatory consent based on facts relating to us or our affiliates. The purchase price for each such market will continue to increase 0.75% at the end of each 30 day period thereafter until the later of its closing or the termination of the agreement. Pursuant to the Kansas City agreement, if closing on all stations has not occurred within 150 days after public notice that the applications for consent to assignment of the Sinclair licenses have been accepted for filing by the FCC, the purchase price shall increase 0.75% if the closing has not occurred due to the failure to receive any required regulatory consent based on facts relating to us or our affiliates. The purchase price will continue to increase 0.75% each 30 day period thereafter until the later of the closing or the termination of the agreement. TERMINATION As long as Sinclair is not in material default of the multi-market agreement, Sinclair may terminate the multi-market agreement with respect to markets not then closed (1) on the date that would otherwise be the date for closing all the markets not then closed, if we breach our representations or warranties, fail to perform our covenants or fail to make required deliveries under the contract(s), (2) one year after the date that the agreement is signed, if all of the stations under that agreement have not closed due to the failure to receive any required regulatory approval and such failure results from facts relating to us or our affiliates, (3) on or after two years after the date that the agreement is signed, if all of the stations under that agreement have not closed due to the failure to receive any necessary regulatory approval and such failure is due to facts relating to Sinclair or its affiliates or (4) on or after eighteen months after the date that the agreement is signed, with respect to the stations under that agreement that have not closed for any reason other than as provided in clause (3). In addition, Sinclair may terminate the multi-market agreement if we are in default in any material respect and the default is not cured within 30 days. Sinclair's sole remedy upon rightful termination of the multi-market agreement for a breach of the agreement by us or a failure to receive any necessary regulatory approval by August 18, 2000, based on facts relating to us or our affiliates with respect to the markets that have not already closed at the time of such termination, is their receipt, as liquidated damages of approximately $43.0 million of the $50.0 million letter of credit, less any amount of the letter of credit released to us upon the earlier closing of any other market (see below). Upon each closing of a market, a pro rata portion of the $50.0 million allocable to that market shall be released to us; provided that 45% of the value of all of Sinclair stations has closed. The Kansas City agreement has substantially the same termination provisions as the multi-market agreement, except that approximately $7.0 million of the $50.0 million letter of credit is allocated to the Kansas City Agreement. We have the right to terminate either agreement with respect to any market not then closed (1) if certain conditions to closing that agreement are not met; (2) if Sinclair is in default in any material respect with regard to the agreement being terminated and such default is not cured within 30 days; (3) fifteen months after the date the agreement is signed if all of the markets under that agreement have not closed due to the failure to receive regulatory approval due to facts relating to Sinclair or its affiliates; or (4) upon the occurrence of the conditions set forth in clause (4) above, in each case without further obligation to Sinclair. In such an event we will obtain the release of any remaining balance of the letter of credit allocable to such agreement. In the event of a default by Sinclair, we are entitled to specific performance and/or damages. 82 88 MANAGEMENT The following table provides information concerning our directors and executive officers.
NAME AGE POSITION - ---- --- -------- Joseph M. Field............. 67 Chairman of the Board and Chief Executive Officer David J. Field.............. 37 President, Chief Operating Officer and Director John C. Donlevie............ 52 Executive Vice President, Secretary, General Counsel and Director Stephen F. Fisher........... 47 Senior Vice President and Chief Financial Officer Herbert Kean, M.D. ......... 67 Director S. Gordon Elkins............ 68 Director Thomas H. Ginley, Jr., 75 Director M.D. ..................... Lee Hague................... 53 Director Marie H. Field.............. 61 Director Michael R. Hannon........... 39 Director David J. Berkman............ 38 Director
Joseph M. Field founded Entercom in 1968 and has served since our inception as our Chairman of the Board and Chief Executive Officer and was our President until September 1998. Before entering the broadcasting business, he practiced law for 14 years in New York (including service as an Assistant United States Attorney) and Philadelphia. Mr. Field served on the Board of Directors of the National Association of Broadcasters for four years as a representative of the major radio group broadcasters. He currently serves on the Boards of Directors of The Curtis Institute of Music, the Settlement Music School, the American Interfaith Institute, the Liberty Museum, the Jewish Educational and Vocational Service (JEVS) and the Philadelphia Chamber Music Society. Mr. Field has a B.A. from the University of Pennsylvania and a L.L.B. from Yale Law School. He is the spouse of Marie H. Field and the father of David J. Field. David J. Field has served as our President since September 1998, our Chief Operating Officer since April 1996 and one of our directors since November 1995. He also served as our Chief Financial Officer from 1992 to November 1998. Mr. Field joined us in 1987 and served as our Director of Finance and Corporate Development from 1987 to 1988, Vice President-Finance and Corporate Development from 1988 to 1992, Vice President-Operations and Chief Financial Officer from 1992 to 1995 and Senior Vice President-Operations and Chief Financial Officer from 1995 to 1996. Prior to joining us, he was an investment banker with Goldman, Sachs & Co. Mr. Field currently serves on the Boards of Directors of The Radio Advertising Bureau and The Wilderness Society. He has a B.A. from Amherst College and an M.B.A. from the Wharton School of the University of Pennsylvania. Mr. Field is the son of Joseph M. Field and Marie H. Field. John C. Donlevie has served as our Executive Vice President, General Counsel and one of our directors since October 1989, our Secretary since December 1998 and was our Vice President-Legal and Administrative from July 1984 when he joined us to October 1989. Prior to joining us, Mr. Donlevie practiced law for 11 years, most recently 83 89 as Corporate Counsel of Ecolaire Incorporated in Malvern, Pennsylvania. He has a B.S. from Drexel University and a J.D. from Temple University School of Law. Stephen F. Fisher has served as our Senior Vice President and Chief Financial Officer since November 1998. From 1994 to 1998, he was a Managing Director with Bachow & Associates, a private equity firm located in Bala Cynwyd, Pennsylvania. Prior to joining Bachow & Associates, Mr. Fisher held numerous operational and financial management positions over a period of 15 years, most recently as Executive Vice President with Westinghouse Broadcasting Company, Inc. (now CBS). He has an M.A. from Bob Jones University and an M.B.A. from the University of South Carolina. Herbert Kean, M.D. has served as one of our directors since our inception. In addition, he served as our Secretary from our inception until February 1984. Dr. Kean is currently a medical physician in private practice in the Philadelphia area. He has a B.S. from the University of Pennsylvania and an M.D. from Hahnemann University. S. Gordon Elkins has served as one of our directors since February 1978. He was a partner in the law firm of Stradley, Ronon, Stevens & Young from September 1962 through January 1999 and currently is affiliated with the firm. Mr. Elkins has a B.S. from Temple University and an L.L.B. from Yale Law School. Thomas H. Ginley, Jr., M.D. has served as one of our directors since January 1971 and previously served as our Secretary from February 1984 to December 1998. Dr. Ginley is President and a director of the A & T Development Corporation, Treasurer and a director of Vanessa Noel Couture, Inc. and President of Gemologist Treasury International Inc. He is a diplomat of the National Board as well as a fellow of the American College of Surgeons. Dr. Ginley has an M.D. from Georgetown University. Lee Hague has served as one of our directors since March 1980. He has served as an independent consultant to various broadcasting groups and provides financial advisory and media brokering services to the industry. Mr. Hague is currently the Chairman of the Board and Chief Executive Officer of Aspect Holdings Inc. Prior to joining Aspect Holdings Inc. in 1998, he served as President of Hague & Company over a period of 20 years. Mr. Hague has over 20 years' experience in the radio industry. He has a B.S. from Northwestern University and an M.M. from the J.L. Kellogg Graduate School of Management, Northwestern University. Marie H. Field has served as one of our directors since October 1989. She served for over 25 years as a teacher in public and private schools in New York and Philadelphia. Mrs. Field serves on the Board of Directors of the Ovarian Cancer Research Fund in New York and the Board of Overseers of the University of Pennsylvania School of Social Work. She has a B.A. from Barnard College. Mrs. Field is the spouse of Joseph M. Field and the mother of David J. Field. Michael R. Hannon has served as one of our directors since December 1998. He is a general partner of Chase Capital, a general partnership which invests in international private equity opportunities with a significant concentration in the media and telecommunications industries. Prior to joining Chase Capital in 1988, Mr. Hannon held various positions at Morgan Stanley & Co. Incorporated. He currently serves on the Boards of Directors of TeleCorp PCS, Formus Communications and Financial Equity Partners. Mr. Hannon has a B.A. from Yale University and an M.B.A. from Columbia Business School. 84 90 David J. Berkman has served as one of our directors since the consummation of our initial public offering in January 1999. He has served as Executive Vice President and is on the Board of Directors of The Associated Group, Inc., a company involved in selected aspects of the telecommunications business, since 1994. As part of his duties for The Associated Group, Inc., Mr. Berkman serves as Chief Executive Officer and is on the Board of Directors of True Position, Inc., a company engaged in the provision of wireless location products and services. He also currently serves on the Boards of Directors of Teligent, Inc., V-Span, Inc. and Portatel del Sureste, S.A. de C.V. Mr. Berkman has a B.S. from the Wharton School of the University of Pennsylvania. COMMITTEES OF THE BOARD OF DIRECTORS Our board of directors has established an audit committee and a compensation committee. AUDIT COMMITTEE. The audit committee consists of Messrs. Berkman and Hague. The responsibilities of the audit committee include: - recommending to the board of directors independent public accountants to conduct the annual audit of our financial statements; - reviewing the proposed scope of the audit and approving the audit fees to be paid; - reviewing our accounting and financial controls with the independent public accountants and our financial and accounting staff; and - reviewing and approving transactions, other than compensation matters, between us and our directors, officers and affiliates. COMPENSATION COMMITTEE. Our compensation committee consists of Messrs. Ginley, Kean and Hannon. The compensation committee provides a general review of our compensation plans to ensure that they meet corporate objectives. The responsibilities of the compensation committee also include administering and interpreting our Employee Stock Purchase Plan and the 1998 Equity Compensation Plan, including selecting the officers, salaried employees and other qualified recipients that will be granted awards under the 1998 Equity Compensation Plan. DIRECTOR COMPENSATION During the last calendar year, all of our directors were compensated $200 for each board meeting that they attended in person. Following the consummation of our initial public offering, all of our non-employee directors became entitled to receive a fee of $1,000 for each board meeting and $500 for each committee meeting that they attend in person and $250 for each telephonic meeting of the board or a committee. Employee directors are not entitled to receive additional compensation for their services as directors. In addition, upon the completion of our initial public offering, Marie H. Field, S. Gordon Elkins, Lee Hague, Thomas H. Ginley, Jr., M.D., Herbert Kean, M.D., Michael R. Hannon and David J. Berkman received stock options under the 1998 Equity Compensation Plan, and Lee Hague and S. Gordon Elkins also received restricted stock grants under the 1998 Equity Compensation Plan. 85 91 EXECUTIVE OFFICER COMPENSATION The following table provides summary information concerning compensation paid to or earned by our Chief Executive Officer and our other most highly compensated executive officers for services rendered during the year ended September 30, 1998 (the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION OTHER -------------------- ANNUAL NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION - --------------------------- ---- -------- -------- ------------ Joseph M. Field, Chairman of the Board and Chief Executive Officer.......................... 1998 $554,992 -- * David J. Field, President and Chief Operating Officer................ 1998 262,973 $116,000 * John C. Donlevie, Executive Vice President, Secretary and General Counsel.......................... 1998 181,947 116,000 *
- ------------------------- * Value of perquisites and other personal benefits paid does not exceed the lesser of $50,000 or 10% of the total annual salary and bonus reported for the executive officer and, therefore, is not required to be disclosed pursuant to rules of the Commission. (1) Includes amounts accrued during year presented but paid in the subsequent year. 1998 EQUITY COMPENSATION PLAN We have adopted the 1998 Equity Compensation Plan, effective as of June 24, 1998. The 1998 Equity Compensation Plan provides for grants to employees of ours and our subsidiaries (including employees who are officers or directors), our non-employee directors and certain advisors and consultants who perform services for us and our subsidiaries of: - incentive stock options; - "nonqualified stock options" that are not intended to qualify as incentive stock options; - restricted stock; and - stock appreciation rights. Only shares of Class A common stock may be issued under the 1998 Equity Compensation Plan. GENERAL. Subject to adjustment, we may issue shares of Class A common stock up to an amount equal to 10% of our outstanding Class A, Class B and Class C common stock under the Plan. As of September 10, 1999, we have granted and have currently outstanding 11,112 shares of restricted stock and nonqualified stock options to purchase 838,842 shares of Class A common stock having a weighted average exercise price of 86 92 $21.58 per share. We have not issued any incentive stock options or stock appreciation rights. The number of shares for which incentive stock options may be issued under the Plan may not exceed 1,850,000 shares, subject to adjustment, and the number of shares of restricted stock that may be issued under the Plan may not exceed 925,000 shares, subject to adjustment. ADMINISTRATION OF THE 1998 EQUITY COMPENSATION PLAN. The Plan is administered and interpreted by our compensation committee. Subject to the ratification or approval by the board of directors, if the board retains the right, the committee has the sole authority to: - determine the individuals that shall be given awards; - determine the terms of the awards; - delegate to our Chief Executive Officer, Joseph M. Field, the authority to make grants to employees; and - deal with any other matters arising under the Plan. OPTIONS. The exercise price of any incentive stock option will not be less than the fair market value of our Class A common stock on the date of grant, or not less than 110% of the fair market value of the common stock in the case of an employee who owns more than 10% of our Class A, Class B and Class C common stock. The exercise price of a nonqualified stock option may be greater than, equal to or less than the fair market value of our Class A common stock on the date of grant. The exercise period of an option may not exceed ten years from the date of grant, and the exercise period of an incentive stock option granted to an employee who owns more than 10% of the Class A, Class B and Class C common stock may not exceed five years from the date of grant. The participant may pay the exercise price in cash or, with the approval of the committee, by delivering shares of common stock owned by the participant and having a fair market value on the date of exercise equal to the exercise price or by any other method that the committee approves. EMPLOYEE STOCK PURCHASE PLAN We have adopted the Employee Stock Purchase Plan, effective as of January 28, 1999. A total of up to 1,850,000 shares of our Class A common stock may be issued under the employee plan, subject to adjustment. Under the employee plan, we will withhold a specified percentage (not to exceed 10%) of the compensation paid to each participant, and the amount withheld (and any additional amount contributed by the participant) will be used to purchase our Class A common stock on the last day of each purchase period. The purchase price will be determined by the employee plan committee and shall not be less than 85% of the value of the stock on the last day of the purchase period. The length of each purchase period shall be specified by the employee plan committee. The first purchase period began on April 1, 1999. The maximum value of shares that a participant in the employee plan may purchase during any calendar year is $25,000. EMPLOYMENT AGREEMENTS JOSEPH M. FIELD EMPLOYMENT AGREEMENT. We have entered into an employment agreement with Joseph M. Field pursuant to which Mr. Field serves as our Chief Executive Officer. The employment agreement may be terminated upon written notice no 87 93 less than 30 days prior to the end of any calendar year. Absent such written notice, the employment agreement is automatically renewed for a period of one year. In the event of Mr. Field's death during the term of the employment agreement, we will pay his survivors Mr. Field's compensation for one year at the then current rate. In the event of the total disability of Mr. Field, we will pay Mr. Field compensation for the lesser of the period of his disability or one year at the then applicable rate. Mr. Field's current base salary is $558,000 and is increased or decreased annually by a percentage equal to the percentage of inflation or deflation over the immediately preceding twelve month period, provided that the base salary shall never be less than $500,000. The board of directors may approve additional salary, bonuses, fees, or other compensation for Mr. Field. Mr. Field is entitled to participate in any bonus, profit sharing, retirement, insurance or other plan or program that we adopt. Absent our express prior written consent, Mr. Field is prohibited, in the event of his termination by resignation or for cause, for a period of two years following the termination of the employment agreement, from engaging in any broadcast business that we compete with in any standard metropolitan statistical area in which we are then operating a broadcast property. EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS. We have entered into employment agreements with David J. Field and John C. Donlevie. Each of these employment agreements provides that the employee may be terminated at will by either party (1) immediately if good cause for termination exists, or (2) upon thirty days notice in the absence of good cause. Pursuant to these employment agreements, the current annual salaries of Mr. Field and Mr. Donlevie are $350,000 and $225,000, respectively. Each of the employment agreements provides for yearly salary adjustments for inflation and an annual discretionary bonus. STEPHEN F. FISHER EMPLOYMENT AGREEMENT. We have entered into an employment agreement with Stephen F. Fisher for a term ending December 31, 2000 and year to year thereafter unless terminated by either party at least 120 days prior to the end of the then current term. In the event of a change of control, the 120 days is increased by 60 days or in lieu of additional notice we may pay 60 days salary. We may terminate the agreement at any time for cause. Mr. Fisher's salary is $250,000 annually and is increased each year for inflation. In addition, Mr. Fisher is eligible for an annual discretionary bonus. Mr. Fisher is prohibited, so long as he is our employee and for a period of one year thereafter, from serving, directly or indirectly in any enterprise which we compete with; provided, however, if Mr. Fisher is terminated without cause or if his employment agreement is terminated due to the parties inability to renegotiate certain compensation terms, then Mr. Fisher will be restricted from serving in a competitive business for a period of three months plus any time for which he receives a cash payment. 88 94 CERTAIN TRANSACTIONS S. Gordon Elkins, one of our directors, is affiliated with the law firm of Stradley, Ronon, Stevens & Young. This firm has served as our outside counsel on various matters. Michael R. Hannon, one of our directors, is a general partner of Chase Capital Partners. In May 1996, Chase Capital acquired a convertible subordinated promissory note from us for $25 million. The convertible subordinated note was converted into 2,327,500 shares of our Class A common stock and 1,995,669 shares of our Class C common stock. Chase Capital was a selling shareholder in our initial public offering in January 1999 and received net proceeds of $49.2 million from the sale of all of its Class A common stock. On May 21, 1996, we entered into a registration rights agreement, dated as of May 21, 1996, with Chase Equity Associates, L.P., an affiliate of Chase Capital Partners. The agreement grants Chase Equity Associates and Chase Capital the right to require us, subject to certain limitations, to effect one "demand" registration statement under the Securities Act for the sale of their shares of our common stock. Chase Equity Associates is the beneficial owner of all of our outstanding Class C common stock. On May 6, 1999, Chase Equity Associates entered into an agreement with the underwriters of the initial public offering in which (1) the underwriters released Chase Equity Associates from their 180 day lock-up agreement with respect to the sale of 300,000 shares of Class A common stock and (2) Chase Equity Associates agreed that all further sales or dispositions of Class A common stock, except sales pursuant to the registration rights agreement, shall be made through a nationally recognized underwriter that we designate. Some of our FCC licenses are currently owned by ECI License Company, LP, a limited partnership in which we have been the general partner, owning a 99% interest. On January 22, 1999, one of our wholly owned subsidiaries purchased the remaining 1% interest from ECI Investors Corporation, a company that was owned by our shareholders prior to our initial public offering, excluding Chase Capital, in the same percentage as their ownership in our company, for $3.4 million. Of the $3.4 million, Joseph M. Field, our Chairman of the Board and Chief Executive Officer received approximately $1.4 million. Other shareholders prior to the initial public offering that received a portion of the $3.4 million include Marie H. Field, one of our directors and wife of Joseph M. Field, David J. Field, our President, Chief Operating Officer and one of our directors and son of Joseph M. Field, Nancy E. Field, daughter of Joseph M. Field and Marie H. Field, Thomas H. Ginley, Jr, M.D., one of our directors, and his wife Emma Ginley, and Herbert Kean, M.D., one of our directors. 89 95 PRINCIPAL AND SELLING SHAREHOLDERS The following tables set forth certain information as of September 29, 1999 regarding the beneficial ownership of our common stock by: - each person known by us to beneficially own more than 5% percent of any class of our common stock; - each of our directors and Named Executive Officers; - the selling shareholders in the concurrent Class A common stock offering; and - all of our directors and executive officers as a group. Each shareholder possesses sole voting and investment power with respect to the shares listed, unless otherwise noted. For purposes of these tables, we have assumed that the Class A common stock offering is consummated concurrently with this offering. However, neither offering is contingent on the other. PRINCIPAL SHAREHOLDERS
CLASS A COMMON STOCK(1) ------------------------------------------------------------------- NUMBER OF NUMBER BENEFICIALLY OF SHARES PERCENT OF OWNED PERCENT OF BENEFICIALLY CLASS BEFORE SHARES OFFERED CLASS AFTER NAME OWNED(3) THE OFFERING(3) IN THIS OFFERING THE OFFERING(4) - ---- ------------ --------------- ---------------- --------------- Joseph M. Field(5)(6)............... 2,988,305 12.0% 1,200,000(7) 5.4% David J. Field(5)(8)................ 2,574,994 10.3 200,000(9) 7.2 John C. Donlevie.................... 6,155 * -- * Stephen F. Fisher................... 5,000 * -- * Herbert Kean, M.D................... 1,071,590 4.3 -- 3.3 S. Gordon Elkins(5)(10)............. 3,603,044 14.4 450,000(11) 9.6 Thomas H. Ginley, Jr. M.D.(12)...... 879,120 3.5 -- 2.7 Lee Hague........................... 1,000 * -- * Marie H. Field(5)(13)............... 2,988,305 12.0 1,200,000(7) 5.4 Nancy E. Field(5)(14)............... 2,153,400 8.6 500,000(15) 5.0 Michael R. Hannon(16)............... -- -- -- -- David J. Berkman.................... 2,500 * -- * Chase Equity Associates, L.P.(16) 380 Madison Avenue New York, NY 10017................. -- -- -- -- Putnam Investments, Inc.(17) One Post Office Square Boston, MA 02109................... 3,357,125 13.5 -- 10.2 All directors and executive officers as a group (12 persons)............ 8,252,214 33.1 1,500,000 20.5 CLASS B COMMON PERCENT OF TOTAL PERCENT OF TOTAL STOCK(2) ECONOMIC INTEREST VOTING POWER ------------------------- ---------------------- ---------------------- NUMBER OF SHARES BENEFICIALLY PERCENT OF BEFORE THE AFTER THE BEFORE THE AFTER THE NAME OWNED(3) CLASS(3) OFFERING OFFERING OFFERING OFFERING - ---- ------------ ---------- ---------- --------- ---------- --------- Joseph M. Field(5)(6)............... 9,782,555 92.9% 34.4% 25.6 77.4% 72.0% David J. Field(5)(8)................ 749,250 7.1 8.9 6.9 7.7 7.1 John C. Donlevie.................... -- -- * * * * Stephen F. Fisher................... -- -- * * * * Herbert Kean, M.D................... -- -- 2.9 2.4 * * S. Gordon Elkins(5)(10)............. -- -- 9.7 7.0 2.8 2.3 Thomas H. Ginley, Jr. M.D.(12)...... -- -- 2.4 1.9 * * Lee Hague........................... -- -- * * * * Marie H. Field(5)(13)............... -- -- 8.0 4.0 2.3 1.3 Nancy E. Field(5)(14)............... -- -- 5.8 3.7 1.7 1.2 Michael R. Hannon(16)............... -- -- 4.6 3.8 -- -- David J. Berkman.................... -- -- * * * * Chase Equity Associates, L.P.(16) 380 Madison Avenue New York, NY 10017................. -- -- 4.6 3.8 -- -- Putnam Investments, Inc.(17) One Post Office Square Boston, MA 02109................... -- -- 9.0 7.4 2.6 2.4 All directors and executive officers as a group (12 persons)............ 10,531,805 100.0 50.5 38.3 87.2 81.1
90 96 SELLING SHAREHOLDERS
CLASS A COMMON STOCK(1) ------------------------------------------------------------------- NUMBER OF SHARES PERCENT OF NUMBER OF PERCENT OF BENEFICIALLY CLASS BEFORE SHARES OFFERED CLASS AFTER NAME OWNED(3) THE OFFERING(3) IN THIS OFFERING THE OFFERING(4) - ---- ------------ --------------- ---------------- --------------- Marie H. Field..................... 2,988,305 12.0% 500,000 5.4% Joseph and Marie Field Foundation........................ 300,000 1.2 250,000 -- Marie H. Field and Nancy E. Field, Trustees UDT 12/23/76 FBO David J. Field................ 666,000 2.7 300,000(18) 1.1 S. Gordon Elkins & David J. Field, Trustees UDT Joseph M. Field 9/30/92 FBO David J. Field........ 738,150 3.0 100,000(18) 1.9 S. Gordon Elkins & Nancy E. Field, Trustees UDT Joseph M. Field 9/30/92 FBO Nancy E. Field........ 625,422 2.5 100,000(18) 1.6 Marie H. Field and David J. Field, Trustees UDT 12/23/76 FBO Nancy E. Field................ 666,000 2.7 100,000(18) 1.7 Nancy E. Field..................... 2,153,400 8.6 100,000 5.0 Joseph M. Field, Trustee UDT of D. Kraus 7/21/98 FBO Sidonie Kazenel............... 157,805 * 50,000(18) * --------- Total....................... 1,500,000 ========= CLASS B PERCENT OF TOTAL PERCENT OF TOTAL COMMON STOCK(2) ECONOMIC INTEREST VOTING POWER ------------------------- ---------------------- ---------------------- NUMBER OF SHARES BENEFICIALLY PERCENT OF BEFORE THE AFTER THE BEFORE THE AFTER THE NAME OWNED(3) CLASS(3) OFFERING OFFERING OFFERING OFFERING - ---- ------------ ---------- ---------- --------- ---------- --------- Marie H. Field..................... -- -- 8.0% 4.0% 2.3% 1.3% Joseph and Marie Field Foundation........................ -- -- -- -- Marie H. Field and Nancy E. Field, Trustees UDT 12/23/76 FBO David J. Field................ -- -- 1.8 * * * S. Gordon Elkins & David J. Field, Trustees UDT Joseph M. Field 9/30/92 FBO David J. Field........ -- -- 2.0 1.4 * * S. Gordon Elkins & Nancy E. Field, Trustees UDT Joseph M. Field 9/30/92 FBO Nancy E. Field........ -- -- 1.7 1.2 * * Marie H. Field and David J. Field, Trustees UDT 12/23/76 FBO Nancy E. Field................ -- -- 1.8 1.3 * * Nancy E. Field..................... -- -- 5.8 3.7 1.7 1.2 Joseph M. Field, Trustee UDT of D. Kraus 7/21/98 FBO Sidonie Kazenel............... -- -- * * * * Total.......................
- ------------ * Less than one percent. (1) The number of shares of Class A common stock does not include the shares of Class A common stock issuable upon conversion of the outstanding shares of Class B common stock. (2) The Class A common stock and the Class B common stock vote together as a single class on all matters submitted to a vote of shareholders. Each share of Class A common stock is entitled to one vote and each share of Class B common stock is entitled to ten votes, except: (1) any share not voted by either Joseph M. Field or David J. Field is entitled to one vote; (2) the holders of Class A common stock, voting as a separate class, are entitled to elect two directors; (3) each share of Class B common stock is entitled to one vote with respect to any "going private" transactions under the Exchange Act; and (4) as required by law. The shares of Class B common stock are convertible in whole or in part, at the option of the holder, subject to certain conditions, into the same number of shares of Class A common stock. See "Description of Capital Stock." (3) Shares beneficially owned and percentage ownership are based on 24,944,267 shares of Class A common stock, 10,531,805 shares of Class B common stock and 1,695,669 shares of Class C common stock outstanding as of September 10, 1999. (4) Assumes no exercise of the underwriters' over-allotment option. (5) The address of these shareholders is 401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004. (6) Includes (1) 2,830,500 shares of Class A common stock beneficially owned by Marie H. Field, wife of Joseph M. Field, (2) 157,805 shares of Class A common stock held of record by Joseph M. Field as trustee of a trust for the benefit of a sister of Marie H. Field and (3) 300,000 shares of Class A common stock held of record by Joseph M. Field as a director and officer of the Joseph and Marie Field Foundation. (7) Represents (1) 250,000 shares to be sold by the Joseph and Marie Field Foundation, (2) 500,000 shares to be sold by Marie H. Field, (3) 400,000 shares to be sold by two trusts listed in the Selling Shareholders table of which Marie H. Field is a trustee and (4) 50,000 shares to be sold by one trust listed in the Selling Shareholders table of which Joseph M. Field is a trustee. (8) Includes (1) 666,000 shares of Class A common stock held of record by David J. Field as co-trustee of a trust for the benefit of Nancy E. Field, (2) 738,150 shares of Class A common stock held of record by David J. Field as co-trustee of a trust for the benefit of David J. Field and his children and (3) 1,170,844 shares of Class A common stock held of record by David J. Field as co-trustee of two trusts for the benefit of the descendants of David J. Field and Nancy E. Field. (9) Represents shares to be sold by two trusts listed in the Selling Shareholders table of which David J. Field is a trustee. (10) Includes (1) 1,170,844 shares of Class A common stock held of record by Mr. Elkins as co-trustee of two trusts for the benefit of the descendants of David J. Field and Nancy E. Field, respectively (2) 738,150 shares of Class A common stock held of record by Mr. Elkins as co-trustee of a trust for the benefit of David J. Field and his children, (3) 738,150 shares of Class A common stock held of record by Mr. Elkins as co-trustee of a trust for the benefit of Nancy E. Field and her children and (4) 654,900 shares of Class A common stock held of record by Mr. Elkins as trustee of a trust for the benefit of Marie H. Field. 91 97 (11) Represents shares to be sold by (1) two trusts listed in the Selling Shareholders table and of which S. Gordon Elkins is a co-trustee and (2) the Joseph and Marie Field Foundation of which S. Gordon Elkins is a director and officer. (12) Includes (1) 731,120 shares of Class A common stock held by Mr. Ginley in joint tenancy with his spouse, (2) 74,000 shares of Class A common stock owned of record by his spouse and (3) 74,000 shares of Class A common stock held of record by his spouse as co-trustee of two trusts for the benefit of their children. (13) Includes (1) 666,000 shares of Class A common stock held of record by Marie H. Field as co-trustee of a trust for the benefit of David J. Field, (2) 666,000 shares of Class A common stock held of record by Marie H. Field as co-trustee of a trust for the benefit of Nancy E. Field, (3) 157,805 shares of Class A common stock held of record by Joseph M. Field, husband of Marie H. Field, as trustee of a trust for the benefit of a sister of Marie H. Field and (4) 300,000 Shares of Class A common stock held of record by Marie H. Field as a director and officer of the Joseph and Marie Field Foundation. Does not include 9,782,555 shares of Class B common stock held by Joseph M. Field, Marie H. Field's spouse. See Note 2 above. (14) Includes (1) 666,000 shares of Class A common stock held of record by Nancy E. Field as co-trustee of a trust for the benefit of David J. Field and (2) 738,150 shares of Class A common stock held of record by Nancy E. Field as co-trustee of a trust for the benefit of Nancy E. Field and her children. (15) Represents (1) 400,000 shares to be sold by Nancy E. Field and (2) 400,000 shares to be sold by two trusts listed in the Selling Shareholder table of which Nancy E. Field is a trustee. (16) Includes 1,695,669 shares of Class C common stock owned by Chase Equity Associates, an affiliate of Chase Capital, which represents 100% of the class. The shares of Class C common stock have no voting rights except as otherwise required by law. Michael R. Hannon, one of our directors, is a general partner of Chase Capital. Mr. Hannon exercises shared investment and voting power with respect to the shares, but disclaims beneficial ownership. The address for Mr. Hannon is 380 Madison Avenue, New York, New York 10017. Chase has granted the underwriters an option to purchase a maximum of 200,000 additional shares to cover over-allotments. If the underwriters exercise any of this over-allotment option, Chase will convert the corresponding number of shares of its Class C common stock into the same number of shares of Class A common stock. (17) Includes 2,999,700 shares owned by Putnam Investment Management, Inc. and 357,425 shares owned by The Putnam Advisory Company, Inc., both affiliates of Putnam Investments, Inc. The beneficial ownership for Putnam is as of June 30, 1999, the date of the last Form 13-F under the Exchange Act that Putnam filed. (18) If the underwriters fully exercise the over-allotment option that we and some of the selling shareholders have granted, the five trusts listed in the Selling Shareholders table will sell in the aggregate an additional 225,000 shares of Class A common stock. 92 98 ENTERCOM COMMUNICATIONS CAPITAL TRUST Entercom Communications Capital Trust is a statutory business trust formed under Delaware law on September 8, 1999 pursuant to a declaration of trust among the initial trustees and Entercom and a certificate of trust filed with the Delaware Secretary of State. The declaration of trust will be amended and restated in its entirety as of the date the trust initially issues the TIDES. The declaration of trust will be qualified as an indenture under the Trust Indenture Act of 1939, as amended, upon the effectiveness of the registration statement of which this prospectus is a part. Unless the context requires otherwise, "Entercom," "We," "Us," "Our" or similar terms in this section refer solely to Entercom Communications Corp. and not the trust or any of our other consolidated subsidiaries. The trust's assets consist principally of the debentures, and payments under the debentures are its sole revenue. The trust exists for the exclusive purposes of: - issuing the common securities and the TIDES representing undivided beneficial ownership interests in the trust's assets; - investing the gross proceeds of those securities in the debentures; and - engaging in only those other activities necessary or incidental to those purposes. Entercom will directly or indirectly acquire common securities of the trust in an aggregate liquidation amount equal to approximately 3% of the total capital of the trust. The trust will generally make payments on the common securities pro rata with the TIDES. However, if an event of default under the declaration of trust occurs and is continuing, Entercom's right to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to your rights. Pursuant to the declaration of trust, the trust will have four trustees: - three of the trustees, referred to as administrative trustees, will be officers of Entercom; and - the fourth trustee will be Wilmington Trust Company, which will act as property trustee and the Delaware statutory trustee. In limited circumstances, the holders of a majority of the TIDES will be entitled to appoint one additional trustee, referred to as the special trustee. The special trustee need not be an officer or employee of or otherwise affiliated with Entercom. The special trustee will have the same rights, powers and privileges as the administrative trustees. See "Description of TIDES -- Voting Rights; Amendment of the Declaration." The property trustee holds title to the debentures for your benefit and the benefit of the holders of the trust's common securities. As the holder of the debenture, the property trustee has the power to exercise all the holder's rights, powers and privileges under the Indenture between Entercom and Wilmington Trust Company, as trustee (the "Indenture"). In addition, the property trustee maintains exclusive control of a segregated non-interest bearing bank account to hold all payments made in respect of the debentures for your benefit and the benefit of the holders of the trust's common securities. Subject to your right to appoint a special trustee, we, as the direct or indirect holder of all of the trust's common securities, have the right to appoint, remove or replace any of the trustees and to increase or decrease the number of trustees. However, the number of trustees must always be at least three, a majority of which must be administrative trustees, and, unless otherwise required by applicable law, there must always be a Delaware statutory trustee. See "Description of Convertible Subordinated Debentures." 93 99 DESCRIPTION OF TIDES Under the terms of the declaration of trust, the trustees on behalf of the trust will issue the TIDES and the common securities in fully registered form without interest coupons. The TIDES will represent preferred undivided beneficial ownership interests in the assets of the trust, and the holders of the TIDES will be entitled to a preference over us, as the holder of the trust's common securities, in limited circumstances with respect to distributions and amounts payable on redemption of the TIDES and the trust's common securities or liquidation of the trust, as well as other benefits as described in the declaration of trust. See "-- Subordination of Common Securities." The declaration of trust will be qualified under and will be subject to and governed by the Trust Indenture Act of 1939 upon effectiveness of the registration statement of which this prospectus is a part. This summary of the provisions of the TIDES, the trust's common securities and the declaration of trust does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the declaration of trust, including the definitions of certain terms. A copy of the declaration of trust has been filed as an exhibit to the registration statement of which this prospectus is a part. Unless the context requires otherwise, "Entercom," "We," "Us," "Our" or similar terms in this section refer solely to Entercom Communications Corp. and not the trust or any of our other consolidated subsidiaries. GENERAL The trust will make payments on the TIDES pro rata with its common securities except as described under "-- Subordination of Common Securities." The guarantee executed by us for your benefit (the "Guarantee") will provide for a guarantee on a subordinated basis with respect to the TIDES but will not guarantee payment of distributions or amounts payable on redemption of the TIDES or on liquidation of the trust when the trust does not have funds on hand available to make those payments. See "Description of Guarantee." DISTRIBUTIONS Distributions will accrue on the TIDES from the date of their original issuance at the annual rate of % of the stated liquidation amount of $50 per TIDES. Subject to the deferral rights described below, the trust will pay the distributions quarterly in arrears on each March 31, June 30, September 30 and December 31, each referred to as a distribution date, commencing December 31, 1999, to the person in whose name each TIDES is registered at the close of business on the fifteenth day of the month of the applicable distribution date. The amount of distributions payable for any period will be computed based on the number of days elapsed in a 360-day year of twelve 30-day months. If any distribution date is not a Business Day, the trust will pay distributions payable on that date on the next succeeding day that is a Business Day (and without any additional distributions or other payments in respect of any such delay) with the same force and effect as if made on the date the payment was originally payable. Distributions that the trust does not pay on the applicable distribution date will accrue additional distributions on the amount of the accrued distributions (to the extent permitted by law), compounded quarterly from the relevant distribution date. See "Description of Convertible Subordinated Debentures -- Additional Sums." A "Business Day" will mean any day other than a Saturday or a Sunday, or a day on which banking institutions in The City of New York or Wilmington, 94 100 Delaware are authorized or required by law or executive order to remain closed, or a day on which the corporate trust office of the property trustee or the trustee under the debentures is closed for business. So long as no event of default under the debentures has occurred and is continuing, we have the right to defer the payment of interest on the debentures at any time or from time to time for a period not exceeding 20 consecutive quarters. However, no deferral period may extend beyond the final stated maturity of the debentures, which is September 30, 2014. See "Description of Convertible Subordinated Debentures -- Option to Extend Interest Payment Date." As a consequence of any deferral election, the trust will defer quarterly distributions on the TIDES during the deferral period. Deferred distributions to which you are entitled will accrue additional distributions, compounded quarterly from the relevant payment date for distributions during any deferral period, to the extent permitted by applicable law. The trust's revenue available for distribution to you will be limited to payments under the debentures. See "Description of Convertible Subordinated Debentures -- General." If we do not make interest payments on the debentures, the property trustee will not have funds available to pay distributions on the TIDES. We have guaranteed the payment of distributions, if and to the extent the trust has funds legally available for the payment of those distributions and cash sufficient to make those payments, on a limited basis as set forth under "Description of Guarantee." CONVERSION RIGHTS General. You may convert your TIDES at any time prior to 5:00 p.m., New York City time, on September 30, 2014 (except that you may convert TIDES called for redemption by us at any time prior to 5:00 p.m., New York City time, on the day preceding the relevant redemption date), at your option and in the manner described below, into shares of our Class A common stock. You may convert each TIDES initially into shares of our Class A common stock (equivalent to an initial conversion price of $ per share of Class A common stock). The conversion ratio and the equivalent conversion price in effect at any given time are referred to as the Applicable Conversion Ratio and the Applicable Conversion Price, respectively, and will be subject to adjustment as described under " -- Conversion Price Adjustments" below. The trust will covenant in the declaration of trust not to convert debentures held by it except pursuant to a notice of conversion delivered to the property trustee, as conversion agent, by you. If you wish to exercise your conversion right, you must deliver an irrevocable conversion notice, together, if the TIDES are in certificated form, with the certificated security, to the conversion agent who will, on your behalf, exchange the TIDES for a Like Amount of debentures and immediately convert the debentures into shares of our Class A common stock. You may obtain copies of the required form of the conversion notice from the conversion agent. At the close of business on a distribution record date, you will be entitled to receive the distribution payable on your TIDES on the corresponding distribution date even if you convert your TIDES after the distribution record date but prior to the distribution date. Except as provided in the immediately preceding sentence, neither we nor the trust will make, or be required to make, any payment, allowance or adjustment for accrued and unpaid distributions, whether or not in arrears, on converted TIDES, even if you convert your TIDES during a deferral period. We will make no payment or allowance for distributions on our shares of Class A common stock issued upon conversion, except to the 95 101 extent that those shares of Class A common stock are held of record on the record date for any distributions. We will deem each conversion to have been effected immediately prior to the close of business on the day on which the trust received the related conversion notice. We will not issue any fractional shares of our Class A common stock as a result of conversion. In lieu of fractional shares, we will pay fractional interest in cash based on the Closing Price of our Class A common stock. Conversion Price Adjustments -- General. The Applicable Conversion Price will be subject to adjustment in certain events including, without duplication: (A) the payment of dividends (and other distributions) payable in our common stock on our common stock; (B) the issuance to all holders of our common stock of rights or warrants; (C) subdivisions and combinations of our common stock; (D) the payment of dividends (and other distributions) to all holders of our common stock consisting of evidences of indebtedness of Entercom, securities or capital stock, cash or assets (including securities, but excluding those rights, warrants, dividends and distributions referred to in clauses (A) and (B) and dividends and distributions paid exclusively in cash); (E) the payment of dividends (and other distributions) on our common stock paid exclusively in cash, excluding (a) cash dividends that do not exceed the per share amount of the smallest of the immediately four preceding quarterly cash dividends (as adjusted to reflect any of the events referred to in clauses (A) through (F) of this sentence) and (b) cash dividends the per share amount of which, together with the aggregate per share amount of any other cash dividends paid within the 12 months preceding the date of payment of such cash dividends, does not exceed 12 1/2% of the current market price of our common stock as of the trading day immediately preceding the date of declaration of the dividend; and (F) payment to holders of our common stock in respect of a tender or exchange offer (other than an odd-lot offer) by us or any of our subsidiaries for our common stock at a price in excess of 110% of the current market price of our common stock as of the trading day next succeeding the last date tenders or exchanges may be made pursuant to the tender or exchange offer. We may, at our option, make reductions in the Applicable Conversion Price as our Board of Directors deems advisable to avoid or diminish any income tax to holders of our common stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. See "United States Federal Income Tax Consequences -- Adjustment of Conversion Price." No adjustment of the Applicable Conversion Price will be made: - upon the issuance of any shares of our common stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of Entercom and the investment of additional optional amounts in shares of our common stock under any plan; - upon the issuance of any shares of our common stock or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of Entercom; or 96 102 - upon the issuance of any shares of our common stock pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security outstanding as of the date the TIDES were first issued. If any action would require adjustment of the Applicable Conversion Price pursuant to more than one of the conversion price adjustment provisions, only one adjustment will be made; provided that the adjustment made will be the one that has the highest absolute value to you. No adjustment in the Applicable Conversion Price will be required unless the adjustment would require an increase or decrease of at least 1% of the Applicable Conversion Price, but any adjustment that would otherwise be required to be made will be carried forward and taken into account in any subsequent adjustment. Except as specifically described above, the Applicable Conversion Price will not be subject to adjustment in the case of the issuance of any Entercom Class A common stock (or securities convertible into or exchangeable for Entercom Class A common stock). Conversion Price Adjustments -- Merger, Consolidation or Sale of Assets of Entercom. If we are a party to any transaction (including, without limitation, a merger, consolidation, sale of all or substantially all of our assets, recapitalization or reclassification of our common stock or any compulsory share exchange (each of the foregoing being referred to as a "Company Transaction")), in each case, as a result of which shares of our common stock will be converted into the right to receive other securities, cash or other property, we will ensure that lawful provision is made as part of the terms of the Company Transaction so that the holder of each TIDES then outstanding will have the right thereafter to convert the TIDES only into: - in the case of any Company Transaction other than a Company Transaction involving a Common Stock Fundamental Change, the kind and amount of securities, cash and other property receivable upon the consummation of the Company Transaction by a holder of that number of shares of our Class A common stock into which a TIDES was convertible immediately prior to the Company Transaction; or - in the case of a Company Transaction involving a Common Stock Fundamental Change, common stock of the kind received by holders of our Class A common stock; but in each case after giving effect to any adjustment discussed below relating to a Fundamental Change if the Company Transaction constitutes a Fundamental Change. The holders of TIDES will have no voting rights with respect to any Company Transaction. In the case of any Company Transaction involving a Fundamental Change, the Applicable Conversion Price will be adjusted immediately before the Fundamental Change as follows: - in the case of a Non-Stock Fundamental Change, the Applicable Conversion Price of the TIDES will become the lower of: - the Applicable Conversion Price immediately prior to the Non-Stock Fundamental Change, but after giving effect to any other prior adjustments, and - the result obtained by multiplying the greater of the Relevant Price or the then applicable Reference Market Price by the Optional Redemption Ratio (the product is referred to as the "Adjusted Relevant Price" or the "Adjusted Reference Market Price," as the case may be); and 97 103 - in the case of a Common Stock Fundamental Change, the Applicable Conversion Price of the TIDES immediately prior to the Common Stock Fundamental Change, but after giving effect to any other prior adjustments, will be adjusted by multiplying the Applicable Conversion Price by a fraction of which the numerator will be the Purchaser Stock Price and the denominator will be the Relevant Price. However, in the event of a Common Stock Fundamental Change in which: - 100% of the value of the consideration received by a holder of our Class A common stock is common stock of the successor, acquiror or other third party (and cash, if any, is paid only with respect to any fractional interests in the common stock resulting from the Common Stock Fundamental Change); and - all our Class A common stock will have been exchanged for, converted into, or acquired for common stock (and cash with respect to fractional interests) of the successor, acquiror or other third party; the Applicable Conversion Price of the TIDES immediately prior to the Common Stock Fundamental Change will be adjusted by multiplying the Applicable Conversion Price by a fraction of which the numerator will be one and the denominator will be the number of shares of common stock of the successor, acquiror or other third party received by a holder of one share of our Class A common stock as a result of the Common Stock Fundamental Change. In the absence of the adjustments to the Applicable Conversion Price in the event of a Company Transaction involving a Fundamental Change, in the case of a Company Transaction each TIDES would become convertible into the securities, cash, or other property receivable by a holder of the number of shares of our Class A common stock into which each TIDES was convertible immediately prior to the Company Transaction. Thus, in the absence of the Fundamental Change provisions, a Company Transaction could substantially lessen or eliminate the value of the conversion privilege associated with the TIDES. For example, if a company were to acquire Entercom in a cash merger, each TIDES would become convertible solely into cash and would no longer be convertible into securities whose value would vary depending on the future prospects of Entercom and other factors. In Non-Stock Fundamental Change transactions, the foregoing conversion price adjustments are designed to increase the amount of securities, cash or other property into which you may convert each TIDES. In a Non-Stock Fundamental Change transaction in which the initial value received per share of our Class A common stock (measured as described in the definition of Relevant Price) is lower than the then Applicable Conversion Price of a TIDES but greater than or equal to the Reference Market Price, the Applicable Conversion Price will be adjusted with the effect that you will be able to convert each TIDES into securities, cash or other property of the same type received by the holders of our Class A common stock in the transaction with the Applicable Conversion Price adjusted as though the initial value had been the Adjusted Relevant Price. In a Non-Stock Fundamental Change transaction in which the initial value received per share of our Class A common stock (measured as described in the definition of Relevant Price) is lower than both the Applicable Conversion Price of a TIDES and the Reference Market Price, the Applicable Conversion Price will be adjusted as described above but calculated as though the initial value had been the Adjusted Reference Market Price. 98 104 In Common Stock Fundamental Change transactions, the foregoing adjustments are designed to provide in effect that: - where our Class A common stock is converted partly into common stock and partly into other securities, cash or property, you will be able to convert each TIDES solely into a number of shares of common stock determined so that the initial value of those shares (measured as described in the definition of Purchaser Stock Price) equals the value of the shares of our Class A common stock into which each TIDES was convertible immediately before the transaction (measured as aforesaid); and - where our Class A common stock is converted solely into common stock, you will be able to convert each TIDES into the same number of shares of common stock receivable by a holder of the number of shares of our Class A common stock into which each TIDES was convertible immediately before the transaction. The term "Closing Price" of any security on any day means the last reported sale price of the security on that day, or in case no sale takes place on that day, the average of the closing bid and asked prices in each case on the principal national securities exchange on which the securities are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc. or any successor national automated interdealer quotation system (the "NNM") or, if the securities are not listed or admitted to trading on any national securities exchange or quoted on the NNM, the average of the closing bid and asked prices of the security in the over-the-counter market as furnished by any New York Stock Exchange member firm selected by Entercom for that purpose. The term "Common Stock Fundamental Change" means any Fundamental Change in which more than 50% of the value (as determined in good faith by our Board of Directors) of the consideration received by holders of our Class A common stock consists of common stock that for each of the ten consecutive trading days immediately prior to and including the Entitlement Date has been admitted for listing or admitted for listing subject to notice of issuance on a national securities exchange or quoted on the NNM; provided, however, that a Fundamental Change will not be a Common Stock Fundamental Change unless either: - we continue to exist after the occurrence of the Fundamental Change and the outstanding TIDES continue to exist as outstanding TIDES; or - not later than the occurrence of the Fundamental Change, the outstanding debentures are converted into or exchanged for debentures of a corporation succeeding to our business, which debentures have terms substantially similar to those of our debentures. The term "Entitlement Date" means the record date for determination of the holders of our common stock entitled to receive securities, cash or other property in connection with a Non-Stock Fundamental Change or a Common Stock Fundamental Change or, if there is no record date, the date upon which holders of our Class A common stock will have the right to receive those securities, cash or other property. The term "Fundamental Change" means the occurrence of any transaction or event in connection with a Company Transaction pursuant to which all or substantially all of our common stock will be exchanged for, converted into, acquired for or constitute solely the right to receive securities, cash or other property (whether by means of an exchange offer, 99 105 liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise). However, in the case of a Company Transaction involving more than one transaction or event, for purposes of adjustment of the Applicable Conversion Price, the Fundamental Change will be deemed to have occurred when substantially all of our common stock is exchanged for, converted into, or acquired for or constitute solely the right to receive securities, cash, or other property, but the adjustment will be based upon the highest weighted average per share consideration that a holder of our common stock could have received in the transactions or events as a result of which more than 50% of all outstanding shares of our common stock will have been exchanged for, converted into, or acquired for or constitute solely the right to receive securities, cash or other property. The term "Non-Stock Fundamental Change" means any Fundamental Change other than a Common Stock Fundamental Change. The term "Optional Redemption Ratio" means a fraction of which the numerator will be $50 and the denominator will be the then current Optional Redemption Price or, on or prior to October 3, 2002, an amount per TIDES determined by us in our sole discretion, after consultation with a nationally recognized investment banking firm, to be the equivalent of the hypothetical redemption price that would have been applicable if the TIDES had been redeemable during that period. The term "Purchaser Stock Price" means, with respect to any Common Stock Fundamental Change, the average of the Closing Prices for the common stock received in the Common Stock Fundamental Change for the ten consecutive trading days prior to and including the Entitlement Date, as adjusted in good faith by us to appropriately reflect any of the events referred to in clauses (A) through (F) of the first paragraph under " -- Conversion Price Adjustments -- General." The term "Reference Market Price" will initially mean on the date the trust originally issues the TIDES, $ (which is an amount equal to 66 2/3% of the last reported sale price for our Class A common stock on the New York Stock Exchange Composite Tape on , 1999). In the event of any adjustment to the Applicable Conversion Price, other than as a result of a Non-Stock Fundamental Change, the trust will also adjust the Reference Market Price so that the ratio of the Reference Market Price to the Applicable Conversion Price after giving effect to any adjustment will be the same as the ratio of $ to the initial conversion price. The term "Relevant Price" means: - in the case of a Non-Stock Fundamental Change in which the holder of our common stock receives only cash, the amount of cash received by the holder of one share of our common stock; and - in the event of any other Non-Stock Fundamental Change or any Common Stock Fundamental Change, the average of the daily Closing Prices for our Class A common stock during the ten consecutive trading days prior to and including the Entitlement Date, in each case as adjusted in good faith by us to appropriately reflect any of the events referred to in clauses (A) through (F) of the first paragraph under "-- Conversion Price Adjustments -- General." MANDATORY REDEMPTION Upon the repayment in full of the debentures at their stated maturity or a redemption in whole or in part of the debentures (other than following any distribution of the debentures to you and the holders of the trust's common securities), the property trustee 100 106 will apply the proceeds from the repayment or redemption to redeem, on a pro rata basis, a Like Amount of TIDES and the trust's common securities, on the Redemption Date, in an amount per TIDES or common security, as applicable, equal to the applicable Redemption Price, which Redemption Price will be equal to: - the liquidation amount of each TIDES plus any accrued and unpaid distributions in the case of (A) the repayment of the debentures at their stated maturity or (B) the redemption of the debentures in certain limited circumstances upon the occurrence of a Tax Event (as hereinafter defined); or - in the case of an optional redemption on or after October 3, 2002, the Optional Redemption Price (as defined under "Description of Convertible Subordinated Debentures -- Redemption -- Optional Redemption"). REDEMPTION PROCEDURES The trust will redeem its TIDES and common securities at the applicable Redemption Price with the proceeds from the contemporaneous repayment or redemption of the debentures. The trust will redeem its TIDES and common securities and will pay the applicable Redemption Price on each Redemption Date only to the extent that it has funds on hand available for the payment of the Redemption Price. See also "-- Subordination of Common Securities." If the trust gives a notice of redemption in respect of the TIDES, then, by 10:00 a.m., New York City time, on the date fixed for redemption (the "Redemption Date"), to the extent funds are available, with respect to the TIDES held in global form, the property trustee will deposit irrevocably with DTC funds sufficient to pay the applicable Redemption Price and will give DTC irrevocable instructions and authority to pay the applicable Redemption Price to you. See "-- Form, Book-Entry Procedures and Transfer." With respect to the TIDES held in certificated form, the property trustee, to the extent funds are available, will irrevocably deposit with the paying agent for the TIDES funds sufficient to pay the applicable Redemption Price and will give the paying agent irrevocable instructions and authority to pay the Redemption Price to the holders of the TIDES upon surrender of their certificates evidencing the TIDES. See "-- Payment and Paying Agency." DTC or the paying agent, as applicable, will pay those distributions payable on or prior to the Redemption Date to you if you were a holder of TIDES on the relevant record dates for the related distribution. If the trust has given notice of redemption and deposited funds as required, then upon the date of the deposit, all of your rights will cease, except your right to receive the applicable Redemption Price, but without interest on the Redemption Price, and the TIDES will cease to be outstanding. If any Redemption Date is not a Business Day, then payment of the applicable Redemption Price payable on that date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any delay), except that, if that Business Day falls in the next calendar year, the payment will be made on the immediately preceding Business Day. If we or the trust improperly withhold or refuse to make payment of the applicable Redemption Price pursuant to the Guarantee as described under "Description of Guarantee," distributions on TIDES will continue to accrue from the Redemption Date originally established by the trust to the date the Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. 101 107 Subject to applicable law (including, without limitation, United States federal securities law), we or our subsidiaries may at any time and from time to time purchase outstanding TIDES by tender in the open market or by private agreement. If we desire to consummate an optional redemption, we must send a notice to each holder of TIDES and the trust's common securities at its registered address in accordance with the notice procedures set forth under "Description of Convertible Subordinated Debentures -- Redemption -- Optional Redemption." We must mail any notice of a Tax Event Redemption at least 30 days but not more than 60 days before the Redemption Date to you. We need not provide notice of repayment at the stated maturity of the debentures. TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION If a Tax Event occurs and is continuing, we will cause the trustees to dissolve and liquidate the trust and, after satisfaction of liabilities of creditors of the trust, cause debentures to be distributed to you in liquidation of the trust within 90 days following the occurrence of the Tax Event. However, the liquidation and distribution will be conditioned on: - the trustees' receipt of an opinion of a nationally recognized independent tax counsel (reasonably acceptable to the trustees) experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that you will not recognize any income, gain or loss for United States federal income tax purposes as a result of such liquidation and distribution of debentures; and - Entercom being unable to avoid such Tax Event within such 90-day period by taking some ministerial action or pursuing some other reasonable measure that, in our sole judgment, will have no adverse effect on us, the trust or you and will involve no material cost. Furthermore, if (1) a nationally recognized independent tax counsel (reasonably acceptable to the trustees) experienced in such matters provides an opinion (the "Redemption Tax Opinion") to us that, as a result of a Tax Event, there is more than an insubstantial risk that we would be precluded from deducting the interest on the debentures for United States federal income tax purposes, even after the debentures were distributed to you upon liquidation of the trust as described above, or (2) such tax counsel informs the trustees that it cannot deliver a No Recognition Opinion, we will have the right, upon not less than 30 nor more than 60 days' notice and within 90 days following the occurrence and continuation of the Tax Event, to redeem the debentures, in whole, but not in part, for cash, for the principal amount plus accrued and unpaid interest and, following such redemption, the trust will redeem all the TIDES at the aggregate liquidation amount of the TIDES plus accrued and unpaid distributions. However, if at the time there is available to us or the trust the opportunity to eliminate, within such 90-day period, the Tax Event by taking some ministerial action or pursuing some other reasonable measure that, in our sole judgment, will have no adverse effect on us, the trust or you and will involve no material cost, we or the trust will pursue that measure in lieu of redemption. See "-- Mandatory Redemption." In addition to the foregoing options, we will also have the option of causing the TIDES to remain outstanding and pay Additional Sums on the debentures. See "Description of Convertible Subordinated Debentures -- Additional Sums." 102 108 The term "Tax Event" means the receipt by the property trustee of an opinion of a nationally recognized independent tax counsel to us (reasonably acceptable to the trustees) experienced in such matters (a "Dissolution Tax Opinion") to the effect that, as a result of: (A) any amendment to or change (including any announced prospective change (which will not include a proposed change), provided that a Tax Event will not occur more than 90 days before the effective date of any prospective change) in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority of the United States or any political subdivision; or (B) any judicial decision or official administrative pronouncement, ruling, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action"); there is more than an insubstantial risk that: (a) if the debentures are held by the property trustee, (1) the trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to interest accrued or received on the debentures or subject to more than a de minimis amount of other taxes, duties or other governmental charges as determined by counsel, or (2) any portion of interest payable by us to the trust (or original issue discount accruing) on the debentures is not, or within 90 days of the date of such opinion will not be, deductible by us in whole or in part for United States federal income tax purposes; or (b) with respect to debentures which are no longer held by the property trustee, any portion of interest payable by us (or original issue discount accruing) on the debentures is not, or within 90 days of the date of such opinion will not be, deductible by us in whole or in part for United States Federal income tax purposes. If an Investment Company Event occurs and is continuing, we will cause the trustees to dissolve and liquidate the trust and, after satisfaction of liabilities of creditors of the trust, cause the debentures to be distributed to you in liquidation of the trust within 90 days following the occurrence of the Investment Company Event. The term "Investment Company Event" means the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority to the effect that the trust is or will be considered an "investment company" required to be registered under the Investment Company Act of 1940, as amended, which change in law becomes effective on or after the date of this prospectus. The distribution by us of the debentures will effectively result in the cancellation of the TIDES. LIQUIDATION OF THE TRUST AND DISTRIBUTION OF CONVERTIBLE SUBORDINATED DEBENTURES We, as the holder of the trust's outstanding common securities, will have the right at any time (including, without limitation, upon the occurrence of a Tax Event or an Investment Company Event) to dissolve the trust and, after satisfaction of liabilities of creditors of the trust as provided by applicable law, cause a Like Amount of the debentures to be distributed to you and the holders of the trust's common securities upon liquidation of the trust. 103 109 The trust will automatically dissolve upon the first to occur of: (A) bankruptcy, dissolution or liquidation of us; (B) our written direction to the property trustee to dissolve the trust (which direction is optional and, except as described above, wholly within our discretion, as depositor); (C) redemption of all the TIDES and the trust's common securities as described under "-- Mandatory Redemption" above; (D) conversion of all outstanding TIDES and the trust's common securities as described under "-- Conversion Rights" above; (E) expiration of the term of the trust; or (F) entry of an order for the dissolution of the trust by a court of competent jurisdiction. If an early dissolution occurs as described in clause (A), (B), (E) or (F) above, the trustees will liquidate the trust as expeditiously as the trustees determine to be possible by distributing, after satisfaction of liabilities to the creditors of the trust as provided by applicable law, to you and the holders of the trust's common securities a Like Amount of the debentures, unless the distribution would not be practical. In that event, you and the holders of the trust's common securities will be entitled to receive out of the trust's assets available for distribution to holders, after satisfaction of liabilities to the trust's creditors as provided by applicable law, an amount equal to, in the case of holders of TIDES, the aggregate liquidation amount of the TIDES plus accrued and unpaid distributions, to the date of payment (that amount being the "Liquidation Distribution"). If the Liquidation Distribution can be paid only in part because the trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the trust will pay the amounts directly payable by it on the TIDES on a pro rata basis. We, as the holder of the trust's common securities, will be entitled to receive distributions upon any liquidation pro rata with you, except that if an event of default under the debentures (or an event that, with notice or passage of time, would become an event of default under the debentures) has occurred and is continuing, the TIDES will have a priority over the trust's common securities with respect to any of those distributions. See "-- Subordination of Common Securities." The term "Like Amount" means: - with respect to a redemption of TIDES, TIDES having an aggregate liquidation amount equal to that portion of the principal amount of debentures to be contemporaneously redeemed allocated to the trust's common securities and to the TIDES based upon the relative liquidation amounts of the classes and the proceeds of which will be used to pay the applicable Redemption Price (each of the "Stated Maturity Price," "Optional Redemption Price" and "Tax Event Redemption Price" being referred to herein as a "Redemption Price") of the TIDES; and - with respect to a distribution of debentures to holders of TIDES in connection with a dissolution or liquidation of the trust, debentures having an aggregate principal amount equal to the aggregate liquidation amount of the TIDES and/or common securities of the holder to whom the trust distributes the debentures. If we do not redeem the debentures prior to maturity, the trust is not liquidated and the debentures are not distributed to you and the holders of the trust's common securities, 104 110 the TIDES will remain outstanding until the repayment of the debentures at their final stated maturity and the distribution of the Liquidation Distribution to you. On and after the liquidation date fixed for any distribution of debentures to you and the holders of the trust's common securities: - the trust will no longer deem the TIDES to be outstanding; - DTC or its nominee, as the record holder of the TIDES, will receive a registered global certificate or certificates representing the debentures to be delivered upon the distribution with respect to TIDES held by DTC or its nominee; and - the trust will deem any certificates representing TIDES not held by DTC or its nominee to represent debentures having a principal amount equal to the liquidation amount of the TIDES and bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid distributions on the TIDES until those certificates are presented to the administrative trustees or their agent for cancellation, whereupon we will issue to the holder, and the trustee under the Indenture will authenticate, a certificate representing the debentures. We cannot assure you as to the market prices for the TIDES or the debentures that you may receive in exchange for the TIDES and/or the trust's common securities if a dissolution and liquidation of the trust were to occur. Accordingly, the TIDES that you may purchase, or the debentures that you may receive on dissolution and liquidation of the trust, may trade at a discount to the price that you originally paid to purchase the TIDES. SUBORDINATION OF COMMON SECURITIES Payment of distributions on, and the Redemption Price of, the TIDES and the trust's common securities, as applicable, will be made pro rata to the holders of TIDES and the trust's common securities. The trust will base those payments on the liquidation amount of the TIDES and the trust's common securities. If on any distribution date or Redemption Date any event of default under the debentures (or an event that, with notice or passage of time, would become an event of default under the debentures) or an event of default under the declaration of trust has occurred and is continuing, no payment of any distribution on, or applicable Redemption Price of, any of the trust's common securities, and no other payment on account of the redemption, liquidation or other acquisition of the trust's common securities, will be made unless payment in full in cash of all accrued and unpaid distributions on all of the outstanding TIDES for all distribution periods terminating on or prior thereto, or, in the case of payment of the applicable Redemption Price, the full amount of the Redemption Price on all of the outstanding TIDES, has been made or provided for, and all funds available to the property trustee will first be applied to the payment in full in cash of all distributions on, or the applicable Redemption Price of, the TIDES then due and payable. In the case of any event of default under the declaration of trust resulting from an event of default under the debentures, the trust will deem us, as holder of the trust's common securities, to have waived any right to act with respect to any event of default under the declaration of trust until the effect of all events of default have been cured, waived or otherwise eliminated. Until all events of default under the declaration of trust have been so cured, waived or otherwise eliminated, the property trustee will act solely on your behalf and not our behalf as holder of the trust's common securities, and only you will have the right to direct the property trustee to act on your behalf. 105 111 EVENTS OF DEFAULT; NOTICE Any one of the following events constitutes an "event of default" under the declaration of trust (whatever the reason for the event of default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): - the occurrence of a event of default under the debentures (see "Description of Convertible Subordinated Debentures -- Debenture Events of Default"); - the trust's default in the payment of any distribution when it becomes due and payable, and continuation of the default for a period of 30 days (subject to the deferral of any due date in the case of a Deferral Period); - the trust's default in the payment of any Redemption Price of any TIDES or common security of the trust when it becomes due and payable; - default in the performance, or breach, in any material respect, of any covenant or warranty of the trustees in the declaration of trust (other than a covenant or warranty, a default in the performance of which or the breach of which is addressed in the second or third bullet points above), and continuation of the default or breach for a period of 90 days after the holders of at least 25% in aggregate liquidation amount of the outstanding TIDES have given, by registered or certified mail, to the defaulting trustee or trustees a written notice specifying the default or breach and requiring it to be remedied and stating that the notice is a "Notice of Default" under the declaration of trust; or - the occurrence of a bankruptcy or insolvency with respect to the property trustee and the failure by us to appoint a successor property trustee within 60 days of those events. Within ten Business Days after the occurrence of any event of default actually known to the property trustee, the property trustee will transmit notice of the event of default to you, the administrative trustees and us, as depositor, unless the event of default has been cured or waived. Entercom, as depositor, and the administrative trustees are required to file annually with the property trustee a certificate as to whether or not we and they are in compliance with all the conditions and covenants applicable to us and them under the declaration of trust. If an event of default under the debentures (or an event that with notice or the passage of time, would become an event of default under the debentures) or an event of default under the declaration of trust has occurred and is continuing, the TIDES will have a preference over the trust's common securities. See " -- Liquidation of the Trust and Distribution of Convertible Subordinated Debentures" and " -- Subordination of Common Securities." REMOVAL OF TRUSTEES Unless an event of default under the debentures has occurred and is continuing, we may remove any trustee at any time. If an event of default under the debentures has occurred and is continuing, the holders of a majority in liquidation amount of the outstanding TIDES may remove the property trustee and the Delaware statutory trustee. In no event will you have the right to vote to appoint, remove or replace the administrative trustees, which voting rights are vested exclusively in us as the holder of the trust's 106 112 common securities. No resignation or removal of the Delaware statutory trustee or the property trustee and no appointment of a successor trustee will be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the declaration of trust. CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE Unless an Event of Default has occurred and is continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the trust's property may at the time be located, we, as the holder of the trust's common securities, and the administrative trustees will have power to appoint one or more persons either to act as a co-trustee, jointly with the property trustee, of all or any part of the trust's property, or to act as separate trustee of any such property. In either case, the newly appointed trustee will have the powers provided in the instrument of appointment. In case an event of default under the debentures has occurred and is continuing, the property trustee alone will have power to make the appointment. MERGER OR CONSOLIDATION OF TRUSTEES Any person into which the property trustee, the Delaware trustee or any administrative trustee that is not a natural person may be merged or with which it may be consolidated, or any person resulting from any merger or consolidation to which the trustee is a party, or any person succeeding to all or substantially all the corporate trust business of the trustee, will be the successor of that trustee under the declaration of trust as long as that person is otherwise qualified and eligible. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST The trust may not merge with or into, consolidate, amalgamate or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other person, except as described below or as otherwise set forth in the declaration of trust. The trust may, at our request, as depositor, with the consent of the administrative trustees but without your consent and the consent of the property trustee or the Delaware statutory trustee, merge with or into, consolidate, amalgamate or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, a trust organized as such under the laws of any state; provided, however, that: - the successor entity either (a) expressly assumes all of the trust's obligations with respect to the TIDES or (b) substitutes for the TIDES other securities having substantially the same terms as the TIDES (the "Successor Securities") so long as the Successor Securities rank the same as the TIDES rank in priority with respect to distributions and payments upon liquidation, redemption and otherwise; - we expressly appoint a trustee of the successor entity possessing the same powers and duties as the property trustee as the holder of the debentures; - the Successor Securities are listed or traded, or any Successor Securities will be listed or traded upon notification of issuance, on any national securities exchange, national automated quotation system or other organization on which the TIDES are then listed or traded, if any; - the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the TIDES (including any Successor Securities) in any material respect; 107 113 - the successor entity has a purpose substantially identical and limited to the purpose of the trust; - prior to the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, we have received an opinion from independent counsel to the trust experienced in such matters to the effect that (a) the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the limited liability of the holders of the TIDES (including any Successor Securities) in any material respect, and (b) following the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the trust nor the successor entity will be required to register as an investment company under the Investment Company Act; - we or any permitted successor or assignee owns all of the common securities of the successor entity and guarantees the obligations of the successor entity under the Successor Securities at least to the extent provided by the Guarantee; and - the merger, consolidation, amalgamation, replacement or lease is not a taxable event for you. Notwithstanding the foregoing, the trust will not, except with the consent of holders of 100% in aggregate liquidation amount of the TIDES and the trust's common securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it, if the consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the trust or the successor entity to be classified as an association taxable as a corporation (or to substantially increase the likelihood that the trust or the successor entity would be classified as other than a grantor trust) for United States federal income tax purposes. VOTING RIGHTS; AMENDMENT OF THE DECLARATION Except as provided below and under "Description of Guarantee -- Amendments and Assignment" and as otherwise required by law and the declaration of trust, you will have no voting rights. In addition to your rights with respect to the enforcement of payment to the trust of principal of or interest on the debentures as described under "Description of Convertible Subordinated Debentures -- Debenture Events of Default," if: - an event of default under the debentures occurs and is continuing; or - we default under the Guarantee with respect to the TIDES (each an "Appointment Event"); then the holders of the TIDES, acting as a single class, will be entitled by a vote of a majority in aggregate stated liquidation amount of the outstanding TIDES to appoint a special trustee. Any holder of TIDES (other than Entercom or any of our affiliates) will be entitled to nominate any person to be appointed as special trustee. Not later than 30 days after the right to appoint a special trustee arises, the trustees will convene a meeting of the holders of TIDES for the purpose of appointing a special trustee. If the trustees fail to convene that meeting within the 30-day period, the holders of not less than 10% of the aggregate stated liquidation amount of the outstanding TIDES will be entitled to convene the meeting. The provisions of the declaration of trust relating to the convening and conduct of the meetings of the holders will apply with respect to the meeting. Any 108 114 special trustee so appointed will cease to be a special trustee if the Appointment Event pursuant to which the special trustee was appointed and all other Appointment Events cease to be continuing. Notwithstanding the appointment of any special trustee, we will retain all rights under the Indenture, including the right to defer payments of interest by extending the interest payment period as described under "Description of Convertible Subordinated Debentures -- Option to Extend Interest Payment Date." Entercom, the property trustee and the administrative trustees may amend the declaration of trust from time to time without your consent: - to cure any ambiguity; - to correct or supplement any provision in the declaration of trust that may be inconsistent with any other provision; - to make any other provisions with respect to ministerial matters or questions arising under the declaration of trust, which will not be inconsistent with the other provisions of the declaration of trust; or - to modify, eliminate or add to any provisions of the declaration of trust to the extent as is necessary to ensure that the trust will not be classified for United States federal income tax purposes as a corporation or will be classified for United States federal income tax purposes as a grantor trust at all times that any TIDES or the trust's common securities are outstanding or to ensure that the trust will not be required to register as an investment company under the Investment Company Act of 1940, as amended. However, in the case of the first clause above, the action must not adversely affect in any material respect the interests of any holder of TIDES or the trust's common securities, and any amendments of the declaration of trust will become effective when notice of the amendment is given to you and the holders of the trust's common securities. Entercom, the property trustee and the administrative trustees may amend the declaration of trust with: - the consent of holders representing not less than a majority (based upon liquidation amounts) of the outstanding TIDES; and - receipt by the trustees of an opinion of counsel to the effect that the amendment or the exercise of any power granted to the trustees in accordance with the amendment will not affect the trust's status as a grantor trust for United States federal income tax purposes or the trust's exemption from status as an investment company under the Investment Company Act. In addition, without the consent of each holder of TIDES and the trust's common securities, the declaration of trust may not be amended to (A) change the amount or timing of any distribution on the TIDES or the trust's common securities or otherwise adversely affect the amount of any distribution required to be made in respect of the TIDES or the trust's common securities as of a specified date or (B) restrict the right of a holder of TIDES or the trust's common securities to institute suit for the enforcement of any payment on or after such date. So long as any debentures are held by the trust, the trustees will not: - direct the time, method and place of conducting any proceeding for any remedy available to the trustee under the debentures, or executing any trust or power conferred on the property trustee with respect to the debentures; 109 115 - waive any past default that is waivable under the Indenture; - exercise any right to rescind or annul a declaration that the principal of all the debentures is due and payable; or - consent to any amendment, modification or termination of the Indenture or the debentures, when that consent will be required; without, in each case, obtaining the prior approval of the holders of a majority in aggregate liquidation amount of all outstanding TIDES; provided, however, that when a consent under the Indenture does require the consent of each holder of debentures affected thereby, the property trustee cannot give its consent without the prior consent of each holder of the TIDES. The trustees cannot revoke any action previously authorized or approved by a vote of the holders of the TIDES except by subsequent vote of those holders. The property trustee will notify each holder of TIDES of any notice of default with respect to the debentures. In addition to obtaining the foregoing approvals of the holders of the TIDES, prior to taking any of the foregoing actions, the trustees will obtain an opinion of counsel experienced in those matters to the effect that the action will not affect the trust's status as a grantor trust for United States federal income tax purposes on account of the action. Any required approval of holders of TIDES may be given at a meeting of those holders convened for such purpose or pursuant to written consent. The property trustee will cause a notice of any meeting at which holders of TIDES are entitled to vote to be given to each holder of record of TIDES in the manner set forth in the declaration of trust. Neither your vote nor your consent is required for the trust to redeem and cancel the TIDES in accordance with the declaration of trust. Notwithstanding that you are entitled to vote or consent under any of the circumstances described above, any of the TIDES that are owned by us, the trustees or any affiliate of Entercom or any trustees, will, for purposes of such vote or consent, be treated as if they were not outstanding. EXPENSES AND TAXES In the Indenture, we, as issuer of the debentures, have agreed to pay all debts and other obligations (other than with respect to payments of distributions, amounts payable upon redemption and the liquidation amount of the TIDES and the trust's common securities) and all of the trust's costs and expenses (including costs and expenses relating to the trust's organization, the fees and expenses of the trustees and the costs and expenses relating to the trust's operations) including those incurred in connection with the offering of the TIDES, and to pay any and all taxes and all costs and expenses with respect to the foregoing (other than United States withholding taxes) to which the trust might become subject. Our obligations under the Indenture are for the benefit of, and will be enforceable by, any creditor to whom any such debts, obligations, costs, expenses and taxes are owed, whether or not the creditor has received notice of those obligations. Any creditor may enforce our obligations directly against us, and we have irrevocably waived any right or remedy to require that any creditor take any action against the trust or any other person before proceeding against us. We have also agreed in the Indenture to execute any additional agreement(s) as may be necessary or desirable to give full effect to the foregoing. 110 116 FORM, BOOK-ENTRY PROCEDURES AND TRANSFER The TIDES will be issued in the form of one fully registered global TIDES certificate (the "Global TIDES"), except as described below. The Global TIDES will be deposited upon issuance with the property trustee as custodian for DTC, in New York, New York, and registered in the name of DTC or its nominee, in each case for credit to an account of a direct or indirect participant in DTC as described below. Except as set forth below, the Global TIDES may be transferred, in whole but not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global TIDES may not be exchanged for TIDES in certificated form except in the limited circumstances described below. See "-- Certificated TIDES." In addition, a transfer of beneficial interests in the Global TIDES will be subject to the applicable rules and procedures of DTC and its direct or indirect participants which may change from time to time. DEPOSITARY PROCEDURES DTC has advised us that it is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes to accounts of its Participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interest and transfer of ownership interest of each actual purchaser of each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants. DTC has also advised us and the trust that, pursuant to procedures established by it: - upon deposit of the Global TIDES, DTC will credit the accounts of Participants designated by Credit Suisse First Boston with portions of the principal amount of the Global TIDES; and - ownership of such interests in the Global TIDES will be shown on, and the transfer of ownership of those Global TIDES will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in the Global TIDES). Investors in the Global TIDES may hold their interests in the Global TIDES directly through DTC, if they are Participants in DTC, or indirectly through organizations which are Participants in DTC's system. All interests in a Global TIDES will be subject to the procedures and requirements of DTC. The laws of some states require that certain persons take physical delivery in certificated form of certain securities, including the TIDES that they own. Consequently, the ability to transfer beneficial interests in a Global TIDES to 111 117 those persons will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants and certain banks, the ability of a person having beneficial interests in a Global TIDES to pledge those interests to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of those interests, may be affected by the lack of a physical certificate evidencing those interests. For certain other restrictions on the transferability of the TIDES, see "-- Certificated TIDES." EXCEPT AS DESCRIBED BELOW, OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL TIDES ARE NOT ENTITLED TO HAVE TIDES REGISTERED IN THEIR NAMES, AND THEY WILL NOT RECEIVE OR BE ENTITLED TO RECEIVE PHYSICAL DELIVERY OF TIDES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS OF TIDES UNDER THE DECLARATION OF TRUST FOR ANY PURPOSE. Payments in respect of the Global TIDES registered in the name of DTC or its nominee will be payable by the property trustee to DTC or its nominee as the registered holder under the declaration of trust by wire transfer in immediately available funds on each distribution date. Under the terms of the declaration of trust, the property trustee will treat the persons in whose names the TIDES, including the Global TIDES, are registered as the owners of the Global TIDES for the purpose of receiving payments and for any and all other purposes. Consequently, neither the property trustee nor any agent of the property trustee has or will have any responsibility or liability for (1) any aspect of DTC's records or any Participant's or Indirect Participant's records relating to, or payments made on account of, beneficial ownership interests in the Global TIDES, or for maintaining, supervising or reviewing any of DTC's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the Global TIDES or (2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. DTC has advised us and the trust that its current practice, upon receipt of any payment in respect of securities such as the TIDES, is to credit the accounts of the relevant Participants with the payment on the payment date, in amounts proportionate to their respective holdings in liquidation amount of beneficial interests in the Global TIDES, as shown on the records of DTC, unless DTC has reason to believe it will not receive payment on the payment date. Payments by the Participants and the Indirect Participants to the beneficial owners of TIDES represented by Global TIDES held through the Participants will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the property trustee or us. Neither the trust nor the property trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the TIDES, and the trust and the property trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes. Interests in the Global TIDES will trade and settle according to the rules and procedures of DTC and its Participants. Transfers and settlements between Participants in DTC will be effected in accordance with DTC's procedures. DTC has advised us and the trust that it will take any action permitted to be taken by you (including, without limitation, the presentation of TIDES for exchange as described below) only at the direction of one or more Participants to whose account with DTC interests in the Global TIDES are credited and only in respect of the portion of the aggregate liquidation amount of the TIDES represented by the Global TIDES as to which the Participant or Participants has or have given such direction. However, if there is an Event of Default under the declaration of trust, DTC reserves the right to exchange the 112 118 Global TIDES for TIDES in certificated form and to distribute those TIDES to its Participants. So long as DTC or its nominee is the registered owner of the Global TIDES, DTC or the nominee, as the case may be, will be considered the sole owner or holder of the TIDES represented by the Global TIDES for all purposes under the declaration of trust. Neither DTC nor its nominee will consent or vote with respect to the TIDES. Under its usual procedures, DTC would mail an omnibus proxy to the trust as soon as possible after the record date. The omnibus proxy assigns the consenting or voting rights of DTC or its nominee to those Participants to whose accounts the TIDES are credited on the record date (identified in a listing attached to the omnibus proxy). The information in this section concerning DTC and its book-entry system has been obtained from sources that we and the trust believe to be reliable, but neither we nor the trust takes responsibility for the accuracy of the information. Although DTC has agreed to the foregoing procedures to facilitate transfers of interest in the Global TIDES among Participants in DTC, it is under no obligation to perform or to continue to perform those procedures, and those procedures may be discontinued at any time. Neither the trust nor the property trustee will have any responsibility for the performance by DTC or its Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations. CERTIFICATED TIDES The TIDES represented by the Global TIDES will be exchangeable for certificated TIDES in definitive form of like tenor as the TIDES ("Certificated TIDES") in denominations of U.S. $1,000.00 and integral multiples of $1,000.00 if: - DTC notifies us or the trust that it is unwilling or unable to continue as depositary for the Global TIDES, or if at any time DTC ceases to be a clearing agency registered under the Exchange Act; - Entercom on behalf of the trust in its sole discretion at any time determines not to have all of the TIDES evidenced by Global TIDES; or - a default entitling you to accelerate the maturity of the TIDES has occurred and is continuing. Any of the TIDES that are exchangeable pursuant to the preceding sentence are exchangeable for Certificated TIDES issuable in authorized denominations and registered in the names as DTC directs. Subject to the foregoing, the Global TIDES are not exchangeable, except for Global TIDES of the same aggregate denomination to be registered in the name of DTC or its nominee. PAYMENT AND PAYING AGENCY Payments in respect of the TIDES held in global form will be made to DTC, which will credit the relevant accounts at DTC on the applicable distribution dates, or, in respect of the TIDES that are not held by DTC, the payments will be made by check mailed to the address of the holder entitled thereto as the address appears on the register. The paying agent will initially be the property trustee and any co-paying agent chosen by the property trustee and acceptable to the administrative trustees and us. The paying agent may resign as paying agent upon 30 days' written notice to the property trustee, the administrative trustees and us. If the property trustee is no longer the paying agent, the 113 119 administrative trustees will appoint a successor (which will be a bank or trust company acceptable to the administrative trustees and us) to act as paying agent. The property trustee has informed the trust that so long as it serves as paying agent for the TIDES, it anticipates that information regarding distributions on the TIDES, including payment date, record date and redemption information, will be made available through Wilmington Trust Company. REGISTRAR, CONVERSION AGENT AND TRANSFER AGENT The property trustee acts as registrar, conversion agent and transfer agent for the TIDES. The property trustee will act as initial paying agent and transfer agent for Certificated TIDES and may designate additional or substitute paying agents and transfer agents at any time. Registration of transfers of Certificated TIDES will be effected without charge by or on behalf of the trust, but upon payment (with the giving of such indemnity as the administrative trustees, the property trustee or we may require) in respect of any tax or other government charges that may be imposed in connection with any transfer or exchange. The trust will not be required to register the transfer or exchange of Certificated TIDES during the period beginning at the opening of business 15 days before any selection of Certificated TIDES to be redeemed and ending at the close of business on the day of that selection or register the transfer or exchange of any Certificated TIDES, or portion thereof, called for redemption. INFORMATION CONCERNING THE PROPERTY TRUSTEE The property trustee, other than during the occurrence and continuance of an event of default, will undertake to perform only those duties as are specifically set forth in the declaration of trust and, during the existence of an event of default, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the property trustee is under no obligation to exercise any of the powers vested in it by the declaration of trust at the request of any holder of TIDES or the trust's common securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. If no event of default has occurred and is continuing and the property trustee is required to decide between alternative causes of action, construe ambiguous provisions in the declaration of trust or is unsure of the application of any provision of the declaration of trust, and the matter is not one on which holders of the TIDES or the trust's common securities are entitled under the declaration of trust to vote, then the property trustee will take the action as is directed by us. If the property trustee receives no directions, it will take the action as it deems advisable and in the best interests of the holders of the TIDES and the trust's common securities and will have no liability except for its own bad faith, negligence or willful misconduct. MISCELLANEOUS The administrative trustees are authorized and directed to: - conduct the affairs of and to operate the trust in a way that the trust will not be deemed to be an investment company required to be registered under the Investment Company Act; 114 120 - take any action to cause the trust to be classified for United States federal income tax purposes as a grantor trust; and - take any action to ensure that the debentures will be treated as our indebtedness for United States federal income tax purposes. In this connection, we and the administrative trustees are authorized to take any action, not inconsistent with applicable law, the trust's certificate of trust or the declaration of trust, that we and the administrative trustees determine in our and their discretion to be necessary or desirable for those purposes, as long as their actions do not materially adversely affect the interests of the holders of the TIDES or the trust's common securities. You and the holders of the trust's common securities have no preemptive or similar rights. The trust may not borrow money or issue debt or mortgage or pledge any of its assets. GOVERNING LAW The declaration of trust and the TIDES will be governed by and construed in accordance with the laws of the State of Delaware. 115 121 DESCRIPTION OF CONVERTIBLE SUBORDINATED DEBENTURES We will issue the debentures under the Indenture. The Indenture will be qualified under and will be subject to and governed by the Trust Indenture Act upon effectiveness of the registration statement of which this prospectus is a part. This summary of certain terms and provisions of the debentures and the Indenture is not complete. For a complete description of the debentures, we encourage you to read the Indenture. The form of Indenture has been filed as an exhibit to the registration statement of which this prospectus is a part. Unless the context requires otherwise, "Entercom," "We," "Us," "Our" or similar terms in this section refer solely to Entercom Communications Corp. and not the trust or any of our other consolidated subsidiaries. GENERAL Concurrently with the issuance of the TIDES and the trust's common securities, the trust will invest the proceeds in our % Convertible Subordinated Debentures due 2014. Interest will accrue on the debentures from the date of their original issuance, at the annual rate of % of the principal amount thereof, subject to the deferral rights described below. The trust will make those payments quarterly in arrears on March 31, June 30, September 30 and December 31 (each, an "Interest Payment Date"), commencing December 31, 1999, to the person in whose name each debenture is registered, at the close of business on the fifteenth of the month in which the applicable Interest Payment Date falls. We anticipate that, until the liquidation of the trust, each debenture will be registered in the name of the trust and held by the property trustee for the benefit of the holders of the TIDES and the trust's common securities. The amount of interest payable for any period will be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. If any Interest Payment Date is not a Business Day, then payment of the interest payable on that date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any the delay), with the same force and effect as if made on the applicable Interest Payment Date. Accrued interest that is not paid on the applicable Interest Payment Date will bear additional interest on the amount of interest (to the extent permitted by law), compounded quarterly from the relevant Interest Payment Date. The term "interest" as used herein will include quarterly interest payments, interest on quarterly interest payments not paid on the applicable Interest Payment Date and Additional Sums, as applicable. See "-- Additional Sums." If the trust distributes the debentures to you, the description of your conversion rights in this prospectus will apply, with such changes as are necessary, to the conversion of the debentures. See "Description of TIDES -- Conversion Rights." Unless we previously redeem or repurchase the debentures in accordance with the Indenture, they will mature on September 30, 2014. See"-- Redemption -- Repayment at Maturity; Redemption of Convertible Subordinated Debentures." The debentures will be unsecured and will rank junior and subordinate in right of payment to all of our Secured Senior Debt. Because we are principally a holding company, our right to participate in any distribution of assets of any subsidiary upon the subsidiary's liquidation or reorganization or otherwise (and thus the ability of holders of the TIDES to benefit indirectly from the distribution) is subject to the prior claims of creditors of the 116 122 subsidiary, except to the extent that we may ourselves be recognized as a creditor of the subsidiary. Accordingly, the debentures will be subordinated to all of our Secured Senior Debt and effectively subordinated to all existing and future liabilities of our subsidiaries. Our subsidiaries are separate legal entities and have no obligations to pay, or make funds available for the payment of, any amounts due on the debentures, the TIDES or the guarantee. Therefore, holders of debentures should look only to our assets for payments on the debentures. The Indenture does not limit the incurrence or issuance of other secured or unsecured debt of Entercom, whether under our current credit agreement or any other debt instrument or agreement that we may enter into in the future or otherwise. See "Risk Factors -- Risks Relating to the TIDES" and "-- Subordination." OPTION TO EXTEND INTEREST PAYMENT DATE As long as no event of default under the debentures has occurred and is continuing, we have the right under the Indenture to defer the payment of interest on the debentures at any time or from time to time for a period not exceeding 20 consecutive quarters with respect to each deferral period; provided, that no deferral period may extend beyond the stated maturity of the debentures. At the end of a deferral period, we must pay all interest, then accrued and unpaid on the debentures (together with interest thereon compounded quarterly from the relevant Interest Payment Date, to the extent permitted by applicable law). During a deferral period and for so long as the debentures remain outstanding, interest will continue to accrue and holders of debentures (and holders of the TIDES while TIDES are outstanding) will be required to accrue interest income (in the form of original issue discount) for United States federal income tax purposes. During any deferral period, we may not: - declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of our capital stock (which includes common and preferred stock) other than stock dividends paid by us which consist of stock of the same class as that on which the dividend is being paid; - make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any of our debt securities that rank pari passu with or junior in interest to the debentures; or - make any guarantee payments with respect to any guarantee by Entercom of the debt securities of any of our subsidiaries if the guarantee ranks pari passu with or junior in interest to the debentures, in each case other than: - dividends or distributions in shares of our capital stock; - any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under plan in the future, or the redemption or repurchase of any rights pursuant thereto; - payments under the Guarantee; - purchases or acquisitions of shares of our common stock in connection with the satisfaction by us of our obligations under any employee benefit plan or any other contractual obligation (other than a contractual obligation ranking expressly by its terms pari passu with or junior to the debentures); - as a result of a reclassification of our capital stock or the exchange or conversion of one class or series of our capital stock for another class or series of our capital stock; or 117 123 - the purchase of fractional interests in shares of our capital stock pursuant to the conversion or exchange provisions of the capital stock or the security being converted or exchanged. The lenders under our Senior Credit Agreement have required, and we expect that the lenders under the amended or replacement credit facility we are seeking to obtain will require, that we exercise our right to defer interest on the debentures in the event a default occurs under the Senior Credit Agreement or other credit facility. Subject to the 20-quarter limitation, the lenders would require this deferral to remain in effect until the default is cured or waived and for a period of two complete consecutive quarters after any and all defaults have been cured or waived. A deferral period will terminate upon the payment by us of all interest then accrued and unpaid on the debentures (together with interest accrued thereon, compounded quarterly, to the extent permitted by applicable law). Prior to the termination of any deferral period, we may further extend the deferral period. However, the further deferral cannot cause the deferral period to exceed 20 consecutive quarters or to extend beyond the stated maturity of the debentures. Upon the termination of any deferral period, and subject to the foregoing limitations, we may elect to begin a new deferral period. We need not pay any interest during a deferral period, except at the end of the deferral period. We must give the property trustee, the administrative trustees and the debenture trustee notice of our election of any deferral period at least ten days prior to the record date for the distributions on the TIDES that would have been payable except for the election to begin or extend the deferral period. The debenture trustee will give notice of our election to begin or extend a new deferral period to the holders of the debentures. There is no limitation on the number of times that we may elect to begin a deferral period. REDEMPTION REPAYMENT AT MATURITY; REDEMPTION OF CONVERTIBLE SUBORDINATED DEBENTURES We must repay the debentures at their stated maturity on September 30, 2014, unless earlier redeemed. The circumstances in which we may, or we are required to, redeem the debentures prior to their stated maturity are described below. Upon the repayment in full at maturity or redemption, in whole or in part, of the debentures (other than following the distribution of the debentures to the holders of the TIDES and the trust's common securities), the trust will concurrently apply the proceeds from the repayment or redemption to redeem, at the applicable Redemption Price, a Like Amount of TIDES and its common securities. See "Description of TIDES -- Mandatory Redemption." OPTIONAL REDEMPTION We will have the right to redeem the debentures in whole or in part, at any time after October 3, 2002, upon not less than 20 nor more than 60 day's notice, at a redemption price (the "Optional Redemption Price") equal to the following prices per $50 principal 118 124 amount of debentures, plus accrued and unpaid interest thereon, if redeemed during the 12-month period ending September 30:
PRICE PER YEAR $50 PRINCIPAL AMOUNT - ---- -------------------- 2003...................... $ 2004...................... $ 2005...................... $ 2006...................... $
In the event of any redemption in part, we will not be required: - to issue, register the transfer of or exchange any debenture during a period beginning at the opening of business 15 days before any selection for redemption of debentures and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all holders of debentures to be so redeemed; and - to register the transfer of or exchange any debentures so selected for redemption, in whole or in part, except the unredeemed portion of any debenture being redeemed in part. In no event will we optionally redeem the debentures during a deferral period. Accordingly, prior to optionally redeeming the debentures, all interest accrued and unpaid (together, in the case of a deferral period, with interest thereon, to the extent permitted by law) to the Interest Payment Date immediately preceding the Optional Redemption Date will be paid in full. TAX EVENT REDEMPTION We may also, under limited circumstances within 90 days of the occurrence and continuation of a Tax Event, redeem (a "Tax Event Redemption") the debentures in whole, but not in part, at the aggregate principal amount of the debentures plus accrued and unpaid interest thereon to the date of redemption (the "Tax Event Redemption Price"). See "Description of TIDES -- Tax Event or Investment Company Event Redemption or Distribution." If we are permitted to consummate a Tax Event Redemption and we desire to do so, we must cause a notice to be mailed to each holder of TIDES and each holder of debentures at least 30 days but not more than 60 days before the Redemption Date. In the event of a Tax Event Redemption, you may convert your TIDES (or debentures, if applicable) called for redemption into our Class A common stock at the Applicable Conversion Ratio prior to 5:00 p.m., New York City time, on the applicable Redemption Date. ADDITIONAL SUMS If (A) the property trustee is the sole holder of all the debentures and (B) the trust is required to pay any additional taxes, duties, assessments or other governmental charges (other than withholding taxes) as a result of a Tax Event ("Additional Sums"), we will pay as additional amounts on the debentures those amounts as required so that the distributions payable by the trust in respect of the TIDES and its common securities will not be reduced as a result of any of those Additional Sums. 119 125 RESTRICTIONS ON PAYMENTS If (A) there has occurred an event of default under the debentures, (B) we are in default with respect to our payment of any obligations under the Guarantee or (C) we have given notice of our election of a deferral period as provided in the Indenture and have not rescinded that notice, or the deferral period is continuing, we will not: - declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of our capital stock (which includes common and preferred stock) other than stock dividends paid by us which consist of stock of the same class as that on which the dividend is being paid; - make any payment of principal, interest or premium, if any, on or repay or repurchase or redeem any of our debt securities that rank pari passu with or junior in interest to the debentures; or - make any guarantee payments with respect to any guarantee by Entercom of the debt securities of any of our subsidiaries if the guarantee ranks pari passu with or junior in interest to the debentures in each case other than: - dividends or distributions in shares of our capital stock; - any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any plan in the future, or the redemption or repurchase of any rights pursuant thereto; - payments under the Guarantee; - purchases or acquisitions of shares of our common stock in connection with the satisfaction by us of our obligations under any employee benefit plan or any other contractual obligation (other than a contractual obligation ranking expressly by its terms pari passu with or junior in interest to the debentures); - as a result of a reclassification of our capital stock or the exchange or conversion of one class or series of our capital stock for another class or series of our capital stock; or - the purchase of fractional interests in shares of our capital stock pursuant to the conversion or exchange provisions of the capital stock or the security being converted or exchanged. MODIFICATION OF INDENTURE From time to time we and the debenture trustee may, without the consent of the holders of debentures, amend, waive or supplement the Indenture for specified purposes, including, among other things, curing ambiguities, defects or inconsistencies (provided that any action does not materially adversely affect the interest of the holders of debentures or the holders of the TIDES so long as they remain outstanding) and qualifying, or maintaining the qualification of, the Indenture under the Trust Indenture Act. The Indenture contains provisions permitting us and the debenture trustee, with the consent of the holders of not less than a majority in principal amount of debentures, to modify the Indenture in a manner affecting the rights of the holders of debentures. However, no modification may, without the consent of the holder of each outstanding debenture so affected, - change the stated maturity of the debentures; 120 126 - reduce the principal amount of the debentures; - reduce the rate or extend the time of payment of interest on the debentures; - reduce the percentage of principal amount of debentures the consent of whose holders is required to amend, waive or supplement the Indenture; or - have certain other effects as set forth in the Indenture. DEBENTURE EVENTS OF DEFAULT The Indenture provides that any one or more of the following described events with respect to the debentures that has occurred and is continuing constitutes an event of default under the debentures: (1) failure for 30 days to pay any interest on the debentures when due (subject to the deferral of any due date in the case of a deferral period); (2) failure to pay any principal or premium, if any, on the debentures when due, whether at maturity, upon redemption, by declaration of acceleration or otherwise; (3) failure to observe or perform certain other covenants contained in the Indenture for 90 days after written notice to us from the debenture trustee or the holders of at least 25% in aggregate outstanding principal amount of the debentures; (4) failure by us to issue and deliver shares of our Class A common stock upon an election by a holder of TIDES to convert its TIDES; (5) bankruptcy, insolvency or reorganization of Entercom or any of its significant subsidiaries; or (6) the voluntary or involuntary dissolution, winding-up or termination of the trust, except in connection with the distribution of the debentures to the holders of TIDES and the trust's common securities in liquidation of the trust, the redemption of all of the TIDES and the trust's common securities or certain mergers, consolidations or amalgamations, each as permitted by the declaration of trust. The holders of a majority in aggregate outstanding principal amount of the debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the debenture trustee. The debenture trustee or the holders of not less than 25% in aggregate outstanding principal amount of the debentures may declare the principal due and payable immediately upon an event of default under the debentures and, should the debenture trustee or the holders of debentures fail to make such declaration, the holders of at least 25% in aggregate liquidation amount of the TIDES will have the right to make the declaration; provided that any declaration will not be effective until the earlier to occur of (1) five business days after receipt by us and the administrative agent under the Senior Credit Agreement of written notice of the declaration and (2) acceleration of obligations under the Senior Credit Agreement. The holders of a majority in aggregate outstanding principal amount of the debentures may annul the declaration and waive the default if the default (other than the non-payment of the principal of the debentures which has become due solely by the acceleration) has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the debenture trustee. Should the holders of debentures fail to annul the declaration and waive the default, the holders of a majority in aggregate liquidation amount of the TIDES will have the right to make a declaration and waive the default. 121 127 The holders of a majority in aggregate outstanding principal amount of the debentures affected thereby may, on behalf of the holders of all the debentures, waive any past default, except a default in the payment of principal of (or premium, if any) or interest (unless the default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the debenture trustee) or a default in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the holder of each outstanding debenture. Should the holders of the debentures fail to annul the declaration and waive the default, the holders of a majority in aggregate liquidation amount of the TIDES will have the right. We are required to file annually with the debenture trustee a certificate as to whether or not we are in compliance with all the conditions and covenants applicable to us under the Indenture. In case an event of default under the debentures occurs and is continuing, the property trustee will have the right to declare the principal of and the interest on the debentures, and any other amounts payable under the Indenture, to be forthwith due and payable and to enforce its other rights as a creditor with respect to the debentures; provided that any declaration will not be effective until the earlier to occur of (1) five business days after receipt by us and the administrative agent under the Senior Credit Agreement of written notice of the declaration and (2) acceleration of obligations under the Senior Credit Agreement. ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TIDES If an event of default under the debentures has occurred and is continuing and the event is attributable to our failure to pay interest or principal on the debentures on the date the interest or principal is otherwise payable, you may institute an action directly against us. We may not amend the Indenture to remove the foregoing right to bring a direct action against us without the prior written consent of the holders of all of the TIDES. If the right to bring a direct action against us is removed, the trust may become subject to the reporting obligations under the Exchange Act. Notwithstanding any payments made to a holder of TIDES by us in connection with a direct action against us, we will remain obligated to pay the principal of and interest on the debentures, and we will be subrogated to the rights of the holder of the TIDES with respect to payments on the TIDES to the extent of any payments made by us to the holder in any direct action against us. You will not be able to exercise directly any remedies, other than those set forth in the preceding paragraph, available to the holders of the debentures unless there was an event of default under the declaration of trust. See "Description of TIDES--Events of Default; Notice." CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS The Indenture provides that we will not consolidate with or merge with or into any other person or convey, transfer or lease our properties and assets substantially as an entirety to any person other than a wholly owned subsidiary, and no person will consolidate with or merge with or into us or convey, transfer or lease its properties and assets substantially as an entirety to us, unless: - in case we consolidate with or merge with or into another person or convey, transfer or lease our properties and assets substantially as an entirety to any person other than a wholly owned subsidiary, the successor person is organized under the laws of 122 128 the United States or any State of the United States or the District of Columbia, and the successor person expressly assumes our obligations on the debentures issued under the Indenture and provides for conversion rights in accordance with the Indenture; - immediately after giving effect thereto, no event of default under the debentures and no event which, after notice or lapse of time or both, would become an event of default under the debentures, has occurred and is continuing; - if at the time any TIDES are outstanding, the transaction is permitted under the declaration of trust and the Guarantee and does not give rise to any breach or violation of the declaration or trust or the Guarantee; and - certain other conditions as prescribed in the Indenture are met. The general provisions of the Indenture do not afford holders of the debentures protection in the event of a highly leveraged or other transaction involving us that may adversely affect holders of the debentures. SUBORDINATION In the Indenture, we have covenanted and agreed that any debentures issued thereunder will be subordinate and junior in right of payment to all of our Secured Senior Debt to the extent provided in the Indenture. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding-up, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency or similar proceedings relating to Entercom, the holders of Secured Senior Debt will first be entitled to receive payment in full in cash of principal of (and premium, if any), interest, and all other obligations with respect to the Secured Senior Debt before the holders of debentures, or the property trustee (or any other person or entity) on behalf of the holders, will be entitled to receive or retain any payment or distribution in respect of the debentures. In the event of the acceleration of the maturity of the debentures, the holders of all Secured Senior Debt outstanding at the time of the acceleration will first be entitled to receive payment in full in cash of all amounts due thereon (including any amounts due upon acceleration) before the holders of the debentures will be entitled to receive or retain any payment or distribution in respect of the debentures. In the event that - we default in the payment of any principal of, premium (if any), interest on, or any other amount with respect to, any Secured Senior Debt when the same becomes due and payable (a "payment default"), whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise; and, in the case of Secured Senior Debt other than Designated Secured Senior Debt, - the default continues beyond the period of grace, if any, specified in the instrument evidencing the Secured Senior Debt, then, unless and until the default is cured or waived or ceases to exist or all Secured Senior Debt is paid in full in cash, no direct or indirect payment or distribution (in cash, property, securities, by set-off or otherwise) will be made or agreed to be made for or in respect of the debentures, or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the debentures. 123 129 Furthermore, in the event that - we suffer a default (other than a payment default) under any Designated Secured Senior Debt; and - the default continues beyond the period of grace, if any, specified in the instrument evidencing the Designated Secured Senior Debt, then, commencing upon the receipt by the debenture trustee (with a copy to us) of written notice of the default from the representative of the holders of the Designated Secured Senior Debt and until the default is cured or waived or ceases to exist or all the Designated Secured Senior Debt is paid in full in cash, no direct or indirect payment or distribution (in cash, property, securities, by set-off or otherwise) will be made or agreed to be made for or in respect of the debentures, or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the debentures. We must promptly notify the holders of Designated Secured Senior Debt of the occurrence of any default under the Indenture or the debentures. The term "Designated Secured Senior Debt" means (1) any obligation under the Senior Credit Agreement and (2) any other Secured Senior Debt the principal amount of which is $10.0 million or more and that has been designated by us as "Designated Secured Senior Debt." The term "Senior Credit Agreement" means (A) that certain Loan Agreement, dated February 13, 1998, as amended on October 8, 1998 and as further amended on July 20, 1999, by and among Entercom, as the borrower, Key Corporate Capital Inc., as administrative agent and document agent, Bank of America National Trust & Savings Association, as syndication agent, and the financial institutions listed therein, as amended, including, without limitation, any related notes, letters of credit, guarantees, collateral documents, instruments and agreements executed in connection therewith, and, in each case, as amended, amended and restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time, and (B) any other debt or credit facility or commercial paper facility providing for revolving credit loans, term loans, accounts receivable financing (including through the sale of accounts receivable to such lenders or to special purpose entities formed to borrow from such lenders against such accounts receivable), letters of credit or other form of financing, in each case, as amended, restated, supplemented, extended, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time, including, in the case of clause (A) and clause (B), any such amendment, restatement, supplement, extension, modification, renewal, refunding, replacement or refinancing, (1) extending or shortening the maturity of any obligation incurred thereunder or contemplated thereby, (2) adding or deleting borrowers or guarantors thereunder and (3) increasing the amount of credit extended, or available to be extended, thereunder. The term "Senior Debt" means: (A) all of our obligations under the Senior Credit Agreement, whether as an obligor, guarantor or otherwise, including, without limitation, principal (including, without limitation, reimbursement obligations in respect of letters of credit (whether or not drawn) and obligations to cash collateralize letters of credit), premium (if any), interest (including, without limitation, interest accruing subsequent to the filing of, or which would have accrued but for the filing of, a petition for bankruptcy, whether or not the interest is an allowable claim in the bankruptcy 124 130 proceeding), fees, indemnifications, expenses and other amounts payable pursuant thereto; (B) the principal of, and premium and interest, if any, on all of our indebtedness for money borrowed, whether outstanding on the date of execution of the Indenture or thereafter created, assumed or incurred; (C) all obligations to make payment pursuant to the terms of financial instruments, such as (1) securities contracts and foreign currency exchange contracts, (2) derivative instruments, such as swap agreements (including interest rate and foreign exchange rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange agreements, options, commodity futures contracts and commodity options contracts, and (3) similar financial instruments; except, in the case of both (A) and (B) above, the indebtedness and obligations that are expressly stated to rank junior in right of payment to, or pari passu in right of payment with, the debentures; (D) indebtedness or obligations of others of the kind described in (A), (B) and (C) above for the payment of which we are responsible or liable as guarantor or otherwise; and (E) any deferrals, renewals or extensions of any Senior Debt that is secured, in whole or in part by our assets. However, Senior Debt will not be deemed to include: - any of our Debt which, when incurred and without respect to any election under Section 1111(b) of the United States Bankruptcy Code of 1978, was without recourse to us; - trade accounts payable in the ordinary course of business; - any of our Debt to any of our subsidiaries; or - Debt to any of our employees. The term "Secured Senior Debt" means Senior Debt that by its terms is secured by any lien, pledge, charge, encumbrance, mortgage, deed of trust, hypothecation, assignment or security interest with respect to assets having a fair market value at the time of the grant thereof (in the judgment of the Board of Directors, our Chief Financial Officer or other responsible officer of Entercom) equal to not less than the amount of such Senior Debt, including, without limitation, Senior Debt under the Senior Credit Agreement. The term "Debt" means: - the principal of, and premium and interest, if any, on indebtedness for money borrowed; - purchase money and similar obligations; - obligations under capital leases; - guarantees, assumptions or purchase commitments relating to, or other transactions as a result of which we are responsible for the payment of the indebtedness of others; - renewals, extensions and refunding of any indebtedness; 125 131 - interest or obligations in respect of any indebtedness accruing after the commencement of any insolvency or bankruptcy proceedings; and - obligations associated with derivative products such as interest rate and currency exchange contracts, foreign exchange contracts, commodity contracts and similar arrangements. The Indenture places no limitation on the amount of Secured Senior Debt that may be incurred by us. We expect from time to time to incur additional indebtedness constituting Secured Senior Debt. At June 30, 1999, our aggregate outstanding Secured Senior Debt was approximately $166.3 million plus a $4.9 million letter of credit, and, on a pro forma basis, we would have had consolidated Secured Senior Debt of $538.9 million plus a $4.9 million letter of credit. The Indenture also places no limitation on the Debt of our subsidiaries, which effectively ranks senior in right of payment to the debentures. REGISTRATION AND TRANSFER The debentures will be represented by one or more global certificates registered in the name of Cede & Co. as the nominee of DTC if, and only if, distributed to the holders of the TIDES and the trust's common securities. Until that time, the debentures will remain registered in the name of and held by the property trustee. Should the debentures be distributed to holders of the TIDES and the trust's common securities, beneficial interests in the debentures will be shown on, and transfers of debentures will be effected only through, records maintained by Participants in DTC. Except as described below, debentures in certificated form will not be issued in exchange for the global certificates. A global security will be exchangeable for debentures in certificated form registered in the names of persons other than Cede & Co. only if: - DTC notifies us that it is unwilling or unable to continue as a depositary for the global security and no successor depositary has been appointed, or it at any time DTC ceases to be a "clearing agency" registered under the Exchange Act, at a time when DTC is required to be so registered to act as the depositary; - we in our sole discretion determines that the global security will be so exchangeable; or - there has occurred and is continuing an event of default under the debentures. Any global security that is exchangeable pursuant to the preceding sentence will be exchangeable for certificates registered in those names as DTC directs. It is expected that the instructions will be based upon directions received by DTC from its Participants with respect to ownership of beneficial interests in the global security. Payments on debentures held in global form will be made to DTC, as the depositary for the debentures. In the case of debentures issued in certificated form, principal and interest will be payable, the transfer of the debentures will be registrable, and debentures will be exchangeable for debentures of other denominations of a like aggregate principal amount, at the corporate office of the debenture trustee in New York, New York, or at the offices of any paying agent or transfer agent appointed by us, provided that payment of interest may be made at our option of by check mailed to the address of the persons entitled thereto or by wire transfer. For a description of DTC and the terms of the depositary arrangements relating to payments, transfers, voting rights, redemptions and other notices and other matters, see "Description of TIDES -- Form, Book-Entry Procedures and Transfer." If the debentures 126 132 are distributed to the holders of the TIDES and the trust's common securities upon the trust's termination, the form, book-entry and transfer procedures with respect to the TIDES as described under "Description of TIDES -- Form, Book-Entry Procedures and Transfer," will apply to the debentures with such changes to the details of the procedures as are necessary. PAYMENT AND PAYING AGENTS Payment of the principal of and interest on the debentures will be made at the office or agency we maintain for that purpose in New York, New York, in the coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. However, at our option, payment of interest may be made (except in the case of debentures that are held in global form) by check mailed to each registered holder or by wire transfer. Payment of any interest on any debentures will be made to the person in whose name the debentures is registered at the close of business on the record date for that interest payment date, except in the case of defaulted interest. GOVERNING LAW The Indenture and the debentures will be governed by and construed in accordance with the laws of the State of New York. INFORMATION CONCERNING THE DEBENTURE TRUSTEE The debenture trustee will be subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to those provisions, the debenture trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of debentures, unless offered reasonable indemnity by the holder against the costs, expenses and liabilities which might be incurred thereby. The debenture trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the debenture trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. 127 133 DESCRIPTION OF GUARANTEE We will execute and deliver the Guarantee for your benefit concurrently with the issuance by the trust of the TIDES. Wilmington Trust Company will act as guarantee trustee under the Guarantee. The Guarantee will be qualified under the Trust Indenture Act upon the effectiveness of the registration statement of which this prospectus is a part. This summary of certain provisions of the Guarantee is not complete. For a complete description of the Guarantee, we encourage you to read the Guarantee. The guarantee trustee holds the Guarantee for the benefit of the holders of the TIDES. We have filed the form of Guarantee as an exhibit to the registration statement of which this prospectus is a part. Unless the context requires otherwise, "Entercom," "We," "Us," "Our" or similar terms in this section refer solely to Entercom Communications Corp. and not the trust or any of our other consolidated subsidiaries. GENERAL Pursuant to the Guarantee, we will irrevocably agree to pay in full on a subordinated basis, as set forth herein, the Guarantee Payments to you, as and when due, regardless of any defense, right of set-off or counterclaim that the trust may have or assert other than the defense of payment. The following payments with respect to the TIDES, to the extent not paid by or on behalf of the trust (the "Guarantee Payments"), will be subject to the Guarantee: - any accrued and unpaid distributions required to be paid on the TIDES, to the extent that the trust has funds on hand available at that time; - the applicable Redemption Price with respect to TIDES called for redemption, to the extent that the trust has funds on hand available at that time; and - upon a voluntary or involuntary dissolution, winding up or liquidation of the trust (other than in connection with the distribution of debentures to you or the redemption of all of the TIDES), the lesser of (a) the Liquidation Distribution, to the extent the trust has funds available and (b) the amount of assets of the trust remaining available for distribution to you upon liquidation of the trust after satisfaction of liabilities to the trust's creditors as required by applicable law. Our obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by us to you or by causing the trust to pay those amounts to you. The Guarantee will be an irrevocable guarantee on a subordinated basis of the trust's obligations under the TIDES, although it will apply only to the extent that the trust has funds sufficient to make those payments, and is not a guarantee of collection. If we do not make interest payments on the debentures held by the trust, the trust will not be able to pay distributions on the TIDES and will not have funds legally available for the distributions. The Guarantee will rank subordinate and junior in right of payment to all Secured Senior Debt. See "-- Status of the Guarantee." Because we are principally a holding company, our right to participate in any distribution of assets of any subsidiary, upon the subsidiary's liquidation or reorganization or otherwise (and thus the ability of the holders of TIDES to benefit indirectly from any such distribution), is subject to the prior claims of creditors of the subsidiary, except to the extent we may ourselves be recognized as a creditor of that subsidiary. Accordingly, our obligations under the Guarantee will be effectively subordinated to all existing and future liabilities of our subsidiaries, and 128 134 claimants should look only to our assets for payments thereunder. The Guarantee does not limit our incurrence or issuance of other secured or unsecured debt, including Secured Senior Debt. STATUS OF THE GUARANTEE The Guarantee will constitute our unsecured obligation and will rank subordinate and junior in right of payment to all Secured Senior Debt in the same manner as the debentures. The Guarantee will constitute a guarantee of payment and not of collection (i.e., the guaranteed party may institute a legal proceeding directly against us to enforce its rights under the Guarantee without first instituting a legal proceeding against any other person or entity). The Guarantee will be held for your benefit. The Guarantee will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by the trust or upon distribution to the holders of the TIDES or the debentures. The Guarantee does not place a limitation on the amount of additional Secured Senior Debt that may be incurred by us. We expect from time to time to incur additional indebtedness constituting Secured Senior Debt. AMENDMENTS AND ASSIGNMENT Except with respect to any changes that do not materially adversely affect your rights (in which case no vote will be required), the Guarantee may not be amended without the prior approval of the holders of not less than a majority of the aggregate liquidation amount of the outstanding TIDES. The manner of obtaining any the approval will be as set forth under "Description of TIDES -- Voting Rights; Amendment of the Declaration." All guarantees and agreements contained in the Guarantee will bind our successors, assigns, receivers, trustees and representatives and will inure to the benefit of the holders of the TIDES then outstanding. EVENTS OF DEFAULT An event of default under the Guarantee will occur upon our failure to perform any of our payment or other obligations under the Guarantee; provided, however, that except with respect to a default in payment of any Guarantee Payment, we must have received notice of default and not have cured the default within 60 days after receipt of the notice. The holders of not less than a majority in aggregate liquidation amount of the TIDES have the right to direct the time, method and place of conducting any proceeding for any remedy available to the guarantee trustee in respect of the Guarantee or to direct the exercise of any trust or power conferred upon the guarantee trustee under the Guarantee. You may institute a legal proceeding directly against us to enforce your rights under the Guarantee without first instituting a legal proceeding against the trust, the guarantee trustee or any other person or entity. We, as guarantor, are required to file annually with the guarantee trustee a certificate as to whether or not we are in compliance with all the conditions and covenants applicable to us under the Guarantee. INFORMATION CONCERNING THE GUARANTEE TRUSTEE The guarantee trustee, other than during the occurrence and continuance of our default in performance of the Guarantee, undertakes to perform only those duties as are 129 135 specifically set forth in the Guarantee and, after default with respect to the Guarantee, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the guarantee trustee is under no obligation to exercise any of the powers vested in it by the Guarantee at the request of any holder of the TIDES unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. TERMINATION OF THE GUARANTEE The Guarantee will terminate as to each holder of TIDES upon: - full payment of the Redemption Price of the TIDES and any accrued and unpaid distributions; - distribution of the debentures held by the trust to you; - liquidation of the trust; or - distribution of Class A common stock of Entercom to holders in respect of conversion of the holder's TIDES into Class A common stock. The Guarantee will terminate completely upon full payment of the amounts payable in accordance with the declaration of trust. The Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of the TIDES must restore payment of any sums paid under the TIDES or the Guarantee. GOVERNING LAW The Guarantee will be governed by and construed in accordance with the laws of the State of New York. 130 136 RELATIONSHIP AMONG THE TIDES, THE CONVERTIBLE SUBORDINATED DEBENTURES AND THE GUARANTEE FULL AND UNCONDITIONAL GUARANTEE We will irrevocably guarantee payments of distributions and other amounts due on the TIDES (to the extent the trust has funds available for the payment of those distributions) as and to the extent set forth under "Description of Guarantee." Taken together, our obligations under the debentures, the Indenture, the declaration of trust and the Guarantee, including our obligation to pay the trust's costs, expenses and other liabilities (other than the trust's obligations to the holders of the TIDES and its common securities pursuant to the terms of those securities) provide in the aggregate, a full, irrevocable and unconditional guarantee of all of the trust's obligations under the TIDES. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes the full, irrevocable and unconditional guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the trust's obligations under the TIDES and its common securities. If and to the extent that we do not make payments on the debentures, the trust will not pay distributions or other amounts due on the TIDES. The Guarantee does not cover payment of distributions when the trust does not have sufficient funds to pay those distributions. In that event, your remedy is to institute a direct action against us. Our obligations under the Guarantee are subordinate and junior in right of payment to all Secured Senior Debt. Unless the context requires otherwise, "Entercom," "We," "Us," "Our" or similar terms in this section refer solely to Entercom Communications Corp. and not the trust or any of our other consolidated subsidiaries. SUFFICIENCY OF PAYMENTS As long as payments of interest and other payments are made when due on the debentures, the payments will be sufficient to cover distributions and other payments due on the TIDES, primarily because: - the aggregate principal amount or applicable Redemption Price of the debentures will be equal to the sum of the aggregate liquidation amount or applicable Redemption Price, as applicable, of the TIDES and the trust's common securities; - the interest rate payable on the debentures and interest and other payment dates on the debentures will match the distribution rate and distributions and other payment dates for the TIDES; - we will pay for all of the trust's costs, expenses and liabilities except the trust's obligations to holders of TIDES and its common securities pursuant to the terms of those securities; and - the declaration of trust further provides that the trust will not engage in any activity that is not consistent with the limited purposes of the declaration of trust. Notwithstanding anything to the contrary in the Indenture, we have the right to set off any payment we are otherwise required to make under the Indenture with and to the extent we have already made, or are concurrently on the date of that payment making, any payment under the Guarantee used to satisfy the related payment of indebtedness under the Indenture. 131 137 ENFORCEMENT RIGHTS OF HOLDERS OF TIDES You may institute a legal proceeding directly against us to enforce your rights under the Guarantee without first instituting a legal proceeding against the guarantee trustee, the trust or any other person or entity. A default or event of default under any Secured Senior Debt would not constitute a default or event of default under the declaration of trust. However, in the event of payment and certain other defaults under, or acceleration of, Secured Senior Debt, the subordination provisions of the Indenture provide that no payments may be made in respect of the debentures until the Secured Senior Debt has been paid in full or the payment or other default under any Secured Senior Debt has been cured or waived. Failure to make required payments on debentures would constitute an Event of Default under the declaration of trust. LIMITED PURPOSE OF THE TRUST The TIDES evidence an undivided beneficial ownership interest in the trust, and the trust exists for the sole purpose of issuing the TIDES and the trust's common securities and investing the proceeds of the TIDES and the trust's common securities in the debentures. RIGHTS UPON DISSOLUTION Upon any voluntary or involuntary dissolution, winding-up or liquidation of the trust involving the liquidation of the debentures, after satisfaction of the liabilities of the creditors of the trust as required by applicable law, you and the holders of the trust's common securities will be entitled to receive, out of the trust's assets held, the Liquidation Distribution in cash. See "Description of TIDES -- Liquidation of the Trust and Distribution of Convertible Subordinated Debentures." Upon any voluntary or involuntary liquidation or bankruptcy of Entercom, the property trustee, as holder of the debentures, would be a subordinated creditor of Entercom, subordinated in right of payment to all Secured Senior Debt as set forth in the Indenture, but entitled to receive payment in full of principal and interest, before any of our stockholders receive payments or distributions. Since we are the guarantor under the Guarantee and have agreed to pay for all of the trust's costs, expenses and liabilities (other than the trust's obligations to the holders of its TIDES and common securities), the positions of a holder of TIDES and a holder of debentures relative to our other creditors and stockholders in the event of our liquidation or bankruptcy are expected to be substantially the same. 132 138 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES In the opinion of Latham & Watkins, counsel to Entercom, the following are the material United States federal income tax consequences of the ownership and disposition of the TIDES. Unless otherwise stated, this summary deals only with the TIDES held as capital assets (e.g., generally as an investment) by holders who acquire the TIDES on their original issue date at their initial offering price. The treatment of a holder may vary depending on its particular situation. This summary does not deal with all aspects of taxation that may be relevant to a holder in light of its personal investments or tax circumstances, or to holders who receive special treatment under the federal income tax laws, including, without limitation: - banks and other financial institutions; - insurance companies; - regulated investment companies and real estate investment trusts; - tax-exempt entities; - brokers-dealers; - persons that hold the TIDES as a part of a position in a "straddle" or as part of a "hedging," "conversion" or other integrated investment transaction for federal income tax purposes; - persons whose "functional currency" is not the U.S. dollar; or - foreign persons. Further, it does not include any description of alternative minimum tax consequences or the tax laws of any state, local or foreign government that may be applicable to the TIDES. This summary is based on the Internal Revenue Code, Treasury Regulations issued thereunder and administrative and judicial interpretations thereof as of the date hereof, all of which are subject to change, possibly on a retroactive basis. The authorities on which this summary is based are subject to various interpretations, and it is therefore possible that the Federal income tax treatment of the ownership and disposition of TIDES may differ from the treatment described below. INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF THE TIDES, IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, UNDER FEDERAL INCOME TAX LAWS AND ANY APPLICABLE STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, INCLUDING THE EFFECTS OF POSSIBLE FUTURE CHANGES IN SUCH LAWS. CLASSIFICATION OF THE TRUST In connection with the issuance of the TIDES, Latham & Watkins, counsel to Entercom, will render its opinion generally to the effect that, assuming full compliance with the terms of the declaration of trust, the Indenture and certain other documents, the trust will be classified for federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for federal income tax purposes each holder of TIDES will be considered the owner of an undivided interest in the debentures 133 139 held by the trust and will be required to include in gross income its pro rata share of income on the debentures, including original issue discount, whether or not cash is actually distributed to the holder. CLASSIFICATION OF THE DEBENTURES Entercom intends to take the position that the debentures will be classified for federal income tax purposes as indebtedness of Entercom under current law. By acceptance of the TIDES, each holder covenants to treat the debentures as indebtedness and the TIDES as evidence of an indirect beneficial ownership interest in the debentures. The Internal Revenue Service, however, has announced in Notice 94-47 that it will scrutinize and may challenge the debt classification of instruments that have some features similar to the debentures. Thus, no assurance can be given that the classification of the debentures as indebtedness will not be challenged by the Internal Revenue Service or, if challenged, that such a challenge will not be successful. The remainder of this discussion assumes that the debentures will be classified for federal income tax purposes as indebtedness of Entercom. ORIGINAL ISSUE DISCOUNT Because Entercom has the option, under the terms of the debentures, to defer payments of interest by extending the interest payment periods for up to 20 quarters, all of the stated interest payments on the debentures will be treated as original issue discount. Under these rules, the original issue discount on the debentures would accrue, and be includible in income, on a daily basis under a constant yield method, including during any interest deferral period, regardless of the holder's method of accounting for federal income tax purposes. Consequently, holders of the TIDES would be required to include original issue discount in gross income even if Entercom did not make any actual distributions during the extension period. Actual distributions of stated interest on the debentures generally would not be separately taxable. A holder that disposes of its TIDES between record dates for payments of distributions on the debentures will be subject to tax on original issue discount accrued through the date of disposition (and not previously included in income), but will not receive cash from the trust with respect to such original issue discount. Because the income underlying the TIDES will not be characterized as dividends for Federal income tax purposes, corporate holders of the TIDES will not be entitled to a dividends-received deduction for any income recognized with respect to the TIDES. RECEIPT OF CONVERTIBLE SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST Under some circumstances, the debentures may be distributed to holders in exchange for the TIDES and in liquidation of the trust. Under current law, a distribution of the debentures to holders in exchange for the TIDES or in liquidation of the trust would be a nontaxable event to each holder. In this case, each holder would receive an aggregate tax basis in the debentures equal to the holder's aggregate tax basis in the TIDES. A holder's holding period in the debentures received in liquidation of the trust would include the period during which the TIDES were held by the holder. The debentures also may, under certain circumstances, be redeemed for cash and the proceeds of such redemption distributed to holders in redemption of their TIDES. Under current law, a redemption of the TIDES for cash would constitute a taxable disposition of 134 140 the redeemed TIDES. In this case, a holder would recognize gain or loss as if it sold the redeemed TIDES for cash. See "-- Sale of TIDES." If, however, the liquidation of the trust were to occur because of a Tax Event which results in the trust being subject to Federal income tax with respect to income accrued or received on the TIDES, the distribution of the debentures to a holder of TIDES would be a taxable event to the trust and to each holder of TIDES. In this case, each holder of TIDES would recognize gain or loss as if the holder had exchanged its TIDES for the debentures upon liquidation of the trust. SALE OF TIDES A holder that sells the TIDES will be considered to have disposed of all or part of its pro rata share of the debentures and will recognize gain or loss equal to the difference between the amount realized on the sale of the TIDES and the holder's adjusted tax basis in the TIDES. A holder's adjusted tax basis in the TIDES generally will be its initial purchase price, increased by original issue discount previously includible in income and decreased by payments received on the TIDES. Any gain or loss recognized on the sale or exchange of the TIDES generally will be a capital gain or loss, except to the extent of any accrued interest with respect to the holder's pro rata share of the debentures required to be included in income as ordinary income. Any gain or loss will be long term capital gain or loss if the TIDES have been held by the holder for more than one year. A holder who disposes of its TIDES between record dates for payments of distributions thereon will be required to include original issue discount on the debentures through the date of disposition in income as ordinary income, and to add this amount to its adjusted tax basis in the TIDES. To the extent the amount recognized on the sale is less than the holder's adjusted tax basis, which basis will include all accrued but unpaid original issue discount, a holder will recognize a capital loss. Subject to limited exceptions set forth in the Internal Revenue Code, capital losses cannot be applied to offset ordinary income for federal income tax purposes. MARKET DISCOUNT AND BOND PREMIUM Holders that purchase the TIDES at a price that is greater than or less than the adjusted issue price of the holder's proportionate share of the debentures, which generally should approximate the face amount plus accrued but unpaid interest on the debentures, may be considered to have acquired their undivided interest in the debentures with "market discount" or "acquisition premium" as these terms are defined for federal income tax purposes. Such holders are advised to consult their tax advisors as to the federal income tax consequences of the acquisition, ownership and disposition of the TIDES. CONVERSION OF TIDES INTO CLASS A COMMON STOCK Except possibly to the extent attributable to accrued but unpaid interest on the debentures, a holder of TIDES will not recognize income, gain or loss upon the conversion, through the conversion agent, of debentures into Class A common stock. A holder of TIDES will, however, recognize gain upon the receipt of cash in lieu of a fractional share of Class A common stock equal to the amount of cash so received less the holder's tax basis in the fractional share. A holder's tax basis in Class A common stock received upon conversion should generally be equal to the holder's tax basis in the TIDES 135 141 delivered to the conversion agent for exchange, less the basis allocated to any fractional share for which cash is received. A holder's holding period in Class A common stock received upon conversion should generally begin on the date the holder acquired the TIDES delivered to the conversion agent for exchange. ADJUSTMENT OF CONVERSION PRICE Treasury Regulations promulgated under Section 305 of the Internal Revenue Code will treat holders of TIDES as having received a constructive distribution from Entercom in the event the conversion ratio of the debentures were adjusted if (i) as a result of the adjustment, the proportionate interest (measured by the quantum of Class A common stock into or for which the debentures are convertible or exchangeable) of the holders of the TIDES in the assets or earnings and profits of Entercom were increased, and (ii) the adjustment was not made pursuant to a bona fide, reasonable antidilution formula. An adjustment in the conversion ratio will not be considered made pursuant to a bona fide, reasonable antidilution formula if the adjustment is made to compensate for certain taxable distributions with respect to the Class A common stock. Thus, under some circumstances, a reduction in the conversion price of the debentures may result in deemed dividend income to holders of TIDES to the extent of the current and accumulated earnings and profits of Entercom. In this case, holders of the TIDES would be required to include their allocable share of the amount of the deemed dividend income in gross income but would not receive any cash related thereto; instead, holders would increase their tax basis in their TIDES by the amount includible in income. INFORMATION REPORTING TO HOLDERS The trust will report the interest paid or accrued, including original issue discount, during the year with respect to the debentures and any gross proceeds received by the trust from the retirement or redemption of the debentures, annually to the holders of record of the TIDES and to the Internal Revenue Service. The trust currently intends to deliver reports to holders of record no later than January 31 following each calendar year. It is anticipated that persons who hold TIDES as nominees for beneficial owners will report the required tax information to beneficial owners on Form 1099. BACKUP WITHHOLDING Payments made on, and proceeds from the sale of the TIDES and any debentures distributed by the trust may be subject to 31% federal income tax backup withholding unless the holder complies with specific identification requirements or otherwise qualifies for an exemption. Backup withholding is not an additional tax. Any withheld amounts will generally be refunded or credited against the holder's federal income tax liability, provided the required information is timely filed with the Internal Revenue Service. POSSIBLE TAX LAW CHANGES Holders of TIDES should be aware that legislation has been proposed by the Clinton Administration in the past that, if enacted, would have denied an interest expense deduction to issuers of instruments such as the TIDES. While legislation of this kind is not currently pending, there is no assurance that similar legislation will not be ultimately enacted into law, or that other developments will not occur on or after the date of this prospectus that would adversely affect the tax treatment of the TIDES or the trust. Changes of this kind could give rise to a Tax Event. 136 142 DESCRIPTION OF CAPITAL STOCK Our authorized capital stock as of September 10, 1999 consisted of: (1) 200,000,000 shares of Class A common stock, of which 24,944,267 shares are issued and outstanding; (2) 75,000,000 shares of Class B common stock, of which 10,531,805 shares are issued and outstanding; (3) 50,000,000 shares of Class C common stock, of which 1,695,669 shares are issued and outstanding; and (4) 25,000,000 shares of preferred stock, none of which are issued or outstanding. We have reserved for issuance under our 1998 Equity Compensation Plan shares of Class A common stock equal to 10% of the number of total outstanding shares of common stock of all classes. We also have 1,850,000 shares of Class A common stock reserved for issuance under our Employee Stock Purchase Plan. The following summary describes the material terms of our capital stock. However, you should refer to the actual terms of our capital stock contained in our amended and restated articles of incorporation and amended and restated bylaws and to the applicable provisions of the Pennsylvania Business Corporation Law of 1988. COMMON STOCK The rights of holders of the common stock are identical in all respects, except as discussed below. All the outstanding shares of Class A common stock, Class B common stock and Class C common stock are, and the shares of Class A common stock sold in the Class A common stock offering will be, upon issuance and payment of the purchase price therefor, validly issued, fully paid and nonassessable. DIVIDENDS. Subject to the right of the holders of any class of preferred stock, holders of shares of common stock are entitled to receive dividends that may be declared by our board of directors out of legally available funds. No dividend may be declared or paid in cash or property on any share of any class of common stock unless simultaneously the same dividend is declared or paid on each share of that and every other class of common stock; provided, that, in the event of stock dividends, holders of a specific class of common stock shall be entitled to receive only additional shares of that class. VOTING RIGHTS. The Class A common stock and the Class B common stock vote together as a single class on all matters submitted to a vote of shareholders. Each share of Class A common stock is entitled to one vote and each share of Class B common stock is entitled to ten votes, except: (1) any share of Class B common stock not voted by either Joseph M. Field or David J. Field, in their own right or pursuant to a proxy, is entitled to one vote; (2) the holders of Class A common stock, voting as a separate class, are entitled to elect two Class A directors; (3) each share of Class B common stock is entitled to one vote with respect to any Going Private Transaction (defined as a "Rule 13e-3 transaction" under the Exchange Act); and (4) as required by law. 137 143 David J. Berkman and Michael R. Hannon were designated Class A directors by our board of directors and will serve until our next annual meeting of shareholders, when the holders of the Class A common stock will elect the Class A directors. The Class A directors serve one-year terms and must be "independent directors." For this purpose, an "independent director" means a person who is not an officer or employee of us or any of our subsidiaries, and who does not have a relationship which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Holders of common stock are not entitled to cumulate votes in the election of directors. LIQUIDATION RIGHTS. Upon our liquidation, dissolution or winding-up, the holders of our common stock are entitled to share ratably in all assets available for distribution after payment in full to creditors and holders of our preferred stock, if any. CONVERSION OF CLASS A COMMON STOCK. Shares of Class A common stock owned by a Regulated Entity (defined as either an entity that is a "bank holding company" under the Bank Holding Company Act of 1956 or a non-bank subsidiary of such an entity, or an entity that, pursuant to Section 8(a) of the International Banking Act of 1978 is subject to the provisions of the Bank Holding Company Act, or any non-bank subsidiary of such an entity), are convertible at any time, at the option of the holder, into an equal number of fully paid and non-assessable shares of Class C common stock. All conversion rights of Class A common stock are subject to any necessary FCC approval. CONVERSION, TRANSFERABILITY OF CLASS B COMMON STOCK. Shares of Class B common stock are convertible at any time, at the option of the holder, into an equal number of fully paid and non-assessable shares of Class A common stock. All conversion rights of Class B common stock are subject to any necessary FCC approval. Shares of Class B common stock transferred to a party other than Joseph M. Field, David J. Field, a spouse or lineal descendant of either Joseph M. Field or David J. Field or any spouse of such lineal descendant, a trustee of a trust established for the benefit of any such persons or the estate of any such persons are automatically converted into an equal number of fully paid and non-assessable shares of Class A common stock. CONVERSION, TRANSFERABILITY OF CLASS C COMMON STOCK. Shares of Class C common stock are convertible at any time subject to certain restrictions, at the option of the holder thereof, into an equal number of fully paid and non-assessable shares of Class A common stock. A Regulated Entity may not convert shares of Class C common stock into Class A common stock if, as a result of such conversion it would own more than 4.99% of the Class A common stock unless such conversion is permitted under our amended and restated articles of incorporation or otherwise under the Banking Holding Company Act. All conversion rights of Class C common stock are subject to any necessary FCC approval. In general, shares of Class C common stock transferred to a party other than a Regulated Entity are automatically converted into an equal number of fully paid and non-assessable shares of Class A common stock. Shares of Class C common stock may be transferred by a Regulated Entity under a limited set of circumstances. OTHER PROVISIONS. The holders of common stock are not entitled to preemptive or similar rights. PREFERRED STOCK We are authorized to issue 25,000,000 shares of preferred stock, par value $.01 per share. Our board of directors, in its sole discretion, may designate and issue one or more 138 144 series of preferred stock from the authorized and unissued shares of preferred stock. Subject to limitations imposed by law or our amended and restated articles of incorporation, the board of directors is empowered to determine: - the designation of and the number of shares constituting a series of preferred stock; - the dividend rate, if any, for the series; - the terms and conditions of any voting and conversion rights for the series, if any; - the number of directors, if any, which the series shall be entitled to elect; - the amounts payable on the series upon our liquidation, dissolution or winding-up; - the redemption prices and terms applicable to the series, if any; and - the preferences and relative rights among the series of preferred stock. Such rights, preferences, privileges and limitations of preferred stock could adversely affect the rights of holders of common stock. There are currently no shares of preferred stock outstanding. FOREIGN OWNERSHIP Our amended and restated articles of incorporation restrict the ownership, voting and transfer of our capital stock, including our common stock, in accordance with the Communications Act and the rules of the FCC, which currently prohibit the issuance of more than 25% of our outstanding capital stock (or more than 25% of the voting rights it represents) to or for the account of aliens or corporations otherwise subject to domination or control by aliens. In addition, the amended and restated articles authorize our board of directors to take action to enforce these prohibitions, including requiring redemptions of common stock and placing a legend regarding restrictions on foreign ownership on the certificates representing the common stock. See "Business -- Federal Regulation of Radio Broadcasting -- Ownership Matters." CERTAIN PROVISIONS OF OUR AMENDED AND RESTATED ARTICLES OF INCORPORATION AND AMENDED AND RESTATED BYLAWS Our amended and restated articles of incorporation and amended and restated bylaws include provisions that could have an anti-takeover effect. These provisions are intended to preserve the continuity and stability of our board of directors and the policies formulated by our board of directors. These provisions are also intended to help ensure that the board of directors, if confronted by a surprise proposal from a third party which has acquired a block of our stock, will have sufficient time to review the proposal, to consider appropriate alternatives to the proposal and to act in what it believes to be the best interests of the shareholders. The following is a summary of the provisions included in our amended and restated articles of incorporation. However, you should refer to the actual document. The board of directors has no current plans to formulate or effect additional measures that could have an anti-takeover effect. EXCULPATION. Directors and officers shall not be personally liable for monetary damages (including, without limitation, any judgment, amount paid in settlement, penalty, 139 145 punitive damages or expense of any nature (including, without limitation, attorneys' fees and disbursements)) for any action taken, or any failure to take any action, unless (1) the director has breached or failed to perform the duties of his or her office and (2) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. INDEMNIFICATION. To the fullest extent permitted by the Pennsylvania Business Corporation Law, we will indemnify any person who was, is, or is threatened to be made, a party to a proceeding by reason of the fact that he or she (1) is or was our director or officer or (2) while our director or officer, is or was serving at our request as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise. BLANK CHECK PREFERRED STOCK. Our board of directors may authorize the issuance of up to 25,000,000 shares of preferred stock in one or more classes or series and may designate the dividend rate, voting rights and other rights, preferences and restrictions of each such class or series. Our board of directors has no present intention to issue any preferred stock; however, our board of directors has the authority, without further shareholder approval, to issue one or more series of preferred stock that could, depending on the terms of such series, either impede or facilitate the completion of a merger, tender offer or other takeover attempt. Although our board of directors is required to make any determination to issue such stock based on its judgment as to the best interests of our shareholders, our board of directors could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of the shareholders might believe to be in their best interests or in which shareholders might receive a premium for their stock over the then market price of such stock. Our board of directors does not intend to seek shareholder approval prior to any issuance of such stock, unless otherwise required by law. PENNSYLVANIA CONTROL-SHARE ACQUISITIONS LAW We are subject to the Pennsylvania Business Corporation Law. Generally, subchapters 25E, F, G, H, I and J of the Pennsylvania Business Corporation Law place procedural requirements and establish restrictions upon the acquisition of voting shares of a corporation which would entitle the acquiring person to cast or direct the casting of a certain percentage of votes in an election of directors. Subchapter 25E of the PBCL provides generally that, if we were involved in a "control transaction," our shareholders would have the right to demand from a "controlling person or group" payment of the fair value of their shares. For purposes of subchapter 25E, a "controlling person or group" is a person or group of persons acting in concert that, through voting shares, has voting power over at least 20% of the votes which our shareholders would be entitled to cast in the election of directors. A control transaction arises, in general, when a person or group acquires the status of a controlling person or group. In general, Subchapter 25F of the Pennsylvania Business Corporation Law delays for five years and imposes conditions upon "business combinations" between an "interested shareholder" and us. The term "business combination" is defined broadly to include various merger, consolidation, division, exchange or sale transactions, including transactions utilizing our assets for purchase price amortization or refinancing purposes. An "interested shareholder," in general, would be a beneficial owner of at least 20% of our voting shares. 140 146 In general, Subchapter 25G of the Pennsylvania Business Corporation Law suspends the voting rights of the "control shares" of a shareholder that acquires for the first time 20% or more, 33 1/3% or more or 50% or more of our shares entitled to be voted in an election of directors. The voting rights of the control shares generally remain suspended until such time as our "disinterested" shareholders vote to restore the voting power of the acquiring shareholder. Subchapter 25H of the Pennsylvania Business Corporation Law provides circumstances for our recovery of profits made upon the sale of our common stock by a "controlling person or group" if the sale occurs within 18 months after the controlling person or group became such and the common stock was acquired during such 18 month period or within 24 months prior thereto. In general, for purposes of Subchapter 25H, a "controlling person or group" is a person or group that (1) has acquired, (2) offered to acquire or (3) publicly disclosed or caused to be disclosed an intention to acquire voting power over shares that would entitle such person or group to cast at least 20% of the votes that our shareholders would be entitled to cast in the election of directors. If our disinterested shareholders vote to restore the voting power of a shareholder who acquires control shares subject to Subchapter 25G, we would then be subject to subchapters 25I and J of the Pennsylvania Business Corporation Law. Subchapter 25I generally provides for a minimum severance payment to certain employees terminated within two years of such approval. Subchapter 25J, in general, prohibits the abrogation of certain labor contracts prior to their stated date of expiration. The foregoing summary describes some of the material terms of certain subchapters of the Pennsylvania Business Corporation Law. However, you should refer to the actual statute. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the common stock is First Union National Bank. 141 147 CERTAIN ERISA CONSIDERATIONS Each fiduciary of a pension, profit-sharing or other employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (a "Plan") should consider the fiduciary standards of ERISA in the context of the Plan's particular circumstances before authorizing an investment in the TIDES. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA, whether the investment could result in an improper delegation of fiduciary authority and whether the investment would be consistent with the documents and instruments governing the Plan. Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as individual retirement accounts and Keogh plans subject to Section 4975 of the Code (also "Plans"), from engaging in certain transactions involving "plan assets" with persons who are "parties in interest" under ERISA or "disqualified persons" under the Code ("Parties in Interest") with respect to such Plans. A violation of these "prohibited transaction" rules may result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons, unless exemptive relief is available under an applicable statutory or administrative exemption. Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and foreign plans (as described in Section 4(b)(4) of ERISA) not subject to Section 401 of the Code are not subject to the requirements of ERISA or Section 4975 of the Code. Under a regulation (the "Plan Assets Regulation") issued by the United States Department of Labor (the "DOL"), the assets of the trust would be deemed to be "plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if "plan assets" of the Plan were used to acquire an equity interest in the trust and no exception were applicable under the Plan Assets Regulation. An "equity interest" is defined under the Plan Assets Regulation as any interest in an entity other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features and specifically includes a beneficial interest in a trust. Pursuant to an exception contained in the Plan Assets Regulation, the assets of the trust would not be deemed to be "plan assets" of investing Plans if, immediately after the most recent acquisition of any equity interest in the trust, less than 25% of the value of each class of equity interests in the trust were held by Plans, other employee benefit plans not subject to ERISA or Section 4975 of the Code (such as governmental, church and foreign plans), and entities holding assets deemed to be "plan assets" of any Plan (collectively, "Benefit Plan Investors"). No assurance can be given that the value of the TIDES held by Benefit Plan Investors will be less than 25% of the total value of such TIDES at the completion of the initial offering or otherwise. All of the Common Securities will be purchased and held by us. If assets of the trust are treated as "plan assets," the trustees of the trust could be treated as fiduciaries to Plans that acquired the TIDES. Certain transactions involving the trust could be deemed to constitute direct or indirect prohibited transactions under ERISA and Section 4975 of the Code with respect to a Plan if the TIDES were acquired with "plan assets" of such Plan and assets of the trust were deemed to be "plan assets" of Plans investing in the trust. For example, if we are a Party in Interest with respect to an investing Plan (either directly or by reason of its ownership of its subsidiaries), extensions of credit between Entercom and the trust (as represented by the debentures and the Guarantee) would likely be prohibited by 142 148 Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code, unless exemptive relief were available under an applicable administrative exemption (see below). In that regard, it is noted that we are a Party in Interest with respect to certain employee benefit plans covering employees of Entercom and our subsidiaries ("Entercom Plans"). However, we do not currently provide services to Plans, or serve as a fiduciary of Plans, other than the Entercom Plans and accordingly might not be treated as a Party in Interest with respect to any Plans other than Entercom Plans. If we are not a Party in Interest with respect to a Plan which is not an Entercom Plan, then a direct or indirect loan between us and such Plan would not appear to constitute a prohibited transaction. The DOL has issued five prohibited transaction class exemptions ("PTCEs") that may provide exemptive relief for direct or indirect prohibited transactions resulting from the purchase or holding of the TIDES, assuming that assets of the trust were deemed to be "plan assets" of Plans investing in the trust (see above). Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts) and PTCE 84-14 (for certain transactions determined by qualified professional asset managers). Because the TIDES may be deemed to be equity interests in the trust for purposes of applying ERISA and Section 4975 of the Code, the TIDES may not be purchased or held by any Plan, any entity whose underlying assets include "plan assets" by reason of any Plan's investment in an entity (a "Plan Asset Entity") or any person investing "plan assets" of any Plan, unless such purchaser or holder is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14. Any purchaser or holder of the TIDES or any interest therein will be deemed to have represented by its purchase and holding thereof that it either (a) is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf of or with "plan assets" of any Plan or (b) is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14. See "Transfer Restrictions." Further, the fiduciaries of any Plan or Plan Asset Entity which may purchase or hold TIDES will be deemed as a result of such acquisition or holding to have (a) directed the trust to invest in the TIDES, (b) authorized and directed any of the actions taken or which may be taken with respect to the trust and the TIDES by any of Entercom, the trustees, the debenture trustee, or the Guarantee trustee as contemplated by the Indenture, the debentures or the Guarantee and (c) to have appointed any of the trustees. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other persons considering purchasing the TIDES on behalf of or with "plan assets" of any Plan consult with their counsel regarding the potential consequences if the assets of the trust were deemed to be "plan assets" and whether we are a Party in Interest with respect to such plan and if so, the availability of exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 with respect to the acquisition or holding of TIDES. 143 149 SHARES ELIGIBLE FOR FUTURE SALE The market price of our stock could decline due to the large number of shares eligible for public sale upon consummation of the Class A common stock offering. Upon completion of the Class A common stock offering, we will have 32,944,267 shares of Class A common stock, 10,531,805 shares of Class B common stock and 1,695,669 shares of Class C common stock issued and outstanding, assuming no exercise of the underwriter's over-allotment option. Of these shares, 9,500,000 shares of Class A common stock sold in the Class A common stock offering (plus any shares issued upon exercise of the underwriters' over-allotment option), the 13,627,500 shares sold in our initial public offering in January 1999, approximately 300,000 shares of Class A common stock sold into the public market since the initial public offering and approximately 100,000 shares of unrestricted Class A common stock will be freely transferable without restriction in the public market, except to the extent that these shares have been acquired by our affiliates; resales of shares acquired by affiliates are subject to restrictions under Rule 144 of the Securities Act. In addition, upon conversion of the TIDES, the shares of Class A common stock into which the TIDES are convertible will be freely transferable without restriction in the public market, except to the extent that those shares are acquired by our affiliates and are therefore subject to restrictions under Rule 144. The remaining shares of Class A common stock and all shares of Class B common stock and Class C common stock were issued in reliance on exemptions from the registration requirements of the Securities Act, and these shares are "restricted" securities under Rule 144. The number of "restricted" shares available for sale in the public market is limited by the restrictions under Rule 144, although as to shares held by persons who are not our affiliates, many of those restrictions do not apply. In connection with the Class A common stock offering, our directors, members of senior management, Chase Capital and the selling shareholders have agreed pursuant to lock-up agreements not to sell or otherwise dispose of shares representing approximately 10,500,000 shares of Class A common stock, 10,531,805 shares of Class B common stock and 1,695,669 shares of Class C common stock, other than shares sold in the Class A common stock offering, for a period of 90 days after the date of the Class A common stock offering prospectus without the prior written consent of Credit Suisse First Boston Corporation. The restricted securities will generally be available for sale in the open market, subject to the lock-up agreements and the applicable requirements of Rule 144. In general, under Rule 144, as currently in effect, a shareholder (or shareholders whose shares are aggregated) who has beneficially owned restricted securities for at least one year (including persons who may be deemed "affiliates" under Rule 144) is entitled to sell a number of shares within any three-month period that does not exceed the greater of 1% of the then outstanding shares of the class of common stock or the average weekly trading volume of such stock during the four calendar weeks preceding such sale, subject to certain manner of sale limitations. A shareholder who is deemed not to have been an affiliate for at least three months prior to the date of sale and who has beneficially owned restricted securities for at least two years would be entitled to sell such shares under Rule 144 without regard to the volume or manner of sale limitations described above. 144 150 UNDERWRITING Under the terms and subject to the conditions contained in an underwriting agreement dated September , 1999, we and the trust have agreed that the trust shall sell to the underwriters named below, for whom Credit Suisse First Boston Corporation, Banc of America Securities LLC and Deutsche Bank Securities Inc. are acting as representatives, the following respective numbers of TIDES:
Number of TIDES Underwriter --------- Credit Suisse First Boston Corporation...................... Banc of America Securities LLC ............................. Deutsche Bank Securities Inc. .............................. Total................................................ 3,000,000 =========
The underwriting agreement provides that the underwriters are obligated to purchase all of the TIDES in the offering if any are purchased, other than those TIDES covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering of the TIDES may be terminated. Since the proceeds of the sale of the TIDES will be used by the trust to purchase the debentures, the underwriting agreement provides that we will pay as compensation to the underwriters a commission of $ per TIDES or $ . We have granted to the underwriters a 30-day option to purchase on a pro rata basis up to 450,000 additional TIDES from us at the public offering price, plus accrued distributions. The option may be exercised only to cover any over-allotments of TIDES. The underwriters propose to offer the TIDES initially at the public offering price on the cover page of this prospectus and to selling group members at a discount of up to $ per TIDES. The underwriters and selling group members may allow a discount of $ per TIDES on sales to other broker/dealers. After the initial public offering, the public offering price and other selling terms may be changed by the representatives. We estimate that our out of pocket expenses of the offering, excluding commissions, will be approximately $ . In connection with the Class A common stock offering, our directors, members of senior management and selling and other shareholders, including Chase Equity Associates, L.P., have agreed pursuant to lock-up agreements not to sell or otherwise dispose of shares representing approximately 10,500,000 shares of Class A common stock, 10,531,805 shares of Class B common stock and 1,695,669 shares of Class C common stock, other than shares sold in the Class A common stock offering, for a period of 90 days after the date of the Class A common stock offering prospectus without the prior written consent of Credit Suisse First Boston Corporation. We and the trust have agreed to indemnify the underwriters against liabilities under the Securities Act or contribute to payments which the underwriters may be required to make in that respect. The TIDES are new securities for which there currently is no market. We do not intend to list the TIDES on a national securities exchange or automated interdealer 145 151 quotation system. One or more of the underwriters intend to make a secondary market for the TIDES. However, they are not obligated to do so and may discontinue making a secondary market for the TIDES at any time without notice. The representatives may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act. - Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. - Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. - Syndicate covering transactions involve purchases of the TIDES in the open market after the distribution has been completed in order to cover syndicate short positions. - Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the TIDES originally sold by such syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. These stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the TIDES to be higher than it would otherwise be in the absence of such transactions. These transactions, if commenced, may be discontinued at any time. The underwriters and their affiliates have provided financial services to us in the past for which they received customary compensation. In addition, Credit Suisse First Boston Corporation and Deutsche Bank Securities Inc. are acting as underwriters in our concurrent offering of Class A common stock and an affiliate of Banc of America Securities LLC is a lender under our current credit facility. A portion of the proceeds from the concurrent Class A common stock offering will be used to repay debt under our current credit facility. The decision of Banc of America Securities LLC to distribute the TIDES was made independent of its affiliated lender under our current credit facility. The affiliated lender has no involvement in determining whether or when to distribute the TIDES under this offering or the terms of this offering. Banc of America Securities LLC will not receive any benefit from this offering other than its portion of the underwriting fee as paid by us. 146 152 NOTICE TO CANADIAN RESIDENTS RESALE RESTRICTIONS The distribution of the TIDES in Canada is being made only on a private placement basis exempt from the requirement that we and the trust prepare and file a prospectus with the securities regulatory authorities in each province where trades of the TIDES are effected. Accordingly, any resale of the TIDES in Canada must be made in accordance with applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with available statutory exemptions or pursuant to a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the TIDES. REPRESENTATIONS OF PURCHASERS Each purchaser of TIDES in Canada who receives a purchase confirmation will be deemed to represent to us, the trust and the dealer from whom such purchase confirmation is received that (1) the purchaser is entitled under applicable provincial securities laws to purchase such TIDES without the benefit of a prospectus qualified under such securities laws, (2) where required by law, that the purchaser is purchasing as principal and not as agent and (3) the purchaser has reviewed the text above under "Resale Restrictions." RIGHTS OF ACTION (ONTARIO PURCHASERS) The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by Ontario securities law. As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws. ENFORCEMENT OF LEGAL RIGHTS All of our directors and officers as well as the experts named herein and the trust may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us, the trust or these persons. All or a substantial portion of our assets, the assets of the trust and the assets of these persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us, the trust or these persons in Canada or to enforce a judgment obtained in Canadian courts against us, the trust or these persons outside of Canada. NOTICE TO BRITISH COLUMBIA RESIDENTS A purchaser of TIDES to whom the Securities Act (British Columbia) applies is advised that the purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any TIDES acquired by the purchaser pursuant to this offering. The report must be in the form attached to British Columbia Securities Commission Blanket Order (BOR) #95/17, a copy of which may be obtained from the Company. Only one report must be filed in respect of TIDES acquired on the same date and under the same prospectus exemption. 147 153 TAXATION AND ELIGIBILITY FOR INVESTMENT Canadian purchasers of TIDES should consult their own legal and tax advisers with respect to the tax consequences of an investment in the shares of TIDES in their particular circumstances and with respect to the eligibility of the shares of TIDES for investment by the purchaser under relevant Canadian legislation. 148 154 LEGAL MATTERS Morris, Nichols, Arsht & Tunnell, special Delaware counsel to the trust and Entercom, will pass on certain matters of Delaware law relating to the validity of the TIDES. Latham & Watkins, Washington, D.C., will pass upon the validity of the debentures and the Guarantee. John C. Donlevie, Esq. will pass upon the validity of the Class A common stock issuable upon conversion of the TIDES. Weil, Gotshal & Manges LLP, New York, New York, will pass upon certain matters on behalf of the underwriters. EXPERTS Our financial statements as of September 30, 1997 and 1998 and for each of the three years in the period ended September 30, 1998 included in this prospectus and the related financial statement schedule included elsewhere in the registration statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports appearing in this prospectus and elsewhere in the registration statement (which reports expressed an unqualified opinion and include an explanatory paragraph referring to the restatement of our 1997 and 1998 consolidated financial statements), and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The combined financial statements of the Portland, Oregon and Rochester, New York Radio Groups of Heritage Media Services, Inc. -- Broadcasting Segment as of December 31, 1997 and for the eight month period ended August 31, 1997 and the four month period ended December 31, 1997 included in this prospectus have been audited by Arthur Andersen LLP, independent public accountants, as stated in their report appearing herein and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The combined financial statements of the Boston Radio Market of CBS Radio, Inc. as of, and for the year ended December 31, 1997 included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing in this prospectus, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The combined financial statements of Sinclair Broadcast Group, Inc. and Subsidiaries-Radio Division for each of the two years in the period ended December 31, 1998 and the seven month period ended December 31, 1996 and the three month period ended March 31, 1999 included in this prospectus have been audited by Arthur Andersen LLP, independent public accountants, as stated in their report appearing herein, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The combined statements of Heritage Media Services, Inc. -- Radio Broadcasting Segment -- a Division of Heritage Media Corporation as of December 31, 1996 and 1997 for the year ended December 31, 1996 and for each of the eight month period ended August 31, 1997 and four month period ended December 31, 1997 included in this prospectus have been audited by Arthur Andersen LLP, independent public accountants, as stated in their report appearing in this prospectus, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 149 155 WHERE YOU CAN FIND MORE INFORMATION We and the trust have filed with the Commission a Registration Statement on Form S-1 regarding this offering. This prospectus, which is part of the registration statement, does not contain all of the information included in the registration statement, and you should refer to the registration statement and its exhibits to read that information. References in this prospectus to any of our contracts or other documents are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document. You may read and copy the registration statement, the related exhibits and the other material we file with the Commission at the Commission's public reference room in Washington, D.C. and at the Commission's regional offices in Chicago, Illinois and New York, New York. You can also request copies of those documents, upon payment of a duplicating fee, by writing to the Commission. Please call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The Commission also maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file with the Commission. The site's address is www.sec.gov. You may also request a copy of these filings, at no cost, by writing or telephoning us as follows: Corporate Secretary, Entercom Communications Corp., 401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004, (610) 660-5610. 150 156 INDEX TO FINANCIAL STATEMENTS
PAGE ----- ENTERCOM COMMUNICATIONS CORP. CONSOLIDATED FINANCIAL STATEMENTS Independent Auditors' Report........................... F-4 Balance Sheets as of September 30, 1997 and 1998....... F-5 Statements of Income for the Years Ended September 30, 1996, 1997 and 1998................................... F-7 Statement of Shareholders' Equity for the Years Ended September 30, 1996, 1997 and 1998..................... F-9 Statements of Cash Flows for the Years Ended September 30, 1996, 1997 and 1998............................... F-10 Notes to the Consolidated Financial Statements for the Years Ended September 30, 1996, 1997 and 1998......... F-11 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Balance Sheet as of December 31, 1998.................. F-31 Statements of Operations for the Three Months Ended December 31, 1997 and 1998............................ F-32 Statements of Cash Flows for the Three Months Ended December 31, 1997 and 1998............................ F-33 Notes to Condensed Consolidated Financial Statements... F-34 Balance Sheet as of June 30, 1999...................... F-38 Statement of Operations for the Six Months Ended June 30, 1999 and 1998..................................... F-40 Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1999..................................... F-42 Notes to Condensed Consolidated Financial Statements... F-44 THE JUNE 1998 SEVEN-STATION SINCLAIR TRANSACTION THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT Report of Independent Public Accountants............... F-48 Combined Balance Sheet as of December 31, 1997......... F-49 Combined Statements of Operations for the Eight Months Ended August 31, 1997 (Predecessor) and for the Four Months Ended December 31, 1997........................ F-50 Combined Statements of Stockholders' Equity for the Eight Months Ended August 31, 1997 (Predecessor) and for the Four Months Ended December 31, 1997........... F-51 Combined Statements of Cash Flows for the Eight Months Ended August 31, 1997 (Predecessor) and for the Four Months Ended December 31, 1997........................ F-52 Notes to Combined Financial Statements................. F-53
F-1 157
PAGE ----- Unaudited Financial Statements: Combined Balance Sheets as of December 31, 1997 (Predecessor) and March 31, 1998 (unaudited).......... F-60 Combined Statements of Operations for the Three Months Ended March 31, 1997 (Predecessor), the Two Months Ended February 28, 1998 (Predecessor) and the One Month Ended March 31, 1998 (unaudited)................ F-61 Combined Statements of Cash Flows for the Three Months Ended March 31, 1997 (Predecessor), the Two Months Ended February 28, 1998 (Predecessor) and the One Month Ended March 31, 1998 (unaudited)................ F-62 Notes to Unaudited Combined Financial Statements....... F-63 THE CBS -- BOSTON TRANSACTION THE BOSTON RADIO MARKET OF CBS RADIO, INC. Independent Auditors' Report........................... F-65 Combined Balance Sheets as of December 31, 1997 and September 30, 1998 (Unaudited)........................ F-66 Combined Statements of Operations and Equity for the Year Ended December 31, 1997 and for the Nine-Month Periods Ended September 30, 1997 and 1998 (Unaudited)........................................... F-67 Combined Statements of Cash Flows for the Year Ended December 31, 1997 and for the Nine-Month Periods Ended September 30, 1997 and 1998 (Unaudited)............... F-68 Notes to Combined Financial Statements................. F-69 THE SINCLAIR ACQUISITION THE SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION Report of Independent Public Accountants............... F-75 Consolidated Balance Sheets as of December 31, 1997 and 1998 and March 31, 1999............................... F-76 Consolidated Statements of Operations for the Seven Months Ended December 31, 1996, and the Years Ended December 31, 1997 and 1998, and the Three Months Ended March 31, 1999........................................ F-77 Consolidated Statements of Stockholders' Equity for the Seven Months Ended December 31, 1996, and the Year Ended December 31, 1997 and 1998 and the Three Months Ended March 31, 1999.................................. F-78 Consolidated Statements of Cash Flows for the Seven Months Ended December 31, 1996, and the Years Ended December 31, 1997 and 1998 and the Three Months Ended March 31, 1999........................................ F-79 Notes to Consolidated Financial Statements............. F-80
F-2 158
PAGE ----- Unaudited Financial Statements Unaudited Consolidated Balance Sheets as of December 31, 1998 and June 30, 1999............................ F-92 Unaudited Consolidated Statements of Operations for the Six Months Ended June 30, 1998 and 1999............... F-93 Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1999............... F-94 Notes to Unaudited Consolidated Financial Statements... F-95 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT -- A DIVISION OF HERITAGE MEDIA CORPORATION Report of Independent Public Accountants............... F-98 Combined Balance Sheets as of December 31, 1997 and 1996 (Predecessor).................................... F-99 Combined Statements of Operations for the Four Months Ended December 31, 1997, the Eight Months Ended August 31, 1997 (Predecessor) and the year Ended December 31, 1996 (Predecessor).................................... F-100 Combined Statements of Stockholders' Equity for the Year Ended December 31, 1996 (Predecessor), the Eight Months Ended August 31, 1997 (Predecessor) and the Four Months Ended December 31, 1997................... F-101 Combined Statements of Cash Flows for the Four Months Ended December 31, 1997, the Eight Months Ended August 31, 1997 (Predecessor) and the Year Ended December 31, 1996 (Predecessor).................................... F-102 Notes to Combined Financial Statements................. F-103
F-3 159 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Entercom Communications Corp.: We have audited the accompanying consolidated balance sheets of Entercom Communications Corp. (formerly Entertainment Communications, Inc.) and subsidiaries (the "Company") as of September 30, 1997 and 1998, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended September 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Entercom Communications Corp. and subsidiaries at September 30, 1997 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1998 in conformity with generally accepted accounting principles. As discussed in Note 14 to the consolidated financial statements, the accompanying consolidated financial statements for the years ended September 30, 1997 and 1998 have been restated. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania December 31, 1998 (January 26, 1999 as to Notes 10 and 13) F-4 160 ENTERCOM COMMUNICATIONS CORP. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND 1998 (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(AS RESTATED, SEE NOTE 14) SEPTEMBER 30, -------------------- 1997 1998 -------- -------- ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 2)..................... $ 3,626 $ 6,666 Accounts receivable (net of allowance for doubtful accounts of $292 in 1997 and $367 in 1998).......... 24,796 32,524 Prepaid expenses and deposits.......................... 1,691 5,303 Station acquisition deposits........................... 4,957 344 Income tax deposit..................................... 490 978 Assets held for sale (Note 9).......................... 5,310 -------- -------- Total current assets................................ 35,560 51,125 -------- -------- PROPERTY AND EQUIPMENT -- At cost (Note 2): Land, land easements and land improvements............. 4,584 5,954 Building............................................... 2,454 3,939 Equipment.............................................. 22,784 31,979 Furniture and fixtures................................. 5,064 7,115 Leasehold improvements................................. 1,047 3,362 -------- -------- 35,933 52,349 Accumulated depreciation............................... (8,158) (9,679) -------- -------- 27,775 42,670 Capital improvements in progress....................... 1,379 387 -------- -------- Net property and equipment.......................... 29,154 43,057 -------- -------- RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES: Net of accumulated amortization of $6,307 in 1997 and $14,265 in 1998 (Notes 2, 3, and 4)................. 295,419 424,716 DEFERRED CHARGES AND OTHER ASSETS -- Net (Notes 2, 3 and 5)..................................................... 4,610 4,047 -------- -------- TOTAL.................................................... $364,743 $522,945 ======== ========
See notes to consolidated financial statements. F-5 161 ENTERCOM COMMUNICATIONS CORP. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND 1998 (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(AS RESTATED, SEE NOTE 14) SEPTEMBER 30, ------------------- SEPTEMBER 30, 1997 1998 PRO FORMA -------- -------- ------------- (NOTE 1) (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable.......................................... $ 7,128 $ 10,919 $ 10,919 Accrued liabilities: Salaries............................................... 2,422 4,052 4,052 Interest............................................... 109 1,114 1,114 Taxes other than income................................ 69 189 189 Barter (Note 2)........................................ 5 18 18 Corporate state income taxes (Note 2)..................... 323 459 459 Senior debt -- current.................................... 10 10 -------- -------- -------- Total current liabilities............................ 10,056 16,761 16,761 SENIOR DEBT -- Noncurrent (Note 6A)......................... 117,000 253,774 270,918 CONVERTIBLE SUBORDINATED NOTE (Note 6D) Note payable........ 25,000 25,000 25,000 Accrued interest.......................................... 2,427 4,352 4,352 Cumulative adjustment to reflect indexing of convertible subordinated note...................................... 29,070 37,911 37,911 -------- -------- -------- Total convertible subordinated note.................. 56,497 67,263 67,263 DEFERRED TAX LIABILITY...................................... 82,138 MINORITY INTEREST IN EQUITY OF PARTNERSHIP (Notes 2 and 8)........................................................ 2,171 2,177 2,177 -------- -------- -------- Total liabilities.................................... 185,724 339,975 439,257 -------- -------- -------- COMMITMENTS AND CONTINGENCIES (Note 9) SHAREHOLDERS' EQUITY (Note 10): Preferred stock $.01 par value; authorized 25,000,000 shares; none issued Class A common stock $.01 par value; voting; authorized 200,000,000 shares; issued and outstanding 11,002,194 shares...................... 110 110 110 Class B common stock $.01 par value; voting; authorized 75,000,000 shares; issued and outstanding 10,531,805 shares................................................. 105 105 105 Class C common stock $.01 par value; nonvoting; authorized 25,000,000 shares; none issued Additional paid-in capital................................ 86,655 Retained earnings......................................... 178,804 182,755 -------- -------- -------- Total shareholders' equity........................ 179,019 182,970 86,870 -------- -------- -------- TOTAL............................................. $364,743 $522,945 $526,127 ======== ======== ========
See notes to consolidated financial statements. F-6 162 ENTERCOM COMMUNICATIONS CORP. CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED SEPTEMBER 30, -------------------------------------- (AS RESTATED, SEE NOTE 14) 1996 1997 1998 ------- ------------ ----------- NET REVENUES........................................... $48,675 $ 93,862 $132,998 OPERATING EXPENSES: Station operating expenses........................... 31,659 61,280 88,599 Depreciation and amortization........................ 2,960 7,685 13,066 Corporate general and administrative expenses........ 2,872 3,249 4,527 Net expense (income) from time brokerage agreement fees.................................... (879) (476) 2,399 ------- --------- -------- Total operating expenses............................. 36,612 71,738 108,591 ------- --------- -------- OPERATING INCOME....................................... 12,063 22,124 24,407 OTHER EXPENSE (INCOME): Interest expense (Note 6)............................ 5,196 11,388 14,663 Adjustment to reflect indexing of the convertible subordinated note (Note 6D)....................... 29,070 8,841 Interest income...................................... (95) (482) (410) Other nonoperating expense........................... 28 1,986 82 Gains on sale of assets and other.................... (119) (197,097) (8,661) ------- --------- -------- Total other expense (income)......................... 5,010 (155,135) 14,515 ------- --------- -------- INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM...... 7,053 177,259 9,892 INCOME TAXES........................................... 274 489 453 ------- --------- -------- INCOME BEFORE EXTRAORDINARY ITEM....................... 6,779 176,770 9,439 EXTRAORDINARY ITEM: Debt extinguishment (net of taxes of $23, and $25 in 1996 and 1998, respectively) (Note 6)................ 539 2,376 ------- --------- -------- NET INCOME............................................. $ 6,240 $ 176,770 $ 7,063 ======= ========= ======== PRO FORMA DATA (UNAUDITED) PRO FORMA NET INCOME DATA: Income before income taxes and extraordinary item.... $ 7,053 $ 177,259 $ 9,892 Pro forma income taxes (Note 1)...................... 2,680 78,405 7,119 ------- --------- -------- Pro forma income before extraordinary item........... 4,373 98,854 2,773 Extraordinary item, net of pro forma taxes........... 348 1,488 ------- --------- -------- PRO FORMA NET INCOME................................... $ 4,025 $ 98,854 $ 1,285 ======= ========= ========
F-7 163
YEAR ENDED SEPTEMBER 30, -------------------------------------- (AS RESTATED, SEE NOTE 14) 1996 1997 1998 ------- ------------ ----------- PRO FORMA EARNINGS PER SHARE (Note 1): Basic: Pro forma earnings before extraordinary item...... $ 0.20 $ 4.59 $ 0.12 Extraordinary item, net of pro forma taxes........ 0.01 0.06 ------- --------- -------- Pro forma earnings per share...................... $ 0.19 $ 4.59 $ 0.06 ======= ========= ======== Diluted: Pro forma earnings before extraordinary items..... $ 0.20 $ 4.59 $ 0.12 Extraordinary item, net of pro forma taxes........ 0.01 0.06 ------- --------- -------- Pro forma earnings per share...................... $ 0.19 $ 4.59 $ 0.06 ======= ========= ======== WEIGHTED AVERAGE SHARES: Basic................................................ 21,534 21,534 22,239 Diluted.............................................. 21,534 21,534 22,239
See notes to consolidated financial statements. F-8 164 ENTERCOM COMMUNICATIONS CORP. STATEMENT OF SHAREHOLDERS' EQUITY YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998 (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK -------------------------------------------------------------------------------- NONVOTING VOTING CLASS A CLASS B ADDITIONAL ---------------- ---------------- -------------------- ------------------- PAID-IN SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL ------- ------ ------- ------ ----------- ------ ---------- ------ ---------- Balance, October 1, 1995, as originally reported......... 46,260 $ 2 80,580 $ 4 $ 710 Adjustment for the change in capitalization (Note 13).... (46,260) (2) (80,580) (4) 12,935,594 129 10,531,805 105 (228) ------- --- ------- --- ----------- ---- ---------- ---- ----- Balance, October 1, 1995, as adjusted.................... 12,935,594 129 10,531,805 105 482 Net income for the year....... Dividends..................... ------- --- ------- --- ----------- ---- ---------- ---- ----- Balance, September 30, 1996 (as restated)............... 12,935,594 129 10,531,805 105 482 Retirement of treasury stock....................... (1,933,400) (19) (482) Net income for the year (as restated)................... Dividends..................... ------- --- ------- --- ----------- ---- ---------- ---- ----- Balance, September 30, 1997 (as restated)............... 11,002,194 110 10,531,805 105 Net income for the year (as restated)................... Dividends..................... ------- --- ------- --- ----------- ---- ---------- ---- ----- Balance, September 30, 1998 (as restated)............... $ $ 11,002,194 $110 10,531,805 $105 $ ======= === ======= === =========== ==== ========== ==== ===== TREASURY STOCK AT COST ---------------------------------------------------- RETAINED NONVOTING VOTING CLASS A EARNINGS SHARES SHARES SHARES AMOUNT TOTAL -------- --------- ------ ---------- ------- -------- Balance, October 1, 1995, as originally reported......... $ 1,155 2,610 7,830 $(1,044) $ 827 Adjustment for the change in capitalization (Note 13).... (2,610) (7,830) 1,931,400 -------- ------ ------ ---------- ------- -------- Balance, October 1, 1995, as adjusted.................... 1,155 1,931,400 (1,044) 827 Net income for the year....... 6,240 6,240 Dividends..................... (1,988) (1,988) -------- ------ ------ ---------- ------- -------- Balance, September 30, 1996 (as restated)............... 5,407 1,931,400 (1,044) 5,079 Retirement of treasury stock....................... (543) (1,931,400) 1,044 Net income for the year (as restated)................... 176,770 176,770 Dividends..................... (2,830) (2,830) -------- ------ ------ ---------- ------- -------- Balance, September 30, 1997 (as restated)............... 178,804 179,019 Net income for the year (as restated)................... 7,063 7,063 Dividends..................... (3,112) (3,112) -------- ------ ------ ---------- ------- -------- Balance, September 30, 1998 (as restated)............... $182,755 $ $182,970 ======== ====== ====== ========== ======= ========
See notes to consolidated financial statements. F-9 165 ENTERCOM COMMUNICATIONS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998 (AMOUNTS IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, -------------------------------------- (AS RESTATED, SEE NOTE 14) 1996 1997 1998 -------- ---------- ---------- OPERATING ACTIVITIES: Net income................................................ $ 6,240 $ 176,770 $ 7,063 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................... 2,960 7,685 13,066 Extraordinary items..................................... 562 2,401 Gains on dispositions and exchanges of assets........... (119) (197,097) (8,661) Interest accrued........................................ 643 1,785 1,925 Adjustment to reflect indexing of the convertible subordinated note (Note 6D)........................... 29,070 8,841 Changes in assets and liabilities which provided (used) cash: Accounts receivable............................. (3,336) (11,798) (7,728) Prepaid expenses........................................ (150) (956) (101) Accounts payable, accrued liabilities and corporate state income taxes.................................... 4,048 1,463 6,695 Minority interest....................................... (21) 1,910 6 Income tax deposit...................................... 1,946 27 (488) -------- --------- --------- Net cash provided by operating activities............ 12,773 8,859 23,019 -------- --------- --------- INVESTING ACTIVITIES: Additions to property and equipment....................... (1,493) (4,373) (11,183) Proceeds from sale of property and equipment, intangibles and other assets........................................ 560 3,750 9,724 Proceeds from exchanges of radio stations................. 72,200 3,132 Payments for exchanges of radio stations.................. (5,304) (306) Purchases of radio station assets (Note 3)................ (91,519) (74,498) (152,791) Deferred charges and other assets......................... (4,050) (644) (3,329) Station acquisition deposits.............................. (4,826) 1,102 -------- --------- --------- Net cash used in investing activities................ (96,502) (13,695) (153,651) -------- --------- --------- FINANCING ACTIVITIES: Proceeds from issuance of long-term debt.................. 137,500 20,000 277,286 Payments of long-term debt................................ (48,055) (14,000) (140,502) Dividends paid............................................ (1,988) (2,830) (3,112) -------- --------- --------- Net cash provided by financing activities............ 87,457 3,170 133,672 -------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 3,728 (1,666) 3,040 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 1,564 5,292 3,626 -------- --------- --------- CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 5,292 $ 3,626 $ 6,666 ======== ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during the period for: Interest................................................ $ 3,688 $ 10,203 $ 11,541 ======== ========= ========= Income taxes............................................ $ 148 $ 211 $ 293 ======== ========= =========
Supplemental Disclosures of Noncash Investing and Financing Activities -- In connection with the radio station exchange transactions completed by the Company, the noncash portion of assets recorded was $127,000 for the year ended September 30, 1997 and $22,500 for the year ended September 30, 1998. See notes to consolidated financial statements. F-10 166 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998 1. BASIS OF PRESENTATION AND ORGANIZATION OPERATIONS -- Entercom Communications Corp. (formerly Entertainment Communications, Inc.) (the "Company") is principally engaged in the management and operation of radio broadcast stations throughout the United States. The Company owns or operates three or more radio stations in the following markets: Boston, Seattle, Portland, Sacramento, Kansas City and Rochester. UNAUDITED PRO FORMA ADJUSTMENTS -- The Company intends to offer shares of its Class A Common Stock to the public during 1999 (the "Offering"). Just prior to the effective date of the Offering, the Company will terminate its status as an S Corporation. At that time, the Company will be required to provide deferred income taxes for cumulative temporary differences between financial statement and income tax bases of the Company's assets and liabilities. At September 30, 1998, a deferred tax liability of $82.1 million has been reflected in the pro forma balance sheet presented. In addition, a deferred tax asset of $3.2 million would have been established. In addition, the S Corporation shareholders will receive distributions of approximately $1.0 million prior to, and approximately $88.1 million subsequent to the effective date of the Offering. Of these amounts, $1.0 million relates to income tax liabilities attributable to the S Corporation shareholders' share of the Company's taxable income for the year ended September 30, 1998, $16.1 million relates to taxed but undistributed income as of September 30, 1998, $70.2 million relates to taxable gains from transactions occurring subsequent to September 30, 1998 and $1.6 million relates to the estimated taxable income from operations for the period from October 1, 1998 to January 31, 1999. Only those distributions (totaling approximately $17.1 million) related to transactions occurring prior to October 1, 1998 have been reflected for purposes of the unaudited pro forma balance sheet presented with the accompanying consolidated financial statements. Of the $88.1 million to be distributed subsequent to the effective date of the Offering, $0.2 million will be paid to the S Corporation shareholders for their estimated income taxes on the income of the Company for its 1999 fiscal year; payment of the balance is conditional on the successful completion of the Offering. The unaudited pro forma net income data reflect adjustments for income taxes as if the Company had been subject to federal and state income taxes based upon a pro forma effective tax rate of 38% applied to income before income taxes excluding the effect of adjustment to reflect indexing of convertible subordinated note (as such adjustment is not tax deductible) of $29.1 million and $8.8 million for the years ending September 30, 1997 and 1998, respectively. (See Note 6(D)). PRO FORMA EARNINGS PER SHARE -- Pro forma earnings per share is calculated in accordance with Statement of Financial Accounting Standards No. 128 and, as such, is based on the weighted average number of shares of Common Stock outstanding and dilutive common equivalent shares from convertible debt (using the if-converted method). For the years ended September 30, 1996, 1997 and 1998, the effect of the conversion of the convertible subordinated note was antidilutive. F-11 167 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES INCOME TAX STATUS -- The shareholders of the Company elected to change the tax status of the Company from a C Corporation to an S Corporation beginning October 1, 1987 for federal and certain state income tax purposes. For certain other states for which an S Corporation election has not been made, the Company incurs state income taxes. The shareholders' election to be taxed as an S Corporation relieves the Company of the obligation to pay federal and certain state corporate income taxes but results in shareholders being directly liable for payment of such income taxes on their pro rata share of the Company's taxable income, including taxable income which has been deferred as a result of the Company's use of different accounting methods for financial reporting and income tax reporting. PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial statements include the accounts of the Company, its limited partnership interest and its subsidiaries, all of which are wholly-owned. All intercompany transactions and balances have been eliminated in consolidation. MANAGEMENT'S USE OF ESTIMATES -- The preparation of consolidated financial statements, in accordance with generally accepted accounting principles, requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. DEPRECIATION -- Depreciation is determined on a straight-line basis. The estimated useful lives for depreciation are as follows: Land improvements........................................... 10 years Building.................................................... 20 years Equipment................................................... 5-20 years Furniture and fixtures...................................... 5-10 years Leasehold improvements...................................... Various
REVENUE RECOGNITION -- Revenue from the sale of commercial broadcast time to advertisers is recognized when the commercials are broadcast. Promotional fees are recognized as services are rendered. CONCENTRATION OF CREDIT RISK -- The Company's revenues and accounts receivable relate primarily to the sale of advertising within the radio stations' broadcast areas. Credit is extended based on an evaluation of the customers' financial condition, and generally, collateral is not required. Credit losses are provided for in the financial statements and consistently have been within management's expectations. The Company also maintains deposit accounts with financial institutions. At times, such deposits may exceed FDIC insurance limits. F-12 168 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ADVERTISING COSTS -- Advertising costs are expensed as incurred and approximated $4.3 million, $6.0 million and $6.6 million for the fiscal years ended September 30, 1996, 1997 and 1998, respectively. RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES -- Broadcasting licenses and other intangibles are being amortized on a straight-line basis over 40 years. LONG-LIVED ASSETS -- In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the Company evaluates the recoverability of its long-lived assets which include broadcasting licenses, other intangibles, deferred charges, and other assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If indications are that the carrying amount of the asset is not recoverable, the Company will estimate the future cash flows expected to result from use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, the Company recognizes an impairment loss. The impairment loss recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. DEFERRED CHARGES -- The Company defers and amortizes debt issuance costs and leasehold premiums over the term of the debt and life of the lease, respectively. NET EXPENSE (INCOME) FROM TIME BROKERAGE AGREEMENT ("TBA") FEES -- Net expense (income) from TBA fees consist of fees paid by or earned by the Company under agreements which permit an acquirer to program and market stations prior to acquisition. The Company sometimes enters into such agreements prior to the consummation of station acquisitions or dispositions. Under the TBAs relating to the Company's acquisitions, the expense from TBA fees was approximately $0.4 million, $2.2 million and $2.5 million for the years ended September 30, 1996, 1997 and 1998, respectively. Under the TBAs relating to the Company's dispositions, the income from TBA fees was approximately $1.2 million, $2.7 million and $0.1 million for the years ended September 30, 1996, 1997 and 1998, respectively. Amounts reflected in net revenues and station operating expenses from operations under TBAs, excluding expense (income) from TBA fees, were approximately $2.4 million and $1.3 million, $12.3 million and $9.0 million, and $7.8 million and $5.0 million for the years ended September 30, 1996, 1997 and 1998, respectively. BARTER TRANSACTIONS -- The Company provides advertising broadcast time in exchange for certain products, supplies and services. The terms of the exchanges generally permit the Company to preempt such broadcast time in favor of advertisers who purchase time on regular terms. The Company includes the value of such exchanges in both broadcasting revenues and operating costs and expenses. Barter valuation is based upon management's estimate of the fair value of the products, supplies and services received. For the years ended September 30, 1996, 1997 and 1998, barter transactions amounted to approximately $632,000, $822,000 and $1,043,000, respectively. The Company accrues as a liability the amount by which the value of broadcasting time to be provided exceeds the value of products, supplies and services to be received. At September 30, 1996, 1997 and 1998, such amounts were approximately $120,000, $5,000 and $19,000, respectively. F-13 169 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CASH AND CASH EQUIVALENTS -- Cash and cash equivalents consist primarily of amounts held on deposit with financial institutions in immediately available money market accounts. DERIVATIVE FINANCIAL INSTRUMENTS -- The Company uses derivative financial instruments, including interest rate exchange agreements ("Swaps") and interest rate cap agreements ("Caps"), to manage its exposure to fluctuations in interest rates. Swaps and Caps are matched with debt and periodic cash payments and are accrued on a net basis as an adjustment to interest expense. Any fees associated with these instruments are amortized over their term. RECENT ACCOUNTING PRONOUNCEMENTS -- In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings per Share", which was effective for the Company beginning October 1, 1997. SFAS No. 128 establishes standards for computing and presenting earnings per share ("EPS") and applies to entities with publicly held common stock or potential common stock. It replaces the presentation of primary EPS with a presentation of basic EPS and requires the dual presentation of basic and diluted EPS on the face of the income statement. This statement requires restatement of all prior period EPS data presented. For the years ended September 30, 1996, 1997 and 1998 the effect of the conversion of convertible debt was antidilutive. The Board of Directors has declared, contingent upon the successful completion of the Company's initial public offering of its common stock, certain dividends to be payable to the S Corporation shareholders. Of these dividends, approximately $17.1 million is attributable to the undistributed taxable income of the Company prior to October 1, 1998. This amount exceeds the Company's earnings for the year ended September 30, 1998 by approximately $15.9 million. The weighted average outstanding shares have been increased by 705,000 shares, which represent the number of shares which, when multiplied by an offering price of $22.50 per share, would be sufficient to replace the capital in excess of the current years earnings which is proposed to be distributed to the S Corporation shareholders. In June 1998, the FASB issued SFAS No. 133 entitled "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as "derivatives") and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Management has not yet determined what effect, if any, this statement will have on the Company. RECLASSIFICATIONS -- Certain reclassifications have been made to the consolidated financial statements for the years ended September 30, 1996 and 1997 in order to conform to the current year presentation. 3. ACQUISITIONS AND OTHER SIGNIFICANT TRANSACTIONS During each of the periods presented the Company consummated acquisitions of radio stations. All of these acquisitions were accounted for under the purchase method of accounting (unless otherwise noted below), and the purchase prices, including transaction F-14 170 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) costs, were allocated to the assets based upon their respective fair values as determined by independent appraisal as of the purchase dates. Gains on exchange transactions are determined based on the excess of the fair value of the station assets acquired, as determined by an independent appraisal, plus any cash received, over the Company's carrying basis in the station assets exchanged, plus cash paid by the Company, all less transaction costs. 1996 ACQUISITIONS The Company completed a three party Asset Purchase Agreement on August 1, 1996, whereby the Company acquired WAXQ-FM, New York City, from GAF Corporation for a cash purchase price of $90 million and simultaneously exchanged WAXQ-FM and $1.2 million in cash to Viacom, Inc. for all of Viacom's broadcast assets of three radio stations, KBSG-FM, KBSG-AM and KNDD-FM, and two tower facilities, all serving the Seattle, Washington radio market. The Company incurred approximately $319,000 in transaction costs related to the acquisition. Broadcasting licenses and other intangibles totaling approximately $87.5 million were recorded in connection with this transaction. 1997 ACQUISITIONS On March 27, 1997, the Company acquired the assets of KMBZ-AM, KYYS-FM (formerly KLTH-FM), KCMO-AM and KCMO-FM, serving the Kansas City, Kansas/ Missouri radio market, from Bonneville International Corporation and Bonneville Holding Corporation (collectively referred to hereafter as "Bonneville") for a purchase price of $35.0 million. The Company also acquired the assets of KIRO-AM, KIRO-FM and KNWX-AM, serving the Seattle, Washington radio market, from KIRO, Inc., a wholly owned subsidiary of Bonneville International Corporation ("KIRO") for a purchase price of $60.0 million. As consideration for the assets received, the Company transferred the assets of KLDE-FM serving the Houston, Texas radio market, plus $5.0 million, to Bonneville and KIRO resulting in a gain of $88.7 million. The Company incurred transaction costs of $246,000 related to these acquisitions. Broadcasting licenses and other intangibles in the amount of $85.8 million were recorded in connection with these transactions. On April 28, 1997, the Company acquired the assets of KEDO-AM and KLYK-FM, serving the Longview/Kelso, Washington radio market, for $1.8 million from Longview Broadcasting Company and Premier Development Company. The Company incurred transaction costs of $38,000 related to these acquisitions. Broadcasting licenses and other intangibles in the amount of $733,000 were recorded in connection with this transaction. On May 30, 1997, the Company completed an Asset Exchange Agreement with Nationwide Communications, Inc. ("Nationwide") and Secret Communications, LP ("Secret"). In this three party agreement, in exchange for the transfer to Secret of the Company's two FM radio stations in Pittsburgh, WDSY and WNRQ, the Company received Nationwide's FM radio station in Seattle, KISW, plus $32.5 million, resulting in a gain of $43.9 million. Broadcasting licenses and other intangibles in the amount of $12.1 million were recorded in connection with this transaction. The total purchase price of this transaction was $47.0 million. F-15 171 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On May 30, 1997, the Company acquired the assets of KLOU-FM, serving the St. Louis, Missouri radio market, from Group W Broadcasting, Inc., plus $39.7 million, in exchange for the assets of KITS-FM, resulting in a gain of $61.2 million. The Company incurred transaction costs of $58,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $21.6 million were recorded in connection with this transaction. The total purchase price of this transaction was $62.2 million. On June 3, 1997, the Company acquired the assets of KDND-FM (formerly KXOA-FM), serving the Sacramento, California radio market, from American Radio Systems Corporation for $27.2 million. The Company incurred transaction costs of $192,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $26.9 million were recorded in connection with this transaction. On June 4, 1997, the Company acquired the assets of KRXQ-FM and KSEG-FM, serving the Sacramento, California radio market, from Citicasters Co. for $45.0 million. The Company incurred transaction costs of $268,000 related to these acquisitions. Broadcasting licenses and other intangibles in the amount of $40.7 million were recorded in connection with this transaction. 1998 ACQUISITIONS On November 26, 1997, the Company acquired the assets of KSSJ-FM (formerly KBYA-FM), serving the Sacramento, California radio market, from Susquehanna Radio Corp., KTHX License Investment Co. and KTHX Radio Inc. for $15.9 million. The Company incurred transaction costs of $87,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $15.8 million were recorded in connection with this transaction. On January 1, 1998, the Company acquired the assets of KCTC-AM, serving the Sacramento, California radio market, from ARS for $4.0 million. The Company incurred transaction costs of $13,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $2.7 million were recorded in connection with this transaction. On January 1, 1998, the Company acquired the assets of KUDL-FM and WDAF-AM, serving the Kansas City, Kansas/Missouri radio market from ARS. As consideration for the assets received, which included the receipt of $7.1 million in cash from ARS, the Company transferred the assets of KLOU-FM, serving the St. Louis radio market, to ARS resulting in a gain of $300,000. The Company incurred transaction costs of $294,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $12.8 million were recorded in connection with this transaction. The total purchase price of this transaction was $15.4 million. On May 7, 1998, the Company acquired the assets of WSKY-FM (formerly WRRX-FM), serving the Gainesville/Ocala, Florida radio market, from Gator Broadcasting Co. for $2.0 million. The Company incurred transaction costs of $66,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $1.7 million were recorded in connection with this transaction. F-16 172 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On May 15, 1998, the Company acquired the assets of KBAM-AM and KRQT-FM, serving the Longview, Washington radio market, from Armak Broadcasters Inc. for $1.0 million. The Company incurred transaction costs of $43,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $350,000 were recorded in connection with this transaction. On June 19, 1998, the Company acquired from Sinclair Broadcast Group the assets of KKSN-AM, KKSN-FM, and KKRH-FM, all serving the Portland, Oregon radio market, and WBEE-FM, WBBF-FM (formerly WKLX-FM), WQRV-FM and WEZO-AM (formerly WBBF-AM) all serving the Rochester, New York radio market. The purchase price for the stations was $126.5 million. The Company began operations at these stations on March 1, 1998 under a TBA. The Company incurred transaction costs of $494,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $121.3 million were recorded in connection with this transaction. On August 13, 1998 the Company acquired from Capital Broadcasting, Inc. the assets and rental leases used in connection with the operation of a tower facility serving the Kansas City, Kansas/Missouri radio market for a purchase price of $2.0 million. On September 16, 1998, the Company completed an agreement with American Radio Systems, Inc. and American Radio Systems License Corp. (collectively referred to as "ARS") to exchange certain assets used in the operation of radio stations serving the Sacramento radio market. ARS provided KRAK-FM's license and transmission facility to the Company in exchange for KRXQ's license and transmission facility and $4.5 million. Each of the stations retained its own call letters, programming format and studio and office property and equipment, and the parties provided each other with reciprocal covenants against programming competition on the respective frequencies for a period of two years. ARS also transferred the intellectual property comprising program format for use by the Company on its recently acquired KBYA-FM in that market. The transaction was accounted for as a nonmonetary exchange of similar productive assets and no gain or loss was recognized. The assets received were recorded at the historical cost of the assets surrendered plus the $3.8 million paid to ARS. In a related transaction the Company sold the KRXQ-FM transmitter site, including broadcast tower facilities, to ARS for $750,000, resulting in a loss of $34,000. OTHER TRANSACTIONS On March 6, 1996, the Company sold all of the assets of KMTT-AM, Tacoma, Washington, including assignment of the FCC license, to Southwave Wireless Communications, Inc. LLC for a cash purchase price of $500,000, resulting in a gain of approximately $140,000. On December 6, 1996, the Company sold certain assets of KEGE-AM, Richfield, Minnesota, including assignment of the FCC license, to Salem Media of Minnesota, Inc. for $3.0 million, resulting in a gain of approximately $2.6 million. On February 6, 1997, the Company sold all of the assets of WDSY-AM, Pittsburgh, Pennsylvania, including assignment of the FCC license, to Mortenson Broadcasting F-17 173 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company for a cash purchase price of $750,000, resulting in a gain of approximately $700,000. On May 7, 1998, the Company sold certain rights in a license for the Vancouver, Washington radio market to Jacor Communications and Smith Broadcasting, Inc. for $10.0 million. The Company acquired an interest in these rights at a cost of $1.3 million through an agreement with Q Prime Inc., Clifford Burnstein and Peter D. Mensch. The sale resulted in a gain of $8.5 million. On June 25, 1998, the Company completed its transaction with McKenzie River Broadcasting Company ("McKenzie") whereby McKenzie received FCC approval to reclassify the broadcast license of its KMGE-FM station, serving the Eugene, Oregon radio market, from a Class C to a Class C-1. Such a reclassification of that station allowed the Company to seek approval from the FCC for construction and operation of an enhanced transmission facility for its KNRK-FM station serving the Portland, Oregon radio market. In consideration for its agreement, McKenzie was paid approximately $1.2 million and the Company recorded this amount as broadcast licenses. Effective July 1, 1997, the Company entered into a Joint Sales Agreement ("JSA") with Classic Radio, Inc. ("Classic"), whereby the Company serves as the exclusive sales agent for the Classic-owned KING-FM radio station, located in Seattle, Washington. This agreement is a continuation of a relationship under a prior JSA which expired on June 30, 1997. Under the new JSA, which continues through June 30, 2002, the Company will be entitled to all revenues from the sale of advertising time broadcast on KING-FM, but will be required to pay a monthly fee to Classic based upon calculations as defined in the agreement. Under the terms of the JSA, the Company will be responsible for all costs incurred in selling the advertising time. Classic will be responsible for all costs incurred in operating the station. Gross revenues and expenses incurred by the Company under this contract during the years ended September 30, 1997 and 1998 were $2.6 million and $1.3 million and $3.6 million and $2.3 million, respectively. On October 7, 1997, the Company, in a transaction with Kanza Inc., exchanged the broadcasting frequency and the transmitter related assets of KCMO-AM, Kansas City, Missouri for the broadcasting frequency and transmitter related assets of WHB-AM, Kansas City, Missouri. The Company incurred transaction costs of $233,000. The transaction was accounted for as a nonmonetary exchange of similar productive assets and no gain or loss was recognized. The assets received were recorded at the historical cost of the assets surrendered. The following unaudited pro forma summary presents the consolidated results of operations as if the transactions which occurred within either the 1997 or 1998 fiscal years had all occurred at the beginning of the 1997 fiscal year, after giving effect to certain adjustments, including depreciation and amortization of assets and interest expense on any debt incurred to fund the acquisitions which would have been incurred had such acquisitions and other transactions occurred at the beginning of the 1997 fiscal year. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions and other transactions been made as of that date or results which may occur in the future. F-18 174 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED SEPTEMBER 30, -------------------------- 1997 1998 ---------- ---------- (AMOUNTS IN THOUSANDS) (UNAUDITED) Net revenues........................................... $122,711 $140,544 ======== ======== Income (loss) before extraordinary items and gains on sale of assets....................................... $(21,795) $ 3,126 ======== ======== Income before extraordinary items...................... $183,313 $ 3,126 ======== ======== Net income............................................. $183,313 $ 750 ======== ========
4. RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES Radio Broadcasting Licenses and other intangibles consist of the following:
SEPTEMBER 30, ---------------------- 1997 1998 --------- --------- (AMOUNTS IN THOUSANDS) FCC Licenses............................................. $300,022 $436,407 Other Intangibles........................................ 1,704 2,574 -------- -------- Subtotal................................................. 301,726 438,981 Less accumulated amortization............................ (6,307) (14,265) -------- -------- Total radio broadcasting licenses and other intangibles............................................ $295,419 $424,716 ======== ========
5. DEFERRED CHARGES AND OTHER ASSETS Deferred charges and other assets consist of the following:
SEPTEMBER 30, ---------------- 1997 1998 ------ ------ (AMOUNTS IN THOUSANDS) Debt issuance costs, less accumulated amortization of $715,000 and $566,000 in 1997 and 1998, respectively...... $3,629 $2,163 Leasehold premium, less accumulated amortization of $125,000 and $228,000 in 1997 and 1998, respectively............... 862 1,644 Other deferred charges, less accumulated amortization of $77,000 and $124,000 in 1997 and 1998, respectively....... 119 240 ------ ------ $4,610 $4,047 ====== ======
F-19 175 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. DEBT (A) Senior debt consists of the following:
SEPTEMBER 30, ---------------------- 1997 1998 --------- --------- (AMOUNTS IN THOUSANDS) Notes payable, due June 30, 2003(A)(1)(a)................ $ 92,000 Notes payable, due June 30, 2003 (A)(1)(b)............... 25,000 Notes payable due February 13, 2006 (A)(2)............... $253,500 Other.................................................... 284 -------- -------- Total............................................... 117,000 253,784 Amounts due within one year.............................. 10 -------- -------- $117,000 $253,774 ======== ========
- ------------------------- (1) On March 25, 1997, the Company expanded its existing credit facility with a group of banks to $165.0 million. The credit facility consisted of a $140.0 million reducing revolving credit and a $25.0 million amortizing term loan. At September 30, 1997, outstanding balances against these credit facilities were $92.0 million and $25.0 million, respectively. Under the loan agreement, the Company provided the banks with a pledge of its 99% interest in ECI License Company LP, a pledge of all of the outstanding stock of the Company, and a pledge of all the Company's other assets. The agreement included certain restrictive covenants, including a limitation on dividends. These debt facilities were replaced with the debt facility described in paragraph (A)(2) below. (a) The availability under the reducing revolving credit agreement, which was to mature on June 30, 2003, reduced on a quarterly basis beginning September 30, 1997 in amounts which vary from $3.5 million to $12.4 million. The Company had the option under this agreement to elect to pay interest at a rate equal to LIBOR (in increments with durations of 1, 2, 3 or 6 months) plus 1.25% or the prime rate. Under certain events, the Company's borrowing costs could have increased to a maximum of LIBOR plus 3.25% or prime plus 2%. The interest payable on LIBOR rates was payable at the end of the selected duration but not less frequently than every three months and on prime rates was payable at the end of each calendar quarter. The weighted average interest rate under this agreement at September 30, 1997 was 7.46%. The Company was required to maintain a minimum of $1.0 million in cash, cash equivalents, or cash available under this facility. (b) The $25.0 million amortizing term loan, which was to mature on June 30, 2003, reduced in ten equal quarterly payments of $625,000, beginning December 31, 2000 with a final payment of $18.75 million due June 30, 2003. The Company had the option to pay interest at a rate of LIBOR plus 3.25% or prime plus 2%. F-20 176 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The interest payment was due in the same manner as described in (A)(1)(a) above. The interest rate under this agreement at September 30, 1997 was 8.91%. (2) The Company's term and revolving credit facilities were refinanced on February 13, 1998, under a new bank credit agreement (the "New Credit Agreement") with Key Corporate Capital Inc., as administrative agent. The New Credit Agreement provides for a $300.0 million Senior Secured Revolving Credit Facility (the "New Bank Facility"). See Note 12, Subsequent Events, for further discussion. The New Bank Facility is secured by (i) a pledge of the Company's 99% interest in ECI License Company, LP ("ECI"), (ii) a security interest in substantially all of the assets of ECI, (iii) a pledge of 100% of the outstanding stock of the Company; provided, however, that this pledge will be released if the Company restructures by forming subsidiaries to hold the station assets and licenses (in such a restructuring, the Company will pledge the stock of all such subsidiaries which will become Guarantors, and ECI will be dissolved, further, upon such restructuring and pledge of stock, the pledges under (i) and (ii) above will be terminated and released), (iv) a security interest in all major tangible and intangible personal property assets of the Company and any future subsidiaries as well as a negative pledge on all real property, and (v) an assignment of all major leases, rights, etc. as appropriate. The availability under the reducing revolving credit agreement, which matures on February 13, 2006, reduces on a quarterly basis beginning June 30, 2000 in amounts which vary from $3.75 million to $15.0 million. The Company has the option under this agreement to elect to pay interest at a rate equal to LIBOR (in increments with durations of 1, 2, 3 or 6 months) plus .50% or the prime rate. Under certain events, the Company's borrowing costs can increase to a maximum of LIBOR plus 2.125% or prime plus .875%. The interest payable on LIBOR rates is payable at the end of the selected duration but not less frequently than every three months and on prime rates is payable at the end of each calendar quarter. The weighted average interest rates under this agreement at September 30, 1998 was 7.53%. The Company also pays a commitment fee of 0.375% per annum on the average unused balance of the New Bank Facility. (B) The Company has entered into several interest rate transactions as hedges against the variable rate debt discussed in 6(A) above: (1) In June 1987, the Company entered into an interest rate agreement or "swap" for a notional amount of $6.0 million which concluded in June 1996. The Company paid a fixed rate of 9.55% on the notional amount to a bank and the bank paid to the Company a variable rate equal to three-month LIBOR as determined from time to time on a quarterly basis through June 30, 1996. The net amount the Company paid under this agreement was $175,000 for the year ended September 30, 1996 and has been accounted for as interest expense. (2) In May 1995, the Company entered into an interest rate swap agreement for a notional amount of $20.0 million through May 16, 2000. Under this agreement, the Company pays a fixed rate of 6.77% on the notional amount to a bank and the bank pays to the Company a variable rate equal to three-month LIBOR as F-21 177 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) determined from time to time on a quarterly basis through May 16, 2000. The variable rate was 5.5%, 5.7% and 5.7% at September 30, 1996, 1997 and 1998, respectively. The net amount the Company paid under this agreement was $240,000, $235,000 and $211,000 for the years ended September 30, 1996, 1997 and 1998, respectively. These amounts have been accounted for as interest expense. (3) In July 1996, the Company entered into a convertible rate cap transaction in the amount of $25.0 million to hedge a portion of its variable rate debt. Pursuant to this transaction, the bank elected, effective October 29, 1998, to convert the transaction to a swap for a notional amount of $25.0 million in which the Company pays a fixed rate of 5.89% on the notional amount to the bank and the bank pays to the Company a variable rate equal to three-month LIBOR through July 29, 2003. No amounts were paid relating to this transaction during the years ended September 30, 1996, 1997 and 1998. (4) In August 1996, the Company simultaneously entered into a rate cap transaction and a swap option transaction in the amount of $25.0 million to hedge a portion of its variable rate debt. Under the rate cap transaction, which expires August 8, 2000, the Company's base LIBOR rate cannot exceed 7.5% at the time of any quarterly reset date. Under the swap option transaction, the bank may make an election prior to August 8, 2000 to enter into a swap in which the Company pays a fixed rate of 6.05% on the notional amount to a bank and the bank pays to the Company a variable rate equal to three-month LIBOR. If the bank exercises its election, then the swap will terminate on August 8, 2002. Any election by the bank will not terminate the rate cap transaction described above. No amounts were paid related to these transactions during the years ended September 30, 1996, 1997 and 1998. (5) On January 6, 1998, the Company entered into an interest rate swap agreement with a bank in the amount of $15.0 million to hedge a portion of its variable rate debt. Under the swap transaction, which expires January 10, 2005, unless terminated by the bank by January 6, 2003, the Company pays a fixed rate of 5.61% on the notional amount to the bank and the bank pays to the Company a variable rate equal to three month LIBOR as determined from time to time on a quarterly basis through the end of the transaction period. The variable rate was 5.7% as of September 30, 1998. The net amount paid to the Company under this agreement was $9,000 for the year ended September 30, 1998. (6) On January 6, 1998, the Company entered into an interest rate swap agreement with a bank in the amount of $14.0 million to hedge a portion of its variable rate debt. Under the swap transaction, which expires January 10, 2005, the Company pays a fixed rate of 5.86% on the notional amount to the bank and the bank pays to the Company a variable rate equal to three months LIBOR as determined from time to time on a quarterly basis through the end of the transaction period. The variable rate was 5.7% as of September 30, 1998. The net amount paid by the Company under this agreement was $17,000 for the year ended September 30, 1998. F-22 178 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (7) On February 26, 1998, the Company entered into an interest rate swap agreement with a bank in the amount of $30.0 million to hedge a portion of its variable rate debt. Under the swap transaction, which expires February 27, 2008, unless terminated by the bank on February 28, 2005, the Company pays a fixed rate of 5.77% on the notional amount to the bank and the bank pays to the Company a variable rate equal to three month LIBOR as determined from time to time on a quarterly basis through the end of the transaction period. The variable rate was 5.7% as of September 30, 1998. The net amount paid by the Company under this agreement was $16,000 for the year ended September 30, 1998. (C) Aggregate principal maturities on Senior debt are as follows (amounts in thousands): Fiscal years ending September 30: 1999...................................................... $ 10 2000...................................................... 10 2001...................................................... 10 2002...................................................... 43,510 2003...................................................... 35,010 Thereafter................................................ 175,234 -------- Total.................................................. $253,784 ========
The extraordinary charges for 1996 and 1998 are the result of the write-offs ($539,000 and $2,376,000 respectively, net of tax benefits) of unamortized finance charges resulting from the early extinguishment of long-term debt. (D) On May 21, 1996, the Company entered into a convertible subordinated note purchase agreement with an investment partnership in the principal amount of $25.0 million. Interest on the note accrues at the rate of 7% per annum. Such interest compounds annually and is deferred and payable with principal in one installment on May 21, 2003. The payment due date can be deferred by one year under certain circumstances. The obligations of the Company under the note are subordinate to the obligations of the notes payable to the banks as noted in (A)(2) above. The convertible subordinated note is convertible by the holder under certain events and circumstances such as a public offering of the Company's capital stock, a change of control of the Company, a sale of substantially all of the Company's assets, a merger or consolidation into a publicly traded company or the Company's ceasing to be an S Corporation. In the event of conversion, the holders would receive shares of the common stock of the Company representing an ownership interest of approximately 15% of the Company prior to such event in lieu of all outstanding principal and interest. Under certain events and circumstances, the holder of the note has the option to put ("Put Option") the convertible subordinated note to the Company and receive, at the option of the Company, either cash or a new note ("Put Note"). The Put Option is exercisable on or after May 21, 2001. The amount of cash or principal of the Put Note will equal the fair market F-23 179 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) value of the shares of common stock into which the convertible subordinated note is convertible. The Put Note would accrue interest at prime plus 2% and would be due May 21, 2004. In the event that the note is not converted or put to the Company by May 21, 2003, then the Company can redeem the convertible subordinated note by either paying cash or issuing a new note (Redemption Note). The amount of cash or principal of the Redemption Note will equal the original principal amount of the convertible subordinated note ($25.0 million) plus interest accrued through the Date of Redemption at an interest rate of 7% per annum. The Redemption Note would also accrue interest at 7% per annum and would be due on May 21, 2004. Due to the existence of the Put Option described above, the Company accounts for this instrument as indexed debt. Accordingly, the Company's balance sheets as of September 30, 1997 and 1998 and statements of income for the years then ended reflect an "adjustment to reflect indexing of the convertible subordinated note." No adjustment was required for fiscal 1996. The adjustment to reflect indexing of the convertible subordinated note has been determined by reference to the difference between the estimated market value of the shares of Common Stock into which the note is convertible pursuant to the terms of the Put Option and the sum of the principal outstanding of $25.0 million plus interest accrued at 7% per annum. Such estimated market value is calculated using comparable publicly held radio broadcast companies' multiples of broadcast cash flow. The holder of the convertible subordinated note has stated that in connection with the initial public offering of the Company's Common Stock, it will exercise its conversion option. Up to the date of the conversion, the Company may recognize further adjustments to the indexing of the convertible subordinated note. Upon conversion, the amount of the liability recorded will convert to equity and there will be no further obligation by the Company. F-24 180 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of the Company's financial instruments, which consist of cash and cash equivalents, accounts receivable, station acquisition deposits, income tax deposit, accounts payable, accrued liabilities, debt and interest rate instruments, have been determined by the Company using available market information and appropriate valuation methodologies. At September 30, 1997 and 1998, the fair value of cash and cash equivalents, accounts receivable, station acquisition deposits, income tax deposit, accounts payable, accrued liabilities and debt approximate their carrying value. At September 30, 1997 and 1998, respectively, unrealized losses on interest rate hedges described under Note 6(B) (2), (3), (4), (5), (6) and (7) are as follows (amounts in thousands):
SEPTEMBER 30, ---------------- 1997 1998 ----- ------- 6(B) (2)............................................. $(351) $ (652) (3)............................................ (212) (1,057) (4)............................................ (103) (1,069) (5)............................................ (525) (6)............................................ (705) (7)............................................ (1,793)
8. MINORITY INTEREST On December 2, 1992, in connection with a financing transaction, the Company created a wholly owned subsidiary, ECI Investors Corporation ("Investors"), with a capital of $50,000. Upon creation, the Company immediately distributed the stock of Investors to the Company's shareholders. On December 23, 1992, the Company formed a limited partnership, ECI License Company, LP ("Partnership") with Investors. The Company is the sole general partner of the Partnership. The Company contributed its FCC (FCC) licenses and authorizations to the Partnership in exchange for a 99% interest in the Partnership, and Investors acquired its 1% interest in the Partnership for cash. On all subsequent occasions when the Company acquired FCC licenses and authorizations it has contributed them to the Partnership for its 99% interest and Investors has contributed its matching 1% interest. On each such occasion, as well as on the dispositions of FCC licenses and authorizations, excluding those FCC licenses and authorizations used to acquire new FCC licenses and authorizations which qualify under IRC Section 1031, commonly known as "SWAPS," the book value of the Partnership has been adjusted to reflect such transaction. The book value of the Partnership was approximately $114.2 million (net of accumulated amortization of approximately $4.5 million) and $132.2 million (net of accumulated amortization of approximately $7.3 million) at September 30, 1997 and 1998. The Company's 99% interest in the Partnership is pledged as collateral for the debt described in Note 6A(2). The Company pays a licensing fee to the Partnership in exchange for the right to utilize the Partnership's licenses and authorizations in connection with the operation of the stations. F-25 181 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As discussed in Note 2, the financial impact of such transactions is substantially eliminated in consolidation. The minority interest at September 30, 1997 and 1998 included in the accompanying consolidated balance sheets represents the 1% interest of Investors in the Partnership, net of two notes receivable by the Partnership from Investors. These notes were in the amounts of approximately $875,000 and $7,000 at September 30, 1997 and $839,000 plus various other notes which total approximately $200,000 at September 30, 1998. These notes bear interest at rates ranging from 6% to 8% per annum, and were issued to the Partnership by Investors for Investors' share of the FCC licenses and authorizations acquired by the Company during 1997 and 1998. These notes are due in ten equal annual installments, plus accrued interest. 9. COMMITMENTS AND CONTINGENCIES ACQUISITIONS The Company entered into a preliminary agreement on February 6, 1996 for the Company to acquire the assets of radio station KWOD-FM, Sacramento, California, from Royce International Broadcasting Corporation subject to approval by the FCC for a purchase price of $25.0 million. Notwithstanding efforts by the Company to pursue this transaction, the seller has been nonresponsive. Accordingly, the Company cannot determine if and when the transaction might occur. On August 13, 1998, the Company entered into three agreements with CBS Radio, Inc. pursuant to which it will (i) purchase WRKO-AM and WEEI-AM in Boston for $82.0 million in cash (the "First Boston Transaction"), (ii) sell WLLD-FM and WYUU-FM in Tampa for $75.0 million in cash (the "Tampa Transaction") and (iii) purchase WAAF-AM and WEGQ-FM in Boston and WWTM-AM in Worchester for $58.0 million (the "Second Boston Transaction"). The assets that will be sold in the Tampa Transaction have been segregated on the Consolidated Balance Sheet as assets held for sale. These assets consist of $2.8 million in property and equipment, net of accumulated depreciation, and $2.5 million in radio broadcasting licenses and other intangibles, net of accumulated amortization. See Notes 12(D) and 12(G). OTHER The Company's employment agreement with its Chairman and Chief Executive Officer renews automatically each calendar year unless terminated by either party in accordance with the contract. Under the terms of the agreement, compensation is calculated annually by utilizing the gross national product implicit price deflator issued by the Bureau of Economic Analysis to determine the equivalent of 1993 base compensation of $500,000. Total compensation for the years ended September 30, 1996, 1997 and 1998 was approximately $540,000, $554,000, and $567,000, respectively. Rental expense is incurred principally for office and broadcasting facilities. Rental expense during the years ended September 30, 1996, 1997 and 1998 was approximately $1.2 million, $2.2 million and $2.8 million, respectively. The Company also has various contracts for sports programming and on-air personalities with terms ranging from one to five years. F-26 182 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The aggregate minimum annual commitments as of September 30, 1998 for operating leases, sports programming and on-air personalities are as follows:
OPERATING SPORTS ON-AIR LEASES PROGRAMMING PERSONALITIES --------- ----------- ------------- (AMOUNTS IN THOUSANDS) Fiscal years ending September 30: 1999...................................... $ 3,160 $16,625 $ 5,880 2000...................................... 3,066 18,110 3,690 2001...................................... 2,893 8,802 1,420 2002...................................... 2,964 6,718 713 2003...................................... 2,458 181 Thereafter................................ 11,138 ------- ------- ------- $25,679 $50,255 $11,884 ======= ======= =======
The Company is subject to various outstanding claims which arose in the ordinary course of business and to other legal proceedings. In the opinion of management, any liability of the Company which may arise out of or with respect to these matters will not materially affect the financial position, results of operations or cash flows of the Company. 10. SHAREHOLDERS' EQUITY During 1997, the Company retired treasury stock consisting of 1,931,400 shares of Class A common stock. For the fiscal years ended September 30, 1996, 1997 and 1998, the Company paid total dividends of $2.0, $2.8, and $3.1 million, respectively. These amounts include special dividends paid to the Company's shareholders to compensate them for federal and state income tax obligations attributable to pass-through taxable income generated by the Company. On June 24, 1998, the Board of Directors and the shareholders of the Company approved the Company's amended and restated Articles of Incorporation to provide for, among other things, an increase in the aggregate number of shares which the Company has authority to issue to 350,000,000 shares, par value $.01 per share, consisting of the following: (i) 200,000,000 shares of Class A Common Stock; (ii) 75,000,000 shares of Class B Common Stock; (iii) 50,000,000 shares of Class C Common Stock; and (iv) 25,000,000 shares of Preferred Stock. Such change occurred just prior to the effective date of the Company's initial public offering. 11. EMPLOYEE SAVINGS AND BENEFIT PLANS The Company sponsors a 401(k) savings plan which includes a provision under which the Company contributes 50% of the amount of any eligible employee's contribution to the plan up to a maximum employer contribution of 3% of an employee's compensation. The F-27 183 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) maximum eligible employee contribution under the plan was $9,500, $9,500 and $10,000 for the plan years ended December 31, 1996, 1997 and 1998. The Company may at its discretion suspend future matching contributions. The Company contributed approximately $232,000, $485,000, and $588,000, under the 401(k) plan for the years ended September 30, 1996, 1997, and 1998, respectively. On June 24, 1998, the Company adopted an Equity Compensation Plan (the "Compensation Plan"). The Compensation Plan will allow officers (including those also serving as directors) and other employees, non-employee directors and key advisors or consultants, selected by a Committee of the Board of Directors, to receive incentive stock options, nonqualified stock options, restricted stock and stock appreciation rights in the Common Stock of the Company. There are 5,000,000 shares of Common Stock reserved for issuance under the Compensation Plan. On December 29, 1998, the Board of Directors granted 11,112 shares of restricted stock and 838,965 in options of which 563,403 options have an exercise price equal to the initial public offering price per share and 275,562 have an exercise price of 80% of the initial public offering price. All of the options and restricted stock vest over a four year period. For options granted at prices below fair market value, the Company will recognize $1.2 million in non-cash compensation expense ratably over the four year period. For restricted stock, the Company will recognize $250,000 in non-cash compensation expense ratably over the four year period. On June 24, 1998, the Company adopted an Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan will allow the participants to purchase shares of the Company's Common Stock at a purchase price equal to 85% of the Market Value of such shares on the Purchase Date. There are 1,850,000 shares of Common Stock reserved for issuance under the Purchase Plan. No awards have been issued under this plan. 12. SUBSEQUENT EVENTS (A) On October 8, 1998, the Company amended their New Credit Agreement with Key Corporation Capital Inc. to increase their Senior Secured Revolving Credit Facility to $350.0 million. Availability under this credit agreement reduces on a quarterly basis beginning June 30, 2000 in amounts which vary from $4.4 million to $17.5 million. (B) In July 1996, the Company entered into a convertible rate cap transaction in the amount of $25.0 million to hedge a portion of its variable rate debt. Pursuant to this transaction, the bank elected, effective October 29, 1998, to convert the transaction to a swap for a notional amount of $25.0 million in which the Company pays a fixed rate of 5.89% on the notional amount to the bank and the bank pays to the Company a variable rate equal to the three-month LIBOR through July 29, 2003. (C) On December 9, 1998, the Company entered into an agreement to acquire KKGM-AM, a radio station serving Kansas City, Kansas, from Mortenson Broadcasting Company of Canton, LLC for the sum of $2.8 million. (D) On December 11, 1998, the Company acquired the assets of WRKO-AM and WEEI-AM, serving the Boston radio market, from CBS for $82.0 million (the "First Boston Transaction"). The Company incurred transaction costs of $284,023 related to F-28 184 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) this acquisition. Broadcasting licenses and other intangibles in the amount of $77.8 million will be recorded in connection with this transaction. (E) On December 14, 1998, the Company acquired the assets of KSLM-AM, serving the Salem, Oregon radio market, from Willamette Broadcasting Co. for $605,000. The Company incurred transaction costs of $13,812 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $506,100 will be recorded in connection with this transaction. (F) The Company is required to maintain a $4.9 million letter of credit, which increases to $5.0 million on May 15, 2000 in connection with contracts assumed in the First Boston Transaction. The contracts expire on November 15, 2000. (G) On December 22, 1998, the Company sold the assets of WLLD-FM and WYUU-FM, serving the Tampa, Florida radio market to CBS for $75.0 million. (H) In December 1998, the Board approved the purchase of the 1% minority interest in ECI License Company, L.P. for an amount of $3.4 million. (I) In December 1998, the Company invested $1.0 million by purchasing 200,000 shares at $5.00 per share in USA Digital Radio, Inc. The Company's investment represents a minority share in a privately held company formed to develop in-band on channel digital radio for AM and FM broadcast stations. 13. CHANGES IN CAPITALIZATION In connection with the adoption of the Company's amended and restated Articles of Incorporation (See Note 10), the Company declared a 185 for 1 stock split payable to shareholders at the time the Amended and Restated Articles of Incorporation become effective. The accompanying consolidated financial statements give effect to these transactions as if they had occurred on October 1, 1995. 14. RESTATEMENT Subsequent to the issuance of the Company's fiscal 1998 consolidated financial statements, the Company determined that its fiscal 1997 and 1998 consolidated financial statements should be restated to reflect the 7% convertible subordinated note (see Note 6(D)) as an indexed debt instrument and to record the change in the put option value as a charge to operations. F-29 185 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The effect of this item on the accompanying consolidated financial statements is summarized as follows: STATEMENTS OF INCOME
1997 1998 PREVIOUSLY 1997 PREVIOUSLY 1998 REPORTED AS RESTATED REPORTED AS RESTATED ---------- ----------- ---------- ----------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) Adjustment to reflect indexing of convertible subordinated note....... $ 29,070 $ 8,841 INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS................. $206,329 177,259 $ 18,733 9,892 NET INCOME............................ 205,840 176,770 15,904 7,063 PRO FORMA DATA (UNAUDITED) PRO FORMA NET INCOME DATA: Income before income taxes and extraordinary items.............. 206,329 177,259 18,733 9,892 PRO FORMA NET INCOME.................. 127,924 98,854 10,126 1,285 PRO FORMA EARNINGS PER SHARE (Note 1): Basic: Pro forma earnings before extraordinary items............ 5.94 4.59 0.46 0.12 Pro forma earnings per share..... 5.94 4.59 0.40 0.06 Diluted: Pro forma earnings before extraordinary items............ 5.05 4.59 0.46 0.12 Pro forma earnings per share..... 5.05 4.59 0.40 0.06
BALANCE SHEETS Cumulative adjustment to reflect indexing of convertible subordinated note................................ 29,070 37,911 Total convertible subordinated note... 27,427 56,497 29,352 67,263 Total shareholders' equity............ 208,089 179,019 220,881 182,970
F-30 186 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1998 (AMOUNTS IN THOUSANDS) (UNAUDITED)
DECEMBER 31, 1998 ------------ ASSETS CURRENT ASSETS Cash and cash equivalents................................. $ 6,469 Accounts receivable, net of allowance for doubtful accounts............................................... 38,511 Prepaid expenses and deposits............................. 6,259 Proceeds held in escrow from sale of Tampa stations....... 75,000 Station acquisition deposits.............................. 327 -------- Total current assets...................................... 126,566 -------- PROPERTY AND EQUIPMENT -- At cost Land and land easements and land improvements............. 6,927 Building.................................................. 4,596 Equipment................................................. 35,804 Furniture and fixtures.................................... 7,662 Leasehold improvements.................................... 3,899 -------- 58,888 Accumulated depreciation.................................. (10,874) -------- 48,014 Capital improvements in progress............................ 629 -------- Net property and equipment.................................. 48,643 -------- RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES -- NET.... 500,545 DEFERRED CHARGES AND OTHER ASSETS -- NET.................... 5,280 -------- TOTAL....................................................... $681,034 ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable.......................................... $ 18,224 Accrued liabilities: Salaries............................................... 4,322 Interest............................................... 1,492 Other.................................................. 1,094 Long-term debt due within one year........................ 10 -------- Total current liabilities................................. 25,142 -------- SENIOR DEBT................................................. 330,271 CONVERTIBLE SUBORDINATED NOTE Note payable.............................................. 25,000 Accrued interest.......................................... 4,858 Cumulative adjustment to reflect indexing of convertible subordinated note...................................... 67,414 -------- Total convertible subordinated note....................... 97,272 MINORITY INTEREST IN EQUITY OF PARTNERSHIP.................. 2,882 -------- Total liabilities......................................... 455,567 -------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Class A common stock...................................... 110 Class B common stock...................................... 105 Retained earnings......................................... 225,252 -------- Total shareholders' equity................................ 225,467 -------- TOTAL..................................................... $681,034 ========
See notes to condensed consolidated financial statements. F-31 187 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 1997 AND 1998 (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, -------------------- 1997 1998 -------- -------- NET REVENUES................................................ $ 28,399 $ 47,363 OPERATING EXPENSES: Station operating expenses................................ 18,868 29,990 Depreciation and amortization............................. 2,880 4,358 Corporate general and administrative expenses............. 849 1,850 Net expense from time brokerage agreement fees............ 1,236 -------- -------- 22,597 37,434 -------- -------- OPERATING INCOME............................................ 5,802 9,929 -------- -------- OTHER EXPENSE (INCOME) ITEMS: Interest expense.......................................... 2,996 5,732 Adjustment to reflect indexing of convertible subordinated note................................................... 14,903 29,503 Interest income........................................... (127) (146) Other non-operating expenses.............................. 25 723 Gains on sale of assets and other......................... (43) (69,648) -------- -------- Total other expense (income).............................. 17,754 (33,836) -------- -------- INCOME (LOSS) BEFORE INCOME TAXES........................... (11,952) 43,765 INCOME TAXES................................................ 81 310 -------- -------- NET INCOME (LOSS)........................................... $(12,033) $ 43,455 ======== ======== PRO FORMA DATA PRO FORMA NET INCOME DATA: Income (loss) before income taxes......................... $(11,952) $ 43,765 Pro forma income taxes.................................... 1,121 27,842 -------- -------- PRO FORMA NET INCOME (LOSS)................................. $(13,073) $ 15,923 ======== ======== PRO FORMA EARNINGS PER SHARE: Basic: Pro forma earnings (losses)............................ $ (0.61) $ 0.64 Diluted: Pro forma earnings (losses)............................ $ (0.61) $ 0.64 WEIGHTED AVERAGE SHARES: Basic..................................................... 21,534 24,742 Diluted................................................... 21,534 24,742
See notes to condensed consolidated financial statements. F-32 188 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED DECEMBER 31, 1997 AND 1998 (AMOUNTS IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, -------------------- 1997 1998 -------- -------- OPERATING ACTIVITIES: Net income (loss)......................................... $(12,033) $ 43,455 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation.............................................. 764 1,223 Amortization of radio broadcasting licenses, other intangibles and deferred charges....................... 2,116 3,135 Gains on dispositions and exchanges of assets............. (43) (69,648) Interest on the convertible subordinated note............. 477 506 Adjustment to reflect indexing of convertible subordinated note................................................... 14,903 29,503 Changes in assets and liabilities which provided (used) cash: Accounts receivable.................................... 135 (5,987) Prepaid expenses....................................... 981 (115) Accounts payable, accrued liabilities and corporate state income taxes.................................... 16 8,381 Minority interest in equity of partnership............. 25 705 -------- -------- Net cash provided by operating activities.............. 7,341 11,158 -------- -------- INVESTING ACTIVITIES: Additions to property and equipment....................... (5,012) (2,400) Proceeds from sale of property and equipment, intangibles and other assets....................................... 68 75,016 Purchases of radio station assets......................... (15,987) (82,903) Purchase of investment.................................... (1,000) Deferred charges and other assets......................... (50) (622) Proceeds held in escrow from sale of Tampa stations....... (75,000) Stations acquisition deposits............................. 3,511 15 -------- -------- Net cash used in investing activities.................. (17,470) (86,894) -------- -------- FINANCING ACTIVITIES: Payments of long-term debt................................ (3,000) (3,003) Proceeds from issuance of long-term debt.................. 13,000 79,500 Dividends paid............................................ (958) -------- -------- Net cash provided by financing activities.............. 10,000 75,539 -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS................... (129) (197) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 3,626 6,666 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 3,497 $ 6,469 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during the period for: Interest............................................... $ 2,980 $ 5,698 ======== ======== Income taxes........................................... $ 31 $ 60 ======== ========
See notes to condensed consolidated financial statements. F-33 189 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 1997 AND 1998 1. BASIS OF PRESENTATION The accompanying unaudited financial statements for Entercom Communications Corp. (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. For the three months ended December 31, 1998, the weighted average outstanding shares have been increased by 3,208,000 shares, which represent the number of shares which, when multiplied by an offering price of $22.50 per share, would be sufficient to replace the capital in excess of the current period's earnings which was authorized for subsequent distribution to the shareholders of the Company while the Company was an S Corporation (the "S Corporation Shareholders"), prior to the initial public offering of 13,627,500 shares of the Company's Class A Common Stock at an offering price of $22.50 (the "IPO"). 2. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS COMPLETED ACQUISITIONS, DIVESTITURES AND INVESTMENTS On December 11, 1998, the Company acquired the assets of WRKO-AM and WEEI-AM, serving the Boston radio market, from CBS Radio, Inc. for $82.0 million. The Company incurred transaction costs of approximately $284,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $77.8 million were recorded in connection with this transaction. On December 14, 1998, the Company acquired the assets of KSLM-AM, serving the Salem, Oregon radio market, from Willamette Broadcasting Co. for $605,000. The Company incurred transaction costs of approximately $14,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $506,100 were recorded in connection with this transactions. On December 21, 1998, the Company purchased 200,000 shares of the common stock of USA Digital Radio, Inc. at a per share price of $5.00 for an aggregate investment of $1.0 million. USA Digital Radio, Inc. is a developer of in-band AM and FM digital audio broadcasting technology. On December 22, 1998, the Company sold the assets of WLLD-FM and WYUU-FM, serving the Tampa, Florida radio market to CBS for $75.0 million resulting in a gain of approximately $69.6 million. PENDING ACQUISITIONS In August 1998, the Company entered into an agreement with CBS pursuant to which it agreed to purchase WAAF-FM and WEGQ-FM in Boston and WWTM-AM in Worchester for $58.0 million in cash. In September, 1998, the Company began operating F-34 190 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) these stations under a time brokerage agreement. On February 22, 1999, the Company consummated the Transaction. On December 9, 1998, the Company entered into an agreement to acquire WREN-AM, a radio station serving Kansas City, Kansas, from Mortenson Broadcasting Company of Canton, LLC and Mortenson Broadcasting Company for the sum of $2.8 million. It is anticipated that this transaction will close in the first half of the calendar year 1999. The following unaudited pro forma summary presents the consolidated results of operations as if the transactions which occurred during the period of October 1, 1997 through December 31, 1998 had all occurred as of October 1, 1997, after giving effect to certain adjustments, including depreciation and amortization of assets and interest expense on any debt incurred to find the acquisitions which would have been incurred had such acquisitions and other transactions occurred as of October 1, 1997. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions and other transactions been made as of that date or results which may occur in the future.
PERIODS ENDED DECEMBER 31, -------------------- 1997 1998 -------- -------- (UNAUDITED) Net revenues............................................. $ 37,725 $ 47,363 Loss before gains on sale of assets...................... $(15,185) $(26,078) Net income (loss)........................................ $ 54,506 $(26,078)
3. DEBT The Company has a senior secured Credit Facility (the "Credit Facility") with a syndicate of banks which allows the Company to borrow up to $350.0 million on a reducing, revolving basis. Availability under the Credit Facility reduces quarterly beginning June 30, 2000, in amounts which vary from $4.4 million to $17.5 million. As of December 31, 1998, the Company had approximately $330.0 million of borrowings outstanding under the Credit Facility. The current outstanding indebtedness under the Credit Facility was not reduced by the $75.0 million proceeds from the Tampa Transaction as these funds were being held in escrow in a qualified intermediary account. In connection with the Company's IPO which was completed on February 3, 1999, the Company received approximately $236.1 million in net proceeds which was used to repay revolving indebtedness outstanding under the Credit Facility. As of March 5, 1999, the Company had revolving indebtedness outstanding under the Credit Facility of approximately $147.5 million, which included $58.0 million in connection with the consummation of the acquisition of WAAF-FM and WEGQ-FM in Boston and WWTM-AM in Worchester. See Note 5, Subsequent Events. F-35 191 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. COMMITMENTS AND CONTINGENCIES ACQUISITIONS The Company entered into a preliminary agreement on February 6, 1996, to acquire the assets of radio station KWOD-FM, Sacramento, California, from Royce International Broadcasting Corporation, subject to approval by the FCC, for a purchase price of $25.0 million. Notwithstanding efforts by the Company to pursue this Transaction, the seller has been nonresponsive. Accordingly, the Company cannot determine if and when the transaction might occur. CONTINGENCIES The Company is subject to various outstanding claims which arose in the ordinary course of business and to other legal proceedings. In the opinion of management, any liability of the Company which may arise out of or with respect to these matters will not materially affect the financial position, results of operations or cash flows of the Company. 5. SUBSEQUENT EVENTS On February 3, 1999, the Company completed the IPO, pursuant to which 13,627,500 shares of Class A Common Stock were sold to the public at a price of $22.50 per share. Of the 13,627,500 shares sold, the Company sold 11,300,000 and Chase Capital Partners ("Chase Capital"), the sole selling shareholder, sold 2,327,500 shares. The net proceeds to the Company, after deducting underwriting discounts and other offering expenses was approximately $236.1 million. In connection with the IPO, the following events occurred: Effective January 28, 1999 (the "Revocation Date"), the Company revoked its S Corporation status with the Internal Revenue Service and therefore the last day the Company was taxed as an S Corporation was January 27, 1999. As a result, all of the Company's net income after January 27, 1999 will be taxed to the Company rather than taxed to the Company's shareholders. Prior to the revocation of its S Corporation status, the Company declared a dividend (the "S Distribution"), conditioned upon consummation of the IPO, payable to its former S Corporation Shareholders in the amount of $88.1 million, which the Company estimated would be the undistributed balance of the income of the Company which has been taxed, or is taxable to its S Corporation Shareholders as of the revocation date. On March 2, 1999 the company distributed $75 million to its S Corporation shareholders as partial payment of the S Distribution. The Company anticipates paying the remaining $13.1 million in April, 1999. As a result of the revocation of its S Corporation status and its resulting treatment as a C Corporation, the Company will record a non-cash deferred tax expense of approximately $81.7 million in the quarter ending March 31, 1999, resulting from the recording of a deferred income tax asset of $4.3 million and a deferred income tax liability of $86.0 million. F-36 192 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Prior to the IPO, Chase Capital, which held a Convertible Subordinated Promissory Note of the Company (the "Convertible Subordinated Note") with principal in the amount of $25.0 million, converted the Convertible Subordinated Note into 2,327,500 shares of Class A Common Stock and 1,995,669 shares of Class C Common Stock (the "Chase Conversion"). At the time of the Chase Conversion, the market value of the shares into which the Convertible Subordinated Note was convertible, was approximately $97.3 million (the principal amount of the Convertible Subordinated Note plus accrued interest amounted to approximately $29.9 million, and the cumulative adjustment to reflect indexing of the Convertible Subordinated Note was approximately $67.4 million). The Convertible Subordinated Note has been retired and there is no further obligation due. On January 22, 1999, in a related party transaction, the Company purchased a 1% minority interest in ECI License Company, L.P. for an amount of $3.4 million. ECI License Company, L.P. is a limited partnership in which the Company is the general partner and owns a 99% interest. ECI License Company, L.P. owns certain of the Company's FCC licenses. In August 1998, the Company entered into an agreement with CBS pursuant to which it agreed to purchase WAAF-FM and WEGQ-FM in Boston and WWTM-AM in Worchester for $58.0 million in cash (the "Second Boston Transaction"). In September, 1998, the Company began operating these stations under a TBA. On February 22, 1999, the Company consummated the Transaction. F-37 193 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 1999 (AMOUNTS IN THOUSANDS) (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents................................. $ 8,713 Accounts receivable, net of allowance for doubtful accounts.............................................. 45,160 Prepaid expenses and deposits.......................... 6,402 Deferred tax assets.................................... 1,949 Station acquisition deposits........................... 142 -------- Total current assets.............................. 62,366 -------- PROPERTY AND EQUIPMENT -- At cost Land and land easements and land improvements............. 6,737 Building.................................................. 4,509 Equipment................................................. 39,947 Furniture and fixtures.................................... 9,049 Leasehold improvements.................................... 4,000 -------- 64,242 Accumulated depreciation.................................. (13,568) -------- 50,674 Capital improvements in progress............................ 2,086 -------- Net property and equipment.................................. 52,760 -------- RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES -- NET.... 552,282 DEFERRED CHARGES AND OTHER ASSETS -- NET.................... 4,219 -------- TOTAL............................................. $671,627 ========
See notes to condensed consolidated financial statements F-38 194 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 1999 (DOLLARS IN THOUSANDS) (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable.......................................... $ 16,568 Accrued liabilities: Salaries............................................... 4,852 Interest............................................... 432 Other.................................................. 299 Income tax payable........................................ 2,798 Long-term debt due within one year........................ 10 -------- Total current liabilities................................. 24,959 -------- SENIOR DEBT................................................. 166,266 Deferred tax liability...................................... 83,516 Total liabilities......................................... 274,741 -------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock Class A common stock...................................... 249 Class B common stock...................................... 105 Class C common stock...................................... 17 Additional paid-in capital................................ 468,239 Retained earnings......................................... (71,501) Unearned compensation..................................... (223) -------- Total shareholders' equity................................ 396,886 -------- TOTAL............................................. $671,627 ========
See notes to condensed consolidated financial statements F-39 195 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 AND 1999 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ---------------------------- 1998 1999 ----------- -------------- NET REVENUES.......................................... $ 63,687 $ 95,545 OPERATING EXPENSES: Station operating expenses.......................... 42,749 64,296 Depreciation and amortization....................... 6,079 10,019 Corporate general and administrative expenses....... 2,193 3,454 Net time brokerage agreement expenses............... 2,273 652 ----------- -------------- OPERATING INCOME...................................... 10,393 17,124 ----------- -------------- OTHER EXPENSE (INCOME) ITEMS: Interest expense.................................... 6,179 6,246 Adjustment to reflect indexing of Convertible Subordinated Note................................ 5,693 Interest income..................................... (180) (599) Other non-operating expenses........................ 57 Gains on sale of assets............................. (8,748) (467) ----------- -------------- Total other expense (income)........................ 3,001 5,180 ----------- -------------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM.................................. 7,392 11,944 INCOME TAXES Income taxes -- C Corporation....................... 5,249 Income taxes -- S Corporation....................... 71 125 Deferred income taxes for conversion from an S to a C Corporation.................................... 79,845 ----------- -------------- Total income taxes.................................. 71 85,219 ----------- -------------- NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM........... 7,321 (73,275) EXTRAORDINARY ITEM (NET OF TAX BENEFIT)............... 2,397 ----------- -------------- NET INCOME (LOSS)..................................... $ 4,924 $ (73,275) =========== ==============
F-40 196
SIX MONTHS ENDED JUNE 30, ---------------------------- 1998 1999 ----------- -------------- NET LOSS PER SHARE Basic: Loss before extraordinary item................... $ (2.10) Extraordinary item, net of taxes................. -------------- NET LOSS PER SHARE.................................... $ (2.10) ============== Diluted: Loss before extraordinary item................... $ (2.10) Extraordinary item, net of taxes................. -------------- NET LOSS PER SHARE.................................... $ (2.10) ============== PRO FORMA DATA PRO FORMA NET INCOME DATA: Income before income taxes and extraordinary item... $ 7,392 $ 11,944 Pro forma income taxes.............................. 4,972 4,539 ----------- -------------- Pro forma income before extraordinary item.......... 2,420 7,405 Extraordinary item, net of pro forma taxes.......... 1,489 ----------- -------------- PRO FORMA NET INCOME.................................. $ 931 $ 7,405 =========== ============== PRO FORMA EARNINGS PER SHARE: Basic: Pro forma earnings before extraordinary item..... $ 0.11 $ 0.21 Extraordinary item, net of pro forma taxes....... 0.07 ----------- -------------- Pro forma earnings per share..................... $ 0.04 $ 0.21 =========== ============== Diluted: Pro forma earnings before extraordinary item..... $ 0.11 $ 0.21 Extraordinary item, net of pro forma taxes....... 0.07 ----------- -------------- Pro forma earnings per share..................... $ 0.04 $ 0.21 =========== ============== WEIGHTED AVERAGE SHARES: Basic............................................... 21,534 34,836 Diluted............................................. 21,534 35,251
See notes to condensed consolidated financial statements F-41 197 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1998 AND 1999 (AMOUNTS IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ---------------------- 1998 1999 --------- --------- OPERATING ACTIVITIES: Net income (loss).................................... $ 4,924 $ (73,275) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation......................................... 1,872 2,726 Amortization of radio broadcasting licenses, other intangibles and deferred charges.................. 4,207 7,293 Extraordinary items.................................. 2,401 Deferred taxes....................................... 81,567 Gain on dispositions and exchanges of assets......... (8,748) (467) Non-cash stock-based compensation expense............ 219 Interest on the Convertible Subordinated Note........ 944 Adjustment to reflect indexing of convertible subordinated note................................. 5693 Changes in assets and liabilities which provided (used) cash: Accounts receivable............................... (5,808) (6,649) Prepaid expenses.................................. (1,076) (145) Accounts payable, accrued liabilities and corporate state income taxes.................... 1,371 (183) Minority interest in equity of partnership........ (2) (2,882) --------- --------- Net cash provided by operating activities......... 5,778 8,204 --------- --------- INVESTING ACTIVITIES: Additions to property and equipment.................. (4,955) (4,901) Proceeds from sale of assets......................... 8,906 1,162 Proceeds from exchanges of radio stations............ 3,132 Payment for exchanges of radio stations.............. (306) Purchases of radio station assets.................... (130,103) (60,968) Deferred charges and other assets.................... (3,163) (479) Station acquisition deposits......................... 924 75,187 --------- --------- Net cash (used) provided by investing activities...................................... (125,565) 10,001 --------- ---------
F-42 198
SIX MONTHS ENDED JUNE 30, ---------------------- 1998 1999 --------- --------- FINANCING ACTIVITIES: Net proceeds from Initial Public Offering............ 236,157 Proceeds from issuance of long-term debt............. 257,793 82,500 Payment of long-term debt............................ (133,008) (246,505) Dividends paid to S corporation shareholders......... (2,401) (88,113) --------- --------- Net cash provided (used) by financing activities...................................... 122,384 (15,961) --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS.............. 2,597 2,244 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD......... 3,497 6,469 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD............... $ 6,094 $ 8,713 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during the period for: Interest.......................................... $ 4,378 $ 6,301 ========= ========= Income taxes...................................... $ 198 $ 1,652 ========= =========
Supplemental Disclosures of Non-Cash Investing and Financing Activities -- In connection with the radio station exchange transactions completed by the Company during the six months ended June 30, 1998, the non-cash portion of assets recorded was $22,500. In connection with the Company's Initial Public Offering completed during the six months ended June 30, 1999, the Convertible Subordinated Note, net of deferred finance charges of $96,400 was converted into equity. See notes to condensed consolidated financial statements F-43 199 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1998 AND 1999 1. BASIS OF PRESENTATION The accompanying unaudited financial statements for Entercom Communications Corp. (the "Company") have been prepared in accordance with generally accepted accounting principals for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Effective January 28, 1999 (the "Revocation Date"), in connection with the initial public offering (the "IPO") of 13,627,500 shares of Class A Common Stock of the Company at a price of $22.50 per share, the Company revoked its S Corporation status with the Internal Revenue Service and therefore the last day the Company was taxed as an S Corporation was January 27, 1999. As a result, all of the Company's effective tax rate for state and federal income taxes for the period subsequent to January 27, 1999 is at a combined rate of 38%, applied to taxable income before income taxes, which is adjusted for permanent differences between tax and book income. On January 29, 1999, the Company's Class A Common Stock began trading on the New York Stock Exchange. On February 3, 1999, the Company completed the IPO pursuant to which 13,627,500 shares of Class A Common Stock were sold to the public at a price of $22.50 per share. Of the 13,627,500 shares sold, the Company sold 11,300,000 and Chase Capital Partners ("Chase Capital"), the sole selling shareholder, sold 2,327,500 shares. The net proceeds to the Company, after deducting underwriting discounts and other offering expenses was approximately $236.2 million. As a result of the revocation of its S Corporation status and its conversion to a C Corporation, the Company recorded a non-cash deferred income tax expense of approximately $79.8 million to reflect the cumulative effect of temporary differences between the tax and financial reporting bases of the Company's assets and liabilities attributable to the period prior to its conversion to a C Corporation. The unaudited pro forma net income data reflect adjustments for income taxes as if the Company had been subject to federal and state income taxes based upon a pro forma effective tax rate of 38% applied to income before income taxes and extraordinary item, excluding the effect of an expense adjustment to reflect indexing of the Convertible Subordinated Note (as such adjustment is not tax deductible) of $5.7 million for the six-month period ended June 30, 1998. The net income (loss) per share and pro forma earnings per share are calculated in accordance with Statement of Financial Accounting Standards No. 128 and, are based on the weighted average number of shares of Common Stock outstanding and dilutive common equivalent shares which include stock options and restricted stock (using the treasury stock method). For the six-month period ended June 30, 1998, the effect of the conversion of the Convertible Subordinated Note for the calculation of the pro forma income per share was antidilutive. F-44 200 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1998 AND 1999 -- (CONTINUED) 2. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS COMPLETED ACQUISITIONS AND DIVESTITURES FOR THE SIX MONTHS ENDED JUNE 30, 1999 On January 22, 1999, in a related party transaction, a wholly owned subsidiary of the Company purchased a 1% limited partnership interest in ECI License Company, L.P. for $3.4 million. ECI License Company, L.P. is a limited partnership in which the Company is the general partner, owning a 99% general partnership interest. ECI License Company, L.P. owns certain of the Company's FCC licenses. The acquisition effectively gives the Company 100% interest in its FCC licenses. On February 22, 1999, the Company purchased the assets of radio stations WAAF-FM and WEGQ-FM in Boston and WWTM-AM in Worchester from CBS for $58.0 million in cash. The Company incurred transaction costs of approximately $0.2 million related to this transaction. Broadcasting licenses and other intangibles in the amount of $55.7 million were recorded in connection with this transaction. The Company had operated these stations under a TBA since September 1998 and for the three months ended March 31, 1999, the Company incurred TBA fees in the amount of $0.7 million. On April 22, 1999, the Company sold a building located in Seattle, Washington for a cash purchase price of $1.3 million, resulting in a gain of approximately $0.5 million. On June 11, 1999, the Company acquired the assets of radio station WREN-AM, serving the Kansas City, Kansas/Missouri radio market, from Mortenson Broadcasting Company of Canton, LLC and Mortenson Broadcasting Company for the sum of $2.8 million in cash. Broadcasting licenses in the amount of $2.5 million were recorded in connection with this transaction. OTHER SIGNIFICANT EVENTS Prior to the revocation of its S Corporation status, the Company declared a dividend (the "S Distribution"), conditioned upon consummation of the IPO, payable to its former S Corporation shareholders in the amount of $88.1 million, which the Company estimated would be the undistributed balance of the income of the Company which has been taxed or is taxable to its S Corporation shareholders as of the Revocation Date. The S Distribution of $88.1 million has been paid as of June 30, 1999. Prior to the IPO, Chase Capital, which held a Convertible Subordinated Promissory Note of the Company (the "Convertible Subordinated Note") in the principal amount of $25.0 million, converted the Convertible Subordinated Note into 2,327,500 shares of Class A Common Stock and 1,995,669 shares of Class C Common Stock (the "Chase Conversion"). At the time of the Chase Conversion, the market value of the shares into which the Convertible Subordinated Note was convertible, was approximately $97.3 million (the principal amount of the Convertible Subordinated Note plus accrued interest amounted to approximately $29.9 million, and the cumulative adjustment to reflect indexing of the Convertible Subordinated Note was approximately $67.4 million). The Convertible Subordinated Note has been retired and there is no further obligation due. F-45 201 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1998 AND 1999 -- (CONTINUED) UNAUDITED PRO FORMA INFORMATION FOR ACQUISITIONS AND DIVESTITURES The following unaudited pro forma summary presents the consolidated results of operations as if the acquisition and divestiture transactions which occurred during the period of January 1, 1998 through June 30, 1999 had all occurred as of January 1, 1998, after giving effect to certain adjustments, including depreciation and amortization of assets and interest expense on any debt incurred to fund the acquisitions which would have been incurred had such acquisitions and other transactions occurred as of January 1, 1998. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of (i) what would have occurred had the acquisitions and other transactions been made as of the date or (ii) results which may occur in the future.
SIX MONTHS ENDED JUNE 30, ------------------- 1998 1999 ------- -------- (UNAUDITED) Net revenues................................................ $82,143 $ 95,545 Loss before extraordinary item and gains on sale of assets.................................................... (9,023) (73,938) Loss before extraordinary item (net of tax benefits)........ (2,448) (73,938) Net loss.................................................... (4,845) (73,938)
3. DEBT The Company has a senior secured Credit Facility (the "Credit Facility") with a syndicate of banks which allows the Company to borrow up to $350.0 million on a reducing, revolving basis. Availability under the Credit Facility reduces quarterly beginning June 30, 2000, in amounts which vary from $4.4 million to $17.5 million. As of June 30, 1999, the Company had $166.0 million of borrowings outstanding under the Credit Facility, in addition to an outstanding Letter of Credit in the amount of $4.9 million. 4. COMMITMENTS AND CONTINGENCIES ACQUISITIONS The Company entered into a preliminary agreement on February 6, 1996, to acquire the assets of radio station KWOD-FM, Sacramento, California, from Royce International Broadcasting Corporation, subject to approval by the FCC, for a purchase price of $25.0 million. Notwithstanding efforts by the Company to pursue this Transaction, the seller has been nonresponsive. Accordingly, the Company cannot determine if and when the transaction might occur. On July 28, 1999, the Company commenced an action seeking to enforce this Agreement. CONTINGENCIES The Company is subject to various outstanding claims which arose in the ordinary course of business and to other legal proceedings. In the opinion of management, any F-46 202 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1998 AND 1999 -- (CONTINUED) liability of the Company which may arise out of or with respect to these matters will not materially affect the financial position, results of operations or cash flows of the Company. 5. SHAREHOLDERS' EQUITY During the six months ended June 30, 1999, the Company issued options to purchase 823,609 shares of its Class A Common Stock at prices ranging from $18.00 to $34.00 per share. All of the options become exercisable over a four-year period. In connection with the grant of options with exercise prices below fair market value at the time of grant, the Company recognized compensation expense in the amount of approximately $170,000 for the six-months ended June 30, 1999. On January 28, 1999, the Company issued certain Restricted Stock awards, consisting of rights to 11,112 shares of Class A Common Stock, to two directors. Such shares vest ratably on each of the next four anniversary dates of the grant. In connection with three awards, the Company recognized compensation expense in the amount of approximately $26,000 for the six-months ended June 30, 1999, . On May 1, 1999, Chase Capital converted 300,000 shares of Class C Common Stock to 300,000 shares of Class A Common Stock. 6. SUBSEQUENT EVENTS On July 28, 1999, the Company entered into agreements to purchase from Sinclair Broadcast Group ("Sinclair") all of Sinclair's radio properties (with the exception of its St. Louis cluster) and to purchase 300,000 shares of USA Digital Radio Inc. for a purchase price of $824.5 million in cash (the "Sinclair Transaction"). As part of the Sinclair Transaction, the Company will agree to spend $5.0 million in television advertising time for the promotion of the Company's radio stations, on Sinclair's TV stations over a five year period, and will be responsible for certain capital expenditures not to exceed $2.0 million. The Sinclair Transaction covers 46 stations (15 AM and 31 FM) in nine markets including Kansas City, Milwaukee, New Orleans, Memphis, Buffalo, Norfolk, Greensboro/ Winston-Salem/High Point, Greenville/Spartanburg and Scranton/Wilkes-Barre. The Company will be required to sell or exchange certain radio stations in the Kansas City market in order to meet regulatory requirements limiting the number of stations the Company may own in this market to eight (the Company currently owns seven). Completion of the Sinclair Transaction is subject to several factors including approval by the Boards of Directors of both companies, FCC approval, Department of Justice approval, the Company's due diligence and completion of definitive documentation. The Company expects to close on this transaction in the last quarter of 1999. F-47 203 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Entertainment Communications, Inc. and Subsidiaries: We have audited the accompanying combined balance sheet of the Portland, Oregon and Rochester, New York Radio Groups of Heritage Media Services, Inc. -- Broadcasting Segment (the Company) as of December 31, 1997, and the related combined statements of operations, stockholders' equity and cash flows of the Portland, Oregon and Rochester, New York Radio Groups of Heritage Media Services, Inc. -- Broadcasting Segment (the Predecessor) for the eight months ended August 31, 1997 and of the Company for the four months ended December 31, 1997. These financial statements are the responsibility of the Company's and the Predecessor's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1997, and the results of operations and cash flows of the Predecessor for the eight months ended August 31, 1997, and of the Company for the four months ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Baltimore, Maryland, May 29, 1998 F-48 204 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED BALANCE SHEET AS OF DECEMBER 31, 1997 (IN THOUSANDS)
1997 -------- ASSETS CURRENT ASSETS: Cash...................................................... $ 594 Accounts receivable, net of allowance for doubtful accounts of $166....................................... 3,474 Prepaid expenses and other current assets................. 41 Deferred barter costs..................................... 113 Deferred tax asset........................................ 64 -------- Total current assets................................... 4,286 PROPERTY, PLANT AND EQUIPMENT, net.......................... 4,497 DUE FROM AFFILIATE.......................................... 1,719 ACQUIRED INTANGIBLE BROADCASTING ASSETS, net................ 116,171 -------- Total Assets........................................... $126,673 ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses..................... $ 520 Deferred revenue.......................................... 11 Deferred barter revenue................................... 108 -------- Total current liabilities.............................. 639 DEFERRED TAX LIABILITY...................................... 98 OTHER LONG-TERM LIABILITIES................................. 292 -------- Total Liabilities...................................... 1,029 -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $1.00 par value, 10,000 shares authorized and 10,000 shares issued and outstanding............... 10 Additional paid-in capital................................ 127,035 Accumulated deficit....................................... (1,401) -------- Total Stockholders' Equity............................. 125,644 -------- Total Liabilities and Stockholders' Equity............. $126,673 ========
The accompanying notes are an integral part of this combined balance sheet. F-49 205 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS)
PREDECESSOR COMPANY ------------ ------------ EIGHT MONTHS FOUR MONTHS ENDED ENDED AUGUST 31, DECEMBER 31, 1997 1997 ------------ ------------ NET REVENUES: Station broadcasting revenues, net of agency commissions of $1,060 and $1,845, respectively................................... $10,449 $ 5,635 Revenues realized from station barter arrangements................................... 847 464 ------- ------- Total net revenues............................. 11,296 6,099 ------- ------- OPERATING EXPENSES: Programming and production........................ 4,024 2,059 Selling, general and administrative............... 1,618 830 Corporate overhead allocation..................... 814 478 Expenses realized from station barter arrangements................................... 922 411 Depreciation of property and equipment............ 395 251 Amortization of acquired intangible broadcasting assets and other assets........................ 775 2,623 ------- ------- Total operating expenses....................... 8,548 6,652 ------- ------- Broadcast operating income (loss).............. 2,748 (553) ------- ------- OTHER INCOME (EXPENSE): Interest expense.................................. 651 265 Other expense, net................................ -- 21 ------- ------- Income (loss) before provision for income taxes........................................ 2,097 (839) PROVISION FOR INCOME TAXES.......................... 1,339 562 ------- ------- Net income (loss)................................. $ 758 $(1,401) ======= =======
The accompanying notes are an integral part of these combined statements. F-50 206 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
RETAINED COMMON STOCK ADDITIONAL EARNINGS/ --------------- PAID-IN (ACCUMULATED STOCKHOLDER'S SHARES AMOUNT CAPITAL DEFICIT) EQUITY ------ ------ ---------- ------------ ------------- PREDECESSOR: BALANCE, January 1, 1997.......... 10 $10 $ -- $ 7,041 $ 7,051 HMC noncash capital contributions................ -- -- 1,209 -- 1,209 Net income...................... -- -- -- 758 758 Acquisition by News Corporation.................. -- -- 125,291 (7,799) 117,492 -- --- -------- ------- -------- BALANCE, August 31, 1997.......... 10 $10 $126,500 $ -- $126,510 == === ======== ======= ======== COMPANY: BALANCE, September 1, 1997........ 10 $10 $126,500 $ -- $126,510 News Corporation noncash capital contributions................ -- -- 535 -- 535 Net loss........................ -- -- -- (1,401) (1,401) -- --- -------- ------- -------- BALANCE, December 31, 1997........ 10 $10 $127,035 $(1,401) $125,644 == === ======== ======= ========
The accompanying notes are an integral part of these combined statements. F-51 207 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
PREDECESSOR COMPANY ------------ ------------ EIGHT MONTHS FOUR MONTHS ENDED ENDED AUGUST 31, DECEMBER 31, 1997 1997 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)......................................... $ 758 $(1,401) Adjustments to reconcile net income (loss) to net cash flows from operating activities-........................ Depreciation of property and equipment.................... 395 251 Amortization of acquired intangible broadcasting assets and other assets........................................ 775 2,623 Changes in assets and liabilities, net of effects of acquisitions-........................................... (Increase) decrease in accounts receivable, net........... 121 (225) Net effect of change in deferred barter revenue and deferred barter costs................................... 76 (49) Increase in prepaid expenses and other current assets..... (15) (15) Increase in deferred tax asset............................ (50) (15) Increase (decrease) in accounts payable and accrued expenses................................................ (826) 150 Increase (decrease) in deferred revenue................... (75) 11 (Decrease) increase in deferred tax liability............. 99 (1) Decrease in other long-term liabilities................... (12) (25) ------- ------- Net cash flows from operating activities................ 1,246 1,304 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment..................... (157) (11) Acquisitions, net of cash acquired........................ (1,859) -- ------- ------- Net cash flows from investing activities................ (2,016) (11) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in due to affiliates............................. (512) -- Increase in due from affiliates........................... -- (1,719) Capital contributions made by Parent...................... 1,209 535 ------- ------- Net cash flows from financing activities................ 697 (1,184) ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (73) 109 CASH, beginning of period................................... 558 485 ------- ------- CASH, end of period......................................... $ 485 $ 594 ======= ======= SUPPLEMENTAL DISCLOSURES: Cash paid for interest.................................... $ -- $ 21 ======= ======= Cash paid for income taxes................................ $ 152 $ 29 ======= =======
The accompanying notes are an integral part of these combined statements. F-52 208 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION Heritage Media Services, Inc. ("HMSI") operates in two segments -- Marketing Services and Broadcasting. Heritage Media Corporation is the parent company of HMSI, (collectively referred to hereafter as either "HMC" or the "Parent"). The Broadcasting Segment was wholly-owned and operated by HMSI, which was owned by HMC through August 31, 1997 (the "Predecessor"). In July 1997, HMC entered into an asset sale agreement with Sinclair Broadcast Group, Inc. ("SBG") whereby SBG would acquire 100% of the Broadcasting Segment (which consisted of six television stations in three markets and 24 radio stations in seven markets) for $630 million in cash. Effective September 1, 1997, The News Corporation Limited ("News Corporation") acquired all of the license and nonlicense assets of HMC. Due to certain regulatory requirements, News Corporation has established a trust to hold all of the license and nonlicense assets of the Broadcasting Segment until the sale to SBG has closed. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets and acquired intangible broadcasting assets of $51.4 million and $578.6 million, respectively. During January 1998, Entertainment Communications, Inc. ("Entercom") entered into an Asset Purchase Agreement with Tuscaloosa Broadcasting Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc. (collectively referred to hereafter as "Sinclair") to acquire KKSN-AM, KKSN-FM and KKRH-FM, all serving the Portland, Oregon radio market and WBBF-AM, WBBF-FM, WKLX-FM and WQRV-FM, all serving the Rochester, New York radio market for a purchase price of $126.5 million. Simultaneously with the above agreement, Entercom entered into a Time Brokerage Agreement ("TBA") with Sinclair whereby, effective March 1, 1998, Entercom programs these stations for the period prior to consummation of the purchase agreement and Sinclair receives a monthly TBA fee of $631,500. Closing on this transaction is expected in June 1998. The accompanying combined financial statements include the accounts of the Portland, Oregon and Rochester, New York Radio Group, which are collectively referred to hereafter as "the Company." The accompanying December 31, 1997, balance sheet and related statements of operations and cash flows for the four-month period ended December 31, 1997, are presented on a new basis of accounting, reflecting the impact of the News Corporation acquisition. The accompanying financial statements for the eight-month period ended August 31, 1997, are presented as "Predecessor" financial statements. DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-53 209 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) CONCENTRATION OF CREDIT RISK The Company's revenues and accounts receivable relate primarily to the sale of advertising within the radio stations' broadcast areas. Credit is extended based on an evaluation of the customers' financial condition. Credit losses are provided for in the financial statements. In the opinion of management, credit risk with respect to trade receivables is limited due to the large number of diversified customers and the geographic diversification of the Company's customer base. The Company performs ongoing credit evaluations of its customers and believes that adequate allowances for any uncollectible trade receivables are maintained. At December 31, 1997, no receivable from any customer exceeded 5% of stockholders' equity, and no customer accounted for more than 10% of net revenues for the eight months ended August 31, 1997 or for the four months ended December 31, 1997. ACQUIRED INTANGIBLE BROADCASTING ASSETS Acquired intangible broadcasting assets are being amortized over periods of 4 to 40 years. These amounts result from the acquisition of certain radio station license and nonlicense assets by The News Corporation (see Note 1). The Company monitors the individual financial performance of each of the stations and continually evaluates the realizability of intangible and tangible assets and the existence of any impairment to its recoverability based on the projected undiscounted cash flows of the respective stations. Intangible assets consist of the following as of December 31, 1997 (in thousands):
AMORTIZATION PERIOD 1997 ------------ -------- Goodwill............................................... 40 years $ 1,897 FCC licenses........................................... 15-25 years 52,092 Other.................................................. 4-25 years 65,172 -------- 119,161 Less: Accumulated amortization......................... 2,626 -------- $116,535 ========
F-54 210 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded on the straight-line basis over the estimated useful lives of the assets. Property and equipment at December 31, 1997, are summarized as follows (in thousands):
USEFUL LIFE 1997 ----------- ------ Land..................................................... -- $ 442 Broadcasting equipment................................... 5-25 years 366 Buildings and improvements............................... 12-30 years 3,684 Other equipment.......................................... 4-8 years 256 ------ 4,748 Less: Accumulated depreciation........................... 251 ------ $4,497 ======
BARTER TRANSACTIONS Certain program contracts provide for the exchange of advertising air time in lieu of cash payments for the rights to such programming. These contracts are recorded as the programs are aired at the estimated fair value of the advertising air time given in exchange for the program rights. Network programming is excluded from these calculations. The Company broadcasts certain customers' advertising in exchange for equipment, merchandise and services. The estimated fair value of the equipment, merchandise or services received is recorded as deferred barter costs and the corresponding obligation to broadcast advertising is recorded as deferred barter revenues. The deferred barter costs are expensed or capitalized as they are used, consumed or received. Deferred barter revenues are recognized as the related advertising is aired. REVENUES Revenue from the sale of commercial broadcast time to advertisers is recognized when the commercials are broadcast. Promotional fees are recognized as services are rendered. 2. ACCRUED EXPENSES: Accrued expenses consist of the following at December 31, 1997, (in thousands):
1997 ---- Commissions................................................. $193 Payroll and employee benefits............................... 137 Other....................................................... 187 ---- $517 ====
F-55 211 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) 3. DUE TO AFFILIATE: The Predecessor had an arrangement with HMSI whereby HMSI would provide certain management and other services to the Predecessor. The services provided included consultation and direct management assistance with respect to operations and strategic planning. The Predecessor was allocated approximately $814,000 of corporate overhead expenses for these services for the eight months ended August 31, 1997. In order to fund acquisitions and provide operating funds, HMSI entered into a Bank Credit Agreement. The debt used to finance acquisitions and fund daily operations of the Predecessor was recorded by the Predecessor as due to affiliate in the year ending December 31, 1996. HMSI allocated interest at a rate of approximately 10.0%, which approximated the average rate paid on the borrowings. Associated with the HMSI debt, the Predecessor was allocated approximately $0.6 million of deferred financing costs in 1996. The deferred financing costs were fully amortized in accordance with the acquisition by News Corporation on September 1, 1997. 4. INCOME TAXES: The Parent files a consolidated federal tax return and separate state tax returns for each of its subsidiaries in certain filing jurisdictions. It is the Parent's policy to pay the federal income tax provision of the Company. The accompanying financial statements have been prepared in accordance with the separate return method of FASB 109, whereby the allocation of the federal tax provision due to the Parent is based on what the Company's current and deferred federal tax provision would have been had the Company filed a federal income tax return outside of its consolidated group. The Company is not required to reimburse the Parent for its federal tax provision. Accordingly, this amount is recorded as a capital contribution in the accompanying consolidated financial statements. No federal deferred tax assets or liabilities are recorded because those amounts are considered currently paid to or received by the Parent. The federal and state tax provision was calculated based on pretax income, plus or minus permanent book-to-tax differences, times the statutory tax rate of 40%. The Company had no alternative minimum tax credit carryforwards as of December 31, 1997. The effective tax rate in the current year exceeds the statutory tax rate of 40% due to the effects of nondeductible goodwill. F-56 212 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) The provision for income taxes consists of the following (in thousands):
PREDECESSOR COMPANY ------------ ------------ EIGHT MONTHS FOUR MONTHS ENDED ENDED AUGUST 31, DECEMBER 31, 1997 1997 ------------ ------------ Current: Federal..................................... $1,267 $523 State....................................... 81 33 ------ ---- 1,348 556 ------ ---- Deferred: Federal..................................... -- -- State....................................... (9) 6 ------ ---- (9) 6 ------ ---- Provision for income taxes.................. $1,339 $562 ====== ====
The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision (in thousands):
PREDECESSOR COMPANY ------------ ------------ EIGHT MONTHS FOUR MONTHS ENDED ENDED AUGUST 31, DECEMBER 31, 1997 1997 ------------ ------------ Statutory federal income taxes.............. $ 703 $(504) Adjustments: State income taxes, net of federal effect................................. 82 (59) Non-deductible goodwill amortization...... 276 1,125 Other..................................... 278 -- ------ ----- Provision for income taxes.................. $1,339 $ 562 ====== =====
F-57 213 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes the state tax effects of the significant types of temporary differences between financial reporting basis and tax basis which were generated during the years ended December 31, 1997 (in thousands):
1997 ---- Deferred Tax Assets: Bad debt reserve.......................................... $14 Accruals.................................................. 27 Other intangibles......................................... 23 --- $64 === Deferred Tax Liability: Depreciation.............................................. $98 ===
5. EMPLOYEE BENEFIT PLAN: Company employees were covered by HMC's Retirement Savings Plan (the Plan) through December 31, 1997, whereby participants contributed portions of their annual compensation to the Plan and certain contributions were made at the discretion of the Company based on criteria set forth in the Plan Agreement. Participants are generally 100% vested in Company contributions after five years of employment with the Company. Company expenses under the Plan were not material for the year ended December 31, 1997. 6. RELATED PARTY TRANSACTIONS: The Company received certain advances from HMC during the eight months ended August 31, 1997, which were evidenced by a subordination agreement. All advances from HMC were repaid on August 31, 1997. 7. CONTINGENCIES AND OTHER COMMITMENTS: LEASES AND CONTRACTS The Company and its subsidiaries lease certain real property and transportation and other equipment under noncancellable operating leases expiring at various dates through 2015. The Company also has long-term contractual obligations with two major broadcast ratings firms that provide monthly ratings services and guaranteed store contracts. Rent expense under these leases for the eight months ended August 31, 1997, and for the four months ended December 31, 1997, was approximately $210,000 and $105,000, respectively. F-58 214 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Future minimum payments under the leases are as follows (in thousands): 1998........................................................ $ 392 1999........................................................ 386 2000........................................................ 386 2001........................................................ 371 2002........................................................ 357 2003 and thereafter......................................... 814 ------ $2,706 ======
LITIGATION Lawsuits and claims are filed against the Company from time to time in the ordinary course of business which are generally incidental to its business. Management of the Company does not believe the resolution of such matters will have a significant effect on its liquidity, financial position or results of operations. F-59 215 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND MARCH 31, 1998 (IN THOUSANDS)
PREDECESSOR COMPANY ------------ ------------ DECEMBER 31, MARCH 31, 1997 1998 ------------ ------------ (UNAUDITED) ASSETS CURRENT ASSETS: Cash............................................... $ 594 $ -- Accounts receivable, net of allowance for doubtful accounts of $166................................ 3,474 -- Prepaid expenses and other current assets.......... 41 -- Deferred barter costs.............................. 113 -- Deferred tax asset................................. 64 -- -------- -------- Total current assets............................ 4,286 -- PROPERTY, PLANT AND EQUIPMENT, net................... 4,497 5,152 DUE FROM AFFILIATE................................... 1,719 -- ACQUIRED INTANGIBLE BROADCASTING ASSETS, net......... 116,171 116,934 -------- -------- Total Assets.................................... $126,673 $122,086 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses.............. $ 520 $ -- Deferred revenue................................... 11 -- Deferred barter revenue............................ 108 -- Due to parent...................................... -- 70 -------- -------- Total current liabilities....................... 639 70 DEFERRED TAX LIABILITY............................... 98 -- OTHER LONG-TERM LIABILITIES.......................... 292 -- -------- -------- Total Liabilities............................... 1,029 70 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $1.00 par value, 10,000 shares authorized and 10,000 and 0 shares issued and outstanding..................................... 10 -- Additional paid-in capital......................... 127,035 122,827 Accumulated deficit................................ (1,401) (811) -------- -------- Total Stockholders' Equity...................... 125,644 122,016 -------- -------- Total Liabilities and Stockholders' Equity...... $126,673 $122,086 ======== ========
The accompanying notes are an integral part of these combined balance sheets. F-60 216 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS)
PREDECESSOR PREDECESSOR ------------ COMPANY ------------ TWO ----------- THREE MONTHS MONTHS ONE MONTH ENDED ENDED ENDED MARCH 31, FEBRUARY 28, MARCH 31, 1997 1998 1998 ------------ ------------ ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) NET REVENUES: Station broadcasting revenue, net of agency commissions of $611 and $387, respectively.............................. $3,349 $ 2,169 $ -- Revenues realized from station barter arrangements.............................. 249 187 -- Time brokerage agreement revenues........... -- -- 635 ------ ------- ----- Total net revenues..................... 3,598 2,356 635 OPERATING EXPENSES: Programming and production.................. 1,303 824 3 Selling, general and administrative......... 885 603 -- Expenses realized from station barter arrangements.............................. 245 280 -- Depreciation of property and equipment...... 147 126 78 Amortization of acquired intangible broadcasting assets and other assets...... 287 1,503 663 ------ ------- ----- Total operating expenses............... 2,867 3,336 744 ------ ------- ----- Broadcast operating income (loss)...... 731 (980) (109) ------ ------- ----- OTHER EXPENSE: Interest expense.......................... 261 -- 702 ------ ------- ----- Income (loss) before provision for income taxes..................................... 470 (980) (811) PROVISION FOR INCOME TAXES.................. 52 40 -- ------ ------- ----- Net income (loss)......................... $ 418 $(1,020) $(811) ====== ======= =====
The accompanying notes are an integral part of these combined statements. F-61 217 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
PREDECESSOR PREDECESSOR ------------ COMPANY ------------ TWO ----------- THREE MONTHS MONTHS ONE MONTH ENDED ENDED ENDED MARCH 31, FEBRUARY 28, MARCH 31, 1997 1998 1998 ------------ ------------ ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)......................................... $ 418 $(1,020) $(811) Adjustments to reconcile net income (loss) to net cash flows from operating activities: Depreciation of property and equipment.................. 147 126 78 Amortization of acquired intangible broadcasting assets and other assets..................................... 287 1,503 663 Changes in certain assets and liabilities, net of effects of acquisitions: Decrease in accounts receivable, net.................... 644 415 -- Net effect of change in deferred barter revenue and deferred barter costs................................ (6) 96 -- Increase in prepaid expenses and other assets........... (9) (3) -- (Decrease) increase in accounts payable and accrued expenses............................................. (535) 76 -- Decrease in deferred revenue............................ (3) -- -- Decrease in other long-term liabilities................. (1) (70) -- ------- ------- ----- Net cash flows from operating activities............. 942 1,123 (70) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment..................... (82) (7) -- Acquisitions, net of cash acquired........................ (1,894) -- -- ------- ------- ----- Net cash flows from investing activities............. (1,976) (7) -- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in due to affiliates.................. 995 (1,111) 70 ------- ------- ----- Net cash flows from financing activities............. 995 (1,111) 70 ------- ------- ----- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...... (39) 5 -- CASH, beginning of period................................. 558 594 -- ------- ------- ----- CASH, end of period....................................... $ 519 $ 599 $ -- ======= ======= =====
The accompanying notes are an integral part of these combined statements. F-62 218 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION Heritage Media Services, Inc. ("HMSI") operates in two segments -- Marketing Services and Broadcasting. Heritage Media Corporation is the parent company of HMSI, (collectively referred to hereafter as either "HMC" or the "Parent"). The Broadcasting Segment was wholly-owned and operated by HMSI, which was owned by HMC through August 31, 1997 (the "Predecessor"). In July 1997, HMC entered into an asset sale agreement with Sinclair Broadcast Group, Inc. ("SBG") whereby SBG would acquire 100% of the Broadcasting Segment (which consisted of six television stations in three markets and 24 radio stations in seven markets) for $630 million in cash. Effective September 1, 1997, The News Corporation Limited ("News Corporation") acquired all of the license and nonlicense assets of HMC. Due to certain regulatory requirements, News Corporation established a trust to hold all of the license and nonlicense assets of the Broadcasting Segment until the sale to SBG had closed. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets and acquired intangible broadcasting assets of $51.4 million and $578.6 million, respectively. During January 1998, Entertainment Communications, Inc. ("Entercom") entered into an Asset Purchase Agreement with Tuscaloosa Broadcasting Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc. (collectively referred to hereafter as "Sinclair") to acquire KKSN-AM, KKSN-FM and KKRH-FM, all serving the Portland, Oregon radio market and WBBF-AM, WBBF-FM, WKLX-FM and WQRV-FM, all serving the Rochester, New York radio market for a purchase price of $126.5 million. Simultaneously with the above agreement, Entercom entered into a Time Brokerage Agreement ("TBA") with Sinclair whereby, effective March 1, 1998, Entercom programs these stations for the period prior to consummation of the purchase agreement and Sinclair receives a monthly TBA fee of $631,500. Effective March 1, 1998, SBG completed its acquisition of the Portland, Oregon and Rochester, New York Radio Groups from News Corporation. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to the assets to be sold. In June 1998, Entercom closed its transaction with Sinclair. The accompanying combined financial statements include the accounts of the Portland, Oregon and Rochester, New York Radio Group, which are collectively referred to hereafter as "the Company." The accompanying March 31, 1998, balance sheet and the related statements of operations and cash flows for the one-month period ended March 31, 1998, are presented on a new basis of accounting, reflecting the impact of the acquisition by SBG. The accompanying financial statements for the three months ended March 31, 1997, and the two months ended February 28, 1998, are presented as "Predecessor" financial statements. INTERIM FINANCIAL STATEMENTS The combined financial statements for the period ended March 31, 1997, the two months ended February 28, 1998, and the one month ended March 31, 1998, are F-63 219 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS -- (CONTINUED) unaudited, but in the opinion of management, such financial statements have been presented on the same basis as the audited combined financial statements and include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial position and results of operations, and cash flows for these periods. The results of operations presented in the accompanying financial statements are not necessarily representative of operations for an entire year. F-64 220 INDEPENDENT AUDITORS' REPORT Entercom Communications Corp.: We have audited the accompanying combined balance sheet of the Boston Radio Market of CBS Radio, Inc. (the "Boston Radio Market") (formerly American Radio Systems Corporation ("ARS") prior to the sale of ARS to CBS on June 4, 1998), which is comprised of radio properties owned by CBS Radio, Inc., a wholly owned subsidiary of CBS Corporation ("CBS") as of December 31, 1997, and the related combined statements of operations and equity and cash flows for the year ended December 31, 1997. These financial statements are the responsibility of the management of the Boston Radio Market. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the combined financial position of the Boston Radio Market as of December 31, 1997, and the results of their combined operations and their combined cash flows for the year then ended in conformity with generally accepted accounting principles. The accompanying combined financial statements have been prepared from the separate accounting records maintained by the Boston Radio Market while owned by ARS and may not be indicative of the conditions that would have existed or the results of operations had the assets to be sold been operated as an unaffiliated company. As discussed in Note 1, certain of the operating expenses represent allocations made by ARS in the accompanying financial statements. In August 1998, CBS Radio, Inc. entered into an agreement to sell the net assets of the Boston Radio Market to Entercom Communications Corp. On December 11, 1998, CBS Radio Inc. sold the net assets of WRKO-AM and WEEI-AM, which comprise a portion of the Boston Radio Market, to Entercom Communications Corp. DELOITTE & TOUCHE LLP Boston, Massachusetts September 18, 1998 (December 11, 1998 as to Note 7) F-65 221 THE BOSTON RADIO MARKET OF CBS RADIO, INC. COMBINED BALANCE SHEETS DECEMBER 31, 1997 AND SEPTEMBER 30, 1998
PREDECESSOR CURRENT OWNER OWNER ------------ ------------- DECEMBER 31, SEPTEMBER 30, 1997 1998 ------------ ------------- (UNAUDITED) (NOTE 1) ASSETS CURRENT ASSETS: Accounts and notes receivable (less allowances for doubtful accounts of $2,140,000 in 1997 and $848,539 (unaudited) in 1998)............. $ 8,246,194 $ 7,853,713 Prepaid expenses and other assets................ 486,976 841,911 Deposits and other current assets -- related parties....................................... 6,695 -- ----------- ------------ Total......................................... 8,739,865 8,695,624 ----------- ------------ PROPERTY AND EQUIPMENT -- Net...................... 11,799,363 6,224,161 ----------- ------------ OTHER ASSETS: Intangible assets -- net......................... 33,006,828 132,358,075 Other assets..................................... 94,758 89,861 ----------- ------------ Total......................................... 33,101,586 132,447,936 ----------- ------------ TOTAL.............................................. $53,640,814 $147,367,721 =========== ============ LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable................................. $ 994,252 $ 676,317 Accrued compensation............................. 303,104 440,290 Accrued expenses................................. 794,867 2,915,381 Capitalized lease obligation..................... 137,762 47,212 ----------- ------------ Total......................................... 2,229,985 4,079,200 COMMITMENTS AND CONTINGENCIES (Note 6) EQUITY............................................. 51,410,829 143,288,521 ----------- ------------ TOTAL.............................................. $53,640,814 $147,367,721 =========== ============
See notes to combined financial statements. F-66 222 THE BOSTON RADIO MARKET OF CBS RADIO, INC. COMBINED STATEMENTS OF OPERATIONS AND EQUITY YEAR ENDED DECEMBER 31, 1997, NINE MONTHS ENDED SEPTEMBER 30, 1997, FIVE MONTHS ENDED MAY 31, 1998, AND FOUR MONTHS ENDED SEPTEMBER 30, 1998
PREDECESSOR OWNER CURRENT OWNER NINE MONTHS FOUR MONTHS YEAR ENDED ENDED FIVE MONTHS ENDED DECEMBER 31, SEPTEMBER 30, ENDED MAY 31, SEPTEMBER 30, 1997 1997 1998 1998 ------------ ----------------- ------------- ------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (NOTE 1) NET REVENUES.............................. $37,331,314 $28,764,056 $14,994,176 $ 12,103,681 ----------- ----------- ----------- ------------ OPERATING EXPENSES: Operating expenses, excluding depreciation, amortization, general and administrative expenses........... 27,747,140 21,205,835 12,205,334 9,823,762 Depreciation and amortization........... 2,852,025 2,428,522 1,245,587 1,417,764 General and administrative.............. 5,092,850 3,828,835 2,630,801 1,428,257 ----------- ----------- ----------- ------------ Total operating expenses.............. 35,692,015 27,463,192 16,081,722 12,669,783 ----------- ----------- ----------- ------------ OPERATING INCOME (LOSS) BEFORE INCOME TAXES................................... 1,639,299 1,300,864 (1,087,546) (566,102) INCOME TAX EXPENSE (BENEFIT).............. 660,600 524,248 (438,300) (228,139) ----------- ----------- ----------- ------------ NET INCOME (LOSS)......................... 978,699 776,616 (649,246) (337,963) EQUITY, BEGINNING OF PERIOD............... 27,760,648 27,760,648 51,410,829 50,916,914 NET CONTRIBUTION.......................... 22,671,482 23,701,248 155,331 92,709,570 ----------- ----------- ----------- ------------ EQUITY, ENDING THE PERIOD................. $51,410,829 $52,238,512 $50,916,914 $143,288,521 =========== =========== =========== ============
See notes to combined financial statements. F-67 223 THE BOSTON RADIO MARKET OF CBS RADIO, INC. COMBINED STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 1997, NINE MONTHS ENDED SEPTEMBER 30, 1997, FIVE MONTHS ENDED MAY 31, 1998, AND FOUR MONTHS ENDED SEPTEMBER 30, 1998
PREDECESSOR OWNER CURRENT OWNER NINE MONTHS FOUR MONTHS YEAR ENDED ENDED FIVE MONTHS ENDED DECEMBER 31, SEPTEMBER 30, ENDED MAY 31, SEPTEMBER 30, 1997 1997 1998 1998 ------------ ----------------- ------------- ------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (NOTE 1) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)......................... $ 978,699 $ 776,616 $ (649,246) $ (337,963) Reconciliation of net income to cash provided by operating activities: Depreciation and amortization............. 2,852,025 2,428,522 1,245,585 1,417,764 Loss on disposal of property and equipment.............................. 28,021 19,560 -- -- Change in assets and liabilities: Accounts receivable.................... 405,299 (605,537) (834,450) 1,226,961 Prepaid expenses....................... (324,285) (410,999) (803,662) 448,727 Other assets........................... 709,979 703,850 7,480 4,112 Accounts payable and accrued expenses............................. (975,450) (448,358) 1,627,167 222,047 Net cash provided by operating activities (Note 1).................................. $ 3,674,288 $ 2,463,654 $ 592,874 $ 2,981,648 =========== =========== ========== =========== CASH FLOWS USED FOR INVESTING ACTIVITIES: Purchase of property and equipment........ (1,396,694) (1,074,510) (365,543) (74,824) Proceeds from sale of property............ 60,654 35,577 -- -- ----------- ----------- ---------- ----------- Net cash used for investing activities...... (1,336,040) (1,038,933) (365,543) (74,824) ----------- ----------- ---------- ----------- CASH FLOWS USED FOR FINANCING ACTIVITIES: Repayments of long-term debt................ (189,840) (155,639) (85,000) (72,865) Net transfer to Owner....................... (2,148,408) (1,269,082) (142,331) (2,833,959) ----------- ----------- ---------- ----------- Net cash used for financing activities...... (2,338,248) (1,424,721) (227,331) (2,906,824) ----------- ----------- ---------- ----------- CASH, BEGINNING AND END OF PERIOD........... $ -- $ -- $ -- $ -- =========== =========== ========== =========== NONCASH ACTIVITIES:
In 1997, the Predecessor Owner acquired $24.8 million in assets, principally intangible assets, which were financed by the Owners. In 1997, the Predecessor Owner transferred assets to an affiliate of the Stations totaling approximately $1 million. In 1998, the Current Owner applied the CBS purchase price to increase intangible assets by $98.3 million and decrease property and equipment by $5.6 million. See notes to combined financial statements. F-68 224 THE BOSTON RADIO MARKET OF CBS RADIO, INC. NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1997, NINE MONTHS ENDED SEPTEMBER 30, 1997, FIVE MONTHS ENDED MAY 31, 1998, AND FOUR MONTHS ENDED SEPTEMBER 30, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS AND BASIS OF PRESENTATION -- The accompanying financial statements present the combined assets, liabilities and operations of the Boston Radio Market of CBS Radio, Inc. (the "Boston Radio Market"), which is comprised of radio stations WRKO-AM, WEEI-AM, WEGQ-FM, WAAF-FM, serving the Boston, Massachusetts, radio market, and WWTM-AM, serving the Worcester, Massachusetts, radio market (the "Stations"). Through June 4, 1998, the Stations were owned by American Radio Systems Corporation (the "Predecessor Owner" or "ARS"), an operator of radio stations throughout the United States. On June 4, 1998, ARS was acquired by CBS Radio, Inc., a wholly owned subsidiary of CBS Corporation (collectively with CBS Radio, Inc., "CBS" or the "Current Owner"). In connection with the acquisition of ARS by CBS (the "ARS/CBS merger"), CBS was required to sell the Boston Radio Market to comply with certain regulations of the FCC. During August 1998, CBS entered into purchase and sale agreements with Entercom Communications Corp. ("Entercom") to sell the net assets of the Boston Radio Market for approximately $140.0 million, subject to receipt of regulatory approval which is expected to be received during 1998 (See note 7 for further discussion). CBS and ARS are referred to as the Stations' "Owners" for purposes of these notes to combined financial statements. All significant intercompany transactions have been eliminated in combination. INTERIM FINANCIAL INFORMATION -- The financial statements for the nine months ended September 30, 1997, the five months ended May 31, 1998, and the four months ended September 30, 1998 are unaudited. Except for the application of Accounting Principle Board Opinion No. 16, "Business Combination," to the Station's financial statements while owned by the Current Owner, the accompanying unaudited interim financial statements have been prepared on a basis substantially consistent with that of the audited Predecessor Owner's financial statements included herein. For purposes of preparing the Current Owner's unaudited financial statements, the ARS/CBS merger is assumed to have occurred on May 31, 1998. In the opinion of management, such unaudited financial statements include all adjustments, which are only of a normal and recurring nature, considered necessary for a fair presentation. Operating results for the unaudited periods presented are not necessarily indicative of the results that may be expected for a full year. REVENUE RECOGNITION -- Revenues are recognized when advertisements are broadcast. PROPERTY AND EQUIPMENT -- Property and equipment at December 31, 1997 are recorded at cost, and depreciation is computed using straight-line and accelerated methods over estimated useful lives ranging from three to twenty years. Property and equipment at September 30, 1998, reflects the allocation of the CBS purchase price to the Stations' assets, net of depreciation computed using straight-line methods over estimated useful lives ranging from three to thirty-nine years. INTANGIBLE ASSETS -- Intangible assets consist primarily of goodwill, FCC licenses, and call letters acquired in connection with the acquisition of the Stations and are being F-69 225 THE BOSTON RADIO MARKET OF CBS RADIO, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) amortized over their respective estimated useful lives (ranging from one to forty years) using the straight-line method. On an ongoing basis, management evaluates the recoverability of the net carrying value of property and equipment and intangible assets by reference to the Stations' anticipated undiscounted future cash flows generated by said assets and comparison of carrying value to management's estimates of fair value, generally determined by using certain accepted industry measures of value (principally, cash flow multiple methods). Intangible assets at September 30, 1998 reflect the allocation of the CBS purchase price to the Stations' assets, net of amortization computed using the straight-line method over an estimated useful life of forty years. INCOME TAXES -- The results of the Stations' operations are included in the federal and state income tax returns filed by the Stations' Owners. The Stations' portion of the income tax provision (benefit) is allocated at a federal and state computed statutory rate of 40.3%. The Stations' federal and state income taxes are generally paid to, or refunded from, the Owners. Deferred tax assets and liabilities are maintained at the Owners' ownership levels. BARTER TRANSACTIONS -- Revenues from the Stations' exchanges of advertising time for goods or services are recognized at the fair market value of the items received or to be received. The value of the goods and services received is recognized in both net revenues and operating expenses. Net unearned barter balances are included in accounts receivable. Barter transactions are reported on a net basis within operating expenses and balances as of and for the year ended December 31, 1997 were approximately as follows: Barter revenues............................................ $2,273,689 Barter expenses............................................ 1,978,702 Net barter receivable...................................... 120,852
USE OF ESTIMATES -- The preparation of combined financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes to the financial statements. Management bases its estimates on certain assumptions which they believe are reasonable in the circumstances, and while actual results could differ from those estimates, management does not believe that any change in those assumptions in the near term would have a material effect on its financial position, results of operations or liquidity. ALLOCATION OF CERTAIN OPERATING EXPENSES -- The operations, as presented herein, include allocations and estimates of certain expenses, principally corporate accounting and tax, rent, administrative salaries, and legal, historically provided to the Stations by the Owners. The amounts of such allocated expenses in these combined financial statements have been allocated by management based on a variety of factors, including, for example, personnel, labor costs and square footage. Management believes these allocations have been made on a reasonable basis. However, the financial position and results of operations, as presented herein, may not be the same as would have occurred had the Stations been operated as a stand-alone entity. F-70 226 THE BOSTON RADIO MARKET OF CBS RADIO, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Interest expense incurred by the Owners under various long-term debt arrangements has not historically been allocated to the Stations and, accordingly, the accompanying combined financial statements do not include interest expense. See Note 4 for interest expense associated with a capitalized lease obligation. CONCENTRATION OF CREDIT RISK -- The Stations extend credit to customers on an unsecured basis in the normal course of business. No individual industry or industry segment is significant to the Stations' customer base. The Stations have policies governing the extension of credit and collection of amounts due from customers. SUPPLEMENTAL CASH FLOW INFORMATION -- The Stations participate in a centralized cash management system maintained by the Owners. Accordingly, cash balances are not maintained at the Stations. The Stations' assets are pledged as collateral for the Owners' long-term debt agreements. Cash paid for interest aggregated $44,900 during 1997. NEW ACCOUNTING PRONOUNCEMENTS -- In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which the Stations will adopt during fiscal year 2000. The adoption of SFAS No. 133 is not expected to have a material impact on the Stations' combined financial statements. 2. ACQUISITIONS In January 1997, ARS completed the acquisition of WAAF-FM and WWTM-AM for an aggregate purchase price of approximately $24.8 million (the "1997 Acquisition"). The purchase price related to the 1997 Acquisition was allocated to the assets acquired, principally intangible assets, based on their estimated fair value at the date of acquisition. Since the acquisition, the 1997 Acquisition has been included as a component of the Boston Radio Market. The Predecessor Owner began programming and marketing the Stations pursuant to a Local Marketing Agreement ("LMA") in August 1996 and, as a result, proforma financial information has not been presented as such information would not be materially different from the amounts presented in the historical 1997 combined statements of operations. F-71 227 THE BOSTON RADIO MARKET OF CBS RADIO, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) 3. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS Property and equipment consisted of the following at December 31, 1997: Land and improvements..................................... $ 1,426,552 Buildings and improvements................................ 3,133,400 Broadcast equipment(1).................................... 8,847,524 Office and other equipment, furniture and fixtures........ 2,382,158 Other..................................................... 7,430 ----------- Total..................................................... 15,797,064 Less accumulated depreciation............................. (3,997,701) ----------- Property and equipment -- net............................. $11,799,363 ===========
- ------------------------- (1) Includes approximately $570,000 of assets recorded under a capital lease (see Note 4). Intangible assets consisted of the following at December 31, 1997: FCC licenses (estimated life 25 years).................... $30,786,241 Goodwill (estimated life 40 years)........................ 4,246,985 Other intangibles (estimated life 1-25 years)............. 2,044,207 ----------- Total..................................................... 37,077,433 Less accumulated amortization............................. (4,070,605) ----------- Intangible assets -- net.................................. $33,006,828 ===========
4. CAPITALIZED LEASE OBLIGATION In September of 1996, an equipment lease agreement with Fleet Capital Corporation dated May 17, 1990 was extended for an additional twenty-four months. Upon the lease's final payment in August 1998, ownership of the property was transferred to the Stations. Interest expense, reported within general and administrative expense in the accompanying combined statement of operations, aggregated $32,400 during 1997. 5. EMPLOYEE BENEFIT PLAN Through December 31, 1997, employees of the Stations participated in a retirement savings plan (the "Plan") sponsored by the Predecessor Owner. The Plan is a defined contribution plan that covers eligible salaried employees who have at least one year of service. Participants may make pre-tax contributions to the Plan up to 10% of their compensation, not to exceed the annual limit prescribed by the Internal Revenue Service. The Owners matched contributions to the Plan in an amount equal to 100% of the first 5% F-72 228 THE BOSTON RADIO MARKET OF CBS RADIO, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) of base compensation that a participant contributes to the Plan, unless otherwise determined by annual resolution. The Stations were charged $90,000 by the Predecessor Owner for the year ended December 31, 1997. 6. COMMITMENTS AND CONTINGENCIES BROADCAST RIGHTS -- At December 31, 1997, the Stations were committed to the purchase of broadcast rights for various sports events and other programming, including on-air talent, aggregating approximately $21,134,000. This programming is not yet available for broadcast. As of December 31, 1997, aggregate payments related to these commitments during the next five years are as follows (in thousands): 1998........................................................ $ 8,042 1999........................................................ 7,266 2000........................................................ 5,408 2001........................................................ 358 2002........................................................ 60 ------- $21,134 =======
LEASES -- The Stations lease various offices, studios, and broadcast and other equipment under operating leases that expire over various terms. Most leases contain renewal options with specified increases in lease payments in the event of renewal by the Stations. Future minimum rental payments required under noncancellable operating leases in effect at December 31, 1997 are approximately as follows (in thousands): Year Ending December 31 1998........................................................ $ 620 1999........................................................ 473 2000........................................................ 295 2001........................................................ 286 2002........................................................ 187 Thereafter.................................................. 1,378 ------ Total....................................................... $3,239 ======
Aggregate rent expense under operating leases for the year ended December 31, 1997 approximated $438,000. AUDIENCE RATING AND OTHER SERVICE EMPLOYMENT CONTRACTS -- The Stations have entered into various noncancellable audience rating and other service and employment contracts that expire over the next five years. Most of these audience rating and other service agreements are subject to escalation clauses and may be renewed for successive F-73 229 THE BOSTON RADIO MARKET OF CBS RADIO, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) periods ranging from one to five years on terms similar to current agreements, except for specified increases in payments. Certain of these contracts will not be assumed by Entercom. Future minimum payments required under these contracts at December 31, 1997 are as follows (in thousands): 1998........................................................ $2,481 1999........................................................ 2,573 2000........................................................ 1,725 2001........................................................ 699 2002........................................................ 648 ------ Total....................................................... $8,126 ======
Total expense under these contracts for the year ended December 31, 1997 approximated $2,574,000. LITIGATION -- CBS has agreed to indemnify Entercom for any litigation expenses associated with the Stations prior to the acquisition by Entercom. * * * * * * 7. SUBSEQUENT EVENT In relation to the agreement of sale between CBS Radio Inc. and Entercom Communications Corp., Entercom Communications Corp. began operating WEEI-AM and WRKO-AM on September 21, 1998 and WEGQ-FM, WAAF-FM, and WWTM-AM on September 23, 1998 under a time brokerage agreement. Under the time brokerage agreement, CBS Radio Inc. will permit Entercom Communications Corp. to program and market the Boston Radio Market for a fee of $590,000 per month. On December 11, 1998 CBS Radio Inc. sold the net assets of WRKO-AM and WEEI-AM, which comprise a portion of the Boston Radio Market, to Entercom Communications Corp. for a purchase price of $82.0 million. F-74 230 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Sinclair Broadcast Group, Inc.: We have audited the accompanying consolidated balance sheets of the Sinclair Broadcast Group, Inc. (a Maryland corporation) and subsidiaries -- Radio Division (the "Company") as of December 31, 1997 and 1998, and March 31, 1999, and the related consolidated statements of operations, stockholders' equity and cash flows for the seven months ended December 31, 1996, the years ended December 31, 1997 and 1998, and the three months ended March 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Sinclair Broadcast Group, Inc. and subsidiaries -- Radio Division, as of December 31, 1997 and 1998, and March 31, 1999, and the results of its operations and its cash flows for the seven months ended December 31, 1996, the years ended December 31, 1997 and 1998, and the three months ended March 31, 1999, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Baltimore, Maryland, July 26, 1999, except for Note 10, as to which the date is August 5, 1999 F-75 231 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
AS OF DECEMBER 31, ------------------- MARCH 31, 1997 1998 1999 -------- -------- --------- ASSETS CURRENT ASSETS: Cash...................................................... $ 598 $ 878 $ 940 Accounts receivable, net of allowance for doubtful accounts of $623, $1,100 and $1,144, respectively....... 11,612 21,731 16,254 Prepaid expenses and other current assets................. 398 551 687 Deferred barter costs..................................... 1,187 2,043 2,548 Deferred tax asset........................................ 226 -- -- -------- -------- -------- Total current assets...................................... 14,021 25,203 20,429 PROPERTY AND EQUIPMENT, net................................. 23,586 31,653 31,502 OTHER ASSETS................................................ 20,664 9,662 10,277 ACQUIRED INTANGIBLE BROADCASTING ASSETS, net of accumulated amortization of $11,609, $23,454 and $26,967, respectively.............................................. 227,036 363,190 359,677 -------- -------- -------- Total Assets............................................ $285,307 $429,708 $421,885 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable.......................................... $ 393 $ 258 $ 566 Accrued liabilities....................................... 1,952 5,084 4,218 Sports rights contracts................................... 860 650 -- Deferred barter revenue................................... 1,315 1,848 2,289 Deferred tax liabilities.................................. -- 35 47 -------- -------- -------- Total current liabilities................................. 4,520 7,875 7,120 LONG-TERM LIABILITIES: Parent company indebtedness............................... 172,405 329,060 323,787 Other long-term liabilities............................... -- 176 162 Deferred tax liabilities, less current portion............ 5,759 6,867 7,197 -------- -------- -------- Total liabilities....................................... 182,684 343,978 338,266 -------- -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Contributed Capital....................................... 110,000 90,000 90,000 Accumulated deficit....................................... (7,377) (4,270) (6,381) -------- -------- -------- Total stockholders' equity.............................. 102,623 85,730 83,619 -------- -------- -------- Total Liabilities and Stockholders' Equity.............. $285,307 $429,708 $421,885 ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. F-76 232 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
THREE SEVEN MONTHS YEARS ENDED MONTHS ENDED DECEMBER 31, ENDED DECEMBER 31, ------------------- MARCH 31, 1996 1997 1998 1999 ------------ -------- -------- --------- REVENUES: Station broadcast revenues, net of agency commissions of $3,945, $6,529, $10,707 and $2,784, respectively............................. $33,725 $ 55,778 $ 87,771 $21,796 Revenues realized from station barter arrangements..................................... 2,269 2,610 3,810 927 ------- -------- -------- ------- Total revenues................................ 35,994 58,388 91,581 22,723 ------- -------- -------- ------- OPERATING EXPENSES: Program and production............................. 9,521 15,445 23,994 6,754 Sport rights....................................... 2,425 2,500 2,950 -- Selling, general and administrative................ 12,338 21,943 29,719 8,955 Corporate expenses................................. 1,720 2,893 3,465 847 Depreciation and amortization...................... 4,516 11,350 16,117 4,424 ------- -------- -------- ------- Total operating expenses...................... 30,520 54,131 76,245 20,980 ------- -------- -------- ------- Broadcast operating income......................... 5,474 4,257 15,336 1,743 ------- -------- -------- ------- OTHER INCOME (EXPENSE): Interest on parent company indebtedness............ (7,308) (12,137) (16,659) (4,938) Gain on sale of broadcast asset.................... -- -- 13,640 -- Loss on sale of broadcast asset.................... -- -- (2,860) -- Other income (expense)............................. -- (2) (1) 107 ------- -------- -------- ------- Income (loss) before (provision) benefit for income taxes and extraordinary item..................... (1,834) (7,882) 9,456 (3,088) INCOME TAX (PROVISION) BENEFIT..................... 78 2,261 (4,200) 977 ------- -------- -------- ------- Net income (loss) before extraordinary loss........ (1,756) (5,621) 5,256 (2,111) EXTRAORDINARY ITEM: Loss on early extinguishment of debt, net of related income tax benefit of $1,432............. -- -- (2,149) -- ------- -------- -------- ------- NET INCOME (LOSS).................................. $(1,756) $ (5,621) $ 3,107 $(2,111) ======= ======== ======== =======
The accompanying notes are an integral part of these consolidated statements. F-77 233 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
TOTAL CONTRIBUTED ACCUMULATED STOCKHOLDERS' CAPITAL DEFICIT EQUITY ----------- ----------- ------------- BALANCE, June 1, 1996................... $110,000 $ -- $110,000 Net loss.............................. -- (1,756) (1,756) -------- ------- -------- BALANCE, December 31, 1996.............. 110,000 (1,756) 108,244 Net loss.............................. -- (5,621) (5,621) -------- ------- -------- BALANCE, December 31, 1997.............. 110,000 (7,377) 102,623 Distribution of capital............... (20,000) -- (20,000) Net income............................ -- 3,107 3,107 -------- ------- -------- BALANCE, December 31, 1998.............. 90,000 (4,270) 85,730 Net loss.............................. -- (2,111) (2,111) -------- ------- -------- BALANCE, March 31, 1999................. $ 90,000 $(6,381) $ 83,619 ======== ======= ========
The accompanying notes are an integral part of these consolidated statements. F-78 234 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
SEVEN MONTHS YEARS ENDED THREE MONTHS ENDED DECEMBER 31, ENDED DECEMBER 31, ------------------- MARCH 31, 1996 1997 1998 1999 ------------ ------- --------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)..................................... $ (1,756) $(5,621) $ 3,107 $(2,111) Adjustments to reconcile net income (loss) to net cash flows from operating activities -- Gain on sales of assets............................... -- -- (13,640) -- Loss on sale of assets................................ -- -- 2,860 -- Loss on early extinguishment of debt.................. -- -- 3,581 -- Depreciation and amortization......................... 4,516 11,350 16,117 4,424 Sports rights......................................... 2,425 2,500 2,950 -- Deferred tax provision (benefit)...................... 1,050 4,483 1,369 342 Changes in assets and liabilities, net of effects of acquisitions and dispositions -- (Increase) decrease in accounts receivable, net....... (12,053) (328) (9,378) 5,477 (Increase) decrease in prepaid expenses and other current assets..................................... (58) (182) 280 (136) Increase (decrease) in accounts payable and accrued liabilities........................................ 3,440 (1,628) (444) (558) Net effect of change in deferred barter revenue and deferred barter costs.............................. (491) 626 (185) (64) Increase (decrease) in other long-term liabilities.... -- -- 176 (14) Payments on sports rights contracts................... (1,615) (2,450) (3,160) (650) --------- ------- --------- ------- Net cash flows from operating activities.............. (4,542) 8,750 3,633 6,710 --------- ------- --------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment................. (206) (2,717) (3,419) (760) Acquisition of radio stations......................... (169,371) (3,143) (204,940) -- Proceeds from sale of broadcast assets................ -- -- 72,114 -- --------- ------- --------- ------- Net cash flows from investing activities.............. (169,577) (5,860) (136,245) (760) --------- ------- --------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in parent company indebtedness............. 5,128 (5,815) (52,048) (5,888) Borrowings from parent company related to acquisitions....................................... 169,371 3,143 204,940 -- Distribution of capital to parent company............. -- -- (20,000) -- --------- ------- --------- ------- Net cash flows from financing activities.............. 174,499 (2,672) 132,892 (5,888) --------- ------- --------- ------- NET INCREASE IN CASH.................................... 380 218 280 62 CASH, beginning of period............................. -- 380 598 878 --------- ------- --------- ------- CASH, end of period................................... $ 380 $ 598 $ 878 $ 940 ========= ======= ========= ======= SUPPLEMENTAL INFORMATION: Parent company capital contribution related to acquisitions....................................... $ 110,000 $ -- $ -- $ -- ========= ======= ========= =======
The accompanying notes are an integral part of these consolidated statements. F-79 235 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1997 AND 1998, AND MARCH 31, 1999 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION The Sinclair Broadcast Group, Inc. and subsidiaries -- Radio Division ("the Company") was formed through acquisition. Sinclair Broadcast Group, Inc. ("SBG") entered into the radio business in May 1996 when it acquired radio stations from River City Broadcasting LLP ("River City"). As a result of the River City acquisition, the Company now owns radio stations serving the Memphis, Buffalo and Wilkes-Barre/ Scranton markets. In addition, SBG purchased from River City the right to acquire certain radio stations serving the Greenville/Spartansburg/ Asheville market and exercised the right to acquire these stations in July 1998. In March and July 1998, SBG acquired radio stations from Heritage Media Services, Inc. ("Heritage") serving the Kansas City, Milwaukee and New Orleans markets. In July 1998, SBG acquired radio stations from Max Media Properties, LLC ("Max Media") serving the Greensboro/Winston Salem/ High-Point and Norfolk markets. These acquisitions and other less significant acquisitions and dispositions have been recorded under the purchase method of accounting. The divisional financial statements include operating results of SBG's radio assets acquired from their respective dates of acquisition (see Note 8), excluding the radio stations operating in the St. Louis market (See Note 10). These consolidated financial statements have been prepared from SBG's historical accounting records and present the operations of the Radio Division as if the Company had been a separate entity for all periods presented. During these periods, SBG provided various services to the Company (see Note 4). Furthermore, acquisitions consummated by SBG have been presented as if they were made by the Company and the consideration to effect these acquisitions was both loaned and contributed by SBG. All significant intercompany transactions and account balances have been eliminated in consolidation. The financial information included herein may not necessarily reflect the consolidated results of operations, financial position, changes in stockholders' equity and cash flows of the Company in the future or what they would have been had it been a separate, stand-alone entity during the periods presented. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to intangible assets, sports rights contracts, allowances for doubtful accounts, income taxes and litigation based on currently available information. Changes in facts and circumstances may result in revised estimates. F-80 236 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments is determined by the Company using the best available market information and appropriate valuation methodologies. However, considerable judgment is necessary in interpreting market data to develop the estimates of fair value. Accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange or the value that ultimately will be realized by the Company upon maturity or disposition. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts. Most of the Company's financial instruments, including cash, accounts receivable and payable and accruals are short-term in nature. Accordingly, the carrying amount of the Company's financial instruments approximates their fair value. Interest rates on the Company's intercompany debt are based upon SBG's floating interest rate. Management believes that these rates are at fair market value; however, these rates may not be reflective of rates available to the Company as a stand-alone entity. BARTER ARRANGEMENTS The Company broadcasts certain customers' advertising in exchange for equipment, merchandise and services. The estimated fair value of the equipment, merchandise or services received is recorded as deferred barter costs and the corresponding obligation to broadcast advertising is recorded as deferred barter revenue. The deferred barter costs are expensed or capitalized as they are used, consumed or received. Deferred barter revenue is recognized as the related advertising is aired. SPORTS RIGHTS The Company has agreements for the rights to air sports programming over contract periods which generally run from one to three years. Contract payments are made in installments over terms that are generally shorter than the contract period. The aggregate amount of programming rights for each season is recorded as an asset and a liability during the season in which the sports programming become available to be aired. The portion of the sport rights contract payable within one year is reflected as a current liability in the accompanying consolidated balance sheets. Amortization of sports rights is recognized on a straight-line basis over the period which the sports programming is aired. Additionally, the Company has entered into noncancellable commitments for sports programming rights over the next four years, aggregating $10.5 million as of March 31, 1999. The Company has estimated the fair value of these noncancellable commitments at approximately $9.0 million at March 31, 1999. These estimates are based on future cash flows discounted at the Company's current borrowing rate. F-81 237 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OTHER ASSETS Other assets consist of the following (in thousands):
DECEMBER 31, ----------------- MARCH 31, 1997 1998 1999 ------- ------ --------- Deferred debt acquisition costs.................. $ 4,387 $ -- $ -- Equity investments............................... -- 1,500 1,500 Deposits and other costs related to future acquisitions................................... 11,377 6,162 6,777 Purchase options................................. 4,900 2,000 2,000 ------- ------ ------- $20,664 $9,662 $10,277 ======= ====== =======
ACQUIRED INTANGIBLE BROADCASTING ASSETS Acquired intangible broadcasting assets are being amortized on a straight-line basis over periods of 15 to 40 years. These amounts result from the acquisition of radio station broadcasting assets. The Company monitors and continually evaluates the realizability of intangible and tangible assets and the existence of any impairment to its recoverability based on the projected undiscounted cash flows of the respective stations. Management believes that the carrying amounts of the Company's tangible and intangible assets have not been impaired. Intangible broadcasting assets, at cost, as of December 31, 1997 and 1998, and March 31, 1999, consist of the following (in thousands):
DECEMBER 31, AMORTIZATION -------------------- MARCH 31, PERIOD 1997 1998 1999 ------------ -------- -------- --------- Goodwill........................ 40 years $ 79,462 $114,690 $114,690 Decaying advertiser base........ 15 years 9,730 10,757 10,757 FCC licenses.................... 25 years 149,453 255,285 255,285 Network affiliations............ 25 years -- 2,061 2,061 Other........................... 15 years -- 3,851 3,851 -------- -------- -------- 238,645 386,644 386,644 Less: Accumulated amortization.................. (11,609) (23,454) (26,967) -------- -------- -------- $227,036 $363,190 $359,677 ======== ======== ========
F-82 238 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ACCRUED LIABILITIES Accrued liabilities consist of the following as of December 31, 1997 and 1998, and as of March 31, 1999 (in thousands):
DECEMBER 31, ---------------- MARCH 31, 1997 1998 1999 ------ ------ --------- Compensation...................................... $1,600 $3,092 $2,788 Other............................................. 352 1,992 1,430 ------ ------ ------ $1,952 $5,084 $4,218 ====== ====== ======
REVENUE RECOGNITION Broadcasting revenues are derived principally from the sale of radio advertising spots to local, regional and national advertisers. Advertising revenue is recognized in the period during which the program time and spot announcements are broadcast. NEW PRONOUNCEMENTS In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued. SFAS No. 130 requires that an enterprise report by major component and as a single total the change in its net assets from nonowner sources during the period. This statement is effective for fiscal years beginning after December 15, 1997, and was adopted during 1998. Adoption of this statement did not impact the Company's combined financial position, results of operations or cash flows. 2. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed under the straight-line method over the following estimated useful lives: Buildings and improvements............................... 10 - 35 years Station equipment........................................ 5 - 10 years Office furniture and equipment........................... 5 - 10 years Leasehold improvements................................... 10 - 31 years Automotive equipment..................................... 3 - 5 years
F-83 239 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Property and equipment consists of the following as of December 31, 1997 and 1998, and as of March 31, 1999 (in thousands):
DECEMBER 31, ------------------ MARCH 31, 1997 1998 1999 ------- ------- --------- Land and improvements........................... $ 2,994 $ 1,558 $ 1,558 Buildings and improvements...................... 5,535 5,247 5,247 Station equipment............................... 16,073 24,292 24,564 Office furniture and equipment.................. 1,507 3,073 3,438 Leasehold improvements.......................... 136 1,541 1,679 Automotive equipment............................ 684 1,398 1,378 ------- ------- ------- 26,929 37,109 37,864 Less: Accumulated depreciation and amortization.................................. (3,343) (5,456) (6,362) ------- ------- ------- $23,586 $31,653 $31,502 ======= ======= =======
3. PARENT COMPANY INDEBTEDNESS: In connection with the acquisitions discussed in Note 8, SBG made loans to the Company. The Company has been charged interest on these loans at a rate of interest equal to SBG's annual weighted average borrowing rate on its outstanding indebtedness. The weighted average interest rates on parent company indebtedness for the seven months ended December 31, 1996, the years ended December 31, 1997 and 1998, and the three months ended March 31, 1999, were 9.0%, 7.9%, 6.6% and 6.3%, respectively. Substantially all of the Company's assets have been pledged as security for SBG's notes payable and commercial bank financing. Additionally, the operations of the Company have been utilized to service the debt principal and interest payments of SBG. As part of the River City Acquisition (see Note 8), a portion of the deferred financing costs incurred by SBG as a result of obtaining a Bank Credit Agreement were allocated to the Radio Division. In 1998, SBG entered into a new Bank Credit Agreement resulting in an extraordinary loss of $2.1 million, net of a tax benefit of $1.4 million allocable to the Radio Division. The extraordinary loss represents the write-off of debt acquisition costs associated with indebtedness replaced by a new facility. 4. RELATED PARTY TRANSACTIONS: The Company has utilized various services provided by SBG or its subsidiaires. These services included, among others, certain investor relations, executive, human resources, legal, investment, finance, real estate, information management, internal audit, tax, transportation and treasury. The costs of such services have been allocated according to established methodologies and are determined on an annual basis by SBG. Such methodologies depend on the specific service provided and include allocating costs that directly relate to the Company or allocating costs that represent a pro rata portion of the F-84 240 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) total costs for the services provided. Management of the Company believes these allocations to be a fair and reasonable share of such costs. For the seven months ended December 31, 1996, for the years ended December 31, 1997 and 1998, and for the three months ended March 31, 1999, allocated expenses of approximately $1.7 million, $2.9 million, $3.5 million, and $0.8 million, respectively, were included in the consolidated statements of operations of the Company. Substantially all costs relating to direct intercompany services have been reflected in the accompanying combined financial statements. The Company's radio stations and SBG's television stations have historically provided broadcast time to each other. The revenues or costs associated with these intercompany transactions were not significant in the periods presented. The Company and SBG have entered into joint advertising arrangements. Revenues are distributed to the parties providing the services based upon the contract terms. The revenues associated with such sales were not significant in the periods presented. 5. INCOME TAXES: Income taxes are provided using the asset and liability method in accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred tax assets and liabilities are recognized based on differences between book and tax basis of assets and liabilities using presently enacted tax rates. The provision for income taxes is the sum of the amount of income tax paid or payable for the year as determined by applying the provisions of enacted tax laws to taxable income for that year and the net changes during the year in the Company's deferred tax assets and liabilities other than changes arising from acquisitions and dispositions. SBG files a consolidated federal tax return and separate state tax returns for each of its subsidiaries. It is SBG's policy to reimburse the Company for its federal net operating losses when generated through intercompany charges. The Company is responsible for its current state tax liabilities. The accompanying financial statements have been prepared in accordance with the separate return method of FASB 109, whereby the allocation of federal tax provision due to the parent is based on what the subsidiary's current and deferred federal tax provision would have been had the subsidiary filed a federal income tax return outside its consolidated group. Given that SBG is required to reimburse the Company for its federal net operating losses when generated, the value of the tax effected federal net operating losses is recorded as an intercompany charge and included as a reduction of the due to parent amount in the accompanying balance sheets. F-85 241 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The (provision) benefit for income taxes consists of the following as of the seven months ended December 31, 1996, the years ended December 31, 1997 and 1998, and the three months ended March 31, 1999 (in thousands):
DECEMBER 31, -------------------------- MARCH 31, 1996 1997 1998 1999 ----- ------ ------- --------- (Provision) benefit for income taxes before extraordinary items............ $ 78 $2,261 $(4,200) $ 977 Income tax effect of extraordinary items................................. -- -- 1,432 -- ----- ------ ------- ------ $ 78 $2,261 $(2,768) $ 977 ===== ====== ======= ====== Current: Federal................................. $ -- $ -- $ (61) $ -- State................................... (667) (802) (806) (185) ----- ------ ------- ------ (667) (802) (867) (185) ----- ------ ------- ------ Deferred: Federal................................. 705 2,737 (1,922) 1,005 State................................... 40 326 21 157 ----- ------ ------- ------ 745 3,063 (1,901) 1,162 ----- ------ ------- ------ $ 78 $2,261 $(2,768) $ 977 ===== ====== ======= ======
The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded (provision) benefit (in thousands):
DECEMBER 31, ---------------------- MARCH 31, 1996 1997 1998 1999 ----- ---- ----- --------- Statutory federal income taxes.............. 35.0% 35.0% (35.0)% 35.0% Adjustments -- State income and franchise taxes, net of federal effect.................... (22.6) (4.0) (8.8) (0.6) Nondeductible expense items............ (9.2) (3.1) (5.1) (4.0) Other.................................. 1.1 0.8 1.8 1.2 ----- ---- ----- ---- (Provision) benefit for income taxes........ 4.3% 28.7% (47.1)% 31.6% ===== ==== ===== ====
Temporary differences between the financial reporting carrying amounts and the tax basis of assets and liabilities give rise to deferred taxes. The Company has a net deferred tax liability of $5.5 million, $6.9 million and $7.2 million as of December 31, 1997 and 1998, and as of March 31, 1999, respectively. The realization of deferred tax assets is contingent upon the Company's ability to generate sufficient future taxable income to F-86 242 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) realize the future tax benefits associated with the deferred tax assets. Management believes that deferred assets will be realized through future operating results. Total deferred tax assets and deferred tax liabilities as of December 31, 1997 and 1998, and as of March 31, 1999, including the effects of the source of differences between financial accounting and tax bases of the Company's assets and liabilities which give rise to the deferred tax assets and deferred tax liabilities and the tax effect of each are as follows (in thousands):
DECEMBER 31, ----------------- MARCH 31, 1997 1998 1999 ------ ------- --------- Deferred Tax Assets: Accruals and reserves.......................... $ 417 $ 413 $ 435 Loss on disposal of fixed assets............... -- 1,829 2,336 State net operating losses..................... 1,244 1,735 1,965 Tax credits.................................... -- 61 61 Other.......................................... 2 -- -- ------ ------- ------- $1,663 $ 4,038 $ 4,797 ====== ======= ======= Deferred Tax Liabilities: FCC license.................................... $1,837 $ 4,534 $ 5,062 Fixed assets and intangibles................... 5,359 6,406 6,979 ------ ------- ------- $7,196 $10,940 $12,041 ====== ======= =======
6. EMPLOYEE BENEFITS: Employees of the Company participate in the Sinclair Broadcast Group, Inc. 401(k) Profit Sharing Plan and Trust (the "SBG Plan") which covers eligible employees of the Company. Contributions made to the SBG Plan include an employee elected salary reduction amount, company matching contributions and a discretionary amount determined each year by SBG's Board of Directors. During December 1997, SBG registered 800,000 shares of its Class "A" Common Stock with the Securities and Exchange Commission (the "Commission") to be issued as a matching contribution for the 1997 plan year and subsequent plan years. The Company's 401(k) expense for the periods ended December 31, 1996, 1997 and 1998, and the three months ended March 31, 1999, was $91,000, $177,000, $299,000 and $89,000, respectively. 7. COMMITMENTS AND CONTINGENCIES: LITIGATION The Company is involved in certain litigation matters arising in the normal course of business. In the opinion of management, these matters are not significant and will not have a material adverse effect on the Company's financial position. F-87 243 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OPERATING LEASES The Company leases certain property and equipment under noncancellable operating lease agreements. Future minimum lease payments under noncancellable operating leases beginning April 1, 1999, are approximately (in thousands): April 1, 1999 to December 31, 1999.......................... $ 1,985 2000........................................................ 2,445 2001........................................................ 2,169 2002........................................................ 1,944 2003........................................................ 1,481 2004 and thereafter......................................... 17,050 ------- $27,074 =======
8. ACQUISITIONS: The acquisitions consummated by SBG have been presented as if they were made by the Company and the consideration to effect these acquisitions was either contributed or loaned by SBG. RIVER CITY ACQUISITION In May 1996, the Company entered into the radio business when it acquired radio stations from River City Broadcasting LLP ("River City"). As a result of the River City acquisition, the Company currently owns stations serving the Memphis, Buffalo, Wilkes-Barre/Scranton and New Orleans radio markets. In addition, the Company acquired radio stations in the Nashville and Los Angeles markets which were sold during 1998 (see 1998 Acquisitions and Dispositions discussed below). The Company also purchased options to acquire additional radio stations in the Buffalo, Wilkes-Barre/Scranton and Greenville/Spartansburg/ Asheville markets which have all since been exercised. In order to complete the acquisition, SBG made loans and contributed capital to the Company totaling $169.4 million and $110.0 million, respectively. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets, acquired intangible broadcasting assets and other intangible assets for $22.0 million, $225.9 million and $31.5 million, respectively, based upon an independent appraisal. 1997 ACQUISITIONS During 1997, the Company exercised its options to acquire radio stations in the Wilkes-Barre/Scranton and Buffalo markets. These options were purchased in connection with the River City Acquisition. The total option exercise price of $3.1 million was allocated to acquired intangible broadcasting assets. F-88 244 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 ACQUISITIONS AND DISPOSITIONS HERITAGE ACQUISITION. In March 1998, the Company completed the purchase of certain radio broadcast assets of Heritage Media Services, Inc. ("Heritage"). Pursuant to this acquisition, the Company now owns radio stations serving the Kansas City and Milwaukee markets. In July 1998, the Company acquired three radio stations in the New Orleans, Louisiana, market and simultaneously disposed of two of those stations (see Centennial Disposition below). In order to complete the acquisition, SBG made loans to the Company totaling $121.1 million. The acquisition was accounted for under the purchase method of accounting whereby the net purchase price for stations was allocated to property and programming assets, acquired intangible broadcasting assets and other intangible assets for $5.1 million, $104.1 million and $11.9 million, respectively, based on an independent appraisal. SFX DISPOSITION. In May 1998, the Company completed the sale of its radio stations located in the Nashville, Tennessee, market to SFX Broadcasting, Inc. for aggregate consideration of approximately $35.0 million (the "SFX Disposition"). The disposal included the sale of property and programming assets and intangible assets. In connection with the disposition, the Company recognized a $5.2 million gain on the sale and utilized the proceeds to reduce parent company indebtedness. MAX MEDIA ACQUISITION. In July 1998, the Company directly or indirectly acquired all of the equity interests of Max Media Properties LLC ("Max Media"). As a result of this acquisition, the Company now owns radio stations serving the Greensboro and Norfolk markets. In order to complete the acquisition, SBG made loans to the Company totaling $78.3 million. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets and acquired intangible broadcasting assets for $4.8 million and $73.5 million, respectively, based on an independent appraisal. CENTENNIAL DISPOSITION. In July 1998, the Company completed the sale of the assets of radio stations WRNO-FM, KMEZ-FM and WBYU-AM in New Orleans, Louisiana, to Centennial Broadcasting for $16.1 million in cash and recognized a loss on the sale of $2.9 million. The Company acquired KMEZ-FM in connection with the River City Acquisition in May of 1996 and acquired WRNO-FM and WBYU-AM in New Orleans from Heritage in July 1998. The Company was required to divest WRNO-FM, KMEZ-FM and WBYU-AM to meet certain regulatory ownership guidelines. The Company utilized the proceeds to reduce parent company indebtedness. GREENVILLE ACQUISITION. In July 1998, the Company acquired three radio stations in the Greenville/Spartansburg market from Keymarket Radio of South Carolina, Inc. for purchase price consideration involving the forgiveness of approximately $8.0 million of indebtedness. Concurrently with the acquisition, the Company acquired an additional two radio stations in the same market from Spartan Broadcasting for a purchase price of approximately $5.2 million. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and acquired intangible broadcasting assets for $5.0 million and $10.1 million, respectively, based on an independent appraisal. F-89 245 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) RADIO UNICA DISPOSITION. In July 1998, the Company completed the sale of KBLA-AM in Los Angeles, California, to Radio Unica Corp. for approximately $21.0 million in cash. In connection with the disposition, the Company recognized a $8.4 million gain. The disposal included the sale of property and programming assets and intangible assets. The Company utilized the proceeds from the sale to reduce parent company indebtedness. 9. UNAUDITED PRO FORMA SUMMARY RESULTS OF OPERATIONS: The following unaudited pro forma summary presents the consolidated results of operations for the years ended December 31, 1997 and 1998, as if significant acquisitions and dispositions completed through December 31, 1998, had occurred at the beginning of 1997. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had significant acquisitions and dispositions been made as of that date or of results which may occur in the future:
(UNAUDITED) ------------------- 1997 1998 ------- -------- Net revenues.............................................. $93,148 $102,340 ======= ======== Net income before extraordinary item...................... $(4,970) $ 4,127 ======= ======== Net income (loss)......................................... $(4,970) $ 2,189 ======= ========
10. SUBSEQUENT EVENT: ST. LOUIS PURCHASE OPTION. In connection with the acquisition of River City, the Company entered into a five year agreement (the "Baker Agreement") with Barry Baker (the Chief Executive Officer of River City) pursuant to which Mr. Baker served as a consultant to the Company until terminating such services effective March 8, 1999 (the "Termination Date"). As of February 8, 1999, the conditions to Mr. Baker becoming an officer of the Company had not been satisfied, and on that date Mr. Baker and the Company entered into a termination agreement, effective on March 8, 1999. Mr. Baker had certain rights as a consequence of the termination of the Baker Agreement. These rights included Mr. Baker's right to purchase, at fair market value, the radio stations owned by the Company serving the St. Louis, Missouri market. In June 1999, the Company received a letter from Mr. Baker in which Mr. Baker elected to exercise his option to purchase the radio properties of the Company in the St. Louis market for their fair market value. In his letter, Mr. Baker names Emmis Communications Corporation ("Emmis") as his designee. Sinclair is evaluating the validity of Mr. Baker's designation of Emmis. In light of the foregoing, the fact that negotiations of a definitive purchase agreement are yet to commence, that a fair market value has not been determined, and that approvals would be required from both the Department of Justice and the Federal Communications Commission, there can be no assurance that the transactions contemplated by the option will be consummated. F-90 246 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ENTERCOM DISPOSITION. In July 1999, the Company entered into an agreement to sell 46 radio stations in nine markets to Entercom Communications Corporation ("Entercom") for $824.5 million in cash (the "Entercom Disposition"). After the completion of this transaction, the Company will have divested of all of its stations with the exception of those serving the St. Louis market. The St. Louis market is subject to a purchase option and may be acquired by another third party as discussed above. The Entercom Disposition is subject to FCC and Department of Justice approval. KXOK-FM ACQUISITION. In August 1999, the Company completed the purchase of radio station KXOK-FM in St. Louis, Missouri for a purchase price of $14.1 million in cash. KXOK is also subject to the St. Louis Purchase Option described above. F-91 247 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION UNAUDITED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 31, JUNE 30, 1998 1999 ------------ -------- ASSETS CURRENT ASSETS: Cash................................................... $ 878 $ 1,133 Accounts receivable, net............................... 21,731 21,501 Prepaid expenses and other current assets.............. 551 899 Deferred barter costs.................................. 2,043 2,784 -------- -------- Total current assets........................... 25,203 26,317 PROPERTY AND EQUIPMENT, net.............................. 31,653 31,971 OTHER ASSETS............................................. 9,662 10,919 ACQUIRED INTANGIBLE BROADCASTING ASSETS, net............. 363,190 363,953 -------- -------- Total Assets................................... $429,708 $433,160 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable....................................... $ 258 $ 1,107 Accrued liabilities.................................... 5,084 4,604 Sports rights contracts................................ 650 -- Deferred barter revenues............................... 1,848 2,447 Deferred tax liabilities............................... 35 61 -------- -------- Total current liabilities...................... 7,875 8,219 LONG-TERM LIABILITIES: Parent company indebtedness............................ 329,060 331,325 Other long term liabilities............................ 176 139 Deferred tax liabilities, less current portion......... 6,867 8,881 -------- -------- Total liabilities.............................. 343,978 348,564 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDER'S EQUITY: Contributed capital.................................... 90,000 90,000 Accumulated deficit.................................... (4,270) (5,404) -------- -------- Total stockholder's equity..................... 85,730 84,596 -------- -------- Total Liabilities and Stockholder's Equity..... $429,708 $433,160 ======== ========
The accompanying notes are an integral part of these unaudited balance sheets. F-92 248 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ------------------ 1998 1999 ------- ------- REVENUES: Station broadcast revenues, net of agency commissions.... $31,813 $50,710 Revenues realized from station barter arrangements....... 1,658 1,927 ------- ------- Total revenues................................... 33,471 52,637 ------- ------- OPERATING EXPENSES: Program and production................................... 9,067 14,834 Selling, general and administrative...................... 12,037 18,784 Corporate expenses....................................... 1,511 1,626 Depreciation and amortization............................ 7,022 8,896 ------- ------- Total operating expenses......................... 29,637 44,140 ------- ------- Broadcast operating income....................... 3,834 8,497 ------- ------- OTHER INCOME (EXPENSE): Interest on parent company indebtedness.................. (8,256) (9,738) Net gain (loss) on sale of broadcast assets.............. 5,225 (30) Other income............................................. 22 61 ------- ------- Income (loss) before (provision) benefit for income taxes and extraordinary item........... 825 (1,210) INCOME TAX (PROVISION) BENEFIT............................. (370) 76 ------- ------- NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM................ 455 (1,134) EXTRAORDINARY ITEM: Loss on early extinguishment of debt, net of related income tax benefit of $1,432.......................... (2,149) -- ------- ------- NET LOSS................................................... $(1,694) $(1,134) ======= =======
The accompanying notes are an integral part of these unaudited consolidated statements. F-93 249 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ------------------- 1998 1999 -------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.................................................. $ (1,694) $(1,134) Adjustments to reconcile net loss to net cash flows from operating activities- Extraordinary loss on early extinguishment of debt..... 3,581 -- Gain on sale of broadcast assets....................... (5,225) -- Depreciation and amortization.......................... 7,022 8,896 Deferred tax (benefit) provision....................... (1,326) 2,040 Changes in assets and liabilities, net of effects of acquisitions and dispositions- (Increase) decrease in accounts receivable, net........ (2,328) 230 Decrease (increase) in prepaid expenses and other current assets....................................... 260 (348) Increase in accounts payable and accrued liabilities... 731 365 Net effect of change in deferred barter revenues and deferred barter costs................................ (91) (142) Decrease in other long-term liabilities................ -- (37) Payments on program contracts payable.................. (860) (650) -------- ------- Net cash flows from operating activities............. 70 9,220 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment..................... (2,024) (1,314) Acquisition of radio stations............................. (95,511) -- Proceed from sale of broadcast assets..................... 35,000 -- -------- ------- Net cash flows used in investing activities.......... (62,535) (1,314) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in parent company indebtedness................. (12,639) (7,651) Borrowings from parent company related to acquisitions.... 95,511 -- Distribution of capital to parent company................. (20,000) -- -------- ------- Net cash flows from financing activities............. 62,872 (7,651) -------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS................... 407 255 CASH AND CASH EQUIVALENTS, beginning of period.............. 598 878 -------- ------- CASH AND CASH EQUIVALENTS, end of period.................... $ 1,005 $ 1,133 ======== =======
The accompanying notes are an integral part of these unaudited consolidated statements. F-94 250 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION The Sinclair Broadcast Group, Inc. and subsidiaries -- Radio Division ("the Company") was formed through acquisition. Sinclair Broadcast Group, Inc. ("SBG") entered into the radio business in May 1996 when it acquired radio stations from River City Broadcasting LLP ("River City"). As a result of the River City acquisition, the Company now owns radio stations serving the Memphis, Buffalo and Wilkes-Barre/ Scranton markets. In addition, SBG purchased from River City the right to acquire certain radio stations serving the Greenville/Spartansburg/Asheville market and exercised the right to acquire these stations in July 1998. In March and July 1998, SBG acquired radio stations from Heritage Media Services, Inc. ("Heritage") serving the Kansas City, Milwaukee and New Orleans markets. In July 1998, SBG acquired radio stations from Max Media Properties, LLC ("Max Media") serving the Greensboro/Winston Salem/ High-Point and Norfolk markets. These acquisitions and other less significant acquisitions and dispositions have been recorded under the purchase method of accounting. The divisional financial statements include operating results of SBG's radio assets acquired from their respective dates of acquisition, excluding the radio stations operating in the St. Louis market (see Note 3). These consolidated financial statements have been prepared from SBG's historical accounting records and present the operations of the Radio Divison as if the Company had been a separate entity for all periods presented. During these periods, SBG provided various services to the Company (see Note 2). Furthermore, acquisitions consummated by SBG have been presented as if they were made by the Company and the consideration to effect these acquisitions was both loaned and contributed by SBG. All significant intercompany transactions and account balances have been eliminated in consolidation. The financial information included herein may not necessarily reflect the consolidated results of operations, financial position, changes in equity and cash flows of the Company in the future or what they would have been had it been a separate, stand-alone entity during the periods presented. INTERIM FINANCIAL STATEMENTS The consolidated financial statements for the six months ended June 30, 1998 and 1999 are unaudited, but in the opinion of management, such financial statements have been presented on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial position and results of operations, and cash flows for these periods. As permitted under the applicable rules and regulations of the Securities and Exchange Commission, these financial statements do not include all disclosures normally included with audited consolidated financial statements, and, accordingly, should be read in conjunction with the consolidated financial statements and notes thereto as of December 31, 1997, and 1998 and March 31, 1999 and for the periods then ended. The F-95 251 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) results of operations presented in the accompanying financial statements are not necessarily representative of operations for an entire year. 2. RELATED PARTY TRANSACTIONS: The Company has utilized various services provided by SBG or its subsidiaries. These services included, among others, certain investor relations, executive, human resources, legal, investment, finance, real estate, information management, internal audit, tax, transportation and treasury. The costs of such services have been allocated according to established methodologies and are determined on an annual basis by SBG. Such methodologies depend on the specific service provided and include allocating costs that directly relate to the Company or allocating costs that represent a pro rata portion of the total costs for the services provided. Management of the Company believes these allocations to be a fair and reasonable share of such costs. For the six months ended June 30, 1998 and 1999, allocated expenses of approximately $1.5 million (unaudited) and $1.6 million (unaudited), respectively, were included in the consolidated statements of operations of the Company. Substantially all costs relating to direct intercompany services have been reflected in the accompanying combined financial statements. The Company's radio stations and SBG's television stations have historically provided broadcast time to each other. The revenues or costs associated with these intercompany transactions were not significant in the periods presented. The Company and SBG have entered into joint advertising arrangements. Revenues are distributed to the parties providing the services based upon the contract terms. The revenues associated with such sales were not significant in the periods presented. 3. ST. LOUIS PURCHASE OPTION: ST. LOUIS PURCHASE OPTION. In connection with the acquisition of River City, the Company entered into a five year agreement (the "Baker Agreement") with Barry Baker (the Chief Executive Officer of River City) pursuant to which Mr. Baker served as a consultant to the Company until terminating such services effective March 8, 1999 (the "Termination Date"). As of February 8, 1999, the conditions to Mr. Baker becoming an officer of the Company had not been satisfied, and on that date Mr. Baker and the Company entered into a termination agreement, effective on March 8, 1999. Mr. Baker had certain rights as a consequence of the termination of the Baker Agreement. These rights included Mr. Baker's right to purchase, at fair market value, the radio stations owned by the Company serving the St. Louis, Missouri market. In June 1999, the Company received a letter from Mr. Baker in which Mr. Baker elected to exercise his option to purchase the radio properties of the Company in the St. Louis market for their fair market value. In his letter, Mr. Baker names Emmis Communications Corporation ("Emmis") as his designee. Sinclair is evaluating the validity of Mr. Baker's designation of Emmis. In light of the foregoing, the fact that negotiations of a definitive purchase agreement are yet to commence, that a fair market value has not been determined, and that approvals would be required from both the F-96 252 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Department of Justice and the Federal Communications Commission, there can be no assurance that the transactions contemplated by the option will be consummated. 4. SUBSEQUENT EVENTS: ENTERCOM DISPOSITION. In July 1999, the Company entered into an agreement to sell 46 radio stations in nine markets to Entercom Communications Corporation ("Entercom") for $824.5 million in cash (the "Entercom Disposition"). After the completion of this transaction, the Company will have divested of all of its stations with the exception of those serving the St. Louis market. The St. Louis market is subject to a purchase option and may be acquired by another third party as discussed above. The Entercom Disposition is subject to FCC and Department of Justice approval. KXOK-FM ACQUISITION. In August 1999, the Company completed the purchase of radio station KXOK-FM in St. Louis, Missouri for a purchase price of $14.1 million in cash. KXOK is also subject to the St. Louis Purchase Option described above. F-97 253 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Sinclair Broadcast Group, Inc.: We have audited the accompanying combined balance sheets of Heritage Media Services, Inc. -- Radio Broadcasting Segment -- a Division of Heritage Media Corporation (the Company) as of December 31, 1997, and Heritage Media Services, Inc. -- Radio Broadcasting Segment -- a Division of Heritage Media Corporation (the Predecessor) as of December 31, 1996, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows of the Company for the four months ended December 31, 1997, and of the Predecessor for the eight months ended August 31, 1997, and the year ended December 31, 1996. These financial statements are the responsibility of the Company's and the Predecessor's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1997, and the Predecessor as of December 31, 1996, and the results of operations and cash flows of the Company for the four months ended December 31, 1997, and of the Predecessor for the eight months ended August 31, 1997, and for the year ended December 31, 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Baltimore, Maryland, July 2, 1999 F-98 254 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION COMBINED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND 1996 (IN THOUSANDS, EXCEPT SHARE DATA)
COMPANY PREDECESSOR 1997 1996 -------- ----------- ASSETS CURRENT ASSETS: Cash.................................................... $ 1,379 $ 1,213 Accounts receivable, net of allowance for doubtful accounts of $1,100 and $1,034, respectively........... 12,311 10,914 Prepaid expenses and other current assets............... 500 43 Deferred barter costs................................... 549 1,328 Deferred tax asset...................................... 159 162 -------- ------- Total current assets.................................... 14,898 13,660 PROPERTY AND EQUIPMENT, net............................. 17,205 13,585 ACQUIRED INTANGIBLE BROADCASTING ASSETS, net............ 311,910 56,678 OTHER ASSETS............................................ 33 183 -------- ------- Total Assets....................................... $344,046 $84,106 ======== ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses................. $ 3,814 $ 3,670 Deferred revenue...................................... 280 428 Deferred barter revenues.............................. 570 1,249 -------- ------- Total current liabilities.......................... 4,664 5,347 DUE TO AFFILIATE........................................ -- 63,005 DEFERRED TAX LIABILITY.................................. 353 197 OTHER LONG-TERM LIABILITIES............................. 391 115 -------- ------- Total Liabilities.................................. 5,408 68,664 -------- ------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $1.00 par value, 15,000 shares authorized, issued and outstanding................. 15 15 Additional paid-in capital............................ 341,902 20,368 Accumulated deficit................................... (3,279) (4,941) -------- ------- Total Stockholders' Equity............................ 338,638 15,442 -------- ------- Total Liabilities and Stockholders' Equity............ $344,046 $84,106 ======== =======
The accompanying notes are an integral part of these combined balance sheets. F-99 255 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS)
COMPANY PREDECESSOR ------------ --------------------------- FOUR MONTHS EIGHT MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, AUGUST 31, DECEMBER 31, 1997 1997 1996 ------------ ------------ ------------ NET REVENUES: Station broadcasting revenues, net of agency commissions of $3,681, $5,989 and $8,539, respectively............. $21,328 $34,979 $50,303 Revenues realized from station barter arrangements......................... 1,394 2,451 2,975 ------- ------- ------- Total net revenues...................... 22,722 37,430 53,278 ------- ------- ------- OPERATING EXPENSES: Programming and production.............. 10,168 14,929 11,146 Selling, general and administrative..... 4,093 8,669 21,404 Expenses realized from station barter arrangements......................... 1,392 2,567 2,804 Depreciation of property and equipment............................ 1,055 1,267 1,729 Amortization of acquired intangible broadcasting assets and other assets............................... 6,847 2,908 4,515 ------- ------- ------- Total operating expenses............. 23,555 30,340 41,598 ------- ------- ------- Broadcast operating income (loss).... (833) 7,090 11,680 OTHER INCOME (EXPENSE): Interest expense........................ (645) (1,604) (6,170) Gain on exchange of assets.............. -- 9,401 -- Other expense, net...................... (342) (27) -- ------- ------- ------- Income (loss) before provision for income taxes....................... (1,820) 14,860 5,510 PROVISION FOR INCOME TAXES................ 1,459 7,055 2,930 ------- ------- ------- Net income (loss)....................... $(3,279) $ 7,805 $ 2,580 ======= ======= =======
The accompanying notes are an integral part of these combined statements. F-100 256 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS)
COMMON STOCK ADDITIONAL STOCKHOLDERS' --------------- PAID-IN ACCUMULATED EQUITY SHARES AMOUNT CAPITAL DEFICIT (DEFICIT) ------ ------ ---------- ----------- ------------- PREDECESSOR: BALANCE, December 31, 1995..... 15 $15 $ 99 $ (721) $ (607) HMC capital contributions...... -- -- 20,269 -- 20,269 Dividends to HMC............ -- -- -- (6,800) (6,800) Net income.................. -- -- -- 2,580 2,580 -- --- -------- ------- -------- BALANCE, December 31, 1996..... 15 15 20,368 (4,941) 15,442 HMC noncash capital contributions............. -- -- 6,439 -- 6,439 Net income................ -- -- -- 7,805 7,805 -- --- -------- ------- -------- BALANCE, August 31, 1997....... 15 $15 $ 26,807 $ 2,864 $ 29,686 == === ======== ======= ======== COMPANY: BALANCE, September 1, 1997..... 15 $15 $339,985 $ -- $340,000 News Corporation noncash capital contributions..... -- -- 1,917 -- 1,917 Net loss.................... -- -- -- (3,279) (3,279) -- --- -------- ------- -------- BALANCE, December 31, 1997..... 15 $15 $341,902 $(3,279) $338,638 == === ======== ======= ========
The accompanying notes are an integral part of these combined statements. F-101 257 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION COMBINED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
COMPANY PREDECESSOR ----------------- --------------------------------- FOUR MONTHS ENDED EIGHT MONTHS ENDED YEAR ENDED DECEMBER 31, AUGUST 31, DECEMBER 31, 1997 1997 1996 ----------------- ------------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)........................... $(3,279) $ 7,805 $ 2,580 Adjustments to reconcile net income (loss) to net cash flows from operating activities -- Gain on exchange of assets............... -- (9,401) -- Depreciation of property and equipment... 1,055 1,267 1,729 Amortization of acquired intangible broadcasting assets and other assets... 6,847 2,908 4,515 Amortization of deferred financing costs.................................. 251 84 97 Deferred tax provision (benefit)......... 24 (33) (70) Changes in assets and liabilities, net of effects of acquisitions -- (Increase) in accounts receivable, net... (715) (897) (1,501) Net effect of change in deferred barter revenues and deferred barter costs..... 4 95 (77) (Increase) decrease in prepaid expenses and other current assets............... (483) (1,723) 745 (Increase) decrease in other assets...... -- 176 (7) Increase (decrease) in accounts payable and accrued expenses................... 143 230 (1,112) Increase (decrease) in deferred revenue................................ 1 (149) 152 Increase (decrease) in other long-term liabilities............................ (15) 291 47 ------- -------- -------- Net cash flows from operating activities.......................... 3,833 653 7,098 ------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment....... (317) (853) (1,316) Receipts from exchange of stations.......... -- 11,309 4,723 Payments for acquisition of stations........ -- (12,445) (6,584) ------- -------- -------- Net cash flows from investing activities.......................... (317) (1,989) (3,177) ------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends to Parent......................... -- -- (6,800) Decrease in due to affiliate................ (5,341) (5,029) (17,257) Capital contributions made by Parent........ 1,917 6,439 20,269 ------- -------- -------- Net cash flows from financing activities.......................... (3,424) 1,410 (3,788) ------- -------- -------- NET INCREASE IN CASH.......................... 92 74 133 CASH, beginning of period..................... 1,287 1,213 1,080 ------- -------- -------- CASH, end of period........................... $ 1,379 $ 1,287 $ 1,213 ======= ======== ========
The accompanying notes are an integral part of these combined statements. F-102 258 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION Heritage Media Services, Inc. ("HMSI") operates in three segments -- Marketing Services, Television Broadcasting and Radio Broadcasting is a division of Heritage Media Corporation ("HMC"). The accompanying consolidated financial statements include the accounts of the radio operations, which are collectively referred to hereafter as "the Company, the Companies or the Radio Broadcasting Segment." The Radio Broadcasting Segment was wholly-owned and operated by HMSI, which was owned by HMC through August 31, 1997 (the Predecessor). In July 1997, HMC entered into an asset sale agreement with Sinclair Broadcast Group, Inc. ("SBG") whereby SBG would acquire 100% of the Television and Radio Broadcasting Segment for $630 million. Effective September 1, 1997, The News Corporation Limited ("News Corporation") acquired all of the license and nonlicense assets of HMC. Due to certain regulatory requirements, News Corporation established a trust to hold all of the license and nonlicense assets of the Radio Broadcasting Segment until the sale to SBG closed. The acquisition was accounted for under the purchase method of accounting whereby the purchase price of $340 million for the Radio Broadcasting Segment was allocated to property and programming assets and acquired intangible broadcasting assets of approximately $18 million and $322 million, respectively. During March 1998, the sale to SBG was completed. The accompanying December 31, 1997, combined balance sheet and related combined statements of operations and cash flows for the four-month period ended December 31, 1997, are presented on a new basis of accounting to reflect the News Corporation acquisition. The accompanying combined financial statements for the eight-month period ended August 31, 1997, and for the year ended December 31, 1996, are presented as "Predecessor" financial statements. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to intangible assets, contracts, allowances for doubtful accounts, income taxes and litigation based on currently available information. Changes in facts and circumstances may result in revised estimates. F-103 259 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded on the straight-line basis over the estimated useful lives of the assets. Property and equipment at December 31, 1997 and 1996, are summarized as follows (in thousands):
COMPANY PREDECESSOR USEFUL LIFE 1997 1996 ----------- ------- ----------- Land....................................... -- $ 858 $ 1,368 Broadcasting equipment..................... 5-25 years 13,805 12,402 Buildings and improvements................. 12-30 years 2,288 3,199 Other equipment............................ 4-8 years 1,309 5,123 ------- ------- 18,260 22,092 Less: Accumulated depreciation............. (1,055) (8,507) ------- ------- Property and equipment, net................ $17,205 $13,585 ======= =======
ACQUIRED INTANGIBLE BROADCASTING ASSETS Acquired intangible broadcasting assets are being amortized over periods of four to 40 years. These amounts result from the acquisition of certain radio station license and nonlicense assets (see Notes 1 and 8). The Company monitors the individual financial performance of each of the stations and continually evaluates the realizability of intangible and tangible assets and the existence of any impairment to its recoverability based on the projected undiscounted cash flows of the respective stations. Management believes that the carrying amounts of the Company's tangible and intangible assets have not been impaired. Intangible assets consist of the following as of December 31, 1997 and 1996 (in thousands):
AMORTIZATION COMPANY PREDECESSOR PERIOD 1997 1996 ------------ -------- ----------- Goodwill.................................. 40 years $104,377 $ 10,604 FCC licenses.............................. 15-25 years 213,364 61,745 Other..................................... 4-25 years 1,016 531 -------- -------- 318,757 72,880 Less: Accumulated amortization............ (6,847) (16,202) -------- -------- Intangible assets, net.................... $311,910 $ 56,678 ======== ========
F-104 260 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) BARTER TRANSACTIONS The Company broadcasts certain customers' advertising in exchange for equipment, merchandise and services. The estimated fair value of the equipment, merchandise or services received is recorded as deferred barter costs and the corresponding obligation to broadcast advertising is recorded as deferred barter revenues. The deferred barter costs are expensed or capitalized as they are used, consumed or received. Deferred barter revenues are recognized as the related advertising is aired. OTHER ASSETS Debt issuance costs are amortized to interest expense using the effective interest method over the period of the related debt agreement. REVENUES Revenues are primarily derived from the sale of radio advertising spots and are recognized when the spots are broadcast. Advertising revenues are presented net of advertising agency and national sales representative commissions. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments is determined by the Company using the best available market information and appropriate valuation methodologies. However, considerable judgement is necessary in interpreting market data to develop the estimates of fair value. Accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in current market exchange or the value that ultimately will be realized by the Company upon maturity or disposition. The use of different market or estimation methodologies may have a material effect on the estimated fair value amounts. Most of the Company's financial instruments, including cash, trade receivables and payables and accruals, are short-term in nature. Accordingly, the carrying amount of the Company's financial instruments approximate their fair value. RECLASSIFICATIONS Certain reclassifications have been made to the prior year financial statements to conform with the current year presentation. F-105 261 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) 2. ACCRUED EXPENSES: Accrued expenses consist of the following at December 31, 1997 and 1996, (in thousands):
COMPANY PREDECESSOR 1997 1996 ------- ----------- Commissions.............................................. $2,600 $ 919 Payroll and employee benefits............................ 352 128 Other.................................................... 784 2,480 ------ ------ $3,736 $3,527 ====== ======
3. DUE TO AFFILIATE: The Predecessor had an arrangement with HMSI whereby HMSI would provide certain management and other services to the Predecessor. The services provided included consultation and direct management assistance with respect to operations and strategic planning. The Predecessor was allocated approximately $2,548,000 and $1,150,000 of corporate overhead expenses for these services for the eight months ended August 31, 1997, and for the year ended December 31, 1996, respectively. In order to fund acquisitions and provide operating funds, HMSI entered into a Bank Credit Agreement. The debt used to finance acquisitions and fund daily operations of the Predecessor was recorded by the Predecessor as due to affiliate in the accompanying consolidated balance sheets as of December 31, 1996. HMSI allocated interest at a rate of approximately 10.0%, which approximated the average rate paid on the borrowings. Associated with the HMSI debt, the Predecessor was allocated approximately $183,000 of deferred financing costs in 1996. The deferred financing costs were fully amortized in conjunction with the acquisition by News Corporation on September 1, 1997. 4. INCOME TAXES: HMC files a consolidated federal tax return and separate state tax returns for each of its subsidiaries in certain filing jurisdictions. It is HMC's policy to pay the federal income tax provision of the Company. The accompanying financial statements have been prepared in accordance with the separate return method of FASB 109, whereby the allocation of the federal tax provision due to HMC is based on what the Company's current and deferred federal tax provision would have been had the Company filed a federal income tax return outside of its consolidated group. The Company is not required to reimburse HMC for its federal tax provision. Accordingly, this amount is recorded as a capital contribution in the accompanying combined financial statements. The federal and state tax provision was calculated based on pretax income, plus or minus permanent book-to-tax differences, at the statutory tax rate of 40%. F-106 262 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) The provision for income taxes consists of the following (in thousands):
COMPANY PREDECESSOR ----------------- -------------------------------- FOUR MONTHS ENDED EIGHT MONTHS YEAR ENDED DECEMBER 31, ENDED AUGUST 31, DECEMBER 31, 1997 1997 1996 ----------------- ---------------- ------------ Current: Federal...................... $1,220 $6,025 $2,550 State........................ 215 1,063 450 ------ ------ ------ 1,435 7,088 3,000 ------ ------ ------ Deferred: Federal...................... -- -- -- State........................ 24 (33) (70) ------ ------ ------ 24 (33) (70) ------ ------ ------ Provision for income taxes..... $1,459 $7,055 $2,930 ====== ====== ======
COMPANY PREDECESSOR ----------------- -------------------------------- FOUR MONTHS ENDED EIGHT MONTHS YEAR ENDED DECEMBER 31, ENDED AUGUST 31, DECEMBER 31, 1997 1997 1996 ----------------- ---------------- ------------ Statutory federal income taxes........................ $ (619) $5,052 $1,873 Adjustments: State income taxes, net of federal effect.......... (109) 892 331 Non-deductible goodwill amortization............ 2,157 973 568 Non-deductible expense items................... 6 11 26 Other..................... 24 127 132 ------ ------ ------ Provision for income taxes..... $1,459 $7,055 $2,930 ====== ====== ======
F-107 263 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes the state tax effects of the significant types of temporary differences between financial reporting basis and tax basis which were generated during the years ended December 31, 1997 and 1996:
COMPANY PREDECESSOR 1997 1996 ------- ----------- Deferred Tax Assets: Bad debt reserve....................................... $ 352 $ 62 Accruals............................................... 92 113 Other intangibles...................................... (285) (13) ----- ----- $ 159 $ 162 ===== ===== Deferred Tax Liability: Accumulated depreciation............................... $(353) $(197) ===== =====
5. EMPLOYEE BENEFIT PLAN: Company employees were covered by HMC's Retirement Savings Plan (the Plan) through the date the company was acquired by SBG, whereby participants contributed portions of their annual compensation to the Plan and certain contributions were made at the discretion of HMC based on criteria set forth in the Plan Agreement. Participants are generally 100% vested in Company contributions after five years of employment with the Company. Company expenses under the Plan were not material for the year ended December 31, 1997. 6. RELATED PARTY TRANSACTIONS: The Company received certain advances from HMC during the eight months ended August 31, 1997, which were evidenced by a subordination agreement. All advances from HMC were repaid on August 31, 1997. 7. CONTINGENCIES AND OTHER COMMITMENTS: LEASES AND CONTRACTS The Company leases certain real property and transportation and other equipment under noncancellable operating leases expiring at various dates through 2010. The Company also has long-term contractual obligations with two major broadcast ratings firms that provide monthly ratings services and guaranteed store contracts. Rent expense under the leases for the four months ended December 31, 1997, the eight months ended August 31, 1997, and the year ended December 31, 1996, was approximately $499,000, $791,000 and $985,000, respectively. F-108 264 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Future minimum payments under the leases are as follows (in thousands): 1998........................................................ $ 908 1999........................................................ 911 2000........................................................ 912 2001........................................................ 899 2002........................................................ 917 2003 and thereafter......................................... 2,416 ------ $6,963 ======
LITIGATION Lawsuits and claims are filed against the Company from time to time in the ordinary course of business which are generally incidental to its business. Management does not believe the resolution of such matters will have a significant effect on the Company's liquidity, financial position or results of operations. 8. ACQUISITIONS, EXCHANGES AND DISPOSITIONS: On January 7, 1997, the Company acquired all of the license and nonlicense assets of radio station WHRR (FM), serving the Rochester, New York market for approximately $2.0 million. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets and acquired intangible broadcasting assets of $.1 million and $1.9 million, respectively. On January 20, 1997, the Company entered into a like-kind exchange with Journal Broadcast Group ("JBG") whereby the Company transferred radio stations WMYU (FM) and WWST (FM) in exchange for radio station KQRC (FM). The assets exchanged were used in the same line of business, no monetary consideration was received and the fair value of the assets exchanged were greater than their carrying cost and, as such, no gain was recognized in the accompanying combined statement of operations. On January 24, 1997, the Company acquired all of the license and nonlicense assets of radio stations KXTR (FM) and KCAZ (FM), serving the Kansas City, Missouri market for approximately $10.5 million. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets and acquired intangible broadcasting assets of $.9 million and $9.6 million, respectively. On February 17, 1997, the Company entered into a like-kind exchange with Susquehanna Radio Corporation ("SRC") whereby the Company transferred radio station WVAE (FM) to SRC and received radio stations WGH (AM), WGH (FM) and WVCL (FM), along with $5.0 million in cash. In connection with the exchange, a gain of F-109 265 HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT A DIVISION OF HERITAGE MEDIA CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) approximately $4.6 million was recorded in the accompanying combined statement of operations. On April 11, 1997, the Company entered into a like-kind exchange with American Radio System Corporation ("ARSC") whereby the Company transferred radio stations KCIN (FM) and KRPM (AM) to ARSC and received radio stations WRNO (FM), WEZB (FM) and WBYU (AM), along with approximately $6.2 million in cash. In connection with the exchange, a gain of approximately $4.8 million was recorded in the accompanying combined statement of operations. On June 19, 1998, SBG completed the sale of seven radio stations serving the Portland, Oregon and Rochester, New York, radio markets to Entercom Communcations Corporation for the aggregate consideration of approximately $126.9 million. On April 7, 1999, SBG agreed to sell to Barnstable Broadcasting, Inc., radio stations WFOG (FM) and WGLT (AM/FM), serving the Norfolk, Virginia, radio market. F-110 266 ENTERCOM COMMUNICATIONS CAPITAL TRUST [ENTERCOM LOGO] ENTERCOM COMMUNICATIONS CORP. 267 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth fees payable to the Securities and Exchange Commission and the National Association of Securities Dealers, Inc., and other estimated expenses expected to be incurred in connection with the issuance and distribution of securities being registered. All such fees and expenses shall be paid by the Entercom. Securities and Exchange Commission Registration Fee........ $ 47,955 NASD Fee................................................... 17,750 New York Stock Exchange Listing Fee........................ 10,000 Printing and Engraving Expenses............................ 350,000 Accounting Fees and Expenses............................... 300,000 Legal Fees and Expenses.................................... 150,000 Trustee Fees and Expenses.................................. 10,000 Miscellaneous.............................................. 114,295 ---------- Total................................................. $1,000,000 ==========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Entercom's Amended and Restated Articles of Incorporation provide that the Entercom's directors shall not be personally liable to the Entercom and its shareholders for monetary damages for any action taken, or any failure to take any action, unless: (i) the director has breached or failed to perform the duties of his or her office under applicable provisions of Pennsylvania law, and (ii) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. This provision does not eliminate the duty of care, and, in appropriate circumstances, equitable remedies such as an injunction or other forms of non-monetary relief would remain available under Pennsylvania law. The provision does not affect a director's responsibilities under any other law, such as federal securities laws, criminal laws or state or federal environmental laws. Entercom's Amended and Restated Bylaws provide that the Entercom shall indemnify its officers and directors to the fullest extent permitted by Pennsylvania law, including some instances in which indemnification is otherwise discretionary under Pennsylvania law. In general, any officer or director of the Entercom shall be indemnified by Entercom against expenses including attorneys' fees, judgments, fines and settlements actually and reasonably incurred by that person in connection with a legal proceeding as a result of such relationship, whether or not the indemnified liability arises from an action by or in the right of Entercom, if the officer or director acted in good faith and in the manner believed to be in, or not opposed to, Entercom's best interest, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful. Such indemnity is limited to the extent that (i) such person is not otherwise indemnified and (ii) such indemnifications are not prohibited by Pennsylvania law or any other applicable law. II-1 268 Any indemnification under the previous paragraph (unless ordered by a court) shall be made by Entercom only as authorized in the specific case upon the determination that indemnification of the director or officer is proper in the circumstances because that person has met the applicable standard of conduct set forth above. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum of disinterested directors who are not parties to such action or (ii) if such quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion. To the extent that a director or officer of Entercom shall be successful in prosecuting an indemnity claim, the reasonable expenses of any such person and the fees and expenses of any special legal counsel engaged to determine the possibility of indemnification shall be borne by Entercom. Expenses incurred by a director or officer of Entercom in defending a civil or criminal action, suit or proceeding shall be paid by Entercom in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that person is not entitled to be indemnified by Entercom under the Bylaws or applicable provisions of Pennsylvania law. The indemnification and advancement of expenses provided by, or granted pursuant to Article VIII of the Bylaws is not deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled, both as to action in that person's official capacity and as to action in another capacity while holding such office. To satisfy its indemnification obligations, Entercom may maintain insurance, obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of Entercom, or use any other mechanism or arrangement whatsoever in such amounts, costs, terms and conditions as the Board of Directors shall deem appropriate. The obligations of Entercom to indemnify a director or officer under Article VIII of the Bylaws is a contract between Entercom and such director or officer and no modification or repeal of the Bylaws shall detrimentally affect such officer or director with regard to that person's acts or omissions prior to such amendment or repeal. Upon consummation of Entercom's initial public offering, Entercom purchased insurance for its directors and officers for certain losses arising from claims or charges made against them in their capacities as directors and officers of Entercom. The Declaration of Trust (the "Declaration") provides that no Trustee, affiliate of any Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee, or any employee or agent of the Trust or its affiliates (each an "Indemnified Person") shall be liable, responsible or accountable in damages or otherwise to any officer, director, shareholder, partner, member, representative or agent of the Trust, any affiliate of the Trust or any holder of Trust securities for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by the Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. The directors and officers of II-2 269 Entercom and the Regular Trustees are covered by insurance policies indemnifying them against certain liabilities, including certain liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), which might be incurred by them in such capacities and against which they cannot be indemnified by Entercom or the Trust. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. In January 1999, Entercom effected a 185 for one stock split of its outstanding shares of voting and non-voting common stock. Each share of prior common stock held by Joseph M. Field, the registrant's Chairman of the Board and Chief Executive Officer, and David J. Field, the registrant's President and Chief Operating Officer, was exchanged for one share of Class B Common Stock and each share of prior common stock held by all other shareholders was exchanged for one share of Class A Common Stock. On January 28, 1999, Entercom converted a 7% Subordinated Convertible Note due 2003 in the principal amount of $25 million held by Chase Equity Associates, L.P., an affiliate of Chase Capital Partners, into 2,327,500 shares of Class A Common Stock and 1,995,669 shares of Class C Common Stock. Both transactions were intended to be exempt from the registration requirements of the Securities Act by virtue of Section 3(a)(9) thereof. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) The following exhibits are filed as part of this registration statement:
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.01 Amended and Restated Articles of Incorporation of the Registrant(3) 3.02 Form of Amended and Restated Bylaws of the Registrant(3) 4.01 Certificate of Trust of Entercom Communications Capital Trust(1) 4.02 Form of Amended and Restated Declaration of Trust of Entercom Communications Capital Trust among Entercom Communications Corp. as Sponsor, Wilmington Trust Company as Property Trustee and Delaware Trustee and Joseph M. Field, David J. Field and John C. Donlevie as Administrative Trustees(1) 4.03 Form of Indenture for the Convertible Subordinated Debentures due 2014 among Entercom Communications Corp. as Issuer and Wilmington Trust Company as Indenture Trustee(1) 4.04 Form of Entercom Communications Capital Trust % Convertible Preferred Securities (included in Exhibit 4.02)(1) 4.05 Form of Entercom Communications Corp. Convertible Junior Subordinated Debentures due 2014 (included in Exhibit 4.03)(1) 4.06 Form of Preferred Securities Guarantee between Entercom Communications Corp. as Guarantor, and Wilmington Trust Company as Guarantee Trustee(1) 4.07 Form of Common Securities Guarantee by Entercom Communications Corp. as Guarantor(1)
II-3 270
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 5.01 Opinion of Latham & Watkins as to the legality of the Convertible Junior Subordinated Debentures and the Preferred Securities Guarantee(1) 5.02 Opinion of Morris, Nichols, Arsht & Tunnell as to the legality of the Convertible Preferred Securities and as to other matters of Delaware law(1) 5.03 Opinion of John C. Donlevie, Esq. as to the legality of the Class A common stock issuable upon conversion of the TIDES(1) 8.01 Opinion of Latham & Watkins as to certain tax matters(1) 10.01 Registration Rights Agreement, dated as of May 21, 1996, between the Registrant and Chase Equity Associates, L.P.(3) 10.02 Employment Agreement, dated June 25, 1993, between the Registrant and Joseph M. Field, as amended(3) 10.03 Employment Agreement, dated December 17, 1998, between the Registrant and David J. Field, as amended(3) 10.04 Employment Agreement, dated December 17, 1998, between the Registrant and John C. Donlevie, as amended(3) 10.05 Employment Agreement, dated November 13, 1998, between the Registrant and Stephen F. Fisher(3) 10.06 Entercom 1998 Equity Compensation Plan(3) 10.07 Loan Agreement, dated as of February 13, 1998, among the Registrant, Key Corporate Capital Inc., as administrative agent, Bank of America, National Trust and Savings Association, as syndication agent, and certain banks listed therein, as amended by the First Amendment to Loan Agreement dated October 8, 1998(3) 10.08 Amended and Restated Asset Purchase Agreement, dated as of August 20, 1999, among the Registrant, Sinclair Communications, Inc., WCGV, Inc., Sinclair Radio of Milwaukee Licensee, LLC, Sinclair Radio of New Orleans Licensee, LLC, Sinclair Radio of Memphis, Inc., Sinclair Radio of Memphis Licensee, Inc., Sinclair Properties, LLC, Sinclair Radio of Norfolk/Greensboro Licensee, L.P., Sinclair Radio of Buffalo, Inc., Sinclair Radio of Buffalo Licensee, LLC, WLFL, Inc., Sinclair Radio of Greenville Licensee, Inc., Sinclair Radio of Wilkes-Barre, Inc. and Sinclair Radio of Willkes-Barre Licensee, LLC(5) 10.09 Asset Purchase Agreement, dated as of August 20, 1999, among the Registrant, Sinclair Communications, Inc., Sinclair Media III, Inc. and Sinclair Radio of Kansas City Licensee, LLC(5) 10.10 Asset Purchase Agreement, dated as of January 26, 1998, among the Registrant, Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc.(3) 10.11 Time Brokerage Agreement, dated as of January 26, 1998, among the Registrant, Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc.(3) 10.12 Asset Purchase Agreement, dated as of August 13, 1998, among the Registrant, CBS Radio, Inc. and CBS Radio License, Inc.(3) 10.13 Time Brokerage Agreement, dated as of August 13, 1998, among the Registrant, CBS Radio, Inc. and CBS Radio License, Inc.(3)
II-4 271
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.14 Asset Purchase Agreement, dated as of August 13, 1998, among CBS Radio, Inc. CBS Radio License, Inc., ARS Acquisition II, Inc. and the Registrant(3) 10.15 Time Brokerage Agreement, dated as of August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition II, Inc. and the Registrant(3) 12.01 Statement Regarding Computation of Ratios(1) 21.01 Information Regarding Subsidiaries of the Registrant(1) 23.01 Consent of Deloitte & Touche LLP, Philadelphia, PA(1) 23.02 Consent of Deloitte & Touche LLP, Boston, MA(1) 23.03 Consent of Arthur Andersen LLP, Baltimore, MD(1) *24.01 Power of Attorney (included on signature page of this Registration Statement) 25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Wilmington Trust Company, as Indenture Trustee under the Convertible Subordinated Debentures Indenture due 2014(1) 25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Wilmington Trust Company, as Property Trustee under the Amended and Restated Declaration of Trust(1) 25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Wilmington Trust Company, as Preferred Guarantee Trustee under the Preferred Securities Guarantee(1)
- ------------------------- * Previously filed. (1) Filed herewith. (2) To be filed by amendment. (3) Incorporated by reference to Entercom's Registration Statement on Form S-1. (File No. 333-61381) (4) Incorporated by reference to Entercom's Quarterly Report on Form 10-Q. (File No. 001-14461) (5) Incorporated by reference to Entercom's Registration Statement on Form S-1. (File No. 333-86397) (b) FINANCIAL STATEMENT SCHEDULE SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS II-5 272 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Bala Cynwyd, Pennsylvania, on September 30, 1999. ENTERCOM COMMUNICATIONS CORP. By: /s/ JOSEPH M. FIELD ------------------------------------ Joseph M. Field Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ JOSEPH M. FIELD Chairman of the Board and Chief September 30, 1999 - --------------------------------------------- Executive Officer (Principal Joseph M. Field Executive Officer) /s/ DAVID J. FIELD President, Chief Operating September 30, 1999 - --------------------------------------------- Officer David J. Field and a Director * Executive Vice President, September 30, 1999 - --------------------------------------------- Secretary, General Counsel and John C. Donlevie a Director * Senior Vice President and Chief September 30, 1999 - --------------------------------------------- Financial Officer (Principal Stephen F. Fisher Financial and Accounting Officer) * Director September 30, 1999 - --------------------------------------------- Marie H. Field * Director September 30, 1999 - --------------------------------------------- Herbert Kean, M.D. * Director September 30, 1999 - --------------------------------------------- Lee Hague * Director September 30, 1999 - --------------------------------------------- Thomas H. Ginley, Jr., M.D.
II-6 273
SIGNATURE CAPACITY DATE --------- -------- ---- * Director September 30, 1999 - --------------------------------------------- S. Gordon Elkins * Director September 30, 1999 - --------------------------------------------- Michael R. Hannon * Director September 30, 1999 - --------------------------------------------- David J. Berkman *By /s/ JOSEPH M. FIELD --------------------------------------- Joseph M. Field Attorney-in-fact
II-7 274 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Bala Cynwyd, Pennsylvania, on September 30, 1999. ENTERCOM COMMUNICATIONS CAPITAL TRUST By: /s/ JOSEPH M. FIELD ------------------------------------ Joseph M. Field As Administrative Trustee Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ JOSEPH M. FIELD Administrative Trustee September 30, 1999 - --------------------------------------------- Joseph M. Field /s/ DAVID J. FIELD Administrative Trustee September 30, 1999 - --------------------------------------------- David J. Field /s/ JOHN C. DONLEVIE Administrative Trustee September 30, 1999 - --------------------------------------------- John C. Donlevie
II-8 275 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Entercom Communications Corp.: We have audited the accompanying consolidated financial statements of Entercom Communications Corp. and subsidiaries (the "Company") as of September 30, 1997 and 1998, and for each of the three years in the period ended September 30, 1998, and have issued our report thereon dated December 31, 1998 (January 26, 1999 as to Notes 10 and 13) (which expresses an unqualified opinion and includes an explanatory paragraph relating to the restatement described in Note 14) (included elsewhere in this Registration Statement). Our audits also included the financial statement schedule listed in Item 16(b) of this Registration Statement. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Deloitte & Touche LLP Philadelphia, Pennsylvania December 31, 1998 (January 26, 1999 as to Notes 10 and 13) 276 SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS ENTERCOM COMMUNICATIONS CORP. YEARS ENDED SEPTEMBER 30, 1996, 1997, AND 1998
ADDITIONS BALANCE AT CHARGED TO DEDUCTIONS BEGINNING COSTS AND FROM BALANCE AT ALLOWANCE FOR DOUBTFUL ACCOUNTS OF PERIOD EXPENSES RESERVES(A) END OF PERIOD - ------------------------------- ---------- ---------- ----------- ------------- 1996.......................... $ 63,524 $318,599 $265,283 $116,840 1997.......................... 116,840 548,726 373,566 292,000 1998.......................... 292,000 920,381 845,381 367,000
- --------------- (A) Uncollectible accounts written off. 277 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE 1.01 Form of Underwriting Agreement(1) 3.01 Amended and Restated Articles of Incorporation of the Registrant(3) 3.02 Form of Amended and Restated Bylaws of the Registrant(3) 4.01 Certificate of Trust of Entercom Communications Capital Trust(1) 4.02 Form of Amended and Restated Declaration of Trust of Entercom Communications Capital Trust among Entercom Communications Corp. as Sponsor, Wilmington Trust Company as Property Trustee and Delaware Trustee and Joseph M. Field, David J. Field and John C. Donlevie as Administrative Trustees(1) 4.03 Form of Indenture for the Convertible Subordinated Debentures due 2014 among Entercom Communications Corp. as Issuer and Wilmington Trust Company as Indenture Trustee(1) 4.04 Form of Entercom Communications Capital Trust % Convertible Preferred Securities (included in Exhibit 4.02)(1) 4.05 Form of Entercom Communications Corp. Convertible Subordinated Debentures due 2014 (included in Exhibit 4.03)(1) 4.06 Form of Preferred Securities Guarantee between Entercom Communications Corp. as Guarantor, and Wilmington Trust Company as Guarantee Trustee(1) 4.07 Form of Common Securities Guarantee by Entercom Communications Corp. as Guarantor(1) 5.01 Opinion of Latham & Watkins as to the legality of the Convertible Subordinated Debentures and the Preferred Securities Guarantee(1) 5.02 Opinion of Morris, Nichols, Arsht & Tunnell as to the legality of the Convertible Preferred Securities and as to other matters of Delaware law(1) 5.03 Opinion of John C. Donlevie, Esq. as to the legality of the Class A common stock issuable upon conversion of the TIDES(1) 8.01 Opinion of Latham & Watkins as to certain tax matters(1) 10.01 Registration Rights Agreement, dated as of May 21, 1996, between the Registrant and Chase Equity Associates, L.P.(3) 10.02 Employment Agreement, dated June 25, 1993, between the Registrant and Joseph M. Field, as amended(3) 10.03 Employment Agreement, dated December 17, 1998, between the Registrant and David J. Field, as amended(3) 10.04 Employment Agreement, dated December 17, 1998, between the Registrant and John C. Donlevie, as amended(3) 10.05 Employment Agreement, dated November 13, 1998, between the Registrant and Stephen F. Fisher(3) 10.06 Entercom 1998 Equity Compensation Plan(3)
278
EXHIBIT NUMBER DESCRIPTION PAGE 10.07 Loan Agreement, dated as of February 13, 1998, among the Registrant, Key Corporate Capital Inc., as administrative agent, Bank of America, National Trust and Savings Association, as syndication agent, and certain banks listed therein, as amended by the First Amendment to Loan Agreement dated October 8, 1998(3) 10.08 Amended and Restated Asset Purchase Agreement, dated as of August 20, 1999, among the Registrant, Sinclair Communications, Inc., WCGV, Inc., Sinclair Radio of Milwaukee Licensee, LLC, Sinclair Radio of New Orleans Licensee, LLC, Sinclair Radio of Memphis, Inc., Sinclair Radio of Memphis Licensee, Inc., Sinclair Properties, LLC, Sinclair Radio of Norfolk/Greensboro Licensee, L.P., Sinclair Radio of Buffalo, Inc., Sinclair Radio of Buffalo Licensee, LLC, WLFL, Inc., Sinclair Radio of Greenville Licensee, Inc., Sinclair Radio of Wilkes-Barre, Inc. and Sinclair Radio of Willkes-Barre Licensee, LLC.(5) 10.09 Asset Purchase Agreement, dated as of August 20, 1999, among the Registrant, Sinclair Communications, Inc., Sinclair Media III, Inc. and Sinclair Radio of Kansas City Licensee, LLC.(5) 10.10 Asset Purchase Agreement, dated as of January 26, 1998, among the Registrant, Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc.(3) 10.11 Time Brokerage Agreement, dated as of January 26, 1998, among the Registrant, Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc.(3) 10.12 Asset Purchase Agreement, dated as of August 13, 1998, among the Registrant, CBS Radio, Inc. and CBS Radio License, Inc.(3) 10.13 Time Brokerage Agreement, dated as of August 13, 1998, among the Registrant, CBS Radio, Inc., and CBS Radio License, Inc.(3) 10.14 Asset Purchase Agreement, dated as of August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition II, Inc. and the Registrant(3) 10.15 Time Brokerage Agreement, dated as of August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition II, Inc. and the Registrant(3) 12.01 Statement Regarding Computation of Ratios(1) 21.01 Information Regarding Subsidiaries of the Registrant(1) 23.01 Consent of Deloitte & Touche LLP, Philadelphia, PA(1) 23.02 Consent of Deloitte & Touche LLP, Boston, MA(1) 23.03 Consent of Arthur Andersen LLP, Baltimore, MD(1) *24.01 Power of Attorney (included on signature page of this Registration Statement) 25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Wilmington Trust Company, as Indenture Trustee under the Convertible Subordinated Debentures Indenture due 2014(1)
279
EXHIBIT NUMBER DESCRIPTION PAGE 25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Wilmington Trust Company, as Property Trustee under the Amended and Restated Declaration of Trust(1) 25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Wilmington Trust Company, as Preferred Guarantee Trustee under the Preferred Securities Guarantee(1)
- ------------------------- * Previously filed. (1) Filed herewith. (2) To be filed by amendment. (3) Incorporated by reference to Entercom's Registration Statement on Form S-1. (File No. 333-61381) (4) Incorporated by reference to Entercom's Quarterly Report on Form 10-Q. (File No. 001-14461) (5) Incorporated by reference to Entercom's Registration Statement on Form S-1. (File No. 333-86397) EX-1.01 2 FORM OF UNDERWRITING AGREEMENT 1 EXHIBIT 1.01 3,000,000 TIDES(SM) ENTERCOM COMMUNICATIONS CAPITAL TRUST ___% CONVERTIBLE PREFERRED SECURITIES, TERM INCOME DEFERRABLE EQUITY SECURITIES (TIDES)SM (LIQUIDATION AMOUNT $50 PER EACH OF THE TIDES) GUARANTEED TO THE EXTENT SET FORTH IN THE GUARANTEE AGREEMENT BY, AND CONVERTIBLE INTO CLASS A COMMON STOCK OF, ENTERCOM COMMUNICATIONS CORP. UNDERWRITING AGREEMENT Dated: September __, 1999 CREDIT SUISSE FIRST BOSTON CORPORATION BANC OF AMERICA SECURITIES LLC DEUTSCHE BANK SECURITIES INC. As Representatives of the Several Underwriters, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, N.Y. 10010-3629 Ladies and Gentlemen: 1. Introductory. Entercom Communications Capital Trust, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), and Entercom Communications Corp., a Pennsylvania corporation, as sponsor of the Trust and as guarantor (the "Company"), propose, subject to the terms and conditions stated herein, that the Trust issue and sell an aggregate of 3,000,000 ___% Convertible Preferred Securities, Term Income Deferrable Equity Securities, or TIDES (the "Firm Securities"). The Company and the Trust also propose that the Trust sell to the several Underwriters named in Schedule A hereto (the "Underwriters"), at the option of the Underwriters, an aggregate of not more than 450,000 additional TIDES, as set forth below (such additional shares being hereinafter referred to as the "Optional Securities"). The Firm Securities and the Optional Securities are herein collectively called the "Offered Securities." 1 2 The TIDES represent undivided beneficial ownership interests in the assets of the Trust, guaranteed by the Company as to the payment of distributions, and as to payments on liquidation or redemption, to the extent set forth in a guarantee agreement (the "Guarantee") between the Company and Wilmington Trust Company, as trustee (the "Guarantee Trustee"). The proceeds of the sale by the Trust of the Offered Securities and its common securities (the "Common Securities") are to be used to purchase the Convertible Subordinated Debentures due 2014 (the "Debentures") of the Company, which will be issued pursuant to an Indenture (the "Indenture") between the Company and Wilmington Trust Company, as trustee (the "Debenture Trustee"). The TIDES are convertible into shares of Class A Common Stock, par value $.01 per share (the "Company Common Stock"), of the Company. Each of the Trust and the Company hereby agrees with the several Underwriters as follows: 2. Representations and Warranties of the Trust and the Company. (a) Each of the Trust and the Company jointly and severally represents and warrants to, and agrees with, the several Underwriters that: (i) A registration statement (No. 333-86843) relating to the Offered Securities, including a form of prospectus, has been filed with the Securities and Exchange Commission (the "Commission") and either (A) has been declared effective under the Securities Act of 1933, as amended (the "Act") and is not proposed to be amended or (B) is proposed to be amended by amendment or post-effective amendment. If such registration statement (an "initial registration statement") has been declared effective, either (A) an additional registration statement (an "additional registration statement") relating to the Offered Securities may have been filed with the Commission pursuant to Rule 462(b) ("Rule 462(b)") under the Act and, if so filed, has become effective upon filing pursuant to such Rule and all the Offered Securities have been duly registered under the Act pursuant to the initial registration statement and, if applicable, the additional registration statement or (B) such an additional registration statement is proposed to be filed with the Commission pursuant to Rule 462(b) and will become effective upon filing pursuant to such Rule and upon such filing all the Offered Securities will have been duly registered under the Act pursuant to the initial registration statement and such additional registration statement. If the Company and the Trust do not propose to amend the initial registration statement or if an additional registration statement has been filed and the Company and the Trust do not propose to amend it, and if any post-effective amendment to either registration statement has been filed with the Commission prior to the execution and delivery of this Agreement, the most recent amendment (if any) to each registration statement has been declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act or, in the case of the additional registration statement, Rule 462(b). For purposes of this Agreement, "Effective Time" with respect to the initial registration statement or, if filed prior to the execution and delivery of this Agreement, the additional registration statement means (A) if the Company and the Trust have advised the Representatives that they do not propose to amend such registration statement, the date and time as of which such registration statement, or the most recent post-effective amendment 2 3 thereto (if any) filed prior to the execution and delivery of this Agreement, was declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c), or (B) if the Company and the Trust have advised the Representatives that they propose to file an amendment or post-effective amendment to such registration statement, the date and time as of which such registration statement, as amended by such amendment or post-effective amendment, as the case may be, is declared effective by the Commission. If an additional registration statement has not been filed prior to the execution and delivery of this Agreement but the Company and the Trust have advised the Representatives that they propose to file one, "Effective Time" with respect to such additional registration statement means the date and time as of which such registration statement is filed and becomes effective pursuant to Rule 462(b). "Effective Date" with respect to the initial registration statement or the additional registration statement (if any) means the date of the Effective Time thereof. The initial registration statement, as amended at its Effective Time, including all information contained in the additional registration statement (if any) and deemed to be a part of the initial registration statement as of the Effective Time of the additional registration statement pursuant to the General Instructions of the Form on which it is filed and including all information (if any) deemed to be a part of the initial registration statement as of its Effective Time pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is hereinafter referred to as the "Initial Registration Statement." The additional registration statement, as amended at its Effective Time, including the contents of the initial registration statement incorporated by reference therein and including all information (if any) deemed to be a part of the additional registration statement as of its Effective Time pursuant to Rule 430A(b), is hereinafter referred to as the "Additional Registration Statement." The Initial Registration Statement and the Additional Registration Statement are hereinafter referred to collectively as the "Registration Statements" and individually as a "Registration Statement." The form of prospectus relating to the Offered Securities, as first filed with the Commission pursuant to and in accordance with Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is required) as included in a Registration Statement, is hereinafter referred to as the "Prospectus." No document has been or will be prepared or distributed in reliance on Rule 434 under the Act. (ii) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement: (A) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission ("Rules and Regulations") and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (B) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement conformed or will conform, in all material respects to the requirements of the Act and the Rules and Regulations and did not include, or will not include, any untrue statement of a material fact and did not omit, or will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (C) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement is prior to the execution and 3 4 delivery of this Agreement, the Additional Registration Statement each conforms, and at the time of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration Statement in which the Prospectus is included, and on each Closing Date (as hereinafter defined) each Registration Statement and the Prospectus will conform, in all material respects to the requirements of the Act and the Rules and Regulations, and neither of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which such statements were made) not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and the Prospectus will conform in all material respects to the requirements of the Act and the Rules and Regulations, neither of such documents will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which such statements were made) not misleading, and no Additional Registration Statement has been or will be filed. The two preceding sentences do not apply to statements in or omissions from a Registration Statement or the Prospectus based upon written information furnished to the Company and the Trust by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(b) hereof. (iii) The Trust has been duly created and is validly existing as a statutory business trust in good standing under the Delaware Business Trust Act (the "Trust Act") with the power and authority to own property and conduct its business as described in the Prospectus, and has conducted and will conduct no business other than the transactions contemplated by this Agreement and as described in the Prospectus; the Trust is not a party to or bound by any agreement or instrument other than this Agreement, the Amended and Restated Declaration of Trust (the "Declaration") between the Company and the trustees named therein (the "Issuer Trustees" and, collectively with the Guarantee Trustee and the Debenture Trustee, the "Trustees") and the agreements and instruments contemplated by the Declaration and the Prospectus; the Trust has no liabilities or obligations other than those arising out of the transactions contemplated by this Agreement and the Declaration and as described in the Prospectus; and the Trust is not a party to or subject to any action, suit or proceeding of any nature. (iv) The Company has been duly incorporated and is a validly existing corporation in good standing under the laws of the Commonwealth of Pennsylvania, with power and authority (corporate and other) to own, lease or operate its properties and conduct its business as described in the Prospectus; and the Company is duly qualified to do business as a foreign corporation and is in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the 4 5 condition (financial or other), business, properties, prospects or results of operations ("Material Adverse Effect") of the Company and its subsidiaries taken as a whole. (v) Each subsidiary of the Company has been duly incorporated or organized, as the case may be, and is validly existing and in good standing under the laws of the jurisdiction of its organization, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; and each subsidiary of the Company is duly qualified to do business as a foreign corporation, limited liability company or business trust, as applicable, and is in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect on the Company and its subsidiaries taken as a whole; all of the issued and outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued, is fully paid and nonassessable and is owned of record and beneficially by the Company or by a subsidiary of the Company; and the capital stock or other equity interest of each subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects, except as disclosed in the Prospectus. (vi) The Offered Securities have been duly authorized by the Trust, and when the Offered Securities have been delivered and paid for in accordance with this Agreement on each Closing Date (as defined below), such Offered Securities will have been validly issued, fully paid and nonassessable preferred undivided beneficial interests in the assets of the Trust and will conform to the description thereof contained in the Prospectus; the issuance of the Offered Securities is not subject to preemptive or other similar rights; the Offered Securities will have the rights set forth in the Declaration, and the Offered Securities when issued and delivered against payment therefor as provided herein will be, and the Declaration, when duly executed and delivered, will be, valid and binding obligations of the Trust. (vii) The Common Securities have been duly and validly authorized by the Trust and upon delivery by the Trust to the Company against payment therefor as described in the Prospectus, will be duly and validly issued and fully paid undivided beneficial interests in the assets of the Trust and will conform to the description thereof contained in the Prospectus; the issuance of the Common Securities is not subject to preemptive or other similar rights; and all of the issued and outstanding Common Securities of the Trust will be directly owned by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. (viii) The Guarantee, the Debentures, the Declaration, the Indenture, the Common Securities Purchase Agreement between the Trust and the Company (the "Common Securities Purchase Agreement") and the Common Securities Guarantee Agreement by the Company for the benefit of the holders of the Common Securities (the Guarantee, the Debentures, the Declaration, the Indenture, the Common Securities Purchase Agreement and the Common Securities Guarantee Agreement being collectively referred to as the 5 6 "Company Agreements") have each been duly authorized and when validly executed and delivered by the Company and, in the case of the Guarantee, by the Guarantee Trustee, in the case of the Declaration, by the Issuer Trustees, in the case of the Indenture, by the Debenture Trustee, in the case of the Common Securities Purchase Agreement, by the Trust and, in the case of the Debentures, when validly issued by the Company and validly authenticated and delivered by the Debenture Trustee and paid for by the Trust, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; the Debentures are entitled to the benefits of the Indenture; and the Company Agreements will conform in all material respects to the descriptions thereof in the Prospectus. (ix) When the Offered Securities are delivered and paid for pursuant to this Agreement on each Closing Date (as defined below), such Offered Securities will be exchangeable for Debentures which will be convertible into shares of Company Common Stock ("Underlying Shares") in accordance with the Declaration; the Underlying Shares initially issuable upon conversion of such Offered Securities have been duly authorized and reserved for issuance upon such conversion and, when issued upon such conversion, will be validly issued, fully paid and nonassessable; the outstanding shares of Company Common Stock conform to the description thereof contained in the Prospectus; and the stockholders of the Company have no preemptive rights with respect to the Offered Securities, the Debentures or the Underlying Shares. (x) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Trust or the Company and any person that would give rise to a valid claim against the Trust or the Company or any Underwriter for a brokerage commission, finder's fee or other like payment in connection with this offering. (xi) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Trust or the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to a Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act. (xii) The Underlying Shares will be approved for listing on The New York Stock Exchange prior to the Closing Date subject to official notice of issuance. (xiii) Except as disclosed in the Prospectus, no consent, approval, authorization, or order of, or filing with, any governmental agency or body (including, without limitation, the Federal Communications Commission (the "FCC")) or any court is required to be obtained or made by the Trust or the Company for the consummation by the Trust or the Company of 6 7 the transactions contemplated by this Agreement and the Company Agreements in connection with the issuance and sale of the Offered Securities by the Trust, the distribution of the Debentures pursuant to or upon liquidation of the Trust, the conversion of Debentures into Company Common Stock, the issuance by the Company of the Guarantee or the purchase of the Debentures by the Trust, except such as have been obtained and made under the Act and such as may be required under state securities laws and except that a copy of this Agreement is to be filed with the FCC within 30 days of its execution. (xiv) The execution, delivery and performance of this Agreement by the Trust, the issue and sale of Offered Securities and compliance with the terms thereof, the distribution of the Debentures pursuant to or upon liquidation of the Trust, the purchase of the Debentures by the Trust and the consummation by the Trust of the transactions contemplated herein will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Trust or any of its properties, or any agreement or instrument to which the Trust is a party or by which the Trust is bound or to which any of the properties of the Trust is subject, or the Declaration, and the Trust has full power and authority to authorize, issue and sell the Offered Securities as contemplated by this Agreement. (xv) The execution, delivery and performance by the Company of this Agreement and the Company Agreements, the consummation by the Company of the transactions contemplated herein and therein, the issuance by the Company of the Guarantee, the distribution of the Debentures pursuant to or upon liquidation of the Trust, the conversion of Debentures into Company Common Stock and the sale of the Debentures to the Trust will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject, assuming that in connection with the consummation of such transactions, (i) Joseph M. Field continues to hold in his own name and exercise voting control of the securities of the Company representing majority voting control of the Company; (ii) each purchaser of the Offered Securities is qualified under the Communications Laws to hold such interest; and (iii) not more than 25% of the capital stock of the Company in the aggregate is owned by foreign governments, alien individuals or entities or representatives thereof, except where the breach or violation would not have a Material Adverse Effect on the Company and its subsidiaries taken as a whole; or the charter or by-laws of the Company or any such subsidiary, and the Company has full power and authority to authorize, issue and sell the Debentures and to authorize and issue the Guarantee as contemplated by this Agreement. (xvi) This Agreement has been duly authorized, executed and delivered by the Trust and the Company. 7 8 (xvii) Except as disclosed in the Prospectus, the Trust will on the Closing Date have good and valid title to all the Debentures, free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by the Trust. (xviii) Except as disclosed in the Prospectus, the Company and its subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them; and except as disclosed in the Prospectus, the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases or subleases with no exceptions that, individually, would materially interfere with the aggregate use of such properties in any one radio market. (xix) The Company and its subsidiaries possess adequate certificates, authorities or permits and hold all necessary licenses (including, without limitation, licenses issued by the FCC) issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, license, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect on the Company and its subsidiaries taken as a whole. (xx) Except as disclosed in the Prospectus, no labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent that might have a Material Adverse Effect on the Company and its subsidiaries taken as a whole. (xxi) The Company and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "Intellectual Property Rights") necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property Rights that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect on the Company and its subsidiaries taken as a whole. (xxii) The Company and its subsidiaries have filed all necessary federal, state, local and foreign income and franchise tax returns, except where the failure to file such returns would not have a Material Adverse Effect on the Company and its subsidiaries taken as a whole and the Company and its subsidiaries have paid all taxes shown as due thereon; and other than tax deficiencies that the Company or its subsidiaries are contesting in good faith and for which adequate reserves have been provided, there is no tax deficiency that has been 8 9 asserted against the Company or its subsidiaries that would, individually or in the aggregate, have a Material Adverse Effect on the Company and its subsidiaries taken as a whole. (xxiii) Neither the Company nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "Environmental Laws"), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would individually or in the aggregate reasonably be expected to have a Material Adverse Effect on the Company and its subsidiaries taken as a whole; and the Company is not aware of any pending investigation which might reasonably be expected to lead to such a claim. (xxiv) Except as disclosed in the Prospectus, there are no pending actions, suits, proceedings, inquiries or investigations before or brought by any court or governmental agency or body (including, without limitation, the FCC) against or, to the knowledge of the Company, affecting the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect on the Company and its subsidiaries taken as a whole, or would materially and adversely affect the ability of the Company to perform its obligations under this Agreement, or which are otherwise material in the context of the offer and sale of the Offered Securities by the Company; and no such actions, suits or proceedings are threatened or, to the Company's knowledge, contemplated. (xxv) The financial statements included in each Registration Statement and the Prospectus (other than the Sinclair Financials, 1998 Heritage Financials, the 1997 Heritage Financials and the CBS Financials defined in paragraph (xxvi) below) present fairly the financial position of the Company, its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and except as otherwise disclosed in the Prospectus, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis; and the schedules included in each Registration Statement present fairly the information required to be stated therein; and the assumptions used in preparing the pro forma financial statements included in each Registration Statement and the Prospectus provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts. (xxvi) After due inquiry, the Company has no reason to believe that (a) the financial statements and related schedules and notes of Sinclair Broadcast Group and Subsidiaries - 9 10 Radio Division (the "Sinclair Financials") included in the Registration Statement and Prospectus do not present fairly the consolidated financial position, results of operations and cash flows for the periods shown and changes in financial position of Sinclair Broadcast Group and Subsidiaries - Radio Division on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; (b) the financial statements and related schedules and notes of the Portland, Oregon and Rochester, New York Radio Groups of Heritage Media Services, Inc. - Broadcasting Segment (the "1998 Heritage Financials") included in the Registration Statement and Prospectus do not present fairly the consolidated financial position, results of operations and cash flows for the periods shown and changes in financial position of Portland, Oregon and Rochester, New York Radio Groups of Heritage Media Services, Inc. - Broadcasting Segment on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; (c) the financial statements and related schedules and notes of Heritage Media Services, Inc. - Broadcasting Segment - a Division of Heritage Media Corporation (the "1997 Heritage Financials") included in the Registration Statement and Prospectus do not present fairly the consolidated financial position, results of operations and cash flows for the periods shown and changes in financial position of Heritage Media Services, Inc. - Broadcasting Segment - a Division of Heritage Media Corporation on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; (d) the financial statements and related schedules and notes of the Boston Radio Market of CBS Radio, Inc. (the "CBS Financials") included in the Registration Statement and Prospectus do not present fairly the consolidated financial position, results of operations and cash flows for the periods shown and changes in financial position of the Boston Radio Market of CBS Radio, Inc. on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; or (e) the Sinclair Financials, 1998 Heritage Financials, the 1997 Heritage Financials and the CBS Financials have not been prepared in accordance with generally accepted accounting principles consistently applied except as disclosed therein. (xxvii) Since the date of the latest audited financial statements included in the Prospectus there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties, prospects or results of operations of the Company and its subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Prospectus, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (xxviii) The statistical and market-related data included in the Prospectus are based on or derived from sources that the Company believes to be accurate and reliable. (xxix) Each of the Company and its subsidiaries (i) make and keep accurate books and records and (ii) maintain internal accounting controls that provide reasonable assurance that (A) transactions are executed in accordance with management's authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and 10 11 to maintain profitability for its assets, (C) access to its assets is permitted only in accordance with management's authorization and (D) the reported accountability for its assets is compared with existing assets at reasonable intervals. (xxx) Neither the Trust nor the Company is and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as defined in the Investment Company Act of 1940, as amended. (xxxi) To the knowledge of the Trust and the Company, each of Deloitte & Touche LLP and Arthur Andersen LLP, which firms have examined the consolidated financial statements as set forth in their reports included in the Prospectus, is an independent public accounting firm within the meaning of the Act and the rules and regulations thereunder. (xxxii) The Amended and Restated Asset Purchase Agreement, dated August 20, 1999, by and among various subsidiaries of Sinclair and the Company and the Asset Purchase Agreement dated August 20, 1999, by and among various subsidiaries of Sinclair and the Company, have each been duly authorized, executed and delivered by the Company and each constitutes a validly and legally binding obligation of the Company, each enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles, and each remains in full force and effect. 3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Trust and the Company agree that the Trust shall sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Trust, at a purchase price of $50.00 per TIDES, plus accrued and unpaid distributions from the First Closing Date (as hereinafter defined) the number of Firm Securities set forth opposite the name of such Underwriter in Schedule A hereto. The Trust will deliver against payment of the purchase price the Firm Securities in the form of one or more permanent global Securities in definitive form (the "Form Global Securities") deposited with the Trustee as custodian for The Depository Trust Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC. Interests in any permanent global Securities will be held only in book-entry form through DTC, except in the limited circumstances described in the Prospectus. Payment for the Firm Securities shall be made by the Underwriters in Federal (same day) funds by official bank check or checks or wire transfer to an account at a bank acceptable to Credit Suisse First Boston Corporation ("CSFBC") drawn to the order of Entercom Communications Corp. at the office of CSFBC, Eleven Madison Avenue, New York, New York, at 10:00 A.M., New York time, on _______ __, 1999, or at such other time not later than seven full business days thereafter as CSFBC, the Company and the Trust determine, such time being herein referred to as the "First Closing Date," against delivery to the Trustee as custodian for DTC of the 11 12 Firm Global Securities representing all the Firm Securities. The Firm Global Securities will be made available for checking at the above office of CSFBC at least 24 hours prior to the First Closing. In addition, upon written notice from CSFBC given to the Trust and the Company from time to time not more than 30 days subsequent to the date of the Prospectus, the Underwriters may purchase all or less than all of the Optional Securities at the purchase price per Offered Security (plus accrued and unpaid distributions thereon at the rate borne by the Offered Securities to the related Option Closing Date (as defined below)) to be paid for the Firm Securities. The Trust and the Company agree that the Trust shall sell to the Underwriters the number of Optional Securities specified in such notice and the Underwriters agree, severally and not jointly, to purchase such Optional Securities. Such Optional Securities shall be purchased for the account of each Underwriter in the same proportion as the number of Firm Securities set forth opposite such Underwriter's name bears to the total number of Firm Securities (subject to adjustment by CSFBC to eliminate fractions) and may be purchased by the Underwriters only for the purpose of covering over-allotments made in connection with the sale of the Firm Securities. No Optional Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised from time to time, and to the extent not previously exercised may be surrendered and terminated at any time upon notice by CSFBC to the Trust and the Company. Each time for the delivery of and payment for the Optional Securities, being herein referred to as an "Optional Closing Date," which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a "Closing Date"), shall be determined by CSFBC but shall be not later than five full business days after written notice of election to purchase Optional Securities is given. On the applicable Closing Date, the Trust will deliver against payment of the purchase price the optional Securities being purchased on each Optional Closing Date in the form of one or more permanent global securities in definitive form (each, an "Optional Global Security") deposited with the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC. Payment for such Optional Securities shall be made by the Underwriters in Federal (same day) funds by official bank check or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to the order of Entercom Communications Corp. at the office of CSFBC, Eleven Madison Avenue, New York, New York, against delivery to the Trustee as custodian for DTC of the Optional Global Securities representing all of the Optional Securities being purchased on such Optional Closing Date. As compensation for the Underwriters' commitments, the Company will pay to CSFBC the sum of $1.50 per TIDES times the total number of Offered Securities purchased by the Underwriters on each Closing Date as commissions for the sale of the Offered Securities under this Agreement. Such payment will be made on each Closing Date with respect to the Offered Securities purchased on such Closing Date. 12 13 4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Offered Securities for sale to the public as set forth in the Prospectus. 5. Certain Agreements of the Trust and the Company. Each of the Trust and the Company, jointly and severally, agrees with the several Underwriters that: (a) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Trust and the Company will file the Prospectus with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable and if consented to by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the second business day following the execution and delivery of this Agreement or (B) the fifteenth business day after the Effective Date of the Initial Registration Statement. The Trust and the Company will advise CSFBC promptly of any such filing pursuant to Rule 424(b). If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement and an additional registration statement is necessary to register a portion of the Offered Securities under the Act but the Effective Time thereof has not occurred as of such execution and delivery, the Trust and the Company will file the additional registration statement or, if filed, will file a post-effective amendment thereto with the Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on the date of this Agreement or, if earlier, on or prior to the time the Prospectus is printed and distributed to any Underwriter, or will make such filing at such later date as shall have been consented to by CSFBC. (b) The Trust and the Company will advise CSFBC promptly of any proposal to amend or supplement the initial or any additional registration statement as filed or the related prospectus or the Initial Registration Statement, the Additional Registration Statement (if any) or the Prospectus and will not effect such amendment or supplementation without CSFBC's consent; and the Trust and the Company will also advise CSFBC promptly of the effectiveness of each Registration Statement (if its Effective Time is subsequent to the execution and delivery of this Agreement) and of any amendment or supplementation of a Registration Statement or the Prospectus and of the institution by the Commission of any stop order proceedings in respect of a Registration Statement and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued. (c) If, at any time when a prospectus relating to the Offered Securities is required to be delivered under the Act in connection with sales by any Underwriter or dealer, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Act, the Trust and the Company will promptly notify CSFBC of such event and will promptly prepare and file with the Commission, at their own expense, an amendment or supplement 13 14 which will correct such statement or omission or an amendment which will effect such compliance. Neither CSFBC's consent to, nor the Underwriters' delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6 hereof. (d) As soon as practicable, but not later than the Availability Date (as defined below), the Company will make generally available to its securityholders an earnings statement covering a period of at least 12 months beginning after the Effective Date of the Initial Registration Statement (or, if later, the Effective Date of the Additional Registration Statement) which will satisfy the provisions of Section 11(a) of the Act. For the purpose of the preceding sentence, "Availability Date" means the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes such Effective Date, except that, if such fourth fiscal quarter is the last quarter of the Company's fiscal year, "Availability Date" means the 90th day after the end of such fourth fiscal quarter. (e) The Trust and the Company will furnish to the Representatives copies of each Registration Statement (five of which will be signed and will include all exhibits), each related preliminary prospectus, and, so long as a prospectus relating to the Offered Securities is required to be delivered under the Act in connection with sales by any Underwriter or dealer, the Prospectus and all amendments and supplements to such documents, in each case in such quantities as CSFBC requests. The Prospectus shall be so furnished on or prior to 3:00 P.M., New York time, on the business day following the later of the execution and delivery of this Agreement or the Effective Time of the Initial Registration Statement. All other such documents shall be so furnished as soon as available. The Trust and the Company will pay the expenses of printing and distributing to the Underwriters all such documents. (f) The Trust and the Company will arrange for the qualification of the Offered Securities for sale under the laws of such jurisdictions as CSFBC designates and will continue such qualifications in effect so long as required for the distribution of the Offered Securities. (g) During the period of five years hereafter, the Company will furnish to the Representatives and, upon request, to each of the other Underwriters, as soon as practicable after the end of each fiscal year, a copy of its annual report to shareholders for such year; and the Company will furnish to the Representatives (i) as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Securities Exchange Act of 1934, as amended, or mailed to shareholders, and (ii) from time to time, such other information concerning the Company as CSFBC may reasonably request, subject to the limitations under the Act and the Securities Exchange Act of 1934, as amended. (h) For a period of 90 days after the date of the public offering of the Offered Securities, the Trust and the Company will not offer, sell, contract to sell, pledge or 14 15 otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Act relating to, any additional Offered Securities or securities convertible into or exchangeable or exercisable for any Offered Securities, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of CSFBC. (i) The Company agrees with the several Underwriters that the Company will pay all expenses incident to the performance of the obligations of the Company and the Trust under this Agreement and the Company Agreements, including, without limitation, (i) the fees and expenses of the Trustees and the Issuer Trustees and their professional advisers; (ii) all expenses in connection with the execution, issue, authentication, packaging and delivery of the Offered Securities, the preparation and printing of this Agreement, the Company Agreements, the Offered Securities and the Prospectus and amendments and supplements thereto, and any other document relating to the issuance, offer, sale and delivery of the Offered Securities; (iii) any filing fees and other expenses (including reasonable fees and disbursements of counsel) incurred in connection with qualification of the Offered Securities for sale under the laws of such jurisdictions as CSFBC designates and the printing of memoranda relating thereto; (iv) the filing fee incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by the National Association of Securities Dealers, Inc. of the terms of the offering; (v) any travel expenses of the Company's officers and employees and any other expenses of the Company in connection with attending or hosting meetings with prospective purchasers of the Offered Securities, and for expenses incurred in distributing preliminary prospectuses and the Prospectus (including any amendments and supplements thereto) to the Underwriters. 6. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Securities on the First Closing Date and the Optional Securities to be purchased on each Optional Closing Date will be subject to the accuracy of the representations and warranties on the part of the Trust and the Company herein, to the accuracy of the statements of officers of the Trust and the Company made pursuant to the provisions hereof, to the performance by the Trust and the Company of their respective obligations hereunder and to the following additional conditions precedent: (a) The Representatives shall have received a letter, dated the date of delivery thereof (which, if the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, shall be on or prior to the date of this Agreement or, if the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement, shall be prior to the filing of the amendment or post-effective amendment to the registration statement to be filed shortly prior to such Effective Time), of Deloitte & Touche LLP and Arthur Andersen LLP confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating to the effect that: (i) in their opinion the financial statements and schedules examined by them 15 16 and included in the Registration Statements comply as to form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations; (ii) they have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in the Statement of Auditing Standards No. 71, Interim Financial Information, on the unaudited financial statements included in the Registration Statements; (iii) with respect to Deloitte & Touche LLP only, on the basis of a reading of the latest available interim financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) the unaudited financial statements included in the Registration Statements do not comply as to form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations or any material modifications should be made to such unaudited financial statements for them to be in conformity with generally accepted accounting principles; (B) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three business days prior to the date of this Agreement, there was any change in the capital stock or any increase in short-term indebtedness or long-term debt of the Company and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net assets, as compared with amounts shown on the latest balance sheet included in the Prospectus; or (C) for the period from the closing date of the latest income statement included in the Prospectus to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year, in consolidated net broadcast revenue, net income (loss) or in the total or per share amounts of consolidated income (loss) before extraordinary items; except in all cases set forth in clauses (A) and (B) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (iii) they have compared specified dollar amounts (or percentages derived 16 17 from such dollar amounts) and other financial information contained in the Registration Statements (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter. For purposes of this subsection, (i) if the Effective Time of the Initial Registration Statements is subsequent to the execution and delivery of this Agreement, "Registration Statements" shall mean the initial registration statement as proposed to be amended by the amendment or post-effective amendment to be filed shortly prior to its Effective Time, (ii) if the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement but the Effective Time of the Additional Registration Statement is subsequent to such execution and delivery, "Registration Statements" shall mean the Initial Registration Statement and the additional registration statement as proposed to be filed or as proposed to be amended by the post-effective amendment to be filed shortly prior to its Effective Time, and (iii) "Prospectus" shall mean the prospectus included in the Registration Statements. (b) If the Effective Time of the Initial Registration Statement is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or such later date as shall have been consented to by CSFBC. If the Effective Time of the Additional Registration Statement (if any) is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or, if earlier, the time the Prospectus is printed and distributed to any Underwriter, or shall have occurred at such later date as shall have been consented to by CSFBC. If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing Date, no stop order suspending the effectiveness of a Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Trust, the Company or the Representatives, shall be contemplated by the Commission. (c) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Trust, the Company or its subsidiaries which, in the judgment of a majority in interest of the Underwriters including the Representatives, is material and adverse and makes it impractical or inadvisable to proceed with completion of the public offering or the sale of 17 18 and payment for the Offered Securities; (ii) any downgrading in the rating of any debt securities or preferred stock of the Trust or the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities or preferred stock of the Trust or the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any suspension or limitation of trading in securities generally on The New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (iv) any banking moratorium declared by U.S. Federal, New York or Pennsylvania authorities; or (v) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Underwriters including the Representatives, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the Offered Securities. (d) The Representatives shall have received an opinion, dated such Closing Date, of Latham & Watkins, counsel for the Company, to the effect that: (i) Based solely on certificates from public officials, such counsel confirms that the Company is qualified to do business in those jurisdictions set forth on Schedule A hereto. (ii) Except as described in the Prospectus, to such counsel's knowledge, there are no outstanding options, warrants or other rights calling for the issuance of, or any commitment, plan or arrangement to issue, any shares of capital stock of the Company or any security convertible into or exchangeable or exercisable for any capital stock of the Company. (iii) Except as described in the Prospectus, to such counsel's knowledge, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act. (iv) No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by the Company for the consummation of the transactions contemplated by this Agreement or the Company Agreements in connection with the sale of the Offered Securities by 18 19 the Company, except such as have been obtained and made under the Act and such as may be required under state securities laws; provided, however, that such counsel need not express an opinion as to any consents, approvals, authorizations or filings that may be required by the FCC or under the Communications Act of 1934. (v) The issuance and sale of the Offered Securities, the Common Securities and the Debentures and the conversion of the Debentures into Common Stock of the Company pursuant to this Agreement and the Company Agreements have been duly authorized and will not result in any violation by the Company of any federal or New York statute, rule or regulation applicable to the Company (other than federal or state securities laws, which are specifically addressed elsewhere therein), or in the breach of or a default under any of the agreements filed as an exhibit to the Registration Statement to which the Company or any of its subsidiaries is a party; provided, however, that such counsel need not express an opinion with respect to any requirements of the FCC or under the Communications Act of 1934; (vi) Upon due authorization, execution and delivery by the Company, and the Trustee, the Indenture will be a legally valid and binding agreement of the Company, enforceable against the Company in accordance with its terms; (vii) The Debentures, when executed and authenticated in accordance with the terms of the Indenture and delivered to, and paid for by, the Trust will be the legally valid and binding obligations of the Company, enforceable against the Company in accordance with its terms and will be entitled to the benefits provided by the Indenture; (viii) Upon due authorization, execution and delivery in accordance with its terms by the Company and the Guarantee Trustee, and upon due execution, authentication and delivery of the Debentures and upon payment therefor, the Guarantee will be a legally valid and binding obligation of the Company, enforceable against the Company in accordance with its terms; (ix) The Initial Registration Statement and the Additional Registration Statement, if any, have become effective under the Act, and, to the best of the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued under the Act and no proceedings for that purpose have been initiated or, to the best of such counsel's knowledge, pending, contemplated or threatened by the Commission; and any required filing of the Prospectus pursuant to Rule 424(b) under the Act has been made in accordance with Rule 430A under the Act; (x) The Registration Statement and the Prospectus comply as to form in all material respects with the requirements for registration statements on Form S-1 19 20 under the Act and the rules and regulations thereunder, it being understood that such counsel need express no opinion as to (A) the financial statements or other financial data contained in the Registration Statements or the Prospectus or (B) any requirements of the FCC or the Communications Act of 1934; and (xi) The descriptions in the Registration Statements and Prospectus of statutes, legal and governmental proceedings and contracts and other documents are accurate and fairly present the information required to be shown, other than the description of the Pennsylvania Business Corporation Code, as to which such counsel need not express an opinion, and, to the best of such counsel's knowledge, there are no legal or governmental proceedings required to be described in the Registration Statement or the Prospectus which are not described as required or of any contracts or documents of a character required to be described in a Registration Statement or the Prospectus or to be filed as exhibits to a Registration Statement which are not described and filed as required. (xii) Neither the Trust nor the Company is and, after giving effect to the offering and sale of the Offered Securities and the Debentures delivered on such Closing Date and the application of the proceeds thereof as described in the Registration Statement, will not be subject to registration as an investment company under the Investment Company Act. Such counsel shall also indicate that no facts came to its attention that caused it to believe that the Registration Statement, at the time it became effective or on the Closing Date, contained an untrue statement of fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading, or that the Prospectus, as of its date and the Closing Date contained an untrue statement of fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The foregoing opinion may be limited to the federal securities laws of the United States of America, the laws of the State of New York, and counsel rendering the foregoing opinion may rely as to questions of fact upon the representations of the Company set forth in this Agreement and upon certificates of officers of the Company and of government officials. In addition, counsel may state that it has made no special inquiry or investigation in respect of opinions that are rendered to the knowledge of such counsel. (e) The Representatives shall have received an opinion, dated such Closing Date, of Morris, Nichols, Arsht & Tunnell, special Delaware counsel to the Trust and the Company, to the effect that: 20 21 (i) The Trust has been duly created and is validly existing as a business trust in good standing under the laws of the State of Delaware. All filings required under the Business Trust Act with respect to the creation and valid existence of the Trust as a Delaware business trust have been made. Under the Business Trust Act and the Declaration, the Trust has all requisite business trust power and authority to own its property and conduct its business as described in the Prospectus. (ii) Under the Business Trust Act and the Declaration, the Trust has requisite business trust power and authority to authorize, issue and sell the Offered Securities and the Common Securities as contemplated by this Agreement, the Common Securities Purchase Agreement, the Prospectus and the Declaration and to execute, deliver and perform its obligations under this Agreement and the Common Securities Purchase Agreement. (iii) The Offered Securities have been duly authorized for issuance by the Declaration and, when issued, executed, authenticated, delivered and paid for in accordance with the terms of the Declaration and the terms of this Agreement, will be fully paid and, subject to the limitation set forth in paragraph (v) below, non-assessable undivided beneficial interests in the assets of the Trust and will entitle the holders thereof to the benefits of the Declaration except to the extent that enforcement of the Declaration may be limited by (a) bankruptcy, insolvency, receivership, liquidation, fraudulent conveyance, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and remedies, (b) general principles of equity (regardless of whether considered and applied in a proceeding in equity or at law), and (c) considerations of public policy and the effect of applicable law relating to fiduciary duties. Under the Declaration and the Business Trust Act, the issuance of the Offered Securities and the Common Securities is not subject to preemptive rights. (iv) The Declaration is a legal, valid and binding obligation of the Company, and is enforceable against the Company in accordance with its terms, subject to the effect upon the Declaration of (a) bankruptcy, insolvency, receivership, liquidation, fraudulent conveyance, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and remedies, (b) general principles of equity (regardless of whether considered and applied in a proceeding in equity or at law), and (c) considerations of public policy and the effect of applicable law relating to fiduciary duties. (v) Each holder of Offered Securities, in such capacity, will be entitled to the same limitation of personal liability as that extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware, provided, however, we express no opinion with respect to the liability of any holder of Offered Securities who is, was or may become a named Trustee of the Trust. We note, however, that the holders of the Offered Securities 21 22 may be required to make payment or provide indemnity or security as set forth in the Declaration. (vi) Under the Declaration and the Business Trust Act, the execution and delivery by the Trust of this Agreement and the Common Securities Purchase Agreement, and the performance of its obligations thereunder, have been duly authorized by all necessary trust action on the part of the Trust. (vii) No consent, approval, authorization or order of, or filing with, any governmental agency or body, or any court, of the State of Delaware is required for the performance of this Agreement, the Guarantee, the Declaration, the Indenture, the Common Securities Purchase Agreement and the Common Securities Guarantee Agreement, the issuance and sale of the Offered Securities, the Common Securities and the Debentures, the distribution of the Debentures pursuant to or upon dissolution of the Trust in accordance with the Declaration (other than dissolution pursuant to judicial order or supervision) and the conversion of Debentures into Common Stock of the Company. (viii) The execution, delivery and performance of this Agreement, the Guarantee, the Declaration, the Indenture, the Common Securities Purchase Agreement and the Common Securities Guarantee Agreement, the issuance and sale of the Offered Securities, the Common Securities and the Debentures, the distribution of the Debentures pursuant to or upon dissolution of the Trust in accordance with the Declaration (other than dissolution pursuant to judicial order or supervision) and the conversion of Debentures into Common Stock of the Company will not violate any statute or any rule, regulation or, after due inquiry on the day immediately preceding closing, limited to, and solely to the extent disclosed thereupon, the court dockets for active cases in the Court of Chancery of the State of Delaware in and for New Castle County, Delaware, the Superior Court of the State of Delaware in and for New Castle County, Delaware, and the United States District Court sitting in the State of Delaware (a "Court"), order of any governmental agency or body, or any Court, of the State of Delaware having jurisdiction over the Trust or any of its properties. (ix) No Governmental Approval of the State of Delaware that has not been obtained is required for the execution, delivery and performance by the Trust of this Agreement or the Common Securities Purchase Agreement, the issuance and sale of the Offered Securities or the Common Securities by the Trust, the exchange of the Debentures for Offered Securities in accordance with the Declaration or the purchase of the Debentures by the Trust. (x) Neither the execution, delivery and performance by the Trust of this Agreement and the Common Securities Purchase Agreement, the issuance and sale of the Offered Securities or the Common Securities by the Trust, the exchange of the Debentures for Offered Securities in accordance with the 22 23 Declaration nor the purchase of the Debentures by the Trust will (a) violate any of the provisions of the Declaration or (b) result in a violation of the Business Trust Act or any applicable law of the State of Delaware. (f) The Representatives shall have received an opinion, dated such Closing Date, of Morris, Nichols, Arsht & Tunnell, special Delaware counsel to the Guarantee Trustee and Indenture Trustee and Property Trustee, to the effect that: (i) The Trustee is a banking corporation duly incorporated and validly existing under the laws of the State of Delaware. (ii) The execution, delivery and performance by the Property Trustee of the Amended and Restated Declaration of Trust, the execution, delivery of performance by the Guarantee Trustee of the Guarantee Agreement and the execution, delivery and performance by the Indenture Trustee of the Indenture have been duly authorized by all necessary corporate action on the part of the Property Trustee, the Guarantee Trustee and the Indenture Trustee, respectively. The Amended and Restated Declaration of Trust, the Guarantee Agreement and the Indenture have been duly executed and delivered by the Property Trustee, the Guarantee Trustee and the Indenture Trustee, respectively, and the Declaration constitutes the legal, valid and binding obligation of the Property Trustee, enforceable against the Property Trustee in accordance with its terms, except as enforcement thereof may be limited by (a) bankruptcy, insolvency, receivership, liquidation, fraudulent conveyance, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and remedies, (b) general principles of equity (regardless of whether considered and applied in a proceeding in equity or at law), and (c) considerations of public policy and the effect of applicable law relating to fiduciary duties. (iii) The execution, delivery and performance of the Amended and Restated Declaration of Trust, the Guarantee Agreement and the Indenture by the Property Trustee, the Guarantee Trustee and the Indenture Trustee, respectively, do not violate or constitute a breach of the Articles of Organization or Bylaws of the Property Trustee, the Guarantee Trustee or the Indenture Trustee, respectively, or the terms of any indenture or other agreement or instrument actually known to such counsel and to which the Property Trustee, the Guarantee Trustee or the Indenture Trustee, respectively, is a party or is bound or any judgment, order or decree actually known to such counsel to be applicable to the Property Trustee, the Guarantee Trustee or the Indenture Trustee, respectively, of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Property Trustee, the Guarantee Trustee or the Indenture Trustee, respectively. (iv) No consent, approval or authorization of, or registration with or notice to any federal or Delaware state banking authority is required for the 23 24 execution, delivery or performance by the Property Trustee, the Guarantee Trustee or the Indenture Trustee of the Amended and Restated Declaration of Trust, the Guarantee Agreement and the Indenture, respectively. (g) The Representatives shall have received an opinion, dated such Closing Date, of John C. Donlevie, General Counsel to the Company, or such other counsel reasonably acceptable to the Underwriters, to the effect that: (i) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the Commonwealth of Pennsylvania, with corporate power and authority to own its properties and conduct its business as described in the Prospectus. (ii) The Company Common Stock to be issued upon conversion of the Debentures have been duly authorized and reserved for issuance upon such conversion, and when issued upon such conversion in accordance with the terms and conditions of the Indenture, will be validly issued, fully paid and nonassessable and will conform to the description thereof contained in the Prospectus; and the shareholders of the Company have no preemptive rights with respect to the Securities the Common Securities, the Debentures or the Company Common Stock. (iii) This Agreement, the Guarantee, the Declaration, the Indenture, the Common Securities Purchase Agreement and the Common Securities Guarantee Agreement have been duly authorized, executed and delivered by the Company and are enforceable against the Company in accordance with their terms; the issuance and sale of the Offered Securities pursuant to this Agreement will not result in the violation by the Company of its Certificate of Incorporation or Bylaws, or in a breach of or a default under any of the agreements filed as an exhibit to the Registration Statement to which the Company or any subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject. (iv) Each of the Company's subsidiaries has been duly organized and is an entity validly existing and in good standing under the laws of the state of its organization, with full power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; and each subsidiary is duly qualified to do business as a foreign corporation, limited liability company or business trust, as applicable, and in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect on the Company and its subsidiaries taken as a whole. (v) Except as set forth in the Prospectus, all of the outstanding shares of capital stock of, or other ownership interests in, each of the subsidiaries of the 24 25 Company have been duly authorized and validly issued, are fully paid and nonassessable and are owned of record and beneficially by the Company or by a subsidiary of the Company, and were not issued in violation of any preemptive rights, rights of first refusal or other similar rights (in each case created by statute or under any subsidiary's certificate of incorporation or bylaws or any agreement to which any subsidiary is a party of which we have knowledge); to such counsel's knowledge, all such shares are owned by the Company, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature, except liens set forth in the Prospectus. (vi) Except as described in the Prospectus, to such counsel's knowledge, there are no outstanding options, warrants or other rights calling for the issuance of, or any commitment, plan or arrangement to issue, any shares of capital stock of any subsidiary of the Company or any security convertible into or exchangeable or exercisable for any capital stock of any subsidiary of the Company. (vii) The description in the Registration Statements and Prospectus of the Pennsylvania Business Corporation Code is accurate and fairly presents the information required to be shown. (viii) The Amended and Restated Asset Purchase Agreement, dated August 20, 1999, by and among various subsidiaries of Sinclair and the Company and the Asset Purchase Agreement, dated August 20, 1999, by and among various subsidiaries of Sinclair and the Company, have each been duly authorized, executed and delivered by the Company and each constitutes a validly and legally binding obligation of the Company, each enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. With respect to the information contained in opinions (iv), (v) and (vi), such counsel may state that he has relied upon legal opinions rendered to him in connection with the Offering by counsel familiar with the capital structure of the Company's subsidiaries or with the agreements in question, as the case may be. The foregoing opinion may be limited to the laws of the Commonwealth of Pennsylvania and the Pennsylvania Business Corporation Law of 1988, as amended, and, in the case of opinion (viii), counsel may assume that the laws of Maryland, which purports to be the governing law of the agreements discussed in opinion (viii), are consistent with the laws of the Commonwealth of Pennsylvania, and counsel rendering the foregoing opinion may rely as to questions of fact upon the representations of the Company set forth in this Agreement and upon certificates of officers of the Company and of government officials. In addition, counsel may state that he has made no special inquiry or investigation in respect of opinions that are rendered to the knowledge of such counsel. 25 26 (h) The Representatives shall have received an opinion, dated such Closing Date, of Leventhal, Senter & Lerman PLLC, FCC counsel for the Company, to the effect that: (i) The issuance and sale of the Offered Securities by the Company in accordance with this Agreement does not require FCC approval assuming that, in connection therewith, (i) Joseph M. Field continues to hold in his own name and exercise voting control of the voting securities of the Company representing majority voting control of the Company; (ii) each purchaser of the Offered Securities is qualified under the Communications Laws to hold such interest; and (iii) not more than 25% of the capital stock of the Company in the aggregate will be owned by foreign governments, alien individuals or entities, or representatives thereof. (ii) The execution and delivery by the Company of this Agreement and the issuance and sale of the Offered Securities by the Company in accordance with this Agreement does not constitute a violation by the Company of the Communications Act of 1934, as amended, and the regulations promulgated thereunder (the "Communications Laws") assuming that, in connection therewith: (i) Joseph M. Field continues to hold in his own name and exercise voting control of the voting securities of the Company representing majority voting control of the Company; (ii) each purchaser of the Offered Securities is qualified under the Communications Laws to hold such interest; and (iii) not more than 25% of the capital stock of the Company in the aggregate will be owned by foreign governments, alien individuals or entities, or representatives thereof. (iii) The entities listed on Exhibit A attached to such opinion (the "Licensees") hold the respective FCC Licenses listed thereon. Such FCC Licenses are in full force and effect, except as noted on Exhibit A. As used herein, "full force and effect" means that, to the knowledge of such counsel, the orders issuing the FCC Licenses have become effective, no stay of the effectiveness of such orders has been issued by the FCC, and the FCC Licenses have not been invalidated by any subsequent published FCC action. (iv) To the knowledge of such counsel, except for those disclosed in this Agreement, the Registration Statement or on Exhibit B attached to such opinion, and except for proceedings affecting the radio broadcasting industry generally, there are no proceedings pending or threatened in writing under the Communications Laws against the Company, the Licensees or the stations by or before the FCC or before any court having jurisdiction of matters under the Communications Laws which seek the revocation, non-renewal, or material adverse modification of any of the FCC Licenses. (v) The FCC Statements (which include the statements of the Company in the Registration Statements under the captions "Risk Factors -- We must respond to 26 27 rapid changes in technology, services and standards that characterize our industry in order to remain competitive," "Risk Factors -- We are dependent on federally-issued licenses to operate our radio stations and are subject to extensive federal regulation," Business -- Federal Regulation of Radio Broadcasting," "Business -- Competition; Changes in Broadcasting Industry" and "Description of Capital Stock - Foreign Ownership"), insofar as they constitute summaries of the Communications Laws and material proceedings thereunder are accurate, and fairly present the information set forth therein in all material respects. (vi) Such counsel has no reason to believe that the Registration Statement and the Prospectus or any amendment or supplement thereto, as of its issue date or as of the date hereof, solely with respect to statements relating to federal broadcast communications law or legal conclusions with respect to federal broadcast communications law, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make such statements or conclusions, in light of the circumstances under which they were made, not misleading. (i) The Representatives shall have received from Weil, Gotshal & Manges LLP, counsel for the Underwriters, such opinion or opinions, dated such Closing Date, with respect to the Registration Statements, the Prospectus and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (j) The Representatives shall have received a certificate, dated such Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Company and an Administrative Trustee of the Trust in which such officers and trustee, to the best of their knowledge after reasonable investigation, shall state that: the representations and warranties of the Company and the Trust in this Agreement are true and correct as though made on such Closing Date; the Company and the Trust have complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date; no stop order suspending the effectiveness of any Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission; the Additional Registration Statement (if any) satisfying the requirements of subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment of the applicable filing fee in accordance with Rule 111(a) or (b) under the Act, prior to the time the Prospectus was printed and distributed to any Underwriter; and, subsequent to the date of the most recent financial statements in the Prospectus, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole or of the Trust except as set forth in or contemplated by the Prospectus or as described in such certificate. 27 28 (k) The Representatives shall have received letters, dated such Closing Date, of Deloitte & Touche LLP and Arthur Andersen LLP which meet the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than three business days prior to such Closing Date for the purposes of this subsection. The Company will furnish the Representatives with such conformed copies of such opinions, certificates, letters and documents as the Representatives reasonably request. CSFBC may in its sole discretion waive on behalf of the Underwriters compliance with any conditions to the obligations of the Underwriters hereunder. 7. Indemnification and Contribution. (a) The Trust and the Company will indemnify and hold harmless each Underwriter, its partners, directors and officers and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Act against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Trust and the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Trust and the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in subsection (b) below, and provided, further, that with respect to any untrue statement or alleged untrue statement in or omission or alleged omission from any preliminary prospectus, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages or liabilities purchased the Offered Securities concerned, to the extent that a prospectus relating to such Offered Securities was required to be delivered by such Underwriter under the Act in connection with such purchase and any such loss, claim, damage or liability of such Underwriter results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Offered Securities to such person, a copy of the Prospectus if the Company has previously furnished such quantity of copies thereof to such Underwriter. (b) Each Underwriter will severally and not jointly indemnify and hold harmless the Trust and the Company, its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Act against any losses, claims, damages or liabilities to 28 29 which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Trust and the Company by such Underwriter through the Representatives specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Trust and the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: the over-allotment and stabilization information contained in the last paragraph under the caption "Underwriting" and the concession and reallowance figures appearing in the fourth paragraph under the caption "Underwriting." (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party. (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is 29 30 appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Trust and the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Trust and the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Trust and the Company bear to the total underwriting discounts and commissions received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Trust and the Company or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. (e) The obligations of the Trust and the Company under this Section shall be in addition to any liability which the Trust and the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each director of the Company, to each officer of the Company who has signed a Registration Statement and to each person, if any, who controls the Trust and the Company within the meaning of the Act. 8. Default of Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Offered Securities hereunder on either the First or any Optional Closing Date and the aggregate principal amount of Offered Securities that such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of the total principal amount of Offered Securities that the Underwriters are obligated to purchase on such Closing Date, CSFBC may make arrangements satisfactory to the Trust and the Company for the purchase of such Offered Securities by other persons, including any of the Underwriters, but if no such arrangements are made by such 30 31 Closing Date, the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate principal amount of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total principal amount of Offered Securities that the Underwriters are obligated to purchase on such Closing Date and arrangements satisfactory to CSFBC, the Trust and the Company for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter and the Company, except as provided in Section 9. As used in this Agreement, the term "Underwriter" includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Trust and the Company or their officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, the Trust, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Underwriters is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5(j) and the respective obligations of the Trust and the Company and the Underwriters pursuant to Section 7 shall remain in effect, and if any Offered Securities have been purchased hereunder the representations and warranties in Section 2 and all obligations under Section 5 shall also remain in effect. If the purchase of the Offered Securities by the Underwriters is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in clause (iii), (iv) or (v) of Section 6(c), the Trust and the Company will reimburse the Underwriters for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 10. Notices. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking Department - Transactions Advisory Group, or, if sent to the Trust or the Company, will be mailed, delivered or telegraphed and confirmed to it at 401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004, Attention: John C. Donlevie, Esq.; provided, however, that any notice to an Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Underwriter. 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder. 31 32 12. Representation. The Representatives will act for the several Underwriters in connection with the transactions contemplated by this Agreement, and any action under this Agreement taken by the Representatives jointly or by CSFBC will be binding upon all the Underwriters. 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Each of the Trust and the Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 32 33 If the foregoing is in accordance with the Representatives' understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement between the Trust, the Company and the several Underwriters in accordance with its terms. Very truly yours, ENTERCOM COMMUNICATIONS CAPITAL TRUST By: ______________________________________ Name: ____________________________________ solely in his capacity as trustee and not in his individual capacity ENTERCOM COMMUNICATIONS CORP. By: ______________________________________ Name: ____________________________________ Title: ___________________________________ The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date and effective time first above written. CREDIT SUISSE FIRST BOSTON CORPORATION BANC OF AMERICA SECURITIES LLC DEUTSCHE BANK SECURITIES INC. Acting on behalf of themselves and as the Representatives of the several Underwriters. By: CREDIT SUISSE FIRST BOSTON CORPORATION By: _________________________________ Name: _______________________________ Title: ______________________________ 33 34 SCHEDULE A
UNDERWRITER TOTAL NUMBER OF FIRM SECURITIES TO BE PURCHASED --------- Credit Suisse First Boston Corporation..................... Banc of America Securities LLC............................. Deutsche Bank Securities Inc............................... --------- Total....................................................................... 3,000,000
34 EX-4.01 3 CERTIFICATE OF TRUST/CAPITAL TRUST 1 EXHIBIT 4.01 DECLARATION OF TRUST DECLARATION OF TRUST, dated as of September 8, 1999, between Entercom Communications Corp., a Pennsylvania corporation, as Sponsor, Wilmington Trust Company, a Delaware banking corporation, as Delaware Trustee, and Joseph M. Field, David J. Field and John C. Donlevie, as Administrative Trustees (collectively with the Delaware Trustee, the "Trustees"). The Sponsor and the Trustees hereby agree as follows: 1. The trust created hereby (the "Trust") shall be known as "Entercom Communications Capital Trust", in which name the Trustees, or the Sponsor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Sponsor hereby assigns, transfers, conveys and sets over to the Trust the sum of $10. The Trustees hereby acknowledge receipt of such amount from the Sponsor, which amount shall constitute the initial trust estate. The Trustees hereby declare that they will hold the trust estate for the Sponsor. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Sections 3801 et seq. (the "Business Trust Act"), and that this document constitute the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust in the office of the Secretary of State of the State of Delaware in the form attached hereto. The Trust is hereby established by the Sponsor and the Trustees for the purposes of (i) issuing preferred securities ("Preferred Securities") representing undivided beneficial interests in the assets of the Trust in exchange for cash and investing the proceeds thereof in debt securities of the Sponsor, (ii) issuing and selling common securities ("Common Securities" and, together with the Preferred Securities, "Trust Securities") representing undivided beneficial interests in the assets of the Trust to the Sponsor in exchange for cash and investing the proceeds thereof in additional debt securities of the Sponsor and (iii) engaging in such other activities as are necessary, convenient or incidental thereto. 3. Concurrent with the first issuance of any Trust Securities by the Trust, the Sponsor and the Trustees intend to enter into an amended and restated Declaration of Trust, satisfactory to each such party and substantially in the form to be included as an exhibit to the 1933 Act Registration Statement referred to below at the time such registration statement becomes effective under the Securities Act of 1933, as amended (the "Securities Act"), to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities and the Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Declaration of Trust, the Trustees shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain, prior to such execution and delivery, any licenses, consents or approvals required by applicable law or otherwise. 4. The Sponsor and the Trustees hereby authorize and direct the Sponsor, as 2 the sponsor of the Trust, as applicable, (i) to prepare and file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust, (a) a Registration Statement on Form S-1 (the "1933 Act Registration Statement"), including any pre-effective or post-effective amendments to such Registration Statement, relating to the registration of the Preferred Securities under the Securities Act and (b) a Registration Statement on Form 8-A (the "1934 Act Registration Statement") (including any pre-effective or post-effective amendments thereto) relating to the registration of the Preferred Securities under Section 12(b) of the Securities Exchange Act of 1934, as amended; (ii) to prepare and file with the New York Stock Exchange and execute a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed and continue to be listed on the New York Stock Exchange; (iii) to prepare and file and execute, in each case on behalf of the Trust, such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Preferred Securities under the securities or "blue sky" laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or desirable; and (iv) to negotiate the terms of, and execute on behalf of the Trust, an underwriting agreement among the Trust, the Sponsor and any underwriter, dealer or agent relating to the Preferred Securities, substantially in the form to be included as an exhibit to, or incorporated by reference in, the 1933 Act Registration Statement. It is hereby acknowledged and agreed that in connection with any execution, filing or document referred to in clauses (i)-(iii) above, (A) any Administrative Trustee (or his attorneys-in-fact and agents or the Sponsor as permitted herein) is authorized on behalf of the Trust to file and execute such document on behalf of the Trust and (B) the Delaware Trustee shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission or the New York Stock Exchange or state securities or blue sky laws, and in such case only to the extent so required. In connection with all of the foregoing, the Sponsor and each Administrative Trustee, solely in its capacity as Trustee of the Trust, hereby constitutes and appoints Joseph M. Field, David J. Field and John C. Donlevie, and each of them, his, her or its, as the case may be, true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for the Sponsor or such Trustee and in the Sponsor's or such Trustee's name, place and stead, in any and all capacities, to sign and file (i) the 1933 Act Registration Statement and the 1934 Act Registration Statement and any and all amendments (including post-effective amendments) or supplements thereto, with all exhibits thereto, and other documents in connection therewith, and (ii) a registration statement and any and all amendments thereto filed pursuant to Rule 462(b) under the Securities Act with the Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Sponsor or such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, shall do or cause to be done by virtue hereof. 5. This Declaration of Trust may be executed in one or more counterparts. 6. The number of Trustees initially shall be four (4) and thereafter the number - 2 - 3 of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Sponsor which may increase or decrease the number of Trustees; provided, however, that the number of Trustees shall in no event be less than four (4); and provided, further, however, that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity that has its principal place of business in the State of Delaware and meets any other requirements imposed by applicable law. Subject to the foregoing, the Sponsor is entitled to appoint or remove without cause any Trustee at any time. Any Trustee may resign upon thirty days prior notice to the Sponsor; provided, however, that the Delaware Trustee may resign immediately upon notice to the Sponsor if the Delaware Trustee is required to join in any filing or execute on behalf of the Trust any document pursuant to the provisions of paragraph 4 hereof and, upon giving such notice, the Delaware Trustee shall not be required to join in any such filing or execute on behalf of the Trust any such document; provided, further, however, that no resignation of the Delaware Trustee shall be effective until a successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. 7. To the fullest extent permitted by applicable law, the Sponsor agrees to indemnify (i) the Delaware Trustee, (ii) any affiliate of the Delaware Trustee, and (iii) any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Delaware Trustee (each of the persons or entities in (i) through (iii) being referred to as an "Indemnified Person") for, and to hold each Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this paragraph 7 shall survive the termination of this Declaration. The Delaware Trustee shall not have any of the powers or duties of the trustees set forth herein, except as required under the Business Trust Act. The Delaware Trustee shall be a trustee hereunder for the sole and limited purpose of fulfilling the requirements of Section 3807(a) of the Business Trust Act. 8. The Trust may terminate without issuing any Trust Securities at the election of the Sponsor. 9. This Declaration shall be governed by the laws of the State of Delaware, without regard to conflict of laws principles. - 3 - 4 IN WITNESS WHEREOF, the parties hereto have caused this Declaration of Trust to be duly executed as of the day and year first above written. ENTERCOM COMMUNICATIONS CORP., as Sponsor By: ____________________ Name: David J. Field Title: President and Chief Operating Officer WILMINGTON TRUST COMPANY, as Delaware Trustee By: ____________________ Name: Title: ____________________________ Joseph M. Field, as Trustee ____________________________ David J. Field, as Trustee ____________________________ John C. Donlevie, as Trustee - 4 - EX-4.02 4 FORM OF AMENDED AND RESTATED DECLARATION OF TRUST 1 EXHIBIT 4.02 AMENDED AND RESTATED DECLARATION OF TRUST OF ENTERCOM COMMUNICATIONS CAPITAL TRUST Dated as of October __, 1999 2 TABLE OF CONTENTS
Page ---- ARTICLE I INTERPRETATION AND DEFINITIONS................................................... 1 Section 1.01 Definitions............................................................... 1 ARTICLE II TRUST INDENTURE ACT.............................................................. 9 Section 2.01 Trust Indenture Act; Application.......................................... 9 Section 2.02 Lists of Holders of Securities............................................ 9 Section 2.03 Reports by the Property Trustee........................................... 10 Section 2.04 Periodic Reports to Property Trustee...................................... 10 Section 2.05 Evidence of Compliance with Conditions Precedent.......................... 10 Section 2.06 Events of Default; Waiver................................................. 10 Section 2.07 Event of Default; Notice.................................................. 12 ARTICLE III ORGANIZATION..................................................................... 13 Section 3.01 Name...................................................................... 13 Section 3.02 Office.................................................................... 13 Section 3.03 Purpose................................................................... 13 Section 3.04 Authority................................................................. 13 Section 3.05 Title to Property of the Trust............................................ 14 Section 3.06 Powers and Duties of the Administrative Trustees.......................... 14 Section 3.07 Prohibition of Actions by the Trust and the Trustees...................... 17 Section 3.08 Powers and Duties of the Property Trustee................................. 18 Section 3.09 Certain Duties and Responsibilities of the Property Trustee............... 20 Section 3.10 Certain Rights of Property Trustee........................................ 22 Section 3.11 Delaware Trustee.......................................................... 24 Section 3.12 Execution of Documents.................................................... 24 Section 3.13 Not Responsible for Recitals or Issuance of Securities.................... 24 Section 3.14 Duration of Trust......................................................... 24 Section 3.15 Mergers................................................................... 24 ARTICLE IV SPONSOR.......................................................................... 26 Section 4.01 Sponsor's Purchase of Common Securities................................... 26 Section 4.02 Responsibilities of the Sponsor........................................... 26 Section 4.03 Guarantee of Payment of Trust Obligations................................. 27 ARTICLE V TRUSTEES......................................................................... 28 Section 5.01 Number of Trustees........................................................ 28 Section 5.02 Delaware Trustee.......................................................... 28 Section 5.03 Property Trustee; Eligibility............................................. 28 Section 5.04 Qualifications of Administrative Trustees and Delaware Trustee Generally.. 29 Section 5.05 Initial Trustees.......................................................... 29 Section 5.06 Appointment, Removal and Resignation of Trustees.......................... 30 Section 5.07 Vacancies Among Trustees.................................................. 33 Section 5.08 Effect of Vacancies....................................................... 33
i 3 TABLE OF CONTENTS (CONTINUED)
Page ---- Section 5.09 Meetings.................................................................. 33 Section 5.10 Delegation of Power....................................................... 34 Section 5.11 Merger, Conversion, Consolidation or Succession to Business............... 34 ARTICLE VI DISTRIBUTIONS.................................................................... 34 Section 6.01 Distributions............................................................. 34 ARTICLE VII ISSUANCE OF SECURITIES........................................................... 35 Section 7.01 General Provisions Regarding Securities................................... 35 Section 7.02 Execution and Authentication.............................................. 35 Section 7.03 Form and Dating........................................................... 36 Section 7.04 Registrar, Paying Agent and Conversion Agent.............................. 38 Section 7.05 Paying Agent to Hold Money in Trust....................................... 39 Section 7.06 Replacement Securities.................................................... 39 Section 7.07 Outstanding Preferred Securities.......................................... 39 Section 7.08 Preferred Securities in Treasury.......................................... 40 Section 7.09 Temporary Securities...................................................... 40 Section 7.10 Cancellation.............................................................. 40 ARTICLE VIII DISSOLUTION AND TERMINATION OF TRUST............................................. 41 Section 8.01 Dissolution and Termination of Trust...................................... 41 ARTICLE IX TRANSFER AND EXCHANGE............................................................ 42 Section 9.01 General................................................................... 42 Section 9.02 Transfer Procedures and Restrictions...................................... 43 Section 9.03 Deemed Security Holders................................................... 45 Section 9.04 Notices to Clearing Agency................................................ 45 Section 9.05 Appointment of Successor Clearing Agency.................................. 45 ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS............ 46 Section 10.01 Liability................................................................. 46 Section 10.02 Exculpation............................................................... 46 Section 10.03 Fiduciary Duty............................................................ 47 Section 10.04 Indemnification........................................................... 48 Section 10.05 Outside Businesses........................................................ 48 ARTICLE XI ACCOUNTING....................................................................... 49 Section 11.01 Fiscal Year............................................................... 49 Section 11.02 Certain Accounting Matters................................................ 49 Section 11.03 Banking................................................................... 49 Section 11.04 Withholding............................................................... 50
ii 4 TABLE OF CONTENTS (CONTINUED)
Page ---- ARTICLE XII AMENDMENTS AND MEETINGS.......................................................... 50 Section 12.01 Amendments................................................................ 50 Section 12.02 Meetings of the Holders of Securities; Action by Written Consent.......... 51 ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE........................ 52 Section 13.01 Representations and Warranties of Property Trustee........................ 52 Section 13.02 Representations and Warranties of Delaware Trustee........................ 53 ARTICLE XIV MISCELLANEOUS.................................................................... 54 Section 14.01 Notices................................................................... 54 Section 14.02 Governing Law............................................................. 55 Section 14.03 Intention of the Parties.................................................. 55 Section 14.04 Headings.................................................................. 56 Section 14.05 Successors and Assigns.................................................... 56 Section 14.06 Partial Enforceability.................................................... 56 Section 14.07 Counterparts.............................................................. 56 Annex I - Terms of __% Convertible Preferred Securities and __% Convertible Common Securities........................................................ I-1 Exhibit A-1 - Form of Preferred Security..................................................... A-1-1 Exhibit A-2 - Form of Common Security........................................................ A-2-1
iii 5 AMENDED AND RESTATED DECLARATION OF TRUST OF ENTERCOM COMMUNICATIONS CAPITAL TRUST October __, 1999 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of October __, 1999, by the undersigned trustees (together with all other Persons from time to time duly appointed and serving as trustees in accordance with the provisions of this Declaration, the "Trustees"), Entercom Communications Corp., a Pennsylvania corporation, as trust sponsor (the "Sponsor"), and by the holders, from time to time, of undivided beneficial interests in the assets of the Trust (as defined below) issued pursuant to this Declaration; WHEREAS, certain of the Trustees and the Sponsor established Entercom Communications Capital Trust (the "Trust") under the Business Trust Act (as hereinafter defined) pursuant to a Declaration of Trust dated as of September 8, 1999 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on September 8, 1999, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Debentures of the Debenture Issuer (as hereinafter defined); and WHEREAS, as of the date hereof, no interests in the Trust have been issued; WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; and NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS Section 1.01 Definitions. Unless the context otherwise requires: (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Declaration, and 6 any capitalized term not defined in this Declaration shall have the meaning assigned thereto in the Indenture; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles, Sections, Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; (e) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; (f) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (g) a reference to the singular includes the plural and vice versa. "Administrative Action" has the meaning set forth in the definition of "Tax Event." "Administrative Trustee" means any Trustee other than the Property Trustee and the Delaware Trustee. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Registrar, Paying Agent, Conversion Agent or co-registrar. "Appointment Event" means an event defined in the terms of the Preferred Securities, as set forth in Annex I, which entitles the Holders of a Majority in Liquidation Amount of the Preferred Securities to appoint a Special Trustee. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Beneficiaries" has the meaning set forth in Section 4.03(a). 2 7 "Book Entry Interest" means a beneficial interest in a global certificate, ownership and transfers of which shall be maintained and made through book entries by a Depositary as described in Section 7.03. "Business Day" means any day other than a Saturday or a Sunday, a day on which banking institutions in New York, New York or Wilmington, Delaware are authorized or required by law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time, or any successor legislation. "Certificate" means a certificate in global or definitive form representing a Common Security or a Preferred Security. "Closing Date" means October __, 1999. "Code" means the Internal Revenue Code of 1986, as amended, or any successor legislation. "Commission" means the Securities and Exchange Commission. "Common Securities" has the meaning specified in Section 7.01(a). "Common Securities Guarantee" means the guarantee agreement to be dated as of October __, 1999 of the Sponsor in respect of the Common Securities. "Conversion Agent" has the meaning set forth in Section 7.04. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Event of Default" in respect of the Securities means an Event of Default (as defined in the Indenture) has occurred and is continuing in respect of the Debentures. "Debenture Issuer" means the Sponsor in its capacity as issuer of the Debentures. "Debenture Trustee" means Wilmington Trust Company, a Delaware banking corporation, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the series of Debentures to be issued by the Debenture Issuer under the Indenture to be held by the Property Trustee, in the form attached to the Indenture as Exhibit A. 3 8 "Delaware Trustee" has the meaning set forth in Section 5.02. "Deferral Period" has the meaning set forth in the Indenture. "Definitive Preferred Securities" means any Preferred Securities in definitive form issued by the Trust. "Depositary" means The Depository Trust Company, the initial clearing agency, until a successor shall be appointed pursuant to Section 9.05, and thereafter means such successor Depositary. "Distribution" means a distribution payable to Holders of Securities in accordance with Section 6.01. "Event of Default" means: (i) a Debenture Event of Default; or (ii) default by the Trust in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days (subject to the deferral of any due date in the case of a Deferral Period); or (iii) default by the Trust in the payment of any Redemption Price of any Security when it becomes due and payable; or (iv) default in the performance, or breach, in any material respect, of any covenant or warranty of the Trustees in the Declaration (other than a covenant or warranty, a default in the performance of which or the breach of which is addressed in clause (ii) or (iii) above), and continuation of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the defaulting Issuer Trustee or Issuer Trustees by the holders of at least 25% in aggregate liquidation amount of the outstanding Preferred Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" under the Declaration; or (v) the failure of the Sponsor to appoint a successor Property Trustee in the manner required by Section 5.06(c). "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Global Preferred Security" has the meaning set forth in Section 7.03(a). 4 9 "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means (a) any Trustee; (b) any Affiliate of any Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee; or (d) any employee or agent of the Trust or its Affiliates. "Indenture" means the Indenture dated as of October __, 1999, between the Debenture Issuer and the Debenture Trustee, as it may be amended from time to time. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Legal Action" has the meaning set forth in Section 3.06(g). "Like Amount" means (i) with respect to a redemption of Preferred Securities, Preferred Securities having an aggregate liquidation amount equal to that portion of the principal amount of Debentures to be contemporaneously redeemed in accordance with the Indenture, allocated to the Common Securities and to the Preferred Securities based upon the relative liquidation amounts of such classes and the proceeds of which will be used to pay the applicable Redemption Price of the Preferred Securities and (ii) with respect to a distribution of Debentures to holders of Preferred Securities in connection with a dissolution or liquidation of the Trust, Debentures having a principal amount equal to the aggregate liquidation amount of the Securities of the Holder to whom such Debentures are distributed. "List of Holders" has the meaning set forth in Section 2.02(a). "Majority in Liquidation Amount of the Securities" means, except as provided in the terms of the Preferred Securities and by the Trust Indenture Act, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Preferred Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise) of all outstanding Securities of the relevant class. "Ministerial Action" has the meaning set forth in the terms of the Securities as set forth in Annex I. 5 10 "Obligations" means any costs, expenses or liabilities of the Trust, other than obligations of the Trust to pay to Holders of any Securities or other similar interests in the Trust the amounts due such Holders pursuant to the terms of the Securities or such other similar interests, as the case may be. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (i) a statement that each officer signing the Certificate has read the covenant or condition and the definition relating thereto; (ii) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (iii) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Optional Closing Date" has the meaning assigned to such term in the Underwriting Agreement. "Participants" has the meaning set forth in Section 7.03(b). "Paying Agent" has the meaning specified in Section 7.04. "Person" means a legal person, including any individual, corporation, estate, company, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Securities" has the meaning specified in Section 7.01(a). "Preferred Securities Guarantee" means the guarantee agreement to be dated as of October __, 1999, of the Sponsor in respect of the Preferred Securities. "Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Depositary, or on the books of a Person maintaining an account with such Depositary (directly as a Participant or as an indirect participant, in each case in accordance with the rules of such Depositary). 6 11 "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 5.03. "Property Trustee Account" has the meaning set forth in Section 3.08(c). "Prospectus" means the prospectus, dated as of September __, 1999, relating to the issuance by the Trust of Preferred Securities. "Quorum" means a majority of the Administrative Trustees or, if there are only two Administrative Trustees, both of them. "Redemption Price" has the meaning set forth in Annex I. "Registrar" has the meaning set forth in Section 7.04. "Registration Statement" means the registration statement filed by the Trust and the Sponsor with the Commission relating to the issuance by the Trust of Preferred Securities. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Property Trustee, any vice-president, any assistant vice-president, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer in the Corporate Trust Department of the Property Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended, or any successor legislation. "Securities Custodian" means the custodian with respect to any Preferred Security in global form. "Securities Guarantees" means the Preferred Securities Guarantee and the Common Securities Guarantee. "Special Trustee" means a trustee appointed by the Holders of a Majority in Liquidation Amount of the Preferred Securities in accordance with Section 5.06(a)(ii)(B). 7 12 "Sponsor" means Entercom Communications Corp., a Pennsylvania corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Successor Delaware Trustee" has the meaning set forth in Section 5.06. "Successor Property Trustee" has the meaning set forth in Section 5.06. "Super Majority" has the meaning set forth in Section 2.06(a)(ii). "Tax Event" means the Property Trustee shall have received an opinion of nationally recognized independent tax counsel to the Sponsor (reasonably acceptable to the Trustees) experienced in such matters (a "Dissolution Tax Opinion") to the effect that, as a result of (i) any amendment to or change (including any announced prospective change (which shall not include a proposed change), provided that a Tax Event shall not occur more than 90 days before the effective date of any such prospective change) in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (ii) any judicial decision or official administrative pronouncement, ruling, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action"), in each case, on or after the date of original issuance of the Debentures or the issue date of the Preferred Securities issued by the Trust, there is more than an insubstantial risk that (a) if the Debentures are held by the Property Trustee, (I) the Trust is, or will be within 90 days of the date of such opinion, subject to United States Federal income tax with respect to interest accrued or received on the Debentures or subject to more than a de minimis amount of other taxes, duties or other governmental charges as determined by such counsel, or (II) any portion of interest payable by the Sponsor to the Trust on the Debentures is not, or within 90 days of the date of such opinion will not be, deductible by the Sponsor in whole or in part for United States Federal income tax purposes or (b) with respect to Debentures which are no longer held by the Property Trustee, any portion of interest payable by the Sponsor on the Debentures is not, or within 90 days of the date of such opinion will not be, deductible by the Sponsor in whole or in part for United States Federal income tax purposes. "10% in Liquidation Amount of the Securities" means, except as provided in the terms of the Preferred Securities or by the Trust Indenture Act, Holders of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Preferred Securities or Holders of outstanding Common Securities, voting separately as a class, representing 10% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise) of all outstanding Securities of the relevant class. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). 8 13 "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Underwriting Agreement" has the meaning set forth in Section 7.03. ARTICLE II TRUST INDENTURE ACT Section 2.01 Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration, which are incorporated by reference in and made part of this Declaration and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act. (c) If and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. (d) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. Section 2.02 Lists of Holders of Securities. (a) Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide the Property Trustee (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, provided that neither the Sponsor nor the Administrative Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor and the Administrative Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the 9 14 Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in its capacity as Paying Agent (if acting in such capacity), provided that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Property Trustee shall comply with its obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act. Section 2.03 Reports by the Property Trustee. Within 60 days after ________ __ of each year, commencing ________ __, _______, the Property Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. Section 2.04 Periodic Reports to Property Trustee. Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Section 2.05 Evidence of Compliance with Conditions Precedent. Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. Section 2.06 Events of Default; Waiver. (a) The Holders of a Majority in Liquidation Amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default in respect of the Preferred Securities and its consequences, provided that if the Event of Default: (i) is caused by a Debenture Event of Default that is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; 10 15 (ii) is caused by a Debenture Event of Default that requires the consent or vote of greater than a majority in principal amount of the holders of the Debentures (a "Super Majority") to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Preferred Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; (iii) is the result of a default by the Trust in the payment of any Distribution when it becomes due and payable, which default has continued for 30 days (subject to the deferral of any due date in the case of a Default Period), the Event of Default shall not be waivable; or (iv) is the result of a default by the Trust in the payment of any Redemption Price of any Preferred Security when it becomes due and payable, the Event of Default shall not be waivable. The foregoing provisions of this Section 2.06(a) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Preferred Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or an Event of Default with respect to the Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Preferred Securities of an Event of Default with respect to the Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. (b) The Holders of a Majority in Liquidation Amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that if the Event of Default is caused by a Debenture Event of Default that: (i) is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.06(b), the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of a Super Majority to be waived, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this 11 16 Section 2.06(b), the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Common Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; provided, further, each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and its consequences until the effects of all Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Preferred Securities and only the Holders of the Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. The foregoing provisions of this Section 2.06(b) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.06(b), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Event of Default under the Indenture by the Property Trustee at the direction of the Holders of the Preferred Securities, constitutes a waiver of the corresponding Event of Default under this Declaration. The foregoing provisions of this Section 2.06(c) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Section 2.07 Event of Default; Notice. (a) The Property Trustee shall, within ten Business Days after the occurrence of an Event of Default actually known to the Trustee, (i) transmit by mail, first-class postage prepaid, to the Holders of the Securities, and (ii) transmit by any means provided for in this Declaration to the Administrative Trustees and the Sponsor, notices of all defaults actually known to the Property Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.07(a) being hereby defined to be an Event of Default, not including any periods of grace and irrespective of the giving of any notice); provided that except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures or in the payment of any sinking fund installment established for the Debentures, the Property Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible 12 17 Officers of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Property Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 5.01(1) and 5.01(2) of the Indenture; or (ii) any default as to which the Property Trustee shall have received written notice. ARTICLE III ORGANIZATION Section 3.01 Name. The Trust is named "Entercom Communications Capital Trust," as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Administrative Trustees. Section 3.02 Office. The address of the principal office of the Trust is c/o Entercom Communications Corp., 409 City Avenue, Suite 401, Bala Cynwyd, Pennsylvania 19004, Attention: John C. Donlevie. On ten Business Days written notice to the Holders of Securities, the Administrative Trustees may designate another principal office. Section 3.03 Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities and use the proceeds from such sale to acquire the Debentures, and (b) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States Federal income tax purposes as a grantor trust. Section 3.04 Authority. (a) Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Administrative Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Administrative Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee in accordance with its powers shall constitute the act of and 13 18 serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. (b) Except as expressly set forth in this Declaration and except if a meeting of the Administrative Trustees is called with respect to any matter over which the Administrative Trustees have power to act, any power of the Administrative Trustees may be exercised by, or with the consent of, any one such Administrative Trustee. (c) An Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purposes of signing any documents which the Administrative Trustees have power and authority to cause the Trust to execute pursuant to Section 3.06. Section 3.05 Title to Property of the Trust. Except as provided in Section 3.08 with respect to the Debentures and the Property Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. Section 3.06 Powers and Duties of the Administrative Trustees. The Administrative Trustees shall have, together (except in the case of paragraphs (a), (b) and (c) of this Section 3.06) with any Special Trustee holding office pursuant to Section 5.06, if any, the exclusive power, duty and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Preferred Securities and the Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Preferred Securities and no more than one series of Common Securities, and, provided, further, that there shall be no interests in the Trust other than the Securities, and the issuance of Securities shall be limited to simultaneous issuances of both Preferred Securities and Common Securities on the Closing Date and any Optional Closing Date; (b) in connection with the issue and sale of the Preferred Securities, at the direction of the Sponsor, to: (i) assist in the preparation of the Prospectus and a preliminary prospectus, in each case prepared by the Sponsor, in relation to the offering and sale of Preferred Securities to execute and file with the Commission, at such time as determined by the Sponsor, a registration statement filed on Form S-1 prepared 14 19 by the Sponsor, including any amendments thereto, in relation to the Preferred Securities; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Preferred Securities in any State or foreign jurisdiction in which the Sponsor has determined to qualify or register such Preferred Securities for sale; (iii) execute and file an application, prepared by the Sponsor, at such time, if any, as determined by the Sponsor, to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing or quotation of the Preferred Securities; (iv) execute and deliver letters, documents, or instruments with The Depository Trust Company relating to the Preferred Securities; (v) execute and file with the Commission, at such time as determined by the Sponsor, a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor relating to the registration of the Preferred Securities under Section 12 of the Exchange Act; and (vi) execute and enter into the Underwriting Agreement and other related agreements providing for the sale of the Preferred Securities and to provide any certificates or other documents in connection with such agreements; (c) to acquire the Debentures with the proceeds of the sale of the Preferred Securities and the Common Securities; provided, however, that the Administrative Trustees shall cause legal title to the Debentures to be held of record in the name of the Property Trustee for the benefit of the Holders of the Preferred Securities and the Holders of Common Securities; (d) to give the Sponsor and the Property Trustee prompt written notice of the occurrence of a Tax Event; provided that the Administrative Trustees (and Special Trustee, if any) shall consult with the Sponsor and the Property Trustee before taking or refraining from taking any Ministerial Action in relation to a Tax Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of Section 316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Preferred Securities and Holders of Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Administrative Trustees pursuant to the terms of the Securities and this Declaration; 15 20 (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.08(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate required by Section 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Administrative Trustee; (k) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities; (m) to give prompt written notice to the Holders of the Securities of any notice received from the Debenture Issuer of its election to defer payments of interest on the Debentures by extending the interest payment period under the Indenture; (n) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Preferred Securities or to enable the Trust to effect the purposes for which the Trust was created; (p) to take any action, not inconsistent with this Declaration or with applicable law, that the Administrative Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.06, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust to be classified for United States federal income tax purposes as a grantor trust; and 16 21 (iii) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes, provided that such action does not materially adversely affect the interests of Holders; and (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Administrative Trustees, on behalf of the Trust. The Administrative Trustees must exercise the powers set forth in this Section 3.06 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.03, and the Administrative Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.03. Subject to this Section 3.06, the Administrative Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.08. Any expenses incurred by the Administrative Trustees (or the Special Trustee, if any) pursuant to this Section 3.06 shall be reimbursed by the Debenture Issuer. Section 3.07 Prohibition of Actions by the Trust and the Trustees. (a) The Trust shall not, and the Trustees (including the Property Trustee) on behalf of the Trust shall not, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall cause the Trust not to: (i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or 17 22 (vii) other than as provided in the Declaration or Annex I hereto, (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under Section 5.13 of the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless, in the case of each action described in clause (A), (B), (C) or (D), the Trust shall have received an opinion of counsel to the effect that such modification will not affect the Trust's status as a grantor trust for United States federal income tax purposes. Section 3.08 Powers and Duties of the Property Trustee. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Holders of the Securities. The right, title and interest of the Property Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 5.06. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Debentures to the Administrative Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee). (c) The Property Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Trustee Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Property Trustee, deposit such funds into the Property Trustee Account and make payments to the Holders of the Preferred Securities and Holders of the Common Securities from the Property Trustee Account in accordance with Section 6.01. Funds in the Property Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. (ii) engage in such ministerial activities as so directed and as shall be necessary or appropriate to effect the redemption of the Preferred Securities and the Common Securities to the extent the Debentures are redeemed or mature; and (iii) upon written notice of distribution issued by the Administrative Trustees in accordance with the terms of the Securities, engage in such ministerial activities as so directed as shall be necessary or appropriate to 18 23 effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain special events (as may be defined in the terms of the Securities) arising from a change in law or a change in legal interpretation or other specified circumstances pursuant to the terms of the Securities. (d) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of the Securities. (e) The Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act; provided, however, that if a Debenture Event of Default has occurred and is continuing and such event is attributable to the failure of the Sponsor to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Preferred Securities may institute a legal proceeding directly for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Securities. In connection with such Direct Action, the Debenture Issuer will be subrogated to the rights of such Holder of Preferred Securities to the extent of any payment made by the Sponsor to such Holder of Preferred Securities in such Direct Action. In addition, if the Property Trustee fails to enforce its rights under the Debentures (other than rights arising from an Event of Default described in the immediately preceding sentence) after any Holder of Preferred Securities shall have made a written request to the Property Trustee to enforce such rights, such Holder of Preferred Securities may, to the fullest extent permitted by law, institute a Direct Action to enforce such rights. Except as provided in the preceding sentences, the Holders of Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Debentures. (f) The Property Trustee shall not resign as a Trustee unless either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a Successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 5.06. (g) The Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture and, if an Event of Default occurs and is continuing, the Property Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of such Securities. 19 24 (h) The Property Trustee will act as Paying Agent and Registrar in New York to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all securities and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee. (i) Subject to this Section 3.08, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Administrative Trustees set forth in Section 3.06. (j) The Property Trustee must exercise the powers set forth in this Section 3.08 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.03, and the Property Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.03. Section 3.09 Certain Duties and Responsibilities of the Property Trustee. (a) The Property Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.06), the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the 20 25 requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in Liquidation Amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers; (v) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Property Trustee Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration and the Trust Indenture Act; (vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Sponsor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Trustee Account maintained by the Property Trustee pursuant to Section 3.08(c)(i) and except to the extent otherwise required by law; and (viii) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Property Trustee be liable for the default or misconduct of the Administrative Trustees or the Sponsor. 21 26 Section 3.10 Certain Rights of Property Trustee. (a) Subject to the provisions of Section 3.09: (i) the Property Trustee may rely conclusively and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Administrative Trustees contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Administrative Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or registration thereof; (v) the Property Trustee may consult with counsel of its choice or other experts and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee security satisfactory to the Property Trustee, against the costs, expenses (including its attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested in writing by the Property Trustee, provided, that, nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Property 22 27 Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, security, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Property Trustee may execute any of its powers hereunder or perform any of its duties hereunder either directly or by or through agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Property Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request instructions from the Holders of the Securities which instructions may only be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; and (xii) the Property Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any 23 28 right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. Section 3.11 Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 5.02, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Administrative Trustees or the Property Trustee described in this Declaration. Except as set forth in Section 5.02, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. Section 3.12 Execution of Documents. Except as otherwise required by the Business Trust Act, any Administrative Trustee is authorized to execute on behalf of the Trust any documents that the Administrative Trustees have the power and authority to execute pursuant to Section 3.06; provided that the registration statement referred to in Section 3.06(b)(i), including any amendments thereto, shall be signed by a majority of the Administrative Trustees. Section 3.13 Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. Section 3.14 Duration of Trust. The Trust, unless dissolved pursuant to the provisions of Article VIII hereof, shall exist until September 30, 2014. Section 3.15 Mergers. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any Person, except as described in Section 3.15(b) and (c) of this Declaration and Section 3 and Section 4 of the terms of the Securities as set forth in Annex I attached hereto. (b) The Trust may, with the consent of a majority of the Administrative Trustees and without the consent of the Holders of the Securities, the Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with or into, 24 29 or be replaced by a trust organized as such under the laws of any State or the District of Columbia; provided that: (i) if the Trust is not the surviving entity, the successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") as long as the Successor Securities rank, with respect to participation in the profits and distributions and payments upon liquidation, redemption and otherwise at least as high as the Preferred Securities rank with respect to distributions and payments upon liquidation redemption and otherwise; (ii) the Debenture Issuer appoints a Trustee of such Successor Entity possessing the same powers and duties of the Property Trustee as the Holder of the Debentures; (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or with any other organization on which the Preferred Securities are then listed or quoted; (iv) such merger, consolidation, amalgamation or replacement does not adversely affect the powers, preferences and other special rights of the Holders of the Preferred Securities (including any Successor Securities) in any material respect; (v) such Successor Entity has a purpose substantially identical to that of the Trust; (vi) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of a nationally recognized independent counsel (reasonably acceptable to the Property Trustee) to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement will not adversely affect the limited liability of the Holders of the Securities (including any Successor Securities); and (B) following such merger, consolidation, amalgamation or replacement, neither the Sponsor nor the Successor Entity will be required to register as an Investment Company. 25 30 (vii) the Sponsor provides a guarantee to the Holders of the Successor Securities with respect to the Successor Entity having substantially the same terms as the Preferred Securities Guarantee; and (viii) such merger, consolidation, amalgamation, replacement or lease is not a taxable event for holders of the Preferred Securities. (c) Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in liquidation amount of the Preferred Securities and Common Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as an association taxable as a corporation (or substantially increase the likelihood that the Trust or Successor Entity would be classified as other than a grantor trust) for United States federal income tax purposes. Article IV SPONSOR Section 4.01 Sponsor's Purchase of Common Securities. On the Closing Date and any Optional Closing Date the Sponsor will purchase an amount of Common Securities issued by the Trust such that the aggregate liquidation amount of such Common Securities purchased by the Sponsor shall at such date equal 3% of the total capital of the Trust. Section 4.02 Responsibilities of the Sponsor. In connection with the issue and sale of the Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to prepare the Prospectus and to prepare for filing by the Trust with the Commission the Registration Statement, including any amendments thereto; (b) to determine the States and foreign jurisdictions in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States and foreign jurisdictions; (c) if deemed necessary or advisable by the Sponsor, to prepare for filing by the Trust an application to the New York Stock Exchange or any other national 26 31 stock exchange or the Nasdaq National Market for listing or quotation of the Preferred Securities; (d) if deemed necessary or advisable by the Sponsor, to prepare for filing by the Trust with the Commission a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12 of the Exchange Act, including any amendments thereto; and (e) to negotiate the terms of the Underwriting Agreement and other related agreements providing for the sale of the Preferred Securities. Section 4.03 Guarantee of Payment of Trust Obligations. (a) Subject to the terms and conditions of this Section 4.03, the Sponsor hereby irrevocably and unconditionally guarantees to each Person to whom the Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the full payment, when and as due, of any and all Obligations to such Beneficiaries. (b) The agreement of the Sponsor in Section 4.03(a) is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof. (c) The agreement of the Sponsor set forth in Section 4.03(a) shall terminate and be of no further force and effect upon the later of (a) the date on which full payment has been made of all amounts payable to all Holders of all the Preferred Securities (whether upon redemption, liquidation, exchange or otherwise) and (b) the date on which there are no Beneficiaries remaining; provided, however, that such agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any Holder of Preferred Securities or any Beneficiary must restore payment of any sums paid under the Preferred Securities, under any Obligation, under the Preferred Securities Guarantee or under this Agreement for any reason whatsoever. Such agreement is continuing, irrevocable, unconditional and absolute. Article V TRUSTEES Section 5.01 Number of Trustees. The number of Trustees shall initially be five (5), consisting of three (3) Administrative Trustees, the Delaware Trustee and the Property Trustee, and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities: 27 32 (i) the number of Trustees may be increased or decreased, except as provided in Sections 5.01(b)(ii) and 5.06(a)(ii)(B) with respect to the Special Trustee, by vote of the Holders of a Majority in Liquidation Amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities or by written consent; and (ii) the number of Trustees shall be increased automatically by one (1) if an Appointment Event has occurred and is continuing and the Holders of a Majority in Liquidation Amount of the Preferred Securities appoint a Special Trustee in accordance with Section 5.06(a)(ii). Section 5.02 Delaware Trustee. If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall either be (1) a natural person who is at least 21 years of age and a resident of the State of Delaware, or (ii) an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, provided that if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. Section 5.03 Property Trustee; Eligibility. (a) There shall at all times be one Trustee which shall act as Property Trustee which shall: (i) not be an Affiliate of the Sponsor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.03(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 5.03(a), the Property Trustee shall immediately resign in the manner and with the effect set forth in Section 5.06(e). 28 33 (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. (d) The Preferred Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. Section 5.04 Qualifications of Administrative Trustees and Delaware Trustee Generally. Each Administrative Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. Section 5.05 Initial Trustees. The initial Administrative Trustees shall be: Joseph M. Field c/o Entercom Communications Corp. 409 City Avenue, Suite 401 Bala Cynwyd, Pennsylvania 19004 David J. Field c/o Entercom Communications Corp. 409 City Avenue, Suite 401 Bala Cynwyd, Pennsylvania 19004 John C. Donlevie c/o Entercom Communications Corp. 409 City Avenue, Suite 401 Bala Cynwyd, Pennsylvania 19004 The initial Delaware Trustee shall be: Wilmington Trust Company 1100 North Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration 29 34 The initial Property Trustee shall be: Wilmington Trust Company 1100 North Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration Section 5.06 Appointment, Removal and Resignation of Trustees. (a) Except as provided otherwise in this Section 5.06(b) and 5.06(d), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of any Securities: (A) other than in respect to a Special Trustee, by vote of the Holders of a Majority in Liquidation Amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities or by written consent, unless a Debenture Event of Default shall have occurred and be continuing, in which event the Property Trustee and the Delaware Trustee may only be removed by the Holders of a Majority in Liquidation Amount of the Preferred Securities, voting as a class at a meeting of the Holders of the Preferred Securities or by written consent; and (B) if an Appointment Event has occurred and is continuing, one (1) additional trustee (the "Special Trustee"), who shall have the same rights, powers and privileges as an Administrative Trustee, may be appointed by vote of the Holders of a Majority in Liquidation Amount of the Preferred Securities, voting as a class at a meeting of the Holders of the Preferred Securities and such Special Trustee may only be removed (otherwise than by the operation of Section 5.06(e)), by vote of the Holders of a Majority in Liquidation Amount of the Preferred Securities voting as a class at a meeting of the Holders of the Preferred Securities. (b) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.06(a) until a successor Property Trustee meeting the requirements of Section 5.03 (a "Successor Property Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the Administrative Trustees and the Sponsor. (c) The Holders of a Majority in Liquidation Amount of the Common Securities shall remove the Property Trustee by written instrument upon: 30 35 (i) the entry or a decree or order by a court having jurisdiction in the premises adjudging the Property Trustee as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Property Trustee under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Property Trustee or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (ii) the institution by the Property Trustee of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Property Trustee or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by the Property Trustee in furtherance of any such action. The Sponsor shall appoint a Successor Property Trustee within 60 days of such an event. (d) The Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 5.06(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.02 and 5.04 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Trustees and the Sponsor. (e) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation, provided that a Special Trustee shall only hold office while an Appointment Event is continuing and shall cease to hold office immediately after the Appointment Event pursuant to which the Special Trustee was appointed and all other Appointment Events cease to be continuing. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) No such resignation of the Trustee that acts as the Property Trustee shall be effective: (A) until a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such 31 36 Successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the holders of the Securities; (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee; and (iii) no such resignation of a Special Trustee shall be effective until the 60th day following delivery of the instrument of resignation of the Special Trustee to the Sponsor and the Trust or such later date specified in such instrument during which period the Holders of the Preferred Securities shall have the right to appoint a successor Special Trustee as provided in this Section 5.06. (f) The Holders of the Common Securities shall use their best efforts to promptly appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 5.06. (g) If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.06 within 60 days after delivery to the Sponsor and the Trust of an instrument of resignation or removal, at the cost of the Sponsor the resigning Property Trustee or Delaware Trustee, resigning or being removed as applicable, may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper and prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. (h) No Property Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Property Trustee or Successor Delaware Trustee, as the case may be. Section 5.07 Vacancies Among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.01, or if the number of Trustees is increased pursuant to Section 5.01, a vacancy shall occur. A resolution certifying the existence of such vacancy by a majority of the Administrative Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.06. 32 37 Section 5.08 Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul, dissolve or terminate the Trust. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of a Administrative Trustee in accordance with Section 5.06, the Administrative Trustees in office, regardless of their number, shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Declaration. Section 5.09 Meetings. Meetings of the Administrative Trustees shall be held from time to time upon the call of any Administrative Trustee. Regular meetings of the Administrative Trustees may be held at a time and place fixed by resolution of the Administrative Trustees. Notice of any meetings of the Administrative Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile or overnight courier) not less than 24 hours before such meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Administrative Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Administrative Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Administrative Trustees may be taken at a meeting by vote of a majority of the Administrative Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting and without prior notice by the unanimous written consent of the Administrative Trustees. In the event there is only one Administrative Trustee, any and all action of such Administrative Trustee shall be evidenced by a written consent of such Administrative Trustee. In the event a Special Trustee is holding office pursuant to Section 5.06, such Special Trustee shall have the same rights as an Administrative Trustee with respect to participation in a meeting of the Administrative Trustees. Section 5.10 Delegation of Power. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.06, including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and 33 38 (b) the Administrative Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. Section 5.11 Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Property Trustee or the Delaware Trustee, as the case may be, may be merged or converted or with which either may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Property Trustee or the Delaware Trustee, as the case may be, shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Property Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Property Trustee or the Delaware Trustee, as the case may be, hereunder, provided such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. Article VI DISTRIBUTIONS Section 6.01 Distributions. Holders shall receive Distributions (as defined herein) in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Preferred Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of interest (including Compounded Interest (as defined in the Indenture), Additional Sums (as defined in the Indenture), premium or principal on the Debentures held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders. Article VII ISSUANCE OF SECURITIES Section 7.01 General Provisions Regarding Securities. (a) The Administrative Trustees shall on behalf of the Trust issue one class of convertible preferred securities, designated as ___% Convertible Preferred Securities, Term Income Deferrable Equity Securities (TIDES)sm, representing undivided 34 39 beneficial interests in the assets of the Trust (the "Preferred Securities"), having such terms as are set forth in Annex I and one class of convertible common securities, liquidation amount $50, representing undivided beneficial interests in the assets of the Trust (the "Common Securities"), having such terms as are set forth in Annex I. The Trust shall have no securities or other interests in the assets of the Trust other than the Preferred Securities and the Common Securities. The Trust shall issue no Securities in bearer form. (b) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (c) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable, subject to Section 10.01 with respect to the Common Securities. (d) Every Person, by virtue of having become a Holder or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. (e) Every Person, by virtue of having become a Holder or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have covenanted to treat the Debentures as indebtedness and the Securities as evidence of an indirect beneficial ownership interest in the Debentures. Section 7.02 Execution and Authentication. (a) The Securities shall be signed on behalf of the Trust by one Administrative Trustee. In case any Administrative Trustee of the Trust who shall have signed any of the Securities shall cease to be such Administrative Trustee before the Securities so signed shall be delivered by the Trust, such Securities nevertheless may be delivered as though the person who signed such Securities had not ceased to be such Administrative Trustee; and any Securities may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be the Administrative Trustees of the Trust, although at the date of delivery of the Declaration any such person was not such a Administrative Trustee. (b) One Administrative Trustee shall sign the Preferred Securities for the Trust by manual or facsimile signature. Unless otherwise determined by the Trust, such signature shall, in the case of Common Securities, be a manual signature. A Preferred Security shall not be valid until authenticated by the manual signature of an authorized signatory of the Property Trustee. The signature shall be conclusive evidence that the Preferred Security has been authenticated under this Declaration. 35 40 Upon a written order of the Trust signed by one Administrative Trustee, the Property Trustee shall authenticate the Preferred Securities for original issue by executing the Property Trustee's certificate of authentication contained in the form of Preferred Securities attached hereto as Exhibit A-1. The aggregate number of Preferred Securities outstanding at any time shall not exceed the number set forth in the terms in Annex I hereto except as provided in Section 7.06. The Property Trustee may appoint an authenticating agent acceptable to the Trust to authenticate Preferred Securities. An authenticating agent may authenticate Preferred Securities whenever the Property Trustee may do so. Each reference in this Declaration to authentication by the Property Trustee includes authentication by such agent. An authenticating agent has the same rights as the Property Trustee to deal with the Company or an Affiliate. Section 7.03 Form and Dating. The Preferred Securities and the Property Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1 and the Common Securities shall be substantially in the form of Exhibit A-2, each of which is hereby incorporated in and expressly made a part of this Declaration. Certificates may be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustees, as evidenced by their execution thereof. The Securities may have letters, numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Trust). The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Property Trustee in writing. Each Preferred Security shall be dated the date of its authentication. The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent applicable, the Property Trustee and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such terms and provisions and to be bound thereby. The Preferred Securities are being offered and sold by the Trust pursuant to a Underwriting Agreement relating to the Preferred Securities, dated September __, 1999, among the Trust, the Sponsor and the Underwriters named therein (the "Underwriting Agreement"). (a) Global securities. Preferred Securities offered and sold as provided in the Underwriting Agreement shall be issued in the form of one or more permanent global Securities in definitive, fully registered form without distribution coupons with the appropriate global legends set forth in Exhibit A-1 hereto (each, a "Global Preferred Security"), which shall be deposited on behalf of the purchasers of the Preferred Securities represented thereby with the Property Trustee, at its Wilmington, Delaware office as custodian for the Depositary, and registered in the name of the 36 41 Depositary or a nominee of the Depositary, duly executed by an Administrative Trustee on behalf of the Trust and authenticated by the Property Trustee as provided herein. (b) Book-entry provisions. This Section 7.03(b) shall apply only to the Global Preferred Securities as may be authorized by the Trust to be deposited with or on behalf of the Depositary. An Administrative Trustee on behalf of the Trust shall execute and the Property Trustee shall, in accordance with this Section 7.03, authenticate and deliver initially one or more Global Preferred Securities that (a) shall be registered in the name of Cede & Co. or other nominee of such Depositary and (b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's written instructions or held by the Trustee as custodian for the Depositary. Members of, or participants in, the Depositary ("Participants") shall have no rights under this Declaration with respect to any Global Preferred Security held on their behalf by the Depositary or by the Property Trustee as the custodian of the Depositary or under such Global Preferred Security, and the Depositary may be treated by the Trust, the Property Trustee and any agent of the Trust or the Property Trustee as the absolute owner of such Global Preferred Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Trust, the Property Trustee or any agent of the Trust or the Property Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Participants, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Preferred Security. (c) Certificated securities. Except as provided in Section 7.03(d), owners of beneficial interests in the Global Preferred Security will not be entitled to receive physical delivery of certificated Preferred Securities. (d) A Global Preferred Security deposited with the Depositary or with the Property Trustee as custodian for the Depositary pursuant to this Section 7.03 shall be transferred to the beneficial owners thereof in the form of certificated Preferred Securities only if such transfer complies with Section 9.02 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Preferred Security or if at any time such Depositary ceases to be a "clearing agency" registered under the Exchange Act, at a time when the Depositary is required to be so registered to act as such depositary, (ii) the Sponsor on behalf of the Trust in its sole discretion determines that such Global Preferred Security shall be so exchangeable, or (iii) an Event of Default has occurred and is continuing. (e) Any Global Preferred Security that is transferable to the beneficial owners thereof in the form of certificated Preferred Securities pursuant to this Section 7.03 shall be surrendered by the Depositary to the Property Trustee located in Wilmington, Delaware, to be so transferred, in whole or from time to time in part, 37 42 without charge, and the Property Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Preferred Security, an equal aggregate liquidation amount of Preferred Securities of authorized denominations in the form of certificated Preferred Securities. Any portion of a Global Preferred Security transferred pursuant to this Section shall be registered in such names as the Depositary shall direct. (f) Subject to the provisions of Section 7.03(e), the registered holder of a Global Preferred Security may grant proxies and otherwise authorize any person, including Participants and persons that may hold interests through Participants, to take any action which a holder is entitled to take under this Declaration or the Securities. (g) In the event of the occurrence of any of the events specified in Section 7.03(d), the Trust will promptly make available to the Property Trustee a reasonable supply of certificated Securities in definitive, fully registered form without distribution coupons. Section 7.04 Registrar, Paying Agent and Conversion Agent. The Trust shall maintain in Wilmington, Delaware (i) an office or agency where Preferred Securities may be presented for registration of transfer or for exchange ("Registrar"), (ii) an office or agency where Preferred Securities may be presented for payment ("Paying Agent") and (iii) an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Registrar shall keep a register of the Preferred Securities and of their transfer and exchange. The Trust may appoint the Registrar, the Paying Agent and the Conversion Agent and may appoint one or more co-registrars, one or more additional paying agents and one or more additional conversion agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent and the term "Conversion Agent" includes any additional conversion agent. The Trust may change any Paying Agent, Registrar, co-registrar or Conversion Agent without prior notice to any Holder. The Trust shall notify the Property Trustee of the name and address of any Agent not a party to this Declaration. If the Trust fails to appoint or maintain another entity as Registrar, Paying Agent or Conversion Agent, the Property Trustee shall act as such. The Trust or any of its Affiliates may act as Paying Agent, Registrar, or Conversion Agent. The Trust shall act as Paying Agent, Registrar, co-registrar, and Conversion Agent for the Common Securities. The Trust initially appoints the Property Trustee as Registrar, Paying Agent, and Conversion Agent for the Preferred Securities. Section 7.05 Paying Agent to Hold Money in Trust. The Trust shall require each Paying Agent other than the Property Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Property Trustee all money held by the Paying Agent for the payment of principal or distribution on the Securities, and will notify the Property Trustee if there are insufficient funds. While any such insufficiency continues, the Property Trustee may require a 38 43 Paying Agent to pay all money held by it to the Property Trustee. The Trust at any time may require a Paying Agent to pay all money held by it to the Property Trustee and to account for any money disbursed by it. Upon payment over to the Property Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust) shall have no further liability for the money. If the Trust or the Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Section 7.06 Replacement Securities. If the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken or if such Security is mutilated and is surrendered to the Trust or in the case of the Preferred Securities to the Property Trustee, an Administrative Trustee on behalf of the Trust shall issue and, with respect to the Preferred Securities, the Property Trustee shall authenticate a replacement Security if the Property Trustee's and the Trust's requirements, as the case may be, are met. If required by the Property Trustee or the Trust, an indemnity bond must be sufficient in the judgment of both to protect the Trustees, the Sponsor or any authenticating agent from any loss which any of them may suffer if a Security is replaced. The Sponsor may charge for its expenses in replacing a Security. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be purchased by the Sponsor pursuant to Article III hereof, the Sponsor in its discretion may, instead of issuing a new Security, pay or purchase such Security, as the case may be. Section 7.07 Outstanding Preferred Securities. The Preferred Securities outstanding at any time are all the Preferred Securities authenticated by the Property Trustee except for those canceled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. If a Preferred Security is replaced, paid or purchased pursuant to Section 7.06 hereof, it ceases to be outstanding unless the Property Trustee receives proof satisfactory to it that the replaced, paid or purchased Preferred Security is held by a protected purchaser. If Preferred Securities are considered paid in accordance with the terms of this Declaration, they cease to be outstanding and Distributions on them cease to accumulate. A Preferred Security does not cease to be outstanding because one of the Trustees, the Trust, the Sponsor or an Affiliate of the Sponsor or Trustees holds the Security. 39 44 Section 7.08 Preferred Securities in Treasury. In determining whether the Holders of the required amount of Securities have concurred in any direction, waiver or consent, Preferred Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as the case may be, shall be disregarded and deemed not to be outstanding, except that for the purposes of determining whether the Property Trustee shall be fully protected in relying on any such direction, waiver or consent, only Securities which the Property Trustee actually knows are so owned shall be so disregarded. Section 7.09 Temporary Securities. Until definitive Securities are ready for delivery, an Administrative Trustee may prepare and, in the case of the Preferred Securities, the Property Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that an Administrative Trustee considers appropriate for temporary Securities. Without unreasonable delay, an Administrative Trustee shall prepare and deliver to the Property Trustee Preferred Securities in certificated form (other than in the case of Preferred Securities in global form) and thereupon any or all temporary Preferred Securities (other than any such Preferred Securities in global form) may be surrendered in exchange therefor, at the office of the Registrar, and the Property Trustee shall authenticate and deliver an equal aggregate liquidation amount of Definitive Preferred Securities in certificated form in exchange for temporary Preferred Securities (other than any such Preferred Securities in global form). Section 7.10 Cancellation. The Trust at any time may deliver Preferred Securities to the Property Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent shall forward to the Property Trustee any Preferred Securities surrendered to them for registration of transfer, redemption, conversion, exchange or payment. The Property Trustee shall promptly cancel all Preferred Securities surrendered for registration of transfer, redemption, conversion, exchange, payment, replacement or cancellation and shall return such canceled Preferred Securities to the Administrative Trustees. The Trust may not issue new Preferred Securities to replace Preferred Securities that it has paid or that have been delivered to the Property Trustee for cancellation or that any holder has converted. Article VIII DISSOLUTION AND TERMINATION OF TRUST Section 8.01 Dissolution and Termination of Trust. (a) The Trust shall dissolve upon the earliest to occur of the following: 40 45 (i) the bankruptcy of the Holder of the Common Securities or the Sponsor; (ii) the filing of a certificate of dissolution or its equivalent with respect to the Holder of the Common Securities or the Sponsor; or the revocation of the charter of the Holder of the Common Securities or the Sponsor and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) the written direction of the Sponsor, as the Holder of the outstanding Common Securities, to the Property Trustee to dissolve the Trust and distribute a Like Amount of Debentures to Holders of the Securities in accordance with the terms of the Securities; (iv) all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; (v) upon the distribution of the Class A Common Stock (as defined in the Indenture) of the Sponsor to Holders of all outstanding Securities upon conversion of all such Securities; (vi) the expiration of the term of the Trust as set forth in Section 3.14 hereof; (vii) the entry of a decree of judicial dissolution of the Trust; or (viii) before the issuance of any Securities, with the consent of all the Administrative Trustees and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 8.01(a) and after satisfaction of liabilities of creditors of the Trust as provided by applicable law, any one of the Trustees (each of whom is hereby authorized to take such action) shall file a certificate of cancellation with the Secretary of State of the State of Delaware terminating the Trust and, upon such filing, the respective obligations and responsibilities of the Trustees, and the Trust created and continued hereby, shall terminate. (c) The provisions of Sections 3.09, 4.03, 10.01(b), 10.04, the last sentence of Section 3.06 and Article X shall survive the termination of the Trust. 41 46 Article IX TRANSFER AND EXCHANGE Section 9.01 General. (a) Where Preferred Securities are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal number of Preferred Securities represented by different certificates, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Administrative Trustee in accordance with this Declaration shall execute and deliver and the Property Trustee shall authenticate Preferred Securities at the Registrar's request. (b) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. To the fullest extent permitted by law, any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. Subject to this Article IX, the Sponsor and any Related Party may only transfer Common Securities to the Sponsor or a Related Party of the Sponsor or as otherwise permitted by Article VIII of the Indenture; provided that any such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause: (i) the Trust to be classified for United States federal income tax purposes as a grantor trust; and (ii) more than an insubstantial risk that the Trust would be an Investment Company or the transferee would become an Investment Company. (c) The Administrative Trustees shall provide for the registration of Securities and of transfers of Securities, which will be effected without charge but only upon payment (with such indemnity as the Administrative Trustees or Property Trustee may require) in respect of any tax or other governmental charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Securities, the Administrative Trustees shall cause one or more new Securities to be issued in the name of the designated transferee or transferees. Every Security surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Administrative Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Security surrendered for registration of transfer shall be cancelled in accordance with Section 7.10. A transferee of a Security shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Security. By acceptance of a Security, each transferee shall be deemed to have agreed to be bound by this Declaration. 42 47 (d) The Trust shall not be required (i) to issue, register the transfer of, or exchange, certificated Preferred Securities during a period beginning at the opening of business 15 days before the day of any selection of Preferred Securities for redemption set forth in the terms of the Securities as set forth in Annex I hereto and ending at the close of business on the day of selection, or (ii) to register the transfer or exchange of any certificated Preferred Security so selected for redemption in whole or in part, except the unredeemed portion of any certificated Preferred Security being redeemed in part. (e) All Preferred Securities issued upon any transfer or exchange pursuant to the terms of this Declaration shall evidence the same security and shall be entitled to the same benefits under this Declaration as the Preferred Securities surrendered upon such transfer or exchange. Section 9.02 Transfer Procedures and Restrictions. (a) Transfer and exchange of Definitive Preferred Securities. When Definitive Preferred Securities are presented to the Registrar or co-Registrar (i) to register the transfer of such Definitive Preferred Securities, or (ii) to exchange such Definitive Preferred Securities for an equal number of Definitive Preferred Securities of another denomination, the Registrar or co-registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Preferred Securities surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to an Administrative Trustee on behalf of the Trust and the Registrar or co-registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. (b) Restrictions on transfer of a Definitive Preferred Security for a beneficial interest in a Global Preferred Security. A Definitive Preferred Security may not be exchanged for a beneficial interest in a Global Preferred Security except upon satisfaction of the requirements set forth below. Upon receipt by the Property Trustee of a Definitive Preferred Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Property Trustee, together with written instructions directing the Property Trustee to make, or to direct the Depositary to make, an adjustment on its books and records with respect to such Global Preferred Security to reflect an increase in the number of the Preferred Securities represented by the Global Preferred Securities, then the Property Trustee shall cancel such Definitive Preferred Security and cause, or direct by the Depositary to cause, the aggregate number of Preferred Securities represented by the Global Preferred Security to be increased accordingly. If no Global Preferred Securities are then outstanding, the Administrative Trustee shall execute and deliver and the Property Trustee shall authenticate, upon 43 48 written order or any Administrative Trustee, an appropriate number of Preferred Securities in global form. (c) Transfer and exchange of Global Preferred Securities. The transfer and exchange of Global Preferred Securities or beneficial interests therein shall be effected through the Depositary, in accordance with this Declaration (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. (d) Transfer of a beneficial interest in a Global Preferred Security for a Definitive Preferred Security. Definitive Preferred Securities issued in exchange for a beneficial interest in a Global Preferred Security pursuant to this Section 9.02(d) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its Participants or indirect participants or otherwise, shall instruct the Property Trustee. The Property Trustee shall deliver such Preferred Securities to the Persons in whose names such Preferred Securities are so registered in accordance with the instructions of the Depositary. (e) Restrictions on transfer and exchange of Global Preferred Securities. Notwithstanding any other provisions of this Declaration (other than the provisions set forth in Section 7.03), a Global Preferred Security may not be transferred as a whole except by the Depositary to a nominee of the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. (f) Cancellation or adjustment of Global Preferred Security. At such time as all beneficial interests in a Global Preferred Security have either been exchanged for Definitive Preferred Securities to the extent permitted by the Declaration or redeemed, repurchased or cancelled in accordance with the terms of this Declaration, such Global Preferred Security shall be returned to the Depositary for cancellation or retained and cancelled by the Property Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Preferred Security is exchanged for Definitive Preferred Securities, Preferred Securities represented by such Global Preferred Security in global form shall be reduced and an adjustment shall be made on the books and records of the Property Trustee (if it is then the Securities Custodian for such Global Preferred Security) with respect to such Global Preferred Security, by the Property Trustee or the Securities Custodian, to reflect such reduction. (g) No obligation of the Property Trustee. (i) The Property Trustee shall have no responsibility or obligation to any beneficial owner of a Global Preferred Security, a Participant in the Depositary or other Person with respect to the accuracy of the records of the Depositary or its nominee or of any Participant thereof, with respect to any ownership interest in the Preferred Securities or with respect to the delivery to any Participant, beneficial owner or other Person (other than the Depositary) of any 44 49 notice (including any notice of redemption) or the payment of any amount, under or with respect to such Preferred Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Preferred Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its nominee in the case of a Global Preferred Security). The rights of beneficial owners in any Global Preferred Security shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Property Trustee may conclusively rely and shall be fully protected in relying upon information furnished by the Depositary or agent thereof with respect to its Participants and any beneficial owners. (ii) The Property Trustee and Registrar shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Declaration or under applicable law with respect to any transfer of any interest in any Preferred Security (including any transfers between or among Depositary Participants or beneficial owners in any Global Preferred Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Declaration, and to examine the same to determine substantial compliance as to form with the express requirements hereof. Section 9.03 Deemed Security Holders. The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust, the Trustees, the Registrar or a co-registrar shall have actual or other notice thereof. Section 9.04 Notices to Clearing Agency. Whenever a notice or other communication to the Preferred Security Holders is required under this Declaration, the Trustees shall, in the case of any Global Preferred Security, give all such notices and communications specified herein to be given to the Preferred Security Holders to the Depositary, and shall have no notice obligations to the Preferred Security Beneficial Owners. Section 9.05 Appointment of Successor Clearing Agency. If the Depository elects to discontinue its services as securities depositary with respect to the Preferred Securities, the Administrative Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Preferred Securities. 45 50 Article X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS Section 10.01 Liability. (a) Except as expressly set forth in this Declaration, the Securities Guarantees and the terms of the Securities the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; or (ii) required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise. (b) The Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust's assets. (c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of the Preferred Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. Section 10.02 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. 46 51 Section 10.03 Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between an Indemnified Person and any Covered Person; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. 47 52 Section 10.04 Indemnification. (a) To the fullest extent permitted by applicable law, the Debenture Issuer shall indemnify and hold harmless each Indemnified Person from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees and expenses) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Debenture Issuer prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Debenture Issuer of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 10.4(a). The indemnification shall survive the termination of this Declaration or the resignation or removal of the Property Trustee or the Delaware Trustee, as the case may be. Section 10.05 Outside Businesses. Any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee (subject to Section 5.03(c)) may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. None of the Sponsor, any Covered Person, the Delaware Trustee, or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. 48 53 ARTICLE XI ACCOUNTING Section 11.01 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. Section 11.02 Certain Accounting Matters. (a) At all times during the existence of the Trust, the Administrative Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year by a firm of independent certified public accountants selected by the Administrative Trustees. (b) The Administrative Trustees shall cause to be prepared and delivered to each of the Holders of Securities, within 90 days after the end of each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss; (c) The Administrative Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities, any annual United States federal income tax information statement, required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Administrative Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. (d) The Administrative Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Administrative Trustees on behalf of the Trust with any state or local taxing authority. Section 11.03 Banking. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Property Trustee shall be made directly to the Property Trustee Account and no other funds of the Trust shall be deposited in the Property Trustee Account. The sole signatories for such accounts shall be designated by the 49 54 Administrative Trustees; provided, however, that the Property Trustee shall designate the signatories for the Property Trustee Account. Section 11.04 Withholding. The Administrative Trustees on behalf of the Trust shall comply with all withholding requirements under United States federal, state and local law. The Administrative Trustees on behalf of the Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Administrative Trustees on behalf of the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Administrative Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed overwithholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust (at the written direction of one of the Administrative Trustees of the Trust) may reduce subsequent Distributions by the amount of such withholding. ARTICLE XII AMENDMENTS AND MEETINGS Section 12.01 Amendments. (a) This Declaration may be amended from time to time by the Sponsor, the Property Trustee and the Administrative Trustees, without the consent of the Holders of the Securities, (i) to cure any ambiguity, correct or supplement any provision in the Declaration that may be inconsistent with any other provision, or to make any other provisions with respect to ministerial matters or questions arising under the Declaration, which shall not be inconsistent with the other provisions of the Declaration, or (ii) to modify, eliminate or add to any provisions of the Declaration to such extent as shall be necessary to ensure that the Trust will not be classified for United States federal income tax purposes as a corporation or will be classified for United States federal income tax purposes as a grantor trust at all times that any Securities are outstanding or to ensure that the Trust will not be required to register as an "investment company" under the Investment Company Act; provided, however, that in the case of clause (i), such action shall not adversely affect in any material respect the interests of any Holder of Securities, and any such amendments of the Declaration shall become effective when notice thereof is given to the Holders of the Securities. 50 55 (b) Except as provided in (c) below, this Declaration may be amended by the Trustees and the Sponsor with (i) the consent of Holders representing not less than a Majority in Liquidation Amount of the outstanding Preferred Securities, and (ii) receipt by the Trustees of an opinion of counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not affect the Trust's status as a grantor trust for United States federal income tax purposes or the Trust's exemption from status as an "investment company" under the Investment Company Act. (c) Without the consent of each holder of Securities, the Declaration may not be amended to (i) change the amount or timing of any Distribution on the Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Securities of a specified date or (ii) restrict the right of a Holder of Securities to institute suit for the enforcement of any such payment on or after such date. Section 12.02 Meetings of the Holders of Securities; Action by Written Consent. (a) Meetings of the Holders of any class of Securities may be called at any time by the Administrative Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading. The Administrative Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 25% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Administrative Trustees one or more requests in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Certificates held by the Holders of Securities exercising the right to call a meeting and only those Securities represented by the Certificates so specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting and without prior notice if a consent in writing setting forth the action so taken is signed by the Holders of 51 56 Securities owning not less than the minimum aggregate liquidation amount of Securities that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Administrative Trustees may specify that any written ballot submitted to the Holders for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Administrative Trustees; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; (iii) each meeting of the Holders of the Securities shall be conducted by the Administrative Trustees or by such other Person that the Administrative Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of any stock exchange on which the Preferred Securities are then listed or trading, provide otherwise, the Administrative Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE Section 13.01 Representations and Warranties of Property Trustee. The Trustee that acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, at the Closing Date and at each Optional Closing Date, if any, and each Successor Property Trustee represents and 52 57 warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) The Property Trustee is a banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, with corporate power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (b) The execution, delivery and performance by the Property Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration has been duly executed and delivered by the Property Trustee, and constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) The execution, delivery and performance of the Declaration by the Property Trustee does not conflict with or constitute a breach of the certificate of incorporation or by-laws of the Property Trustee. (d) No consent, approval or authorization of, or registration with or notice to, any Delaware or Federal banking authority is required for the execution, delivery or performance by the Property Trustee, of the Declaration. (e) The Property Trustee, pursuant to this Declaration, shall hold legal title to, and an ownership interest on behalf of the Holders of the Securities, in the Debentures and agrees that, except as expressly provided or contemplated by this Declaration, it will not create, incur or assume, or suffer to exist any mortgage, pledge, hypothecation, encumbrance, lien or other charge or security interest upon the Debentures. Section 13.02 Representations and Warranties of Delaware Trustee. The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, at the Closing Date and at each Optional Closing Date, if any, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Delaware Trustee that: (a) The Delaware Trustee is a banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, with corporate power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. 53 58 (b) The execution, delivery and performance by the Delaware Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Delaware Trustee. The Declaration has been duly executed and delivered by the Delaware Trustee, and constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) The execution, delivery and performance of the Declaration by the Delaware Trustee does not conflict with or constitute a breach of the certificate of incorporation or by-laws of the Delaware Trustee. (d) No consent, approval or authorization of, or registration with or notice to, any Delaware or Federal banking authority is required for the execution, delivery or performance by the Delaware Trustee, of the Declaration. (e) The Delaware Trustee is an entity which has its principal place of business in the State of Delaware. ARTICLE XIV MISCELLANEOUS Section 14.01 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) if given to the Trust, in care of the Administrative Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): c/o Entercom Communications Corp. 409 City Avenue, Suite 401 Bala Cynwyd, Pennsylvania 19004 Attention: John C. Donlevie (b) if given to the Property Trustee, at the mailing address set forth below (or such other address as the Property Trustee may give notice of to the Holders of the Securities): Wilmington Trust Company 1100 North Market Street 54 59 Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration (c) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as the Delaware Trustee may give notice of to the Holders of the Securities): Wilmington Trust Company 1100 North Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): c/o Entercom Communications Corp. 409 City Avenue, Suite 401 Bala Cynwyd, Pennsylvania 19004 Attention: John C. Donlevie (e) if given to any other Holder, at the address set forth on the books and records of the Trust or the Registrar, as applicable. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. Section 14.02 Governing Law. THIS DECLARATION AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION THAT WOULD CALL FOR THE APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE; PROVIDED, HOWEVER, THAT THERE SHALL NOT BE APPLICABLE TO THE PARTIES HEREUNDER OR 55 60 THIS DECLARATION ANY PROVISION OF THE LAWS (STATUTORY OR COMMON) OF THE STATE OF DELAWARE PERTAINING TO TRUSTS THAT RELATED TO OR REGULATE, IN A MANNER INCONSISTENT WITH THE TERMS HEREOF (A) THE FILING WITH ANY COURT OR GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND CHARGES, (B) AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND EXPENDITURES TO INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE ESTABLISHMENT OF FIDUCIARY OR OTHER STANDARDS OF RESPONSIBILITY OR LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE LIMITATIONS OR LIABILITIES OR AUTHORITIES AND POWERS OF THE TRUSTEES HEREUNDER AS SET FORTH OR REFERENCED IN THIS DECLARATION. SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST. Section 14.03 Intention of the Parties. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties. Section 14.04 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. 56 61 Section 14.05 Successors and Assigns. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. Section 14.06 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. Section 14.07 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 57 62 IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. ______________________________________ Joseph M. Field, as Administrative Trustee ______________________________________ David J. Field, as Administrative Trustee ______________________________________ John C. Donlevie as Administrative Trustee WILMINGTON TRUST COMPANY, as Delaware Trustee By:___________________________________ Name:______________________________ Title:_____________________________ WILMINGTON TRUST COMPANY, as Property Trustee By:___________________________________ Name:______________________________ Title:_____________________________ ENTERCOM COMMUNICATIONS CORP., as Sponsor and Debenture Issuer By:___________________________________ Name:______________________________ Title:_____________________________ 58 63 ANNEX I TERMS OF ___% CONVERTIBLE PREFERRED SECURITIES TERM INCOME DEFERRABLE EQUITY SECURITIES (TIDES)(SM) ___% CONVERTIBLE COMMON SECURITIES Pursuant to Section 7.01 of the Amended and Restated Declaration of Trust, dated as of October __, 1999 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or the Indenture (as defined in the Declaration) or, if not defined in the Declaration or Indenture, as defined in the Prospectus (as defined in the Declaration): 1. Designation and Number. (a) "Preferred Securities." _____________ Preferred Securities of the Trust with an aggregate liquidation preference with respect to the assets of the Trust of _______________________________________ ($_____________) (or up to ________ Preferred Securities of the Trust with an aggregate liquidation preference of ______________ ($_____________), depending on the exercise of the Underwriter's overallotment option), and a liquidation amount with respect to the assets of the Trust of $50 per Preferred Security, are hereby designated for the purposes of identification only as "__% Convertible Preferred Securities, Term Income Deferrable Equity Securities (TIDES)" (the "Preferred Securities"). The Preferred Security Certificates evidencing the Preferred Securities shall be substantially in the form attached hereto as Exhibit A-1, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange or other organization on which the Preferred Securities are listed. (b) "Common Securities." ___________ Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of ___________________________________________ Dollars ($________________) (or up to ___________ Common Securities of the Trust with an aggregate liquidation preference of ___________ ($__________), depending on the exercise of the Underwriter's overallotment option), and a liquidation amount with respect to the assets of the Trust of $50 per Common Security, are hereby designated for the purposes of identification only as "__% Convertible Common Securities" (the "Common Securities"). The Common Security Certificates evidencing the Common Securities shall be substantially in the form attached hereto as Exhibit A-2, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. Distributions. (a) Distributions payable on each Security will be fixed at a rate per annum of __% (the "Coupon Rate") of the stated liquidation amount of $50 per Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon I-1 64 compounded quarterly at the Coupon Rate (to the extent permitted by applicable law), as described in the Declaration. The term "Distributions" as used herein includes such quarterly distributions, additional distributions on quarterly distributions not paid on the applicable Distribution Date, Special Distributions and Additional Sums, as applicable. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. (b) Distributions on the Securities will be cumulative, will accrue from the date of their original issuance and will be payable quarterly in arrears, on the following dates, which dates correspond to the interest payment dates on the Debentures: March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 1999, except as otherwise described below. The Sponsor has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each a "Deferral Period") and, as a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate compounded quarterly during any such Deferral Period. Prior to three Business Days before a Regular Record Date fixed for a Payment Resumption Date (as defined in the Indenture), the Sponsor may further extend such Deferral Period; provided that such Deferral Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters or extend beyond the maturity (whether at the stated maturity or by declaration of acceleration, call for redemption or otherwise) of the Debentures under the Indenture. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the Regular Record Date for the relevant Payment Resumption Date. Upon the termination of any Deferral Period and the payment of all amounts then due, the Sponsor may commence a new Deferral Period, subject to the above requirements. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust at the close of business on the relevant record dates. The relevant record dates shall be on the 15th of the month of the relevant payment dates, except as otherwise described in this Annex I to the Declaration. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment in respect of Preferred Securities being held in book-entry form through The Depository Trust Company (the "Depositary") will be made as described under the heading "Description of TIDES--Form, Book-Entry Procedures and Transfer" in the Prospectus. The relevant record dates for the Common Securities shall be the same record dates as for the Preferred Securities. Distributions payable on any Securities that are not punctually paid on any Distribution payment date, as a result of the I-2 65 Sponsor having failed to make a payment under the Debentures, will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, with respect to any Redemption Date, if such Business Day is in the next succeeding calendar year, such Redemption Date shall be the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (d) In the event of an election by the Holder to convert its Securities through the Conversion Agent into Class A Common Stock pursuant to the terms of the Securities as forth in this Annex I to the Declaration, no payment, allowance or adjustment shall be made with respect to accumulated and unpaid Distributions on such Securities, or be required to be made; provided that Holders of Securities at the close of business on any record date for the payment of Distributions will be entitled to receive the Distributions payable on such Securities on the corresponding payment date notwithstanding the conversion of such Securities into Class A Common Stock following such record date. (e) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities. 3. Liquidation Distribution Upon Dissolution. In the event of any voluntary or involuntary dissolution of the Trust, the Trust shall be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law (including, without limitation, by paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with Section 3808(e) of the Business Trust Act), to the Holders of the Securities a Like Amount of Debentures, unless such distribution would not be practical as determined by the Administrative Trustees, in which event such Holders will be entitled to receive out of the assets of the Trust available for distribution to holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law (including, without limitation, by paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with Section 3808(e) of the Business Trust Act), an amount equal to, in the case of Holders of Preferred Securities, the aggregate liquidation amount thereof plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If such Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Preferred Securities shall be paid on a Pro Rata (as defined below) basis in accordance I-3 66 with paragraph 9. The Holder of the Common Securities will be entitled to receive distributions upon any such liquidation Pro Rata with the Holders of the Preferred Securities, except as provided in paragraph 10. 4. Redemption and Distribution. (a) Upon the repayment or payment of the Debentures in whole or in part, whether at maturity or upon redemption or otherwise (other than following any distribution of the Debentures to the Holders), the proceeds from such repayment or redemption (the "Proceeds") shall be simultaneously applied to redeem, on a Pro Rata basis, a Like Amount of Securities, on the redemption date, in an amount per Security equal to the applicable redemption price, which redemption price will be equal to (i) the liquidation amount of each of the Securities plus any accrued and unpaid Distributions thereon (A) in the case of the repayment of the Debentures at stated maturity, or (B) in the case of a redemption of the Debentures in certain limited circumstances set forth in the Indenture upon the occurrence of a Tax Event or (ii) in the case of an Optional Redemption on or after October 3, 2002 the Optional Redemption Price (as defined in the Indenture), payable in cash (as applicable, the "Redemption Price"). Notwithstanding the foregoing, if the Proceeds are less than the aggregate Redemption Price, then the Proceeds shall be applied to redeem the Securities on a pro rata basis in accordance with paragraph 9. Holders will be given not less than 30 (or, in the case of a redemption pursuant to subparagraph (d) below, 20) nor more than 60 days' notice of such redemption. Upon the repayment of the Debentures at maturity or upon any acceleration, earlier redemption or otherwise, the proceeds from such repayment will be applied to redeem the Securities, in whole, upon not less than 30 nor more than 60 days' notice. (b) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Preferred Securities will be redeemed Pro Rata and the Preferred Securities to be redeemed will be as described in Paragraph 4(f)(ii) below. (c) The Sponsor, as the Holder of the outstanding Common Securities, shall have the right at any time (including, without limitation, upon the occurrence of a Tax Event or Investment Company Act Event) to dissolve the Trust and, after satisfaction of the creditors of the Trust, cause a Like Amount of the Debentures to be distributed to the Holders of the Securities upon liquidation of the Trust, provided that, other than in the case of an Investment Company Event, the Administrative Trustees shall have received a No Recognition Opinion (as defined below) prior to the dissolution of the Trust. (d) If, at any time, a Tax Event shall occur and be continuing the Sponsor shall cause the Administrative Trustees to dissolve the Trust and, after satisfaction of creditors of the Trust (including, without limitation, by paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with Section 3808(e) of the Business Trust Act), cause Debentures to be distributed to the Holders of the Securities in liquidation of the Trust within 90 days following the occurrence of such Tax Event (the "90 Day Period"); provided, however, that such dissolution and distribution shall be conditioned on (i) the Trustees' receipt of an opinion I-4 67 of a nationally recognized independent tax counsel (reasonably acceptable to the Trustees) experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Securities will not recognize any income, gain or loss for United States federal income tax purposes as a result of such liquidation and distribution of Debentures, and (ii) the Sponsor being unable to avoid such Tax Event within the 90 Day Period by taking some ministerial action or pursuing some other reasonable measure that, in the sole judgment of the Sponsor, will have no adverse effect on the Trust, the Sponsor or the Holders of the Securities and will involve no material cost ("Ministerial Action"). If (i) the Sponsor has received an opinion (a "Redemption Tax Opinion") of a nationally recognized independent tax counsel (reasonably acceptable to the Trustees) experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Sponsor would be precluded from deducting the interest on the Debentures for United States federal income tax purposes, even after the Debentures were distributed to the Holders of Securities upon liquidation of the Trust as described in this paragraph 4(d), or (ii) the Trustees shall have been informed by such tax counsel that it cannot deliver a No Recognition Opinion, the Sponsor shall have the right, upon not less than 20 nor more than 60 days' notice, and within 90 days following the occurrence of such Tax Event, to redeem the Debentures in whole (but not in part) for cash, for the principal amount plus accrued and unpaid interest thereon and, following such redemption, all the Securities will be redeemed by the Trust at the liquidation amount of $50 per Security plus accrued and unpaid Distributions thereon; provided, however, that, if at the time there is available to the Sponsor or the Trust the opportunity to eliminate, within the 90 Day Period, the Tax Event by taking some Ministerial Action, the Trust or the Sponsor will pursue such Ministerial Action in lieu of redemption. In lieu of the foregoing options, the Company shall also have the option of causing the Securities to remain outstanding and pay Additional Sums on the Debentures. "Tax Event" means that the Property Trustee shall have received an opinion of a nationally recognized independent tax counsel to the Sponsor (reasonably acceptable to the Trustees) experienced in such matters (a "Dissolution Tax Opinion") to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change (which shall not include a proposed change), provided that a Tax Event shall not occur more than 90 days before the effective date of any such prospective change) in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority therefor or therein or (ii) any judicial decision or official administrative pronouncement, ruling, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action"), there is more than an insubstantial risk that (a) if the Debentures are held by the Property Trustee, (I) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to interest accrued or received on the Debentures or subject to more than a de minimis amount of other taxes, duties or other governmental charges as determined by such counsel, or (II) any portion of interest payable by the Sponsor to the Trust on the I-5 68 Debentures is not, or within 90 days of the date of such opinion will not be, deductible by the Sponsor in whole or in part for United States federal income tax purposes or (b) with respect to Debentures which are no longer held by the Property Trustee, any portion of interest payable by the Sponsor on the Debentures is not, or within 90 days of the date of such opinion will not be, deductible by the Sponsor in whole or in part for United States federal income tax purposes. If an Investment Company Event (as hereinafter defined) shall occur and be continuing, the Sponsor shall cause the Trustees to dissolve the Trust and, after satisfaction of liabilities of the creditors of the Trust as provided by applicable law (including, without limitation, by paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with Section 3808(e) of the Business Trust Act), cause the Debentures to be distributed to the Holders of the Securities in liquidation of the Trust within 90 days following the occurrence of such Investment Company Event. "Investment Company Event" means the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), to the effect that the Trust is or will be considered an Investment Company which is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after the date of the Prospectus. After the date fixed for any distribution of Debentures: (i) the Securities will no longer be deemed to be outstanding, (ii) the Depositary or its nominee (or any successor Depositary or its nominee), as record Holder of Preferred Securities represented by global certificates, will receive a registered global certificate or certificates representing the Debentures to be delivered upon such distribution and (iii) any certificates representing Securities, except for certificates representing Preferred Securities held by the Depositary or its nominee (or any successor Depositary or its nominee), will be deemed to represent Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of such Securities, with accrued and unpaid interest equal to accrued and unpaid Distributions on such Securities until such certificates are presented to the Sponsor or its agent for transfer or reissuance. (e) The Securities will not be redeemed unless all accrued and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or before the date of redemption. (f) Redemption or distribution procedures. (i) Notice of any redemption of, or notice of distribution of Debentures in exchange for the Securities (a "Redemption/Distribution Notice") will be given by an Administrative Trustee on behalf of the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 (or 20, in the case of redemption or distribution upon the occurrence of a Tax Event) nor more than 60 days before the date fixed for redemption or exchange thereof which, in I-6 69 the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph 4(f)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each Holder of Preferred Securities, it being understood that, in respect of Preferred Securities registered in the name of and held of record by the Depositary (or any successor Depositary) or any nominee, the distribution of the proceeds of such redemption will be made to each Participant (or Person on whose behalf such nominee holds such securities) in accordance with the procedures applied by such agency or nominee. (iii) If Securities are to be redeemed and an Administrative Trustee on behalf of the Trust gives a Redemption/Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this paragraph 4 (which notice will be irrevocable), then (A) with respect to Preferred Securities held in book-entry form, by 12:00 noon, New York City time, on the redemption date, to the extent funds are available, with respect to Preferred Securities held in global form, the Property Trustee will deposit irrevocably with the Depositary (or successor Depositary) funds sufficient to pay the amount payable on redemption with respect to such Preferred Securities and will give the Depositary irrevocable instructions and authority to pay the amount payable on redemption to the Holders of such Preferred Securities, and (B) with respect to Preferred Securities issued in certificated form and Common Securities, to the extent funds are available, the Property Trustee will irrevocably deposit with the Paying Agent funds sufficient to pay the amount payable on redemption to the Holders of such Securities and will give the Paying Agent irrevocable instructions and authority to pay the amount payable on redemption to the Holders thereof upon surrender of their certificates. If a Redemption/Distribution Notice shall have been given and funds deposited as required, then on the date of such deposit, all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the redemption price, but without interest on such redemption price, and such Securities will cease to be outstanding. Neither the Administrative Trustees nor the Property Trustee shall be required to register or cause to be registered the transfer of any Securities that have been so called for redemption. If any date fixed for redemption of Securities is not a Business Day, then payment of the amount payable on such date will be I-7 70 made on the next succeeding day that is a Business Day (without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the redemption price in respect of any Securities is improperly withheld or refused and not paid either by the Trust or by the Sponsor as guarantor pursuant to the relevant Securities Guarantee, Distributions on such Securities will continue to accrue at the then applicable rate, from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the amount payable upon redemption (other than for purposes of calculating any premium). (iv) Redemption/Distribution Notices shall be sent by the Administrative Trustees on behalf of the Trust to (A) in the case of Preferred Securities held in book-entry form, the Depositary and, in the case of Securities held in certificated form, the Holders of such certificates and (B) in respect of the Common Securities, the Holder thereof. (v) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. 5. Conversion Rights. The Holders of Securities shall have the right at any time, at their option, to cause the Conversion Agent to convert Securities, on behalf of the converting Holders, into shares of Class A Common Stock, par value $.01 per share, of the Sponsor (the "Class A Common Stock") in the manner described herein on and subject to the following terms and conditions: (a) The Securities will be convertible at the office of the Conversion Agent into fully paid and nonassessable shares of Class A Common Stock pursuant to the Holder's direction to the Conversion Agent to exchange such Securities for a portion of the Debentures theretofore held by the Trust on the basis of one Security per $50 principal amount of Debentures, and immediately convert such amount of Debentures into fully paid and nonassessable shares of Class A Common Stock at an initial rate of __________ shares of Class A Common Stock per $50 principal amount of Debentures (which is equivalent to a conversion price of $__________ per share of Class A Common Stock, subject to certain adjustments set forth in the Indenture). (b) In order to convert Securities into Class A Common Stock the Holder shall submit to the Conversion Agent at the office referred to above an irrevocable request to convert Securities on behalf of such Holder (the "Conversion Request"), together, if the Securities are in certificated form, with such certificates. The Conversion I-8 71 Request shall (i) set forth the number of Securities to be converted and the name or names, if other than the Holder, in which the shares of Class A Common Stock should be issued and (ii) direct the Conversion Agent (a) to exchange such Securities for a portion of the Debentures held by the Trust (at the rate of exchange specified in the preceding paragraph) and (b) to immediately convert such Debentures on behalf of such Holder, into Class A Common Stock (at the conversion rate specified in the preceding paragraph). The Conversion Agent shall notify the Trust of the Holder's election to exchange Securities for a portion of the Debentures held by the Trust and the Trust shall, upon receipt of such notice, deliver to the Conversion Agent the appropriate principal amount of Debentures for exchange in accordance with this Section. The Conversion Agent shall thereupon notify the Sponsor of the Holder's election to convert such Debentures into shares of Class A Common Stock. Holders of Securities at the close of business on a Distribution record date will be entitled to receive the Distribution payable on such Securities on the corresponding Distribution payment date notwithstanding the conversion of such Securities following such record date but prior to such distribution payment date. Except as provided above, neither the Trust nor the Sponsor will make, or be required to make, any payment, allowance or adjustment upon any conversion on account of any accumulated and unpaid Distributions accrued on the Securities, whether or not in arrears, (including any Additional Amounts accrued thereon) surrendered for conversion, or on account of any accumulated and unpaid dividends on the shares of Class A Common Stock issued upon such conversion, except to the extent that such shares are held of record on the record date for any such distributions. Securities shall be deemed to have been converted immediately prior to the close of business on the day on which a Notice of Conversion relating to such Securities is received by the Trust in accordance with the foregoing provision (the "Conversion Date"). The Person or Persons entitled to receive the Class A Common Stock issuable upon conversion of the Debentures shall be treated for all purposes as the record holder or holders of such Class A Common Stock at such time. As promptly as practicable on or after the Conversion Date, the Sponsor shall issue and deliver at the office of the Conversion Agent a certificate or certificates for the number of full shares of Class A Common Stock issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same, unless otherwise directed by the Holder in the notice of conversion and the Conversion Agent shall distribute such certificate or certificates to such Person or Persons. (c) Each Holder of a Security by his acceptance thereof appoints Wilmington Trust Company "Conversion Agent" for the purpose of effecting the conversion of Securities in accordance with this Section. In effecting the conversion and transactions described in this Section, the Conversion Agent shall be acting as agent of the Holders of Securities directing it to effect such conversion transactions. The Conversion Agent is hereby authorized (i) to exchange Securities from time to time for Debentures held by the Trust in connection with the conversion of such Securities in accordance with this Section and (ii) to convert all or a portion of the Debentures into Class A Common Stock and thereupon to deliver such shares of Class A Common Stock I-9 72 in accordance with the provisions of this Section and to deliver to the Trust a new Debenture or Debentures for any resulting unconverted principal amount. (d) No fractional shares of Class A Common Stock will be issued as a result of conversion, but in lieu thereof, such fractional interest will be paid in cash by the Sponsor to the Trust, which in turn will make such payment to the Holder or Holders of Securities so converted. (e) The Sponsor shall at all times reserve and keep available out of its authorized and unissued Class A Common Stock, solely for issuance upon the conversion of the Debentures, free from any preemptive or other similar rights, such number of shares of Class A Common Stock as shall from time to time be issuable upon the conversion of all the Debentures then outstanding. Notwithstanding the foregoing, the Sponsor shall be entitled to deliver upon conversion of Debentures, shares of Class A Common Stock reacquired and held in the treasury of the Sponsor (in lieu of the issuance of authorized and unissued shares of Class A Common Stock), so long as any such treasury shares are free and clear of all liens, charges, security interests or encumbrances. Any shares of Class A Common Stock issued upon conversion of the Debentures shall be duly authorized, validly issued and fully paid and nonassessable. The Trust shall deliver the shares of Class A Common Stock received upon conversion of the Debentures to the converting Holder free and clear of all liens, charges, security interests and encumbrances, except for United States withholding taxes. Each of the Sponsor and the Trust shall prepare and shall use its best efforts to obtain and keep in force such governmental or regulatory permits or other authorizations as may be required by law, and shall comply with all applicable requirements as to registration or qualification of the Class A Common Stock (and all requirements to list the Class A Common Stock issuable upon conversion of Debentures that are at the time applicable), in order to enable the Sponsor to lawfully issue Class A Common Stock upon conversion of the Debentures and to lawfully deliver the Class A Common Stock to each Holder upon conversion of the Securities. (f) The Sponsor will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Class A Common Stock on conversion of Debentures and the delivery of the shares of Class A Common Stock upon conversion of the Securities. The Sponsor shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Class A Common Stock in a name other than that in which the Securities so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Sponsor the amount of any such tax, or has established to the satisfaction of the Sponsor that such tax has been paid. (g) Nothing in the preceding Paragraph (f) shall limit the requirement of the Trust to withhold taxes pursuant to the terms of the Securities set forth in this Annex I to the Declaration or in the Declaration itself or otherwise require the Property Trustee or the Trust to pay any amounts on account of such withholdings. I-10 73 6. Voting Rights; Preferred Securities. (a) Except as provided under paragraphs 6(b) and 8, in the Business Trust Act and as otherwise required by law, the Declaration and the Indenture, the Holders of the Preferred Securities will have no voting rights. (b) In addition to the rights of the Holders of the Preferred Securities with respect to the enforcement of payment of principal and interest on the Debentures set forth herein, in the Declaration or in the Indenture, if (i) a Debenture Event of Default occurs and is continuing or (ii) the Company defaults under the Guarantee (each of (i) and (ii) being an "Appointment Event"), then the Holders of the Preferred Securities, acting as a single class, will be entitled by the vote of a Majority in Liquidation Amount of the Preferred Securities to appoint a Special Trustee in accordance with Section 5.06(a)(ii)(B) of the Declaration. Any Holder of Preferred Securities (other than the Sponsor, or any entity directly or indirectly controlling or controlled by or under direct or indirect common control with the Sponsor) will be entitled to nominate any Person to be appointed as Special Trustee. Not later than 30 days after such right to appoint a Special Trustee arises, the Trustees will convene a meeting for the purpose of appointing a Special Trustee. If the Trustees fail to convene such meeting within such 30-day period, the Holders of not less than 10% in aggregate liquidation amount of the Preferred Securities will be entitled to convene such meeting in accordance with Section 12.02 of the Declaration. The record date for such meeting will be the close of business on the Business Day that is one Business Day before the day on which notice of the meeting is sent to the Holders. The provisions of the Declaration relating to the convening and conduct of the meetings of the Holders will apply with respect to any such meeting. Any Special Trustee so appointed shall cease to be a Special Trustee if the Appointment Event pursuant to which the Special Trustee was appointed and all other Appointment Events cease to be continuing. A Special Trustee may be removed without cause at any time by vote of the Holders of a Majority in Liquidation Amount of the Preferred Securities at a meeting of the Holders of the Preferred Securities or by written consent in accordance with Section 5.06(a)(ii)(B) of the Declaration. The Holders of 10% in liquidation amount of the Preferred Securities will be entitled to convene such a meeting in accordance with Section 12.02 of the Declaration. The record date for such meeting will be the close of business on the Business Day which is one Business Day before the day on which the notice of meeting is sent to Holders. Notwithstanding the appointment of a Special Trustee, the Sponsor shall retain all rights under the Indenture, including the right to defer payments of interest by extending the interest payment period on the Debentures. Subject to the requirements set forth in this paragraph, the Holders of a Majority in Liquidation Amount of the Preferred Securities, voting separately as a class may, and the Trustees shall not, without obtaining the prior approval of the Holders of a Majority in Liquidation Amount of all outstanding Preferred Securities (i) direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee under the Indenture, or executing any trust or power conferred upon the Property Trustee I-11 74 with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 5.13 of the Indenture or otherwise, (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, provided, however, that, where a consent under the Indenture would require the consent or act of the Holders of greater than a majority of the Holders in principal amount of Debentures affected thereby (a "Super Majority"), the Property Trustee may only give such consent or take such action at the direction of the Holders of at least the proportion in liquidation preference of the Preferred Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The Property Trustee shall not, and none of the other Trustees shall in any event, revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities, except by a subsequent vote of the Holders of the Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Preferred Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not fail to be classified as a grantor trust for United States federal income tax purposes. If a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption on the redemption date), then a Holder of Preferred Securities may directly institute a proceeding for enforcement of payment to such Holder (a "Direct Action") of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such Holder on or after the respective due date specified in the Debentures. Except as provided in the preceding sentence, the Holders of Preferred Securities will not be able to exercise directly any other remedy available to the Holders of the Debentures. In connection with any Direct Action, the Debenture Issuer will be subrogated to the rights of such Holder of Preferred Securities under the Declaration to the extent of any payment made by the Debenture Issuer to such Holder of Preferred Securities in such Direct Action. Any approval or direction of Holders of Preferred Securities may be given at a separate meeting of Holders of Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or without notice pursuant to written consent. The Administrative Trustees will cause a notice of any meeting at which Holders of Preferred Securities are entitled to vote, to be mailed to each Holder of record of Preferred Securities. Each such notice will include a statement setting forth the following information (i) the date of such meeting, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote and (iii) instructions for the delivery of proxies. I-12 75 No vote or consent of the Holders of the Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. 7. Voting Rights--Common Securities. (a) Except as provided under paragraphs 7(b), (c) and 8, in the Business Trust Act and as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article V of the Declaration, to vote to appoint, remove or replace any Trustee, subject to the exclusive right of the Holders of the Preferred Securities to appoint, remove or replace a Special Trustee. (c) Subject to Section 2.06 of the Declaration and only after the Event of Default with respect to the Preferred Securities has been cured, waived, or otherwise eliminated and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in Liquidation Amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 5.13 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, provided that where a consent or action under the Indenture would require the consent or act of the Holders of greater than a majority in principal amount of Debentures affected thereby (a "Super Majority"), the Property Trustee may only give such consent or take such action at the direction of the Holders of at least the proportion in liquidation amount of the Common Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. Pursuant to this paragraph 7(c), the Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities, except by a subsequent vote of the Holders of the Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Common Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that, as a result of I-13 76 such action the Trust will not fail to be classified as a grantor trust for United States federal income tax purposes. If the Property Trustee fails to enforce its rights, as holder of the Debentures, under the Indenture, any Holder of Common Securities may, to the fullest extent permitted by law and after a period of 30 days has elapsed from such Holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against the Sponsor, to enforce the Property Trustee's rights, as holder of the Debentures, under the Indenture, without first instituting any legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or without notice pursuant to written consent. The Administrative Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote and (iii) instructions for the delivery of proxies. No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. 8. Amendments to Declaration and Indenture. (a) In addition to any requirements under Section 12.01 of the Declaration, if any proposed amendment to the Declaration provides for, or the Administrative Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than as described in Section 8.01 of the Declaration, then the Holders of outstanding Securities will be entitled to vote on such amendment or proposal (but not on any other amendment or proposal) and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in Liquidation Amount of the Securities, voting together as a single class, provided, however, that, the rights of Holders of Preferred Securities under Article V of the Declaration to appoint, remove or replace a Special Trustee shall not be amended without the consent of each Holder of Preferred Securities; and provided, further, that if any amendment or proposal referred to in clause (i) above would adversely affect only the Preferred Securities or only the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a Majority in Liquidation Amount of such class of Securities. (b) In the event the consent of the Property Trustee as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Debentures, the Property Trustee shall request the I-14 77 direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by at least the same proportion in aggregate stated liquidation preference of the Securities; provided, however, that the Property Trustee shall not take any action in accordance with the directions of the Holders of the Securities under this paragraph 8(b) unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. 9. Pro Rata. A reference in these terms of the Securities to any payment, Distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, on any Distribution Date or redemption date an Event of Default under the Declaration has occurred and is continuing, in which case no payment of any Distribution on, or amount payable upon redemption of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the amount payable upon redemption of the Preferred Securities, the full amount of such amount in respect of all outstanding Preferred Securities shall have been made or provided for, and all funds available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions on, or the amount payable upon redemption of Preferred Securities then due and payable. 10. Ranking. The Preferred Securities rank pari passu and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default occurs and is continuing under the Indenture in respect of the Debentures held by the Property Trustee, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Preferred Securities. 11. Acceptance of Securities Guarantees and Indenture. Each Holder of Preferred Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Preferred Securities Guarantee and the Common Securities Guarantee, respectively, including the subordination provisions therein and to the provisions of the Indenture which are incorporated by reference herein and which include, among other things, provisions relating to certain rights of the Holders of the Preferred Securities all as set forth therein. I-15 78 12. No Preemptive Rights. The Holders of the Securities shall have no preemptive or similar rights to subscribe for any additional securities. 13. Miscellaneous. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Preferred Securities Guarantee or the Common Securities Guarantee (as may be appropriate), and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business. I-16 79 EXHIBIT A-1 FORM OF PREFERRED SECURITY [FORM OF FACE OF SECURITY] [Include if Preferred Security is in global form and the Depository Trust Company is the Depository-- UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] [Include if Preferred Security is in global form-- TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE DECLARATION REFERRED TO BELOW.] Certificate Number Number of Preferred Securities CUSIP NO. 29363P 10 4 Preferred Securities of Entercom Communications Capital Trust A-1-1 80 __% Convertible Preferred Securities Term Income Deferrable Equity Securities (TIDES)(SM)* (liquidation amount $50 per Convertible Preferred Security) Entercom Communications Capital Trust, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that__________________________________________________________ (the "Holder") is the registered owner of preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the ___% Convertible Preferred Securities, Term Income Deferrable Equity Securities (TIDES)(SM)* (liquidation amount $50 per Convertible Preferred Security) (the "Preferred Securities"). Subject to the terms of the Declaration (as defined below), the Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of October __, 1999, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Preferred Securities as set forth in Annex I to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Preferred Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Preferred Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Reference is hereby made to select provisions of the Preferred Securities set forth on the reverse hereof, which select provisions shall for all purposes have the same effect as if set forth at this place. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Preferred Securities as evidence of indirect beneficial ownership in the Debentures. Unless the Property Trustee's Certificate of Authentication hereon has been properly executed, these Preferred Securities shall not be entitled to any benefit under the Declaration or be valid or obligatory for any purpose. - ------------------------- * The terms Term Income Deferrable Equity Securities (TIDES)(SM) and TIDES (SM) are registered servicemarks of Credit Suisse First Boston Corporation. A-1-2 81 IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day of _________, ____. Entercom Communications Capital Trust By:__________________________________ Name: Title: Administrative Trustee A-1-3 82 PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Preferred Securities referred to in the within-mentioned Declaration. Dated: WILMINGTON TRUST COMPANY, as Property Trustee By:_____________________________ Authorized Signature A-1-4 83 [FORM OF REVERSE OF SECURITY] Distributions payable on each Preferred Security will be fixed at a rate per annum of __% (the "Coupon Rate") of the stated liquidation amount of $50 per Preferred Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such quarterly distributions, additional distributions on quarterly distributions not paid on the applicable Distribution Date, Special Distributions and Additional Sums, as applicable. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. Except as otherwise described below, Distributions on the Preferred Securities will be cumulative, will accrue from the date of their original issuance and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 1999 to Holders of record at the close of business on the 15th of the month next preceding the applicable payment date, which payment dates shall correspond to the interest payment dates (each an "Interest Payment Date") on the Debentures. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each a "Deferral Period") and, as a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate compounded quarterly during any such Deferral Period. Prior to the termination of any such Deferral Period, the Debenture Issuer may further extend such Deferral Period; provided that such Deferral Period together with all such previous and further deferrals thereof may not exceed 20 consecutive quarters or extend beyond the maturity (whether at the stated maturity or by declaration of acceleration, call for redemption or otherwise) of the Debentures under the Indenture. Payments of accrued Distributions will be payable on an Interest Payment Date elected by the Company to Holders as they appear on the books and records of the Trust on the record date fixed for such Interest Payment Date. Upon the termination of any Deferral Period and the payment of all amounts then due, the Debenture Issuer may commence a new Deferral Period, subject to the above requirements. The Preferred Securities shall be redeemable as provided in the Declaration. The Preferred Securities shall be convertible into shares of Class A Common Stock, through (i) the exchange of Preferred Securities for a portion of the A-1-5 84 Debentures and (ii) the immediate conversion of such Debentures into Class A Common Stock, in the manner and according to the terms set forth in the Declaration. A-1-6 85 CONVERSION REQUEST To: Wilmington Trust Company as Property Trustee of Entercom Communications Capital Trust The undersigned owner of these Preferred Securities hereby irrevocably exercises the option to convert these Preferred Securities, or the portion below designated, into Class A Common Stock of Entercom Communications Corp. (the "Class A Common Stock") in accordance with the terms of the Amended and Restated Declaration of Trust (the "Declaration"), dated as of October __, 1999, by Joseph M. Field, David J. Field and John C. Donlevie, as Administrative Trustees, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as Property Trustee, Entercom Communications Corp., as Sponsor, and by the Holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to the Declaration. Pursuant to the aforementioned exercise of the option to convert these Preferred Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Declaration) to (i) exchange such Preferred Securities for a portion of the Debentures (as that term is defined in the Declaration) held by the Trust (at the rate of exchange specified in the terms of the Preferred Securities set forth as Annex I to the Declaration) and (ii) immediately convert such Debentures on behalf of the undersigned, into Class A Common Stock (at the conversion rate specified in the terms of the Preferred Securities set forth as Annex I to the Declaration). The undersigned does also hereby direct the Conversion Agent that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date: in whole |___| in part |___| Number of Preferred Securities to be converted: ___________________ A-1-7 86 If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the shares of Class A Common Stock are to be issued, along with the address or addresses of such person or persons: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ___________________________________ Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ___________________________________ Signature Guarantee:* ________ * (Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A-1-8 87 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security to: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert assignee's social security or tax identification number) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ agent to transfer this Preferred Security on the books of the Trust. The agent may substitute another to act for him or her. Date: Signature:__________________ (Sign exactly as your name appears on the other side of this Preferred Security Certificate) Signature Guarantee:* ________ * (Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A-1-9 88 EXHIBIT A-2 FORM OF COMMON SECURITY [FORM OF FACE OF SECURITY] Certificate Number Number of Common Securities Common Securities of Entercom Communications Capital Trust __% Convertible Common Securities (liquidation amount $50 per Convertible Common Security) Entercom Communications Trust, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that ________________________________________________________________________________ (the "Holder") is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the __% Convertible Common Securities (liquidation amount $50 per Convertible Common Security) (the "Common Securities"). Subject to the terms of the Declaration (as defined below), the Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of October __, 1999, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Common Securities as set forth in Annex I to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Common Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture to a Holder without charge upon written request to the Sponsor at its principal place of business. Reference is hereby made to select provisions of the Common Securities set forth on the reverse hereof, which select provisions shall for all purposes have the same effect as if set forth at this place. Upon receipt of this certificate, the Sponsor is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat for United States federal income tax purposes the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. A-2-1 89 IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day of _________, ____. Entercom Communications Capital Trust By:______________________________ Name: Title: Administrative Trustee A-2-2 90 [FORM OF REVERSE OF SECURITY] Distributions payable on each Common Security will be fixed at a rate per annum of __% (the "Coupon Rate") of the stated liquidation amount of $50 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes quarterly distributions, additional distributions on quarterly distributions not paid on the applicable Distribution Date, Special Distributions and Additional Sums, as applicable. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. Except as otherwise described below, Distributions on the Common Securities will be cumulative, will accrue from the date of their original issuance and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 1999 to Holders of record one (1) day prior to such payment dates, which payment dates shall correspond to the interest payment dates (each, an "Interest Payment Date") on the Debentures. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each a "Deferral Period") and, as a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate compounded quarterly during any such Deferral Period. Prior to the termination of any such Deferral Period, the Debenture Issuer may further extend such Deferral Period; provided that such Deferral Period together with all such previous and further deferrals thereof may not exceed 20 consecutive quarters or extend beyond the maturity (whether at the stated maturity or by declaration of acceleration, call for redemption or otherwise) of the Debentures under the Indenture. Payments of accrued Distributions will be payable on an Interest Payment Date elected by the Company to Holders as they appear on the books and records of the Trust on the record date fixed for such Interest Payment Date. Upon the termination of any Deferral Period and the payment of all amounts then due, the Debenture Issuer may commence a new Deferral Period, subject to the above requirements. The Common Securities shall be redeemable as provided in the Declaration. A-2-3 91 The Common Securities shall be convertible into shares of Class A Common Stock, through (i) the exchange of Common Securities for a portion of the Debentures and (ii) the immediate conversion of such Debentures into Class A Common Stock, in the manner and according to the terms set forth in the Declaration. A-2-4 92 CONVERSION REQUEST To: Wilmington Trust Company, as Property Trustee of Entercom Communications Capital Trust The undersigned owner of these Common Securities hereby irrevocably exercises the option to convert these Common Securities, or the portion below designated, into Class A Common Stock of Entercom Communications Corp. (the "Class A Common Stock") in accordance with the terms of the Amended and Restated Declaration of Trust (the "Declaration"), dated as of October ___, 1999, by Joseph M. Field, David J. Field and John C. Donlevie, as Administrative Trustees, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as Property Trustee, Entercom Communications Corp., as Sponsor, and by the Holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to the Declaration. Pursuant to the aforementioned exercise of the option to convert these Common Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Declaration) to (i) exchange such Common Securities for a portion of the Debentures (as that term is defined in the Declaration) held by the Trust (at the rate of exchange specified in the terms of the Common Securities set forth as Annex I to the Declaration) and (ii) immediately convert such Debentures on behalf of the undersigned, into Class A Common Stock (at the conversion rate specified in the terms of the Common Securities set forth as Annex I to the Declaration). The undersigned does also hereby direct the Conversion Agent that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date: in whole _________in part_________ Number of Common Securities to be converted: _____________________ If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the shares of Class A Common Stock are to be issued, along with the address or addresses of such person or persons ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ A-2-5 93 ________________________________________________________________________________ Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Signature Guarantee:*______ ___________________________ ________ * (Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A-2-6 94 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert assignee's social security or tax identification number) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints ________________________________________________________________________________ ________________________________________________________________________________ agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: Signature:____________________________________________________ (Sign exactly as your name appears on the other side of this Common Security Certificate) Signature Guarantee:*_________________________________________ ________ * (Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A-2-7 EX-4.03 5 FORM OF INDENTURE 1 EXHIBIT 4.03 - -------------------------------------------------------------------------------- ENTERCOM COMMUNICATIONS CORP. TO WILMINGTON TRUST COMPANY TRUSTEE ----------------------- INDENTURE ----------------------- DATED AS OF OCTOBER __, 1999 $ ------------ CONVERTIBLE SUBORDINATED DEBENTURES DUE 2014 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.............................2 Section 1.01 Definitions..................................................................2 Section 1.02 Compliance Certificates and Opinions........................................12 Section 1.03 Form of Documents Delivered to Trustee......................................13 Section 1.04 Acts of Holders; Record Dates...............................................13 Section 1.05 Notices, etc., to Trustee and the Company...................................15 Section 1.06 Notice to Holders; Waiver...................................................15 Section 1.07 Conflict with Trust Indenture Act...........................................16 Section 1.08 Effect of Headings and Table of Contents....................................16 Section 1.09 Successors and Assigns......................................................16 Section 1.10 Separability Clause.........................................................16 Section 1.11 Benefits of Indenture.......................................................16 Section 1.12 Governing Law...............................................................16 Section 1.13 Legal Holidays..............................................................16 ARTICLE II SECURITY FORMS.....................................................................17 Section 2.01 Forms Generally.............................................................17 Section 2.02 Initial Issuance to Property Trustee........................................17 Section 2.03 Additional Provisions Required in Global Security...........................17 Section 2.04 Issuance of Global Securities to Holders....................................18 ARTICLE III THE SECURITIES.....................................................................18 Section 3.01 Title and Terms.............................................................18 Section 3.02 Denominations...............................................................20 Section 3.03 Execution, Authentication, Delivery and Dating..............................20 Section 3.04 Temporary Securities........................................................20 Section 3.05 Global Securities...........................................................21 Section 3.06 Registration, Transfer and Exchange Generally; Certain Transfers and Exchanges...................................................22 Section 3.07 Mutilated, Destroyed, Lost and Stolen Securities............................24 Section 3.08 Payment of Interest; Interest Rights Preserved..............................25 Section 3.09 Persons Deemed Owners.......................................................26 Section 3.10 Cancellation................................................................27 Section 3.11 Right of Set Off............................................................27 Section 3.12 CUSIP Numbers...............................................................27 Section 3.13 Extension of Interest Payment Period; Notice of Extension...................27 Section 3.14 Paying Agent, Security Registrar and Conversion Agent.......................28 ARTICLE IV SATISFACTION AND DISCHARGE.........................................................28 Section 4.01 Satisfaction and Discharge of Indenture.....................................28 Section 4.02 Application of Trust Money..................................................30
i 3 TABLE OF CONTENTS (CONTINUED)
PAGE ---- ARTICLE V REMEDIES...........................................................................30 Section 5.01 Events of Default...........................................................30 Section 5.02 Acceleration of Maturity; Rescission and Annulment..........................31 Section 5.03 Collection of Indebtedness and Suits for Enforcement by Trustee.............32 Section 5.04 Trustee May File Proofs of Claim............................................33 Section 5.05 Trustee May Enforce Claims Without Possession of Securities.................33 Section 5.06 Application of Money Collected..............................................33 Section 5.07 Limitation on Suits.........................................................34 Section 5.08 Unconditional Right of Holders to Receive Principal and Interest and to Convert.....................................................35 Section 5.09 Restoration of Rights and Remedies..........................................35 Section 5.10 Rights and Remedies Cumulative..............................................35 Section 5.11 Delay or Omission not Waiver................................................35 Section 5.12 Control by Holders..........................................................35 Section 5.13 Waiver of Past Defaults.....................................................36 Section 5.14 Undertaking for Costs.......................................................36 Section 5.15 Waiver of Stay or Extension Laws............................................36 Section 5.16 Enforcement by Holders of Preferred Securities..............................37 ARTICLE VI THE TRUSTEE........................................................................37 Section 6.01 Certain Duties and Responsibilities.........................................37 Section 6.02 Notice of Defaults..........................................................38 Section 6.03 Certain Rights of Trustee...................................................38 Section 6.04 Not Responsible for Recitals or Issuance of Securities......................39 Section 6.05 May Hold Securities.........................................................39 Section 6.06 Money Held in Trust.........................................................39 Section 6.07 Compensation and Reimbursement..............................................39 Section 6.08 Disqualification; Conflicting Interests.....................................40 Section 6.09 Corporate Trustee Required; Eligibility.....................................40 Section 6.10 Resignation and Removal; Appointment of Successor...........................41 Section 6.11 Acceptance of Appointment by Successor......................................42 Section 6.12 Merger, Conversion, Consolidation or Succession to Business.................42 Section 6.13 Preferential Collection of Claims Against Company...........................42 Section 6.14 Co-trustees and Separate Trustees...........................................43 ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY..................................44 Section 7.01 Company to Furnish Trustee Names and Addresses of Holders...................44 Section 7.02 Preservation of Information; Communications to Holders......................44 Section 7.03 Reports by Trustee..........................................................45
ii 4 TABLE OF CONTENTS (CONTINUED)
PAGE ---- Section 7.04 Reports by Company..........................................................45 Section 7.05 Tax Reporting...............................................................45 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE...............................45 Section 8.01 Company May Consolidate, etc., only on Certain Terms........................45 Section 8.02 Successor Substituted.......................................................46 ARTICLE IX SUPPLEMENTAL INDENTURES............................................................47 Section 9.01 Supplemental Indentures Without Consent of Holders..........................47 Section 9.02 Supplemental Indentures with Consent of Holders.............................47 Section 9.03 Execution of Supplemental Indentures........................................49 Section 9.04 Effect of Supplemental Indentures...........................................49 Section 9.05 Conformity with Trust Indenture Act.........................................49 Section 9.06 Reference in Securities to Supplemental Indentures..........................49 ARTICLE X COVENANTS; REPRESENTATIONS AND WARRANTIES..........................................50 Section 10.01 Payment of Principal and Interest...........................................50 Section 10.02 Maintenance of Office or Agency.............................................50 Section 10.03 Money for Security Payments to be Held in Trust.............................50 Section 10.04 Statement by Officers as to Default.........................................51 Section 10.05 Limitation on Dividends; Transactions with Affiliates; Covenants as to the Trust...................................................51 Section 10.06 Payment of Expenses of the Trust............................................52 Section 10.07 Prospectus Amendment or Supplement..........................................53 ARTICLE XI REDEMPTION OF SECURITIES...........................................................53 Section 11.01 Optional Redemption.........................................................53 Section 11.02 Tax Event Redemption........................................................54 Section 11.03 Selection by Trustee of Securities to be Redeemed...........................54 Section 11.04 Notice of Redemption........................................................55 Section 11.05 Deposit of Redemption Price.................................................56 Section 11.06 Securities Payable on Redemption Date.......................................56 Section 11.07 Securities Redeemed in Part.................................................56 ARTICLE XII SUBORDINATION OF SECURITIES........................................................57 Section 12.01 Agreement to Subordinate....................................................57 Section 12.02 Default on Secured Senior Debt..............................................57 Section 12.03 Liquidation; Dissolution; Bankruptcy........................................58 Section 12.04 Subrogation.................................................................59 Section 12.05 Trustee to Effectuate Subordination.........................................60 Section 12.06 Notice by the Company.......................................................60 Section 12.07 Rights of the Trustee; Holders of Secured Senior Debt.......................61 Section 12.08 Subordination May not be Impaired...........................................61
iii 5 TABLE OF CONTENTS (CONTINUED)
PAGE ---- ARTICLE XIII CONVERSION OF SECURITIES...........................................................62 Section 13.01 Conversion Rights...........................................................62 Section 13.02 Conversion Procedures.......................................................62 Section 13.03 Conversion Price Adjustments................................................64 Section 13.04 Reclassification, Consolidation, Merger or Sale of Assets...................69 Section 13.05 Notice of Adjustments of Conversion Price...................................70 Section 13.06 Prior Notice of Certain Events..............................................70 Section 13.07 Adjustments in case of Fundamental Changes..................................71 Section 13.08 Dividend or Interest Reinvestment Plans.....................................74 Section 13.09 Certain Additional Rights...................................................74 Section 13.10 Trustee not Responsible for Determining Conversion Price or Adjustments.....75 ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS...................75 Section 14.01 No Recourse.................................................................75 EXHIBIT A FORM OF SECURITY...........................................................................A-1
iv 6 CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318 OF THE TRUST INDENTURE ACT OF 1939:
TRUST INDENTURE ACT INDENTURE SECTION SECTION ------- ------- Section 310 (a) (1)............................................................ 6.09 (a) (2)............................................................ 6.09 (a) (3)............................................................ Not Applicable (a) (4)............................................................ Not Applicable (b)................................................................ 6.08, 6.10 Section 311 (a)................................................................ 6.13 (b)................................................................ 6.13 Section 312 (a)................................................................ 7.01, 7.02(a) (b)................................................................ 7.02(b) (c)................................................................ 7.02(c) Section 313 (a)................................................................ 7.03(a) (a) (4)............................................................ 7.03(a) (b)................................................................ 7.03(a) (c)................................................................ 7.03(a) (d)................................................................ 7.03(b) Section 314 (a)................................................................ 7.04 (b)................................................................ Not Applicable (c) (1)............................................................ 1.02 (c) (2)............................................................ 1.02 (c) (3)............................................................ Not Applicable (d)................................................................ Not Applicable (e)................................................................ 1.02 Section 315 (a)................................................................ 6.01, 6.03 (b)................................................................ 6.02 (c)................................................................ 6.01 (d)................................................................ 6.01 (e)................................................................ 5.14 Section 316 (a) (1) (A)........................................................ 5.02, 5.12 (a) (1) (B)........................................................ 5.13 (a) (2)............................................................ Not Applicable (b)................................................................ 5.08 (c)................................................................ 1.04(c) Section 317 (a) (1)............................................................ 5.03 (a) (2)............................................................ 5.04 (b)................................................................ 1.003 Section 318 (a)................................................................ 1.07
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. v 7 INDENTURE, dated as of October __, 1999, between Entercom Communications Corp., a corporation duly organized and existing under the laws of the State of Pennsylvania (herein called the "Company"), and Wilmington Trust Company, a Delaware banking corporation, as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY WHEREAS Entercom Communications Capital Trust, a Delaware business trust (the "Trust"), formed under the Amended and Restated Declaration of Trust among the Company, as Sponsor, Wilmington Trust Company, as property trustee (the "Property Trustee"), and Wilmington Trust Company, as Delaware trustee (the "Delaware Trustee"), and Joseph M. Field, David J. Field and John C. Donlevie, as trustees (together with the Property Trustee and the Delaware Trustee, the "Issuer Trustees"), dated as of October __, 1999, (the "Declaration"), pursuant to the Underwriting Agreement (the "Underwriting Agreement") dated September __, 1999, among the Company, the Trust and the Underwriters named therein, will issue and sell up to 3,000,000 of its ____% Convertible Preferred Securities, Term Income Deferrable Equity Securities (TIDES)SM ("Preferred Securities") (or up to 3,450,000 of its Preferred Securities to the extent the over-allotment option is exercised in full) with a liquidation amount of $50 per Preferred Security, having an aggregate liquidation amount with respect to the assets of the Trust of up to $150,000,000 (or up to $172,500,000 to the extent the over-allotment option is exercised in full); WHEREAS the trustees of the Trust, on behalf of the Trust, will execute and deliver to the Company Common Securities evidencing an ownership interest in the Trust, registered in the name of the Company, in an aggregate amount equal to approximately three percent of the capitalization of the Trust, equivalent to up to 92,800 ____% Common Securities (the "Common Securities" and, together with the Preferred Securities, the "Trust Securities") (or up to 106,720 ___% Common Securities to the extent the over-allotment option is exercised in full), with a liquidation amount of $50 per Common Security, having an aggregate liquidation amount with respect to the assets of the Trust of up to $4,640,000 (or up to $5,336,000 to the extent the over-allotment option is exercised in full); WHEREAS the Trust will use the proceeds from the sale of the Preferred Securities and the Common Securities to purchase from the Company the Convertible Subordinated Debentures Due 2014 (the "Securities") in an aggregate principal amount of up to $150,000,000 (or up to $172,500,000 to the extent the over-allotment option is exercised in full); WHEREAS the Company is guaranteeing the payment of distributions on the Trust Securities and payment of the Redemption Price (as defined herein) and payments on liquidation with respect to the Trust Securities, to the extent provided in the Common Securities Guarantee Agreement, dated October __, 1999, delivered by the Company, and the Preferred Securities Guarantee Agreement, dated October __, 1999, between the Company and Wilmington Trust Company, as Guarantee Trustee, for the 8 benefit of the holders of the Trust Securities from time to time (together, the "Guarantee"); WHEREAS the Company has duly authorized the creation of an issue of the Securities of substantially the tenor and amount hereinafter set forth and to provide therefor the Company has duly authorized the execution and delivery of this Indenture; WHEREAS, so long as the Trust is a Holder of Securities and any Preferred Securities are outstanding, the Declaration provides that the holders of Preferred Securities may cause the Conversion Agent (as defined herein) to (i) exchange such Preferred Securities for Securities held by the Trust and (ii) immediately convert such Securities into Common Stock (as defined herein); and WHEREAS all things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders (as defined herein) thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.01 Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; and (4) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. 2 9 "Act," when used with respect to any Holder, has the meaning specified in Section 1.04. "Additional Payments" means Compounded Interest and Additional Sums, if any. "Additional Sums" has the meaning specified in Section 3.01. "Adjusted Reference Market Price" has the meaning specified in Section 13.07(a)(i). "Adjusted Relevant Price" has the meaning specified in Section 13.07(a)(i). "Administrative Action" has the meaning specified in the definition of Tax Event in this Section 1.01. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Registrar, Paying Agent, Conversion Agent or co-registrar. "Agent Member" means any member of, or participant in, the Depositary. "Applicable Conversion Price" has the meaning specified in Section 13.01. "Applicable Conversion Ratio" has the meaning specified in Section 13.01. "Applicable Rate" means __%, the rate at which the Securities accrue interest and the corresponding Trust Securities accrue distributions. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. 3 10 "Business Day" means any day other than a Saturday or a Sunday, or a day on which banking institutions in New York, New York or Wilmington, Delaware are authorized or required by law or executive order to remain closed, or a day on which the corporate trust office of the Property Trustee or the Trustee is closed for business. "Class A Common Stock" has the meaning specified in Section 13.01. "Closing Price" has the meaning specified in Section 13.07(b). "Commission" means the Securities and Exchange Commission, as from time to time constituted, created, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Securities" has the meaning specified in the Second Recital to this instrument. "Common Stock" includes any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. However, subject to the provisions of Article XIII, shares issuable on conversion of Securities shall include only shares of the class designated as Class A Common Stock of the Company at the date of this instrument or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company; provided, that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable on conversion shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "Common Stock Fundamental Change" has the meaning specified in Section 13.07(b). "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. 4 11 "Company Transaction" has the meaning specified in Section 13.04. "Compounded Interest" has the meaning specified in Section 3.13. "Conversion Agent" means the Person appointed to act on behalf of the holders of Preferred Securities in effecting the conversion of Preferred Securities as and in the manner set forth in the Declaration and Section 13.02 hereof. "Conversion Date" has the meaning specified in Section 13.02. "Corporate Trust Office" means the principal office of the Trustee in Wilmington, Delaware, at which at any particular time its corporate trust business shall be administered and which at the date of this Indenture is 1100 North Market Street, Wilmington, Delaware 19890-0001. "Declaration" has the meaning specified in the Recitals to this instrument. "Debt" means (i) the principal of and premium and interest, if any, on indebtedness for money borrowed, (ii) purchase money and similar obligations, (iii) obligations under capital leases, (iv) guarantees, assumptions or purchase commitments relating to, or other transactions as a result of which the Company is responsible for the payment of, such indebtedness of others, (v) renewals, extensions and refunding of any such indebtedness, (vi) interest or obligations in respect of any such indebtedness accruing after the commencement of any insolvency or bankruptcy proceedings and (vii) obligations associated with derivative products such as interest rate and currency exchange contracts, foreign exchange contracts, commodity contracts and similar arrangements. "Defaulted Interest" has the meaning specified in Section 3.08. "Deferral Period" has the meaning specified in Section 3.13. "Deferral Notice" has the meaning specified in Section 3.13. "Delaware Trustee" has the meaning given it in the first recital of this instrument. "Depositary" means The Depository Trust Company, or any successor thereto. "Designated Secured Senior Debt" means (i) any obligation under the Senior Credit Agreement and (2) any other Secured Senior Debt the principal amount of which is $10.0 million or more and that has been designated by the Company as "Designated Secured Senior Debt." "Dissolution Tax Opinion" has the meaning specified in the definition of Tax Event in this Section 1.01. 5 12 "Entitlement Date" has the meaning specified in Section 13.07(b). "Event of Default" has the meaning specified in Section 5.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Expiration Date" has the meaning specified in Section 1.04(d). "Expiration Time" has the meaning specified in Section 13.03(vi). "Fundamental Change" has the meaning specified in Section 13.07(b). "Global Security" means a Security issued in the form prescribed in Section 2.03, issued to the Depositary or its nominee, and registered in the name of the Depositary or its nominee. "Guarantee" has the meaning specified in the Fourth Recital to this instrument. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. "Initial Conversion Price" has the meaning specified in Section 13.01. "Initial Conversion Ratio" has the meaning specified in Section 13.01. "Interest Payment Date" has the meaning specified in Section 3.01. "Issuer Trustees" has the meaning specified in the First Recital of this Indenture. "Maturity," when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "90 Day Period" has the meaning specified in Section 11.02. 6 13 "NNM" means the National Market System of the National Association of Securities Dealers, Inc., or any successor national automated interdealer quotation system. "Non-Stock Fundamental Change" has the meaning specified in Section 13.07(b). "No Recognition Opinion" means an opinion of a nationally recognized independent tax counsel (reasonably acceptable to the Issuer Trustees) experienced in such matters, which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Securities will not recognize any income, gain or loss for United States Federal income tax purposes as a result of the liquidation of the Trust and the distribution of the Securities to the holders of the Preferred Securities. "Notice Of Conversion" means the notice to be given by a Holder of Preferred Securities to the Conversion Agent directing the Conversion Agent to exchange such Preferred Securities for Securities and to convert such Securities into Common Stock on behalf of such holder. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 10.04 shall be the principal executive, financial or accounting officer of the Company. "Opinion Of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be reasonably acceptable to the Trustee. "Optional Redemption" has the meaning specified in Section 11.01. "Optional Redemption Price" has the meaning specified in Section 11.01. "Optional Redemption Ratio" has the meaning specified in Section 13.07(b). "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has 7 14 been made; and (iii) Securities which have been paid pursuant to Section 3.08, converted into Common Stock pursuant to Section 13.01, or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company. "Paying Agent" means any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company. "Payment Resumption Date" has the meaning set forth in Section 3.13. "Person" means any individual, corporation, estate company, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.07 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Securities" has the meaning specified in the first recital to this instrument. "Property Trustee" has the meaning specified in the Recitals to this instrument. "Purchased Shares" has the meaning specified in Section 13.03(vi). "Purchaser Stock Price" has the meaning specified in Section 13.07(b). "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Redemption Tax Opinion" means an opinion of a nationally recognized independent tax counsel (reasonably acceptable to the Issuer Trustees) experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Company would be precluded from deducting the interest on the Securities for United States Federal income tax purposes, even after the Trust was liquidated and the Securities were distributed to the holders of the Preferred Securities. 8 15 "Reference Date" has the meaning specified in Section 13.03(iv). "Reference Market Price" has the meaning specified in Section 13.07(b). "Regular Record Date" has the meaning specified in Section 3.01. "Relevant Price" has the meaning specified in Section 13.07(b). "Responsible Officer," when used with respect to the Trustee, means the chairman or any Vice-chairman of the board of directors, the chairman or any Vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any Vice president, any assistant vice president, the treasurer, any assistant treasurer, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Secured Senior Debt" means Senior Debt that is secured by any lien, pledge, charge, encumbrance, mortgage, deed of trust, hypothecation, assignment or security interest with respect to or assets having a fair market value at the time of the grant thereof (in the judgment of the Board of Directors, the Chief Financial Officer or other responsible officer of the Company) equal to not less than the amount of such Senior Debt, including, without limitation, Secured Senior Debt under the Senior Credit Agreement. "Securities" has the meaning specified in the Third Recital to this instrument. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. "Security Register" and "Security Registrar" have the respective meanings specified in Section 3.06. "Senior Credit Agreement" means (A) that certain Loan Agreement, dated February 13, 1998, as amended on October 8, 1998 and as further amended on July 20, 1999, by and among Entercom, as the borrower, Key Corporate Capital Inc., as administrative agent and document agent, Bank of America National Trust & Savings Association, as syndication agent, and the financial institutions listed therein, as amended, including, without limitation, any related notes, letters of credit, guarantees, collateral documents, instruments and agreements executed in connection therewith, and, in each case, as amended, amended and restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time, and (B) any other debt or credit facility or commercial paper facility providing for revolving credit loans, term loans, accounts receivable financing (including through the sale of accounts receivable to such lenders or to special purpose entities formed to borrow from such lenders against such 9 16 accounts receivable), letters of credit or other form of financing, in each case, as amended, restated, supplemented, extended, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time, including, in the case of clause (A) and clause (B), any such amendment, restatement, supplement, extension, modification, renewal, refunding, replacement or refinancing, (1) extending or shortening the maturity of any obligation incurred thereunder or contemplated thereby, (2) adding or deleting borrowers or guarantors thereunder and (3) increasing the amount of credit extended, or available to be extended, thereunder. "Senior Debt" means (i) all of the Company's obligations under the Senior Credit Agreement, including whether as an obligor, guarantor or otherwise, without limitation, principal (including, without limitation, reimbursement obligations in respect of letters of credit (whether or not drawn) and obligations to cash collateralize letters of credit), premium (if any), interest (including, without limitation, interest accruing subsequent to the filing of, or which would have accrued but for the filing of, a petition for bankruptcy, whether or not the interest is an allowable claim in the bankruptcy proceeding), fees, indemnifications, expenses and other amounts payable pursuant thereto; (ii) the principal of, and premium and interest, if any, on all indebtedness of the Company for money borrowed, whether outstanding on the date of execution of the Indenture or thereafter created, assumed or incurred, (iii) all obligations to make payment pursuant to the terms of financial instruments, such as (a) securities contracts and foreign currency exchange contracts, (b) derivative instruments, such as swap agreements (including interest rate and foreign exchange rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange agreements, options, commodity futures contracts and commodity options contracts, and (c) similar financial instruments; except, in the case of (i) and (ii) above, such indebtedness and obligations that are expressly stated to rank junior in right of payment to, or pari passu in right of payment with, the Securities, (iv) indebtedness or obligations of others of the kind described in (i), (ii) and (iii) above for the payment of which the Company is responsible or liable as guarantor or otherwise, and (v) any deferrals, renewals or extensions of any Senior Debt that is secured, in whole or in part by the Company's assets; provided, however that Senior Debt shall not be deemed to include (a) any Debt of the Company which, when incurred and without respect to any election under Section 1111(b) of the United States Bankruptcy Code of 1978, was without recourse to the Company, (b) trade accounts payable in the ordinary course of business, (c) any Debt of the Company to any of its subsidiaries or (d) Debt to any employee of the Company. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.08. "Stated Maturity," when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal, together with any accrued and unpaid interest (including Compounded Interest), of such Security or such installment of interest is due and payable. 10 17 "Subsidiary" of any Person means (i) a corporation more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation) in which such Person, or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs thereof. "Tax Event" means the receipt by the Property Trustee of an opinion of a nationally recognized independent tax counsel to the Company experienced in such matters (a "Dissolution Tax Opinion") to the effect that, as a result of (a) any amendment to or change (including any announced prospective change (which shall not include a proposed change), provided that a Tax Event shall not occur more than 90 days before the effective date of any such prospective change) in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any judicial decision or official administrative pronouncement, ruling, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action"), there is more than an insubstantial risk that (x) if the Securities are held by the Property Trustee, (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States Federal income tax with respect to interest accrued or received on the Securities or subject to more than a de minimis amount of other taxes, duties or other governmental charges as determined by such counsel, or (ii) any portion of interest payable by the Company to the Trust on the Securities is not, or within 90 days of the date of such opinion will not be, deductible by the Company in whole or in part for United States Federal income tax purposes or (y) with respect to Securities which are no longer held by the Property Trustee, any portion of interest payable by the Company on the Securities is not, or within 90 days of the date of such opinion will not be, deductible by the Company in whole or in part for United States Federal income tax purposes. "Trading Day" has the meaning specified in Section 13.07(b). "Trust" has the meaning specified in the first recital to this instrument. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. 11 18 "Trust Securities" has the meaning specified in the second recital to this instrument. "Underwriters," with respect to the Preferred Securities, means Credit Suisse First Boston Corporation, Banc of America Securities LLC and Deutsche Bank Securities Inc. "Underwriting Agreement" has the meaning specified in the Recitals to this instruments. "Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." "Voting Stock" of any Person means capital stock of such Person which ordinarily has voting power for the election of directors (or Persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. Section 1.02 Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act or reasonably requested by the Trustee in connection with such application or request. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the applicable requirements of the Trust Indenture Act and any other applicable requirement set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made or caused to be made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. 12 19 Section 1.03 Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 1.04 Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments is or are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be 13 20 proved in any other manner which the Trustee or the Company, as the case may be, deems sufficient. (c) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 7.01) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to join in the giving or making of (i) any notice of default, (ii) any declaration of acceleration referred to in Section 5.02, (iii) any request to institute proceedings referred to in Section 5.07(2) or (iv) any direction referred to in Section 5.12. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the date set by the Trustee by which any such determination shall be made (the "Expiration Date") by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities in the manner set forth in Section 1.06. (e) The ownership of Securities shall be proved by the Security Register. (f) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. 14 21 (g) Without limiting the foregoing, a Holder entitled hereunder to give or take any such action with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which who may do so pursuant to such appointment with regard to all or any different part of such principal amount. Section 1.05 Notices, etc., to Trustee and the Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to: Wilmington Trust Company 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to: Entercom Communications Corp. 409 City Avenue, Suite 401 Bala Cynwyd, Pennsylvania 19004 Attention: John C. Donlevie, Esq. Section 1.06 Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at such Holder's address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice when mailed to a Holder in the aforesaid manner shall be conclusively deemed to have been received by such Holder whether or not actually received by such Holder. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. 15 22 In case, by reason of the suspension of regular mail service or by reason of any other cause, it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 1.07 Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the required provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Section 1.08 Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.09 Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 1.10 Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.11 Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Secured Senior Debt, the holders of Preferred Securities (to the extent provided herein) and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.12 Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Section 1.13 Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security or the last date on which a Holder has the right to convert his Securities shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal or conversion of the Securities need not be made on such date, but may be made on the next succeeding Business Day (except that, with respect to any Redemption Date, if such Business Day is in the next succeeding calendar year, such Redemption Date shall be the immediately preceding Business Day) with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity or on such last day for conversion, provided that no interest shall accrue for the 16 23 period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. ARTICLE II SECURITY FORMS Section 2.01 Forms Generally. The Securities and the Trustee's certificates of authentication shall be substantially in the form of Exhibit A which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The Company shall furnish any such legend not contained in Exhibit A to the Trustee in writing. Each Security shall be dated the date of its authentication. The terms and provisions of the Securities set forth in Exhibit A are part of the terms of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. The definitive Securities shall be typewritten or printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 2.02 Initial Issuance to Property Trustee. The Securities initially issued to the Property Trustee of the Trust shall be in the form of one or more individual certificates in definitive, fully registered form. Section 2.03 Additional Provisions Required in Global Security. Any Global Security issued hereunder shall, in addition to the provisions incorporated in Section 2.01, bear a legend in substantially the following form: "THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF 17 24 THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO ENTERCOM COMMUNICATIONS CORP. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN." Section 2.04 Issuance of Global Securities to Holders. The Securities may be represented by one or more Global Securities registered in the name of the Depositary or its nominee if, and only if, the Securities are distributed to the Holders of the Trust Securities. Until such time, the Securities shall be registered in the name of and held by the Property Trustee. Securities distributed to Holders of book-entry Trust Securities shall be distributed in the form of one or more Global Securities registered in the name of the Depositary or its nominee, and deposited with the Security Registrar, as custodian for such Depositary, or held by such Depositary for credit by the Depositary to the respective accounts of the beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Securities distributed to Holders of Trust Securities other than book-entry Trust Securities shall not be issued in the form of a Global Security or any other form intended to facilitate book-entry trading in beneficial interests in such Securities. ARTICLE III THE SECURITIES Section 3.01 Title and Terms. The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is limited to the sum of $_______________ except for Securities authenticated and delivered upon 18 25 registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 3.04, 3.05, 3.06, 3.07, 9.06, 11.07 or 13.02. The Securities shall be known and designated as the "___% Convertible Subordinated Debentures Due 2014" of the Company. Their Stated Maturity shall be September 30, 2014, and they shall bear interest at the Applicable Rate, from October __, 1999, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, as the case may be, payable quarterly (subject to deferral as set forth herein), in arrears, on March 31, June 30, September 30 and December 31 (each an "Interest Payment Date") of each year, commencing December 31, 1999, until the principal thereof is paid or made available for payment, and they shall be paid to the Person in whose name the Security is registered at the close of business on the regular record date for such interest installment, which shall be the close of business on the fifteenth day of the month of the applicable Interest Payment Date (the "Regular Record Date"). Interest will compound quarterly and will accrue at the Applicable Rate on any interest installment in arrears for more than one quarter or during an extension of an interest payment period as set forth in Section 3.13 hereof. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Except as provided in the following sentence, the amount of interest payable for any period shorter than a full quarterly period for which interest is computed, will be computed on the basis of the actual number of days elapsed in such a 30-day month. In the event that any date on which interest is payable on the Securities is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on such date. If at any time while the Property Trustee is the Holder of all the Securities, the Trust is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, as a result of a Tax Event, then, in any case, the Company will pay as additional amounts ("Additional Sums") on the Securities held by the Property Trustee, such additional amounts on the Securities as shall be required so that the distributions payable by the Trust in respect of the Preferred Securities and the Common Securities will not be reduced as a result of any of those Additional Sums. The principal of and interest on the Securities shall be payable at the office or agency of the Company in Bala Cynwyd, Pennsylvania maintained for such purpose and at any other office or agency maintained by the Company for such purpose in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at any time that the Property Trustee is not the sole holder of the Securities, payment of interest may, at the option of the Company, be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or by wire transfer. 19 26 The Securities shall be redeemable as provided in Article XI hereof. The Securities shall be subordinated in right of payment to Secured Senior Debt as provided in Article XII hereof. The Securities shall be convertible as provided in Article XIII hereof. Section 3.02 Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and integral multiples thereof. Section 3.03 Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall manually authenticate and make available for delivery such Securities as in this Indenture provided and not otherwise. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Section 3.04 Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and make available for delivery, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. 20 27 If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Company designated pursuant to Section 10.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 3.05 Global Securities. (a) Each Global Security issued under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. (b) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (i) such Depositary advises the Trustee in writing that such Depositary is no longer willing or able to continue as a Depositary with respect to such Global Security, and no successor depositary shall have been appointed, or if at any time the Depositary ceases to be a "clearing agency" registered under the Exchange Act, at a time when the Depositary is required to be so registered to act as such depositary, (ii) the Company in its sole discretion determines that such Global Security shall be so exchangeable or (iii) there shall have occurred and be continuing an Event of Default. (c) If any Global Security is to be exchanged for other Securities or canceled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the Security Registrar for exchange or cancellation as provided in this Article III. If any Global Security is to be exchanged for other Securities or canceled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, then either (i) such Global Security shall be so surrendered for exchange or cancellation as provided in this Article III or (ii) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or equal to the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Security Registrar, whereupon the Trustee shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security by the Depositary, accompanied by registration instructions, the Trustee shall, subject to Section 3.05(b) and as otherwise provided in this Article III, authenticate 21 28 and make available for delivery any Securities issuable in exchange for such Global Security (or any portion thereof) in accordance with the instructions of the Depositary. The Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. (d) The Depositary or its nominee, as registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under this Indenture and the Securities, and owners of beneficial interests in a Global Security shall hold such interest pursuant to the rules and procedures of the Depositary. Accordingly, any such owner's beneficial interests in a Global Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Agent Members. Neither the Trustee nor the Security Registrar shall have any liability in respect of any transfers effected by the Depositary. (e) The rights of the beneficial interests in a Global Security shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its Agent Members. Section 3.06 Registration, Transfer and Exchange Generally; Certain Transfers and Exchanges. (a) The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 10.02 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 10.02 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and make available for delivery, the Securities which the Holder making the exchange is entitled to receive. 22 29 All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 3.04, 3.05, 9.06, 11.09 or 13.01 not involving any transfer. Neither the Company nor the Trustee shall be required (i) in the case of a partial redemption of the Securities, to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities selected for redemption under Section 11.04 and ending at the close of business on the day of such mailing or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. (b) Transfer and exchange procedures and restrictions. Upon any distribution of the Securities to the holders of the Trust Securities in accordance with the Declaration, the Company and the Trustee shall enter into a supplemental indenture pursuant to Section 9.01(6) to provide for transfer procedures and restrictions with respect to the Securities substantially similar to those contained in the Declaration to the extent applicable in the circumstances existing at the time of such distribution. Notwithstanding any other provision of the Indenture, transfers and exchanges of Securities and beneficial interests in a Global Security of the kinds specified in this Section 3.06(b) shall be made only in accordance with this Section 3.06(b). (1) Non-Global Security to Global Security. If the Holder of a Security (other than a Global Security) wishes at any time to transfer all or any portion of such Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Global Security, such transfer may be effected only in accordance with the provisions of this clause (b)(1) and subject to the rules and procedures of the Depositary. Upon receipt by the Security Registrar of (A) such Security as provided in Section 3.06(a) and instructions satisfactory to the Security Registrar directing that a beneficial interest in the Global Security in a specified principal amount not greater than the principal amount of such Security be credited to a specified Agent Member's account and (B) a Securities Certificate duly executed by such Holder or such Holder's attorney duly 23 30 authorized in writing, then the Security Registrar shall cancel such Security (and issue a new Security in respect of the untransferred portion thereof) as provided in Section 3.06(a) and increase the aggregate principal amount of the Global Security by the specified principal amount as provided in Section 3.05(c). (2) Non-Global Security to Non-Global Security. A Security that is not a Global Security may be transferred, in whole or in part, to a Person who takes delivery in the form of another Security that is not a Global Security as provided in Section 3.06(a). (3) Exchanges between Global Security and Non-Global Security. A beneficial interest in a Global Security may be exchanged for a Security that is not a Global Security as provided in Section 3.05. Section 3.07 Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. 24 31 The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 3.08 Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date (as defined below) for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment (which date shall be sufficiently in advance of such notice to permit the Trustee timely to take the actions contemplated by this Section 3.08), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date (the "Special Record Date") for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). 25 32 (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and, if so listed, upon such notice as may be required by such exchange (or by the Trustee if the Securities are not listed), if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee provided that any such payment will be made in coin or currency of the United States of America which at the time of payment is a legal tender for payment of public and private debt. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue interest (including in each such case Compounded Interest), which were carried by such other Security. In the case of any Security which is converted after any Regular Record Date and on or prior to the next succeeding Interest Payment Date interest whose Stated Maturity is on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion, and such interest (whether or not punctually paid or duly provided for) shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on such Regular Record Date. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any Security that is converted prior to any Regular Record Date, interest whose Stated Maturity is after the date of conversion of such Security shall not be payable, and the Company shall not make nor be required to make any other payment, adjustment or allowance with respect to accrued but unpaid interest (including Additional Payments) on the Securities being converted, which shall be deemed to be paid in full. Section 3.09 Persons Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (subject to Section 3.08) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company or the Trustee from giving effect to any written certification, proxy, or other authorization furnished by a Depositary or impair, as between the Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as Holder of any Security. 26 33 Section 3.10 Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of as directed by a Company Order; provided, however, that the Trustee shall not be required to destroy the certificates representing such canceled Securities. Section 3.11 Right of Set Off. Notwithstanding anything to the contrary in this Indenture, the Company shall have the right to set off any payment it is otherwise required to make hereunder to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee. Section 3.12 CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. Section 3.13 Extension of Interest Payment Period; Notice of Extension. (a) So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time during the term of this Security, from time to time to defer payments of interest by extending for successive periods not exceeding 20 consecutive quarters for each such period (a "Deferral Period"); provided that no Deferral Period may extend beyond September 30, 2014. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 3.13, will bear interest thereon at the Applicable Rate compounded quarterly for each quarter of the Deferral Period ("Compounded Interest"). On the applicable Payment Resumption Date, the Company shall pay all interest then accrued and unpaid on the Securities, including any Compounded Interest that shall be payable to the Holders of the Securities in whose names the Securities are registered in the Security Register on the Regular Record Date fixed for such Payment Resumption Date. A Deferral Period shall terminate upon the payment by the Company of all interest then accrued and unpaid on the Securities (together with interest thereon accrued at an annual rate equal to the Applicable Rate, compounded quarterly, to the extent permitted by applicable law). Before the termination of any Deferral Period, the Company may further extend such period as provided in paragraph (b) of this Section 3.13, provided that such period together with all such further 27 34 extensions thereof shall not exceed 20 consecutive quarters or extend beyond the Stated Maturity of the Securities. Upon the termination of any Deferral Period, and subject to the foregoing requirements, the Company may elect to begin a new Deferral Period. No interest shall be due and payable during a Deferral Period except on the Payment Resumption Date as determined pursuant to paragraph (b) of this Section 3.13. There is no limitation on the number of times that the Company may elect to begin a Deferral Period. (b) The Company shall give the Holder of the Security and the Trustee written notice (a "Deferral Notice") of its selection of a Deferral Period at least ten days prior to the record date for any distributions that would have been payable on the Trust Securities except for the decision to begin or extend a Deferral Period. On or prior to the Regular Record Date immediately preceding the Interest Payment Date on which the Company elects to pay all interest then accrued and unpaid on the Securities, including Compound Interest (the "Payment Resumption Date"), the Company shall give the Holder of the Security and the Trustee written notice that the Deferral Period will end on such Payment Resumption Date. Notwithstanding the provision of such notice, the Company may elect to further extend the Deferral Period, subject to the limitations set forth in Section 3.13(a), by providing the Holder of the Security and the Trustee with a new Deferral Notice not less than three Business Days prior to the Regular Record Date immediately preceding the previously scheduled Payment Resumption Date. The Company may elect to pay all interest then accrued and unpaid on the Securities, including Compound Interest, on an Interest Payment Date prior to its most recently established Payment Resumption Date provided that the Company gives the Holder of the Security and the Trustee a new Deferral Notice setting forth the revised Payment Resumption Date at least three Business Days prior to the Regular Record Date for such revised Payment Resumption Date. (c) The quarter in which any Deferral Notice is given pursuant to paragraph (b) hereof shall be counted as one of the 20 quarters permitted in the maximum Deferral Period permitted under paragraph (a) hereof. Section 3.14 Paying Agent, Security Registrar and Conversion Agent. The Trustee will initially act as Paying Agent, Security Registrar and Conversion Agent. The Company may change any Paying Agent, Security Registrar, co-registrar or Conversion Agent without prior notice. The Company or any of its Affiliates may act in any such capacity. ARTICLE IV SATISFACTION AND DISCHARGE Section 4.01 Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of conversion, registration of transfer or exchange of Securities herein expressly provided for), and the 28 35 Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.06 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.03) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation 1) have become due and payable, or 2) will become due and payable at their Stated Maturity within one year, or 3) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company and the Company, in the case of (1), (2) or (3) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest (including Compounded Interest) to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.07 and, if money shall have been deposited with 29 36 the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 4.02 and the last paragraph of Section 10.03 shall survive. Section 4.02 Application of Trust Money. Subject to the provisions of the last paragraph of Section 10.03, all money deposited with the Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and interest for whose payment such money has been deposited with the Trustee. All moneys deposited with the Trustee pursuant to Section 4.01 (and held by it or any Paying Agent) for the payment of Securities subsequently converted shall be returned to the Company upon Company Request. ARTICLE V REMEDIES Section 5.01 Events of Default. "Event of Default," wherever used herein, means any one of the following events that has occurred and is continuing (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article XI or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security, including any Additional Payments, when it becomes due and payable, and continuance of such default for a period of 30 days (subject to the deferral of any due date in the case of a Deferral Period); or (2) default in the payment of the principal of any Security when due, whether at its Maturity, upon redemption, by declaration of acceleration or otherwise; or (3) default in the observation or performance, in any material respect, of any covenant of the Company in this Indenture (other than a covenant a default in the performance of which or the breach of which is elsewhere in this Section specifically dealt with), and continuance of such default for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate outstanding principal amount of the Securities a written notice specifying such default and requiring it to be remedied; or (4) failure by the Company to issue and deliver Class A Common Stock upon an election to convert the Securities into Class A Common Stock; or 30 37 (5) the entry or a decree or order by a court having jurisdiction in the premises adjudging the Company as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (6) the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by the Company in furtherance of any such action; or (7) the voluntary or involuntary dissolution, winding up or termination of the Trust, except in connection with (i) the distribution of Securities to holders of Preferred Securities in liquidation or redemption of their interests in the Trust, (ii) the redemption of all of the outstanding Preferred Securities of the Trust or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration. Section 5.02 Acceleration of Maturity; Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal of all the Outstanding Securities and any other amounts payable hereunder (including any Additional Payments) to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders); provided that, if the Property Trustee is the sole Holder of the Securities and if upon an Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities fail to declare the principal of all the Securities to be immediately due and payable, the holders of at least 25% in aggregate liquidation amount of Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee; and upon any such declaration such principal and all accrued interest shall become immediately due and payable. Upon any such declaration such principal amount (or specified amount) of and the accrued interest (including any Additional Payments) on all the Securities shall then become immediately due and payable; provided 31 38 that the payment of principal and interest on such Securities (including Additional Payments) shall remain subordinated to the extent provided in Article XII. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as provided in this Article hereinafter, the Holders of a majority in aggregate principal amount of the Outstanding Securities or of a majority in liquidation amount of Preferred Securities, as the case may be, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest (including any Compounded Interest) on all Securities, (B) the principal of any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and (C) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13. The Company is required to file annually with the Trustee a certificate as to whether or not the Company is in compliance with all the conditions and covenants applicable to it under this Indenture. No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 5.03 Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest (including any Compounded Interest) on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of any Security at the Stated Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal 32 39 and interest (including any Additional Payments) and, to the extent that payment thereof shall be legally enforceable, interest on any overdue principal and on any overdue interest (including any Additional Sums), at the rate borne by the Securities, and, in addition thereto, all amounts owing to the Trustee under Section 6.07. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 5.04 Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it and any predecessor Trustee under Section 6.07. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 5.05 Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of all the amounts owing to the Trustee and any predecessor Trustee under Section 6.07, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 5.06 Application of Money Collected. Subject to Article XII, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or interest (including any Additional Payments), 33 40 upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under Section 6.07; SECOND: To the payment of the amounts then due and unpaid for principal of and interest (including any Additional Payments) on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and interest (including any Compounded Interest), respectively; and THIRD: The balance, if any, to the Company. Section 5.07 Limitation on Suits. Subject to Section 5.08, no Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default, in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. 34 41 Section 5.08 Unconditional Right of Holders to Receive Principal and Interest and to Convert. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and (subject to Section 3.08) interest (including any Additional Payments) on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to convert such Security in accordance with Article XIII and to institute suit for the enforcement of any such payment and right to convert, and such rights shall not be impaired without the consent of such Holder. If the Property Trustee is the sole Holder of the Securities, any holder of the Preferred Securities shall have the right to institute suit on behalf of the Trust for the enforcement of any such payment and right to convert. Section 5.09 Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 5.10 Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 3.07, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.11 Delay or Omission not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 5.12 Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture; 35 42 (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and (3) subject to Section 6.01, the Trustee need not take any action that might involve the Trustee in personal liability or be unduly prejudicial to the Holders not joining therein. Section 5.13 Waiver of Past Defaults. Subject to Section 9.02 hereof, the Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (1) in the payment of the principal of, premium, if any, or interest (including any Additional Payments) on any Security (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Trustee); or (2) in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 5.14 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Trustee or in any suit for the enforcement of the right to receive the principal of and interest (including any Additional Payments) on any Security or to convert any Security in accordance with Article XIII. Section 5.15 Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power 36 43 herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 5.16 Enforcement by Holders of Preferred Securities. Notwithstanding anything to the contrary contained herein, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the Securities on the date such interest or principal is otherwise payable, the Company acknowledges that, in such event, a holder of Preferred Securities may institute a legal proceeding directly for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Securities. The Company may not amend this Indenture to remove the foregoing right to bring a Direct Action without the prior written consent of all the holders of Preferred Securities. Notwithstanding any payment made to such holder of Preferred Securities by the Company in connection with a Direct Action, the Company shall remain obligated to pay the principal of and interest on the Securities (including Additional Payments, if any) held by the Trust or the Property Trustee and the Company shall be subrogated to the rights of the holder of such Preferred Securities with respect to payments on the Preferred Securities to the extent of any payments made by the Company to such holder in any Direct Action. The holders of Preferred Securities will not be able to exercise directly any other remedy available to the Holders of the Securities. ARTICLE VI THE TRUSTEE Section 6.01 Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default, the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee. (b) In case an Event of Default has occurred and is continuing, and is known to the Trustee, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (c) Notwithstanding the foregoing, (i) the duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act and (ii) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or 37 44 liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 6.02 Notice of Defaults. The Trustee shall give the Holders notice of any default hereunder known to the Trustee as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 5.01(3), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. Section 6.03 Certain Rights of Trustee. Subject to the provisions of Section 6.01: (a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel of its choice and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, 38 45 may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to reasonable examination of the books, records and premises of the Company, personally or by agent or attorney; the reasonable expense of every such investigation shall be paid by the Company or, if paid by the Trustee, shall be repaid by the Company upon demand; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence or willful misconduct, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; and (i) the Trustee shall not be charged with knowledge of any default or Event of Default hereunder unless a Responsible Officer of the Trustee shall have knowledge of the default or Event of Default. Section 6.04 Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of the Securities or the proceeds thereof. Section 6.05 May Hold Securities. The Trustee, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.08 and 6.13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, or such other agent. Section 6.06 Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 6.07 Compensation and Reimbursement. The Company agrees: (1) to pay to the Trustee from time to time such reasonable compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be 39 46 limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, fees, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee and any predecessor Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. To secure the Company's payment obligations in this Section 6.07, the Company and the Holders agree that the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee. Such lien shall survive the satisfaction or discharge of this Indenture. The provisions of this Section 6.07 shall survive the termination of this Indenture. Section 6.08 Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. Section 6.09 Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000 and has its Corporate Trust Office in Wilmington, Delaware. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. 40 47 Section 6.10 Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with Section 6.08 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months; or (2) the Trustee shall cease to be eligible under Section 6.09 and shall fail to resign after written request therefor by the Company or by any such Holder; or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any such case, (i) the Company may remove the Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee 41 48 appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give written notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 1.06. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 6.11 Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; provided that on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments required to more fully and certainly vest in and confirm to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 6.12 Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided that such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 6.13 Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). 42 49 Section 6.14 Co-trustees and Separate Trustees. At any time or times, for the purpose of meeting the legal requirements of any applicable jurisdiction, the Company and the Trustee shall have power to appoint, and, upon the written request of the Trustee or of the Holders of at least 25% in principal amount of the Securities then outstanding, the Company shall for such purpose join with the Trustee in the execution and delivery of all instruments and agreements necessary or proper to appoint one or more Persons approved by the Trustee either to act as co-trustee, jointly with the Trustee, or to act as separate trustee, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons, in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Company does not joint in such appointment within 15 days after the receipt by it of a request so to do, or if an Event of Default shall have occurred and be continuing, the Trustee alone shall have power to make such appointment. Should any written instrument or instruments from the Company be required by any co-trustee or separate trustee so appointed to more fully confirm to such co-trustee or separate trustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Company. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following conditions: (a) the Securities shall be authenticated and delivered, and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely, by the Trustee; (b) the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed either by the Trustee or by the Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee; (c) the Trustee at any time, by an instrument in writing executed by it, with the concurrence of the Company, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, if an Event of Default shall have occurred and be continuing, the Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Company. Upon the written request of the Trustee, the Company shall join with the Trustee in the execution and delivery of all instruments and agreements, necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or 43 50 separate trustee so resigned or removed may be appointed in the manner provided in this Section; (d) no co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Trustee, or any other such trustee hereunder; and (e) any notice from the Holders of Securities delivered to the Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 7.01 Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (a) semiannually, not later than January 15 and July 15 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than 15 days prior to the delivery thereof; and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. Section 7.02 Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.01 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.01 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of 44 51 information as to names and addresses of Holders made pursuant to the Trust Indenture Act. Section 7.03 Reports by Trustee. (a) Within 60 days after May 15 of each year, commencing May 15, 2000, the Trustee shall transmit by first-class mail to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when the Securities are listed on any stock exchange. Section 7.04 Reports by Company. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided, that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). Section 7.05 Tax Reporting. The Company shall provide to the Trustee on a timely basis such information as the Trustee requires to enable the Trustee to prepare and file any form required to be submitted by the Company with the Internal Revenue Service and the Holders relating to original issue discount, including, without limitation, Form 1099-0ID or any successor form. ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 8.01 Company May Consolidate, etc., only on Certain Terms. The Company shall not consolidate with or merge with or into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person other than a wholly owned subsidiary, and no Person shall consolidate with or 45 52 merge with or into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (1) in case the Company shall consolidate with or merge with or into another Person or convey, transfer or lease all or substantially all of its properties and assets on a consolidated basis to any Person other than a wholly owned subsidiary, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease, all or substantially all of the properties and assets of the Company on a consolidated basis shall be a corporation, limited liability company, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of and interest (including any Additional Payments) on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed and shall have provided for conversion rights in accordance with Article XIII; (2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or a Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (3) if at the time any Preferred Securities are outstanding, such consolidation or merger or conveyance, transfer or lease of assets of the Company is permitted under, and does not give rise to any breach or violation of, the Declaration or the Guarantee; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 8.02 Successor Substituted. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of all or substantially all the properties and assets of the Company on a consolidated basis in accordance with Section 8.01, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the 46 53 case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE IX SUPPLEMENTAL INDENTURES Section 9.01 Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (3) to make provision with respect to the conversion rights of Holders pursuant to the requirements of Article XIII; or (4) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture; provided, that such action pursuant to this clause (4) shall not adversely affect the interests of the Holders of the Securities or, so long as any of the Preferred Securities shall remain outstanding, the holders of the Preferred Securities; or (5) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act; or (6) to make provision for transfer procedures, certification, book-entry provisions, the form of restricted securities legends, if any, to be placed on Securities, and all other matters required pursuant to Section 3.06(b) or otherwise necessary, desirable or appropriate in connection with the issuance of Securities to holders of Preferred Securities in the event of a distribution of Securities by the Trust if a Tax Event or Investment Company Event occurs and is continuing. Section 9.02 Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the 47 54 Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) extend the Stated Maturity of the principal of, or any installment of interest (including any Additional Payments) on, such Security, or reduce the principal amount thereof, or reduce the rate or extend the time for payment of interest thereon, or reduce any premium payable upon the redemption thereof, or change the place of payment where, or the coin or currency in which, such Security or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or adversely affect the right to convert such Security as provided in Article XIII (except as permitted by Section 9.01(3)), or modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture, or (3) modify any of the provisions of this Section or Section 5.13, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. Notwithstanding anything to the contrary in this Indenture or the Declaration, if the Property Trustee is the sole holder of the Securities, so long as any of the Preferred Securities remains outstanding, no amendment shall be made that adversely affects the holders of such Preferred Securities, and no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of the percentage of the aggregate liquidation amount of such Preferred Securities then outstanding which is at least equal to the percentage of aggregate stated principal amount of the Outstanding Securities as shall be required under this Indenture to effect any such amendment, termination or waiver. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. 48 55 The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date; provided, that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be canceled and of no further effect. Section 9.03 Execution of Supplemental Indentures. In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 9.04 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. No such supplemental indenture shall directly or indirectly modify the provisions of Article XII in any manner which might terminate or impair the rights of the Secured Senior Debt pursuant to such subordination provisions. Section 9.05 Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. Section 9.06 Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture, may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. 49 56 ARTICLE X COVENANTS; REPRESENTATIONS AND WARRANTIES Section 10.01 Payment of Principal and Interest. The Company will duly and punctually pay the principal of and interest on the Securities in accordance with the terms of the Securities and this Indenture. Section 10.02 Maintenance of Office or Agency. The Company will maintain in the United States an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer, exchange or conversion, and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in the United States) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the United States for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 10.03 Money for Security Payments to be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will, prior to each due date of the principal of or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal or interest so becoming due, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (i) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent 50 57 and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities) in the making of any payment in respect of the Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent as such. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or interest on any Security and remaining unclaimed for two years after such principal or interest has become due and payable, shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of any such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease. Section 10.04 Statement by Officers as to Default. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the material terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. Section 10.05 Limitation on Dividends; Transactions with Affiliates; Covenants as to the Trust. (a) If at such time (x) there shall have occurred an Event of Default, (y) the Company shall be in default with respect to its payment of any obligations under the Guarantee or (z) the Company shall have given notice of its election to begin a Deferral Period as provided herein and shall not have rescinded such notice, or such Deferral Period shall be continuing, the Company covenants that the Company shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company's capital stock (which includes common and preferred stock) other than stock dividends which consist of stock of the same class as that on which the dividends are being paid, (ii) make any payment of principal, interest or premium, if any, on or repay or repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the Securities or (iii) make any guarantee payments with respect to any guarantee by the Company of 51 58 the debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Securities (in each case, other than (A) dividends or distributions in Common Stock, (B) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (C) payments under the Guarantee, (D) purchases or acquisitions of shares of the Common Stock in connection with the satisfaction by the Company of its obligations under any employee benefit plan or any other contractual obligation of the Company (other than a contractual obligation ranking expressly by its terms pari passu with or junior in interest to the Securities), (E) as a result of a reclassification of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock or (F) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged). (b) The Company also covenants and agrees (i) for so long as the Preferred Securities remain outstanding, (a) to maintain directly or indirectly 100% ownership of the Common Securities, provided that certain successor Persons in transactions which are permitted by Article VIII may succeed to the Company's ownership of the Common Securities, (b) not to voluntarily terminate, wind-up or liquidate the Trust, except in connection with (I) a distribution of the Securities to the holders of the Trust Securities in liquidation of the Trust, (II) the redemption of all Trust Securities or (iii) certain mergers, consolidations or amalgamations permitted by the Declaration, and (c) not to convert Securities except pursuant to a notice of conversion delivered to the Conversion Agent by a Holder or by a holder of Common Securities, (ii) to use its reasonable efforts, consistent with the terms and provisions of the Declaration, to cause the Trust to remain classified as a grantor trust and not taxable as a corporation for United States federal income tax purposes, (iii) to maintain the reservation for issuance of the number of shares of Class A Common Stock that would be required from time to time upon the conversation of al the Securities then outstanding, (iv) to deliver shares of Class A Common Stock upon an election by a Holder to convert such Preferred Securities into or for Class A Common Stock, and (v) to honor all obligations relating to the conversion or exchange of Preferred Securities into or for Class A Common Stock or Securities. Section 10.06 Payment of Expenses of the Trust. In connection with the offering, sale and issuance of the Securities to the Property Trustee in connection with the sale of the Trust Securities by the Trust, the Company shall: (a) pay for all costs, fees and expenses relating to the offering, sale and issuance of the Securities, including commissions to the Underwriters payable pursuant to the Underwriting Agreement and compensation of the Trustee under the Indenture in accordance with the provisions of Section 6.07 of the Indenture; 52 59 (b) be responsible for and pay for all debts and obligations (other than with respect to the Trust Securities) of the Trust, pay for all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the offering, sale and issuance of the Trust Securities (including commissions to the Underwriters in connection therewith), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets); and (c) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. Section 10.07 Prospectus Amendment or Supplement. The Trust and the Company will advise the Underwriters promptly of any proposal to amend or supplement the final prospectus dated September __, 1999 (the "Prospectus"), and will not effect such amendment or supplementation without the Underwriters' consent. If, at any time, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any such time to amend or supplement the Prospectus to comply with any applicable law, the Trust and the Company promptly will notify the Underwriters of such event and promptly will prepare, at their own expense, an amendment or supplement which will correct such statement or omission or effect such compliance. Neither the Underwriters' consent to nor the Underwriters' delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6 of the Underwriting Agreement. ARTICLE XI REDEMPTION OF SECURITIES Section 11.01 Optional Redemption. The Company shall have the right to redeem the Securities (an "Optional Redemption") in whole or in part, at any time or from time to time on or after October 3, 2002, at a Redemption Price (the "Optional Redemption Price") equal the prices per $50 principal amount of Securities set forth in the following table, plus accrued and unpaid interest, including Additional Payments, if any, to the Redemption Date, if redeemed during the 12-month period ending on September 30: 53 60
PRICE PER $50 YEAR PRINCIPAL AMOUNT --------------------------- ---------------- 2003....................... $ ----------- 2004....................... $ ----------- 2005....................... $ ----------- 2006....................... $ -----------
and thereafter at $50 per $50 principal amount of the Securities plus, in each case, any accrued and unpaid interest, including Additional Payments, if any, to the Redemption Date. Section 11.02 Tax Event Redemption. If a Tax Event has occurred and is continuing and: (1) the Company has received a Redemption Tax Opinion; or (2) the Issuer Trustees shall have been informed by nationally recognized independent tax counsel (reasonably acceptable to the Issuer Trustees) experienced in such matters that a No Recognition Opinion cannot be delivered, then the Company shall have the right upon not less than 20 days, nor more than 60 days, notice to the Holders of the Securities to redeem the Securities in whole, but not in part, for cash at $50 per $50 principal amount of the Securities plus accrued and unpaid interest, including Additional Payments, if any, to the Redemption Date, within 90 days following the occurrence of such Tax Event (the "90 Day Period"); provided, however, that if, at the time there is available to the Company or the Trust the opportunity to eliminate, within the 90 Day Period, the Tax Event by taking some ministerial action, including, but not limited to, filing a form or making an election, or pursuing some other similar reasonable measure which, in the sole judgment of the Company, will have no adverse effect on the Company, the Trust or the Holders of the Preferred Securities and will involve no material cost, then the Company or the Trust shall pursue such ministerial action or other measure in lieu of redemption; and provided further that the Company shall have no right to redeem the Securities while the Trust is pursuing any ministerial action or other similar measure pursuant to its obligations under the Declaration. If the Company opts not to redeem the Securities pursuant to this Section 11.02, the Company shall be required to pay Additional Sums in respect of the Securities pursuant to Section 3.01 for so long as (i) a Tax Event has occurred and is continuing and (ii) the Property Trustee is the sole Holder of the Securities. Section 11.03 Selection by Trustee of Securities to be Redeemed. If less than all the Securities are to be redeemed (unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee by such method as the Trustee shall deem 54 61 fair and appropriate, from the Outstanding Securities not previously called for redemption. Such selection method may provide for the selection for redemption of portions (equal to $50 or any integral multiple thereof) of the principal amount of the Securities. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption as aforesaid and, in case of any Securities selected for partial redemption as aforesaid, the principal amount thereof to be redeemed. The provisions of the two preceding paragraphs shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 11.04 Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 (or, in the case of a redemption pursuant to Section 11.02 hereof, 20) nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at such Holder's address appearing in the Security Register. All notices of redemption given pursuant to this Article XI shall identify the Securities to be redeemed (including, if relevant, CUSIP number) and shall state: (1) the Redemption Date, (2) the Redemption Price, (3) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date, (4) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and (5) the date on which the right to convert the Securities to be redeemed will terminate and the places where such Securities may be surrendered for conversion. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. 55 62 Section 11.05 Deposit of Redemption Price. Prior to 12:00 noon on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.03) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. If any Security called for redemption is converted, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Security shall (subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in the last paragraph of Section 3.08) be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. Section 11.06 Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to the terms and the provisions of Section 3.08. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. Section 11.07 Securities Redeemed in Part. (a) In the event of any redemption in part, the Company shall not be required (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the date of the mailing of a notice of redemption of Securities selected for redemption and ending at the close of business on the day of such mailing and (ii) to register the transfer of or exchange any Securities so selected for redemption, in whole or in part, except for the unredeemed portion of any Securities being redeemed in part. (b) If a partial redemption of the Securities would result in the delisting of the Preferred Securities issued by the Trust from any national securities exchange or other organization on which the Preferred Securities are listed, the Company shall not be permitted to effect such partial redemption and may only redeem the Securities in whole. 56 63 (c) Any Security which is to be redeemed only in part shall be surrendered at a place of payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. If a Global Security is surrendered, such new Security will (subject to Section 3.06) also be a new Global Security. ARTICLE XII SUBORDINATION OF SECURITIES Section 12.01 Agreement to Subordinate. The Company covenants and agrees, and each Holder of Securities by such Holder's acceptance thereof likewise covenants and agrees, that all Securities shall be issued subject to the provisions of this Article XII; and each Holder of a Security, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of, premium, if any, and interest (including Additional Payments) on all Securities issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Secured Senior Debt, whether outstanding at the date of this Indenture or thereafter incurred; provided, however, that no provision of this Article XII shall prevent the occurrence of any default or Event of Default hereunder. Section 12.02 Default on Secured Senior Debt. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Secured Senior Debt (other than Designated Secured Senior Debt) continuing beyond the period of grace, if any, specified in the instrument evidencing such Secured Senior Debt, unless and until such default shall have been cured or waived or shall have ceased to exist, and in the event that the maturity of any Secured Senior Debt has been accelerated because of a default, then no payment shall be made by the Company with respect to the principal of (including redemption payments), premium, if any, or interest on the Securities. Furthermore, in the event and during the continuation of any default (other than a payment default) by the Company under any Designated Secured Senior Debt continuing beyond the period of grace, if any, specified in the instrument evidencing such Designated Secured Senior Debt, upon notice of the default from representatives of the holders of the Designated Secured Senior Debt and until such default shall have been cured or waived or shall have ceased to exist or all the Designated Secured Senior Debt is paid in full in cash, then no payment shall be made by the Company with respect to the principal of (including redemption payments), premium, if any, or interest on the Securities. 57 64 In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraphs of this Section 12.02, subject to Section 12.06, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Secured Senior Debt or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Secured Senior Debt may have been issued, as their respective interests may appear, but only to the extent that the holders of the Secured Senior Debt (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Secured Senior Debt and only the amounts specified in such notice to the Trustee shall be paid to the holders of Secured Senior Debt. Section 12.03 Liquidation; Dissolution; Bankruptcy. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts (including principal, premium, if any, and interest) due or to become due upon all Secured Senior Debt (including any interest accruing subsequent to the filing of a petition for bankruptcy regardless of whether such interest is an allowed claim in the bankruptcy proceeding) shall first be paid in full in cash, or payment thereof provided for in money in accordance with and to the extent permitted by the terms of such Secured Senior Debt, before any payment is made on account of the principal (and premium, if any) or interest on the Securities; and upon any such dissolution or winding up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee would be entitled, except for the provisions of this Article XII, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them or it, directly to the holders of Secured Senior Debt (pro rata to such holders on the basis of the respective amounts of Secured Senior Debt held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Secured Senior Debt may have been issued, as their respective interests may appear, to the extent necessary to pay such Secured Senior Debt in full, in cash or in money's worth in accordance with and to the extent permitted by the terms of such Secured Senior Debt, after giving effect to any concurrent payment or distribution to or for the holders of such Secured Senior Debt, before any payment or distribution is made to the Holders of Securities or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing shall be received by the Trustee or the Holders of the Securities before all Secured Senior Debt is paid in full in cash, or provision is made for such payment in money in accordance and to the extent permitted by the terms 58 65 of such Secured Senior Debt, subject to Section 12.06, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Secured Senior Debt or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Secured Senior Debt may have been issued, and their respective interests may appear, as calculated by the Company, for application to the payment of all Secured Senior Debt remaining unpaid to the extent necessary to pay such Secured Senior Debt in full in cash or in money's worth in accordance with and to the extent permitted by the terms of such Secured Senior Debt, after giving effect to any concurrent payment or distribution to or for the holders of such Secured Senior Debt. For purposes of this Article XII, the words, "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XII with respect to the Securities to the payment of all Secured Senior Debt which may at the time be outstanding; provided that (i) such Secured Senior Debt is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Secured Senior Debt are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company with or into, another Person or the liquidation or dissolution of the Company following the conveyance, transfer or lease of all or substantially all its properties and assets on a consolidated basis to another Person upon the terms and conditions provided for in Article VIII hereof shall not be deemed a dissolution, winding up, liquidation or reorganization for the purposes of this Section 12.03 if such other Person shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions stated in Article VIII hereof. Nothing in Section 12.02 or in this Section 12.03 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.07 hereof. Section 12.04 Subrogation. Subject to the prior payment in full of all Secured Senior Debt in cash or in money's worth in accordance with and to the extent permitted by the terms of such Secured Senior Debt, the rights of the Holders of the Securities shall be subrogated to the rights of the holders of such Secured Senior Debt to receive payments or distributions of cash, property or securities of the Company, as the case may be, applicable to such Secured Senior Debt until the principal of (and premium, if any) and interest on the Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Secured Senior Debt of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article XII, and no payment pursuant to the provisions of this Article XII, to or for the benefit of the holders of such Secured Senior Debt by Holders of the Securities or the Trustee, shall, as between the Company, its creditors other than holders of Secured Senior Debt, and the Holders of the Securities, be deemed to be a payment by the Company to or on account of such Secured Senior Debt. It is understood that the provisions of this Article XII are and are intended solely 59 66 for the purposes of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of such Secured Senior Debt on the other hand. Nothing contained in this Article XII or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Secured Senior Debt, and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company, as the case may be, other than the holders of Secured Senior Debt, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XII of the holders of such Secured Senior Debt in respect of cash, property or securities of the Company, as the case may be, received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article XII, the Trustee, subject to the provisions of Section 6.03, and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of the Securities, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of the Secured Senior Debt and other indebtedness of the Company, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XII. Section 12.05 Trustee to Effectuate Subordination. Each Holder of Securities by such Holder's acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XII and appoints the Trustee as such Holder's attorney-in-fact for any and all such purposes. Section 12.06 Notice by the Company. The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company which would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article XII. Notwithstanding the provisions of this Article XII or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article XII unless and until a Responsible Officer of the Trustee shall have received written notice thereof at the Corporate Trust Office of the Trustee from the Company or a holder or holders of Secured Senior Debt or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to 60 67 the provisions of Section 6.03 hereof, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 12.06 at least five Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which it was received, and shall not be affected by any notice to the contrary which may be received by it within five Business Days prior to such date. The Trustee, subject to the provisions of Section 6.03, shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Secured Senior Debt (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of such Secured Senior Debt or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Secured Senior Debt to participate in any payment or distribution pursuant to this Article XII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Secured Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the right of such Person under this Article XII, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 12.07 Rights of the Trustee; Holders of Secured Senior Debt. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XII in respect of any Secured Senior Debt at any time held by it, to the same extent as any other holder of Secured Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Secured Senior Debt of the Company, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are set forth in this Article XII, and no implied covenants or obligations with respect to the holders of such Secured Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Secured Senior Debt and, subject to the provisions of Section 6.03, the Trustee shall not be liable to any holder of such Secured Senior Debt if it shall pay over or deliver to Holders of Securities, the Company or any other Person money or assets to which any holder of such Secured Senior Debt shall be entitled by virtue of this Article XII or otherwise. Section 12.08 Subordination May not be Impaired. No right of any present or future holder of any Secured Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and 61 68 covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Secured Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article XII or the obligations hereunder of the Holders of the Securities to the holders of Secured Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Secured Senior Debt, or otherwise amend or supplement in any manner such Secured Senior Debt or any instrument evidencing the same or any agreement under which such Secured Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Secured Senior Debt; (iii) release any Person liable in any manner for the collection of such Secured Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. ARTICLE XIII CONVERSION OF SECURITIES Section 13.01 Conversion Rights. Subject to and upon compliance with the provisions of this Article, the Securities are convertible, at the option of the Holder, at any time prior to 5:00 p.m., New York City time, on September 30, 2014 into fully paid and nonassessable shares of Class A Common Stock of the Company, par value $.01 per share ("Class A Common Stock"), at an initial conversion rate of ______ shares of Class A Common Stock for each $50 in aggregate principal amount of Securities (the "Initial Conversion Ratio") (equal to a conversion price of $______ principal amount of Securities per share of Class A Common Stock (the "Initial Conversion Price")). The conversion ratio and the equivalent conversion price in effect at any given time are known as the "Applicable Conversion Ratio" and the "Applicable Conversion Price," respectively, and are subject to adjustment as described in this Article XIII. A Holder of Securities may convert any portion of the principal amount of the Securities into that number of fully paid and nonassessable shares of Class A Common Stock (calculated as to each conversion to the nearest 1/100th of a share) obtained by dividing the principal amount of the Securities to be converted by the Applicable Conversion Ratio. In case a Security or portion thereof is called for redemption, such conversion right in respect of the Security or portion so called shall expire at the close of the Business Day immediately preceding the corresponding Redemption Date, unless the Company defaults in making the payment due upon redemption. Section 13.02 Conversion Procedures. (a) In order to convert all or a portion of the Securities, the Holder thereof shall deliver to the Conversion Agent an irrevocable Notice of Conversion 62 69 setting forth the principal amount of Securities to be converted, together with the name or names, if other than the Holder, in which the shares of Class A Common Stock should be issued upon conversion and, if such Securities are definitive Securities, surrender to the Conversion Agent the Securities to be converted, duly endorsed or assigned to the Company or in blank. In addition, a holder of Preferred Securities may exercise its right under the Declaration to convert such Preferred Securities into Class A Common Stock by delivering to the Conversion Agent an irrevocable Notice of Conversion setting forth the information called for by the preceding sentence and directing the Conversion Agent (i) to exchange such Preferred Security for a portion of the Securities held by the Trust (at an exchange rate of $50 principal amount of Securities for each Preferred Security) and (ii) to immediately convert such Securities, on behalf of such holder, into Class A Common Stock of the Company pursuant to this Article XIII and, if such Preferred Securities are in definitive form, surrendering such Preferred Securities, duly endorsed or assigned to the Company or in blank. So long as any Preferred Securities are outstanding, the Trust shall not convert any Securities except pursuant to a Notice of Conversion duly executed and delivered to the Conversion Agent by a holder of Preferred Securities. If a Notice of Conversion is delivered on or after the Regular Record Date and prior to the subsequent Interest Payment Date, the Holder will be entitled to receive the interest payable on the subsequent Interest Payment Date on the portion of Securities to be converted notwithstanding the conversion thereof prior to such Interest Payment Date. Except as otherwise provided in the immediately preceding sentence, in the case of any Security which is converted, interest whose Stated Maturity is after the date of conversion of such Security shall not be payable, and the Company shall not make nor be required to make any other payment, adjustment or allowance with respect to accrued but unpaid interest on the Securities being converted, which shall be deemed to be paid in full. Each conversion shall be deemed to have been effected immediately prior to the close of business on the day on which the Notice of Conversion was received (the "Conversion Date") by the Conversion Agent from the Holder or from a holder of the Preferred Securities effecting a conversion thereof pursuant to its conversion rights under the Declaration, as the case may be. The Person or Persons entitled to receive the Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Class A Common Stock as of the Conversion Date. As promptly as practicable on or after the Conversion Date, the Company shall issue and deliver at the office of the Conversion Agent, unless otherwise directed by the Holder in the Notice of Conversion, a certificate or certificates for the number of full shares of Class A Common Stock issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same. The Conversion Agent shall deliver such certificate or certificates to such Person or Persons. (b) Subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in the last paragraph of Section 3.08 and the second paragraph of clause (a) of Section 13.02, the Company's delivery upon 63 70 conversion of the whole number of shares of Class A Common Stock into which the Securities are convertible (together with the cash payment, if any, in lieu of fractional shares) shall be deemed to satisfy the Company's obligation to pay the principal amount at Maturity of the portion of Securities so converted and any unpaid interest (including Compounded Interest and Additional Sums) accrued on such Securities at the time of such conversion. (c) No fractional shares of Class A Common Stock will be issued as a result of conversion, but in lieu thereof, the Company shall pay to the Conversion Agent a cash adjustment in an amount equal to the same fraction of the Closing Price of such fractional interest on the date on which the Securities or Preferred Securities, as the case may be, were duly surrendered to the Conversion Agent for conversion, or, if such day is not a Trading Day, on the next Trading Day, and the Conversion Agent in turn will make such payment, if any, to the Holder of the Securities or the holder of the Preferred Securities so converted. (d) In the event of the conversion of any Security in part only, a new Security or Securities for the unconverted portion thereof will be issued in the name of the Holder thereof upon the cancellation thereof in accordance with Section 3.06. (e) In effecting the conversion transactions described in this Section, the Conversion Agent is acting as agent of the holders of Preferred Securities (in the exchange of Preferred Securities for Securities) and as agent of the Holders of Securities (in the conversion of Securities into Class A Common Stock), as the case may be, directing it to effect such conversion transactions. The Conversion Agent is hereby authorized (x) if the Trust exists, (i) to exchange Securities held by or on behalf of the Trust from time to time for Preferred Securities in connection with the conversion of such Preferred Securities in accordance with this Article XIII and (ii) to convert all or a portion of the Securities into Class A Common Stock and thereupon to deliver such shares of Class A Common Stock in accordance with the provisions of this Article XIII and to deliver to the Trust a new Security or Securities for any resulting unconverted to exchange Securities held by the Holders in connection with the conversion of such Securities in accordance with this Article XIII and (y) if the Trust has been dissolved and the Securities have been distributed to the holders of the Preferred Securities, to convert all or a portion of the Securities into Class A Common Stock and thereupon to deliver such shares of Class A Common Stock in accordance with the provisions of this Article XIII and to deliver to such Holders a new Security or Securities for any resulting unconverted principal amount. Section 13.03 Conversion Price Adjustments. The Applicable Conversion Price shall be subject to adjustment (without duplication) from time to time as follows: (i) In case the Company shall pay a dividend or make a distribution on the Common Stock exclusively in Common Stock, the Applicable 64 71 Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Applicable Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subparagraph (i), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. In the event that such dividend or distribution is not so paid or made, the Applicable Conversion Price shall again be adjusted to be the Applicable Conversion Price which would then be in effect if such dividend or distribution had not occurred. (ii) In case the Company shall pay or make a dividend or ther distribution on its Common Stock consisting exclusively of, or shall otherwise issue to all holders of its Common Stock, rights or warrants, in each case entitling the holders thereof to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in subparagraph (vii)) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights or warrants, the Applicable Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such Applicable Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately prior to the opening of business on the day following the date fixed for such determination. To the extent that rights are not so issued or shares of Common Stock are not so delivered after the expiration of such rights or warrants, the Applicable Conversion Price shall be readjusted to the Applicable Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such rights or warrants had not been fixed. For the purposes of this subparagraph (ii), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. (iii) In case outstanding shares of Class A Common Stock shall be subdivided into a greater number of shares of Class A Common Stock, the Applicable Conversion Price in effect at the opening of business on the day 65 72 following the day upon which such subdivision becomes effective shall be proportionately reduced and, conversely, in case outstanding shares of Class A Common Stock shall each be combined into a smaller number of shares of Class A Common Stock, the Applicable Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately prior to the opening of business on the day following the day upon which such subdivision or combination becomes effective. (iv) Subject to the last sentence of this subparagraph (iv), in case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness, shares of any class or series of capital stock, cash or assets (including securities, but excluding any rights or warrants referred to in subparagraph (ii) of this Section 13.03, any dividend or distribution paid exclusively in cash and any dividend or distribution referred to in subparagraph (i) of this Section 13.03), the Applicable Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Applicable Conversion Price in effect immediately prior to the effectiveness of the Applicable Conversion Price reduction contemplated by this subparagraph (iv) by a fraction of which the numerator shall be the current market price per share (determined as provided in subparagraph (vii) of this Section 13.03) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such distribution (the "Reference Date") less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors), on the Reference Date, of the portion of the evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the Reference Date. In the event that such dividend or distribution is not so paid or made, the Applicable Conversion Price shall again be adjusted to be the Applicable Conversion Price which would then be in effect if such dividend or distribution had not occurred. For purposes of this subparagraph (iv), any dividend or distribution that includes shares of Common Stock or rights or warrants to subscribe for or purchase shares of Common Stock shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, shares of capital stock, cash or assets other than such shares of Common Stock or such rights or warrants (making any Applicable Conversion Price reduction required by this subparagraph (iv)) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants (making any further Applicable Conversion Price reduction required by subparagraph (i) or (ii) of this Section 13.03), except any shares of Common Stock included in such dividend or distribution shall not be deemed "outstanding 66 73 at the close of business on the date fixed for such determination" within the meaning of subparagraph (i) of this Section 13.03. (v) In case the Company shall pay or make a dividend or other distribution on its Common Stock exclusively in cash (excluding (x) cash dividends to the extent that they do not exceed the per share amount of the smallest of the immediately four preceding quarterly cash dividends (as adjusted to appropriately reflect any of the events referred to in subparagraphs (i), (ii), (iii), (iv), (v) and (vi)), and (y) cash dividends to the extent that the annualized per share amount thereof does not exceed 12.5% of the current market price per share of the Common Stock on the Trading Day next preceding the date of declaration of such dividend, the Applicable Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Applicable Conversion Price in effect immediately prior to the effectiveness of the Applicable Conversion Price reduction contemplated by this subparagraph (v) by a fraction of which the numerator shall be the current market price per share (determined as provided in subparagraph (vii) of this Section 13.03) of the Common Stock on the date fixed for the payment of such distribution less the amount of cash so distributed and not excluded as provided applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the date fixed for the payment of such distribution; provided, however, that in the event the portion of the cash so distributed applicable to one share of Common Stock is equal to or greater than the current market price per share (as defined in subparagraph (vii) of this Section 13.03) of the Common Stock on the record date mentioned above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder of Securities shall have the right to receive upon conversion the amount of cash such Holder would have received had such Holder converted each Security immediately prior to the record date for the distribution of the cash. In the event that such dividend or distribution is not so paid or made, the Applicable Conversion Price shall again be adjusted to be the Applicable Conversion Price which would then be in effect if such record date had not been fixed. (vi) In case a tender or exchange offer (other than an odd-lot offer) made by the Company or any Subsidiary of the Company for all or any portion of the Company's Common Stock shall expire and such tender or exchange offer shall involve the payment by the Company or such Subsidiary of consideration per share of Common Stock having a fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) at the last time (the "Expiration Time") tenders or exchanges may be made pursuant to such tender or exchange offer (as it shall have been amended) that exceeds 110% of the current market price per share (determined as provided in subparagraph (vii) of this Section 13.03) of the Common Stock on the Trading Day next succeeding the 67 74 Expiration Time, the Applicable Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Applicable Conversion Price in effect immediately prior to the effectiveness of the Applicable Conversion Price reduction contemplated by this subparagraph (vi) by a fraction of which the numerator shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) at the Expiration Time multiplied by the current market price per share (determined as provided in subparagraph (vii) of this Section 13.03) of the Common Stock on the Trading Day next succeeding the Expiration Time and the denominator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the current market price per share (determined as provided in subparagraph (vii) of this Section 13.03) of the Common Stock on the Trading Day next succeeding the Expiration Time, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Time. (vii) For the purpose of any computation under subparagraphs (ii), (iv), (v) and (vi) of this Section 13.03, the current market price per share of Common Stock on any date in question shall be deemed to be the average of the daily Closing Prices of the Class A Common Stock for the ten consecutive Trading Days prior to the earlier of the day in question and, if applicable, the day before the "ex" date with respect to the issuance or distribution requiring such computation; provided, however, that if another event occurs that would require an adjustment pursuant to subparagraphs (i) through (vi) of this Section 13.03, inclusive, the Board of Directors may make such adjustments to the Closing Prices during such five Trading Day period as it deems appropriate to effectuate the intent of the adjustments in this Section 13.03, in which case any such determination by the Board of Directors shall be set forth in a Board Resolution and shall be conclusive. For purposes of this paragraph, the term "ex" date, (1) when used with respect to any issuance or distribution, means the first date on which the Class A Common Stock is quoted regular way on the New York Stock Exchange Composite Tape or on such successor securities exchange on which the Class A Common Stock may be quoted or listed or in the relevant market from which the Closing Prices were obtained without the right to receive such issuance or distribution, and (2) when used with respect to any tender or exchange offer means the first date on which the Class A Common Stock is quoted regular way on such securities exchange or in such market after the Expiration Time of such offer. 68 75 (viii) The Company may make such reductions in the Applicable Conversion Price, in addition to those required by subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of this Section 13.03, as it considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. (ix) There shall also be no adjustment of the Applicable Conversion Price in case of the issuance of any Common Stock (or securities convertible into or exchangeable for Common Stock), except as specifically described above. If any action would require adjustment of the Applicable Conversion Price, pursuant to more than one of the anti-dilution provisions set forth in this Article XIII, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value to Holders. Furthermore, no adjustment in the Applicable Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Applicable Conversion Price; provided, however, that any adjustments which by reason of this sentence are not required to be made shall be carried forward and taken into account in determining whether any subsequent adjustment shall be required. Section 13.04 Reclassification, Consolidation, Merger or Sale of Assets. In the event that the Company shall be a party to any transaction (including without limitation (a) any recapitalization or reclassification of the Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Common Stock), (b) any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), (c) any sale or transfer of all or substantially all of the assets of the Company or (d) any compulsory share exchange) (each of the events in the preceding clauses (a) through (d) being referred to as a "Company Transaction"), in each case, as a result of which shares of Common Stock shall be converted into the right to receive other securities, cash or other property, then lawful provision shall be made as part of the terms of such Company Transaction whereby the Holder of each Security then outstanding shall have the right thereafter to convert such Security only into (i) in the case of any Company Transaction other than a Common Stock Fundamental Change, the kind and amount of securities, cash and other property receivable upon the consummation of the Company Transaction by a holder of that number of shares of Common Stock into which such Security was convertible immediately prior to such transaction, after giving effect to any adjustment in the Applicable Conversion Price required by the provisions of Section 13.07(a)(i), and (ii) in the case of a Company Transaction involving a Common Stock Fundamental Change, common stock of the kind received by holders of Common Stock as a result of such Common Stock Fundamental Change in an amount determined 69 76 pursuant to the provisions of Section 13.07(a)(ii). Holders of the Securities shall have no voting rights with respect to any Company Transaction described in this Section 13.04. The Company or the Person formed by such consolidation or resulting from such merger or which acquired such assets or which acquires the Company's shares, as the case may be, shall make provision in its certificate or articles of incorporation or other constituent document to establish such right. Such certificate or articles of incorporation or other constituent document shall provide for adjustments which, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article XIII. The above provisions shall similarly apply to successive transactions of the foregoing type. Section 13.05 Notice of Adjustments of Conversion Price. Whenever the Applicable Conversion Price is adjusted as herein provided: (a) the Company shall compute the adjusted Applicable Conversion Price and shall prepare a certificate signed by the Chief Financial Officer or the Treasurer of the Company setting forth the adjusted Applicable Conversion Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Trustee, the Conversion Agent, the Property Trustee and the transfer agent for the Preferred Securities and the Securities; and (b) a notice stating the Applicable Conversion Price has been adjusted and setting forth the adjusted Applicable Conversion Price shall as soon as practicable be mailed by the Company to all record holders of Preferred Securities and the Securities at their last addresses as they appear upon the stock transfer books of the Company and the books and records of the Trust, respectively. Section 13.06 Prior Notice of Certain Events. In case: (i) the Company shall (1) declare any dividend (or any other distribution) on its Common Stock, other than (A) a dividend payable in shares of Common Stock or (B) a dividend payable in cash that would not require an adjustment pursuant to Section 13.03(iv) or (v) or (2) authorize a tender or exchange offer that would require an adjustment pursuant to Section 13.03(vi); (ii) the Company shall authorize the granting to all holders of Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or series or of any other rights or warrants; (iii) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company shall be required, or of the sale or 70 77 transfer of all or substantially all of the assets of the Company or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall (a) if any Preferred Securities are outstanding, cause to be filed with the transfer agent for the Preferred Securities, and shall cause to be mailed to the holders of record of the Preferred Securities, at their last addresses as they shall appear upon the books and records of the Trust, or (b) shall cause to be mailed to all Holders at their last addresses as they shall appear in the Security Register, at least fifteen days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record (if any) is to be taken for the purpose of such dividend, distribution, rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). Section 13.07 Adjustments in case of Fundamental Changes. (a) Notwithstanding any other provision in this Article XIII to the contrary, in the case of any Company Transaction involving a Fundamental Change, the Applicable Conversion Price will be adjusted immediately after such Fundamental Change as follows: (i) in the case of a Non-Stock Fundamental Change, the Applicable Conversion Price of the Securities shall thereupon become the lower of (A) the Applicable Conversion Price in effect immediately prior to such Non-Stock Fundamental Change, but after giving effect to any other prior adjustments effected pursuant to this Article XIII, and (B) the result obtained by multiplying the greater of the Relevant Price or the then applicable Reference Market Price by the Optional Redemption Ratio (such product shall hereinafter be referred to as the "Adjusted Relevant Price" or the "Adjusted Reference Market Price," as the case may be); and (ii) in the case of a Common Stock Fundamental Change, the Applicable Conversion Price of the Securities in effect immediately prior to such Common Stock Fundamental Change, but after giving effect to any other prior adjustments effected pursuant to this Article XIII, shall thereupon be adjusted by 71 78 multiplying such Applicable Conversion Price by a fraction of which the numerator shall be the Purchaser Stock Price and the denominator shall be the Relevant Price; provided, however, that in the event of a Common Stock Fundamental Change in which (A) 100% of the value of the consideration received by a holder of Class A Common Stock is common stock of the successor, acquiror or other third party (and cash, if any, is paid only with respect to any fractional interests in such common stock resulting from such Common Stock Fundamental Change) and (B) all of the Class A Common Stock shall have been exchanged for, converted into or acquired for common stock (and cash with respect to fractional interests) of the successor, acquiror or other third party, the Applicable Conversion Price of the Securities in effect immediately prior to such Common Stock Fundamental Change shall thereupon be adjusted by multiplying such Applicable Conversion Price by a fraction of which the numerator shall be one and the denominator shall be the number of shares of common stock of the successor, acquiror, or other third party received by a stockholder for one share of Class A Common Stock as a result of such Common Stock Fundamental Change. (b) Definitions. The following definitions shall apply to terms used in this Article XIII: (1) "Closing Price" of any security on any day shall mean on any day the last reported sale price of such security on such day, or in case no sale takes place on such day, the average of the closing bid and asked prices in each case on the principal national securities exchange on which such securities are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the NNM or, if such securities are not listed or admitted to trading on any national securities exchange or quoted on the NNM, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected by the Company for such purpose. (2) "Common Stock Fundamental Change" shall mean any Fundamental Change in which more than 50% of the value (as determined in good faith by the Board of Directors) of the consideration received by holders of Class A Common Stock consists of common stock that for each of the ten consecutive Trading Days immediately prior to the Entitlement Date has been admitted for listing or admitted for listing subject to notice of issuance on a national securities exchange or quoted on the NNM; provided, however, that a Fundamental Change shall not be a Common Stock Fundamental Change unless either (i) the Company continues to exist after the occurrence of such Fundamental Change and the outstanding Preferred Securities continue to exist as outstanding Preferred Securities, or (ii) not later than the occurrence of such Fundamental Change, the outstanding Securities are converted into or exchanged for debentures of a corporation succeeding to the business of the Company, which debentures have terms substantially similar to those of the Securities. 72 79 (3) "Entitlement Date" shall mean the record date for determination of the holders of Common Stock entitled to receive securities, cash or other property in connection with a Non-Stock Fundamental Change or a Common Stock Fundamental Change or, if there is no such record date, the date upon which holders of Class A Common Stock shall have the right to receive such securities, cash or other property. (4) "Fundamental Change" shall mean the occurrence of any transaction or event in connection with a plan pursuant to which all or substantially all of the Class A Common Stock shall be exchanged for, converted into, acquired for or constitute solely the right to receive securities, cash or other property (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise); provided, however, in the case of a plan involving more than one such transaction or event, for purposes of adjustment of the Applicable Conversion Price, such Fundamental Change shall be deemed to have occurred when substantially all of the Class A Common Stock of the Company shall be exchanged for, converted into, or acquired for or constitute solely the right to receive securities, cash or other property, but the adjustment shall be based upon the highest weighted average per share consideration that a holder of Class A Common Stock could have received in such transactions or events as a result of which more than 50% of the Class A Common Stock of the Company shall have been exchanged for, converted into, or acquired for or constitute solely the right to receive securities, cash or other property. (5) "Non-Stock Fundamental Change" shall mean any Fundamental Change other than a Common Stock Fundamental Change. (6) "Optional Redemption Ratio" means a fraction of which the numerator shall be $50 and the denominator will be the then current Optional Redemption Price or, prior to October 3, 2002, an amount per Security determined by the Company in its sole discretion, after consultation with an investment banking firm, to be the equivalent of the hypothetical redemption price that would have been applicable if the Securities had been redeemable during such period. (7) "Purchaser Stock Price" shall mean, with respect to any Common Stock Fundamental Change, the average of the daily Closing Prices of the common stock received in such Common Stock Fundamental Change for the ten (10) consecutive Trading Days prior to and including the Entitlement Date, as adjusted in good faith by the Board of Directors to appropriately reflect any of the events referred to in subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of Section 13.03. (8) "Reference Market Price" shall initially mean on the date of original issuance of the Securities, $_____ (which is an amount equal to 66-2/3% 73 80 of the last reported sale price for the Class A Common Stock on the New York Stock Exchange Composite Tape on ________ __, 1999 and, in the event of any adjustment to the Applicable Conversion Price, other than as a result of a Non-Stock Fundamental Change, the Reference Market Price shall also be adjusted so that the ratio of the Reference Market Price to the Applicable Conversion Price after giving effect to any such adjustment shall always be the same as the ratio of $______ to the Initial Conversion Price. (9) "Relevant Price" shall mean (i) in the event of a Non-Stock Fundamental Change in which the holders of the Class A Common Stock receive only cash, the amount of cash received by a stockholder for one share of Class A Common Stock and (ii) in the event of any other Non-Stock Fundamental Change or any Common Stock Fundamental Change, the average of the daily Closing Prices of the Class A Common Stock for the ten (10) consecutive Trading Days prior to and including the Entitlement Date, in each case, as adjusted in good faith by the Company to appropriately reflect any of the events referred to in subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of Section 13.03. (10) "Trading Day" shall mean a day on which securities are traded on the national securities exchange or quotation system used to determine the Closing Price. Section 13.08 Dividend or Interest Reinvestment Plans. (a) Notwithstanding the foregoing provisions, the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock under any such plan, and the issuance of any shares of Common Stock or options or rights to purchase such shares pursuant to any employee benefit plan or program of the Company or pursuant to any option issued, shall not be deemed to constitute an issuance of Common Stock or exercisable, exchangeable or convertible securities by the Company to which any of the adjustment provisions described above applies. (b) There shall also be no adjustment of the Applicable Conversion Price in case of the issuance of any stock (or securities convertible into or exchangeable for stock) of the Company except as specifically described in this Article XIII. Section 13.09 Certain Additional Rights. Notwithstanding any other provision of this Article XIII to the contrary, rights, warrants, evidences of indebtedness, other securities, cash or other assets (including, without limitation, any rights distributed pursuant to any stockholder rights plan) shall be deemed not to have been distributed for purposes of this Article XIII if the Company makes proper provision so that each Holder who converts a Security (or any portion thereof) after the date fixed for determination of stockholders entitled to receive such distribution shall be entitled to receive upon such 74 81 conversion, in addition to the shares of Common Stock issuable upon such conversion, the amount and kind of such distributions that such Holder would have been entitled to receive if such Holder had, immediately prior to such determination date, converted such Security into Common Stock. Section 13.10 Trustee not Responsible for Determining Conversion Price or Adjustments. Neither the Trustee nor any Conversion Agent shall at any time be under any duty or responsibility to any Holder of any Security to determine whether any facts exist which may require any adjustment of the Applicable Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or whether any supplemental indenture needs to be entered into. Neither the Trustee nor any Conversion Agent shall be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock or of any securities or property, which may at any time be issued or delivered upon the conversion of any Security; and neither the Trustee nor any Conversion Agent makes any representation with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property upon the surrender of any Security for the purpose of conversion, or, except as expressly herein provided, to comply with any of the covenants of the Company contained in Article X or this Article XIII. ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS Section 14.01 No Recourse. No recourse under or upon any obligation, covenant or agreement of this Indenture, or of any Security, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, past, present or future as such, of the Company or of any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors as such, of the Company or of any predecessor or successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom, are hereby expressly waived and released as a condition 75 82 of, and as a consideration for, the execution of this Indenture and the issuance of such Securities. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 76 83 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. Dated: October __, 1999 ENTERCOM COMMUNICATIONS CORP. By: ----------------------------------------- Name: Title: WILMINGTON TRUST COMPANY, as Trustee By: ----------------------------------------- Name: Title: 77 84 EXHIBIT A FORM OF SECURITY [FORM OF FACE OF SECURITY] [Include if a Global Security: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR A SECURITY REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO ENTERCOM COMMUNICATIONS CORP. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] A-1 85 ENTERCOM COMMUNICATIONS CORP. CONVERTIBLE SUBORDINATED DEBENTURE DUE 2014 No. _________ $_______ CUSIP No. 293639 AA 8 ENTERCOM COMMUNICATIONS CORP., a corporation duly organized and existing under the laws of the State of Pennsylvania (herein called the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ____________________, or registered assigns, the principal sum [indicated on Schedule A hereof](1) [of Dollars](2) ($) on ________ __, ____. Interest Payment Dates: March 31, June 30, September 30 and December 31, commencing December 31, 1999. Regular Record Dates: the close of business on the fifteenth day immediately preceding each Interest Payment Date, commencing December 15, 1999. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. Dated: _____________ __, 1999 ENTERCOM COMMUNICATIONS CORP. By: ----------------------------------------- Name: Title: - ----------------- (1) Applicable to Global Securities only. (2) Applicable to certificated Securities only. A-2 86 [Seal] Attest: - ---------------------------------------------- TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned indenture. Dated: __________ __, 1999 WILMINGTON TRUST COMPANY, as Trustee By: --------------------------------------- Authorized Signatory A-3 87 [FORM OF REVERSE OF SECURITY] ENTERCOM COMMUNICATIONS CORP. CONVERTIBLE SUBORDINATED DEBENTURE DUE 2014 1. Interest. Entercom Communications Corp.,(3) a Pennsylvania corporation (the "Company"), is the issuer of this Convertible Subordinated Debenture Due 2014 (the "Security") limited in aggregate principal amount to $__________, issued under the Indenture hereinafter referred to. The Company promises to pay interest on the Securities in cash from ________ __, ____ or from the most recent interest payment date to which interest has been paid or duly provided for, quarterly (subject to deferral for up to 20 consecutive quarters as described in Section 3 hereof) in arrears on March 31, June 30, September 30, and December 31 of each year (each such date, an "Interest Payment Date"), commencing December 31, 1999, at the Applicable Rate, plus Additional Sums, if any, until the principal hereof shall have become due and payable. The amount of interest payable for any period will be computed on the basis of twelve 30-day months and a 360-day year. To the extent lawful, the Company shall pay interest on overdue installments of interest (without regard to any applicable grace period) at the rate borne by the Securities, compounded quarterly. Any interest paid on this Security shall be increased to the extent necessary to pay Additional Sums as set forth in this Security. 2. Additional Sums. The Company shall pay to Entercom Communications Capital Trust (and its permitted successors or assigns under the Declaration) (the "Trust") such additional amounts as may be necessary in order that the amount of dividends or other distributions then due and payable by the Trust on the Preferred Securities that at any time remain outstanding in accordance with the terms thereof shall not be reduced as a result of any additional taxes, duties and other governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any other taxing authority. 3. Extension Of Interest Payment Period. So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time during the term of this Security, from time to time to defer payments of interest by extending the interest payment period of such Security for up to 20 consecutive quarters (a "Deferral Period"); provided that no Deferral Period may extend beyond September 30, 2014. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to Section 3.13 of the Indenture, will bear interest thereon at the Applicable Rate compounded - ----------------- (3) All terms used in this Security which are defined in the Indenture or in the Declaration referred to herein shall have the meanings assigned to them in the Indenture or the Declaration, as the case may be. 1 88 quarterly for each quarter of the Deferral Period ("Compounded Interest"). On the applicable Payment Resumption Date, the Company shall pay all interest then accrued and unpaid on the Securities, including any Compounded Interest that shall be payable to the Holders of the Securities in whose names the Securities are registered in the Security Register on the record date fixed for such Payment Resumption Date. Before the termination of any Deferral Period, the Company may further extend such period as provided in the Indenture, provided that such period together with all such further extensions thereof shall not exceed 20 consecutive quarters or extend beyond the Stated Maturity of the Security. Upon the termination of any Deferral Period and upon the payment of all Compounded Interest and Additional Sums (together, "Additional Payments"), if any, then due, the Company may commence a new Deferral Period, subject to the foregoing requirements. No interest shall be due and payable during a Deferral Period except on the applicable Payment Resumption Date. The Company shall give the Holder of the Security and the Trustee written notice (a "Deferral Notice") of its selection of a Deferral Period at least ten days prior to the record date for any distributions that would have been payable on the Trust Securities except for the decision to begin or extend such Deferral Period. The Company may elect to pay all interest then accrued and unpaid on the Securities, including Compound Interest, on an Interest Payment Date prior to its most recently established Payment Resumption Date, provided that the Company gives the Holder of the Security and the Trustee a new Deferral Notice setting forth the revised Payment Resumption Date at least three Business Days prior to the Regular Record Date for such revised Payment Resumption Date. The quarter in which any Deferral Notice is given pursuant to the second paragraph of this Section 3 shall be counted as one of the 20 quarters permitted in the maximum Deferral Period permitted under the first paragraph of this Section 3. 4. Method of Payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, which shall be the close of business on the fifteenth day of the month in which the applicable Interest Payment Date falls (the "Regular Record Date"), commencing ________ __, ____. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than ten days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture, provided that any such payment will be made in such coin or currency of the United States of America which at the time of payment is a legal tender for payment of public and private debts. 2 89 Payment of the principal of and interest on this Security will be made at the office or agency of the Company maintained for that purpose in New York, New York, in coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided, however, that at any time that the Property Trustee is not the sole holder of the Securities, payment of interest may, at the option of the Company, be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or by wire transfer. 5. Paying Agent and Security Registrar. The Trustee will act as Paying Agent, Security Registrar and Conversion Agent. The Company may change any Paying Agent, Security Registrar, co-registrar or Conversion Agent without prior notice. The Company or any of its Affiliates may act in any such capacity. 6. Indenture. The Company issued the Securities under an indenture, dated as of October __, ____ (the "Indenture"), between the Company and Wilmington Trust Company, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) ("Trust Indenture Act") as in effect on the date of the Indenture. The Securities are subject to, and qualified by, all such terms, certain of which are summarized herein, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of such terms. The Securities are unsecured general obligations of the Company limited to up to $____________ and subordinated in right of payment to all existing and future Secured Senior Debt of the Company. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed or to convert this Security as provided in the Indenture. 7. Optional Redemption. The Securities are redeemable at the Company's option (an "Optional Redemption") in whole or in part, at any time or from time to time, on or after October 3, 2002, at a Redemption Price equal to the prices per $50 principal amount of Securities set forth in the table below, plus any accrued and unpaid interest, including Additional Payments, if any, to the Redemption Date, if redeemed during the 12-month period ending September 30: 3 90
PRICE PER $50 YEAR PRINCIPAL AMOUNT --------------------------- ---------------- 2003....................... $ ------------ 2004....................... $ ------------ 2005....................... $ ------------ 2006....................... $ ------------
and thereafter at $50 per $50 principal amount of the Securities plus, in each case, any accrued and unpaid interest, including Additional Payments, if any, to the Redemption Date. 8. Optional Redemption Upon Tax Event. Subject to the conditions set forth in the Indenture, the Securities are subject to redemption in whole, but not in part, if a Tax Event shall occur and be continuing, at any time within 90 days following the occurrence of such Tax Event, at a Redemption Price equal to $50 per $50 principal amount thereof, plus accrued but unpaid interest, including Additional Payments, if any, to the Redemption Date. In lieu of the foregoing, the Company also shall have the option of causing the Securities to remain outstanding and pay Additional Sums on the Securities. 9. Notice of Redemption. Notice of redemption will be mailed by first-class mail, postage prepaid, at least 30 days (or 20 days, in the case of a redemption upon the occurrence of a Tax Event), but not more than 60 days before the Redemption Date to each Holder of the Securities to be redeemed at such Holder's address appearing in the Security Register. 10. No Sinking Fund. There are no sinking fund payments with respect to the Securities. 11. Payment to Registered Holders; Cessation of Interest Accrual Upon Redemption. If this Security is redeemed subsequent to a Regular Record Date with respect to any Interest Payment Date specified above and on or prior to such Interest Payment Date, then any accrued interest will be paid to the person in whose name this Security is registered at the close of business on such record date. On or after the Redemption Date, interest will cease to accrue on the Securities, or portion thereof, called for redemption. 12. Subordination. The payment of the principal of, interest on or any other amounts due on the Securities is subordinated in right of payment to all existing and future Secured Senior Debt (as defined below) of the Company, as described in the Indenture. Each Holder, by accepting a Security, agrees to such subordination and authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and appoints the Trustee as its attorney-in-fact for such purpose. 4 91 "Secured Senior Debt" means Senior Debt that is secured by any lien, pledge, charge, encumbrance, mortgage, deed of trust, hypothecation, assignment or security interest with respect to our assets having a fair market value at the time of the grant thereof (in the judgment of the Board of Directors) equal to not less than the amount of such Senior Debt, including, without limitation, Secured Senior Debt under the Senior Credit Agreement. "Senior Debt" means (i) all of the Company's obligations under the Senior Credit Agreement, including whether as an obligor, guarantor or otherwise, without limitation, principal (including, without limitation, reimbursement obligations in respect of letters of credit (whether or not drawn) and obligations to cash collateralize letters of credit), premium (if any), interest (including, without limitation, interest accruing subsequent to the filing of, or which would have accrued but for the filing of, a petition for bankruptcy, whether or not the interest is an allowable claim in the bankruptcy proceeding), fees, indemnifications, expenses and other amounts payable pursuant thereto; (ii) the principal of, and premium and interest, if any, on all indebtedness of the Company for money borrowed, whether outstanding on the date of execution of the Indenture or thereafter created, assumed or incurred, (iii) all obligations to make payment pursuant to the terms of financial instruments, such as (a) securities contracts and foreign currency exchange contracts, (b) derivative instruments, such as swap agreements (including interest rate and foreign exchange rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange agreements, options, commodity futures contracts and commodity options contracts, and (c) similar financial instruments; except, in the case of (i) and (ii) above, such indebtedness and obligations that are expressly stated to rank junior in right of payment to, or pari passu in right of payment with, the Securities, (iv) indebtedness or obligations of others of the kind described in (i), (ii) and (iii) above for the payment of which the Company is responsible or liable as guarantor or otherwise, and (v) any deferrals, renewals or extensions of any Senior Debt that is secured, in whole or in part by the Company's assets; provided, however that Senior Debt shall not be deemed to include (a) any Debt of the Company which, when incurred and without respect to any election under Section 1111(b) of the United States Bankruptcy Code of 1978, was without recourse to the Company, (b) trade accounts payable in the ordinary course of business, (c) any Debt of the Company to any of its subsidiaries or (d) Debt to any employee of the Company. "Senior Credit Agreement" means (A) that certain Loan Agreement, dated February 13, 1998, as amended on October 8, 1998 and as further amended on July 20, 1999, by and among Entercom, as the borrower, Key Corporate Capital Inc., as administrative agent and document agent, Bank of America National Trust & Savings Association, as syndication agent, and the financial institutions listed therein, as amended, including, without limitation, any related notes, letters of credit, guarantees, collateral documents, instruments and agreements executed in connection therewith, and, in each case, as amended, amended and restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time, and (B) any other debt or credit 5 92 facility or commercial paper facility providing for revolving credit loans, term loans, accounts receivable financing (including through the sale of accounts receivable to such lenders or to special purpose entities formed to borrow from such lenders against such accounts receivable), letters of credit or other form of financing, in each case, as amended, restated, supplemented, extended, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time, including, in the case of clause (A) and clause (B), any such amendment, restatement, supplement, extension, modification, renewal, refunding, replacement or refinancing, (1) extending or shortening the maturity of any obligation incurred thereunder or contemplated thereby, (2) adding or deleting borrowers or guarantors thereunder and (3) increasing the amount of credit extended, or available to be extended, thereunder. 13. Conversion. The Holder of any Security has the right, exercisable at any time prior to 5:00 p.m., New York City time, on September 30, 2014, to convert the principal amount thereof (or any portion thereof that is an integral multiple of $50) into shares of Common Stock at the initial conversation rate of ______ shares of Class A Common Stock for each $50 in aggregate principal amount of Securities (equivalent to a conversion price of $________ per share of Class A Common Stock of the Company). The conversion ratio and equivalent conversion price in effect at any time are known as the "Applicable Conversion Price" and the "Applicable Conversion Ratio," respectively, and are subject to adjustment under certain circumstances. If a Security is called for redemption, the conversion right will terminate at the close of business on the Business Day immediately preceding the corresponding Redemption Date, unless the Company defaults in making the payment due upon redemption. To convert a Security, a Holder must (1) complete and sign a conversion notice substantially in the form attached hereto, (2) surrender the Security to a Conversion Agent, (3) furnish appropriate endorsements or transfer documents if required by the Security Registrar or Conversion Agent and (4) pay any transfer or similar tax, if required. Upon conversion, no adjustment or payment will be made for interest or dividends, but if any Holder surrenders a Security for conversion after the close of business on the Regular Record Date for the payment of an installment of interest and prior to the opening of business on the next Interest Payment Date, then, notwithstanding such conversion, the interest payable on such Interest Payment Date will be paid to the registered Holder of such Security on such Regular Record Date. In such event, such Security, when surrendered for conversion, need not be accompanied by payment of an amount equal to the interest payable on such Interest Payment Date on the portion so converted. The number of shares issuable upon conversion of a Security is determined by dividing the principal amount of the Security converted by the Applicable Conversion Price in effect on the Conversion Date. No fractional shares will be issued upon conversion but a cash adjustment will be made for any fractional interest. The outstanding principal amount of any Security shall be reduced by the portion of the principal amount thereof converted into shares of Class A Common Stock. 14. Registration, Transfer, Exchange And Denominations. As provided in the Indenture and subject to certain limitations therein set forth, the transfer 6 93 of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in Bala Cynwyd, Pennsylvania, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities are issuable only in registered form without coupons in denominations of $50 and integral multiples thereof. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. In the event of redemption or conversion of this Security in part only, a new Security or Securities for the unredeemed or unconverted portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. 15. Persons Deemed Owners. Except as provided in Section 3 hereof, the registered Holder of a Security may be treated as its owner for all purposes. 16. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request. After that, Holders of Securities entitled to the money must look to the Company for payment unless an abandoned property law designates another Person and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 17. Events of Default and Remedies. The Securities shall have the Events of Default as set forth in Section 5.01 of the Indenture. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 25% in aggregate principal amount of the Outstanding Securities by notice to the Company and the Trustee may declare all amounts payable on the Securities (including any Additional Payments) to be due and payable immediately; provided that, if the Property Trustee is the sole Holder of the Security and if upon an Event of Default, the Trustee or the Holders of not less than 25% in aggregate principal amount of the then outstanding Securities fail to declare the principal of all the Securities to be immediately due and payable, the holders of at least 25% in aggregate liquidation amount of Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee; and upon any such declaration such principal and all accrued interest shall become immediately due and payable; and provided further that the payment of principal and interest on such Securities shall remain subordinated to the extent provided in the Indenture. 7 94 In the case of an Event of Default, the Holders of a majority in principal amount of the Outstanding Securities by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. Holders may not enforce the Indenture or the Securities except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Securities issued under the Indenture may direct the Trustee in its exercise of any trust or power. The Company must furnish annually compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference to, and subject in its entirety by, the more complete description thereof contained in the Indenture. 18. Amendments, Supplements and Waivers. The Indenture permits, subject to the rights of the holders of Preferred Securities set forth therein and in the Declaration and with certain other exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company, and the rights of the Holders of the Securities under the Indenture, at any time, by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, subject to the rights of the holders of the Preferred Securities set forth therein and in the Declaration, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. The above description of amendments, supplements and waivers is qualified by reference to, and subject in its entirety, by the more complete description thereof contained in the Indenture. 19. Trustee Dealings with the Company. The Trustee, in its individual or any other capacity, may become the owner or pledgee of the Securities and may otherwise deal with the Company or an Affiliate with the same rights it would have, as if it were not a Trustee, subject to certain limitations provided for in the Indenture and in the Trust Indenture Act. Any Agent may do the same with like rights. 20. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of the Securities by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 8 95 21. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 22. Authentication. The Securities shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee or an authenticating agent. 23. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 24. The Company will furnish to any Holder of the Securities upon written request and without charge a copy of the Indenture. Request may be made to: Entercom Communications Corp. 409 City Avenue, Suite 401 Bala Cynwyd, Pennsylvania 19004 Attention: John C. Donlevie, Esq. 9 96 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint ____________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: Your Signature: ----------------------------------------------------------------- (Sign exactly as your name appears on the face of this Note) SIGNATURE GUARANTEE(4) - -------------------------------------------------------------------------------- - ------------------- (4) (Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 10 97 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE A The initial principal amount of this Global Security shall be $_______. The following increases or decreases in the principal amount of this Global Security have been made:
Amount Of Decrease In Signature Of Principal Amount Of This Authorized Global Security Amount Of Increase Principal Amount Of Signatory Of Including Increase Upon In Principal This Global Security Trustee Or Exercise Of Amount Of This Following Such Securities Date Made Over-Allotment Option Global Security Decrease (Or Increase) Custodian - ----------- ------------------------ ------------------ ---------------------- ------------
11 98 ELECTION TO CONVERT To: Entercom Communications Corp. The undersigned owner of this Security hereby irrevocably exercises the option to convert this Security, or the portion below designated, into Class A Common Stock of ENTERCOM COMMUNICATIONS CORP. in accordance with the terms of the Indenture referred to in this Security, and directs that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date: in whole __ Portions of Security to be converted ($50 or integral multiples thereof): $ ----------------------------------- Signature (for conversion only) - ------------------------------------ Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number ------------------------------------------- - -------------------------------------------------------------------------------- Signature Guarantee:(5) - ------------------------------------ - ---------------- (5) (Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) 12 EX-4.06 6 FORM OF PREFERRED SECURITIES GUARANTEE 1 Exhibit 4.06 ================================================================================ PREFERRED SECURITIES GUARANTEE AGREEMENT BETWEEN ENTERCOM COMMUNICATIONS CORP. AND WILMINGTON TRUST COMPANY ================================================================================ 2 CROSS-REFERENCE TABLE(1)
SECTION OF SECTION OF TRUST INDENTURE ACT GUARANTEE OF 1939. AS AMENDED AGREEMENT - ------------------- ----------------- 310(a)...................................................... 4.01(a) 310(b)...................................................... 4.01(c), 2.08 310(c)...................................................... Inapplicable 311(a)...................................................... 2.02(b) 311(b)...................................................... 2.02(b) 311(c)...................................................... Inapplicable 312(a)...................................................... 2.02(a) 312(b)...................................................... 2.02(b) 313......................................................... 2.03 314(a)...................................................... 2.04 314(b)...................................................... Inapplicable 314(c)...................................................... 2.05 314(d)...................................................... Inapplicable 314(e)...................................................... 1.01, 2.05, 3.02 314(f)...................................................... 2.01, 3.02 315(a)...................................................... 3.01(d) 315(b)...................................................... 2.07 315(c)...................................................... 3.01 315(d)...................................................... 3.01(d) 316(a)...................................................... 1.01, 2.06, 5.04 316(b)...................................................... 5.03 316(c)...................................................... 8.02 317(a)...................................................... Inapplicable 317(b)...................................................... Inapplicable 318(a)...................................................... 2.01(b) 318(b)...................................................... 2.01 318(c)...................................................... 2.01(a)
- -------- (1) This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. 3 TABLE OF CONTENTS ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.01 Definitions and Interpretation................................ 1 ARTICLE II TRUST INDENTURE ACT SECTION 2.01 Trust Indenture Act; Application.............................. 5 SECTION 2.02 Lists of Holders of Securities................................ 5 SECTION 2.03 Reports by the Guarantee Trustee.............................. 5 SECTION 2.04 Periodic Reports to Guarantee Trustee......................... 5 SECTION 2.05 Evidence of Compliance with Conditions Precedent.............. 6 SECTION 2.06 Events of Default; Waiver..................................... 6 SECTION 2.07 Event of Default; Notice...................................... 6 SECTION 2.08 Conflicting Interests......................................... 6 ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE Thus SECTION 3.01 Powers and Duties of the Guarantee Trustee.................... 7 SECTION 3.02 Certain Rights of Guarantee Trustee .......................... 8 SECTION 3.03 Not Responsible for Recitals or Issuance of Guarantee......... 10 SECTION 3.04 Compensation; Reimbursement; Indemnity........................ 10 ARTICLE IV GUARANTEE TRUSTEE SECTION 4.01 Guarantee Trustee; Eligibility................................ 10 SECTION 4.02 Appointment, Removal and Resignation of Guarantee Trustee..... 11 ARTICLE V GUARANTEE SECTION 5.01 Guarantee..................................................... 12 SECTION 5.02 Subordination................................................. 12 SECTION 5.03 Waiver of Notice and Demand................................... 12 SECTION 5.04 Obligations Not Affected...................................... 12 SECTION 5.05 Rights of Holders............................................. 13 SECTION 5.06 Guarantee of Payment.......................................... 14 SECTION 5.07 Subrogation................................................... 14 SECTION 5.08 Independent Obligations....................................... 14
4 SECTION 5.09 Conversion.................................................... 14 ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.01 Limitation of Transactions.................................... 14 SECTION 6.02 Ranking....................................................... 15 ARTICLE VII TERMINATION SECTION 7.01 Termination................................................... 15 ARTICLE VIII INDEMNIFICATION SECTION 8.01 Exculpation................................................... 16 SECTION 8.02 Indemnification............................................... 16 ARTICLE IX MISCELLANEOUS SECTION 9.01 Successors and Assigns........................................ 17 SECTION 9.02 Amendments.................................................... 17 SECTION 9.03 Notices....................................................... 17 SECTION 9.04 Benefit....................................................... 18 SECTION 9.05 Governing Law................................................. 18
5 THIS PREFERRED SECURITIES GUARANTEE AGREEMENT ("Guarantee"), dated as of October __, 1999, is executed and delivered by ENTERCOM COMMUNICATIONS CORP., a Pennsylvania corporation (the "Guarantor"), and Wilmington Trust Company, a Delaware banking corporation, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of ENTERCOM COMMUNICATIONS CAPITAL TRUST, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of October __, 1999, among the trustees of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof 3,000,000 TIDES, having an aggregate stated liquidation amount of $150,000,000, designated the __% Convertible Preferred Securities, Term Income Deferrable Equity Securities (TIDES)(SM) (liquidation amount $50 per Preferred Security) (the "Preferred Securities"); WHEREAS, as incentive for the Holders to purchase the TIDES(SM), the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee, to pay on a subordinated basis to the Holders the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; and WHEREAS, the Guarantor is also executing and delivering a guarantee agreement (the "Common Securities Guarantee") in substantially identical terms to this Guarantee for the benefit of the holders of the Common Securities (as defined herein), except that if a Debenture Event of Default or a Declaration Event of Default (each as defined herein) (or an event that, with the passage of time, would become such a Debenture Event of Default or Declaration Event of Default) shall have occurred and be continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated to the rights of Holders to receive Guarantee Payments under this Guarantee. NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.01 Definitions and Interpretation. In this Guarantee, unless the context otherwise requires: 6 (a) capitalized terms used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.01; terms defined in the Declaration as at the date of execution of this Guarantee have the same meaning when used in this Guarantee unless otherwise defined in this Guarantee; (b) a term defined anywhere in this Guarantee has the same meaning throughout; (c) all references to "the Guarantee" or "this Guarantee" are to this Guarantee as modified, supplemented or amended from time to time; (d) all references in this Guarantee to Articles and Sections are to Articles and Sections of this Guarantee unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee unless otherwise defined in this Guarantee or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Common Securities" means the convertible common securities (liquidation amount $50 per common security) representing common undivided beneficial interests in the assets of the Issuer. "Covered Person" means any Holder or beneficial owner of Preferred Securities. "Debenture Event of Default" means an Event of Default as defined in the Indenture. "Debentures" means the series of convertible junior subordinated debt securities of the Guarantor designated the Convertible Junior Subordinated Debentures Due 2014 held by the Property Trustee (as defined in the Indenture) of the Issuer, "Declaration Event of Default" means an Event of Default as defined in the Declaration. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee; provided, however, that except with respect to 2 7 a default in payment of any Guarantee Payment, the Guarantor shall have received notice of default and shall not have cured such default within 60 days after receipt of such notice. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by or on behalf of the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) that are required to be paid on the Preferred Securities, to the extent that the Issuer shall have funds on hand available therefor at such time, (ii) the applicable Redemption Price (as defined in the Indenture) with respect to Preferred Securities called for redemption by the Issuer, to the extent that the Issuer has funds on hand available therefor at such time, and (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of the Issuer (other than in connection with the distribution of Debentures to the Holders or the redemption of all the Preferred Securities), the lesser of (a) the aggregate liquidation amount thereof plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution") to the extent the Issuer has funds available therefor and (b) the amount of assets of the Issuer remaining available for distribution to Holders upon liquidation of the Issuer after satisfaction of liabilities to creditors of the Issuer as required by applicable law. "Guarantee Trustee" means Wilmington Trust Company until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee. "Holder" means any holder, as registered on the books and records of the Issuer of any outstanding Preferred Securities; provided, however, that, in determining whether the holders of the requisite percentage in liquidation amount of the Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of the Guarantee Trustee. "Indenture" means the Indenture, dated as of October __, 1999, among the Guarantor and Wilmington Trust Company, as trustee, and any indenture supplemental thereto, pursuant to which the Debentures are to be issued to the Property Trustee of the Issuer. "Majority in Liquidation Amount of the Preferred Securities" means, except as provided by the Trust Indenture Act, Holder(s), voting separately as a class, representing more than 50% of the stated aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise) of all Preferred Securities then outstanding. 3 8 "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chairman of the Board, President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary of such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee shall include: (g) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (h) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (i) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (j) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Responsible Officer" means, with respect to the Guarantee Trustee, the chairman of the board of directors, the president, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Secured Senior Debt" shall have the meaning set forth in the Indenture. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.01. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. 4 9 ARTICLE II TRUST INDENTURE ACT SECTION 2.01 Trust Indenture Act; Application. (a) This Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee, which are incorporated by reference hereto, and shall, to the extent applicable, be governed by such provisions; and (b) If and to the extent that any provision of this Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. Section 2.02 Lists of Holders of Securities. (a) The Guarantor shall provide the Guarantee Trustee (i) within 14 days after May 15 and November 15 of each year, commencing ________ __, 1999, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of such date; provided that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Guarantee Trustee by the Guarantor, and (ii) at any other time, within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Guarantee Trustee. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Guarantee Trustee shall comply with its obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act. Section 2.03 Reports by the Guarantee Trustee. Within 60 days after May 15 of each year, commencing ______ __, 2000, the Guarantee Trustee shall provide to the Holders of the Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.04 Periodic Reports to Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. 5 10 SECTION 2.05 Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee which relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(l) may be given in the form of an Officers' Certificate. SECTION 2.06 Events of Default; Waiver. The Holders of a Majority in Liquidation Amount of the Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent therefrom. SECTION 2.07 Event of Default; Notice. (a) The Guarantee Trustee shall, within 30 days after the occurrence of an Event of Default actually known to the Guarantee Trustee, transmit by mail, first-class postage prepaid, to the Holders, notices of all Events of Default known to the Guarantee Trustee, unless such defaults have been cured before the giving of such notice; provided that, except in the case of a default in the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default except any Event of Default as to which the Guarantee Trustee shall have received written notice or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice. SECTION 2.08 Conflicting Interests. The Declaration shall be deemed to be specifically described in this Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. 6 11 ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE SECTION 3.01 Powers and Duties of the Guarantee Trustee. (a) This Guarantee shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee to any Person except a Holder exercising his or her rights pursuant to Section 5.05(d) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders. (c) The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.06), and is known to the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Guarantee shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read into this Guarantee against the Guarantee Trustee; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee; but in the 7 12 case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in Liquidation Amount of the Preferred Securities, relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee; and (iv) no provision of this Guarantee shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers. Section 3.02 Certain Rights of Guarantee Trustee. (a) Subject to the provisions of Section 3.01: (i) the Guarantee Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Guarantor contemplated by this Guarantee shall be sufficiently evidenced by an Officers' Certificate; (iii) whenever, in the administration of this Guarantee, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor; (iv) the Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any re-recording, refiling or reregistration thereof); 8 13 (v) the Guarantee Trustee may consult with legal counsel of its selection, and the written advice or opinion of such legal counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may be legal counsel to the Guarantor or any of its Affiliates and may include any of the Guarantor's employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee from any court of competent jurisdiction; (vi) the Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee security and indemnity satisfactory to the Guarantee Trustee against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided that nothing contained in this Section 3.02(a)(vi) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default known to the Guarantee Trustee, of its obligation to exercise the rights and powers vested in it by this Guarantee; (vii) the Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; the reasonable expense of every such investigation shall be paid by the Guarantor or, if paid by the Guarantee Trustee, shall be repaid by the Company upon demand; (viii) the Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action; it being understood that no third party shall be required to inquire as to the authority of the Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action; (x) whenever in the administration of this Guarantee, the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (i) may request written instructions from the Holders or, other than with respect to enforcing any 9 14 remedy or right or taking any action related thereto, the Guarantor, (ii) may refrain from enforcing such remedy or right or taking such other action until such written instructions are received, and (iii) shall be protected in acting in accordance with such written instructions; and (xi) the Guarantee Trustee shall not be charged with knowledge of any default or Event of Default hereunder unless a Responsible Officer of the Guarantee Trustee shall have knowledge of the default or Event of Default. (b) No provision of this Guarantee shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty. SECTION 3.03 Not Responsible for Recitals or Issuance of Guarantee. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representations as to the validity or sufficiency of this Guarantee. SECTION 3.04 Compensation; Reimbursement; Indemnity. The Guarantor agrees: (a) to pay the Guarantee Trustee from time to time such reasonable compensation as the Guarantor and the Guarantee Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (b) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Guarantee Trustee in accordance with the provisions of this Guarantee Agreement (including the reasonable compensation and expenses of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith. As security for the performance of the obligations of the Guarantor under this Section 3.04, the Guarantee Trustee shall have a lien prior to the Preferred Securities upon all property and funds held or collected by the Guarantee Trustee as such, except funds held in trust for the payment of principal of, and premium (if any) or interest on, particular obligations of the Guarantor under this Guarantee. 10 15 The provisions of this Section 3.04 shall survive the termination of this Guarantee Agreement. ARTICLE IV GUARANTEE TRUSTEE SECTION 4.01 Guarantee Trustee, Eligibility. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.0l(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.0l(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.02(c). (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 3.10(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 3.10(b) of the Trust Indenture Act. SECTION 4.02 Appointment, Removal and Resignation of Guarantee Trustee. (a) Subject to Section 4.02(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Guarantee Trustee shall not be removed in accordance with Section 4.02(a) until a Successor Guarantee Trustee has been appointed and has accepted 11 16 such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.02 within 60 days after delivery to the Guarantor of an instrument of removal or resignation, the Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. (e) No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee Trustee. (f) Upon termination of this Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 4.02, the Guarantor shall pay to the Guarantee Trustee all amounts accrued to the date of such termination, removal or resignation. 12 17 ARTICLE V GUARANTEE SECTION 5.01 Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full on a subordinated basis to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Issuer), as and when due, in coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debt regardless of any defense, right of setoff or counterclaim that the Issuer may have or assert other than the defense of payment. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.02 Subordination. If a Debenture Event of Default or a Declaration Event of Default (or an event that, with passage of time, would become a Debenture Event of Default or a Declaration Event of Default) shall have occurred and be continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated to the rights of Holders to receive Guarantee Payments under this Guarantee. SECTION 5.03 Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.04 Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, the amount payable upon redemption or the amount payable upon liquidation of the Issuer or any other sums payable under the terms of the Preferred 13 18 Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions that results from the extension of any interest payment period on the Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the TIDES, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.04 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders or any other Person to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.05 Rights of Holders. The Guarantor expressly acknowledges that: (a) This Guarantee will be deposited with the Guarantee Trustee to be held for the benefit of the Holders. (b) The Guarantee Trustee has the right to enforce this Guarantee on behalf of the Holders. (c) The Holders of a Majority in Liquidation Amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee. 14 19 (d) Any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person. SECTION 5.06 Guarantee of Payment. This Guarantee creates a guarantee of payment and not of collection. This Guarantee will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer) or upon distribution of Debentures to Holders as provided in the Declaration. SECTION 5.07 Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee and shall have the right to waive payment by the Issuer pursuant to Section 5.01; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.08 Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.04 hereof, SECTION 5.09 Conversion. The Guarantor acknowledges its obligation to issue and deliver Class A common stock upon the conversion of the Preferred Securities. ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.01 Limitation of Transactions. So long as any Preferred Securities remain outstanding, if there shall have occurred and be continuing a Debenture Event of Default, a Declaration Event of Default or an event that, with the giving of notice or the lapse of time or both, would constitute a Debenture Event of Default or a Declaration Event of Default, or a selection by the 15 20 Guarantor of a Deferral Period as provided in the Indenture and such period, or any extension thereof, shall be continuing, then (a) the Guarantor shall not declare or pay any dividend on, or make any distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than stock dividends paid by the Guarantor which stock dividends consist of the Stock of the same class as that on which the dividend is being paid), (b) the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Guarantor which rank pari passu with or junior in interest to the Debentures and (c) the Guarantor shall not make any guarantee payments with respect to any guarantee by the Guarantor of the debt securities of any subsidiary of the Guarantor if such guarantee ranks pari passu with or junior in interest to the Debentures (in each case, other than (A) dividends or distributions on the Guarantor's common stock, (B) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (C) payments under this Guarantee, (D) purchases or acquisitions of shares of the Class A common stock in connection with the satisfaction by the Guarantor of its obligations under any employee benefit plan or any other contractual obligation of the Guarantor (other than a contractual obligation ranking expressly by its terms pari passu with or junior in interest to the Debentures), (E) as a result of a reclassification of the Guarantor's capital stock or the exchange or conversion of one class or series of the Guarantor's capital stock for another class or series of the Guarantor's capital stock or (F) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged). SECTION 6.02 Ranking. This Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate to all Secured Senior Debt of the Guarantor to the same extent that the Debentures are subordinated pursuant to the Indenture. ARTICLE VII TERMINATION SECTION 7.01 Termination. This Guarantee shall terminate upon (i) full payment of the amount payable upon redemption of all Preferred Securities, (ii) the distribution of the Guarantor's Class A common stock to the Holders in respect of the conversion of the Preferred Securities into the Guarantor's Class A common stock, (iii) the distribution of the Debentures to the Holders of all of the Preferred Securities or (iv) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under the Preferred Securities or under this Guarantee. 16 21 ARTICLE VIII INDEMNIFICATION SECTION 8.01 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or Omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders might properly be paid. SECTION 8.02 Indemnification. (a) The Guarantor agrees to indemnify each indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability or expense, including taxes (other than taxes based on the income of such Indemnified Person) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.02 shall survive the termination of this Guarantee. (b) To the fullest extent permitted by applicable law, expenses (including legal fees and expenses) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Guarantor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Guarantor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 8.02(a). 17 22 (c) No Indemnified Person shall claim or exact any lien or charge on any Guarantee Payments as a result of any amount due to it under this Guarantee. ARTICLE IX MISCELLANEOUS SECTION 9.01 Successors and Assigns. All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders. SECTION 9.02 Amendments. Except with respect to any changes that do not materially adversely affect the rights of Holders (in which case no consent of Holders will be required), this Guarantee may only be amended with the prior approval of the Holders of a Majority in Liquidation Amount of the Preferred Securities then outstanding; provided, that no amendment that affects the rights, powers, duties, obligations or immunities of the Guarantee Trustee shall be effective unless approved in writing by the Guarantee Trustee. The provisions of Section 12.02 of the Declaration with respect to meetings of holders of the Securities (as defined in the Declaration) apply to the giving of such approval. SECTION 9.03 Notices. All notices provided for in this Guarantee shall be in writing duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first-class mail, as follows: (a) if given to the Issuer, in care of the Regular Trustees at the Issuer's mailing address set forth below (or such other address as the Issuer may give notice): Joseph M. Field David J. Field John C. Donlevie Entercom Communications Capital Trust c/o Entercom Communications Corp. 409 City Avenue, Suite 401 Bala Cynwyd, Pennsylvania 19004 (b) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders): Wilmington Trust Company 1100 North Market Street 18 23 Wilmington, Delaware 19890 Attention: Corporate Trust Administration (c) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders): Entercom Communications Capital Trust c/o Entercom Communications Corp. 409 City Avenue, Suite 401 Bala Cynwyd, Pennsylvania 19004 Attention: John C. Donlevie (d) if given to any Holder, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.04 Benefit. This Guarantee is solely for the benefit of the Holders and, subject to Section 3.01(a), is not separately transferable from the Preferred Securities. SECTION 9.05 Governing Law. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 19 24 THIS GUARANTEE is executed as of the day and year first above written. ENTERCOM COMMUNICATIONS CORP., as Guarantor By: ________________________________ Name: Title: WILMINGTON TRUST COMPANY, as Guarantor Trustee By: ________________________________ Name: Title: 20 EX-4.07 7 FORM OF COMMON SECURITIES GUARANTEE 1 Exhibit 4.07 ================================================================================ COMMON SECURITIES GUARANTEE AGREEMENT DELIVERED BY ENTERCOM COMMUNICATIONS CORP. FOR THE BENEFIT OF THE HOLDERS OF COMMON SECURITIES OF ENTERCOM COMMUNICATIONS CAPITAL TRUST ================================================================================ 2 This COMMON SECURITIES GUARANTEE AGREEMENT (the "Common Securities Guarantee"), dated as of October __, 1999, is executed and delivered by Entercom Communications Corp., a Pennsylvania corporation (the "Guarantor"), for the benefit of the Holders (as defined herein) from time to time of the Common Securities (as defined in the Declaration (as defined herein)) of Entercom Communications Capital Trust, a Delaware business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of October __, 1999, among the trustees of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer; the Issuer is issuing on the date hereof 3,000,000 __% Preferred Securities (as defined in the Declaration), having an aggregate liquidation amount of $150,000,000; and WHEREAS, pursuant to the Declaration, the Issuer is issuing on the date hereof 92,800 Common Securities, having an aggregate stated liquidation amount of $4,640,000 designated the __% Convertible Common Securities (liquidation amount $50 per each of the Convertible Common Securities); WHEREAS, as incentive for the Holders to purchase the Common Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Common Securities Guarantee, to pay on a subordinated basis to the Holders of the Common Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; and WHEREAS, the Guarantor is also executing and delivering a guarantee agreement in substantially identical terms to this Common Securities Guarantee for the benefit of the holders of the Preferred Securities (the "Guarantee") except that if a Debenture Event of Default or a Declaration Event of Default (each as defined herein) (or an event that, with passage of time, would become a Debenture Event of Default or a Declaration Event of Default) shall have occurred and be continuing, the rights of Holders of the Common Securities to receive Guarantee Payments under this Common Securities Guarantee are subordinated to the rights of holders of Preferred Securities to receive Guarantee Payments under the Guarantee. NOW, THEREFORE, in consideration of the purchase by each Holder of Common Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Common Securities Guarantee for the benefit of the Holders. ARTICLE I SECTION 1.01 In this Common Securities Guarantee, unless the context otherwise requires, the terms set forth below shall have the following meanings. 3 (a) capitalized terms used in this Common Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.01 or the Guarantee; (b) terms defined in the Declaration as of the date of execution of this Common Securities Guarantee have the same meaning when used in this Common Securities Guarantee unless otherwise defined in this Common Securities Guarantee or in the Guarantee; (c) a term defined anywhere in this Common Securities Guarantee has the same meaning throughout; (d) all references to "the Common Securities Guarantee" or "this Common Securities Guarantee" are to this Common Securities Guarantee as modified, supplemented or amended from time to time; (e) all references in this Common Securities Guarantee to Articles and Sections are to Articles and Sections of this Common Securities Guarantee unless otherwise specified; and (f) a reference to the singular includes the plural and vice versa. "Debenture Event of Default" means an Event of Default under the Indenture, "Declaration Event of Default" means an Event of Default under the Declaration. "Guarantee Event of Default" means a default by the Guarantor on any of its payment or other obligations under the Common Securities Guarantee. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Common Securities, to the extent not paid or made by or on behalf of the Issuer: (i) any accrued and unpaid Distributions which are required to be paid on such Common Securities, to the extent that the Issuer shall have funds on hand available therefor at such time, (ii) the applicable Redemption Price (as defined in the Indenture) with respect to any Common Securities called for redemption by the Issuer, to the extent that the Issuer has funds on hand available therefor at such time and (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of the Issuer (other than in connection with the distribution of Debentures to the Holders or the redemption of all the Common Securities), the lesser of (a) the aggregate liquidation amount thereof plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution") to the extent the Issuer has funds available therefor and (b) the amount of assets of the Issuer remaining available for distribution to Holders upon liquidation of the Issuer after satisfaction of liabilities to creditors of the Issuer as required by applicable law. 2 4 "Holder" means any holder, as registered on the books and records of the Issuer, of any outstanding Common Securities. "Secured Senior Debt" shall have the meaning set forth in the Indenture. ARTICLE II SECTION 2.01 The Guarantor irrevocably and unconditionally agrees to pay in full on a subordinated basis to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Issuer), as and when due, in coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debt regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert other than the defense of payment. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holder. SECTION 2.02 If a Debenture Event of Default or a Declaration Event of Default (or an event that, with passage of time, would become a Debenture Event of Default) shall have occurred and be continuing, the rights of Holders of the Common Securities to receive Guarantee Payments under this Common Securities Guarantee are subordinated to the rights of holders of Preferred Securities to receive Guarantee Payments under the Guarantee. SECTION 2.03 The Guarantor hereby waives notice of acceptance of this Common Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 2.04 The obligations, covenants, agreements and duties of the Guarantor under this Common Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Common Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, the amount payable upon redemption, or the amount payable upon liquidation of the Issuer or any other sums payable under the terms of the Common Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Common Securities (other than an extension of time for payment of Distributions, that results from the extension of any interest payment period on the Debentures permitted by the Indenture); 3 5 (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Common Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in the Common Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 2.04 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders or any other Person to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 2.05 The Guarantor expressly acknowledges that any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Common Securities Guarantee, without first instituting a legal proceeding against the Issuer or any other Person. SECTION 2.06 This Common Securities Guarantee creates a guarantee of payment and not of collection. This Common Securities Guarantee will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer) or upon distribution of Debentures to Holders as provided in the Declaration. SECTION 2.07 The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Common Securities Guarantee and shall have the right to waive payment by the Issuer pursuant to Section 2.01; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Common Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Common Securities Guarantee. If any amount shall be paid to 4 6 the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 2.08 The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Common Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Common Securities Guarantee, notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 2.04 hereof. SECTION 2.09 The Guarantor acknowledges its obligation to issue and deliver Class A common stock upon the conversion of the Common Securities. SECTION 2.10 The Holders of a majority in liquidation amount of Common Securities may by vote, on behalf of the Holders of all of the Common Securities, waive any past Guarantee Event of Default and its consequences. Upon such waiver, any such Guarantee Event of Default shall cease to exist, and any Guarantee Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Common Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Guarantee Event of Default or impair any right consequent thereon. ARTICLE III SECTION 3.01 So long as any Common Securities remain outstanding, if (i) there shall have occurred and be continuing a Debenture Event of Default, a Declaration Event of Default or an event that, with the giving of notice or the lapse of time or both, would constitute a Debenture Event of Default or a Declaration Event of Default or (ii) a selection by the Guarantor of a Deferral Period as provided in the Indenture and such period, or any extension thereof, shall be continuing, then (a) the Guarantor shall not declare or pay any dividend on, or make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than stock dividends paid by the Guarantor which consist of the stock of the same class as that on which the dividend is being paid), (b) the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Guarantor which rank pari passu with or junior in interest to the Debentures and (c) shall not make any guarantee payments with respect to any guarantee by the Guarantor of the debt securities of any subsidiary of the Guarantor if such guarantee ranks pari passu with or junior in interest to the Debentures (in each case, other than (A) dividends or distributions in the Guarantor's common stock, (B) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (C) payments under the Guarantee, (D) purchases or acquisitions of shares of the Guarantor's common stock in connection with the satisfaction by the Guarantor of its obligations under any employee benefit plan or any other contractual obligation of the Guarantor (other than a contractual obligation ranking expressly by its terms pari passu with or junior in interest 5 7 to the Debentures), (E) as a result of a reclassification of the Guarantor's capital stock or the exchange or conversion of one class or series of the Guarantor's capital stock for another class or series of the Guarantor's capital stock or (F) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged). SECTION 3.02 This Common Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate to all Secured Senior Debt of the Guarantor to the same extent that the Debentures (as defined in the Indenture) are subordinated pursuant to the Indenture. ARTICLE IV SECTION 4.01 This Common Securities Guarantee shall terminate upon (i) full payment of the amount payable upon redemption of the Common Securities, (ii) the distribution of the Guarantor's Class A common stock to the Holders in respect of the conversion of the Common Securities into the Guarantor's Class A common stock, (iii) the distribution of the Debentures to the Holders in exchange for all of the Common Securities or (iv) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Common Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Common Securities must restore payment of any sums paid under the Common Securities or under this Common Securities Guarantee. ARTICLE V SECTION 5.01 All guarantees and agreements contained in this Common Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders. SECTION 5.02 Except with respect to any changes which do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Common Securities Guarantee may only be amended with the prior approval of the Holders of a majority in liquidation amount of the outstanding Common Securities. The provisions of Section 12.02 of the Declaration with respect to meetings of Holders of the Securities apply to the giving of such approval. SECTION 5.03 All notices provided for in this Common Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) if given to the Issuer, in care of the Regular Trustees at the Issuer's mailing address set forth below (or such other address as the Issuer may give notice of to the Holders of the Common Securities): 6 8 Joseph M. Field David J. Field John C. Donlevie Entercom Communications Capital Trust c/o Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 (b) if given to the Guarantor, at the Guarantor's mailing address set forth be low (or such other address as the Guarantor may give notice of to the Holders of the Common Securities): Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 Attention: John C. Donlevie, Esq. (c) if given to any Holder of Common Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 5.04 This Common Securities Guarantee is solely for the benefit of the Holders and is not separately transferable from the Common Securities. SECTION 5.05 THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 7 9 THIS COMMON SECURITIES GUARANTEE is executed as of the day and year first above Written. ENTERCOM COMMUNICATIONS CORP., as Guarantor By: _______________________________________ Name: Title: 8 EX-5.01 8 OPINION OF LATHAM & WATKINS 1 EXHIBIT 5.01 [LATHAM & WATKINS LETTERHEAD] September 30, 1999 Entercom Communications Corp. Entercom Communications Capital Trust Registration 401 City Avenue Bala Cynwyd, Pennsylvania 19004 Re: Entercom Communications Corp. and Entercom Communications Capital Trust Registration Statement on Form S-1; File No. 333-86843 Ladies and Gentlemen: In connection with the Registration Statement on Form S-1 (File No. 333-86843) of Entercom Communications Capital Trust, a statutory business trust formed under Delaware law (the "Trust"), and Entercom Communications Corp., a Pennsylvania corporation (the "Company") filed by the Trust and the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), on September 10, 1999, as amended by Amendment No. 1 filed with the Commission on September 14, 1999 and as amended by Amendment No. 2 filed with the Commission on September 30, 1999 (collectively, the "Registration Statement"), you have requested our opinion with respect to the matters set forth below. The Registration Statement relates to the registration of (i) 3,450,000 __% Convertible Preferred Securities, Term Income Deferrable Equity Securities of the Trust (TIDES) (including 450,000 TIDES to cover over-allotments of TIDES), (ii) $172,500,000 in aggregate principal amount of the __% Convertible Subordinated Debentures due 2014 of the Company (the "Convertible Subordinated Debentures"), (iii) the shares of Class A common stock, par value $.01 per share, of the Company (the "Class A Common Stock") issuable upon the conversion of the TIDES and the Convertible Subordinated Debentures and (iv) the Preferred Securities Guarantee of the Company (the "Guarantee"). The TIDES will be issued pursuant to the Amended and Restated Declaration of Trust of Entercom Communications Capital Trust (the "Trust Agreement") among the Company, as sponsor, Wilmington Trust Company, as property trustee and Delaware trustee and Joseph M. Field, David J. Field and John C. Donlevie, as administrative trustees. The proceeds from the sale by the Trust of the TIDES will be invested in the Convertible Subordinated Debentures, which will be issued pursuant to an Indenture among the Company, as issuer, and Wilmington Trust Company, as indenture trustee (the "Indenture Trustee"). 2 Entercom Communications Corp. September 30, 1999 In our capacity as your counsel in connection with such registration, we are familiar with the proceedings taken and proposed to be taken by the Company in connection with the authorization and issuance of the Convertible Subordinated Debentures and the Guarantee, respectively and for the purposes of this opinion, have assumed such proceedings will be timely completed in the manner presently proposed. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to my satisfaction of such documents, corporate records and instruments, as we have deemed necessary or appropriate for purposes of this opinion. With your consent we have assumed that each of the Convertible Subordinated Debentures, the Indenture and the Guarantee has been authorized by all necessary corporate action of the of the Company. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. We are opining herein as to the effect on the subject transaction only of the internal laws of the State of New York, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or as to any matters of municipal law or the laws of any local agencies within any state. Subject to the foregoing, it is our opinion that: (i) upon due execution, authentication and delivery of the Convertible Subordinated Debentures and the Indenture by or on behalf of the Company against payment therefor in accordance with the terms of the Indenture, each of the Convertible Subordinated Debentures and the Indenture will constitute the valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms; and (ii) upon due execution, authentication and delivery of the Guarantee by or on behalf of the Company, the Guarantee will be the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The opinions rendered above relating to the enforceability of the Convertible Subordinated Debentures and the Guarantee are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors; (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or law, and the discretion of the court before which any proceeding therefor may be brought and (iii) we express no opinion with respect to whether acceleration of the Convertible Subordinated Debentures may affect the collectibility of that portion of the principal amount thereof which might be determined to constitute unearned interest thereon. 3 Entercom Communications Corp. September 30, 1999 To the extent that the obligations of the Company under the Indenture may be dependent upon such matters, we assume for purposes of this opinion that the Indenture Trustee is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Indenture Trustee is duly qualified to engage in the activities contemplated by the Indenture; that the Indenture has been duly authorized, executed and delivered by the Indenture Trustee and constitutes the legally valid, binding and enforceable obligation of the Indenture Trustee enforceable against the Indenture Trustee in accordance with its terms; that the Indenture Trustee is in compliance, generally and with respect to acting as a trustee under the Indenture, with all applicable laws and regulations; and that the Indenture Trustee has the requisite organizational and legal power and authority to perform its obligations under the Indenture. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our name contained under the heading "Legal Matters." Very truly yours, Latham & Watkins EX-5.02 9 OPINION OF MORRIS, NICHOLS ARSHT & TUNNELL 1 Exhibit 5.02 [Letterhead of Morris, Nichols, Arsht & Tunnell Letterhead] September 30, 1999 Entercom Communications Capital Trust c/o Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 Re: Entercom Communications Capital Trust Ladies and Gentlemen: We have acted as special Delaware counsel to Entercom Communications Capital Trust, a Delaware statutory business trust (the "Trust"), and Entercom Communications Corp., a Pennsylvania corporation ("Entercom Communications"), in connection with certain matters relating to (i) the creation of the Trust and (ii) the proposed issuance by the Trust of Preferred Securities to beneficial owners pursuant to and as described in Registration Statement No. 333-86843 (and the Prospectus forming a part thereof) on Form S-1 filed with the Securities and Exchange Commission on September 10, 1999, as amended by Amendment No. 1 and Amendment No. 2 thereto (as so amended, the "Registration Statement"). Capitalized terms used herein and not otherwise herein defined are used as defined in the Amended and Restated Declaration of Trust of the Trust in the form attached as an exhibit to the Registration Statement (the "Governing Instrument"). In rendering this opinion, we have examined and relied upon copies of the following documents in the forms provided to us: the Certificate of Trust of the Trust as filed in the Office of the Secretary of State of the State of Delaware (the "State Office") on September 8, 1999 (the "Certificate of Trust"); a Declaration of Trust of the Trust dated as of September 8, 1999 (the "Original Governing Instrument"); the Governing Instrument; the Indenture to be entered into between Entercom Communications and Wilmington Trust Company, as Trustee; the Preferred Securities Guarantee Agreement to be entered into between Entercom Communications and Wilmington Trust Company, as Trustee; the form of Underwriting Agreement relating to the Preferred Securities among Entercom Communications, the Trust and Credit Suisse First Boston Corporation, Banc of America Securities LLC and Deutsche Bank Securities Inc., as representatives of the several underwriters named therein (the "Underwriting 2 Entercom Communications Corp. September 30, 1999 Page 2 Agreement"); the Registration Statement; and a certification of good standing of the Trust obtained as of a recent date from the State Office. In such examinations, we have assumed the genuineness of all signatures, the conformity to original documents of all documents submitted to us as drafts or copies or forms of documents to be executed and the legal capacity of natural persons to complete the execution of documents. We have further assumed for purposes of this opinion: (i) the due formation or organization, valid existence and good standing of each entity (other than the Trust) that is a party to any of the documents reviewed by us under the laws of the jurisdiction of its respective formation or organization; (ii) the due authorization, execution and delivery by, or on behalf of, each of the parties thereto of the above-referenced documents (including, without limitation, the due authorization, execution and delivery of the Governing Instrument and the Underwriting Agreement prior to the first issuance of Preferred Securities); (iii) that no event has occurred subsequent to the filing of the Certificate of Trust, or will occur prior to the first issuance of Preferred Securities, that would cause a dissolution or liquidation of the Trust under the Original Governing Instrument or the Governing Instrument, as applicable; (iv) that the activities of the Trust have been and will be conducted in accordance with the Original Governing Instrument or the Governing Instrument, as applicable, and the Delaware Business Trust Act, 12 Del. C. Sections 3801 et seq. (the "Delaware Act"); (v) that payment of the required consideration for the Preferred Securities has, or prior to the first issuance of Preferred Securities will have, been made in accordance with the terms and conditions of the Governing Instrument, the Registration Statement and the Underwriting Agreement and that the Preferred Securities are otherwise issued and sold to the Preferred Security Holders in accordance with the terms, conditions, requirements and procedures set forth in the Governing Instrument, the Registration Statement and the Underwriting Agreement; and (vi) that the documents examined by us are in full force and effect, express the entire understanding of the parties thereto with respect to the subject matter thereof and have not been amended, supplemented or otherwise modified, except as herein referenced. We have not reviewed any documents other than those identified above in connection with this opinion, and we have assumed that there are no other documents that are contrary to or inconsistent with the opinions expressed herein. Further, we express no opinion with respect to, and assume no responsibility for the contents of, the Registration Statement or any other offering material relating to the Preferred Securities. No opinion is expressed herein with respect to the requirements of, or compliance with, federal or state securities or blue sky laws. As to any fact material to our opinion, other than those assumed, we have relied without independent investigation on the above-referenced documents and on the accuracy, as of the date hereof, of the matters therein contained. Based on and subject to the foregoing, and limited in all respects to matters of Delaware law, it is our opinion that: 1. The Trust is a duly created and validly existing business trust in good standing under the laws of the State of Delaware. 3 Entercom Communications Corp. September 30, 1999 Page 3 2. Upon issuance, the Preferred Securities will constitute validly issued and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable beneficial interests in the assets of the Trust. 3, Under the Delaware Act and the terms of the Governing Instrument, each Preferred Security Holder of the Trust, in such capacity, will be entitled to the same limitation of personal liability as that extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; provided, however, we express no opinion with respect to the liability of any Preferred Security Holder who is, was or may become a named Trustee of the Trust. Notwithstanding the foregoing, we note pursuant to Section 11.04 of the Governing Instrument, the Trust may withhold amounts otherwise distributable to a Preferred Security Holder and pay over such amounts to the applicable jurisdictions in accordance with federal, state and local law and any amount withheld will be deemed to have been distributed to such Holder and that, pursuant to the Governing Instrument, Preferred Security Holders may be obligated to make payments or provide indemnity or security under the circumstances set forth therein. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name and reference to our opinion under the heading "LEGAL MATTERS" in the Prospectus forming a part thereof. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. This opinion speaks only as of the date hereof and is based on our understandings and assumptions as to present facts, and on our review of the above-referenced documents and the application of Delaware law as the same exist as of the date hereof, and we undertake no obligation to update or supplement this opinion after the date hereof for the benefit of any person or entity with respect to any facts or circumstances that may hereafter come to our attention or any changes in facts or law that may hereafter occur or take effect. This opinion is intended solely for the benefit of the addressee hereof in connection with the matters contemplated hereby and may not be relied on by any other person or entity or for any other purpose without our prior written consent. Very truly yours, MORRIS, NICHOLS, ARSHT & TUNNELL EX-5.03 10 OPINION OF JOHN C. DONLEVIE 1 EXHIBIT 5.03 [ENTERCOM COMMUNICATIONS CORP. LETTERHEAD] September 30, 1999 Entercom Communications Corp. Entercom Communications Capital Trust 401 City Avenue Bala Cynwyd, Pennsylvania 19004 Re: Entercom Communications Corp. and Entercom Communications Capital Trust Registration Statement on Form S-1; File No. 333-86843 Ladies and Gentlemen: I am the Executive Vice President, Secretary and General Counsel of Entercom Communications Corp., a Pennsylvania corporation (the "Company"), and in connection with the Registration Statement on Form S-1 (File No. 333-86843) of Entercom Communications Capital Trust, a statutory business trust formed under Delaware law (the "Trust"), and the Company filed by the Trust and the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), on September 10, 1999, as amended by Amendment No. 1 filed with the Commission on September 14, 1999 and as amended by Amendment No. 2 filed with the Commission on September 30, 1999 (collectively, the "Registration Statement"), you have requested my opinion with respect to the matters set forth below. The Registration Statement relates to the registration of (i) 3,450,000 __% Convertible Preferred Securities, Term Income Deferrable Equity Securities of the Trust (TIDES) (including 450,000 TIDES to cover over-allotments of TIDES), (ii) $172,500,000 in aggregate principal amount of the __% Convertible Subordinated Debentures due 2014 of the Company (the "Convertible Subordinated Debentures"), (iii) the shares of Class A common stock, par value $.01 per share, of the Company (the "Class A Common Stock") issuable upon the conversion of the TIDES and the Convertible Subordinated Debentures and (iv) the Preferred Securities Guarantee of the Company (the "Guarantee"). The TIDES will be issued pursuant to the Amended and Restated Declaration of Trust of Entercom Communications Capital Trust (the "Trust Agreement") among the Company, 2 Entercom Communications Corp. September 30, 1999 as sponsor, Wilmington Trust Company, as property trustee and Delaware trustee and Joseph M. Field, David J. Field and John C. Donlevie, as administrative trustees. The proceeds from the sale by the Trust of the TIDES will be invested in the Convertible Subordinated Debentures, which will be issued pursuant to an Indenture among the Company, as issuer, and Wilmington Trust Company, as indenture trustee (the "Indenture Trustee"). In my capacity as your counsel in connection with such registration, I am familiar with the proceedings taken and proposed to be taken by the Company in connection with the authorization and issuance of the Convertible Subordinated Debentures and the Guarantee, respectively, and the authorization of the Class A Common Stock issuable upon the conversion of the TIDES and the Convertible Subordinated Debentures and for the purposes of this opinion, have assumed such proceedings will be timely completed in the manner presently proposed. In addition, I have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to my satisfaction of such documents, corporate records and instruments, as I have deemed necessary or appropriate for purposes of this opinion. In my examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, and the conformity to authentic original documents of all documents submitted to me as copies. I am opining herein as to the effect on the subject transaction only of the internal laws of the Commonwealth of Pennsylvania, and I express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or as to any matters of municipal law or the laws of any local agencies within any state. Subject to the foregoing, it is my opinion that: (i) the shares of Class A Common Stock issuable upon conversion of the TIDES and the Convertible Subordinated Debentures have been duly authorized, and when issued upon conversion of the TIDES and the Convertible Subordinated Debentures in accordance with the terms of the Indenture, will be validly issued, fully paid and nonassessable; (ii) the Convertible Subordinated Debentures and the Indenture have been duly authorized by all necessary corporate action of the Company; and (iii) the Guarantee has been duly authorized by all necessary corporate action of the Company. 3 Entercom Communications Corp. September 30, 1999 To the extent that the obligations of the Company under the Indenture may be dependent upon such matters, we assume for purposes of this opinion that the Indenture Trustee is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Indenture Trustee is duly qualified to engage in the activities contemplated by the Indenture; that the Indenture has been duly authorized, executed and delivered by the Indenture Trustee and constitutes the legally valid, binding and enforceable obligation of the Indenture Trustee enforceable against the Indenture Trustee in accordance with its terms; that the Indenture Trustee is in compliance, generally and with respect to acting as a trustee under the Indenture, with all applicable laws and regulations; and that the Indenture Trustee has the requisite organizational and legal power and authority to perform its obligations under the Indenture. I consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to my name contained under the heading "Legal Matters." Very truly yours, /s/ John C. Donlevie ---------------------------------------------- John C. Donlevie, Esq. Executive Vice President, Secretary and General Counsel of Entercom Communications Corp. EX-8.01 11 OPINION OF LATHAM & WATKINS/TAX MATTERS 1 Exhibit 8.01 September 30, 1999 LATHAM & WATKINS ATTORNEYS AT LAW PAUL R. WATKINS (1899 - 1973) 1001 PENNSYLVANIA AVE., N.W. DANA LATHAM (1898 - 1974) SUITE 1300 NEW YORK OFFICE WASHINGTON, D.C. 20004-2505 885 THIRD AVENUE, TELEPHONE (202) 637-2200 SUITE 1000 CHICAGO OFFICE FAX (202) 637-2201 NEW YORK, NEW YORK SEARS TOWER, SUITE 5800 10022-4802 CHICAGO, ILLINOIS 60606 __________ PHONE (212) 906-1200, PHONE (312) 876-7700, FAX 993-9767 FAX 751-4864 HONG KONG OFFICE ORANGE COUNTY OFFICE SUITE 2205A, 22ND FLOOR 650 TOWN CENTER DRIVE, NO. 9 QUEEN'S ROAD CENTRAL SUITE 2000 HONG KONG COSTA MESA, CALIFORNIA PHONE + 852-2522-7886, FAX 2522-7006 92626-1925 PHONE (714) 540-1235, LONDON OFFICE FAX 755-8290 ONE ANGEL COURT LONDON EC2R 7HJ ENGLAND SAN DIEGO OFFICE PHONE + 44-171-374 4444, FAX 374 4460 701 "B" STREET, SUITE 2100 September 30, 1999 SAN DIEGO, CALIFORNIA LOS ANGELES OFFICE 92101-8197 633 WEST FIFTH STREET, SUITE 4000 PHONE (619) 236-1234, LOS ANGELES, CALIFORNIA 90071-2007 FAX 696-7419 PHONE (213) 485-1234, FAX 891-8763 MOSCOW OFFICE SAN FRANCISCO OFFICE ULITSA GASHEKA, 7, 9th Floor 505 MONTGOMERY STREET, MOSCOW 123056, RUSSIA SUITE 1900 PHONE + 7-095 785-1234, FAX 785-1235 SAN FRANCISCO, CALIFORNIA 94111-2562 NEW JERSEY OFFICE PHONE (415) 391-0600, ONE NEWARK CENTER, 16th FLOOR FAX 395-8095 NEWARK, NEW JERSEY 07101-3174 PHONE (973) 639-1234, FAX 639-7298 SILICON VALLEY OFFICE 135 COMMONWEALTH DRIVE MENLO PARK, CALIFORNIA 94025 PHONE (650) 328-4600, FAX 463-2600 SINGAPORE OFFICE 20 CECIL STREET, SUITE 25-02 THE EXCHANGE, SINGAPORE 049705 PHONE + 65-536-1161, FAX 536-1171 TOKYO OFFICE INFINI AKASAKA, 8-7-15, AKASAKA, MINATO-KU TOKYO 107-0052, JAPAN PHONE + 813-3423-3970, FAX 3423-3971
Entercom Communications Corp. Entercom Communications Capital Trust 401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 Re: Entercom Communications Capital Trust Ladies and Gentlemen: We have acted as tax counsel to Entercom Communications Corp., a Pennsylvania corporation ("Entercom"), and Entercom Communications Capital Trust, a statutory business trust organized under the Business Trust Act of the State of Delaware (Chapter 38, Title 12 of the Delaware Code, 12 Del. C. Sec. 3801 et set.) (the "Issuer"), in connection with the issuance by the Issuer of up to 3,450,000 _% convertible preferred securities, term income deferrable equity securities (liquidation amount $50 per preferred security) (the "Securities"), representing undivided beneficial interest in the assets of the Issuer, pursuant to a registration statement on Form S-1 (File No. 333-86843) of Entercom and the Issuer filed by the Issuer and Entercom with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), on September 10, 1999, as amended by Amendment No. 1 filed with the Commission on September 14, 1999 and as amended by Amendment No. 2 filed with the Commission on September 30, 1999 (collectively, the "Registration Statement"). You have requested our opinion concerning the statements in the Registration Statement set forth under the caption "United States Federal Income Tax Consequences." The facts as we understand them and upon which with your permission we rely in rendering the opinion expressed herein, are set forth in the Registration Statement. In addition, we have relied, with your permission, exclusively upon the opinion of Morris, Nichols, Arsht and Tunnell, 2 LATHAM & WATKINS Entercom Communications Corp. Entercom Communications Capital Trust September 30, 1999 Page 2 Delaware counsel for Entercom and the Issuer, dated September 30, 1999, with respect to certain matters of Delaware law. In our capacity as tax counsel to Entercom and the Issuer, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to our satisfaction of such documents, corporate records and other instruments as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures thereon, the legal capacity of natural persons executing such documents and the conformity to authentic original documents of all documents submitted to us as copies. We have reviewed and relied upon the Amended and Restated Declaration of Trust of the Issuer among Entercom, as sponsor, Wilmington Trust Company, as property trustee and Delaware trustee, and Joseph M. Field, David J. Field and John C. Donlevie, as administrative trustees, the Indenture (as defined in the Registration Statement) and such other documents as in our judgment were necessary or appropriate to enable us to render the opinion contained herein. We are opining herein as to the effect on the subject transaction only of the Federal income tax laws of the United States and we express no opinion with respect to the applicability thereto, or the effect thereon, of other Federal laws, the laws of any state or other jurisdiction or as to any matters of municipal law or the laws of any other location agencies within any state. Based upon such facts, assumptions and representations, it is our opinion that: (1) The Issuer will be classified for Federal income tax purposes as a grantor trust and not as an association taxable as a corporation. (2) The statements in the Registration Statement set forth under the caption "Federal Income Tax Consequences" to the extent such statements constitute matters of law, summaries of legal matters or legal conclusions, have been reviewed by us and are accurate in all material respects. No opinion is expressed as to any matter not discussed herein. This opinion is rendered to you as of the date hereof of this letter, and we undertake no obligation to update this opinion subsequent to the date hereof. This opinion is based on various statutory provisions, regulations promulgated thereunder and interpretations thereof by the Internal Revenue Service and courts having jurisdiction over such matters, all of which are subject to change either prospectively or retroactively. Also, any variation or difference in the facts, representations or assumptions recited or referred to hereinabove, could affect the conclusions stated herein. 3 LATHAM & WATKINS Entercom Communications Corp. Entercom Communications Capital Trust September 30, 1999 Page 3 This opinion is furnished to you, and is for your use in connection with the transactions set forth in the Registration Statement. This opinion may not be relied upon by you for any other purposes, or furnished to, quoted to, or relied upon by any other person, firm or corporation, for any purpose, without our prior written consent. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Registration Statement. Very truly yours, Latham & Watkins EX-12.01 12 STATEMENT REGARDING COMPUTATION OF RATIOS 1 Exhibit 12.01 ENTERCOM COMMUNICATIONS CORP. Supporting Schedule of Ratio of Earnings to Fixed Charges (in thousands)
Six Months Year Ended September 30, Ended 1994 1995 1996 1997 1998 June 30, 1999 ------ ----- ------ ------- ------ ------------- Income before income taxes and extraordinary item 21,914 4,805 7,053 177,259 9,892 11,944 ====== ===== ====== ======= ====== ====== Fixed Charges Interest expense 1,648 1,992 5,196 11,388 14,663 6,246 Amortization of debt expense 46 59 133 592 453 143 Rental expense interest factor 240 247 360 660 840 539 ------ ----- ------ ------- ------ ------ Total 1,934 2,298 5,689 12,640 15,956 6,928 ====== ===== ====== ======= ====== ====== Earnings Income before income taxes and extraordinary item 21,914 4,805 7,053 177,259 9,892 11,944 Fixed charges 1,934 2,298 5,689 12,640 15,956 6,928 ------ ----- ------ ------- ------ ------ 23,848 7,103 12,742 189,899 25,848 18,872 ====== ===== ====== ======= ====== ====== Ratio of Earnings to Fixed Charges Earnings 23,848 7,103 12,742 189,899 25,848 18,872 Fixed charges 1,934 2,298 5,689 12,640 15,956 6,928 Ratio 12.33 3.09 2.24 15.02 1.62 2.72
EX-21.01 13 INFORMATION REGARDING SUBSIDIARIES OF REGISTRANT 1 Exhibit 21.01 SUBSIDIARIES OF THE REGISTRANT
NAME UNDER WHICH NAME JURISDICTION OF ORGANIZATION SUBSIDIARY DOES BUSINESS - ---- ---------------------------- ------------------------ ECI License Company, LP Pennsylvania ECI License Company, LP Entercom Investors Corp. Pennsylvania Entercom Investors Corp. Entercom Portland, LLC Oregon Entercom Portland, LLC Entercom Portland License, LLC Oregon Entercom Portland License, LLC Entercom Rochester, Inc. New York Entercom Rochester, Inc. Entercom Buffalo License, LLC Delaware Entercom Buffalo License, LLC Entercom Boston 1 Trust Massachusetts Entercom Boston License, LLC Entercom Boston, LLC Delaware Entercom Boston License, LLC Entercom Boston License, LLC Delaware Entercom Boston License, LLC Entercom Seattle, LLC Delaware Entercom Seattle, LLC Entercom Seattle License, LLC Delaware Entercom Seattle License, LLC Entercom Seattle News License, LLC Delaware Entercom Seattle News License, LLC Entercom Sacramento, LLC Delaware Entercom Sacramento, LLC Entercom Longview, LLC Delaware Entercom Longview, LLC Entercom Longview License, LLC Delaware Entercom Longview License, LLC Entercom Gainesville, LLC Delaware Entercom Gainesville, LLC Entercom Gainesville License, LLC Delaware Entercom Gainesville License, LLC Entercom Kansas City, LLC Delaware Entercom Kansas City, LLC Entercom Kansas City News License, LLC Delaware Entercom Kansas City News, LLC Entercom Micanopy License, LLC Delaware Entercom Micanopy License, LLC Entercom Greensboro License, LLC Delaware Entercom Greensboro License, LLC Entercom Greenville License, LLC Delaware Entercom Greenville License, LLC Entercom Memphis License, LLC Delaware Entercom Memphis License, LLC Entercom Milwaukee License, LLC Delaware Entercom Milwaukee License, LLC Entercom New Orleans License, LLC Delaware Entercom New Orleans License, LLC Entercom Norfolk License, LLC Delaware Entercom Norfolk License, LLC Entercom Scranton Wilkes-Barre Delaware Entercom Scranton Wilkes-Barre License, LLC License, LLC Entercom Communications Capital Delaware Entercom Communications Capital Trust Trust Entercom Radio, LLC Delaware Entercom Radio, LLC Entercom Buffalo, LLC Delaware Entercom Buffalo, LLC Entercom Greensboro, LLC Delaware Entercom Greensboro, LLC Entercom Greenville, LLC Delaware Entercom Greenville, LLC Entercom Memphis, LLC Delaware Entercom Memphis, LLC Entercom Milwaukee, LLC Delaware Entercom Milwaukee, LLC Entercom New Orleans, LLC Delaware Entercom New Orleans, LLC Entercom Scranton Wilkes-Barre, LLC Delaware Entercom Scranton Wilkes-Barre, LLC Entercom Norfolk, LLC Delaware Entercom Norfolk, LLC
EX-23.01 14 CONSENT OF DELOITTE & TOUCHE LLP / PHILADELPHIA 1 Exhibit 23.01 INDEPENDENT AUDITORS' CONSENT To the Board of Directors of Entercom Communications Corp. Bala Cynwyd, Pennsylvania We consent to the use in this Amendment No. 2 to Registration Statement No. 333-86843 of Entercom Communications Corp. of our report dated December 31, 1998 (January 26, 1999 as to Notes 10 and 13) (which expresses an unqualified opinion and includes an explanatory paragraph relating to the restatement described in Note 14), appearing in the Prospectus, which is a part of this Registration Statement, and of our report dated December 31, 1998 (January 26, 1999 as to Notes 10 and 13) related to the financial statement schedule included elsewhere in this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania September 28, 1999 EX-23.02 15 CONSENT OF DELOITTE & TOUCHE LLP / BOSTON 1 EXHIBIT 23.02 INDEPENDENT AUDITORS' CONSENT To the Board of Directors of Entercom Communications Corp. Bala Cynwyd, Pennsylvania We consent to the use in this Amendment No. 2 to Registration Statement No. 333-86843 of Entercom Communications Corp. of our report dated September 18, 1998 (December 11, 1998 as to Note 7), appearing in the Prospectus, which is a part of this Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Boston, Massachusetts September 28, 1999 EX-23.03 16 CONSENT OF ARTHUR ANDERSEN LLP / BALTIMORE 1 [ARTHUR ANDERSEN LLP LETTERHEAD] Exhibit 23.03 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports (and to all references to our Firm) included in or made a part of this Amendment No. 2 to Form S-1 Registration Statement. /S/ Arthur Andersen LLP Baltimore, Maryland, September 28, 1999 EX-25.1 17 FORM T-1 / INDENTURE TRUSTEE 1 Registration No. ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)____ WILMINGTON TRUST COMPANY (Exact name of trustee as specified in its charter) Delaware 51-0055023 (State of incorporation) (I.R.S. employer identification no.) Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 (Address of principal executive offices) Cynthia L. Corliss Vice President and Trust Counsel Wilmington Trust Company Rodney Square North Wilmington, Delaware 19890 (302) 651-8516 (Name, address and telephone number of agent for service) ENTERCOM COMMUNICATIONS CORP. (Exact name of obligor as specified in its charter) Pennsylvania 23-1701044 (State of incorporation) (I.R.S. employer identification no.) 401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 (Address of principal executive offices) (Zip Code) % Convertible Subordinated Debentures due 2014 of Entercom Communications Corp. (Title of the indenture securities) ================================================================================ 2 ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Deposit Insurance Co. State Bank Commissioner Five Penn Center Dover, Delaware Suite #2901 Philadelphia, PA (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each affiliation: Based upon an examination of the books and records of the trustee and upon information furnished by the obligor, the obligor is not an affiliate of the trustee. ITEM 3. LIST OF EXHIBITS. List below all exhibits filed as part of this Statement of Eligibility and Qualification. A. Copy of the Charter of Wilmington Trust Company, which includes the certificate of authority of Wilmington Trust Company to commence business and the authorization of Wilmington Trust Company to exercise corporate trust powers. B. Copy of By-Laws of Wilmington Trust Company. C. Consent of Wilmington Trust Company required by Section 321(b) of Trust Indenture Act. D. Copy of most recent Report of Condition of Wilmington Trust Company. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wilmington Trust Company, a corporation organized and existing under the laws of Delaware, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington and State of Delaware on the 22nd day of September, 1999. WILMINGTON TRUST COMPANY [SEAL] Attest: /s/ Donald G. MacKelcan By: /s/ Norma P. Closs ---------------------------- --------------------------------- Assistant Secretary Name: Norma P. Closs Title: Vice President 2 3 EXHIBIT A AMENDED CHARTER WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON MAY 9, 1987 4 AMENDED CHARTER OR ACT OF INCORPORATION OF WILMINGTON TRUST COMPANY WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act of Incorporation of which company has been from time to time amended and changed by merger agreements pursuant to the corporation law for state banks and trust companies of the State of Delaware, does hereby alter and amend its Charter or Act of Incorporation so that the same as so altered and amended shall in its entirety read as follows: FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY. SECOND: - The location of its principal office in the State of Delaware is at Rodney Square North, in the City of Wilmington, County of New Castle; the name of its resident agent is WILMINGTON TRUST COMPANY whose address is Rodney Square North, in said City. In addition to such principal office, the said corporation maintains and operates branch offices in the City of Newark, New Castle County, Delaware, the Town of Newport, New Castle County, Delaware, at Claymont, New Castle County, Delaware, at Greenville, New Castle County Delaware, and at Milford Cross Roads, New Castle County, Delaware, and shall be empowered to open, maintain and operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in the City of Wilmington, New Castle County, Delaware, and such other branch offices or places of business as may be authorized from time to time by the agency or agencies of the government of the State of Delaware empowered to confer such authority. THIRD: - (a) The nature of the business and the objects and purposes proposed to be transacted, promoted or carried on by this Corporation are to do any or all of the things herein mentioned as fully and to the same extent as natural persons might or could do and in any part of the world, viz.: (1) To sue and be sued, complain and defend in any Court of law or equity and to make and use a common seal, and alter the seal at pleasure, to hold, 5 purchase, convey, mortgage or otherwise deal in real and personal estate and property, and to appoint such officers and agents as the business of the Corporation shall require, to make by-laws not inconsistent with the Constitution or laws of the United States or of this State, to discount bills, notes or other evidences of debt, to receive deposits of money, or securities for money, to buy gold and silver bullion and foreign coins, to buy and sell bills of exchange, and generally to use, exercise and enjoy all the powers, rights, privileges and franchises incident to a corporation which are proper or necessary for the transaction of the business of the Corporation hereby created. (2) To insure titles to real and personal property, or any estate or interests therein, and to guarantee the holder of such property, real or personal, against any claim or claims, adverse to his interest therein, and to prepare and give certificates of title for any lands or premises in the State of Delaware, or elsewhere. (3) To act as factor, agent, broker or attorney in the receipt, collection, custody, investment and management of funds, and the purchase, sale, management and disposal of property of all descriptions, and to prepare and execute all papers which may be necessary or proper in such business. (4) To prepare and draw agreements, contracts, deeds, leases, conveyances, mortgages, bonds and legal papers of every description, and to carry on the business of conveyancing in all its branches. (5) To receive upon deposit for safekeeping money, jewelry, plate, deeds, bonds and any and all other personal property of every sort and kind, from executors, administrators, guardians, public officers, courts, receivers, assignees, trustees, and from all fiduciaries, and from all other persons and individuals, and from all corporations whether state, municipal, corporate or private, and to rent boxes, safes, vaults and other receptacles for such property. (6) To act as agent or otherwise for the purpose of registering, issuing, certificating, countersigning, transferring or underwriting the stock, bonds or other obligations of any corporation, association, state or municipality, and may receive and manage any sinking fund therefor on such terms as may be agreed upon between the two parties, and in like manner may act as Treasurer of any corporation or municipality. (7) To act as Trustee under any deed of trust, mortgage, bond or other 2 6 instrument issued by any state, municipality, body politic, corporation, association or person, either alone or in conjunction with any other person or persons, corporation or corporations. (8) To guarantee the validity, performance or effect of any contract or agreement, and the fidelity of persons holding places of responsibility or trust; to become surety for any person, or persons, for the faithful performance of any trust, office, duty, contract or agreement, either by itself or in conjunction with any other person, or persons, corporation, or corporations, or in like manner become surety upon any bond, recognizance, obligation, judgment, suit, order, or decree to be entered in any court of record within the State of Delaware or elsewhere, or which may now or hereafter be required by any law, judge, officer or court in the State of Delaware or elsewhere. (9) To act by any and every method of appointment as trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity in the receiving, holding, managing, and disposing of any and all estates and property, real, personal or mixed, and to be appointed as such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian or bailee by any persons, corporations, court, officer, or authority, in the State of Delaware or elsewhere; and whenever this Corporation is so appointed by any person, corporation, court, officer or authority such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity, it shall not be required to give bond with surety, but its capital stock shall be taken and held as security for the performance of the duties devolving upon it by such appointment. (10) And for its care, management and trouble, and the exercise of any of its powers hereby given, or for the performance of any of the duties which it may undertake or be called upon to perform, or for the assumption of any responsibility the said Corporation may be entitled to receive a proper compensation. (11) To purchase, receive, hold and own bonds, mortgages, debentures, shares of capital stock, and other securities, obligations, contracts and evidences of indebtedness, of any private, public or municipal corporation within and without the State of Delaware, or of the Government of the United States, or of any state, territory, colony, or possession thereof, or of any foreign government or country; to receive, collect, receipt for, and dispose of 3 7 interest, dividends and income upon and from any of the bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property held and owned by it, and to exercise in respect of all such bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property, any and all the rights, powers and privileges of individual owners thereof, including the right to vote thereon; to invest and deal in and with any of the moneys of the Corporation upon such securities and in such manner as it may think fit and proper, and from time to time to vary or realize such investments; to issue bonds and secure the same by pledges or deeds of trust or mortgages of or upon the whole or any part of the property held or owned by the Corporation, and to sell and pledge such bonds, as and when the Board of Directors shall determine, and in the promotion of its said corporate business of investment and to the extent authorized by law, to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and convey real and personal property of any name and nature and any estate or interest therein. (b) In furtherance of, and not in limitation, of the powers conferred by the laws of the State of Delaware, it is hereby expressly provided that the said Corporation shall also have the following powers: (1) To do any or all of the things herein set forth, to the same extent as natural persons might or could do, and in any part of the world. (2) To acquire the good will, rights, property and franchises and to undertake the whole or any part of the assets and liabilities of any person, firm, association or corporation, and to pay for the same in cash, stock of this Corporation, bonds or otherwise; to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole or any part of any business so acquired, and to exercise all the powers necessary or convenient in and about the conduct and management of such business. (3) To take, hold, own, deal in, mortgage or otherwise lien, and to lease, sell, exchange, transfer, or in any manner whatever dispose of property, real, personal or mixed, wherever situated. (4) To enter into, make, perform and carry out contracts of every kind with any person, firm, association or corporation, and, without limit as to amount, to draw, make, accept, endorse, discount, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or 4 8 transferable instruments. (5) To have one or more offices, to carry on all or any of its operations and businesses, without restriction to the same extent as natural persons might or could do, to purchase or otherwise acquire, to hold, own, to mortgage, sell, convey or otherwise dispose of, real and personal property, of every class and description, in any State, District, Territory or Colony of the United States, and in any foreign country or place. (6) It is the intention that the objects, purposes and powers specified and clauses contained in this paragraph shall (except where otherwise expressed in said paragraph) be nowise limited or restricted by reference to or inference from the terms of any other clause of this or any other paragraph in this charter, but that the objects, purposes and powers specified in each of the clauses of this paragraph shall be regarded as independent objects, purposes and powers. FOURTH: - (a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is forty-one million (41,000,000) shares, consisting of: (1) One million (1,000,000) shares of Preferred stock, par value $10.00 per share (hereinafter referred to as "Preferred Stock"); and (2) Forty million (40,000,000) shares of Common Stock, par value $1.00 per share (hereinafter referred to as "Common Stock"). (b) Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors each of said series to be distinctly designated. All shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers and the preferences and relative, participating, optional and other special rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and, subject to the provisions of subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers and the designations, preferences and relative, optional and other special rights, and the qualifications, limitations and restrictions of such series, including, but without limiting the generality of the 5 9 foregoing, the following: (1) The distinctive designation of, and the number of shares of Preferred Stock which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) The rate and times at which, and the terms and conditions on which, dividends, if any, on Preferred Stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other class of stock and whether such dividends shall be cumulative or non-cumulative; (3) The right, if any, of the holders of Preferred Stock of such series to convert the same into or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (4) Whether or not Preferred Stock of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock of such series may be redeemed. (5) The rights, if any, of the holders of Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation. (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such series; and (7) The voting powers, if any, of the holders of such series of Preferred Stock which may, without limiting the generality of the foregoing include the right, voting as a series or by itself or together with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such circumstances and on such conditions as the Board of Directors may determine. (c) (1) After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of section (b) of this Article 6 10 FOURTH), if any, shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of section (b) of this Article FOURTH), and subject further to any conditions which may be fixed in accordance with the provisions of section (b) of this Article FOURTH, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amount, if any, (fixed in accordance with the provisions of section (b) of this Article FOURTH), to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the Corporation, the holders of the Common Stock shall be entitled to receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. (3) Except as may otherwise be required by law or by the provisions of such resolution or resolutions as may be adopted by the Board of Directors pursuant to section (b) of this Article FOURTH, each holder of Common Stock shall have one vote in respect of each share of Common Stock held on all matters voted upon by the stockholders. (d) No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, whether such holders or others, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. (e) The relative powers, preferences and rights of each series of Preferred Stock in relation to the relative powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of 7 11 Directors in the resolution or resolutions adopted pursuant to authority granted in section (b) of this Article FOURTH and the consent, by class or series vote or otherwise, of the holders of such of the series of Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in the resolution or resolutions as to any series of Preferred Stock adopted pursuant to section (b) of this Article FOURTH that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. (f) Subject to the provisions of section (e), shares of any series of Preferred Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (g) Shares of Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (h) The authorized amount of shares of Common Stock and of Preferred Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon. FIFTH: - (a) The business and affairs of the Corporation shall be conducted and managed by a Board of Directors. The number of directors constituting the entire Board shall be not less than five nor more than twenty-five as fixed from time to time by vote of a majority of the whole Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the whole Board shall be twenty-four until otherwise fixed by a majority of the whole Board. (b) The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. At the annual meeting of stockholders in 1982, directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of the second class 8 12 shall be elected to hold office for a term expiring at the second succeeding annual meeting and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next annual election of directors. At such election, the stockholders shall elect a successor to such director to hold office until the next election of the class for which such director shall have been chosen and until his successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. (c) Notwithstanding any other provisions of this Charter or Act of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Charter or Act of Incorporation or the ByLaws of the Corporation), any director or the entire Board of Directors of the Corporation may be removed at any time without cause, but only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose. (d) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Such nominations shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Notice of nominations which are proposed by the Board of Directors shall be given by the Chairman on behalf of the Board. (e) Each notice under subsection (d) shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of such nominee and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. (f) The Chairman of the meeting may, if the facts warrant, determine and declare to 9 13 the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. (g) No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. SIXTH: - The Directors shall choose such officers, agents and servants as may be provided in the By-Laws as they may from time to time find necessary or proper. SEVENTH: - The Corporation hereby created is hereby given the same powers, rights and privileges as may be conferred upon corporations organized under the Act entitled "An Act Providing a General Corporation Law", approved March 10, 1899, as from time to time amended. EIGHTH: - This Act shall be deemed and taken to be a private Act. NINTH: - This Corporation is to have perpetual existence. TENTH: - The Board of Directors, by resolution passed by a majority of the whole Board, may designate any of their number to constitute an Executive Committee, which Committee, to the extent provided in said resolution, or in the By-Laws of the Company, shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. ELEVENTH: - The private property of the stockholders shall not be liable for the payment of corporate debts to any extent whatever. TWELFTH: - The Corporation may transact business in any part of the world. THIRTEENTH: - The Board of Directors of the Corporation is expressly authorized to make, alter or repeal the By-Laws of the Corporation by a vote of the majority of the entire Board. The stockholders may make, alter or repeal any By-Law whether or not adopted by them, provided however, that any such additional By-Laws, alterations or repeal may be adopted only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as 10 14 one class). FOURTEENTH: - Meetings of the Directors may be held outside of the State of Delaware at such places as may be from time to time designated by the Board, and the Directors may keep the books of the Company outside of the State of Delaware at such places as may be from time to time designated by them. FIFTEENTH: - (a) (1) In addition to any affirmative vote required by law, and except as otherwise expressly provided in sections (b) and (c) of this Article FIFTEENTH: (A) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with or into (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder), which, after such merger or consolidation, would be an Affiliate (as hereinafter defined) of an Interested Stockholder, or (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate fair market value of $1,000,000 or more, or (C) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of related transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $1,000,000 or more, or (D) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation, or (E) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder, or any Affiliate of any Interested Stockholder, 11 15 shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purpose of this Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) The term "business combination" as used in this Article FIFTEENTH shall mean any transaction which is referred to in any one or more of clauses (A) through (E) of paragraph 1 of the section (a). (b) The provisions of section (a) of this Article FIFTEENTH shall not be applicable to any particular business combination and such business combination shall require only such affirmative vote as is required by law and any other provisions of the Charter or Act of Incorporation or By-Laws if such business combination has been approved by a majority of the whole Board. (c) For the purposes of this Article FIFTEENTH: (1) A "person" shall mean any individual, firm, corporation or other entity. (2) "Interested Stockholder" shall mean, in respect of any business combination, any person (other than the Corporation or any Subsidiary) who or which as of the record date for the determination of stockholders entitled to notice of and to vote on such business combination, or immediately prior to the consummation of any such transaction: (A) is the beneficial owner, directly or indirectly, of more than 10% of the Voting Shares, or (B) is an Affiliate of the Corporation and at any time within two years prior thereto was the beneficial owner, directly or indirectly, of not less than 10% of the then outstanding voting Shares, or (C) is an assignee of or has otherwise succeeded in any share of capital stock of the Corporation which were at any time within two years prior thereto beneficially owned by any Interested Stockholder, and such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. 12 16 (3) A person shall be the "beneficial owner" of any Voting Shares: (A) which such person or any of its Affiliates and Associates (as hereafter defined) beneficially own, directly or indirectly, or (B) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding, or (C) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation. (4) The outstanding Voting Shares shall include shares deemed owned through application of paragraph (3) above but shall not include any other Voting Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options or otherwise. (5) "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981. (6) "Subsidiary" shall mean any corporation of which a majority of any class of equity security (as defined in Rule 3a11-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981) is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Investment Stockholder set forth in paragraph (2) of this section (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (d) majority of the directors shall have the power and duty to determine for the purposes of this Article FIFTEENTH on the basis of information known to them, (1) the number of Voting Shares beneficially owned by any person (2) whether a person is an Affiliate or Associate of another, (3) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in paragraph (3) of section (c), or (4) whether the assets subject to any business combination or the consideration received for the issuance or 13 17 transfer of securities by the Corporation, or any Subsidiary has an aggregate fair market value of $1,000,000 or more. (e) Nothing contained in this Article FIFTEENTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. SIXTEENTH: Notwithstanding any other provision of this Charter or Act of Incorporation or the By-Laws of the Corporation (and in addition to any other vote that may be required by law, this Charter or Act of Incorporation by the By-Laws), the affirmative vote of the holders of at least two-thirds of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter or Act of Incorporation. SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Laws as the same exists or may hereafter be amended. (b) Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a Director of the Corporation existing hereunder with respect to any act or omission occurring prior to the time of such repeal or modification." 14 18 EXHIBIT B BY-LAWS WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON JANUARY 16, 1997 19 BY-LAWS OF WILMINGTON TRUST COMPANY ARTICLE I STOCKHOLDERS' MEETINGS Section 1. The Annual Meeting of Stockholders shall be held on the third Thursday in April each year at the principal office at the Company or at such other date, time, or place as may be designated by resolution by the Board of Directors. Section 2. Special meetings of all stockholders may be called at any time by the Board of Directors, the Chairman of the Board or the President. Section 3. Notice of all meetings of the stockholders shall be given by mailing to each stockholder at least ten (10) days before said meeting, at his last known address, a written or printed notice fixing the time and place of such meeting. Section 4. A majority in the amount of the capital stock of the Company issued and outstanding on the record date, as herein determined, shall constitute a quorum at all meetings of stockholders for the transaction of any business, but the holders of a small number of shares may adjourn, from time to time, without further notice, until a quorum is secured. At each annual or special meeting of stockholders, each stockholder shall be entitled to one vote, either in person or by proxy, for each share of stock registered in the stockholder's name on the books of the Company on the record date for any such meeting as determined herein. ARTICLE II DIRECTORS Section 1. The number and classification of the Board of Directors shall be as set forth in the Charter of the Bank. Section 2. No person who has attained the age of seventy-two (72) years shall be nominated for election to the Board of Directors of the Company, provided, however, that this limitation shall not apply to any person who was serving as director of the Company on September 16, 1971. Section 3. The class of Directors so elected shall hold office for three years or until their successors are elected and qualified. Section 4. The affairs and business of the Company shall be managed and conducted by the Board of Directors. 20 Section 5. The Board of Directors shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Board of Directors or the President. Section 6. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board of Directors or by the President, and shall be called upon the written request of a majority of the directors. Section 7. A majority of the directors elected and qualified shall be necessary to constitute a quorum for the transaction of business at any meeting of the Board of Directors. Section 8. Written notice shall be sent by mail to each director of any special meeting of the Board of Directors, and of any change in the time or place of any regular meeting, stating the time and place of such meeting, which shall be mailed not less than two days before the time of holding such meeting. Section 9. In the event of the death, resignation, removal, inability to act, or disqualification of any director, the Board of Directors, although less than a quorum, shall have the right to elect the successor who shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, and until such director's successor shall have been duly elected and qualified. Section 10. The Board of Directors at its first meeting after its election by the stockholders shall appoint an Executive Committee, a Trust Committee, an Audit Committee and a Compensation Committee, and shall elect from its own members a Chairman of the Board of Directors and a President who may be the same person. The Board of Directors shall also elect at such meeting a Secretary and a Treasurer, who may be the same person, may appoint at any time such other committees and elect or appoint such other officers as it may deem advisable. The Board of Directors may also elect at such meeting one or more Associate Directors. Section 11. The Board of Directors may at any time remove, with or without cause, any member of any Committee appointed by it or any associate director or officer elected by it and may appoint or elect his successor. Section 12. The Board of Directors may designate an officer to be in charge of such of the departments or divisions of the Company as it may deem advisable. 2 21 ARTICLE III COMMITTEES Section 1. Executive Committee (A) The Executive Committee shall be composed of not more than nine members who shall be selected by the Board of Directors from its own members and who shall hold office during the pleasure of the Board. (B) The Executive Committee shall have all the powers of the Board of Directors when it is not in session to transact all business for and in behalf of the Company that may be brought before it. (C) The Executive Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Executive Committee or at the call of the Chairman of the Board of Directors. The majority of its members shall be necessary to constitute a quorum for the transaction of business. Special meetings of the Executive Committee may be held at any time when a quorum is present. (D) Minutes of each meeting of the Executive Committee shall be kept and submitted to the Board of Directors at its next meeting. (E) The Executive Committee shall advise and superintend all investments that may be made of the funds of the Company, and shall direct the disposal of the same, in accordance with such rules and regulations as the Board of Directors from time to time make. (F) In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Company by its directors and officers as contemplated by these By-Laws any two available members of the Executive Committee as constituted immediately prior to such disaster shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Company in accordance with the provisions of Article III of these By-Laws; and if less than three members of the Trust Committee is constituted immediately prior to such disaster shall be available for the transaction of its business, such Executive Committee shall also be empowered to exercise all of the powers reserved to the Trust Committee under Article III Section 2 hereof. In the event of the unavailability, at such time, of a minimum of two members of such Executive Committee, any three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Company in accordance with the foregoing provisions of this Section. This By-Law shall be subject to implementation by Resolutions of the Board of Directors presently existing or hereafter passed from time to time 3 22 for that purpose, and any provisions of these By-Laws (other than this Section) and any resolutions which are contrary to the provisions of this Section or to the provisions of any such implementary Resolutions shall be suspended during such a disaster period until it shall be determined by any interim Executive Committee acting under this section that it shall be to the advantage of the Company to resume the conduct and management of its affairs and business under all of the other provisions of these By-Laws. Section 2. Trust Committee (A) The Trust Committee shall be composed of not more than thirteen members who shall be selected by the Board of Directors, a majority of whom shall be members of the Board of Directors and who shall hold office during the pleasure of the Board. (B) The Trust Committee shall have general supervision over the Trust Department and the investment of trust funds, in all matters, however, being subject to the approval of the Board of Directors. (C) The Trust Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members or at the call of its chairman. A majority of its members shall be necessary to constitute a quorum for the transaction of business. (D) Minutes of each meeting of the Trust Committee shall be kept and promptly submitted to the Board of Directors. (E) The Trust Committee shall have the power to appoint Committees and/or designate officers or employees of the Company to whom supervision over the investment of trust funds may be delegated when the Trust Committee is not in session. Section 3. Audit Committee (A) The Audit Committee shall be composed of five members who shall be selected by the Board of Directors from its own members, none of whom shall be an officer of the Company, and shall hold office at the pleasure of the Board. (B) The Audit Committee shall have general supervision over the Audit Division in all matters however subject to the approval of the Board of Directors; it shall consider all matters brought to its attention by the officer in charge of the Audit Division, review all reports of examination of the Company made by any governmental agency or such independent auditor employed for that purpose, and make such recommendations to the Board of Directors with respect thereto or with respect to any other matters pertaining to auditing the 4 23 Company as it shall deem desirable. (C) The Audit Committee shall meet whenever and wherever the majority of its members shall deem it to be proper for the transaction of its business, and a majority of its Committee shall constitute a quorum. Section 4. Compensation Committee (A) The Compensation Committee shall be composed of not more than five (5) members who shall be selected by the Board of Directors from its own members who are not officers of the Company and who shall hold office during the pleasure of the Board. (B) The Compensation Committee shall in general advise upon all matters of policy concerning the Company brought to its attention by the management and from time to time review the management of the Company, major organizational matters, including salaries and employee benefits and specifically shall administer the Executive Incentive Compensation Plan. (C) Meetings of the Compensation Committee may be called at any time by the Chairman of the Compensation Committee, the Chairman of the Board of Directors, or the President of the Company. Section 5. Associate Directors (A) Any person who has served as a director may be elected by the Board of Directors as an associate director, to serve during the pleasure of the Board. (B) An associate director shall be entitled to attend all directors meetings and participate in the discussion of all matters brought to the Board, with the exception that he would have no right to vote. An associate director will be eligible for appointment to Committees of the Company, with the exception of the Executive Committee, Audit Committee and Compensation Committee, which must be comprised solely of active directors. Section 6. Absence or Disqualification of Any Member of a Committee (A) In the absence or disqualification of any member of any Committee created under Article III of the By-Laws of this Company, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. 5 24 ARTICLE IV OFFICERS Section 1. The Chairman of the Board of Directors shall preside at all meetings of the Board and shall have such further authority and powers and shall perform such duties as the Board of Directors may from time to time confer and direct. He shall also exercise such powers and perform such duties as may from time to time be agreed upon between himself and the President of the Company. Section 2. The Vice Chairman of the Board. The Vice Chairman of the Board of Directors shall preside at all meetings of the Board of Directors at which the Chairman of the Board shall not be present and shall have such further authority and powers and shall perform such duties as the Board of Directors or the Chairman of the Board may from time to time confer and direct. Section 3. The President shall have the powers and duties pertaining to the office of the President conferred or imposed upon him by statute or assigned to him by the Board of Directors. In the absence of the Chairman of the Board the President shall have the powers and duties of the Chairman of the Board. Section 4. The Chairman of the Board of Directors or the President as designated by the Board of Directors, shall carry into effect all legal directions of the Executive Committee and of the Board of Directors, and shall at all times exercise general supervision over the interest, affairs and operations of the Company and perform all duties incident to his office. Section 5. There may be one or more Vice Presidents, however denominated by the Board of Directors, who may at any time perform all the duties of the Chairman of the Board of Directors and/or the President and such other powers and duties as may from time to time be assigned to them by the Board of Directors, the Executive Committee, the Chairman of the Board or the President and by the officer in charge of the department or division to which they are assigned. Section 6. The Secretary shall attend to the giving of notice of meetings of the stockholders and the Board of Directors, as well as the Committees thereof, to the keeping of accurate minutes of all such meetings and to recording the same in the minute books of the Company. In addition to the other notice requirements of these By-Laws and as may be practicable under the circumstances, all such notices shall be in writing and mailed well in advance of the scheduled date of any other meeting. He shall have custody of the corporate seal and shall affix the same to any documents requiring such corporate seal and to attest the same. 6 25 Section 7. The Treasurer shall have general supervision over all assets and liabilities of the Company. He shall be custodian of and responsible for all monies, funds and valuables of the Company and for the keeping of proper records of the evidence of property or indebtedness and of all the transactions of the Company. He shall have general supervision of the expenditures of the Company and shall report to the Board of Directors at each regular meeting of the condition of the Company, and perform such other duties as may be assigned to him from time to time by the Board of Directors of the Executive Committee. Section 8. There may be a Controller who shall exercise general supervision over the internal operations of the Company, including accounting, and shall render to the Board of Directors at appropriate times a report relating to the general condition and internal operations of the Company. There may be one or more subordinate accounting or controller officers however denominated, who may perform the duties of the Controller and such duties as may be prescribed by the Controller. Section 9. The officer designated by the Board of Directors to be in charge of the Audit Division of the Company with such title as the Board of Directors shall prescribe, shall report to and be directly responsible only to the Board of Directors. There shall be an Auditor and there may be one or more Audit Officers, however denominated, who may perform all the duties of the Auditor and such duties as may be prescribed by the officer in charge of the Audit Division. Section 10. There may be one or more officers, subordinate in rank to all Vice Presidents with such functional titles as shall be determined from time to time by the Board of Directors, who shall ex officio hold the office Assistant Secretary of this Company and who may perform such duties as may be prescribed by the officer in charge of the department or division to whom they are assigned. Section 11. The powers and duties of all other officers of the Company shall be those usually pertaining to their respective offices, subject to the direction of the Board of Directors, the Executive Committee, Chairman of the Board of Directors or the President and the officer in charge of the department or division to which they are assigned. ARTICLE V STOCK AND STOCK CERTIFICATES Section 1. Shares of stock shall be transferrable on the books of the Company and a 7 26 transfer book shall be kept in which all transfers of stock shall be recorded. Section 2. Certificates of stock shall bear the signature of the President or any Vice President, however denominated by the Board of Directors and countersigned by the Secretary or Treasurer or an Assistant Secretary, and the seal of the corporation shall be engraved thereon. Each certificate shall recite that the stock represented thereby is transferrable only upon the books of the Company by the holder thereof or his attorney, upon surrender of the certificate properly endorsed. Any certificate of stock surrendered to the Company shall be cancelled at the time of transfer, and before a new certificate or certificates shall be issued in lieu thereof. Duplicate certificates of stock shall be issued only upon giving such security as may be satisfactory to the Board of Directors or the Executive Committee. Section 3. The Board of Directors of the Company is authorized to fix in advance a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting of stockholders and any adjournment thereof, or entitled to receive payment of any dividend, or to any allotment or rights, or to exercise any rights in respect of any change, conversion or exchange of capital stock, or in connection with obtaining the consent of stockholders for any purpose, which record date shall not be more than 60 nor less than 10 days proceeding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent. ARTICLE VI SEAL Section 1. The corporate seal of the Company shall be in the following form: Between two concentric circles the words "Wilmington Trust Company" within the inner circle the words "Wilmington,Delaware." ARTICLE VII FISCAL YEAR Section 1. The fiscal year of the Company shall be the calendar year. 8 27 ARTICLE VIII EXECUTION OF INSTRUMENTS OF THE COMPANY Section 1. The Chairman of the Board, the President or any Vice President, however denominated by the Board of Directors, shall have full power and authority to enter into, make, sign, execute, acknowledge and/or deliver and the Secretary or any Assistant Secretary shall have full power and authority to attest and affix the corporate seal of the Company to any and all deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes, mortgages and all other instruments incident to the business of this Company or in acting as executor, administrator, guardian, trustee, agent or in any other fiduciary or representative capacity by any and every method of appointment or by whatever person, corporation, court officer or authority in the State of Delaware, or elsewhere, without any specific authority, ratification, approval or confirmation by the Board of Directors or the Executive Committee, and any and all such instruments shall have the same force and validity as though expressly authorized by the Board of Directors and/or the Executive Committee. ARTICLE IX COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES Section 1. Directors and associate directors of the Company, other than salaried officers of the Company, shall be paid such reasonable honoraria or fees for attending meetings of the Board of Directors as the Board of Directors may from time to time determine. Directors and associate directors who serve as members of committees, other than salaried employees of the Company, shall be paid such reasonable honoraria or fees for services as members of committees as the Board of Directors shall from time to time determine and directors and associate directors may be employed by the Company for such special services as the Board of Directors may from time to time determine and shall be paid for such special services so performed reasonable compensation as may be determined by the Board of Directors. ARTICLE X INDEMNIFICATION Section 1. (A) The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was 9 28 serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The Corporation shall indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the Corporation. (B) The Corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a Director or officer in his capacity as a Director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Director or officer to repay all amounts advanced if it should be ultimately determined that the Director or officer is not entitled to be indemnified under this Article or otherwise. (C) If a claim for indemnification or payment of expenses, under this Article X is not paid in full within ninety days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification of payment of expenses under applicable law. (D) The rights conferred on any person by this Article X shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Charter or Act of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested Directors or otherwise. (E) Any repeal or modification of the foregoing provisions of this Article X shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE XI AMENDMENTS TO THE BY-LAWS Section 1. These By-Laws may be altered, amended or repealed, in whole or in part, and any new By-Law or By-Laws adopted at any regular or special meeting of the Board of Directors by a vote of the majority of all the members of the Board of Directors then in office. 10 29 EXHIBIT C SECTION 321(b) CONSENT Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended, Wilmington Trust Company hereby consents that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. WILMINGTON TRUST COMPANY Dated: September 22, 1999 By: /s/ Norma P. Closs --------------------------------- Name: Norma P. Closs Title: Vice President 30 EXHIBIT D NOTICE This form is intended to assist state nonmember banks and savings banks with state publication requirements. It has not been approved by any state banking authorities. Refer to your appropriate state banking authorities for your state publication requirements. R E P O R T O F C O N D I T I O N Consolidating domestic subsidiaries of the WILMINGTON TRUST COMPANY of WILMINGTON - ------------------------------------ --------------- Name of Bank City in the State of DELAWARE , at the close of business on June 30, 1999. --------
ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coins .................. 207,947 Interest-bearing balances ............................................ 0 Held-to-maturity securities ............................................... 37,680 Available-for-sale securities ............................................. 1,598,933 Federal funds sold and securities purchased under agreements to resell .... 180,366 Loans and lease financing receivables: Loans and leases, net of unearned income ............................. 4,237,557 LESS: Allowance for loan and lease losses ........................... 70,233 LESS: Allocated transfer risk reserve ............................... 0 Loans and leases, net of unearned income, allowance, and reserve .......... 4,167,324 Assets held in trading accounts ........................................... 0 Premises and fixed assets (including capitalized leases) .................. 141,415 Other real estate owned ................................................... 922 Investments in unconsolidated subsidiaries and associated companies ....... 1,227 Customers' liability to this bank on acceptances outstanding .............. 0 Intangible assets ......................................................... 5,179 Other assets .............................................................. 104,101 Total assets .............................................................. 6,445 ,094
CONTINUED ON NEXT PAGE 31 LIABILITIES Deposits: In domestic offices ...................................................... 4,574,509 Noninterest-bearing ................................................. 992,436 Interest-bearing .................................................... 3,582,073 Federal funds purchased and Securities sold under agreements to repurchase 344,719 Demand notes issued to the U.S. Treasury ................................. 83,802 Trading liabilities (from Schedule RC-D) ................................. 0 Other borrowed money: .................................................... /////// With original maturity of one year or less .......................... 860,000 With original maturity of more than one year ........................ 43,000 Bank's liability on acceptances executed and outstanding ................. 0 Subordinated notes and debentures ........................................ 0 Other liabilities (from Schedule RC-G) ................................... 80,279 Total liabilities ........................................................ 5,986,309 EQUITY CAPITAL Perpetual preferred stock and related surplus ............................ 0 Common Stock ............................................................. 500 Surplus (exclude all surplus related to preferred stock) ................. 62,118 Undivided profits and capital reserves ................................... 412,409 Net unrealized holding gains (losses) on available-for-sale securities ... (16,242) Total equity capital ..................................................... 458,785 Total liabilities, limited-life preferred stock, and equity capital ...... 6,445,094
2 EX-25.2 18 FORM T-1 / PROPERTY TRUSTEE 1 Registration No. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) WILMINGTON TRUST COMPANY (Exact name of trustee as specified in its charter) Delaware 51-0055023 (State of incorporation) (I.R.S. employer identification no.) Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 (Address of principal executive offices) Cynthia L. Corliss Vice President and Trust Counsel Wilmington Trust Company Rodney Square North Wilmington, Delaware 19890 (302) 651-8516 (Name, address and telephone number of agent for service) ENTERCOM COMMUNICATIONS CORP. ENTERCOM COMMUNICATIONS CAPITAL TRUST I (Exact name of obligor as specified in its charter) Pennsylvania 23-1701044 Delaware To be applied For (State of incorporation) (I.R.S. employer identification no.) 401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 (Address of principal executive offices) (Zip Code) % Convertible Preferred Securities, Term Income Deferrable Equity Securities (TIDES) (Title of the indenture securities) 2 ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Deposit Insurance Co. State Bank Commissioner Five Penn Center Dover, Delaware Suite #2901 Philadelphia, PA (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each affiliation: Based upon an examination of the books and records of the trustee and upon information furnished by the obligor, the obligor is not an affiliate of the trustee. ITEM 3. LIST OF EXHIBITS. List below all exhibits filed as part of this Statement of Eligibility and Qualification. A. Copy of the Charter of Wilmington Trust Company, which includes the certificate of authority of Wilmington Trust Company to commence business and the authorization of Wilmington Trust Company to exercise corporate trust powers. B. Copy of By-Laws of Wilmington Trust Company. C. Consent of Wilmington Trust Company required by Section 321(b) of Trust Indenture Act. D. Copy of most recent Report of Condition of Wilmington Trust Company. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wilmington Trust Company, a corporation organized and existing under the laws of Delaware, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington and State of Delaware on the 22nd day of September, 1999. WILMINGTON TRUST COMPANY [SEAL] Attest: /s/ Donald G. MacKelcan By: /s/ Norma P. Closs Assistant Secretary Name: Norma P. Closs Title: Vice President 2 3 EXHIBIT A AMENDED CHARTER WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON MAY 9, 1987 3 4 AMENDED CHARTER OR ACT OF INCORPORATION OF WILMINGTON TRUST COMPANY WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act of Incorporation of which company has been from time to time amended and changed by merger agreements pursuant to the corporation law for state banks and trust companies of the State of Delaware, does hereby alter and amend its Charter or Act of Incorporation so that the same as so altered and amended shall in its entirety read as follows: FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY. SECOND: - The location of its principal office in the State of Delaware is at Rodney Square North, in the City of Wilmington, County of New Castle; the name of its resident agent is WILMINGTON TRUST COMPANY whose address is Rodney Square North, in said City. In addition to such principal office, the said corporation maintains and operates branch offices in the City of Newark, New Castle County, Delaware, the Town of Newport, New Castle County, Delaware, at Claymont, New Castle County, Delaware, at Greenville, New Castle County Delaware, and at Milford Cross Roads, New Castle County, Delaware, and shall be empowered to open, maintain and operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in the City of Wilmington, New Castle County, Delaware, and such other branch offices or places of business as may be authorized from time to time by the agency or agencies of the government of the State of Delaware empowered to confer such authority. THIRD: - (a) The nature of the business and the objects and purposes proposed to be transacted, promoted or carried on by this Corporation are to do any or all of the things herein mentioned as fully and to the same extent as natural persons might or could do and in any part of the world, viz.: (1) To sue and be sued, complain and defend in any Court of law or equity and to make and use a common seal, and alter the seal at pleasure, to hold, 5 purchase, convey, mortgage or otherwise deal in real and personal estate and property, and to appoint such officers and agents as the business of the Corporation shall require, to make by-laws not inconsistent with the Constitution or laws of the United States or of this State, to discount bills, notes or other evidences of debt, to receive deposits of money, or securities for money, to buy gold and silver bullion and foreign coins, to buy and sell bills of exchange, and generally to use, exercise and enjoy all the powers, rights, privileges and franchises incident to a corporation which are proper or necessary for the transaction of the business of the Corporation hereby created. (2) To insure titles to real and personal property, or any estate or interests therein, and to guarantee the holder of such property, real or personal, against any claim or claims, adverse to his interest therein, and to prepare and give certificates of title for any lands or premises in the State of Delaware, or elsewhere. (3) To act as factor, agent, broker or attorney in the receipt, collection, custody, investment and management of funds, and the purchase, sale, management and disposal of property of all descriptions, and to prepare and execute all papers which may be necessary or proper in such business. (4) To prepare and draw agreements, contracts, deeds, leases, conveyances, mortgages, bonds and legal papers of every description, and to carry on the business of conveyancing in all its branches. (5) To receive upon deposit for safekeeping money, jewelry, plate, deeds, bonds and any and all other personal property of every sort and kind, from executors, administrators, guardians, public officers, courts, receivers, assignees, trustees, and from all fiduciaries, and from all other persons and individuals, and from all corporations whether state, municipal, corporate or private, and to rent boxes, safes, vaults and other receptacles for such property. (6) To act as agent or otherwise for the purpose of registering, issuing, certificating, countersigning, transferring or underwriting the stock, bonds or other obligations of any corporation, association, state or municipality, and may receive and manage any sinking fund therefor on such terms as may be agreed upon between the two parties, and in like manner may act as Treasurer of any corporation or municipality. (7) To act as Trustee under any deed of trust, mortgage, bond or other 2 6 instrument issued by any state, municipality, body politic, corporation, association or person, either alone or in conjunction with any other person or persons, corporation or corporations. (8) To guarantee the validity, performance or effect of any contract or agreement, and the fidelity of persons holding places of responsibility or trust; to become surety for any person, or persons, for the faithful performance of any trust, office, duty, contract or agreement, either by itself or in conjunction with any other person, or persons, corporation, or corporations, or in like manner become surety upon any bond, recognizance, obligation, judgment, suit, order, or decree to be entered in any court of record within the State of Delaware or elsewhere, or which may now or hereafter be required by any law, judge, officer or court in the State of Delaware or elsewhere. (9) To act by any and every method of appointment as trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity in the receiving, holding, managing, and disposing of any and all estates and property, real, personal or mixed, and to be appointed as such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian or bailee by any persons, corporations, court, officer, or authority, in the State of Delaware or elsewhere; and whenever this Corporation is so appointed by any person, corporation, court, officer or authority such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity, it shall not be required to give bond with surety, but its capital stock shall be taken and held as security for the performance of the duties devolving upon it by such appointment. (10) And for its care, management and trouble, and the exercise of any of its powers hereby given, or for the performance of any of the duties which it may undertake or be called upon to perform, or for the assumption of any responsibility the said Corporation may be entitled to receive a proper compensation. (11) To purchase, receive, hold and own bonds, mortgages, debentures, shares of capital stock, and other securities, obligations, contracts and evidences of indebtedness, of any private, public or municipal corporation within and without the State of Delaware, or of the Government of the United States, or of any state, territory, colony, or possession thereof, or of any foreign government or country; to receive, collect, receipt for, and dispose of 3 7 interest, dividends and income upon and from any of the bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property held and owned by it, and to exercise in respect of all such bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property, any and all the rights, powers and privileges of individual owners thereof, including the right to vote thereon; to invest and deal in and with any of the moneys of the Corporation upon such securities and in such manner as it may think fit and proper, and from time to time to vary or realize such investments; to issue bonds and secure the same by pledges or deeds of trust or mortgages of or upon the whole or any part of the property held or owned by the Corporation, and to sell and pledge such bonds, as and when the Board of Directors shall determine, and in the promotion of its said corporate business of investment and to the extent authorized by law, to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and convey real and personal property of any name and nature and any estate or interest therein. (b) In furtherance of, and not in limitation, of the powers conferred by the laws of the State of Delaware, it is hereby expressly provided that the said Corporation shall also have the following powers: (1) To do any or all of the things herein set forth, to the same extent as natural persons might or could do, and in any part of the world. (2) To acquire the good will, rights, property and franchises and to undertake the whole or any part of the assets and liabilities of any person, firm, association or corporation, and to pay for the same in cash, stock of this Corporation, bonds or otherwise; to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole or any part of any business so acquired, and to exercise all the powers necessary or convenient in and about the conduct and management of such business. (3) To take, hold, own, deal in, mortgage or otherwise lien, and to lease, sell, exchange, transfer, or in any manner whatever dispose of property, real, personal or mixed, wherever situated. (4) To enter into, make, perform and carry out contracts of every kind with any person, firm, association or corporation, and, without limit as to amount, to draw, make, accept, endorse, discount, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or 4 8 transferable instruments. (5) To have one or more offices, to carry on all or any of its operations and businesses, without restriction to the same extent as natural persons might or could do, to purchase or otherwise acquire, to hold, own, to mortgage, sell, convey or otherwise dispose of, real and personal property, of every class and description, in any State, District, Territory or Colony of the United States, and in any foreign country or place. (6) It is the intention that the objects, purposes and powers specified and clauses contained in this paragraph shall (except where otherwise expressed in said paragraph) be nowise limited or restricted by reference to or inference from the terms of any other clause of this or any other paragraph in this charter, but that the objects, purposes and powers specified in each of the clauses of this paragraph shall be regarded as independent objects, purposes and powers. FOURTH: - (a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is forty-one million (41,000,000) shares, consisting of: (1) One million (1,000,000) shares of Preferred stock, par value $10.00 per share (hereinafter referred to as "Preferred Stock"); and (2) Forty million (40,000,000) shares of Common Stock, par value $1.00 per share (hereinafter referred to as "Common Stock"). (b) Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors each of said series to be distinctly designated. All shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers and the preferences and relative, participating, optional and other special rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and, subject to the provisions of subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers and the designations, preferences and relative, optional and other special rights, and the qualifications, limitations and restrictions of such series, including, but without limiting the generality of the 5 9 foregoing, the following: (1) The distinctive designation of, and the number of shares of Preferred Stock which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) The rate and times at which, and the terms and conditions on which, dividends, if any, on Preferred Stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other class of stock and whether such dividends shall be cumulative or non-cumulative; (3) The right, if any, of the holders of Preferred Stock of such series to convert the same into or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (4) Whether or not Preferred Stock of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock of such series may be redeemed. (5) The rights, if any, of the holders of Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation. (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such series; and (7) The voting powers, if any, of the holders of such series of Preferred Stock which may, without limiting the generality of the foregoing include the right, voting as a series or by itself or together with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such circumstances and on such conditions as the Board of Directors may determine. (c) (1) After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of section (b) of this Article 6 10 FOURTH), if any, shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of section (b) of this Article FOURTH), and subject further to any conditions which may be fixed in accordance with the provisions of section (b) of this Article FOURTH, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amount, if any, (fixed in accordance with the provisions of section (b) of this Article FOURTH), to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the Corporation, the holders of the Common Stock shall be entitled to receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. (3) Except as may otherwise be required by law or by the provisions of such resolution or resolutions as may be adopted by the Board of Directors pursuant to section (b) of this Article FOURTH, each holder of Common Stock shall have one vote in respect of each share of Common Stock held on all matters voted upon by the stockholders. (d) No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, whether such holders or others, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. (e) The relative powers, preferences and rights of each series of Preferred Stock in relation to the relative powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of 7 11 Directors in the resolution or resolutions adopted pursuant to authority granted in section (b) of this Article FOURTH and the consent, by class or series vote or otherwise, of the holders of such of the series of Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in the resolution or resolutions as to any series of Preferred Stock adopted pursuant to section (b) of this Article FOURTH that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. (f) Subject to the provisions of section (e), shares of any series of Preferred Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (g) Shares of Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (h) The authorized amount of shares of Common Stock and of Preferred Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon. FIFTH: - (a) The business and affairs of the Corporation shall be conducted and managed by a Board of Directors. The number of directors constituting the entire Board shall be not less than five nor more than twenty-five as fixed from time to time by vote of a majority of the whole Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the whole Board shall be twenty-four until otherwise fixed by a majority of the whole Board. (b) The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. At the annual meeting of stockholders in 1982, directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of the second class 8 12 shall be elected to hold office for a term expiring at the second succeeding annual meeting and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next annual election of directors. At such election, the stockholders shall elect a successor to such director to hold office until the next election of the class for which such director shall have been chosen and until his successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. (c) Notwithstanding any other provisions of this Charter or Act of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Charter or Act of Incorporation or the ByLaws of the Corporation), any director or the entire Board of Directors of the Corporation may be removed at any time without cause, but only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose. (d) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Such nominations shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Notice of nominations which are proposed by the Board of Directors shall be given by the Chairman on behalf of the Board. (e) Each notice under subsection (d) shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of such nominee and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. (f) The Chairman of the meeting may, if the facts warrant, determine and declare to 9 13 the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. (g) No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. SIXTH: - The Directors shall choose such officers, agents and servants as may be provided in the By-Laws as they may from time to time find necessary or proper. SEVENTH: - The Corporation hereby created is hereby given the same powers, rights and privileges as may be conferred upon corporations organized under the Act entitled "An Act Providing a General Corporation Law", approved March 10, 1899, as from time to time amended. EIGHTH: - This Act shall be deemed and taken to be a private Act. NINTH: - This Corporation is to have perpetual existence. TENTH: - The Board of Directors, by resolution passed by a majority of the whole Board, may designate any of their number to constitute an Executive Committee, which Committee, to the extent provided in said resolution, or in the By-Laws of the Company, shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. ELEVENTH: - The private property of the stockholders shall not be liable for the payment of corporate debts to any extent whatever. TWELFTH: - The Corporation may transact business in any part of the world. THIRTEENTH: - The Board of Directors of the Corporation is expressly authorized to make, alter or repeal the By-Laws of the Corporation by a vote of the majority of the entire Board. The stockholders may make, alter or repeal any By-Law whether or not adopted by them, provided however, that any such additional By-Laws, alterations or repeal may be adopted only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as 10 14 one class). FOURTEENTH: - Meetings of the Directors may be held outside of the State of Delaware at such places as may be from time to time designated by the Board, and the Directors may keep the books of the Company outside of the State of Delaware at such places as may be from time to time designated by them. FIFTEENTH: - (a) (1) In addition to any affirmative vote required by law, and except as otherwise expressly provided in sections (b) and (c) of this Article FIFTEENTH: (A) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with or into (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder), which, after such merger or consolidation, would be an Affiliate (as hereinafter defined) of an Interested Stockholder, or (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate fair market value of $1,000,000 or more, or (C) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of related transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $1,000,000 or more, or (D) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation, or (E) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder, or any Affiliate of any Interested Stockholder, 11 15 shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purpose of this Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) The term "business combination" as used in this Article FIFTEENTH shall mean any transaction which is referred to in any one or more of clauses (A) through (E) of paragraph 1 of the section (a). (b) The provisions of section (a) of this Article FIFTEENTH shall not be applicable to any particular business combination and such business combination shall require only such affirmative vote as is required by law and any other provisions of the Charter or Act of Incorporation or By-Laws if such business combination has been approved by a majority of the whole Board. (c) For the purposes of this Article FIFTEENTH: (1) A "person" shall mean any individual, firm, corporation or other entity. (2) "Interested Stockholder" shall mean, in respect of any business combination, any person (other than the Corporation or any Subsidiary) who or which as of the record date for the determination of stockholders entitled to notice of and to vote on such business combination, or immediately prior to the consummation of any such transaction: (A) is the beneficial owner, directly or indirectly, of more than 10% of the Voting Shares, or (B) is an Affiliate of the Corporation and at any time within two years prior thereto was the beneficial owner, directly or indirectly, of not less than 10% of the then outstanding voting Shares, or (C) is an assignee of or has otherwise succeeded in any share of capital stock of the Corporation which were at any time within two years prior thereto beneficially owned by any Interested Stockholder, and such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. 12 16 (3) A person shall be the "beneficial owner" of any Voting Shares: (A) which such person or any of its Affiliates and Associates (as hereafter defined) beneficially own, directly or indirectly, or (B) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding, or (C) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation. (4) The outstanding Voting Shares shall include shares deemed owned through application of paragraph (3) above but shall not include any other Voting Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options or otherwise. (5) "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981. (6) "Subsidiary" shall mean any corporation of which a majority of any class of equity security (as defined in Rule 3a11-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981) is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Investment Stockholder set forth in paragraph (2) of this section (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (d) majority of the directors shall have the power and duty to determine for the purposes of this Article FIFTEENTH on the basis of information known to them, (1) the number of Voting Shares beneficially owned by any person (2) whether a person is an Affiliate or Associate of another, (3) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in paragraph (3) of section (c), or (4) whether the assets subject to any business combination or the consideration received for the issuance or 13 17 transfer of securities by the Corporation, or any Subsidiary has an aggregate fair market value of $1,000,000 or more. (e) Nothing contained in this Article FIFTEENTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. SIXTEENTH: Notwithstanding any other provision of this Charter or Act of Incorporation or the By-Laws of the Corporation (and in addition to any other vote that may be required by law, this Charter or Act of Incorporation by the By-Laws), the affirmative vote of the holders of at least two-thirds of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter or Act of Incorporation. SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Laws as the same exists or may hereafter be amended. (b) Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a Director of the Corporation existing hereunder with respect to any act or omission occurring prior to the time of such repeal or modification." 14 18 EXHIBIT B BY-LAWS WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON JANUARY 16, 1997 19 BY-LAWS OF WILMINGTON TRUST COMPANY ARTICLE I STOCKHOLDERS' MEETINGS Section 1. The Annual Meeting of Stockholders shall be held on the third Thursday in April each year at the principal office at the Company or at such other date, time, or place as may be designated by resolution by the Board of Directors. Section 2. Special meetings of all stockholders may be called at any time by the Board of Directors, the Chairman of the Board or the President. Section 3. Notice of all meetings of the stockholders shall be given by mailing to each stockholder at least ten (10) days before said meeting, at his last known address, a written or printed notice fixing the time and place of such meeting. Section 4. A majority in the amount of the capital stock of the Company issued and outstanding on the record date, as herein determined, shall constitute a quorum at all meetings of stockholders for the transaction of any business, but the holders of a small number of shares may adjourn, from time to time, without further notice, until a quorum is secured. At each annual or special meeting of stockholders, each stockholder shall be entitled to one vote, either in person or by proxy, for each share of stock registered in the stockholder's name on the books of the Company on the record date for any such meeting as determined herein. ARTICLE II DIRECTORS Section 1. The number and classification of the Board of Directors shall be as set forth in the Charter of the Bank. Section 2. No person who has attained the age of seventy-two (72) years shall be nominated for election to the Board of Directors of the Company, provided, however, that this limitation shall not apply to any person who was serving as director of the Company on September 16, 1971. Section 3. The class of Directors so elected shall hold office for three years or until their successors are elected and qualified. Section 4. The affairs and business of the Company shall be managed and conducted by the Board of Directors. 20 Section 5. The Board of Directors shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Board of Directors or the President. Section 6. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board of Directors or by the President, and shall be called upon the written request of a majority of the directors. Section 7. A majority of the directors elected and qualified shall be necessary to constitute a quorum for the transaction of business at any meeting of the Board of Directors. Section 8. Written notice shall be sent by mail to each director of any special meeting of the Board of Directors, and of any change in the time or place of any regular meeting, stating the time and place of such meeting, which shall be mailed not less than two days before the time of holding such meeting. Section 9. In the event of the death, resignation, removal, inability to act, or disqualification of any director, the Board of Directors, although less than a quorum, shall have the right to elect the successor who shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, and until such director's successor shall have been duly elected and qualified. Section 10. The Board of Directors at its first meeting after its election by the stockholders shall appoint an Executive Committee, a Trust Committee, an Audit Committee and a Compensation Committee, and shall elect from its own members a Chairman of the Board of Directors and a President who may be the same person. The Board of Directors shall also elect at such meeting a Secretary and a Treasurer, who may be the same person, may appoint at any time such other committees and elect or appoint such other officers as it may deem advisable. The Board of Directors may also elect at such meeting one or more Associate Directors. Section 11. The Board of Directors may at any time remove, with or without cause, any member of any Committee appointed by it or any associate director or officer elected by it and may appoint or elect his successor. Section 12. The Board of Directors may designate an officer to be in charge of such of the departments or divisions of the Company as it may deem advisable. 2 21 ARTICLE III COMMITTEES Section 1. Executive Committee (A) The Executive Committee shall be composed of not more than nine members who shall be selected by the Board of Directors from its own members and who shall hold office during the pleasure of the Board. (B) The Executive Committee shall have all the powers of the Board of Directors when it is not in session to transact all business for and in behalf of the Company that may be brought before it. (C) The Executive Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Executive Committee or at the call of the Chairman of the Board of Directors. The majority of its members shall be necessary to constitute a quorum for the transaction of business. Special meetings of the Executive Committee may be held at any time when a quorum is present. (D) Minutes of each meeting of the Executive Committee shall be kept and submitted to the Board of Directors at its next meeting. (E) The Executive Committee shall advise and superintend all investments that may be made of the funds of the Company, and shall direct the disposal of the same, in accordance with such rules and regulations as the Board of Directors from time to time make. (F) In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Company by its directors and officers as contemplated by these By-Laws any two available members of the Executive Committee as constituted immediately prior to such disaster shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Company in accordance with the provisions of Article III of these By-Laws; and if less than three members of the Trust Committee is constituted immediately prior to such disaster shall be available for the transaction of its business, such Executive Committee shall also be empowered to exercise all of the powers reserved to the Trust Committee under Article III Section 2 hereof. In the event of the unavailability, at such time, of a minimum of two members of such Executive Committee, any three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Company in accordance with the foregoing provisions of this Section. This By-Law shall be subject to implementation by Resolutions of the Board of Directors presently existing or hereafter passed from time to time 3 22 for that purpose, and any provisions of these By-Laws (other than this Section) and any resolutions which are contrary to the provisions of this Section or to the provisions of any such implementary Resolutions shall be suspended during such a disaster period until it shall be determined by any interim Executive Committee acting under this section that it shall be to the advantage of the Company to resume the conduct and management of its affairs and business under all of the other provisions of these By-Laws. Section 2. Trust Committee (A) The Trust Committee shall be composed of not more than thirteen members who shall be selected by the Board of Directors, a majority of whom shall be members of the Board of Directors and who shall hold office during the pleasure of the Board. (B) The Trust Committee shall have general supervision over the Trust Department and the investment of trust funds, in all matters, however, being subject to the approval of the Board of Directors. (C) The Trust Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members or at the call of its chairman. A majority of its members shall be necessary to constitute a quorum for the transaction of business. (D) Minutes of each meeting of the Trust Committee shall be kept and promptly submitted to the Board of Directors. (E) The Trust Committee shall have the power to appoint Committees and/or designate officers or employees of the Company to whom supervision over the investment of trust funds may be delegated when the Trust Committee is not in session. Section 3. Audit Committee (A) The Audit Committee shall be composed of five members who shall be selected by the Board of Directors from its own members, none of whom shall be an officer of the Company, and shall hold office at the pleasure of the Board. (B) The Audit Committee shall have general supervision over the Audit Division in all matters however subject to the approval of the Board of Directors; it shall consider all matters brought to its attention by the officer in charge of the Audit Division, review all reports of examination of the Company made by any governmental agency or such independent auditor employed for that purpose, and make such recommendations to the Board of Directors with respect thereto or with respect to any other matters pertaining to auditing the 4 23 Company as it shall deem desirable. (C) The Audit Committee shall meet whenever and wherever the majority of its members shall deem it to be proper for the transaction of its business, and a majority of its Committee shall constitute a quorum. Section 4. Compensation Committee (A) The Compensation Committee shall be composed of not more than five (5) members who shall be selected by the Board of Directors from its own members who are not officers of the Company and who shall hold office during the pleasure of the Board. (B) The Compensation Committee shall in general advise upon all matters of policy concerning the Company brought to its attention by the management and from time to time review the management of the Company, major organizational matters, including salaries and employee benefits and specifically shall administer the Executive Incentive Compensation Plan. (C) Meetings of the Compensation Committee may be called at any time by the Chairman of the Compensation Committee, the Chairman of the Board of Directors, or the President of the Company. Section 5. Associate Directors (A) Any person who has served as a director may be elected by the Board of Directors as an associate director, to serve during the pleasure of the Board. (B) An associate director shall be entitled to attend all directors meetings and participate in the discussion of all matters brought to the Board, with the exception that he would have no right to vote. An associate director will be eligible for appointment to Committees of the Company, with the exception of the Executive Committee, Audit Committee and Compensation Committee, which must be comprised solely of active directors. Section 6. Absence or Disqualification of Any Member of a Committee (A) In the absence or disqualification of any member of any Committee created under Article III of the By-Laws of this Company, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. 5 24 ARTICLE IV OFFICERS Section 1. The Chairman of the Board of Directors shall preside at all meetings of the Board and shall have such further authority and powers and shall perform such duties as the Board of Directors may from time to time confer and direct. He shall also exercise such powers and perform such duties as may from time to time be agreed upon between himself and the President of the Company. Section 2. The Vice Chairman of the Board. The Vice Chairman of the Board of Directors shall preside at all meetings of the Board of Directors at which the Chairman of the Board shall not be present and shall have such further authority and powers and shall perform such duties as the Board of Directors or the Chairman of the Board may from time to time confer and direct. Section 3. The President shall have the powers and duties pertaining to the office of the President conferred or imposed upon him by statute or assigned to him by the Board of Directors. In the absence of the Chairman of the Board the President shall have the powers and duties of the Chairman of the Board. Section 4. The Chairman of the Board of Directors or the President as designated by the Board of Directors, shall carry into effect all legal directions of the Executive Committee and of the Board of Directors, and shall at all times exercise general supervision over the interest, affairs and operations of the Company and perform all duties incident to his office. Section 5. There may be one or more Vice Presidents, however denominated by the Board of Directors, who may at any time perform all the duties of the Chairman of the Board of Directors and/or the President and such other powers and duties as may from time to time be assigned to them by the Board of Directors, the Executive Committee, the Chairman of the Board or the President and by the officer in charge of the department or division to which they are assigned. Section 6. The Secretary shall attend to the giving of notice of meetings of the stockholders and the Board of Directors, as well as the Committees thereof, to the keeping of accurate minutes of all such meetings and to recording the same in the minute books of the Company. In addition to the other notice requirements of these By-Laws and as may be practicable under the circumstances, all such notices shall be in writing and mailed well in advance of the scheduled date of any other meeting. He shall have custody of the corporate seal and shall affix the same to any documents requiring such corporate seal and to attest the same. 6 25 Section 7. The Treasurer shall have general supervision over all assets and liabilities of the Company. He shall be custodian of and responsible for all monies, funds and valuables of the Company and for the keeping of proper records of the evidence of property or indebtedness and of all the transactions of the Company. He shall have general supervision of the expenditures of the Company and shall report to the Board of Directors at each regular meeting of the condition of the Company, and perform such other duties as may be assigned to him from time to time by the Board of Directors of the Executive Committee. Section 8. There may be a Controller who shall exercise general supervision over the internal operations of the Company, including accounting, and shall render to the Board of Directors at appropriate times a report relating to the general condition and internal operations of the Company. There may be one or more subordinate accounting or controller officers however denominated, who may perform the duties of the Controller and such duties as may be prescribed by the Controller. Section 9. The officer designated by the Board of Directors to be in charge of the Audit Division of the Company with such title as the Board of Directors shall prescribe, shall report to and be directly responsible only to the Board of Directors. There shall be an Auditor and there may be one or more Audit Officers, however denominated, who may perform all the duties of the Auditor and such duties as may be prescribed by the officer in charge of the Audit Division. Section 10. There may be one or more officers, subordinate in rank to all Vice Presidents with such functional titles as shall be determined from time to time by the Board of Directors, who shall ex officio hold the office Assistant Secretary of this Company and who may perform such duties as may be prescribed by the officer in charge of the department or division to whom they are assigned. Section 11. The powers and duties of all other officers of the Company shall be those usually pertaining to their respective offices, subject to the direction of the Board of Directors, the Executive Committee, Chairman of the Board of Directors or the President and the officer in charge of the department or division to which they are assigned. ARTICLE V STOCK AND STOCK CERTIFICATES Section 1. Shares of stock shall be transferrable on the books of the Company and a 7 26 transfer book shall be kept in which all transfers of stock shall be recorded. Section 2. Certificates of stock shall bear the signature of the President or any Vice President, however denominated by the Board of Directors and countersigned by the Secretary or Treasurer or an Assistant Secretary, and the seal of the corporation shall be engraved thereon. Each certificate shall recite that the stock represented thereby is transferrable only upon the books of the Company by the holder thereof or his attorney, upon surrender of the certificate properly endorsed. Any certificate of stock surrendered to the Company shall be cancelled at the time of transfer, and before a new certificate or certificates shall be issued in lieu thereof. Duplicate certificates of stock shall be issued only upon giving such security as may be satisfactory to the Board of Directors or the Executive Committee. Section 3. The Board of Directors of the Company is authorized to fix in advance a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting of stockholders and any adjournment thereof, or entitled to receive payment of any dividend, or to any allotment or rights, or to exercise any rights in respect of any change, conversion or exchange of capital stock, or in connection with obtaining the consent of stockholders for any purpose, which record date shall not be more than 60 nor less than 10 days proceeding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent. ARTICLE VI SEAL Section 1. The corporate seal of the Company shall be in the following form: Between two concentric circles the words "Wilmington Trust Company" within the inner circle the words "Wilmington, Delaware." ARTICLE VII FISCAL YEAR Section 1. The fiscal year of the Company shall be the calendar year. 8 27 ARTICLE VIII EXECUTION OF INSTRUMENTS OF THE COMPANY Section 1. The Chairman of the Board, the President or any Vice President, however denominated by the Board of Directors, shall have full power and authority to enter into, make, sign, execute, acknowledge and/or deliver and the Secretary or any Assistant Secretary shall have full power and authority to attest and affix the corporate seal of the Company to any and all deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes, mortgages and all other instruments incident to the business of this Company or in acting as executor, administrator, guardian, trustee, agent or in any other fiduciary or representative capacity by any and every method of appointment or by whatever person, corporation, court officer or authority in the State of Delaware, or elsewhere, without any specific authority, ratification, approval or confirmation by the Board of Directors or the Executive Committee, and any and all such instruments shall have the same force and validity as though expressly authorized by the Board of Directors and/or the Executive Committee. ARTICLE IX COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES Section 1. Directors and associate directors of the Company, other than salaried officers of the Company, shall be paid such reasonable honoraria or fees for attending meetings of the Board of Directors as the Board of Directors may from time to time determine. Directors and associate directors who serve as members of committees, other than salaried employees of the Company, shall be paid such reasonable honoraria or fees for services as members of committees as the Board of Directors shall from time to time determine and directors and associate directors may be employed by the Company for such special services as the Board of Directors may from time to time determine and shall be paid for such special services so performed reasonable compensation as may be determined by the Board of Directors. ARTICLE X INDEMNIFICATION Section 1. (A) The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was 9 28 serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The Corporation shall indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the Corporation. (B) The Corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a Director or officer in his capacity as a Director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Director or officer to repay all amounts advanced if it should be ultimately determined that the Director or officer is not entitled to be indemnified under this Article or otherwise. (C) If a claim for indemnification or payment of expenses, under this Article X is not paid in full within ninety days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification of payment of expenses under applicable law. (D) The rights conferred on any person by this Article X shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Charter or Act of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested Directors or otherwise. (E) Any repeal or modification of the foregoing provisions of this Article X shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE XI AMENDMENTS TO THE BY-LAWS Section 1. These By-Laws may be altered, amended or repealed, in whole or in part, and any new By-Law or By-Laws adopted at any regular or special meeting of the Board of Directors by a vote of the majority of all the members of the Board of Directors then in office. 10 29 EXHIBIT C SECTION 321(B) CONSENT Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended, Wilmington Trust Company hereby consents that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. WILMINGTON TRUST COMPANY Dated: September 22, 1999 By: /s/ Norma P. Closs ------------------------------ Name: Norma P. Closs Title: Vice President 11 30 EXHIBIT D NOTICE This form is intended to assist state nonmember banks and savings banks with state publication requirements. It has not been approved by any state banking authorities. Refer to your appropriate state banking authorities for your state publication requirements. R E P O R T O F C O N D I T I O N Consolidating domestic subsidiaries of the WILMINGTON TRUST COMPANY of WILMINGTON Name of Bank City in the State of DELAWARE , at the close of business on June 30, 1999.
ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coins ...................................................207,947 Interest-bearing balances....................................................................................0 Held-to-maturity securities................................................................................. 37,680 Available-for-sale securities.............................................................................1,598,933 Federal funds sold and securities purchased under agreements to resell......................................180,366 Loans and lease financing receivables: Loans and leases, net of unearned income ............................................................4,237,557 LESS: Allowance for loan and lease losses .............................................................70,233 LESS: Allocated transfer risk reserve ......................................................................0 Loans and leases, net of unearned income, allowance, and reserve.....................................4,167,324 Assets held in trading accounts...................................................................................0 Premises and fixed assets (including capitalized leases)....................................................141,415 Other real estate owned...................................................................................... 922 Investments in unconsolidated subsidiaries and associated companies...........................................1,227 Customers' liability to this bank on acceptances outstanding......................................................0 Intangible assets............................................................................................ 5,179 Other assets................................................................................................104,101 Total assets..............................................................................................6,445,094
CONTINUED ON NEXT PAGE 31
LIABILITIES Deposits: In domestic offices.......................................................................................4,574,509 Noninterest-bearing ...................................................................................992,436 Interest-bearing ....................................................................................3,582,073 Federal funds purchased and Securities sold under agreements to repurchase................................. 344,719 Demand notes issued to the U.S. Treasury.....................................................................83,802 Trading liabilities (from Schedule RC-D)..........................................................................0 Other borrowed money:......................................................................................./////// With original maturity of one year or less ............................................................860,000 With original maturity of more than one year ...........................................................43,000 Bank's liability on acceptances executed and outstanding..........................................................0 Subordinated notes and debentures.................................................................................0 Other liabilities (from Schedule RC-G).................................................................... 80,279 Total liabilities.........................................................................................5,986,309 EQUITY CAPITAL Perpetual preferred stock and related surplus.....................................................................0 Common Stock....................................................................................................500 Surplus (exclude all surplus related to preferred stock).....................................................62,118 Undivided profits and capital reserves......................................................................412,409 Net unrealized holding gains (losses) on available-for-sale securities.....................................(16,242) Total equity capital........................................................................................458,785 Total liabilities, limited-life preferred stock, and equity capital.......................................6,445,094
2 EX-25.3 19 FORM T-1 / PREFERRED GUARANTEE TRUSTEE 1 Registration No. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) WILMINGTON TRUST COMPANY (Exact name of trustee as specified in its charter) Delaware 51-0055023 (State of incorporation) (I.R.S. employer identification no.) Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 (Address of principal executive offices) Cynthia L. Corliss Vice President and Trust Counsel Wilmington Trust Company Rodney Square North Wilmington, Delaware 19890 (302) 651-8516 (Name, address and telephone number of agent for service) ENTERCOM COMMUNICATIONS CORP. (Exact name of obligor as specified in its charter) Pennsylvania 23-1701044 (State of incorporation) (I.R.S. employer identification no.) 401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 (Address of principal executive offices) (Zip Code) Preferred Securities Guarantee issued by Entercom Communications Corp. (Title of the indenture securities) 2 ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Deposit Insurance Co. State Bank Commissioner Five Penn Center Dover, Delaware Suite #2901 Philadelphia, PA (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each affiliation: Based upon an examination of the books and records of the trustee and upon information furnished by the obligor, the obligor is not an affiliate of the trustee. ITEM 3. LIST OF EXHIBITS. List below all exhibits filed as part of this Statement of Eligibility and Qualification. A. Copy of the Charter of Wilmington Trust Company, which includes the certificate of authority of Wilmington Trust Company to commence business and the authorization of Wilmington Trust Company to exercise corporate trust powers. B. Copy of By-Laws of Wilmington Trust Company. C. Consent of Wilmington Trust Company required by Section 321(b) of Trust Indenture Act. D. Copy of most recent Report of Condition of Wilmington Trust Company. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wilmington Trust Company, a corporation organized and existing under the laws of Delaware, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington and State of Delaware on the 22nd day of September, 1999. WILMINGTON TRUST COMPANY [SEAL] Attest: /s/ Donald G. MacKelcan By: /s/ Norma P. Closs ------------------------ ------------------------ Assistant Secretary Name: Norma P. Closs Title: Vice President 2 3 EXHIBIT A AMENDED CHARTER WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON MAY 9, 1987 4 AMENDED CHARTER OR ACT OF INCORPORATION OF WILMINGTON TRUST COMPANY WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act of Incorporation of which company has been from time to time amended and changed by merger agreements pursuant to the corporation law for state banks and trust companies of the State of Delaware, does hereby alter and amend its Charter or Act of Incorporation so that the same as so altered and amended shall in its entirety read as follows: FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY. SECOND: - The location of its principal office in the State of Delaware is at Rodney Square North, in the City of Wilmington, County of New Castle; the name of its resident agent is WILMINGTON TRUST COMPANY whose address is Rodney Square North, in said City. In addition to such principal office, the said corporation maintains and operates branch offices in the City of Newark, New Castle County, Delaware, the Town of Newport, New Castle County, Delaware, at Claymont, New Castle County, Delaware, at Greenville, New Castle County Delaware, and at Milford Cross Roads, New Castle County, Delaware, and shall be empowered to open, maintain and operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in the City of Wilmington, New Castle County, Delaware, and such other branch offices or places of business as may be authorized from time to time by the agency or agencies of the government of the State of Delaware empowered to confer such authority. THIRD: - (a) The nature of the business and the objects and purposes proposed to be transacted, promoted or carried on by this Corporation are to do any or all of the things herein mentioned as fully and to the same extent as natural persons might or could do and in any part of the world, viz.: (1) To sue and be sued, complain and defend in any Court of law or equity and to make and use a common seal, and alter the seal at pleasure, to hold, 5 purchase, convey, mortgage or otherwise deal in real and personal estate and property, and to appoint such officers and agents as the business of the Corporation shall require, to make by-laws not inconsistent with the Constitution or laws of the United States or of this State, to discount bills, notes or other evidences of debt, to receive deposits of money, or securities for money, to buy gold and silver bullion and foreign coins, to buy and sell bills of exchange, and generally to use, exercise and enjoy all the powers, rights, privileges and franchises incident to a corporation which are proper or necessary for the transaction of the business of the Corporation hereby created. (2) To insure titles to real and personal property, or any estate or interests therein, and to guarantee the holder of such property, real or personal, against any claim or claims, adverse to his interest therein, and to prepare and give certificates of title for any lands or premises in the State of Delaware, or elsewhere. (3) To act as factor, agent, broker or attorney in the receipt, collection, custody, investment and management of funds, and the purchase, sale, management and disposal of property of all descriptions, and to prepare and execute all papers which may be necessary or proper in such business. (4) To prepare and draw agreements, contracts, deeds, leases, conveyances, mortgages, bonds and legal papers of every description, and to carry on the business of conveyancing in all its branches. (5) To receive upon deposit for safekeeping money, jewelry, plate, deeds, bonds and any and all other personal property of every sort and kind, from executors, administrators, guardians, public officers, courts, receivers, assignees, trustees, and from all fiduciaries, and from all other persons and individuals, and from all corporations whether state, municipal, corporate or private, and to rent boxes, safes, vaults and other receptacles for such property. (6) To act as agent or otherwise for the purpose of registering, issuing, certificating, countersigning, transferring or underwriting the stock, bonds or other obligations of any corporation, association, state or municipality, and may receive and manage any sinking fund therefor on such terms as may be agreed upon between the two parties, and in like manner may act as Treasurer of any corporation or municipality. (7) To act as Trustee under any deed of trust, mortgage, bond or other 2 6 instrument issued by any state, municipality, body politic, corporation, association or person, either alone or in conjunction with any other person or persons, corporation or corporations. (8) To guarantee the validity, performance or effect of any contract or agreement, and the fidelity of persons holding places of responsibility or trust; to become surety for any person, or persons, for the faithful performance of any trust, office, duty, contract or agreement, either by itself or in conjunction with any other person, or persons, corporation, or corporations, or in like manner become surety upon any bond, recognizance, obligation, judgment, suit, order, or decree to be entered in any court of record within the State of Delaware or elsewhere, or which may now or hereafter be required by any law, judge, officer or court in the State of Delaware or elsewhere. (9) To act by any and every method of appointment as trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity in the receiving, holding, managing, and disposing of any and all estates and property, real, personal or mixed, and to be appointed as such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian or bailee by any persons, corporations, court, officer, or authority, in the State of Delaware or elsewhere; and whenever this Corporation is so appointed by any person, corporation, court, officer or authority such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity, it shall not be required to give bond with surety, but its capital stock shall be taken and held as security for the performance of the duties devolving upon it by such appointment. (10) And for its care, management and trouble, and the exercise of any of its powers hereby given, or for the performance of any of the duties which it may undertake or be called upon to perform, or for the assumption of any responsibility the said Corporation may be entitled to receive a proper compensation. (11) To purchase, receive, hold and own bonds, mortgages, debentures, shares of capital stock, and other securities, obligations, contracts and evidences of indebtedness, of any private, public or municipal corporation within and without the State of Delaware, or of the Government of the United States, or of any state, territory, colony, or possession thereof, or of any foreign government or country; to receive, collect, receipt for, and dispose of 3 7 interest, dividends and income upon and from any of the bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property held and owned by it, and to exercise in respect of all such bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property, any and all the rights, powers and privileges of individual owners thereof, including the right to vote thereon; to invest and deal in and with any of the moneys of the Corporation upon such securities and in such manner as it may think fit and proper, and from time to time to vary or realize such investments; to issue bonds and secure the same by pledges or deeds of trust or mortgages of or upon the whole or any part of the property held or owned by the Corporation, and to sell and pledge such bonds, as and when the Board of Directors shall determine, and in the promotion of its said corporate business of investment and to the extent authorized by law, to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and convey real and personal property of any name and nature and any estate or interest therein. (b) In furtherance of, and not in limitation, of the powers conferred by the laws of the State of Delaware, it is hereby expressly provided that the said Corporation shall also have the following powers: (1) To do any or all of the things herein set forth, to the same extent as natural persons might or could do, and in any part of the world. (2) To acquire the good will, rights, property and franchises and to undertake the whole or any part of the assets and liabilities of any person, firm, association or corporation, and to pay for the same in cash, stock of this Corporation, bonds or otherwise; to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole or any part of any business so acquired, and to exercise all the powers necessary or convenient in and about the conduct and management of such business. (3) To take, hold, own, deal in, mortgage or otherwise lien, and to lease, sell, exchange, transfer, or in any manner whatever dispose of property, real, personal or mixed, wherever situated. (4) To enter into, make, perform and carry out contracts of every kind with any person, firm, association or corporation, and, without limit as to amount, to draw, make, accept, endorse, discount, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or 4 8 transferable instruments. (5) To have one or more offices, to carry on all or any of its operations and businesses, without restriction to the same extent as natural persons might or could do, to purchase or otherwise acquire, to hold, own, to mortgage, sell, convey or otherwise dispose of, real and personal property, of every class and description, in any State, District, Territory or Colony of the United States, and in any foreign country or place. (6) It is the intention that the objects, purposes and powers specified and clauses contained in this paragraph shall (except where otherwise expressed in said paragraph) be nowise limited or restricted by reference to or inference from the terms of any other clause of this or any other paragraph in this charter, but that the objects, purposes and powers specified in each of the clauses of this paragraph shall be regarded as independent objects, purposes and powers. FOURTH: - (a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is forty-one million (41,000,000) shares, consisting of: (1) One million (1,000,000) shares of Preferred stock, par value $10.00 per share (hereinafter referred to as "Preferred Stock"); and (2) Forty million (40,000,000) shares of Common Stock, par value $1.00 per share (hereinafter referred to as "Common Stock"). (b) Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors each of said series to be distinctly designated. All shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers and the preferences and relative, participating, optional and other special rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and, subject to the provisions of subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers and the designations, preferences and relative, optional and other special rights, and the qualifications, limitations and restrictions of such series, including, but without limiting the generality of the 5 9 foregoing, the following: (1) The distinctive designation of, and the number of shares of Preferred Stock which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) The rate and times at which, and the terms and conditions on which, dividends, if any, on Preferred Stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other class of stock and whether such dividends shall be cumulative or non-cumulative; (3) The right, if any, of the holders of Preferred Stock of such series to convert the same into or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (4) Whether or not Preferred Stock of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock of such series may be redeemed. (5) The rights, if any, of the holders of Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation. (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such series; and (7) The voting powers, if any, of the holders of such series of Preferred Stock which may, without limiting the generality of the foregoing include the right, voting as a series or by itself or together with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such circumstances and on such conditions as the Board of Directors may determine. (c) (1) After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of section (b) of this Article 6 10 FOURTH), if any, shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of section (b) of this Article FOURTH), and subject further to any conditions which may be fixed in accordance with the provisions of section (b) of this Article FOURTH, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amount, if any, (fixed in accordance with the provisions of section (b) of this Article FOURTH), to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the Corporation, the holders of the Common Stock shall be entitled to receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. (3) Except as may otherwise be required by law or by the provisions of such resolution or resolutions as may be adopted by the Board of Directors pursuant to section (b) of this Article FOURTH, each holder of Common Stock shall have one vote in respect of each share of Common Stock held on all matters voted upon by the stockholders. (d) No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, whether such holders or others, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. (e) The relative powers, preferences and rights of each series of Preferred Stock in relation to the relative powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of 7 11 Directors in the resolution or resolutions adopted pursuant to authority granted in section (b) of this Article FOURTH and the consent, by class or series vote or otherwise, of the holders of such of the series of Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in the resolution or resolutions as to any series of Preferred Stock adopted pursuant to section (b) of this Article FOURTH that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. (f) Subject to the provisions of section (e), shares of any series of Preferred Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (g) Shares of Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (h) The authorized amount of shares of Common Stock and of Preferred Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon. FIFTH: - (a) The business and affairs of the Corporation shall be conducted and managed by a Board of Directors. The number of directors constituting the entire Board shall be not less than five nor more than twenty-five as fixed from time to time by vote of a majority of the whole Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the whole Board shall be twenty-four until otherwise fixed by a majority of the whole Board. (b) The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. At the annual meeting of stockholders in 1982, directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of the second class 8 12 shall be elected to hold office for a term expiring at the second succeeding annual meeting and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next annual election of directors. At such election, the stockholders shall elect a successor to such director to hold office until the next election of the class for which such director shall have been chosen and until his successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. (c) Notwithstanding any other provisions of this Charter or Act of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Charter or Act of Incorporation or the By-Laws of the Corporation), any director or the entire Board of Directors of the Corporation may be removed at any time without cause, but only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose. (d) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Such nominations shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Notice of nominations which are proposed by the Board of Directors shall be given by the Chairman on behalf of the Board. (e) Each notice under subsection (d) shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of such nominee and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. (f) The Chairman of the meeting may, if the facts warrant, determine and declare to 9 13 the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. (g) No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. SIXTH: - The Directors shall choose such officers, agents and servants as may be provided in the By-Laws as they may from time to time find necessary or proper. SEVENTH: - The Corporation hereby created is hereby given the same powers, rights and privileges as may be conferred upon corporations organized under the Act entitled "An Act Providing a General Corporation Law", approved March 10, 1899, as from time to time amended. EIGHTH: - This Act shall be deemed and taken to be a private Act. NINTH: - This Corporation is to have perpetual existence. TENTH: - The Board of Directors, by resolution passed by a majority of the whole Board, may designate any of their number to constitute an Executive Committee, which Committee, to the extent provided in said resolution, or in the By-Laws of the Company, shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. ELEVENTH: - The private property of the stockholders shall not be liable for the payment of corporate debts to any extent whatever. TWELFTH: - The Corporation may transact business in any part of the world. THIRTEENTH: - The Board of Directors of the Corporation is expressly authorized to make, alter or repeal the By-Laws of the Corporation by a vote of the majority of the entire Board. The stockholders may make, alter or repeal any By-Law whether or not adopted by them, provided however, that any such additional By-Laws, alterations or repeal may be adopted only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as 10 14 one class). FOURTEENTH: - Meetings of the Directors may be held outside of the State of Delaware at such places as may be from time to time designated by the Board, and the Directors may keep the books of the Company outside of the State of Delaware at such places as may be from time to time designated by them. FIFTEENTH: - (a) (1) In addition to any affirmative vote required by law, and except as otherwise expressly provided in sections (b) and (c) of this Article FIFTEENTH: (A) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with or into (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder), which, after such merger or consolidation, would be an Affiliate (as hereinafter defined) of an Interested Stockholder, or (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate fair market value of $1,000,000 or more, or (C) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of related transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $1,000,000 or more, or (D) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation, or (E) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder, or any Affiliate of any Interested Stockholder, 11 15 shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purpose of this Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) The term "business combination" as used in this Article FIFTEENTH shall mean any transaction which is referred to in any one or more of clauses (A) through (E) of paragraph 1 of the section (a). (b) The provisions of section (a) of this Article FIFTEENTH shall not be applicable to any particular business combination and such business combination shall require only such affirmative vote as is required by law and any other provisions of the Charter or Act of Incorporation or By-Laws if such business combination has been approved by a majority of the whole Board. (c) For the purposes of this Article FIFTEENTH: (1) A "person" shall mean any individual, firm, corporation or other entity. (2) "Interested Stockholder" shall mean, in respect of any business combination, any person (other than the Corporation or any Subsidiary) who or which as of the record date for the determination of stockholders entitled to notice of and to vote on such business combination, or immediately prior to the consummation of any such transaction: (A) is the beneficial owner, directly or indirectly, of more than 10% of the Voting Shares, or (B) is an Affiliate of the Corporation and at any time within two years prior thereto was the beneficial owner, directly or indirectly, of not less than 10% of the then outstanding voting Shares, or (C) is an assignee of or has otherwise succeeded in any share of capital stock of the Corporation which were at any time within two years prior thereto beneficially owned by any Interested Stockholder, and such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. 12 16 (3) A person shall be the "beneficial owner" of any Voting Shares: (A) which such person or any of its Affiliates and Associates (as hereafter defined) beneficially own, directly or indirectly, or (B) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding, or (C) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation. (4) The outstanding Voting Shares shall include shares deemed owned through application of paragraph (3) above but shall not include any other Voting Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options or otherwise. (5) "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981. (6) "Subsidiary" shall mean any corporation of which a majority of any class of equity security (as defined in Rule 3a11-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981) is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Investment Stockholder set forth in paragraph (2) of this section (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (d) majority of the directors shall have the power and duty to determine for the purposes of this Article FIFTEENTH on the basis of information known to them, (1) the number of Voting Shares beneficially owned by any person (2) whether a person is an Affiliate or Associate of another, (3) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in paragraph (3) of section (c), or (4) whether the assets subject to any business combination or the consideration received for the issuance or 13 17 transfer of securities by the Corporation, or any Subsidiary has an aggregate fair market value of $1,000,000 or more. (e) Nothing contained in this Article FIFTEENTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. SIXTEENTH: Notwithstanding any other provision of this Charter or Act of Incorporation or the By-Laws of the Corporation (and in addition to any other vote that may be required by law, this Charter or Act of Incorporation by the By-Laws), the affirmative vote of the holders of at least two-thirds of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter or Act of Incorporation. SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Laws as the same exists or may hereafter be amended. (b) Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a Director of the Corporation existing hereunder with respect to any act or omission occurring prior to the time of such repeal or modification." 14 18 EXHIBIT B BY-LAWS WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON JANUARY 16, 1997 19 BY-LAWS OF WILMINGTON TRUST COMPANY ARTICLE I STOCKHOLDERS' MEETINGS Section 1. The Annual Meeting of Stockholders shall be held on the third Thursday in April each year at the principal office at the Company or at such other date, time, or place as may be designated by resolution by the Board of Directors. Section 2. Special meetings of all stockholders may be called at any time by the Board of Directors, the Chairman of the Board or the President. Section 3. Notice of all meetings of the stockholders shall be given by mailing to each stockholder at least ten (10) days before said meeting, at his last known address, a written or printed notice fixing the time and place of such meeting. Section 4. A majority in the amount of the capital stock of the Company issued and outstanding on the record date, as herein determined, shall constitute a quorum at all meetings of stockholders for the transaction of any business, but the holders of a small number of shares may adjourn, from time to time, without further notice, until a quorum is secured. At each annual or special meeting of stockholders, each stockholder shall be entitled to one vote, either in person or by proxy, for each share of stock registered in the stockholder's name on the books of the Company on the record date for any such meeting as determined herein. ARTICLE II DIRECTORS Section 1. The number and classification of the Board of Directors shall be as set forth in the Charter of the Bank. Section 2. No person who has attained the age of seventy-two (72) years shall be nominated for election to the Board of Directors of the Company, provided, however, that this limitation shall not apply to any person who was serving as director of the Company on September 16, 1971. Section 3. The class of Directors so elected shall hold office for three years or until their successors are elected and qualified. Section 4. The affairs and business of the Company shall be managed and conducted by the Board of Directors. 20 Section 5. The Board of Directors shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Board of Directors or the President. Section 6. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board of Directors or by the President, and shall be called upon the written request of a majority of the directors. Section 7. A majority of the directors elected and qualified shall be necessary to constitute a quorum for the transaction of business at any meeting of the Board of Directors. Section 8. Written notice shall be sent by mail to each director of any special meeting of the Board of Directors, and of any change in the time or place of any regular meeting, stating the time and place of such meeting, which shall be mailed not less than two days before the time of holding such meeting. Section 9. In the event of the death, resignation, removal, inability to act, or disqualification of any director, the Board of Directors, although less than a quorum, shall have the right to elect the successor who shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, and until such director's successor shall have been duly elected and qualified. Section 10. The Board of Directors at its first meeting after its election by the stockholders shall appoint an Executive Committee, a Trust Committee, an Audit Committee and a Compensation Committee, and shall elect from its own members a Chairman of the Board of Directors and a President who may be the same person. The Board of Directors shall also elect at such meeting a Secretary and a Treasurer, who may be the same person, may appoint at any time such other committees and elect or appoint such other officers as it may deem advisable. The Board of Directors may also elect at such meeting one or more Associate Directors. Section 11. The Board of Directors may at any time remove, with or without cause, any member of any Committee appointed by it or any associate director or officer elected by it and may appoint or elect his successor. Section 12. The Board of Directors may designate an officer to be in charge of such of the departments or divisions of the Company as it may deem advisable. 2 21 ARTICLE III COMMITTEES Section 1. Executive Committee (A) The Executive Committee shall be composed of not more than nine members who shall be selected by the Board of Directors from its own members and who shall hold office during the pleasure of the Board. (B) The Executive Committee shall have all the powers of the Board of Directors when it is not in session to transact all business for and in behalf of the Company that may be brought before it. (C) The Executive Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Executive Committee or at the call of the Chairman of the Board of Directors. The majority of its members shall be necessary to constitute a quorum for the transaction of business. Special meetings of the Executive Committee may be held at any time when a quorum is present. (D) Minutes of each meeting of the Executive Committee shall be kept and submitted to the Board of Directors at its next meeting. (E) The Executive Committee shall advise and superintend all investments that may be made of the funds of the Company, and shall direct the disposal of the same, in accordance with such rules and regulations as the Board of Directors from time to time make. (F) In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Company by its directors and officers as contemplated by these By-Laws any two available members of the Executive Committee as constituted immediately prior to such disaster shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Company in accordance with the provisions of Article III of these By-Laws; and if less than three members of the Trust Committee is constituted immediately prior to such disaster shall be available for the transaction of its business, such Executive Committee shall also be empowered to exercise all of the powers reserved to the Trust Committee under Article III Section 2 hereof. In the event of the unavailability, at such time, of a minimum of two members of such Executive Committee, any three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Company in accordance with the foregoing provisions of this Section. This By-Law shall be subject to implementation by Resolutions of the Board of Directors presently existing or hereafter passed from time to time 3 22 for that purpose, and any provisions of these By-Laws (other than this Section) and any resolutions which are contrary to the provisions of this Section or to the provisions of any such implementary Resolutions shall be suspended during such a disaster period until it shall be determined by any interim Executive Committee acting under this section that it shall be to the advantage of the Company to resume the conduct and management of its affairs and business under all of the other provisions of these By-Laws. Section 2. Trust Committee (A) The Trust Committee shall be composed of not more than thirteen members who shall be selected by the Board of Directors, a majority of whom shall be members of the Board of Directors and who shall hold office during the pleasure of the Board. (B) The Trust Committee shall have general supervision over the Trust Department and the investment of trust funds, in all matters, however, being subject to the approval of the Board of Directors. (C) The Trust Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members or at the call of its chairman. A majority of its members shall be necessary to constitute a quorum for the transaction of business. (D) Minutes of each meeting of the Trust Committee shall be kept and promptly submitted to the Board of Directors. (E) The Trust Committee shall have the power to appoint Committees and/or designate officers or employees of the Company to whom supervision over the investment of trust funds may be delegated when the Trust Committee is not in session. Section 3. Audit Committee (A) The Audit Committee shall be composed of five members who shall be selected by the Board of Directors from its own members, none of whom shall be an officer of the Company, and shall hold office at the pleasure of the Board. (B) The Audit Committee shall have general supervision over the Audit Division in all matters however subject to the approval of the Board of Directors; it shall consider all matters brought to its attention by the officer in charge of the Audit Division, review all reports of examination of the Company made by any governmental agency or such independent auditor employed for that purpose, and make such recommendations to the Board of Directors with respect thereto or with respect to any other matters pertaining to auditing the 4 23 Company as it shall deem desirable. (C) The Audit Committee shall meet whenever and wherever the majority of its members shall deem it to be proper for the transaction of its business, and a majority of its Committee shall constitute a quorum. Section 4. Compensation Committee (A) The Compensation Committee shall be composed of not more than five (5) members who shall be selected by the Board of Directors from its own members who are not officers of the Company and who shall hold office during the pleasure of the Board. (B) The Compensation Committee shall in general advise upon all matters of policy concerning the Company brought to its attention by the management and from time to time review the management of the Company, major organizational matters, including salaries and employee benefits and specifically shall administer the Executive Incentive Compensation Plan. (C) Meetings of the Compensation Committee may be called at any time by the Chairman of the Compensation Committee, the Chairman of the Board of Directors, or the President of the Company. Section 5. Associate Directors (A) Any person who has served as a director may be elected by the Board of Directors as an associate director, to serve during the pleasure of the Board. (B) An associate director shall be entitled to attend all directors meetings and participate in the discussion of all matters brought to the Board, with the exception that he would have no right to vote. An associate director will be eligible for appointment to Committees of the Company, with the exception of the Executive Committee, Audit Committee and Compensation Committee, which must be comprised solely of active directors. Section 6. Absence or Disqualification of Any Member of a Committee (A) In the absence or disqualification of any member of any Committee created under Article III of the By-Laws of this Company, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. 5 24 ARTICLE IV OFFICERS Section 1. The Chairman of the Board of Directors shall preside at all meetings of the Board and shall have such further authority and powers and shall perform such duties as the Board of Directors may from time to time confer and direct. He shall also exercise such powers and perform such duties as may from time to time be agreed upon between himself and the President of the Company. Section 2. The Vice Chairman of the Board. The Vice Chairman of the Board of Directors shall preside at all meetings of the Board of Directors at which the Chairman of the Board shall not be present and shall have such further authority and powers and shall perform such duties as the Board of Directors or the Chairman of the Board may from time to time confer and direct. Section 3. The President shall have the powers and duties pertaining to the office of the President conferred or imposed upon him by statute or assigned to him by the Board of Directors. In the absence of the Chairman of the Board the President shall have the powers and duties of the Chairman of the Board. Section 4. The Chairman of the Board of Directors or the President as designated by the Board of Directors, shall carry into effect all legal directions of the Executive Committee and of the Board of Directors, and shall at all times exercise general supervision over the interest, affairs and operations of the Company and perform all duties incident to his office. Section 5. There may be one or more Vice Presidents, however denominated by the Board of Directors, who may at any time perform all the duties of the Chairman of the Board of Directors and/or the President and such other powers and duties as may from time to time be assigned to them by the Board of Directors, the Executive Committee, the Chairman of the Board or the President and by the officer in charge of the department or division to which they are assigned. Section 6. The Secretary shall attend to the giving of notice of meetings of the stockholders and the Board of Directors, as well as the Committees thereof, to the keeping of accurate minutes of all such meetings and to recording the same in the minute books of the Company. In addition to the other notice requirements of these By-Laws and as may be practicable under the circumstances, all such notices shall be in writing and mailed well in advance of the scheduled date of any other meeting. He shall have custody of the corporate seal and shall affix the same to any documents requiring such corporate seal and to attest the same. 6 25 Section 7. The Treasurer shall have general supervision over all assets and liabilities of the Company. He shall be custodian of and responsible for all monies, funds and valuables of the Company and for the keeping of proper records of the evidence of property or indebtedness and of all the transactions of the Company. He shall have general supervision of the expenditures of the Company and shall report to the Board of Directors at each regular meeting of the condition of the Company, and perform such other duties as may be assigned to him from time to time by the Board of Directors of the Executive Committee. Section 8. There may be a Controller who shall exercise general supervision over the internal operations of the Company, including accounting, and shall render to the Board of Directors at appropriate times a report relating to the general condition and internal operations of the Company. There may be one or more subordinate accounting or controller officers however denominated, who may perform the duties of the Controller and such duties as may be prescribed by the Controller. Section 9. The officer designated by the Board of Directors to be in charge of the Audit Division of the Company with such title as the Board of Directors shall prescribe, shall report to and be directly responsible only to the Board of Directors. There shall be an Auditor and there may be one or more Audit Officers, however denominated, who may perform all the duties of the Auditor and such duties as may be prescribed by the officer in charge of the Audit Division. Section 10. There may be one or more officers, subordinate in rank to all Vice Presidents with such functional titles as shall be determined from time to time by the Board of Directors, who shall ex officio hold the office Assistant Secretary of this Company and who may perform such duties as may be prescribed by the officer in charge of the department or division to whom they are assigned. Section 11. The powers and duties of all other officers of the Company shall be those usually pertaining to their respective offices, subject to the direction of the Board of Directors, the Executive Committee, Chairman of the Board of Directors or the President and the officer in charge of the department or division to which they are assigned. ARTICLE V STOCK AND STOCK CERTIFICATES Section 1. Shares of stock shall be transferrable on the books of the Company and a 7 26 transfer book shall be kept in which all transfers of stock shall be recorded. Section 2. Certificates of stock shall bear the signature of the President or any Vice President, however denominated by the Board of Directors and countersigned by the Secretary or Treasurer or an Assistant Secretary, and the seal of the corporation shall be engraved thereon. Each certificate shall recite that the stock represented thereby is transferrable only upon the books of the Company by the holder thereof or his attorney, upon surrender of the certificate properly endorsed. Any certificate of stock surrendered to the Company shall be cancelled at the time of transfer, and before a new certificate or certificates shall be issued in lieu thereof. Duplicate certificates of stock shall be issued only upon giving such security as may be satisfactory to the Board of Directors or the Executive Committee. Section 3. The Board of Directors of the Company is authorized to fix in advance a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting of stockholders and any adjournment thereof, or entitled to receive payment of any dividend, or to any allotment or rights, or to exercise any rights in respect of any change, conversion or exchange of capital stock, or in connection with obtaining the consent of stockholders for any purpose, which record date shall not be more than 60 nor less than 10 days proceeding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent. ARTICLE VI SEAL Section 1. The corporate seal of the Company shall be in the following form: Between two concentric circles the words "Wilmington Trust Company" within the inner circle the words "Wilmington, Delaware." ARTICLE VII FISCAL YEAR Section 1. The fiscal year of the Company shall be the calendar year. 8 27 ARTICLE VIII EXECUTION OF INSTRUMENTS OF THE COMPANY Section 1. The Chairman of the Board, the President or any Vice President, however denominated by the Board of Directors, shall have full power and authority to enter into, make, sign, execute, acknowledge and/or deliver and the Secretary or any Assistant Secretary shall have full power and authority to attest and affix the corporate seal of the Company to any and all deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes, mortgages and all other instruments incident to the business of this Company or in acting as executor, administrator, guardian, trustee, agent or in any other fiduciary or representative capacity by any and every method of appointment or by whatever person, corporation, court officer or authority in the State of Delaware, or elsewhere, without any specific authority, ratification, approval or confirmation by the Board of Directors or the Executive Committee, and any and all such instruments shall have the same force and validity as though expressly authorized by the Board of Directors and/or the Executive Committee. ARTICLE IX COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES Section 1. Directors and associate directors of the Company, other than salaried officers of the Company, shall be paid such reasonable honoraria or fees for attending meetings of the Board of Directors as the Board of Directors may from time to time determine. Directors and associate directors who serve as members of committees, other than salaried employees of the Company, shall be paid such reasonable honoraria or fees for services as members of committees as the Board of Directors shall from time to time determine and directors and associate directors may be employed by the Company for such special services as the Board of Directors may from time to time determine and shall be paid for such special services so performed reasonable compensation as may be determined by the Board of Directors. ARTICLE X INDEMNIFICATION Section 1. (A) The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was 9 28 serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The Corporation shall indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the Corporation. (B) The Corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a Director or officer in his capacity as a Director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Director or officer to repay all amounts advanced if it should be ultimately determined that the Director or officer is not entitled to be indemnified under this Article or otherwise. (C) If a claim for indemnification or payment of expenses, under this Article X is not paid in full within ninety days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification of payment of expenses under applicable law. (D) The rights conferred on any person by this Article X shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Charter or Act of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested Directors or otherwise. (E) Any repeal or modification of the foregoing provisions of this Article X shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE XI AMENDMENTS TO THE BY-LAWS Section 1. These By-Laws may be altered, amended or repealed, in whole or in part, and any new By-Law or By-Laws adopted at any regular or special meeting of the Board of Directors by a vote of the majority of all the members of the Board of Directors then in office. 10 29 EXHIBIT C SECTION 321(b) CONSENT Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended, Wilmington Trust Company hereby consents that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. WILMINGTON TRUST COMPANY Dated: September 22, 1999 By: /s/ Norma P. Closs -------------------------- Name: Norma P. Closs Title: Vice President 30 EXHIBIT D NOTICE This form is intended to assist state nonmember banks and savings banks with state publication requirements. It has not been approved by any state banking authorities. Refer to your appropriate state banking authorities for your state publication requirements. R E P O R T O F C O N D I T I O N Consolidating domestic subsidiaries of the WILMINGTON TRUST COMPANY of WILMINGTON Name of Bank City in the State of DELAWARE , at the close of business on June 30, 1999.
ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coins ................. 207,947 Interest-bearing balances ........................................... 0 Held-to-maturity securities .............................................. 37,680 Available-for-sale securities ............................................ 1,598,933 Federal funds sold and securities purchased under agreements to resell ... 180,366 Loans and lease financing receivables: Loans and leases, net of unearned income ............................ 4,237,557 LESS: Allowance for loan and lease losses .......................... 70,233 LESS: Allocated transfer risk reserve .............................. 0 Loans and leases, net of unearned income, allowance, and reserve .................................................... 4,167,324 Assets held in trading accounts .......................................... 0 Premises and fixed assets (including capitalized leases) ................. 141,415 Other real estate owned .................................................. 922 Investments in unconsolidated subsidiaries and associated companies ...... 1,227 Customers' liability to this bank on acceptances outstanding ............. 0 Intangible assets ........................................................ 5,179 Other assets ............................................................. 104,101 Total assets ............................................................. 6,445,094
CONTINUED ON NEXT PAGE 31 LIABILITIES Deposits: In domestic offices .......................................................... 4,574,509 Noninterest-bearing ..................................................... 992,436 Interest-bearing ........................................................ 3,582,073 Federal funds purchased and Securities sold under agreements to repurchase ... 344,719 Demand notes issued to the U.S. Treasury ..................................... 83,802 Trading liabilities (from Schedule RC-D) ..................................... 0 Other borrowed money: ........................................................ /////// With original maturity of one year or less .............................. 860,000 With original maturity of more than one year ............................ 43,000 Bank's liability on acceptances executed and outstanding ..................... 0 Subordinated notes and debentures ............................................ 0 Other liabilities (from Schedule RC-G) ....................................... 80,279 Total liabilities ............................................................ 5,986,309 EQUITY CAPITAL Perpetual preferred stock and related surplus ................................ 0 Common Stock ................................................................. 500 Surplus (exclude all surplus related to preferred stock) ..................... 62,118 Undivided profits and capital reserves ....................................... 412,409 Net unrealized holding gains (losses) on available-for-sale securities ....... (16,242) Total equity capital ......................................................... 458,785 Total liabilities, limited-life preferred stock, and equity capital .......... 6,445,094
2 -----END PRIVACY-ENHANCED MESSAGE-----