-----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, HSIo0TQJqyg6JVIW2BsmQzZQHFyln/yb1NXotpk8x5CaQAf3YTIoqCjNVX4UFIYP og1Sp48swh6ryWJqpY7Rpw== 0000930661-02-001621.txt : 20020513 0000930661-02-001621.hdr.sgml : 20020513 ACCESSION NUMBER: 0000930661-02-001621 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020513 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: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14461 FILM NUMBER: 02643074 BUSINESS ADDRESS: STREET 1: 401 CITY AVENUE STREET 2: SUITE 409 CITY: BALA CYNWYD STATE: PA ZIP: 19004 BUSINESS PHONE: 610-660-5610 MAIL ADDRESS: STREET 1: 401 CITY AVENUE STREET 2: SUITE 409 CITY: BALA CYNWYD STATE: PA ZIP: 19004 10-Q 1 d10q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________to ___________ Commission File Number: 001-14461 ---------- Entercom Communications Corp. ------------------------------------ (Exact name of registrant as specified in its charter) Pennsylvania 23-1701044 (State or other jurisdiction of incorporation of organization) (I.R.S. Employer Identification No.)
401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 (Address of principal executive offices and Zip Code) (610) 660-5610 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class A Common Stock, $.01 par value -38,950,518 Shares Outstanding as of May 6, 2002 Class B Common Stock, $.01 par value -10,531,805 Shares Outstanding as of May 6, 2002 ENTERCOM COMMUNICATIONS CORP. INDEX
Page Part I - Financial Information Item 1. Financial Statements .............................................. 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...................................... 20 Item 3. Quantitative and Qualitative Disclosures About Market Risk ........ 25 Part II - Other Information Item 1. Legal Proceedings ................................................. 26 Item 2. Changes in Securities and Use of Proceeds ......................... 26 Item 3. Defaults Upon Senior Securities ................................... 26 Item 4. Submission of Matters to a Vote of Security Holders ............... 26 Item 5. Other Information ................................................. 26 Item 6. Exhibits and Reports on Form 8-K .................................. 27 Signatures ..................................................................... 28
2 PART I FINANCIAL INFORMATION ITEM 1. Financial Information ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 AND MARCH 31, 2002 (amounts in thousands) (unaudited) ASSETS
DECEMBER 31, MARCH 31, ----------- -------- 2001 2002 ---- ---- CURRENT ASSETS: Cash and cash equivalents $ 10,751 $ 265,172 Accounts receivable, net of allowance for doubtful accounts 64,319 57,153 Prepaid expenses and deposits 6,521 9,073 Federal and state income tax credits and deposits 933 4,718 Deferred tax assets 5,256 9,085 ----------- ----------- Total current assets 87,780 345,201 ----------- ----------- INVESTMENTS 13,671 14,307 ----------- ----------- PROPERTY AND EQUIPMENT: Land, land easements and land improvements 10,542 10,562 Buildings 11,631 11,636 Equipment 83,388 83,954 Furniture and fixtures 12,592 12,585 Leasehold improvements 11,514 11,527 ----------- ----------- 129,667 130,264 Accumulated depreciation and amortization (37,680) (40,609) ----------- ----------- 91,987 89,655 Capital improvements in progress 345 1,148 ----------- ----------- Net property and equipment 92,332 90,803 ----------- ----------- RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES - Net 1,232,612 1,020,504 ----------- ----------- DEFERRED CHARGES AND OTHER ASSETS - Net 12,345 44,970 ----------- ----------- TOTAL $ 1,438,740 $ 1,515,785 =========== ===========
The accompanying notes to condensed financial statements are an integral part of these statements. 3 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 AND MARCH 31, 2002 (amounts in thousands) (unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY
DECEMBER 31, MARCH 31, ----------- -------- 2001 2002 ---- ---- CURRENT LIABILITIES: Accounts payable $ 10,992 $ 13,146 Accrued liabilities: Salaries 5,446 6,898 Interest 2,689 3,373 Other 6,536 4,880 Derivative instruments 3,529 2,866 Current portion of long-term debt 24,389 38,608 ----------- ----------- Total current liabilities 53,581 69,771 ----------- ----------- LONG-TERM DEBT: Bank facility 363,625 286,406 7.625% Senior subordinated notes - 150,000 Other long-term debt 309 306 ----------- ----------- Total long-term debt 363,934 436,712 ----------- ----------- OTHER LONG-TERM LIABILITIES: Deferred tax liabilities 135,974 55,602 Derivative instruments 3,516 1,503 Deferred rent 854 920 ----------- ----------- Total other long-term liabilities 140,344 58,025 ----------- ----------- COMPANY-OBLIGATED MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SECURITIES OF SUBSIDIARY HOLDING SOLELY CONVERTIBLE DEBENTURES OF THE COMPANY ("TIDES") 125,000 125,000 ----------- ----------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock - - Class A common stock 348 389 Class B common stock 105 105 Class C common stock - - Additional paid-in capital 751,803 952,444 Retained earnings (deficit) 5,418 (127,790) Unearned compensation (201) (169) Accumulated other comprehensive income (loss) (1,592) 1,298 ----------- ----------- Total shareholders' equity 755,881 826,277 ----------- ----------- TOTAL $ 1,438,740 $ 1,515,785 =========== ===========
The accompanying notes to condensed financial statements are an integral part of these statements. 4 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2001 AND 2002 (amounts in thousands, except share and per share data) (unaudited)
THREE MONTHS ENDED ------------------ MARCH 31, -------- 2001 2002 ---- ---- NET REVENUES $ 69,455 $ 74,159 ------------ ------------ OPERATING EXPENSES: Station operating expenses 46,360 48,159 Depreciation and amortization 11,280 3,391 Corporate general and administrative expenses 3,330 3,351 Net expense from time brokerage agreement fees - 2,116 Net loss (gain) on sale of assets 23 (9) ------------ ------------ Total operating expenses 60,993 57,008 ------------ ------------ OPERATING INCOME 8,462 17,151 ------------ ------------ OTHER EXPENSE (INCOME): Interest expense, including amortization of deferred financing costs of $216 in 2001 and $250 in 2002 8,127 5,588 Financing cost of Company-obligated mandatorily redeemable convertible preferred securities of subsidiary holding solely convertible debentures of the Company 1,953 1,953 Interest income (95) (262) Equity loss from unconsolidated affiliate 850 974 Net loss (gain) on derivative instruments 478 (607) ------------ ------------ Total other expense 11,313 7,646 ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES AND ACCOUNTING CHANGE (2,851) 9,505 INCOME TAX PROVISION (BENEFIT) (1,102) 3,837 ------------ ------------ INCOME (LOSS) BEFORE ACCOUNTING CHANGE (1,749) 5,668 Cumulative effect of accounting change, net of taxes of $377 in 2001 and $92,584 in 2002 (566) (138,876) ------------ ------------ NET LOSS $ (2,315) $ (133,208) ============ ============ NET LOSS PER SHARE - BASIC: Income (loss) before accounting change $ (0.04) $ 0.12 Cumulative effect of accounting change, net of taxes (0.01) (2.98) ------------ ------------ NET LOSS PER SHARE - BASIC $ (0.05) $ (2.86) ============ ============ NET LOSS PER SHARE - DILUTED: Income (loss) before accounting change $ (0.04) $ 0.12 Cumulative effect of accounting change, net of taxes (0.01) (2.92) ------------ ------------ NET LOSS PER SHARE - DILUTED $ (0.05) $ (2.80) ============ ============ WEIGHTED AVERAGE SHARES: Basic 45,250,110 46,575,279 ============ ============ Diluted 45,250,110 47,613,126 ============ ============
The accompanying notes to condensed financial statements are an integral part of these statements. 5 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS THREE MONTHS ENDED MARCH 31, 2001 AND 2002 (amounts in thousands) (unaudited)
THREE MONTHS ENDED ------------------ MARCH 31, -------- 2001 2002 ---- ---- NET LOSS $ (2,315) $ (133,208) OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX PROVISION (BENEFIT) Unrealized gain on investments - net of tax provision of $1.2 million in 2001 and $0.6 million in 2002 1,727 960 Unrealized loss on hedged derivatives from cumulative effect of accounting change - net of tax benefit of $0.5 million in 2001 (685) - Unrealized (loss) gain on hedged derivatives - net of tax benefit of $1.1 million in 2001 and tax provision of $1.3 million in 2002 (1,653) 1,930 --------- ---------- COMPREHENSIVE LOSS $ (2,926) $ (130,318) ========= ==========
The accompanying notes to condensed financial statements are an integral part of these statements. 6 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2001 AND 2002 (amounts in thousands) (unaudited)
THREE MONTHS ENDED ------------------ MARCH 31, --------- 2001 2002 ---- ---- OPERATING ACTIVITIES: Net loss $ (2,315) $(133,208) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 11,280 3,391 Amortization of debt financing costs 216 250 Deferred taxes 3,762 7,394 Tax benefit on exercise of options 161 644 Provision for bad debts 1,130 673 Loss (gain) on disposition of assets 23 (9) Non-cash stock-based compensation expense 164 134 Equity loss from unconsolidated affiliate 850 974 Net loss (gain) on derivative instruments 478 (607) Cumulative effect of accounting change 566 138,876 Deferred rent - 66 Changes in assets and liabilities (net of effects of acquisitions and dispositions): Accounts receivable 16,215 6,493 Prepaid expenses and deposits (2,384) (3,969) Prepaid and refundable income taxes (5,212) (3,785) Accounts payable and accrued liabilities (2,706) 2,845 --------- --------- Net cash provided by operating activities 22,228 20,162 --------- --------- INVESTING ACTIVITIES: Additions to property and equipment (4,028) (1,109) Proceeds from sale of property, equipment and other assets 106 9 Purchases of radio station assets - (20,800) Deferred charges and other assets (333) (25) Purchase of investments (2,804) (10) Station acquisition deposits and costs (74) (26,181) --------- --------- Net cash used in investing activities (7,133) (48,116) --------- --------- FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 3,078 195,500 Net proceeds from stock offering - 196,498 Payments on long-term debt (19,004) (108,504) Deferred financing expenses related to bank facility and senior subordinated notes - (4,558) Proceeds from issuance of common stock related to incentive plans 145 158 Proceeds from exercise of stock options 516 3,281 --------- --------- Net cash (used in) provided by financing activities (15,265) 282,375 --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (170) 254,421 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 13,257 10,751 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,087 $ 265,172 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - Cash paid during the period for: Interest $ 7,826 $ 5,536 ========= ========= Interest on TIDES $ - $ - ========= ========= Income taxes $ 25 $ - ========= =========
The accompanying notes to condensed financial statements are an integral part of these statements. 7 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2000 AND 2001 1. BASIS OF PRESENTATION The accompanying unaudited financial statements for Entercom Communications Corp. (the "Company") have been prepared in accordance with (1) generally accepted accounting principles for interim financial information and (2) the instructions to Form 10-Q and Article 10 of Regulation S-X. 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, the financial statements reflect all adjustments considered necessary for a fair statement of the results of operations and financial position for the interim periods presented. All such adjustments are of a normal, recurring nature. This Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company's audited financial statements as of December 31, 2001, and filed with the Securities and Exchange Commission (the "SEC") on February 11, 2002, as part of the Company's Form 10-K. During February 2002, the Company filed a universal shelf registration statement with the SEC to offer up to (1) $250.0 million in aggregate offering price of Class A Common Stock and/or Preferred Stock and (2) $250.0 million in aggregate principal amount or initial accreted value of its debt securities consisting of debentures, notes or other types of debt. In connection with this registration statement, on February 27, 2002, the Company entered into separate equity and debt underwriting agreements for equity and debt offerings that were completed on March 5, 2002 and March 8, 2002 (See Notes 4 and 8). Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. Certain prior year amounts have been reclassified to conform to the current year's presentation, which had no effect on the financial position, results of operations or cash flows of the Company. RECENT ACCOUNTING PRONOUNCEMENTS In June 2001, the FASB issued SFAS No. 141, "Business Combinations." Statement No. 141 addresses financial accounting and reporting for business combinations and supersedes Accounting Principle Board ("APB") Opinion No. 16, "Business Combinations" and FASB Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." Statement No. 141 is effective for all business combinations initiated after June 30, 2001 and eliminates the pooling-of-interest method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. Statement No. 141 also changes the criteria to recognize intangible assets apart from goodwill. The Company adopted this Statement on July 1, 2001. The Company has historically used the purchase method to account for all business combinations and the Company believes that adoption of this Statement did not have a material impact on the Company's financial position, cash flows or results of operations. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" that applies to legal obligations associated with the retirement of a tangible long-lived asset that results from the acquisition, construction, or development and/or the normal operation of a long-lived asset. Under this standard, guidance is provided on measuring and recording the liability. Adoption of this Statement by the Company will be effective on January 1, 2003. The Company does not believe that the adoption of this Statement will materially impact the Company's financial position, cash flows or results of operations. Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets" that requires that goodwill and certain intangibles will not be amortized. Instead, these assets will be reviewed annually for impairment and written down and charged to results of operations only in the periods in which the recorded value of goodwill and certain intangibles is more than its fair value. As of the date of adoption, the Company reflected unamortized goodwill and unamortized broadcasting licenses in the amounts of $4.2 million and $1,228.4 million, respectively. The Company has determined that broadcasting licenses, which previously had been amortized over the maximum period allowed of 40 years, were deemed to have indefinite useful lives. Adoption of this accounting standard had the impact of eliminating the Company's non-cash amortization expense for goodwill and broadcasting licenses. For comparison purposes, for the three months ended March 31, 2001, the Company recorded amortization expense for goodwill and broadcasting licenses of $0.1 million and $7.8 million, respectively. The Company also completed the transitional non-amortizing intangible asset impairment test for broadcasting licenses and recorded to the statement of operations, a $138.9 million impairment charge, net of a deferred tax benefit of $92.6 million, under the cumulative effect of accounting change. The amount of unamortized broadcasting licenses reflected in the balance sheet as of March 31, 2002, after recording the impairment charge, was $996.5 million. The amount of the broadcasting licenses impairment charge was determined by an independent appraisal firm, which relied primarily on a discounted cash flow approach assuming a start-up scenario in which the only assets held by an investor were broadcasting licenses. The Company determined the reporting unit as a radio market and compared the carrying amount of the broadcasting 8 licenses in each market to the fair value of the market's broadcasting licenses as determined by the independent appraiser. The required impairment tests of broadcasting licenses may result in additional future period write-downs. The Company has calculated the transition adjustment in accordance with tentative accounting guidance issued by the Emerging Issues Task Force ("EITF"), and therefore, the guidance could be subject to change. The EITF is a committee appointed by the FASB and assigned the responsibility of answering implementation and interpretation questions related to this new accounting standard. In order to complete the transitional assessment of goodwill as required by SFAS No. 142, the Company will determine by the end of the second quarter of 2002, the fair value of each market and compare it to the market's carrying amount. To the extent a market's carrying amount exceeds its fair value, an indication exists that the market's goodwill assets may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the market's goodwill, determined by allocating the market's fair value to all of its assets and liabilities in a manner similar to a purchase price allocation in accordance with SFAS No. 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of 2002. Any transitional impairment charge will be recognized as the cumulative effect of a change in accounting principle in the Company's consolidated statement of operations. The Company has not yet determined what the effect of the impairment tests related to goodwill will be on the Company's financial position, cash flows or results of operations. The required impairment tests of goodwill may result in future period write-downs. The following unaudited pro forma summary presents the Company's estimate of the effect of the adoption of SFAS No. 142 as of the beginning of the periods presented as reported income before accounting change and net income (loss) are adjusted to eliminate the amortization expense recognized in those periods related to goodwill and broadcasting licenses as goodwill and broadcasting licenses are not amortized under this new accounting standard. The pro forma amounts for the three months ended March 31, 2001 do not include any adjustments for potential write-downs of goodwill and broadcasting licenses which could result based on the performance of the required impairment tests under the provisions of SFAS No. 142. The as reported amounts for the three months ended March 31, 2002 do not include any adjustments for potential write-downs of goodwill which could result in a subsequent quarter of this year based on the performance of the required impairment tests under the provisions of SFAS No. 142.
Three Months Ended March 31, -------------------------------- 2001 2002 --------------- --------------- Pro Forma As Reported Reported income (loss) before accounting change $ (1,749) $ 5,668 Add back: amortization of goodwill, net of tax provision of $12 for the three months ended March 31, 2001 17 - Add back: amortization of broadcasting licenses, net of tax provision of $3,124 for the three months ended March 31, 2001 4,687 - --------------- --------------- Pro forma income before accounting change 2,955 5,668 Reported cumulative effect of accounting change, net of taxes (566) (138,876) --------------- --------------- Pro forma net income (loss) $ 2,389 $ (133,208) =============== =============== Net income (loss) per share - basic: Reported income (loss) before accounting change $ (0.04) $ 0.12 Amortization of goodwill, net of taxes - - Amortization of broadcasting licenses, net of taxes 0.10 - --------------- --------------- Pro forma income before accounting change - basic 0.06 0.12 Reported cumulative effect of accounting change, net of taxes (0.01) (2.98) --------------- --------------- Pro forma net income (loss) per share - basic $ 0.05 $ (2.86) =============== =============== Net income (loss) per share - diluted: Reported income (loss) before accounting change $ (0.04) $ 0.12 Amortization of goodwill, net of taxes - - Amortization of broadcasting licenses, net of taxes 0.10 - --------------- --------------- Pro forma income before accounting change - diluted 0.06 0.12 Reported cumulative effect of accounting change, net of taxes (0.01) (2.92) --------------- --------------- Pro forma net income (loss) per share - diluted $ 0.05 $ (2.80) =============== =============== Weighted average shares:
9
Three Months Ended March 31, ----------------------------------------- 2001 2001 ------------------- ------------------ Pro Forma As Reported As reported and pro forma - basic 45,250,110 46,575,279 =================== ================== As reported - diluted 45,250,110 47,613,126 =================== ================== Pro forma - diluted 45,933,172 47,613,126 =================== ==================
Effective January 1, 2002, the Company adopted SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" that addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" it removes certain assets such as deferred tax assets, goodwill and intangible assets not being amortized from its scope and retains the requirements of SFAS No. 121 regarding the recognition of impairment losses on long-lived assets held for use. SFAS No. 144 also supercedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring events and Transactions" for the disposal of a segment of a business. However, it retains the requirement in Opinion 30 to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. The Company believes that the adoption of this statement did not have a material impact on the Company's financial position, cash flows or results of operations. 2. ACQUISITION, JOINT SALES AGREEMENT AND UNAUDITED PRO FORMA SUMMARY Acquisition for the Three Months Ended March 31, 2002 On February 8, 2002, the Company acquired from WCCB-TV, Inc., a subsidiary of Bahakel Communications, Ltd., the assets of WOZN-FM (formerly WKSI-FM) and WPET-AM, serving the Greensboro, North Carolina radio market, for a purchase price of $20.8 million in cash, of which $1.0 million was paid as a deposit on November 29, 2001. On December 5, 2001, the Company began operating these stations under a time brokerage agreement. The closing of this transaction increased the Company's ownership to six radio stations in the Greensboro, North Carolina radio market. The Company incurred goodwill of $2.7 million in connection with this purchase in order to compete more effectively in the market by increasing the Company's cluster share of market revenues and market cluster ranking. The purchase price allocation for this acquisition is based on information available at this time and is subject to change. For this acquisition, the aggregate purchase price including transaction costs, was allocated as follows: (amounts in thousands) - -------------------------------------------------------------------------------- Asset Description Amount Asset Lives - -------------------------------- ------------------------- ----------------- Equipment $ 297 10 to 15 years Furniture and equipment 30 5 years ------------------------ Total tangible assets 327 ------------------------ Advertiser base 1,121 5 to 11 years Broadcasting licenses 16,690 non-amortizing Goodwill 2,662 non-amortizing ------------------------ Total intangible assets 20,473 ------------------------ Total purchase price $ 20,800 ======================== Joint Sales Agreement On February 1, 2002, the Company entered into an agreement with Classic Radio, Inc. ("Classic") to terminate, effective February 28, 2002, the KING-FM Joint Sales Agreement that was scheduled to expire on June 30, 2002. Under this agreement, the Company served as the exclusive sales agent for the Classic-owned KING-FM radio station located in Seattle Washington. The Company received all revenues from the sale of advertising time broadcast on KING-FM and was required to pay a monthly fee to Classic based upon calculations as defined in the agreement. Under the terms of the JSA, the Company was responsible for all costs incurred in selling the advertising time. Classic was responsible for all costs incurred in operating the station. 10 Unaudited Pro Forma Summary The following unaudited pro forma summary presents the consolidated results of operations as if any acquisitions which occurred during the period of January 1, 2001 through March 31, 2002, had all occurred as of January 1, 2001, after giving effect to certain adjustments, including depreciation and amortization of assets and interest expense on any debt incurred to fund acquisitions which would have been incurred had such acquisitions occurred as of January 1, 2001. For a discussion of these acquisitions, please refer to the Company's Form 10-K filed with the Securities and Exchange Commission on February 11, 2002, which should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q. 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 been made as of that date or results which may occur in the future.
THREE MONTHS ENDED ------------------ MARCH 31, --------- (amounts in thousands, except per share) (Unaudited) --------- 2001 2002 ---- ---- Pro Forma Pro Forma --------- --------- Net revenues $ 70,078 $ 74,159 =============== =============== Income (loss) before accounting change $ (2,224) $ 5,508 =============== =============== Cumulative effect of accounting change, net of taxes $ (566) $ (138,876) =============== =============== Net loss $ (2,790) $ (133,368) =============== =============== Net loss per share - basic $ (0.06) $ (2.86) =============== =============== Net loss per share - diluted $ (0.06) $ (2.80) =============== ===============
3. SENIOR DEBT The Company has a bank credit agreement (the "Bank Facility") with a syndicate of banks which provides for senior secured credit of $650.0 million consisting of: (1) a $325.0 million reducing revolving credit facility ("Revolver") and (2) a $325.0 million multi-draw term loan ("Term Loan"). The Revolver and Term Loan, which mature on September 30, 2007, each reduce on a quarterly basis beginning September 30, 2002, in quarterly amounts that vary from $12.2 million to $16.3 million for each loan. As of March 31, 2002, the Company had $325.0 million of borrowings outstanding under the Bank Facility's Term Loan, in addition to $6.2 million in an outstanding Letter of Credit. The Company used a portion of the March 5, 2002 equity offering's net proceeds (Note 8), to reduce indebtedness outstanding in the amount of $93.5 million under the Revolver. The Bank Facility requires the Company to comply with certain financial covenants and leverage ratios that are defined terms within the agreement and that include but are not limited to the following: (1) Total Debt to Operating Cash Flow, (2) Operating Cash Flow to Interest Expense, (3) Operating Cash Flow to Pro Forma Debt Service and (4) Operating Cash Flow to Fixed Charges. Management believes the Company is in compliance with all of the terms of the agreement. On February 6, 2002, the Company entered into a Second Amendment under the Bank Facility to further clarify the terms under which the Company can issue subordinated debt and to modify certain terms, including operating cash flow to the pro forma debt service ratio financial covenant. The Bank Facility also provides that any time prior to December 31, 2002 the Company may solicit incremental loans up to $350.0 million, thereby increasing the Bank Facility to a total of $1.0 billion. These incremental loans are subject to syndicate approval and are governed under the same terms as the existing Bank Facility. The Company enters into interest rate transactions with different banks to diversify its risk associated with interest rate fluctuations against the variable rate debt under the Bank Facility and to comply with certain covenants under the Bank Facility. Under these transactions, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts calculated by reference to an agreed notional principal amount against the variable debt. The total notional amount of these transactions was $155.0 million as of March 31, 2002. These agreements, with initial terms that vary from 2 years to 7 years, effectively fix the interest at rates that vary from 5.8% to 8.5% on current borrowings equal to the total notional amount. 4. SENIOR SUBORDINATED NOTES On February 27, 2002, the Company's wholly owned subsidiary, Entercom Radio, LLC, entered into an underwriting agreement to sell $150.0 million of 7.625% Senior Subordinated Notes ("Notes") due March 1, 2014. The Company completed this offering on March 5, 2002 and received net proceeds of $145.8 million. There were approximately $4.2 million in deferred offering costs recorded in connection with the sale, which are being amortized to interest expense over the life of the Notes using the effective interest rate method. The proceeds of the Notes will be 11 used to finance pending acquisitions and for general corporate purposes, including future acquisitions and working capital needs. Interest on the Notes, which are in denominations of $1,000 each, will accrue at the rate of 7.625% per annum and will be payable semi-annually in arrears on March 1 and September 1, commencing on September 1, 2002. The Company may redeem the notes on and after March 1, 2007 at an initial redemption price of 103.813% of their principal amount plus accrued interest. In addition, before March 1, 2005, the Company may redeem up to 35% of the Notes at a redemption price of 107.625% of their principal amount plus accrued interest using proceeds of specified equity offerings. The Notes are unsecured and rank junior to our senior indebtedness. In addition to the parent, Entercom Communications Corp., all of the Company's subsidiaries have fully and unconditionally guaranteed these Notes ("Subsidiary Guarantors"). Under certain covenants, the Subsidiary Guarantors are restricted from paying dividends or distributions in excess of amounts defined under the Notes and the Subsidiary Guarantors cannot incur additional indebtedness if the Leverage Ratio of Entercom Radio, LLC exceeds a specified level. 5. CONVERTIBLE PREFERRED SECURITIES On October 6, 1999, the Company sold 2,500,000 Convertible Preferred Securities, Term Income Deferrable Equity Securities ("TIDES"), including underwriters' over-allotments at an offering price of $50.00 per security. The net proceeds to the Company after deducting underwriting discounts and other offering expenses, was $120.5 million. Subject to certain deferral provisions, the trust pays quarterly calendar distributions. The first distribution was paid on December 31, 1999. The TIDES represent undivided preferred beneficial ownership interest in the assets of the trust. The trust used the proceeds to purchase from the Company an equal amount of 6.25% Convertible Subordinated Debentures due 2014. The Company owns all of the common securities issued by the trust. The trust exists for the sole purpose of issuing the common securities and the TIDES. The trust is a wholly-owned subsidiary of the Company, with the sole assets of the trust consisting of the $125.0 million aggregate principal amount of the Company's 6.25% Convertible Subordinated Debentures due September 30, 2014. The Company has entered into several contractual arrangements for the purpose of fully, irrevocably and unconditionally guaranteeing the trust's obligations under the TIDES. The holders of the TIDES have a preference with respect to each distribution and amount payable upon liquidation, redemption or otherwise over the holders of the common securities of the trust. Each TIDES is convertible into shares of the Company's Class A Common Stock at the rate of 1.1364 shares of Class A Common Stock for each TIDES. As of March 31, 2002, there were 2.5 million outstanding TIDES as no holder of the TIDES had converted their shares into Class A Common Stock. The Company may elect after October 3, 2002, to redeem the notes in accordance with the terms of the TIDES. The TIDES are convertible into Class A Common Stock at $44.00 per share. 6. DERIVATIVE AND HEDGING ACTIVITIES Effective January 1, 2001, the Company adopted SFAS No. 133 "Accounting for Derivative and Hedging Activities," that was amended by SFAS No. 137 and SFAS No. 138. SFAS No. 133 established accounting and reporting standards for (1) derivative instruments, including certain derivative instruments embedded in other contracts, which are collectively referred to as derivatives and (2) hedging activities. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item are recognized in the statement of operations. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in other comprehensive income (loss) and are recognized in the statement of operations when the hedged item affects net income (loss). SFAS No. 133 defines new requirements for designation and documentation of hedging relationships as well as on going effectiveness assessments in order to use hedge accounting under this standard. A derivative that does not qualify as a hedge is marked to fair value through the statement of operations. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes relating all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively. For those derivatives that did not qualify for hedge accounting treatment with an aggregate notional amount of $30.0 million, the Company recorded to the statement of operations for the three months ended March 31, 2001: (1) a $0.4 million loss under the cumulative effect of accounting change as an accumulated transition adjustment and (2) a $0.8 million loss under loss on derivative instruments as the adjustment for this period. For those derivatives designated as cash flow hedges that qualify for hedge accounting treatment with an aggregate notional amount of $233.0 million, the Company recorded: (1) the ineffective amount of the hedges to the statement of operations as a $0.6 million loss under the cumulative effect of accounting change as an accumulated transition adjustment and as a $0.3 million gain under loss on derivative instruments as the adjustment for this period and (2) the effective amount of the hedges to other comprehensive loss, as a $1.1 million loss as an accumulated transition adjustment and as a $2.8 million loss to unrealized loss on hedged derivatives as the adjustment for this period. 12 For the three months ended March 31, 2002, the Company recorded to the statement of operations for those derivatives that did not qualify for hedge accounting treatment with an aggregate notional amount of $30.0 million, a $0.4 million gain under gain on derivative instruments. For those derivatives designated as cash flow hedges that qualify for hedge accounting treatment with an aggregate notional amount of $125.0 million, the Company recorded the ineffective amount of the hedges to the statement of operations as a $0.2 million gain and the effective amount of the hedges to the statement of other comprehensive income as a $3.2 million gain to unrealized gain on hedged derivatives. The Company expects to record a $2.0 million gain on hedged derivatives as a reclassification to the statement of operations during the next twelve months from the transition adjustments that were recorded in other comprehensive loss. 7. COMMITMENTS AND CONTINGENCIES Pending 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 ("Royce"), subject to approval by the FCC, for a purchase price of $25.0 million. Notwithstanding the Company's efforts to pursue this transaction, Royce has been non-responsive. On July 28, 1999, the Company commenced a legal action seeking to enforce this agreement, and subsequently Royce filed a cross-complaint against the Company asking for treble damages, an injunction, attorney's fees and costs. Portions of Royce's cross-complaint have been dismissed and after a trial in November 2001, the California Superior Court ruled that the February 1996 agreement was enforceable and that the court would order specific performance of the agreement to sell KWOD. The Company is entitled to recover damages incident to the failure of Royce to honor this agreement but the trial on damages has been delayed by a bankruptcy filing by Royce. On February 6, 2002, the Bankruptcy Court granted our petition to dismiss the bankruptcy filing by Royce. On April 30, 2002 the California Superior Court issued an Interlocutory Judgment ordering, among other things (i) that Royce sign all documents necessary to transfer the assets relating to KWOD to the Company and to complete such transfer in exchange for the $25.0 million purchase price, less the amount of the Company's damages to be determined by the court, (ii) the Company to place $24.8 million in cash and a $7.5 million irrevocable standby letter of credit in an escrow account pending the transfer of the KWOD assets, the determination of the Company's damages and the outcome of Royce's appeal, and (iii) a time Brokerage Agreement commence on May 10, 2002 under which the Company will program and sell most of the broadcast time on KWOD. Royce has filed a petition in the California appeals court challenging this Interlocutory Judgment. The Court of Appeals has issued a temporary stay of the Interlocutory Judgment until May 21, 2002. The Company estimates that the impact of an unfavorable outcome will not materially impact the Company's financial position, results of operations or cash flows. The Company cannot determine if and when the transaction might occur. On December 24, 2001, the Company entered into an option agreement with Tribune Denver Radio, Inc. and Tribune Broadcasting Company ("Tribune") to acquire the assets of KOSI-FM, KKHK-FM and KEZW-AM, serving the Denver, Colorado radio market, for a purchase price of $180.0 million in cash, of which $18.0 million was paid as a deposit on January 2, 2002. On February 1, 2002, the Company began operating these stations under a time brokerage agreement. The time brokerage agreement may run for a period of up to three years at Tribune's option. Closing of this transaction may be delayed at the option of the seller, not to exceed three years, and is conditioned on the approval of the FCC. On February 12, 2002, the Company entered into an agreement with subsidiaries of Emmis Communications Corporation ("Emmis") to acquire the assets of KALC-FM, serving the Denver, Colorado radio market, for a purchase price of $88.0 million in cash, of which the Company paid $8.8 million as a deposit on February 15, 2002. On March 15, 2002, the Company began operating this station under a time brokerage agreement. This transaction closed on May 1, 2002. Upon the expected completion of the acquisition of the three radio stations described in the Tribune transaction in the previous paragraph, the Company will own four radio stations serving the Denver, Colorado radio market. Contingencies In October 1999, The Radio Music License Committee, of which the Company is a participant, filed a motion in the New York courts against Broadcast Music, Inc. commencing a rate-making proceeding, on behalf of the radio industry, seeking a determination of fair and reasonable industry-wide license fees. The Company is currently operating under interim license agreements for the period commencing January 1, 1997 at the rates and terms reflected in prior agreements. The Company's management estimates that the impact of an unfavorable outcome of the motion will not materially impact the financial position, results of operations or cash flows of the Company. In December 2000, the U.S. Copyright Office, under the Digital Millennium Copyright Act, issued a final rule that AM and FM radio broadcast signals transmitted simultaneously over a digital communications network, are subject to the sound recording copyright owner's exclusive right of performance. This would result in the imposition of license fees for Internet streaming and other digital media. As a result of this decision, the Company is participating in an arbitration proceeding at the U.S. Copyright Office to determine the amount of the fees that are due from the use of sound recordings in Internet streaming. In February 2002, the arbitration panel issued its decision setting the license fees for the use of sound recordings in Internet streaming. A number of broadcasters have petitioned the U.S. Copyright Office for a review of this decision. The Company, along with other broadcasters and the National Association of Broadcasters ("NAB") commenced on January 25, 2001 a legal action in the U.S. District Court of Philadelphia, 13 Pennsylvania, seeking declaratory relief as to the impact of the final rule of the Copyright Office. The court in this action on August 1, 2001, upheld the Copyright Office decision. The Company, along with other broadcasters and the NAB, on September 30, 2001, filed an appeal of this decision. This appeal is pending. However, the Company cannot determine the likelihood of success. The Company's management believes that the impact of an unfavorable determination will not materially impact the financial position, results of operations or cash flows of the Company. 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. 8. SHAREHOLDERS' EQUITY On February 27, 2002, the Company entered into an underwriting agreement to sell 3,500,000 shares of Class A Common Stock. The Company completed this offering on March 5, 2002 and sold 3,500,000 shares of Class A Common Stock at a price per share of $51.25. The underwriting agreement included an option by the underwriters to purchase within 30 days up to 525,000 additional shares of Class A Common Stock to cover over-allotments. On March 6, 2002, the underwriters exercised their option to purchase 525,000 shares of Class A Common Stock at a price per share of $51.25 and the Company completed this offering on March 8, 2002. The net proceeds to the Company for both offerings, after deducting underwriting discounts and other offering expenses, were approximately $196.5 million. The Company used a portion of these proceeds in the amount of $93.5 million to reduce the Company's outstanding indebtedness under the Bank Facility's Revolver. During the three months ended March 31, 2001 and 20021, the Company issued non-qualified options to purchase 788,500 shares and 1,141,932 shares, respectively, of its Class A Common Stock at prices ranging from $40.00 to $43.53 and $48.00 to $55.61, respectively, 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 and the grant of performance-based options, the Company recognized non-cash stock-based compensation expense in the amount of $132,000 and $102,000 for the three months ended March 31, 2001 and 2002, respectively. In connection with awards in 1999 and 2000 of Restricted Stock which vest ratably on each of the next four anniversary dates of the grant, the Company recognized non-cash stock-based compensation expense in the amount of $32,000 for each of the three months ended March 31, 2001 and 2002, respectively. 9. NET INCOME PER SHARE The net income per share ("EPS") is calculated in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share" which requires presentation of basic net income per share and diluted net income per share. Basic net income per share excludes dilution and is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income per share is computed in the same manner as basic net income after assuming issuance of common stock for all potentially dilutive equivalent shares, which includes (1) stock options (using the treasury stock method) and (2) the Term Income Deferrable Equity Securities ("TIDES") after eliminating from net income the interest expense, net of taxes, on the TIDES. Anti-dilutive instruments are not considered in this calculation. For the three months ended March 31, 2001, the effect of the stock options and the effect of the TIDES, which is convertible into 2,841,000 shares of Class A Common Stock, were not included in the calculation of net loss per share as they were anti-dilutive. For the three months ended March 31, 2002, stock options were included in the calculation of income before accounting change and net loss per share as they were dilutive and the TIDES, which are convertible into 2,841,000 shares of Class A Common Stock, were not included in the calculation of net loss per share as their effect were anti-dilutive.
THREE MONTHS ENDED ------------------ (amounts in thousands, except share and per share data) MARCH 31, 2001 MARCH 31, 2002 -------------- -------------- Loss Shares EPS Income/(Loss) Shares EPS ---- ------ --- ------------ ------ --- Basic net loss per share: Income (loss) before accounting change $ (1,749) 45,250,110 $ (0.04) $ 5,668 46,575,279 $ 0.12 Cumulative effect of accounting change, net of taxes (566) - (0.01) (138,876) - (2.98) --------- ---------- -------- ----------- ---------- -------- Net loss $ (2,315) 45,250,110 $ (0.05) $ (133,208) 46,575,279 $ (2.86) ========= ======== =========== ======== Impact of options - 1,037,847 ---------- ---------- Diluted net loss per share: Income (loss) before accounting change $ (1,749) 45,250,110 $ (0.04) $ 5,668 47,613,126 $ 0.12 Cumulative effect of accounting change, net of taxes (566) - (0.01) $ (138,876) - $ (2.92) --------- ---------- -------- ----------- ---------- -------- Net loss $ (2,315) 45,250,110 $ (0.05) $ (133,208) 47,613,126 $ (2.80) ========= ========== ======== =========== ========== ========
14 Options to purchase 3,457,500 shares of common stock were outstanding as of March 31, 2001, but were excluded from the computation of diluted net loss per share as their effect were anti-dilutive. Options to purchase 82,678 shares of common stock at a range of $51.38 to $57.63 were outstanding as of March 31, 2002, but were excluded from the computation of diluted net loss per share as the options' exercise price were greater than the average market price of the common stock for the three months ended March 31, 2002. 10. GUARANTOR FINANCIAL INFORMATION Entercom Radio, LLC ("Radio"), a wholly-owned subsidiary of Entercom Communications Corp., is the borrower of the Company's senior debt under the Bank Facility, described in Note 3, and is the borrower of the Company's 7.625% Senior Subordinated Notes, described in Note 4, with Entercom Communications Corp. and subsidiaries as the guarantor. Radio holds the various subsidiary companies that own the operating assets, including broadcasting licenses, permits, authorizations and cash royalties. Entercom Communications Capital Trust, the holder of the TIDES, described in Note 5, is a wholly-owned subsidiary of Entercom Communications Corp and is the holder of 6.25% Convertible Subordinated Debentures due from Entercom Communications Corp. Under the bank facility, Radio is permitted to make distributions to Entercom Communications Corp. in an amount that is required to pay Entercom Communications Corp.'s reasonable overhead costs, other costs associated with conducting the operations of Radio and interest on the TIDES. Under the Notes, Radio is permitted to make distributions to Entercom Communications Corp. in an amount, as defined, that is required to pay Entercom Communications Corp's overhead costs and other costs associated with conducting the operations of Radio and Entercom Communications Corp's payment of interest on the TIDES. The following tables set forth condensed consolidating financial information for Entercom Communications Corp., Entercom Communications Capital Trust and Entercom Radio, LLC, as of December 31, 2001 and March 31, 2002 and for the three months ended March 31, 2001 and 2002.
Balance Sheets as of December 31, 2001 --------------------------------------------------------------------------- Entercom Entercom Communications Communications Capital Entercom Corp. Trust Radio, LLC Eliminations Total -------------- -------------- -------------- ------------ ------------- ASSETS: Current assets $ 5,127 $ - $ 82,653 $ - $ 87,780 Net property and equipment 956 - 91,376 - 92,332 Radio broadcasting licenses and other intangibles -Net - - 1,232,612 - 1,232,612 Other long-term assets 468,238 128,866 24,704 (595,792) 26,016 -------------- -------------- -------------- ------------ ------------- Total assets $ 474,321 $ 128,866 $ 1,431,345 $ (595,792) $ 1,438,740 ============== ============== ============== ============ ============= LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities $ 9,732 $ - $ 43,849 $ - $ 53,581 Long-term debt - - 363,934 - 363,934 Other long-term liabilities 854 3,866 602,550 (466,926) 140,344 -------------- -------------- -------------- ------------ ------------- Total liabilities 10,586 3,866 1,010,333 (466,926) 557,859 -------------- -------------- -------------- ------------ ------------- TIDES 128,866 125,000 - (128,866) 125,000 -------------- -------------- -------------- ------------ ------------- Shareholders' equity Preferred stock - - - - - Class A and B common stock 453 - - - 453 Additional paid-in capital 751,803 - - - 751,803 Retained earnings (deficit) (417,186) - 422,604 - 5,418 Unearned compensation (201) - - - (201) Accumulated other comprehensive loss - - (1,592) - (1,592) -------------- -------------- -------------- ------------ ------------- Total shareholders' equity 334,869 - 421,012 - 755,881 -------------- -------------- -------------- ------------ ------------- Total liabilities and shareholders' equity $ 474,321 $ 128,866 $ 1,431,345 $ (595,792) $ 1,438,740 ============== ============== ============== ============ =============
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Statements of Operations for the Three Months Ended March 31, 2001 --------------------------------------------------------------------------- Entercom Entercom Communications Communications Capital Entercom Corp. Trust Radio, LLC Eliminations Total -------------- -------------- -------------- ------------ ------------- NET REVENUES $ 131 $ 1,953 $ 69,455 $ (2,084) $ 69,455 -------------- -------------- -------------- ------------ ------------- OPERATING EXPENSES (INCOME): Station operating expenses - - 46,491 (131) 46,360 Depreciation and amortization 251 - 11,029 - 11,280 Corporate general and administrative expenses 3,308 - 22 - 3,330 Net (gain) loss on sale of assets (6) - 29 - 23 -------------- -------------- -------------- ------------ ------------- Total operating expenses 3,553 57,571 (131) 60,993 -------------- -------------- -------------- ------------ ------------- OPERATING INCOME (LOSS) (3,422) 1,953 11,884 (1,953) 8,462 -------------- -------------- -------------- ------------ ------------- OTHER EXPENSE (INCOME): Interest expense - - 8,127 - 8,127 Financing cost of TIDES 1,953 1,953 - (1,953) 1,953 Interest income - - (95) - (95) Equity loss from unconsolidated affiliate - - 850 - 850 Net loss on derivative instruments - - 478 - 478 -------------- -------------- -------------- ------------ ------------- Total other expense 1,953 1,953 9,360 (1,953) 11,313 -------------- -------------- -------------- ------------ ------------- INCOME (LOSS) BEFORE INCOME TAXES AND ACCOUNTING CHANGE (5,375) - 2,524 - (2,851) INCOME TAX PROVISION (BENEFIT) (2,150) - 1,048 - (1,102) -------------- -------------- -------------- ------------ ------------- INCOME (LOSS) BEFORE ACCOUNTING CHANGE (3,225) - 1,476 - (1,749) Cumulative effect of accounting change, net of taxes of $377 - - (566) - (566) -------------- -------------- -------------- ------------ ------------- NET INCOME (LOSS) $ (3,225) $ - $ 910 $ - $ (2,315) ============== ============== ============== ============ ============= Statements of Cash Flows for the Three Months Ended March 31, 2001 --------------------------------------------------------------------------- Entercom Entercom Communications Communications Capital Entercom Corp. Trust Radio, LLC Eliminations Total -------------- -------------- -------------- ------------ ------------- OPERATING ACTIVITIES: Net cash provided by operating activities $ 112 $ - $ 22,116 $ - $ 22,228 -------------- -------------- -------------- ------------ ------------- INVESTING ACTIVITIES: Additions to property and equipment (135) - (3,893) - (4,028) Proceeds from sale of property, equipment and other assets - - 106 - 106 Deferred charges and other assets - - (333) - (333) Purchase of investments - - (2,804) - (2,804) Station acquisition deposits and costs - - (74) - (74) -------------- -------------- -------------- ------------ ------------- Net cash used in investing activities (135) - (6,998) - (7,133) -------------- -------------- -------------- ------------ ------------- FINANCING ACTIVITIES: Proceeds from issuance of long-term debt - - 3,078 - 3,078 Payments of long-term debt - - (19,004) - (19,004) Proceeds from issuance of common stock related to incentive plans - - 145 - 145 Proceeds from exercise of stock options - - 516 - 516 -------------- -------------- -------------- ------------ ------------- Net cash used in financing activities - - (15,265) - (15,265) -------------- -------------- -------------- ------------ -------------
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Statements of Cash Flows for the Three Months Ended March 31, 2001 --------------------------------------------------------------------------- Entercom Entercom Communications Communications Capital Entercom Corp. Trust Radio, LLC Eliminations Total -------------- -------------- -------------- ------------ ------------- Net decrease in cash and cash equivalents (23) - (147) - (170) Cash and cash equivalents, beginning of period 24 - 13,233 - 13,257 -------------- -------------- -------------- ------------ ------------- Cash and cash equivalents, end of period $ 1 $ - $ 13,086 $ - $ 13,087 ============== ============== ============== ============ ============= Balance Sheets as of March 31, 2002 --------------------------------------------------------------------------- Entercom Entercom Communications Communications Capital Entercom Corp. Trust Radio, LLC Eliminations Total -------------- -------------- -------------- ------------ ------------- ASSETS: Current assets $ 3,828 $ - $ 341,373 $ - $ 345,201 Net property and equipment 903 - 89,900 - 90,803 Radio broadcasting licenses and other intangibles -Net - - 1,020,504 - 1,020,504 Other long-term assets 664,805 128,866 58,134 (792,528) 59,277 -------------- -------------- -------------- ------------ ------------- Total assets $ 669,536 $ 128,866 $ 1,509,911 $ (792,528) $ 1,515,785 ============== ============== ============== ============ ============= LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities $ 9,565 $ - $ 60,206 $ - $ 69,771 Long-term debt - - 436,712 - 436,712 Other long-term liabilities 920 3,866 716,901 (663,662) 58,025 -------------- -------------- -------------- ------------ ------------- Total liabilities 10,485 3,866 1,213,819 (663,662) 564,508 -------------- -------------- -------------- ------------ ------------- TIDES 128,866 125,000 - (128,866) 125,000 -------------- -------------- -------------- ------------ ------------- Shareholders' equity Preferred stock - - - - - Class A and B common stock 494 - - - 494 Additional paid-in capital 952,444 - - - 952,444 Retained earnings (deficit) (422,584) - 294,794 - (127,790) Unearned compensation (169) - - - (169) Accumulated other comprehensive income - - 1,298 - 1,298 -------------- -------------- -------------- ------------ ------------- Total shareholders' equity 530,185 - 296,092 - 826,277 -------------- -------------- -------------- ------------ ------------- Total liabilities and shareholders' equity $ 669,536 $ 128,866 $ 1,509,911 $ (792,528) $ 1,515,785 ============== ============== ============== ============ ============= Statements of Operations for the Three Months Ended March 31, 2002 --------------------------------------------------------------------------- Entercom Entercom Communications Communications Capital Entercom Corp. Trust Radio, LLC Eliminations Total NET REVENUES $ 134 $ 1,953 $ 74,159 $ (2,087) $ 74,159 -------------- -------------- -------------- ------------ ------------- OPERATING EXPENSES (INCOME): Station operating expenses - - 48,293 (134) 48,159 Depreciation and amortization 261 - 3,130 - 3,391 Corporate general and administrative expenses 3,332 - 19 - 3,351 Net expense from time brokerage agreement fees - - 2,116 - 2,116 Net gain on sale of assets - - (9) - (9) -------------- -------------- -------------- ------------ ------------- Total operating expenses 3,593 53,549 (134) 57,008 -------------- -------------- -------------- ------------ ------------- OPERATING INCOME (LOSS) (3,459) 1,953 20,610 (1,953) 17,151 -------------- -------------- -------------- ------------ ------------- OTHER EXPENSE (INCOME): Interest expense - - 5,588 - 5,588 Financing cost of TIDES 1,953 1,953 - (1,953) 1,953
17
Statements of Operations for the Three Months Ended March 31, 2002 --------------------------------------------------------------------------- Entercom Entercom Communications Communications Capital Entercom Corp. Trust Radio, LLC Eliminations Total Interest income (14) - (248) - (262) Equity loss from unconsolidated affiliate - - 974 - 974 Net loss on derivative instruments - - (607) - (607) -------------- -------------- -------------- ------------ ------------- Total other expense 1,939 1,953 5,707 (1,953) 7,646 -------------- -------------- -------------- ------------ ------------- INCOME (LOSS) BEFORE INCOME TAXES AND ACCOUNTING CHANGE (5,398) - 14,903 - 9,505 INCOME TAXES PROVISION (BENEFIT) (2,159) - 5,996 - 3,837 -------------- -------------- -------------- ------------ ------------- INCOME (LOSS) BEFORE ACCOUNTING CHANGE (3,239) - 8,907 - 5,668 Cumulative effect of accounting change, net of taxes of $92,584 - - (138,876) - (138,876) -------------- -------------- -------------- ------------ ------------- NET LOSS $ (3,239) $ - $ (129,969) $ - $ (133,208) ============== ============== ============== ============ ============= Statements of Cash Flows for the Three Months Ended March 31, 2002 --------------------------------------------------------------------------- Entercom Entercom Communications Communications Capital Entercom Corp. Trust Radio, LLC Eliminations Total -------------- -------------- -------------- ------------ ------------- OPERATING ACTIVITIES: Net cash provided by operating activities $ 84 $ - $ 20,078 $ - $ 20,162 -------------- -------------- -------------- ------------ ------------- INVESTING ACTIVITIES: Additions to property and equipment (15) - (1,094) - (1,109) Proceeds from sale of property, equipment and other assets - - 9 - 9 Purchases of radio station assets - - (20,800) - (20,800) Deferred charges and other assets - - (25) - (25) Purchase of investments - - (10) - (10) Station acquisition deposits and costs - - (26,181) - (26,181) Net inter-company loans (196,567) - 196,567 - - -------------- -------------- -------------- ------------ ------------- Net cash (used in) provided by investing activities (196,582) - 148,466 - (48,116) -------------- -------------- -------------- ------------ ------------- FINANCING ACTIVITIES: Proceeds from issuance of long-term debt - - 195,500 - 195,500 Net proceeds from stock offering 196,498 - - - 196,498 Payments on long-term debt - - (108,504) - (108,504) Deferred financing expenses related to bank facility and senior subordinated notes - - (4,558) - (4,558) Proceeds from issuance of common stock related to incentive plans - - 158 - 158 Proceeds from exercise of stock options - - 3,281 - 3,281 -------------- -------------- -------------- ------------ ------------- Net cash provided by financing activities 196,498 - 85,877 - 282,375 -------------- -------------- -------------- ------------ ------------- Net decrease in cash and cash equivalents - - 254,421 - 254,421 Cash and cash equivalents, beginning of period 1 - 10,750 - 10,751 -------------- -------------- -------------- ------------ ------------- Cash and cash equivalents, end of period $ 1 $ - $ 265,171 $ - $ 265,172 ============== ============== ============== ============ =============
11. SUBSEQUENT EVENTS 18 On April 24, 2002, the Company announced that the agreement with The Baseball Club of Seattle, L.P. for the rights to broadcast the Seattle Mariners Baseball Club on the Company's Seattle radio station will not be renewed upon expiration of the agreement on October 31, 2002. On April 26, 2002, the Company entered into an asset purchase agreement with ABC, Inc. to sell the assets of KQAM-AM, serving the Wichita, Kansas radio market, for $2.0 million in cash. Closing of this transaction, which is conditional upon the approval of the FCC, is expected in the third quarter of 2002 and will decrease the Company's ownership to six radio stations in the Wichita, Kansas radio market. On April 30, 2002 the California Superior Court issued an Interlocutory Judgment ordering, among other things (i) that Royce sign all documents necessary to transfer the assets relating to KWOD to the Company and to complete such transfer in exchange for the $25.0 million purchase price, less the amount of the Company's damages to be determined by the court, (ii) the Company to place $24.8 million in cash and a $7.5 million irrevocable standby letter of credit in an escrow account pending the transfer of the KWOD assets, the determination of the Company's damages and the outcome of Royce's appeal, and (iii) a time Brokerage Agreement commence on May 10, 2002 under which the Company will program and sell most of the broadcast time on KWOD. Royce has filed a petition in the California appeals court challenging this Interlocutory Judgment. The Court of Appeals has issued a temporary stay of the Interlocutory Judgment until May 21, 2002. The Company estimates that the impact of an unfavorable outcome will not materially impact the Company's financial position, results of operations or cash flows. The Company cannot determine if and when the transaction might occur. On May 1, 2002, the Company acquired the assets of KALC-FM in Denver, Colorado, from Emmis for $88.0 million in cash, of which $8.8 million was paid as a deposit on February 15, 2002. Upon the expected completion of the acquisition of the three radio stations described in the Tribune transaction under Note 7, the Company will own four radio stations serving the Denver, Colorado radio market. On May 2, 2002, the Board of Directors approved the appointment of David J. Field, currently President and Chief Operating Officer, as Chief Executive Officer. This title was formerly held by the Chairman of the Board, Joseph M. Field, who will continue as Chairman of the Board. 19 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This report contains, in addition to historical information, statements by us with regard to our expectations as to financial results and other aspects of our business that involve risks and uncertainties and may constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements reflect our current views and are based on certain assumptions. Actual results could differ materially from those currently anticipated as a result of a number of factors, including, but not limited to, the following: (1) the highly competitive nature of, and new technologies in, the radio broadcasting industry; (2) the risks associated with our acquisition strategy generally; (3) the control of us by Joseph M. Field and members of his immediate family; (4) our vulnerability to changes in federal legislation or regulatory policies; (5) our dependence upon our Seattle radio stations; and (6) those matters discussed below. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. You can identify these forward-looking statements by our use of words such as "anticipates," "believes," "continues," "expects," "intends," "likely," "may," "opportunity," "plans," "potential," "project," "will," and similar expressions to identify forward-looking statements, whether in the negative or the affirmative. We cannot guarantee that we actually will achieve these plans, intentions or expectations. These forward-looking statements are subject to risks, uncertainties and other factors, some of which are beyond our control, which could cause actual results to differ materially from those forecast or anticipated in such forward-looking statements. General We are one of the five largest radio broadcasting companies in the United States based upon 2001 revenues pro forma for completed and pending acquisitions as derived from the latest edition of BIA Consulting, Inc. We operate in 19 markets, including Boston, Seattle, Denver, Portland, Sacramento, Kansas City, Milwaukee, Norfolk, New Orleans, Memphis, Buffalo, Greensboro, Rochester, Greenville/Spartanburg, Wilkes-Barre/Scranton, Wichita, Madison, Gainesville/Ocala and Longview/Kelso (WA). 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: (1) a station's audience share in the demographic groups targeted by advertisers, as measured principally by quarterly reports issued by the Arbitron Ratings Company; (2) the number of radio stations in the market competing for the same demographic groups; and (3) the supply of and demand for radio advertising time. 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 audiences. However, because Arbitron reports ratings quarterly, any changed ratings and therefore its effect on advertising revenues tend to lag behind the incurrence of advertising and promotional spending. We include revenues recognized under a time brokerage agreement or a 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. In the following analysis, we discuss broadcast cash flow, broadcast cash flow margin and after tax cash flow. Broadcast cash flow consists of operating income before depreciation and amortization, net expense (income) from time brokerage agreement fees, corporate general and administrative expenses and gain or loss on sale of assets. Broadcast cash flow margin represents broadcast cash flow as a percentage of net revenues. After tax cash flow consists of income (loss) before accounting change, plus the following: depreciation and amortization, non-cash compensation expense (which is otherwise included in corporate general and administrative expenses), deferred taxes, the elimination, net of current taxes, of equity loss from unconsolidated affiliate, any gains or losses on sale of assets, investments and derivative instruments. Although broadcast cash flow, broadcast cash flow margin and 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, broadcast cash flow margin and after tax cash flow in isolation or as substitutes for net income, 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, broadcast cash flow margin and 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. 20 We calculate same station growth by comparing the performance of stations operated by us throughout a relevant period to the comparable performance in the prior year's corresponding period, adjusted for significant changes to sports contracts. "Same station broadcast cash flow margin" is the broadcast cash flow margin of the stations included in our same station calculations. Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the amount of reported revenues and expenses during the reporting period. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different circumstances or using different assumptions. We consider the following policies to be important in understanding the judgments involved in preparing our financial statements and the uncertainties that could affect our results of operations, financial condition or cash flows. Revenue Recognition We recognize revenue from the sale of commercial broadcast time to advertisers when the commercials are broadcast, subject to meeting certain conditions such as persuasive evidence that an arrangement exists, the price is fixed and determinable, and collection is reasonably assured. These criteria are generally met at the time an advertisement is broadcast, and the revenue is recorded net of advertising agency commission. Allowance for Doubtful Accounts We must make estimates to our allowance for doubtful accounts for estimated losses resulting from our customers' inability to make payments. We specifically review historical write-off activity by market, large customer concentrations, customer creditworthiness and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, then additional allowances may be required. Goodwill and Intangible Assets We have made acquisitions in the past for which a significant amount of the purchase price was allocated to broadcast licenses, goodwill and other intangible assets. As of December 31, 2001, we had approximately $1.2 billion in intangible assets, which represented approximately 86% of our total assets. The fair value of these assets is dependent on the performance of our stations. In assessing the recoverability of our intangible assets, we must conduct annual impairment testing required by SFAS No. 142, which requires us to determine the fair value and could require us to write down the carrying value of our broadcasting licenses and goodwill and other intangible assets in future periods. We completed the transitional non-amortizing intangible asset impairment test for broadcasting licenses and recorded to the statement of operations, a $138.9 million impairment charge, net of a deferred tax benefit of $92.6 million, under the cumulative effect of accounting change for the three months ended March 31, 2002. As of March 31, 2002, we had approximately $1.0 billion in intangible assets, which represents approximately 67% of our total assets. Contingencies and Litigation On an on-going basis, we evaluate our exposure related to contingencies and litigation and record a liability when available information indicates that a liability is probable and estimable. We also disclose significant matters that are reasonably possible to result in a loss or are probable but not estimable. Estimation of Effective Tax Rates We evaluate our effective tax rates regularly and adjust rates when appropriate based on currently available information relative to statutory rates, apportionment factors and the applicable taxable income in the jurisdictions in which we operate, among other factors. Recent Events On December 24, 2001, we entered into an agreement to acquire the assets of KOSI-FM, KKHK-FM and KEZW-AM from Tribune Denver Radio, Inc., serving the Denver, Colorado radio market, for a purchase price of $180.0 million in cash, of which $18.0 million was paid as a deposit on January 2, 2002. On February 1, 2002, we began operating these stations under a time brokerage agreement. The time brokerage agreement may run for a period of 21 up to three years at the seller's option. Closing of this transaction may be delayed at the option of the seller, not to exceed three years, and is conditioned on the approval of the FCC. Effective January 1, 2002, we adopted SFAS No. 142, "Goodwill and Other Intangible Assets" that requires that goodwill and certain other intangibles will not be amortized. Amortization of costs associated with the acquisition of radio stations has historically been a significant factor in determining our overall profitability. However, with the adoption of SFAS No. 142, the impact of amortization is expected to be greatly reduced in 2002 and in future periods. Effective on January 1, 2002, we discontinued the amortization of broadcasting licenses and goodwill under the provisions of SFAS No. 142. The amortization expense for broadcasting licenses and goodwill for the three months ended March 31, 2001 was $7.9 million. In addition, under the provisions of SFAS No.142 we completed the transitional non-amortizing intangible asset impairment test for broadcasting licenses and recorded to the statement of operations, a $138.9 million charge, net of a deferred tax benefit, under the cumulative effect of accounting change for the three months ended March 31, 2002. On February 1, 2002, we entered into an agreement effective February 28, 2002, to terminate our joint sales agreement for KING-FM in the Seattle, Washington radio market, that was due to expire on June 30, 2002. On February 8, 2002, we acquired from WCCB-TV, Inc., a subsidiary of Bahakel Communications, Ltd., the assets of WOZN-FM (formerly WKSI-FM) and WPET-AM, serving the Greensboro, North Carolina radio market, for a purchase price of $20.8 million in cash, of which $1.0 million was paid as a deposit on November 29, 2001. On December 5, 2001, we began operating these stations under a time brokerage agreement. The closing of this transaction increases our ownership to six radio stations in the Greensboro, North Carolina radio market. We recorded goodwill of $2.6 million in connection with this purchase in order to compete more effectively in the market by increasing our cluster share of market revenues and market cluster ranking. On February 12, 2002, we entered into an agreement with subsidiaries of Emmis Communications Corporation to acquire the assets of KALC-FM, serving the Denver, Colorado radio market, for a purchase price of $88.0 million in cash, of which we paid $8.8 million as a deposit on February 15, 2002. On March 15, 2002, we began operating this station under a time brokerage agreement. This transaction closed on May 1, 2002. On February 27, 2002, we entered into an underwriting agreement to sell 3,500,000 shares of Class A Common Stock. We completed this offering on March 5, 2002 and sold 3,500,000 shares of Class A Common Stock at a price per share of $51.25. The underwriting agreement included an option by the underwriters to purchase within 30 days up to 525,000 additional shares of Class A Common Stock to cover over-allotments. On March 6, 2002, the underwriters exercised their option to purchase 525,000 shares of Class A Common Stock at a price per share of $51.25 and we completed this offering on March 8, 2002. The net proceeds to us for both offerings, after deducting underwriting discounts and other offering expenses, were approximately $196.5 million. We used a portion of these proceeds in the amount of $93.5 million to reduce our outstanding indebtedness under the Bank Facility's Revolver. On February 27, 2002, we entered into an underwriting agreement to sell $150.0 million of 7.625% senior subordinated notes due March 1, 2014. We completed this offering on March 5, 2002 and received net proceeds of $145.8 million. There were approximately $4.2 million in deferred offering costs recorded in connection with the sale, which are being amortized to interest expense over the life of the notes using the effective interest rate method. The proceeds of the notes will be used to finance pending acquisitions and for general corporate purposes, including future acquisitions and working capital. Results of Operations Our results of operations represent the operations of the radio stations owned or operated pursuant to time brokerage agreements or joint sales agreements during the relevant periods. The following is a discussion of our results of operations for the three months ended March 31, 2002 and March 31, 2001, and should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q. Several factors affected our results of operations for the three months ended March 31, 2002 that did not affect the corresponding period of the prior year. During the three months ended March 31, 2002: (1) we began operating four stations in Denver under two different time brokerage agreements that contributed to higher net revenues, station operating expenses and net expense from time brokerage fees; (2) we acquired two radio stations in Greensboro on February 8, 2002, that we began operating under a time brokerage agreement on December 5, 2001, for approximately $20.8 million, that contributed to higher net revenues, station operating expenses, depreciation and amortization and interest expense; (3) we terminated effective February 28, 2002, our joint sales agreement for KING-FM in Seattle, that contributed to lower net revenues and station operating expenses; (4) we did not renew our rights to broadcast the Boston Celtics nor sell the advertising in these broadcasts under a contract that expired during the second quarter of 2001, that contributed to lower net revenues and lower station operating expenses; and (5) we received net proceeds of $196.5 million from an equity offering and net proceeds of $145.8 million from a senior subordinated note offering, the proceeds of which were used for reducing outstanding indebtedness under our Revolver, for investing purposes until such time as the funds will be needed for pending and future acquisitions, and for general corporate purposes. 22 Three months ended March 31, 2002 compared to the three months ended March 31, 2001 Net Revenues: Net revenues increased 6.8% to $74.2 million for the three months ended March 31, 2002 from $69.5 million for the three months ended March 31, 2001. On a same station basis, net revenues increased 2.5% to $70.5 million from $68.8 million. Same station net revenues increased due to a marginal improvement in the advertising sector of the economy and strong performance of our market clusters which exceeded their combined market growth rates. The overall increase in net revenues for the three months ended March 31, 2002 was affected by acquisitions of stations during this period with net revenues of $3.7 million. Station Operating Expenses: Station operating expenses increased 3.9% to $48.2 million for the three months ended March 31, 2002 from $46.4 million for the three months ended March 31, 2001. On a same station basis, station operating expenses increased 0.9% to $45.7 million from $45.3 million. Same station operating expenses marginally increased due to an increase in same station net revenues for the reasons described above, offset by cost reduction efforts. The overall increase in station operating expenses for the three months ended March 31, 2002 was affected during this period by acquisitions of stations with station operating expenses of $2.2 million. Depreciation and Amortization Expenses: Depreciation and amortization expenses decreased 69.9% to $3.4 million for the three months ended March 31, 2002 from $11.3 million for the three months ended March 31, 2001. The decrease was mainly attributable to the adoption on January 1, 2002 of SFAS No. 142, "Goodwill and Other Intangible Assets," as described more fully in the footnotes to the condensed financial statements under Recent Accounting Pronouncements. Adoption of this accounting standard had the impact of eliminating our amortization expense for goodwill and broadcasting licenses. For comparison purposes, for the three months ended March 31, 2001, we recorded amortization expense for goodwill and broadcasting licenses of $0.1 million and $7.8 million, respectively. We also completed the transitional non-amortizing intangible asset impairment test for broadcasting licenses and recorded to the statement of operations, a $138.9 million charge, net of a deferred tax benefit of $92.6 million, under the cumulative effect of accounting change. Corporate General and Administrative Expenses: Corporate general and administrative expenses increased 0.1% to $3.4 million for the three months ended March 31, 2002 from $3.3 million for the three months ended March 31, 2001. These expenses remained relatively flat due to certain cost containment measures, despite an increase in the number of stations owned or operated during this period as compared to the prior period. Also included is non-cash stock-based compensation expense of $0.1 million and $0.2 million for the three months ended March 31, 2002 and 2001, respectively. Interest Expense: Interest expense, including the financing cost of our 6.25% Convertible Preferred Securities Term Income Deferrable Equity Securities (TIDES), decreased 25.2% to $7.5 million for the three months ended March 31, 2002 from $10.1 million for the three months ended March 31, 2001. The decrease in interest expense was mainly attributable to (1) the expiration on January 11, 2002 of derivatives designated as cash flow hedges with a total notional amount of $108.0 million that effectively fixed our variable rate debt at 6.3%; (2) a decrease of $93.5 million in our indebtedness outstanding on March 5, 2002 from a portion of the cash proceeds from our equity offering; (3) a reduction in interest rates subsequent to the three months ended March 31, 2001, offset by the increase in interest expense from the $150.0 million 7.625% Senior Subordinated Notes issued on March 5, 2002. Income (Loss) Before Income Taxes and Accounting Change: Income before income tax and accounting change increased to $9.5 million for the three months ended March 31, 2002 from a loss before income taxes and accounting change of $2.9 million for the three months ended March 31, 2001. The increase in the income before income taxes and accounting change is mainly attributable to: (1) the impact of eliminating our amortization expense for goodwill and broadcasting licenses of $7.9 million and (2) a reduction in interest expense as a result of the factors described above under interest expense. Net Loss: Net loss increased to $133.2 million for the three months ended March 31, 2002 from $2.3 million for the three months ended March 31, 2001. The increase in net loss is mainly attributable to (1) the factors described above, net of taxes; and (2) a $138.9 million impairment charge, net of a deferred tax benefit, under the cumulative effect of accounting change as an accumulated transition adjustment attributable to the adoption on January 1, 2002 of SFAS No. 142, "Goodwill and Other Intangible Assets." Other Data Broadcast Cash Flow: Broadcast cash flow increased 12.6% to $26.0 million for the three months ended March 31, 2002 from $23.1 million for the three months ended March 31, 2001. On a same station basis, broadcast cash flow increased 5.6% to $24.8 million from $23.5 million for the same reasons that same station net revenues increased, which are described above under net revenues. The increase in broadcast cash flow for the three months ended March 31, 2002 was affected by acquisitions of stations during this period with broadcast cash flow of $1.5 million. Broadcast Cash Flow Margin: The broadcast cash flow margin increased to 35.1% for the three months ended March 31, 2002 from 33.3% for the three months ended March 31, 2001. On a same station basis, our broadcast cash flow margin increased to 35.2% from 34.1%. The increase is primarily attributable to the same reasons that same station net revenues and same station broadcast cash flow increased, which are described above. 23 After Tax Cash Flow: After tax cash flow increased 11.5% to $16.8 million for the three months ended March 31, 2002 from $15.1 million for the three months ended March 31, 2001. The increase in after tax cash flow was positively affected by: (1) the increase in broadcast cash flow for the reasons described under net revenues; (2) the decrease in interest expense, net of tax, for the reasons described above under interest expense; and (3) the tax benefits from the purchase of radio station assets in February 2002. Liquidity and Capital Resources We use a significant portion of our capital resources to consummate acquisitions. These acquisitions are funded from one or a combination of the following sources: (1) our bank facility (described below); (2) the sale of securities; (3) the swapping of our radio stations in transactions which qualify as "like-kind" exchanges under Section 1031 of the Internal Revenue Code and (4) internally-generated cash flow. Net cash flows provided by operating activities were $20.2 million and $22.2 million for the three months ended March 31, 2002 and 2001, 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 radio stations during those periods. For the three months ended March 31, 2002, cash flows provided by operating activities were positively affected by: (1) an improvement in net revenues, net of station operating expenses; (2) a reduction in trade accounts receivables due to the seasonality of the business as first quarter net revenues are typically lower than the prior year's fourth quarter net revenues, offset by an increase in trade accounts receivable as a result of new stations owned or operated by us during this period. For the three months ended March 31, 2001, cash flows were positively affected by a decrease of $16.2 million in outstanding accounts receivable due to the seasonality of the business and to improved collection efforts. Net cash flows used in investing activities were $48.1 million and $7.1 million for the three months ended March 31, 2002 and 2001, respectively. Net cash flows provided by financing activities were $282.4 million for the three months ended March 31, 2002 and net cash flows used in financing activities were $15.3 million for the three months ended March 31, 2001. The cash flows for the three months ended March 31, 2002 reflect acquisitions of radio station assets, deposits for pending acquisitions and the consummation of debt and equity offerings, net of a reduction in outstanding indebtedness. The cash flows for the three months ended March 31, 2001 reflect additions to property and equipment and the net decrease in outstanding indebtedness. During February 2002, we filed a universal shelf registration statement with the SEC to offer up to (1) $250.0 million in aggregate offering price of Class A common stock and/or preferred stock and (2) $250.0 million in aggregate principal amount or initial accreted value of its debt securities consisting of debentures, notes or other types of debt. Under this shelf registration statement, on February 27, 2002, we entered into separate equity and debt underwriting agreements for equity and debt offerings and filed prospectus supplements with the SEC. We completed the equity offering on March 5, 2002 and March 8, 2002 and issued $206.3 million in Class A common stock at a price per share of $51.25 and completed the debt offering on March 5, 2002, and issued $150.0 million in 7.625% senior subordinated notes. We received net proceeds of approximately $196.5 million under the equity offerings and incurred offering expenses of approximately $8.6 million. We received net proceeds of approximately $145.8 million under the debt offering and incurred offering expenses of approximately $4.3 million. We used a portion of the net proceeds from the March 5, 2002 equity offering to reduce $93.5 million of our outstanding indebtedness under our credit facility. Prior to the offerings, we were notified by Moody's Investor Services and Standard and Poor's that each agency had evaluated our debt and issued an upgrade to our credit rating. Management believes that any future upgrade or downgrade would not have a significant impact on our future liquidity. The effect of a change in the credit rating includes, but is not limited to, interest rate changes under any future bank facilities, debentures, notes or other types of debt. As of March 31, 2002, we had $265.2 million in cash and cash equivalents, primarily as a result of the offerings described above. During the three months ended March 31, 2002, we increased our net outstanding debt by $87.0 million. We also acquired radio station assets and increased our acquisition deposits and costs in the amount of $47.0 million. As of March 31, 2002, we had $325.0 million of borrowings outstanding under our bank facility in addition to an outstanding letter of credit in the amount of $6.2 million and $150.0 million in senior subordinated notes. We expect to use the credit available of $318.8 million under the revolving credit facility, subject to defined revolving commitment reductions as described below, and cash on hand to fund pending and future acquisitions. Under our universal shelf registration statement, since we did not issue the full amount available, we may from time to time offer and issue debentures, notes, bonds and other evidence of indebtedness in the amount of $100.0 million and shares of Class A common stock and/or preferred stock in the aggregate offering price of $43.7 million. Unless otherwise described in future prospectus supplements, we intend to use the net proceeds from the sale of securities registered under this universal shelf registration statement for general corporate purposes, which may include additions to working capital, capital expenditures, repayment or redemption of existing indebtedness, pending acquisitions or future acquisitions. In addition to debt service and quarterly distributions under the TIDES, our principal liquidity requirements are for working capital and general corporate purposes, including capital expenditures, and, if appropriate opportunities arise, acquisitions of additional radio stations. Capital expenditures for the three months ended March 31, 2002, were 24 $1.1 million. We estimate that an additional amount of capital expenditures for the balance of 2002 will be between $7.0 and $9.0 million. We believe that cash on hand and cash from operating activities, together with available revolving borrowings under our bank facility, should be sufficient to permit us to meet our financial obligations and fund our operations. However, we may require additional financing for future acquisitions, if any, and we cannot assure you that we will be able to obtain such financing on terms considered favorable by us. We entered into our bank facility as of December 16, 1999, with a syndicate of banks for $650.0 million in senior credit consisting of: (1) $325.0 million in a reducing revolving credit facility and (2) $325.0 million in a multi-draw term loan that was fully drawn as of September 29, 2000. Our bank facility was established to: (1) refinance existing indebtedness; (2) provide working capital; and (3) fund corporate acquisitions. At our election, interest on any outstanding principal accrues at a rate based on either LIBOR plus a spread that ranges from 0.75% to 2.375% or on the prime rate plus a spread of up to 1.125%, depending on our leverage ratio. Under the bank facility, the reducing revolving credit facility and the multi-draw term loan mature on September 30, 2007 and reduce on a quarterly basis beginning September 30, 2002 in amounts that vary from $12.2 million to $16.3 million for each loan. We anticipate that we will meet these quarterly debt reduction commitments through one or more of the following: (1) cash flows from operations; (2) additional borrowings under the Revolver; (3) cash on hand; and (4) other debt or equity offerings. The bank facility requires that we comply with certain financial covenants and leverage ratios that are defined terms within the agreement and compliance with these terms affects our ability to draw down under the revolver. Certain of these financial covenants and leverage ratios include but are not limited to the following: (1) total debt to operating cash flow, (2) operating cash flow to interest expense, (3) operating cash flow to pro forma debt service and (4) operating cash flow to fixed charges. Management believes we are in compliance with all of the terms of the agreement. The bank facility also provides that through December 31, 2002, we may solicit incremental loans up to $350.0 million, thereby increasing the bank facility to a total of $1.0 billion. This incremental borrowing is subject to syndicate approval and is governed under the same terms as the existing bank facility. Recent Accounting Pronouncement In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" that applies to legal obligations associated with the retirement of a tangible long-lived asset that results from the acquisition, construction, or development and/or the normal operation of a long-lived asset. Adoption of this Statement by us will be effective on January 1, 2003. We do not believe that the adoption of this statement will materially impact our financial position, cash flows or results of operations. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk Under certain bank facility covenants that are measured periodically, we may be required from time to time to protect ourselves from interest rate fluctuations through the use of derivative rate hedging instruments. As a result, we have entered into various interest rate transactions with various banks, which we call the rate hedging transactions, designed to mitigate our exposure to significantly higher floating interest rates. These transactions are referred to as a "collar" or a "swap". A collar consists of a rate cap agreement that establishes an upper limit or "cap" for the base LIBOR rate and a rate floor agreement that establishes a lower limit or "floor" for the base LIBOR rate. Collar agreements covering a rate cap and a rate floor have been entered into simultaneously with the same bank. 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. As of March 31, 2002, we have rate hedging transactions in place for a total notional amount of $155.0 million. Our credit exposure under these agreements is limited to the cost of replacing an agreement in the event of non-performance by our counter-party. To minimize this risk, we select high credit quality counter-parties. All of the rate hedging transactions are tied to the three-month LIBOR interest rate, which may fluctuate significantly on a daily basis. The valuation of each of these rate hedging transactions is affected by the change in the three-month LIBOR rates and the remaining term of the agreement. Any increase in the three-month LIBOR rate results in a more favorable valuation, while any decrease in the three-month LIBOR rate results in a less favorable valuation for each of the rate hedging transactions. The three-month LIBOR rate at March 31, 2002 was marginally lower as compared to the rate at December 31, 2001. The decrease in market value liability of the instruments as of March 31, 2002, was due to: (1) a reduction in the remaining term under each of the transactions, including the expiration of $108.0 million in rate hedging transactions and (2) an increase in the forward-looking interest rate curve, offset by the marginal decrease in the three-month LIBOR rate at March 31, 2002. Effective January 1, 2001, we adopted the Financial Accounting Standards Board's ("FASB") Statement of Accounting Standards ("SFAS") No. 133 entitled "Accounting for Derivative and Hedging Activities," that was amended by SFAS No. 137 and SFAS No. 138. SFAS No. 133 established accounting and reporting standards for (1) derivative instruments, including certain derivative instruments embedded in other contracts, which are collectively referred to as derivatives and (2) hedging activities. See also additional disclosures regarding "Liquidity and Capital Resources" made under Item 2, above. 25 PART II OTHER INFORMATION ITEM 1. Legal Proceedings We are from time to time involved in litigation incidental to the conduct of our business, but we are not a party to any lawsuit or proceeding that, in our opinion, 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 ("Royce"), subject to approval by the FCC, for a purchase price of $25.0 million. Notwithstanding our efforts to pursue this transaction, Royce has been non-responsive. On July 28, 1999, we commenced a legal action seeking to enforce this agreement, and subsequently Royce filed a cross-complaint against us asking for treble damages, an injunction, attorney's fees and costs. Portions of Royce's cross-complaint have been dismissed and after a trial in November 2001, the California Superior Court ruled that the February 1996 agreement was enforceable and that the court would order specific performance of the agreement to sell KWOD. In addition, we are entitled to recover damages incident to the failure of Royce to honor this agreement but the trial on damages has been delayed by a bankruptcy filing by Royce. On February 6, 2002, the Bankruptcy Court granted our petition to dismiss the bankruptcy filing by Royce. On April 30, 2002 the California Superior Court issued an Interlocutory Judgment ordering, among other things (i) that Royce sign all documents necessary to transfer the assets relating to KWOD to us and to complete such transfer in exchange for the $25.0 million purchase price, less the amount of our damages to be determined by the court, (ii) us to place $24.8 million in cash and a $7.5 million irrevocable standby letter of credit in an escrow account pending the transfer of the KWOD assets, the determination of our damages and the outcome of Royce's appeal, and (iii) a time Brokerage Agreement commence on May 10, 2002 under which we will program and sell most of the broadcast time on KWOD. Royce has filed a petition in the California appeals court challenging this Interlocutory Judgment. The Court of Appeals has issued a temporary stay of the Interlocutory Judgment until May 21, 2002. We estimate that the impact of an unfavorable outcome will not materially impact our financial position, results of operations or cash flows. We cannot determine if and when the transaction might occur. In October 1999, The Radio Music License Committee, of which we are a participant, filed a motion in the New York courts against Broadcast Music, Inc. commencing a rate-making proceeding, on behalf of the radio industry, seeking a determination of fair and reasonable industry-wide license fees. We are currently operating under interim license agreements for the period commencing January 1, 1997 at the rates and terms reflected in prior agreements. We estimate that the impact of an unfavorable outcome of the motion will not materially impact our financial position, results of operations or cash flows. In December 2000, the U.S. Copyright Office, under the Digital Millennium Copyright Act, issued a final rule that AM and FM radio broadcast signals transmitted simultaneously over a digital communications network, are subject to the sound recording copyright owner's exclusive right of performance. This would result in the imposition of license fees for Internet streaming and other digital media. As a result of this decision, we are now participating in an arbitration proceeding at the U.S. Copyright Office to determine the amount of the fees that are due from the use of sound recordings in Internet streaming. In February 2002, the arbitration panel issued its decision setting the license fees for the use of sound recordings in Internet streaming. A number of broadcasters have petitioned the U.S. Copyright Office for a review of this decision. We, along with other broadcasters, and the National Association of Broadcasters ("NAB") commenced on January 25, 2001 a legal action in the U.S. District Court in Philadelphia, Pennsylvania, seeking declaratory relief as to the impact of the final rule of the Copyright Office. The court in this action on August 1, 2001 upheld the Copyright Office decision. We, along with other broadcasters and the NAB, on September 30, 2001, filed an appeal of this decision. This appeal is pending. We cannot determine the likelihood of success of this appeal. We estimate that the impact of an unfavorable determination will not materially impact our financial position, results of operations or cash flows. ITEM 2. Changes in Securities and Use of Proceeds None to report. ITEM 3. Defaults Upon Senior Securities None to report. ITEM 4. Submission of Matters to a Vote of Security Holders None to report. ITEM 5. Other Information 26 None to report. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description ------ ----------- 3.01 Amended and Restated Articles of Incorporation of Entercom Communications Corp. (1) 3.02 Amended and Restated Bylaws of Entercom Communications Corp. (7) 4.01 Indenture for the Convertible Subordinated Debentures due 2014 amount Entercom Communications Corp., as issuer, and Wilmington Trust Company, as indenture trustee (3) 4.02 Indenture dated as of March 5, 2002 by and among Entercom Radio, LLC and Entercom Capital, Inc., as co-issuers, the Guarantors named therein and HSBC Bank USA, as trustee (7). 4.03 First Supplemental Indenture dated as of March 5, 2002 by and among Entercom Radio, LLC and Entercom Capital, Inc., as co-issuers, the Guarantors named therein and HSBC Bank USA, as trustee (7). 10.01 Registration Rights Agreement, dated as of May 21, 1996, between the Registrant and Chase Equity Associates, L.P. (1) 10.02 Employment Agreement, dated June 25, 1993, between the Registrant and Joseph M. Field, as amended (1) 10.03 Employment Agreement, dated December 17, 1998, between the Registrant and David J. Field, as amended (1) 10.04 Employment Agreement, dated December 17, 1998, between the Registrant and John C. Donlevie, as amended (1) 10.05 Employment Agreement, dated November 13, 1998, between the Registrant and Stephen F. Fisher (1) 10.06 Entercom 1998 Equity Compensation Plan (1) 10.07 Asset Purchase Agreement, dated as of May 11, 2000, among the Registrant, Entercom Kansas City, LLC, Entercom Kansas City License, LLC, and Susquehanna Radio Corp. (See table of contents for list of omitted schedules and exhibits, which the Registrant hereby agrees to furnish supplementally to the Securities and Exchange Commission upon request). (6) 10.08 Credit Agreement, dated as of December 16, 1999, among Entercom Radio, LLC, as the Borrower, the Registrant, as a Guarantor, Banc of America Securities LLC, as Sole Lead Arranger and Book Manager, Key Corporate Capital, Inc., as Administrative Agent, and Co-Documentation Agent, Bank of America, N.A., as Syndication Agent, and Co-Documentation Agent and the Financial Institutions listed therein. (4) 10.09 First Amendment dated May 31, 2001 to the Credit Agreement dated December 16, 1999 between Entercom Radio, LLC, the borrower, Entercom Communications Corp., the parent, Key Corporate Capital, administrative agent, Bank of America, syndication agent and the financial institutions listed on the signature pages. (2) 10.10 Second Amendment dated February 6, 2002 to the Credit Agreement dated December 16, 1999 between Entercom Radio, LLC, the borrower, Entercom Communications Corp., the parent, Key Corporate Capital, administrative agent, Bank of America, syndication agent and the financial institutions listed on the signature pages. (5) (1) Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-61381). (2) Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (File No. 001-14461). (3) Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-86843). (4) Incorporated by reference to our Report on Form 8-K (File No. 001-14461). (5) Incorporated by reference to our Annual Report on Form 10-K for the year ended 2001 (File No. 001-14461) (5). (6) Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 (File No. 001-14461). (7) Filed herewith. (b) Reports filed on Form 8-K None to report. 27 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENTERCOM COMMUNICATIONS CORP. (Registrant) Date: May 10, 2002 /s/ David J. Field ------------------- Name: David J. Field Title: President and Chief Executive Officer Date: May 10, 2002 /s/ Stephen F. Fisher --------------------- Name: Stephen F. Fisher Title: Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 28 EX-3.02 3 dex302.txt AMENDED AND RESTATED BYLAWS OF ENTERCOM EXHIBIT 3.02 AMENDED AND RESTATED BYLAWS OF ENTERCOM COMMUNICATIONS CORP. ARTICLE I Name and Seal Section 1.01. Name. The name of the Corporation is ENTERCOM COMMUNICATIONS CORP. Section 1.02. State of Incorporation. The Corporation is incorporated under the laws of the Commonwealth of Pennsylvania. Section 1.03. Seal. The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization, the words "Corporate Seal," and the name of the State of Incorporation. The seal may be used by any person authorized by the Board of Directors of the Corporation or by these Bylaws by causing the seal or a facsimile thereof to be impressed or affixed, or in any manner reproduced. ARTICLE II Offices and Fiscal Year Section 2.01. Registered Office. The registered office of the Corporation in the Commonwealth of Pennsylvania shall be at 401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004 until otherwise established by an amendment of the articles of incorporation (the "articles") or by the Board of Directors of the Corporation (the "Board of Directors" or the "Board") and a record of such change is filed with the Pennsylvania Department of State in the manner provided by law. Section 2.02. Other Offices. The Corporation may also have offices at such other places within or without the Commonwealth of Pennsylvania as the Board of Directors may from time to time appoint or the business of the Corporation may require. Section 2.03. Fiscal Year. The fiscal year of the Corporation shall be the calendar year beginning on the first day of January in each year. ARTICLE III Notice--Waivers--Meetings Generally Section 3.01. Manner of Giving Notice. (a) General Rule. Whenever notice (in writing or otherwise) is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or courier service, charges prepaid, to the postal address or by facsimile transmission to the facsimile or telephone number or by e-mail or other electronic 1 communication at the e-mail or other electronic communications address, of the person appearing on the books of the Corporation or, in the case of directors, supplied by the director to the Corporation for the purpose of notice. If the notice is sent by mail or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or courier service for delivery to that person or, in the case of facsimile transmission or e-mail or other electronic transmission, when sent. A notice of meeting shall specify the geographic location, if any, day and hour of the meeting and any other information required by any other provision of the Business Corporation Law, the articles or these bylaws. (b) Bulk Mail. If the Corporation has more than 30 shareholders, notice of any regular or special meeting of the shareholders, or any other notice required by the Business Corporation Law or by the articles or these bylaws to be given to all shareholders or to all holders of a class or series of shares, may be given by any class of postpaid mail if the notice is deposited in the United States mail at least 20 days prior to the day named for the meeting or any corporate or shareholder action specified in the notice. (c) Adjourned Shareholder Meetings. When a meeting of shareholders is adjourned by the Chairman of the meeting or a vote of the shareholders, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the Board fixes a new record date for the adjourned meeting in which event notice shall be given in accordance with Section 3.03. Section 3.02. Notice of Meetings of Board of Directors. Notice of a regular meeting of the Board of Directors need not be given, provided that the dates for such meetings are fixed by the Board of Directors or the Chairman for an ensuing period of at least twelve months, and such dates are set forth in the minutes of the meeting at which such dates were fixed, which minutes were distributed to each director. Notice of every special meeting of the Board of Directors shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone, facsimile transmission or e-mail or other electronic transmission) or 48 hours (in the case of notice by courier service or express mail) or five days (in the case of notice by first class mail) before the time at which the meeting is to be held. Every such notice shall state the time and geographic location of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in a notice of the meeting. Section 3.03. Notice of Meetings of Shareholders. (a) General Rule. Except as otherwise provided in Section 3.01(b), notice of every meeting of the shareholders shall be given by, or at the direction of, the Secretary or other authorized person or designated agent to each shareholder of record entitled to vote at the meeting at least (i) ten (10) days prior to the day named for a meeting (and, in case of a meeting called to consider a merger, consolidation, share exchange or division, to each shareholder of record not entitled to vote at the meeting) called to consider a fundamental change under 15 Pa.C.S. Chapter 19 or (ii) five (5) days prior to the day named for the meeting in any other case. If the Secretary neglects or refuses to give notice of a meeting, the person or persons calling the meeting may do so. In the case of a special meeting of shareholders, the notice shall specify the general nature of the business to be transacted. 2 (b) Notice of Action by Shareholders on Bylaws. In the case of a meeting of shareholders that has as one of its purposes action on the bylaws, notice shall be given to each shareholder that the purpose, or one of the purposes, of the meeting is to consider the adoption, amendment or repeal of the bylaws. There shall be included in, or enclosed with, the notice a copy of the proposed amendment or a summary of the changes to be effected thereby. (c) Notice of Action by Shareholders on Fundamental Change. In the case of a meeting of the shareholders that has as one of its purposes action with respect to any fundamental change under 15 Pa.C.S. Chapter 19, each shareholder shall be given, together with notice of the meeting, a copy or summary of the amendment or plan to be considered at the meeting in compliance with the provisions of Chapter 19. (d) Notice of Action by Shareholders Giving Rise to Dissenters Rights. In the case of a meeting of the shareholders that has as one of its purposes action that would give rise to dissenters rights under the provisions of 15 Pa.C.S. Subchapter 15D, each shareholder shall be given, together with notice of the meeting: (1) statement that the shareholders have a right to dissent and obtain payment of the fair value of their shares by complying with the provisions of Subchapter 15D (relating to dissenters rights); and (2) copy of Subchapter 15D. Section 3.04. Waiver of Notice. (a) Written Waiver. Whenever any notice is required to be given under the provisions of the Business Corporation Law, the articles or these bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. (b) Waiver by Attendance. Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 3.05. Modification of Proposal Contained in Notice. Whenever the language of a proposed resolution is included in a notice of a meeting required to be given under the provisions of the Business Corporation Law or the articles or these by laws, the meeting considering the resolution may without further notice adopt it with such clarifying or other amendments as do not materially enlarge its original purpose. Section 3.06. Exception to Requirement of Notice. (a) General Rule. Whenever any notice or communication is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws or by the terms of any agreement or other instrument or as a condition precedent to 3 taking any corporate action and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required. (b) Shareholders Without Forwarding Addresses. Notice or other communications need not be sent to any shareholder with whom the Corporation has been unable to communicate for more than 24 consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the Corporation with a current address. Whenever the shareholder provides the Corporation with a current address, the Corporation shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders. Section 3.07. Use of Conference Telephone and Similar Equipment. Any director may participate in any meeting of the Board of Directors, and the Board of Directors may provide by resolution with respect to a specific meeting or with respect to a class of meetings that one or more persons may participate in a meeting of the shareholders of the Corporation, by means of conference telephone or other electronic technology (including, without limitation, the Internet) by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence of, or vote or action by, or consent or dissent of such person at the meeting. ARTICLE IV Shareholders Section 4.01. Place of Meeting. Meetings of the shareholders of the Corporation may be held at such geographic locations, within or without the Commonwealth of Pennsylvania, as shall be determined by the Board of Directors from time to time. Meetings of the shareholders may also be held by means of the Internet or other electronic communications technology, as may be from time to time fixed or determined by the Board of Directors, and need not be held at a particular geographic location so long as the meeting is held in a fashion pursuant to which the shareholders have the opportunity to read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the shareholders and pose questions to the directors. Section 4.02. Annual Meeting. The Board of Directors may fix and designate the date and time of the annual meeting of the shareholders, but if no such date and time is fixed and designated by the Board, the meeting for any calendar year shall be called for and held on the third Tuesday in April in such year, if not a legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on the next succeeding business day, not a Saturday, at 10 o'clock A.M. and at said meeting the shareholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting. If the annual meeting shall not have been called and held within six months after the designated time, any shareholder may call the meeting at any time thereafter. Section 4.03. Special Meetings. Special meetings of the shareholders may only be called by the Chairman, or by any three members of the Board of Directors, or by resolution of the Board of Directors, which may fix the date, time, the geographic location of the meeting, if any, and/or the electronic communication technology through which the shareholders may participate in the meeting, if any; provided, however, that if there are two vacancies in the offices 4 for the Class A Directors, then the holders of 50% of the Class A Common Stock outstanding shall have the right to call a special meeting of shareholders for the purpose of electing Class A Directors to fill such vacancies. If the Board does not fix the date, time or place of the meeting, it shall be the duty of the Secretary to do so. A date fixed by the Secretary shall not be more than 60 days after the date of the adoption of the resolution of the Board calling the special meeting. Section 4.04. Quorum and Adjournment. (a) General Rule. A meeting of shareholders of the Corporation duly called shall not be organized for the transaction of business unless a quorum is present. The presence of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted upon at the meeting shall constitute a quorum for the purposes of consideration and action on the matter. Shares of the Corporation owned, directly or indirectly, by the Corporation which are controlled, directly or indirectly, by the Board of Directors shall not be counted in determining the total number of outstanding shares for quorum purposes at any given time. (b) Withdrawal of a Quorum. The shareholders present at a duly organized meeting can continue to do business until conclusion of the meeting, including any adjournment thereof, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. (c) Adjournments Generally. Any regular or special meeting of the shareholders, including one at which directors are to be elected and one which cannot be organized because a quorum has not attended, may be adjourned for such period and to such place (i) as the shareholders present and entitled to vote shall direct, or (ii) if no shareholder vote is taken, as the Chairman of the meeting shall direct. (d) Electing Directors at Adjourned Meeting. Those shareholders entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of electing directors. (e) Other Action in Absence of Quorum. Those shareholders entitled to vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least 15 days because of an absence of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if such notice states that in the event a quorum is not present an the date set forth in such notice and the meeting is adjourned to a later date at least 15 days after the initial date then those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. Section 4.05. Action by Shareholders. Except as otherwise provided in the Business Corporation Law or the articles or these bylaws, whenever any corporate action is to be taken by vote of the shareholders of the Corporation, it shall be authorized upon receiving the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon at a meeting duly called and organized and, if any shareholders are entitled to vote thereon as a class, upon receiving the affirmative vote of a majority of the votes cast by the shareholders entitled to vote as a class. 5 Section 4.06. Organization. At every meeting of the shareholders, the Chairman of the Board, if there be one, or, in the case of vacancy in office or absence of the Chairman of the Board, one of the following persons present in the order stated: the Vice Chairman of the Board, the CEO, the President, the COO, the CFO, the Executive Vice President (if there are more than one Executive Vice Presidents, in the order they were appointed in the most recent resolution of the Board of Directors) or a person chosen by vote of the shareholders present, shall act as Chairman of the meeting. The Secretary or, in the absence of the Secretary, an assistant Secretary, or, in the absence of both the Secretary and assistant secretaries, a person appointed by the Chairman of the meeting, shall act as Secretary of the meeting. The Chairman of a meeting of the shareholders shall determine the order of business and shall have the authority to establish rules for the conduct of such meeting. All actions by the Chairman of a meeting in adopting rules for and in conducting a meeting shall be fair to the shareholders. The Chairman of a meeting shall announce at a meeting when the polls close for each matter voted upon. If no announcement is made, the polls shall be deemed to have closed upon the final adjournment of the meeting. After the polls close, no ballots, proxies or votes, nor any revocations or changes thereto may be accepted. Section 4.07. Voting Rights of Shareholders. Except as otherwise provided in the articles, every shareholder of the Corporation shall be entitled to one vote for each full share having voting power standing in the name of the shareholder on the books of the Corporation. Section 4.08. Voting and Other Action by Proxy. (a) General Rule. (1) every shareholder entitled to vote at a meeting of shareholders may authorize another person to act for the shareholder by proxy. (2) The vote at a meeting of shareholders by a proxy of a shareholder on an issue other than a procedural motion considered at such meeting shall constitute the presence of the shareholder for the entire meeting for purposes of determining whether a quorum is present for consideration of any other issue. (3) Where two or more proxies of a shareholder are present, the Corporation shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons. (b) Execution and Filing. Every proxy shall be executed or authenticated by the shareholder or by the duly authorized attorney-in-fact of the shareholder and filed with or transmitted to the Secretary of the Corporation or its designated agent. A shareholder or such Shareholder's duly authorized attorney-in-fact may execute or authenticate a writing or transmit a telephonic or electronic message authorizing another person to act by proxy. An e-mail, Internet communication or other means of telephonic or electronic transmission from a shareholder or attorney-in-fact, or a photographic, facsimile or similar reproduction of a writing executed by a shareholder or attorney-in-fact: 6 (1) may be treated as properly executed or authenticated for purposes of this subsection; and (2) shall be so treated if it sets forth or utilizes a confidential and unique identification number or other mark furnished by the Corporation to the shareholder for the purposes of a particular meeting or transaction. (c) Revocation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the Secretary of the Corporation or its designated agent in writing or by electronic transmission. An unrevoked proxy shall not be valid after three years from the date of its execution, authentication or transmission unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the Secretary of the Corporation. (d) Expenses. The Corporation shall pay the reasonable expenses of solicitation of votes, proxies or consents of shareholders by or on behalf of the Board of Directors or its nominees for election to the Board, including solicitation by professional proxy solicitors and otherwise. Section 4.09. Voting by Fiduciaries and Pledgees. Shares of the Corporation standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, but nothing in this section shall affect the validity of a proxy given to a pledgee or nominee. Section 4.10. Voting by Joint Holders of Shares. (a) General Rule. Where shares of the Corporation are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise: (1) if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the Corporation shall accept as the vote of all the shares the vote cast by a joint owner or a majority of them; and (2) if the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves. (b) Exception. If there has been filed with the Secretary of the Corporation a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons 7 specified as having such voting power in the document latest in date of operative effect so filed, and only those persons, shall be entitled to vote the shares but only in accordance therewith. Section 4.11. Voting by Corporate Shareholders. Any corporation that is a shareholder of this Corporation may vote at meetings of shareholders of this Corporation by any of its officers or agents, or by proxy appointed by any officer or agent, unless some other person, by resolution of the board of directors of the other corporation or a provision of its articles or bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the Secretary of this Corporation, is appointed its general or special proxy in which case that person shall be entitled to vote the shares. Section 4.12. Determination of Shareholders of Record. (a) Fixing Record Date. The Board of Directors may fix a time prior to the date of any meeting of shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than 90 days prior to the date of the meeting of shareholders. Only shareholders of record on the date fixed shall be so entitled notwithstanding any transfer of shares on the books of the Corporation after any record date fixed as provided in this subsection. The Board of Directors may similarly fix a record date for the determination of shareholders of record for any other purpose. When a determination of shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the Board fixes a new record date for the adjourned meeting. (b) Determination When a Record Date is Not Fixed. If a record date is not fixed: (1) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day that is ten days prior to the day on which notice is given. (2) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) Certification by Nominee. The Board of Directors may adopt a procedure whereby a shareholder of the Corporation may certify in writing to the Corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons. Upon receipt by the Corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. Section 4.13. Voting Lists. (a) General Rule. The officer or agent having charge of the transfer books for shares of the Corporation shall make a complete list of the shareholders entitled to vote at any 8 meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof except that, if the Corporation has 1,000 or more shareholders, in lieu of the making of the list the Corporation may make the information therein available at the meeting by any other means. (b) Effect of List. Failure to comply with the requirements of this section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list. The original share register or transfer book, or a duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to who are the shareholders entitled to examine the list or share register or transfer book or to vote at any meeting of shareholders. Section 4.14. Judges of Election. (a) Appointment. In advance of any meeting of shareholders of the Corporation, the Board of Directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder shall, appoint judges of election at the meeting. The number of judges shall be one or three. A person who is a candidate for an office to be filled at the meeting shall not act as a judge. (b) Vacancies. In case any person appointed as a judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Board of Directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof. (c) Duties. The judges of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with nominations by shareholders or the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. (d) Report. On request of the presiding officer of the meeting or of any shareholder, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated therein. Section 4.15. Minors as Security Holders. The Corporation may treat a minor who holds shares or obligations of the Corporation as having capacity to receive and to empower others to receive dividends, interest, principal and other payments or distributions, to vote or express consent or dissent and to make elections and exercise rights relating to such shares or obligations unless, in the case of payments or distributions on shares, the corporate officer responsible for maintaining the list of shareholders or the transfer agent of the Corporation or, in 9 the case of payments or distributions on obligations, the Treasurer or paying officer or agent has received written notice that the holder is a minor. Section 4.16. Advance Notice of Nomination of Directors. (a) Nominations for election of directors may be made by any shareholder entitled to vote for the election of directors only if written notice (the "Nomination Notice") of such shareholder's intent to nominate a director at the meeting is given by the shareholder and received by the Secretary of the Corporation in the manner and within the time specified herein. The Nomination Notice shall be delivered to the Secretary of the Corporation not less than (i) for an election of directors to be held at an annual meeting of shareholders, sixty (60) days prior to the anniversary date of the immediately preceding annual meeting of shareholders, and (ii) for an election of to be held at a special meeting of shareholders, not later than the close of business on the seventh (7th) day following the day on which notice of the meeting was first mailed to shareholders or public disclosure of the special meeting is made. In lieu of delivery to the Secretary of the Corporation, the Nomination Notice may be mailed to the Secretary of the Corporation by certified mail, return receipt requested, but shall be deemed to have been given only upon actual receipt by the Secretary of the Corporation. (b) The Nomination Notice shall be in writing and shall contain or be accompanied by; (1) the name and residence of such shareholder; (2) a representation that the shareholder is a holder of the Corporation's voting stock and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the Nomination Notice; (3) such information regarding each nominee as would have been required to be included in a proxy statement filed pursuant to Regulation 14A of the rules and regulations established by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (or pursuant to any successor act or regulation) had proxies been solicited with respect to such nominee by the management or Board of Directors of the Corporation; (4) a description of all arrangements or understandings among the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which such nomination or nominations are to be made by the shareholder; and (5) the consent of each nominee to serve as a director of the Corporation if so elected. (c) The Chairman of the meeting may, in good faith, determine and declare to the meeting that any nomination made at the meeting was not made in accordance with the foregoing procedures and, in such event, the nomination shall be disregarded. Section 4.17. Advance Notice of Shareholders' Proposals. 10 (a) A proposal to be considered at the Corporation's annual meeting ("Proposal") may be made by any shareholder only if written notice (the "Proposal Notice") of such shareholder's intent to include a proposal at the meeting is given by the shareholder and received by the Secretary of the Corporation in the manner and within the time specified herein. The Proposal Notice shall be delivered to the Secretary of the Corporation by the earlier of (i) sixty (60) days prior to the anniversary date of the immediately preceding annual meeting of shareholders or (ii) one hundred twenty (120) days prior to the anniversary date of the mailing of the Corporation's proxy statement for the immediately preceding annual meeting of shareholders. In lieu of delivery to the Secretary of the Corporation, the Proposal Notice may be mailed to the Secretary of the Corporation by certified mail, return receipt requested, but shall be deemed to have been given only upon actual receipt by the Secretary of the Corporation. (b) The Proposal Notice shall be in writing and shall contain or be accompanied by; (1) the name and residence of such shareholder; (2) the Proposal; and (3) a representation that the shareholder is a holder of the Corporation's voting stock and intends to appear in person or by proxy at the meeting to vote in favor of the Proposal specified in the Proposal Notice. (c) The Chairman of the meeting may, in good faith, determine and declare to the meeting that any Proposal made at the meeting was not made in accordance with the foregoing procedures and, in such event, the Proposal shall be disregarded. ARTICLE V Board of Directors Section 5.01. Powers; Personal Liability. (a) General Rule. Unless otherwise provided by statute, all powers vested by law in the Corporation shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors. (b) Personal Liability of Directors. (1) A director shall not be personally liable to the Corporation or any of its shareholders, as such, for monetary damages (including, without limitation, any judgment, amount paid in settlement, penalty, 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: (i) the director has breached or failed to perform the duties of his or her office under Subchapter 17B of the Business Corporation Law or any successor provision; and 11 (ii) the breach or failure to perform constitutes self- dealing, willful misconduct or recklessness. (2) The provisions of paragraph (1) shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, State or Federal law. (c) Notation of Dissent. A director of the Corporation who is present at a meeting of the Board of Directors, or of a committee of the Board, at which action on any corporate matter is taken on which the director is generally competent to act, shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless the director files his or her written dissent to the action with the Secretary of the meeting before the adjournment thereof or transmits the dissent in writing to the Secretary of the Corporation immediately after the adjournment of the meeting. The right to dissent shall not apply to a director who voted in favor of the action. Nothing in this section shall bar a director from asserting that minutes of the meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, the director notifies the Secretary, in writing, of the asserted omission or inaccuracy. Section 5.02. Qualifications and Selection of Directors. (a) Qualifications. Each director of the Corporation shall be a natural person of full age who need not be a resident of the Commonwealth of Pennsylvania or a shareholder of the Corporation. (b) Election of Directors. In elections for directors, voting need not be by ballot, unless required by vote of the shareholders before the voting for the election of directors begins. The candidates receiving the highest number of votes from each class or group of classes, if any, entitled to elect directors separately up to the number of directors to be elected by the class or group of classes shall be elected. If at any meeting of shareholders, directors of more than one class are to be elected, each class of directors shall be elected in a separate election. Section 5.03. Number and Term of Office. (a) Number. The Board of Directors shall consist of not less than seven (7) Directors nor more than fifteen (l5) directors, including such number of directors as may be elected from time to time by the holders of any class or series of Preferred Stock entitled to elect directors ("Preferred Stock Directors") and the Class A Directors (as hereinafter defined), such number to be determined from time to time by resolution of the Board of Directors. The Board of Directors shall include two directors elected by the holders of the Class A Common Stock by class vote pursuant to the articles (the "Class A Directors"). (b) Term of Office. Each director, other than Class A Directors, shall be elected at the annual meeting of shareholders, except as provided in Section 5.04, and each director shall hold office for such term as shall be established by the Board of Directors provided that no term shall exceed a period of more than three years and until a successor has been 12 selected and qualified or until his or her earlier death, resignation or removal. A decrease in the number of directors shall not have the effect of shortening the term of any incumbent director. (c) Resignation. Any director may resign at any time upon written notice to the Corporation. The resignation shall be effective upon receipt thereof by the Corporation or at such subsequent time as shall be specified in the notice of resignation. (d) Class A Directors. The Class A Directors will be elected at each annual meeting of shareholders commencing with the annual meeting of shareholders to be held in 1999. Section 5.04. Vacancies. (a) General Rule. Vacancies in the Board of Directors, including vacancies resulting from an increase in the number of directors, may be filled by a majority vote of the remaining members of the Board though less than a quorum, or by a sole remaining director, and each person so selected shall be a director to serve until the next selection of the class for which such director has been chosen, and until a successor has been selected and qualified or until his or her earlier death, resignation or removal; provided, however that a vacancy in a Class A Director may only be filled by the sole remaining Class A Director, and if both Class A Directors are vacant, then only the holders of the Class A Common Stock may fill such vacancies. (b) Action by Resigned Directors. When one or more directors resign from the Board effective at a future date, the directors then in office, including those who have so resigned, shall have power by the applicable vote to fill the vacancies, the vote thereon to take effect when the resignations become effective. Section 5.05. Removal of Directors. (a) Removal by the Shareholders. The entire Board of Directors, or any class of the Board, or any individual director may be removed from office only for cause by vote of a majority of the shareholders entitled to vote thereon. In case the Board, or a class of the Board or any one or more directors are so removed, new directors may be elected at the same meeting. The repeal of a provision of the articles or bylaws prohibiting, or the addition of a provision to the articles or bylaws permitting, the removal by the shareholders of the Board, a class of the Board or any individual director without assigning any cause shall not apply to any incumbent director during the balance of the term for which the director was selected. (b) Removal by the Board. The Board of Directors may declare vacant the office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or if, within 60 days after notice of his or her selection, the director does not accept the office either in writing or by attending a meeting of the Board of Directors. Section 5.06. Place of Meetings. Meetings of the Board of Directors may be held at such place within or without the Commonwealth of Pennsylvania as the Board of Directors may from time to time appoint or as may be designated in the notice of the meeting. 13 Section 5.07. Organization of Meetings. At every meeting of the Board of Directors, the Chairman of the Board, if there be one, or, in the case of a vacancy in the office or absence of the Chairman of the Board, one of the following officers present in the order stated: the Vice Chairman of the Board, the CEO, the President, the COO, the CFO, the Executive Vice President (if there are more than one Executive Vice Presidents, in the order they were appointed in the most recent resolution of the Board of Directors), or a person chosen by a majority of the directors present, shall act as Chairman of the meeting. The Secretary or, in the absence of the Secretary, an assistant Secretary, or, in the absence of the Secretary and the assistant secretaries, any person appointed by the Chairman of the meeting, shall act as Secretary of the meeting. Section 5.08. Regular Meetings. Regular meetings of the Board of Directors shall be held at such time and place as shall be designated from time to time by resolution of the Board of Directors, or as called by the Chairman. Section 5.09. Special Meetings. Special meetings of the Board of Directors shall be held whenever called by the Chairman or by two or more of the directors. Section 5.10. Quorum of and Action by Directors. (a) General Rule. A majority of the directors in office of the Corporation shall be necessary to constitute a quorum for the transaction of business and the acts of a majority of the directors present and voting at a meeting at which a quorum is present shall be the acts of the Board of Directors. (b) Action by Written Consent or Ratification. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the Secretary of the Corporation or the action is ratified by the directors at the next regular or special meeting thereof. Section 5.11. Executive and Other Committees. (a) Establishment and Powers. The Board of Directors may, by resolution adopted by a majority of the directors in office, establish one or more committees to consist of one or more directors of the Corporation. Any committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all of the powers and authority of the Board of Directors except that a committee shall not have any power or authority as to the following: (1) The submission to shareholders of any action requiring approval of shareholders under the Business Corporation Law. (2) The creation or filling of vacancies in the Board of Directors. (3) The adoption, amendment or repeal of these bylaws. (4) The amendment or repeal of any resolution of the Board. 14 (5) Action on matters committed by a resolution of the Board of Directors to another committee of the Board. (b) Alternate Committee Members. The Board may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee. In the absence or disqualification of a member and alternate member or members of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member. (c) Term. Each committee of the Board shall serve at the pleasure of the Board. (d) Committee Procedures. Any provision of these bylaws relating to the organization or procedures of or the manner of taking action by the Board of Directors, shall be construed to apply and refer to the organization and procedures of any executive or other committee of the Board. Section 5.12. Compensation. The Board of Directors shall have the authority to fix the compensation of directors for their services as directors and a director may be a salaried officer of the Corporation. Section 5.13. The authority, powers and functions of the Board of Directors of the Corporation may not be varied, and a committee of the Board may not be established, by a bylaw adopted by the shareholders, unless the bylaw has been adopted with the approval of the Board of Directors. ARTICLE VI Officers Section 6.01. Officers Generally. (a) Number, Qualifications and Designation. The officers of the Corporation shall be a Chairman (who shall also be a director), a Chief Executive Officer ("CEO"), a President, one or more Executive Vice Presidents, a Chief Financial Officer ("CFO"), one or more Vice Presidents, a Secretary, a Treasurer, and such other officers as may be elected in accordance with the provisions of Section 6.03. Officers, other than the Chairman may but need not be directors or shareholders of the Corporation. All of the officers shall be natural persons of full age, except that the Treasurer may be a Corporation. The Board of Directors may elect from among the members of the Board a Vice Chairman of the Board who may but need not be an officer of the Corporation. Any number of offices may be held by the same person. (b) Bonding. The Corporation may secure the fidelity of any or all of its officers by bond or otherwise. (c) Standard of Care. In lieu of the standards of conduct otherwise provided by law, officers of the Corporation shall be subject to the same standards of conduct, including 15 standards of care and loyalty and rights of justifiable reliance, as shall at the time be applicable to directors of the Corporation. An officer of the Corporation shall not be personally liable, as such, to the Corporation or its shareholders for monetary damages (including, without limitation, any judgment, amount paid in settlement, penalty, 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 the officer has breached or failed to perform the duties of his or her office under the articles, these bylaws, or the applicable provisions of law and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. The provisions of this subsection shall not apply to the responsibility or liability of an officer pursuant to any criminal statute or for the payment of taxes pursuant to local, state or federal law. Section 6.02. Election, Term of Office and Resignations. (a) Election and Term of Office. The officers of the Corporation, except those appointed by delegated authority pursuant to Section 6.03, shall be elected annually by the Board of Directors, and each such officer shall hold office such term as may be provided by the Board and until a successor has been elected and qualified or until his or her earlier death, resignation or removal. (b) Resignations. Any officer may resign at any time upon written notice to the Corporation. The resignation shall be effective upon receipt thereof by the Corporation or at such subsequent time as may be specified in the notice of resignation. Section 6.03. Subordinate Officers, Committees and Agents. The Board of Directors may from time to time appoint such other officers and such committees, employees or other agents as the business of the Corporation may require, including one or more assistant secretaries, and one or more assistant Treasurers, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws, or as the Board of Directors may from time to time determine. The Board of Directors may delegate to any officer or committee the power to appoint subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents. Section 6.04. Removal of Officers and Agents. Any officer or agent of the Corporation may be removed by the Board of Directors or by the Chairman or the CEO with or without cause. The removal shall be without prejudice to the contract rights, if any, of any person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 6.05. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or any other cause, may be filled by the Board of Directors or by the Chairman, the CEO or by the officer or committee to which the power to fill such office has been delegated pursuant to Section 6.03, as the case may be, and if the office is one for which these bylaws prescribe a term, shall be filled for the unexpired portion of the term. Section 6.06. Authority. All officers of the Corporation, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided by or pursuant to resolutions or orders of the Board of Directors 16 or, in the absence of controlling provisions in the resolutions or orders of the Board of Directors, as may be determined by or pursuant to these bylaws or in the absence of any such controlling authority then as provided by the Chairman or the CEO. Section 6.07. The Chairman. The Chairman of the Board or in the absence of the Chairman, the Vice Chairman of the Board, shall preside at all meetings of the shareholders and of the Board of Directors. In addition, the Chairman shall exercise general supervisory authority over the affairs of the Corporation, shall supervise the activities of the CEO, the President and any other officers of the Corporation, shall present to the annual meeting of the shareholders a report of the business of the Corporation for the preceding fiscal year, and shall perform such other duties as may from time to time be requested by the Board of Directors. Section 6.08. CEO. The CEO shall be the chief executive officer of the Corporation. The CEO shall have general supervision over the business, finances, operations and welfare of the Corporation, subject however, to the control of the Chairman and the Board of Directors. The CEO shall sign, execute, and acknowledge, in the name of the Corporation, deeds, mortgages, bonds, contracts or other instruments, authorized by the Board of Directors, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors, or by these bylaws or by the Chairman, to some other officer or agent of the Corporation; and, in general, shall have all powers and perform all duties incident to the position of a chief executive officer and such other powers and duties as from time to time may be assigned by the Board of Directors. The CEO shall from time to time make such reports of the affairs of the Corporation as the Chairman or the Board may require. Section 6.09. The President. The President shall perform the duties of the CEO in the absence of the CEO and such other duties as may from time to time be assigned to the President by the Chairman or the CEO. Section 6.10. The Vice Presidents. The Vice Presidents shall perform such duties as may from time to time be assigned to them by the Board of Directors, the Chairman, the CEO or the President. Section 6.11. The Secretary. The Secretary or an assistant Secretary shall attend all meetings of the shareholders and of the Board of Directors and all committees thereof and shall record all the votes of the shareholders and of the directors and the minutes of the meetings of the shareholders and of the Board of Directors and of committees of the Board in a book or books to be kept for that purpose; shall see that notices are given and records and reports properly kept and filed by the Corporation as required by law; shall be the custodian of the seal of the Corporation and see that it is affixed to all documents to be executed on behalf of the Corporation under its seal; and, in general, shall perform all duties incident to the office of Secretary, and such other duties as may from time to time be assigned by the Board of Directors, the Chairman or the CEO. Section 6.12. The COO. The COO shall be the chief operating officer and shall have general management and supervision of the operations of the Corporation under the direction and supervision of the Chairman and the CEO; and, in general, shall discharge such other duties as may from time to time be assigned by the Board of Directors, the Chairman or the CEO. 17 Section 6.13. The CFO. The CFO shall be the chief financial officer and shall have general management and supervision of the fiscal affairs of the Corporation under the direction and supervision of the CEO. The CFO shall see that a full and accurate accounting of all financial transactions is made; shall oversee the investment and reinvestment of the capital funds of the Corporation; shall oversee the preparation of any financial reports of the Corporation; shall cooperate in the conduct of the annual audit of the Corporation's financial records by the Corporation's certified public accountants; and, in general, shall discharge such other duties as may from time to time be assigned by the Board of Directors, the Chairman or the CEO. Section 6.14. The Treasurer. The Treasurer shall perform the duties of the CFO in the absence of the CFO and shall have or provide for the custody of the funds or other property of the Corporation; shall collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or received by the Corporation; shall deposit all funds in his or her custody as Treasurer in such banks or other places of deposit as the Board of Directors may from time to time designate; shall, whenever so required by the Board of Directors, render as account showing all transactions as Treasurer, and the financial condition of the Corporation; and, in general, shall discharge such other duties as may from time to time be assigned by the Board of Directors, the Chairman, the CEO, or the CFO. Section 6.15. Salaries. The salaries of the officers elected by the Board of Directors shall be fixed from time to time by the Board of Directors or by such committee or officer as may be designated by resolution of the Board, or in the absence of such designation by the CEO. The salaries or other compensation of any other officers, employees and other agents shall be fixed from time to time by the Board, or by the officer or committee to which the power to appoint such officers or to retain or appoint such employees or other agents has been delegated pursuant to Section 6.03, or in the absence of such designation by the CEO or other officer designated by the CEO. No officer shall be prevented from receiving such salary or other compensation by reason of the fact that the officer is also a director of the Corporation. ARTICLE VII Certificates of Stock, Transfer, Etc. Section 7.01. Share Certificates. (a) Form of Certificates. Certificates for shares of the Corporation shall be in such form as approved by the Board of Directors, and shall state that the Corporation is incorporated under the laws of the Commonwealth of Pennsylvania, the name of the person to whom issued, and the number and class of shares and the designation of the series (if any) that the certificate represents. If the Corporation is authorized to issue shares of more than one class or series, certificates for shares of the Corporation shall set forth upon the face or back of the certificate (or shall state on the face or back of the certificate that the Corporation will furnish to any shareholder upon request and without charge), a full or summary statement of the designations, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the Board of Directors to fix and determine the designations, voting rights, preferences, limitations and special rights of the classes and series of shares of the Corporation. 18 (b) Share Register. The share register or transfer books and blank share certificates shall be kept by the Secretary or by any transfer agent or registrar designated by the Board of Directors for that purpose. Section 7.02. Issuance. The share certificates of the Corporation shall be numbered and registered in the share register or transfer books of the Corporation as they are issued. They shall be executed in such manner as the Board of Directors shall determine. In case any officer, transfer agent or registrar who has signed or authenticated, or whose facsimile signature or authentication has been placed upon, any share certificate shall have ceased to be such officer, transfer agent or registrar because of death, resignation or otherwise, before the certificate is issued, the certificate may be issued with the same effect as if the officer, transfer agent or registrar had not ceased to be such at the date of its issue. The provisions of this Section 7.02 shall be subject to any inconsistent or contrary agreement in effect at the time between the Corporation and any transfer agent or registrar. Section 7.03. Transfer. Transfers of shares shall be made on the share register or transfer books of the Corporation upon surrender of the certificate therefor, endorsed by the person named in the certificate or by an attorney lawfully constituted in writing. No transfer shall be made inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S.[sec][sec].8101 et seq., and its amendments and supplements. Section 7.04. Record Holder of Shares. The Corporation shall be entitled to treat the person in whose name any share or shares of the Corporation stand on the books of the Corporation as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person except that the Corporation may in its discretion recognize certain beneficial owners or shareholders in accordance with the procedures set forth in Section 4.12(c). Section 7.05. Lost, Destroyed or Mutilated Certificates. The holder of any shares of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate therefor, and the Board of Directors may, in its discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and, if the Board of Directors shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as it may direct. Section 7.06. Agreements Restricting Transfer of Shares. The Board of Directors may authorize the Corporation to become party to agreements with shareholders and others relating to transfer, repurchase and issuance of shares of stock of the Corporation; provided, however, that such agreements must be filed with the Corporation and all share certificates affected thereby shall have clearly imprinted thereon a legend containing such agreement or referring thereto. ARTICLE VIII Indemnification of Directors, Officers and Other Authorized Representatives 19 Section 8.01. Scope of Indemnification. (a) General Rule. The Corporation shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a parry or otherwise by reason of the fact that such person is or was serving in an indemnified capacity, including, without limitation, liabilities resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, negligence, gross negligence or act giving rise to strict or products liability, except: (1) where such indemnification is expressly prohibited by applicable law; (2) where the conduct of the indemnified representative has been finally determined pursuant to Section 8.06 or otherwise: (i) to constitute willful misconduct or recklessness within the meaning of 15 Pa.C.S.[sec].1746(b) or any superseding provision of law sufficient in the circumstances to bar indemnification against liabilities arising from the conduct; or (ii) to be based upon or attributable to the receipt by the indemnified representative from the Corporation of a personal benefit to which the indemnified representative is not legally entitled; or (3) to the extent such indemnification has been finally determined in a final adjudication pursuant to Section 8.06 to be otherwise unlawful. (b) Partial Payment. If an indemnified representative is entitled to indemnification in respect of a portion, but not all, of any liabilities to which such person may be subject, the Corporation shall indemnify such indemnified representative to the maximum extent for such portion of the liabilities. (c) Presumption. The termination of a proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the indemnified representative is not entitled to indemnification. (d) Definitions. For purposes of this Article: (1) "indemnified capacity" means any and all past, present and future service by an indemnified representative in one or more capacities as a director, officer, employee or agent of the Corporation, or, at the request of the Corporation, as a director, officer, employee, agent, fiduciary or trustee of another Corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise; (2) "indemnified representative" means any and all directors and officers of the Corporation and any other person designated as an indemnified representative by the Board of Directors of the Corporation (which may, but need 20 not, include any person serving at the request of the Corporation, as a director, officer, employee, agent, fiduciary or trustee of another Corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise); (3) "liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature (including, without limitation, attorneys' fees and disbursements); and (4) "proceeding" means any threatened, pending or completed action, suit, appeal or other proceeding of any nature, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the Corporation, a class of its security holders or otherwise. Section 8.02. Proceedings Initiated by Indemnified Representatives. Notwithstanding any other provision of this Article, the Corporation shall not indemnify under this Article an indemnified representative for any liability incurred in a proceeding initiated (which shall not be deemed to include counter claims or affirmative defenses) or participated in as an intervenor or amicus curiae by the person seeking indemnification unless such initiation of or participation in the proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors in office. This section does not apply to reimbursement of expenses incurred in successfully prosecuting or defending an arbitration under Section 8.06 or otherwise successfully prosecuting or defending the rights of an indemnified representative granted by or pursuant to this Article. Section 8.03. Advancing Expenses. The Corporation shall pay the expenses (including attorneys' fees and disbursements) incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 8.01 or the initiation of or participation in a proceeding which has been authorized by a majority of the directors in office pursuant to Section 8.02 upon receipt of an undertaking by or on behalf of the indemnified representative to repay the amount if it is ultimately determined pursuant to Section 8.06 that such person is not entitled to be indemnified by the Corporation pursuant to this Article. The financial ability of an indemnified representative to repay an advance shall not be a prerequisite to the making of such advance. Section 8.04. Securing of Indemnification Obligations. To further effect, satisfy or secure the indemnification obligations provided herein or otherwise, the Corporation 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 the Corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the Board of Directors shall deem appropriate. Absent fraud, the determination of the Board of Directors with respect to such amounts, costs, terms and conditions shall be conclusive against all security holders, officers and directors and shall not be subject to voidability. 21 Section 8.05. Payment of Indemnification. An indemnified representative who is entitled to indemnification under this Article VIII shall be entitled to payment within 30 days after a written request for indemnification has been delivered to the Secretary of the Corporation. Section 8.06. Arbitration. (a) General Rule. Any dispute related to the right to indemnification, contribution or advancement of expenses as provided under this Article, except with respect to indemnification for liabilities arising under the Securities Act of 1933 that the Corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration in the metropolitan area in which the principal executive offices of the Corporation are located at the time, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the Corporation, the second of whom shall be selected by the indemnified representative and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, and if one of the parties fails or refuses to select an arbitrator or the arbitrators selected by the Corporation and the indemnified representative cannot agree on the selection of the third arbitrator within 30 days after such time as the Corporation and the indemnified representative have each been notified of the selection of the other's arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of general jurisdiction in the county in which the Corporation's executive office is located. (b) Qualifications of Arbitrators. Each arbitrator selected as provided herein is required to be or have been a director or executive officer of a Corporation whose shares of common stock were listed during at least one year of such service on the New York Stock Exchange or the American Stock Exchange or quoted on the National Association of Securities Dealers Automated Quotations System. (c) Burden of Proof. The party or parties challenging the right of an indemnified representative to the benefits of this Article shall have the burden of proof. (d) Expenses. The Corporation shall reimburse an indemnified representative for the expenses (including attorneys' fees and disbursements) incurred in successfully prosecuting or defending such arbitration. (e) Effect. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by any parry in accordance with applicable law in any court of competent jurisdiction, except that the Corporation shall be entitled to interpose as a defense in any such judicial enforcement proceeding any prior final judicial determination adverse to the indemnified representative under Section 8.01(a)(1) or Section 8.01(a)(2). This arbitration provision shall be specifically enforceable. Section 8.07. Contribution. If the indemnification provided for in this Article or otherwise is unavailable for any reason in respect of any liability or portion thereof, the Corporation shall contribute to the liabilities to which the indemnified representative may be subject in such proportion as is appropriate to reflect the intent of this Article or otherwise. 22 Section 8.08. Mandatory Indemnification of Directors, Officers, etc. To the extent that an authorized representative of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1741 or 1742 of the Business Corporation Law or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection therewith. Section 8.09. Contract Rights; Amendment or Repeal. All rights under this Article shall be deemed a contract between the Corporation and the indemnified representative pursuant to which the Corporation and each indemnified representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing. Section 8.10. Scope of Article. The rights granted by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification, contribution or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an indemnified capacity and as to action in any other capacity. The indemnification, contribution and advancement of expenses provided by or granted pursuant to this Article shall continue as to a person who has ceased to be an indemnified representative in respect of matters arising prior to such time, and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person. Section 8.11. Reliance on Provisions. Each person who shall act as an indemnified representative of the Corporation shall be deemed to be doing so in reliance upon the rights of indemnification, contribution and advancement of expenses provided by this Article. Section 8.12. Interpretation. The provisions of this Article are intended to constitute bylaws authorized by 15 Pa.C.S.[sec].1746. Section 8.13. Changes in Pennsylvania Law. References in this Article VIII to Pennsylvania law or to any provision thereof shall be to such law (including without limitation to the Directors' Liability Act) as it existed on the date this Article VIII was adopted or as such law thereafter may be changed; provided that (a) in the case of any change which expands the liability of Directors (or expands the liability of officers) or limits the indemnification rights or the rights to advancement of expenses which the Corporation may provide, the rights to limited liability, to indemnification and to the advancement of expenses provided in this Article shall continue as theretofore to the extent permitted by law; and (b) if such change permits the Corporation without the requirement of any further action by shareholders or Directors to limit further the liability of Directors (or limit the liability of Officers) or to provide broader indemnification rights or rights to the advancement of expenses than the Corporation was permitted to provide prior to such change, then liability thereupon shall be so limited and the rights to indemnification and the advancement of expenses shall be so broadened to the extent permitted by law. ARTICLE IX Dividends and Other Distributions to Shareholders 23 Section 9.01. Dividends. Subject to applicable law of the Commonwealth of Pennsylvania, and in accordance with the provisions thereof at the pertinent applicable time, the Board of Directors of the Corporation may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in cash or property other than its own shares, except when the Corporation is insolvent, or when the payment thereof would render the Corporation insolvent, or when the declaration or payment thereof would be contrary to any restriction contained in the articles, but: (1) Dividends may be declared and paid in cash or property only out of unreserved and unrestricted earned surplus of the Corporation, except as otherwise provided by statute; and (2) No dividends shall be paid which would reduce the remaining net assets of the Corporation below the aggregate preferential amount payable in the event of voluntary liquidation to the holders of shares having preferential rights to the assets of the Corporation in the event of liquidation. The Board of Directors may also, from time to time, distribute to the holders of the Corporation's outstanding shares having a cumulative preferential right to receive dividends in discharge of their cumulative dividend rights, dividends payable in cash out of the unrestricted capital surplus of the Corporation, if at the time the Corporation has no earned surplus and is not insolvent and would not thereby be rendered insolvent. Each such distribution, when made, shall be identified as a payment of cumulative dividends out of capital surplus. Section 9.02. Distributions of Shares of the Corporation. The Board of Directors of the Corporation may, from time to time, distribute pro rata to holders of any class or classes of its issued shares, treasury shares and authorized but unissued shares, but (1) If distribution is made, in the Corporation's authorized but unissued shares having a par value, there shall be transferred to stated capital at the time of such distribution an amount of surplus at least equal to the aggregate par value of the shares so issued; (2) If a distribution is made in the Corporation's authorized but unissued shares without par value, the Board of Directors may fix a stated value for the shares so issued, and there shall be transferred to stated capital, at the time of such distribution, an amount of surplus equal to the aggregate stated value, if any, so fixed; (3) The amount per share so transferred to stated capital, or the fact that there was no such transfer, shall be disclosed to the shareholders receiving such distribution concurrently with the distribution thereof; (4) No distribution of shares of any class shall be made to holders of shares of any other class unless the articles so provide or such distribution is authorized by the affirmative vote or written consent of the holders of a majority of the outstanding shares of the class in which the distribution is to be made. 24 In lieu of issuing fractional shares in any such distribution, the Corporation may pay in cash the fair value thereof, as determined by the Board of Directors, to shareholders entitled thereto. Section 9.03. Reserves. There may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Directors, from time to time, in their absolute discretion determine as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for the purchase of additional property, or for such other purpose as the Board of Directors shall think conducive to the interests of the Corporation. The Board of Directors may abolish or modify any such reserve. ARTICLE X Miscellaneous Section 10.01. Checks. All checks, notes, bills of exchange or other similar orders in writing shall be signed by such one or more officers or employees of the Corporation as the Board of Directors may from time to time designate. Section 10.02. Contracts. (a) General Rule. Except as otherwise provided in the Business Corporation Law in the case of transactions that require action by the shareholders, the Board of Directors may authorize any officer or agent to enter into any contract or to execute or deliver any instrument on behalf of the Corporation, and such authority may be general or confined to specific instances. (b) Statutory Form of Execution of Instruments. Any note, mortgage, evidence of indebtedness, contract or other document, or any assignment or endorsement thereof, executed or entered into between the Corporation and any other person, when signed by one or more officers or agents having actual or apparent authority to sign it, or by the Chairman, or the President or the CEO or an Executive Vice President or the COO or the CFO, and by the Secretary or assistant Secretary or Treasurer or assistant Treasurer of the Corporation, shall be held to have been properly executed for and in behalf of the Corporation, without prejudice to the rights of the Corporation against any person who shall have executed the instrument in excess of his or her actual authority. Section 10.03. Interested Directors or Officers; Quorum. (a) General Rule. A contract or transaction between the Corporation and one or more of its directors or officers or between the Corporation and another Corporation, partnership, joint venture, trust or other enterprise in which one or more of its directors or officers are directors or officers or have a financial or other interest, shall not be void or voidable solely for that reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors that authorizes the contract or transaction, or solely because his, her or their votes are counted for that purpose, if: 25 (1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors and the Board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum; (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors or the shareholders. (b) Quorum. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board which authorizes a contract or transaction specified in subsection (a). Section 10.04. Deposits. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board of Directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees of the Corporation as the Board of Directors shall from time to time designate. Section 10.05. Corporate Records. (a) Required Records. The Corporation shall keep complete and accurate books and records of account, minutes of the proceedings of the incorporators, shareholders and directors and a share register giving the names and addresses of all shareholders and the number and class of shares held by each. The share register shall be kept at either the registered office of the Corporation in the Commonwealth of Pennsylvania or at its principal place of business wherever situated or at the office of its registrar or transfer agent. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time. (b) Right of Inspection. Every shareholder shall, upon written verified demand stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books and records of account, and records of the proceedings of the incorporators, shareholders and directors and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to the interest of the person as a shareholder. In every instance where an attorney or other agent is the person who seeks the right of inspection, the demand shall be accompanied by a verified power of attorney or other writing that authorizes the attorney or other agent to so act on behalf of the shareholder. The demand shall be directed to the Corporation at its registered office in the Commonwealth of Pennsylvania or at its principal place of business wherever situated. 26 ARTICLE XI Amendments Section 11.01. Amendment of Bylaws. These bylaws may be amended or repealed, or new bylaws may be adopted, either (i) by vote of the shareholders at any duly organized annual or special meeting of shareholders, or (ii) with respect to those matters that are not by statute committed expressly to the shareholders and regardless of whether the shareholders have previously adopted or approved the bylaw being amended or repealed, by vote of a majority of the Board of Directors of the Corporation in office at any regular or special meeting of directors. Any change in these bylaws shall take effect when adopted unless otherwise provided in the resolution effecting the change. Section 11.02. Recording Amendments and Alterations. The text of all amendments and alterations to these bylaws shall be attached to the bylaws with a notation of the date of each such amendment or alteration and a notation of whether such amendment or alteration was adopted by the shareholders or the Board of Directors. ARTICLE XII Adoption of Bylaws - Record of Amendment Section 12.01. Adoption. These Amended and Restated Bylaws have been adopted and filed with the undersigned on the 2nd day of May, 2002, and shall be effective as of May 2, 2002. ____________________________________ Secretary Section 12.02. Amendments to Bylaws. Section Amended Date Amended Adopted by - --------------- ------------ ---------- __________________________ Secretary 27 EX-4.02 4 dex402.txt INDENTURE DATED 3/5/2002 EXHIBIT 4.02 ENTERCOM RADIO, LLC ENTERCOM CAPITAL, INC. as Co-Issuers; and HSBC Bank USA as Trustee Guaranteed to the extent set forth therein by the Guarantors named herein. INDENTURE dated as of March 5, 2002 TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE..................................................1 Section 1.01 Certain Definitions..............................................................1 Section 1.02 Other Definitions................................................................4 Section 1.03 Incorporation by Reference of Trust Indenture Act................................5 Section 1.04 Rules of Construction............................................................5 ARTICLE 2 THE SECURITIES..............................................................................5 Section 2.01 Unlimited In Amount, Issuable In Series, Form and Dating.........................5 Section 2.02 Execution and Authentication.....................................................8 Section 2.03 Registrar and Paying Agent.......................................................8 Section 2.04 Paying Agent to Hold Money in Trust..............................................9 Section 2.05 Securityholder Lists.............................................................9 Section 2.06 Transfer and Exchange............................................................9 Section 2.07 Replacement Securities..........................................................10 Section 2.08 Outstanding Securities..........................................................10 Section 2.09 Temporary Securities............................................................11 Section 2.10 Cancellation....................................................................11 Section 2.11 Defaulted Interest..............................................................11 Section 2.12 Special Record Dates............................................................11 Section 2.13 Global Securities...............................................................12 Section 2.14 CUSIP Numbers...................................................................13 ARTICLE 3 REDEMPTION.................................................................................14 Section 3.01 Notices to Trustee..............................................................14 Section 3.02 Selection of Securities to Be Redeemed..........................................14 Section 3.03 Notice of Redemption............................................................14 Section 3.04 Effect of Notice of Redemption..................................................15 Section 3.05 Deposit of Redemption Price.....................................................16 Section 3.06 Securities Redeemed or Purchased in Part........................................16 ARTICLE 4 COVENANTS..................................................................................16 Section 4.01 Payment of Securities...........................................................16 Section 4.02 Maintenance of Office or Agency.................................................16 Section 4.03 Reports.........................................................................17 Section 4.04 Compliance Certificate..........................................................17 Section 4.05 Taxes...........................................................................18 Section 4.06 Stay, Extension and Usury Laws..................................................18 Section 4.07 Calculation of Original Issue Discount..........................................18 ARTICLE 5 SUCCESSORS.................................................................................19
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Section 5.01 When Company May Merge, etc.....................................................19 Section 5.02 Successor Person Substituted....................................................19 ARTICLE 6 DEFAULTS AND REMEDIES......................................................................20 Section 6.01 Events of Default...............................................................20 Section 6.02 Acceleration....................................................................21 Section 6.03 Other Remedies..................................................................21 Section 6.04 Waiver of Past Defaults.........................................................22 Section 6.05 Control by Majority.............................................................22 Section 6.06 Limitation on Suits.............................................................22 Section 6.07 Rights of Holders to Receive Payment............................................23 Section 6.08 Collection Suit by Trustee......................................................23 Section 6.09 Trustee May File Proofs of Claim................................................23 Section 6.10 Priorities......................................................................24 Section 6.11 Undertaking for Costs...........................................................24 ARTICLE 7 TRUSTEE....................................................................................25 Section 7.01 Duties of Trustee...............................................................25 Section 7.02 Rights of Trustee...............................................................26 Section 7.03 Individual Rights of Trustee....................................................27 Section 7.04 Trustee's Disclaimer............................................................27 Section 7.05 Notice of Defaults..............................................................27 Section 7.06 Reports by Trustee to Holders...................................................27 Section 7.07 Compensation and Indemnity......................................................28 Section 7.08 Replacement of Trustee..........................................................28 Section 7.09 Successor Trustee by Merger, etc................................................30 Section 7.10 Eligibility; Disqualification...................................................30 Section 7.11 Preferential Collection of Claims Against Company...............................30 ARTICLE 8 SATISFACTION AND DISCHARGE; DEFEASANCE.....................................................30 Section 8.01 Satisfaction and Discharge......................................................30 Section 8.02 Option to Effect Legal Defeasance or Covenant Defeasance........................31 Section 8.03 Legal Defeasance and Discharge..................................................31 Section 8.04 Covenant Defeasance.............................................................32 Section 8.05 Conditions to Legal or Covenant Defeasance......................................32 Section 8.06 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions........................................................33 Section 8.07 Repayment to Company............................................................34 Section 8.08 Reinstatement...................................................................34 ARTICLE 9 SUPPLEMENTS, AMENDMENTS AND WAIVERS........................................................35 Section 9.01 Without Consent of Holders......................................................35 Section 9.02 With Consent of Holders.........................................................35 Section 9.03 Revocation and Effect of Consents...............................................36
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Section 9.04 Notation on or Exchange of Securities...........................................37 Section 9.05 Trustee to Sign Amendments, etc.................................................37 ARTICLE 10 GUARANTEES................................................................................37 Section 10.01 Guarantee.......................................................................37 ARTICLE 11 MISCELLANEOUS.............................................................................37 Section 11.01 Indenture Subject to Trust Indenture Act........................................37 Section 11.02 Notices.........................................................................37 Section 11.03 Communication By Holders With Other Holders.....................................39 Section 11.04 Certificate and Opinion as to Conditions Precedent..............................39 Section 11.05 Statements Required in Certificate or Opinion...................................39 Section 11.06 Rules by Trustee and Agents.....................................................40 Section 11.07 Legal Holidays..................................................................40 Section 11.08 No Recourse Against Others......................................................40 Section 11.09 Counterparts....................................................................40 Section 11.10 Governing Law...................................................................40 Section 11.11 Submission to Jurisdiction; Service of Process; Waiver of Jury Trial............40 Section 11.12 Severability....................................................................41 Section 11.13 Effect of Headings, Table of Contents, etc......................................41 Section 11.14 Successors and Assigns..........................................................41 Section 11.15 No Interpretation of Other Agreements...........................................41
iii CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section ----------- ----------------- 310(a)(1) ...........................................................................................7.10 (a)(2) ...........................................................................................7.10 (a)(3) ...........................................................................................N.A. (a)(4) ...........................................................................................N.A. (a)(5) ...........................................................................................7.10 (b) ..................................................................................7.03, 7.08; 7.10 (c) ..............................................................................................N.A. 311(a) ..............................................................................................7.11 (b) ..............................................................................................7.11 (c) ..............................................................................................N.A. 312(a) ..............................................................................................2.05 (b) .............................................................................................11.03 (c) .............................................................................................11.03 313(a) ..............................................................................................7.06 (b)(1) ...........................................................................................N.A. (b)(2)............................................................................................7.06 (c) .......................................................................................7.06; 11.02 (d) ..............................................................................................7.06 314(a) ................................................................................4.03; 10.02; 11.05 (b) ..............................................................................................N.A. (c)(1) ..........................................................................................11.04 (c)(2) ..........................................................................................11.04 (c)(3) ...........................................................................................N.A. (d) ..............................................................................................N.A. (e) .............................................................................................11.05 (f) ..............................................................................................N.A. 315(a) .................................................................................7.01(b)(ii), 7.02 (b) .................................................................................7.02, 7.05; 10.02 (c) .....................................................................................7.01(a), 7.02 (d) .....................................................................................7.01(d), 7.02 (e) ..............................................................................................6.11 316(a)(last sentence) ...........................................................................2.13(f) (a)(1)(A) ........................................................................................6.05 (a)(1)(B) ........................................................................................6.04 (a)(2) ..........................................................................................N.A. (b) .............................................................................................6.07 (c) .......................................................................................2.12; 9.03 317(a)(1) ..........................................................................................6.08 (a)(2) ..........................................................................................6.09 (b) .............................................................................................2.04 318(a) .............................................................................................11.01 (b) ..............................................................................................N.A. (c) .............................................................................................11.01 *
- ---------------------------- N.A. means not applicable. * This Cross-Reference Table is not part of the Indenture. iv INDENTURE dated as of March 5, 2002 by and among Entercom Radio, LLC, a Delaware limited liability company, Entercom Capital, Inc., a Delaware corporation (individually, and collectively, the "Company"), as the ------- joint and several obligors, the guarantors listed on Schedule 1 hereto (herein called the "Guarantors") and HSBC Bank USA, a New York banking corporation and trust company, as Trustee (the "Trustee"). ------- The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its debentures, notes or other evidences of indebtedness to be issued in one or more series (the "Securities"), as herein provided, up to such principal amount as may from time ---------- to time be authorized in or pursuant to one or more resolutions of the Board of Directors or by supplemental indenture. Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of each series of the Securities: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 CERTAIN DEFINITIONS. "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 purposes of this definition, "control," as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the Voting Securities of a Person shall be deemed to be a controlling interest in such Person. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. "Agent" means any Registrar, Paying Agent, authenticating ----- agent or co-Registrar. "Board of Directors" means, with respect to any Person, the ------------------ board of directors of such Person (or, if such Person is a limited liability company, the board of managers of such Person) or similar governing body or any authorized committee thereof. "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 or pursuant to authorization by the Board of Directors and to be in full force and effect on the date of such certification (and delivered to the Trustee, if appropriate). "Business Day" means any day other than a Legal Holiday. ------------ "Closing Date" means the date on which the Securities of a ------------ particular series were originally issued under this Indenture. "Commission" means the Securities and Exchange Commission. ---------- 1 "Company" means the party named as such above until a ------- successor replaces it pursuant to this Indenture and thereafter means the successor. "Company Order" means a written order signed in the name of ------------- the Company by two Officers, one of whom must be the Company's principal executive officer, principal financial officer or principal accounting officer and delivered to the Trustee. "Company Request" means a written request signed in the name --------------- of the Company by its Chairman of the Board, a President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" shall mean the corporate trust office ---------------------- of the Trustee, which shall initially be HSBC Bank USA, 452 Fifth Avenue, New York, New York 10018. "Default" means any event that is, or with the passage of time ------- or the giving of notice or both would be, an Event of Default. "Depositary" means, with respect to the Securities of any ---------- series issuable or issued in whole or in part in the form of one or more Global Securities, the person designated as Depositary for such series by the Company, which Depositary shall be a clearing agency registered under the Exchange Act; and if at any time there is more than one such person, "Depositary" as used with respect to the Securities of any series shall mean the Depositary with respect to the Securities of such series. "Exchange Act" means the Securities Exchange Act of 1934, as ------------ amended. "GAAP" means generally accepted accounting principles set ---- forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the Closing Date. "Global Security" shall mean a Security issued to evidence all --------------- or a part of any series of Securities that is executed by the Company and authenticated and delivered by the Trustee to a Depositary or pursuant to such Depositary's instructions, all in accordance with this Indenture and pursuant to Section 2.01, which shall be registered as to principal and interest in the name of such Depositary or its nominee. "Guarantee" means the guarantee by any Guarantor of the --------- obligations under this Indenture. "Holder" or "Securityholder" means a Person in whose name a ------ -------------- Security is registered in the register of Securities kept by the Registrar. "Indenture" means this Indenture, as amended or supplemented --------- from time to time. 2 "Interest" when used with respect to an Original Issue -------- Discount Security that by its terms bears interest only after maturity, means interest payable after maturity. "maturity" when used with respect to any Security, means the -------- date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at stated maturity or by declaration of acceleration, call for redemption or otherwise. "Officer" means, with respect to any Person, the Chairman of ------- the Board, a Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, any Vice-President, the Treasurer, the Controller, the Secretary, any Assistant Treasurer or any Assistant Secretary of such Person. "Officers' Certificate" means a certificate signed by two or --------------------- more Officers, one of whom must be the principal executive officer, principal financial officer or principal accounting officer of the Company that meets the requirements of Section 11.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who ------------------ is reasonably acceptable to the Trustee that meets the requirements of Section 11.05 hereof. The counsel may be an employee of or counsel to the Company or the Trustee. "Original Issue Discount Security" means any Security which -------------------------------- provides that an amount less than its principal amount is due and payable upon acceleration after an Event of Default. "Person" means any individual, corporation, partnership, joint ------ venture, association, limited liability company, joint stock company, trust, unincorporated organization or government or other entity. "principal" of a Security means the principal amount due on --------- the stated maturity of the Security plus the premium, if any, on the Security. "Securities" means the Securities authenticated and delivered ---------- under this Indenture. "Securities Act" means the Securities Act of 1933, as amended -------------- from time to time. "stated maturity" when used with respect to any Security or --------------- any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable. "Subsidiary" means, with respect to any specified Person: (i) ---------- any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such 3 Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. --- [sec][sec] 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA provided, however, that in the event the TIA is amended after such date, "TIA" means, to the extent required by such amendment, the Trust Indenture Act, as amended. "Trust Officer" when used with respect to the Trustee, means ------------- any officer with direct responsibility for the administration of this Indenture 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. "Trustee" means the party named as such above until a ------- successor becomes such pursuant to this Indenture and thereafter means or includes each party who is then a trustee hereunder, and if at any time there is more than one such party, "Trustee" as used with respect to the Securities of any series means the Trustee with respect to Securities of that series. If Trustees with respect to different series of Securities are trustees under this Indenture, nothing herein shall constitute the Trustees co-trustees of the same trust, and each Trustee shall be the trustee of a trust separate and apart from any trust administered by any other Trustee with respect to a different series of Securities. "U.S. Government Obligations" means securities that are (i) --------------------------- direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America that is not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation evidenced by such depository receipt. SECTION 1.02 OTHER DEFINITIONS. Term Defined in Section - ---- ------------------ "Bankruptcy Law" 6.01 -------------- "Custodian" 6.01 --------- "Event of Default" 6.01 ---------------- "Legal Holiday" 11.07 ------------- "Paying Agent" 2.03 ------------ "Place of Payment" 2.01 ---------------- "redemption price" 3.03 ---------------- "Registrar" 2.03 --------- 4 SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Securities. "indenture securityholder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the Securities means the Company and any Guarantor and any successor obligor on the Securities. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them. SECTION 1.04 RULES OF CONSTRUCTION. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and in the plural include the singular; (v) provisions apply to successive events and transactions; and (vi) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE 2 THE SECURITIES SECTION 2.01 UNLIMITED IN AMOUNT, ISSUABLE IN SERIES, FORM AND DATING. 5 The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution or an Officers' Certificate pursuant to authority granted under a Board Resolution or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series: (a) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities); (b) any limit upon the aggregate principal amount of Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to this Article 2); (c) the price or prices (expressed as a percentage of the aggregate principal amount thereof) at which the Securities of the series will be issued; (d) the date or dates on which the principal of the Securities of the series is payable; (e) the rate or rates that may be fixed or variable at which the Securities of the series shall bear interest, if any, or the manner in which such rate or rates shall be determined, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable and the record dates for the determination of Holders to whom interest is payable; (f) the place or places where the principal of, premium, if any, and any interest, if any, on Securities of the series shall be payable or the method of such payment, if by wire transfer, mail or by other means, if other than as provided herein; (g) the price or prices at which (if any), the period or periods within which (if any) and the terms and conditions upon which (if other than as provided herein) Securities of the series may be redeemed, in whole or in part, at the option, or as an obligation, of the Company; (h) the obligation, if any, of the Company to redeem, purchase or repay Securities of the series, in whole or in part, pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period and periods within which and the terms and conditions upon which Securities of the series shall be redeemed, purchased or repaid pursuant to such obligation; (i) the dates, if any, on which, and the price or prices at which, the Securities of the series will be repurchased by the Company at the option of the Holders thereof and other detailed terms and provisions of such repurchase obligations; (j) if other than denominations of $1,000 and any multiple thereof, the denominations in which Securities of the series shall be issuable; 6 (k) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 6.02 hereof; (l) any addition to, change in or deletion from the covenants set forth in Articles 4 or 5 that applies to Securities of the series; (m) any addition to, changes in or deletion from the Events of Default with respect to the Securities of a particular series and any change in the right of the Trustee or the requisite Holders of such Securities to declare the principal amount thereof due and payable pursuant to Section 6.02 hereof; (n) the Trustee for the series of Securities; (o) the forms of the Securities of the series in bearer or fully registered form (and, if in fully registered form, whether the Securities will be issuable, in whole or in part, as Global Securities); (p) the terms and conditions, if any, upon which such Global Security or Securities may be exchanged in whole or in part for other individual Securities, and the Depositary for such Global Security and Securities; (q) the provisions, if any, relating to any security provided for the Securities of the series; (r) any other terms of the series (which terms may modify, supplement or delete any provision of this Indenture with respect to such series; provided, however, that no such term may modify or delete any provision hereof if imposed by the TIA; and provided, further, that any modification or deletion of the rights, duties or immunities of the Trustee hereunder shall have been consented to in writing by the Trustee). (s) the terms and conditions, if any, upon which the Securities of the series shall be exchanged for or converted into other securities of the Company or securities of another person; (t) any depositories, interest rate calculation agents or other agents with respect to Securities of such series if other than those appointed herein; (u) whether the Securities rank as senior subordinated Securities or subordinated Securities or any combination thereof and the terms of any such subordination; (v) the form and terms of any guarantee of any Securities of the series. All Securities of any series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to such Board Resolution or Officers' Certificate or in any such indenture supplemental hereto. 7 The principal of and any interest on the Securities shall be payable at the office or agency of the Company designated in the form of Security for the series (each such place herein called the "Place of Payment"); provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear in the register of Securities referred to in Section 2.03 hereof. Each Security shall be in one of the forms approved from time to time by or pursuant to a Board Resolution or Officers' Certificate, or established in one or more indentures supplemental hereto. Prior to the delivery of a Security to the Trustee for authentication in any form approved by or pursuant to a Board Resolution or Officers' Certificate, the Company shall deliver to the Trustee the Board Resolution or Officers' Certificate by or pursuant to which such form of Security has been approved, which Board Resolution or Officers' Certificate shall have attached thereto a true and correct copy of the form of Security that has been approved by or pursuant thereto. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Security shall be dated the date of its authentication. SECTION 2.02 EXECUTION AND AUTHENTICATION. One or more Officers shall sign the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall nevertheless be valid. A Security shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Securities for original issue upon receipt of a Company Order. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. SECTION 2.03 REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Securities of a particular series may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities of --------- that series may be presented for payment (a "Paying Agent"). The Registrar for a ------------ particular series of Securities shall keep a register of the Securities of that series and of their registration of transfer and exchange. The Company may appoint one or more co-Registrars and one or more additional paying agents for each series of Securities. The term "Paying Agent" includes any additional paying agent. The Company may change any 8 Paying Agent, Registrar or co-Registrar without prior notice to any Securityholder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to maintain a Registrar or Paying Agent for any series of Securities, the Trustee shall act as such. The Company or any of its Affiliates may act as Paying Agent, Registrar or co-Registrar. The Company hereby appoints the Trustee the initial Registrar and Paying Agent for each series of Securities unless another Registrar or Paying Agent, as the case may be, is appointed prior to the time Securities of that series are first issued. SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST. Whenever the Company has 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 in trust for the benefit of the Persons entitled to such principal or interest, 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 shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent will hold in trust for the benefit of the Securityholders of the particular series for which it is acting, or the Trustee, all money held by the Paying Agent for the payment of principal or interest on the Securities of such series, and that such Paying Agent will notify the Trustee of any Default by the Company or any other obligor of the series of Securities in making any such payment and at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. If the Company or an Affiliate acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Securityholders of the particular series for which it is acting all money held by it as Paying Agent. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon so doing, the Paying Agent (if other than the Company or an Affiliate of the Company) shall have no further liability for such money. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Securities. SECTION 2.05 SECURITYHOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders, separately by series, and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders, separately by series, relating to such interest payment date or request, as the case may be. SECTION 2.06 TRANSFER AND EXCHANGE. 9 Where Securities of a series are presented to the Registrar or a co-Registrar with a request to register a transfer or to exchange them for an equal principal amount of Securities of the same series of other authorized denominations, 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 Company shall issue and the Trustee shall authenticate Securities at the Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer tax or similar governmental charge payable upon exchanges pursuant to Sections 2.09, 2.13, 3.06 or 9.04). The Company need not issue, and the Registrar or co-Registrar need not register the transfer or exchange of, (i) any Security of a particular series during a period beginning at the opening of business 15 days before the day of any selection of Securities of that series for redemption under Section 3.02 and ending at the close of business on the day of selection, or (ii) any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security of that series being redeemed in part. SECTION 2.07 REPLACEMENT SECURITIES. If a mutilated Security is surrendered to the Trustee or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security of same series if the Company's and the Trustee's requirements are met. The Trustee or the Company may require an indemnity bond to be furnished which is sufficient in the judgment of both to protect the Company, the Trustee, and any Agent from any loss which any of them may suffer if a Security is replaced. The Company or the Trustee may charge such Holder for its expenses in replacing a Security. Every replacement Security is an obligation of the Company and shall be entitled to all the benefit of the Indenture equally and proportionately with any and all other Securities of the same series. SECTION 2.08 OUTSTANDING SECURITIES. The Securities of any series outstanding at any time are all the Securities of that series authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a protected purchaser. If Securities are considered paid under Section 4.01, they cease to be outstanding and interest on them ceases to accrue. Except as set forth in Section 2.09 hereof, a Security does not cease to be outstanding because the Company or an Affiliate holds the Security. 10 For each series of Original Issue Discount Securities, the principal amount of such Securities that shall be deemed to be outstanding and used to determine whether the necessary Holders have given any request, demand, authorization, direction, notice, consent or waiver shall be the principal amount of such Securities that could be declared to be due and payable upon acceleration upon an Event of Default as of the date of such determination. When requested by the Trustee, the Company shall advise the Trustee of such amount, showing its computations in reasonable detail. SECTION 2.09 TEMPORARY SECURITIES. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities upon a Company Order. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. Holders of temporary securities shall be entitled to all of the benefits of this Indenture. SECTION 2.10 CANCELLATION. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Securities surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall return such canceled Securities to the Company at the Company's written request. The Company may not issue new Securities to replace Securities that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.11 DEFAULTED INTEREST. If the Company fails to make a payment of interest on any series of Securities, the Company, jointly and severally, shall pay such defaulted interest plus (to the extent lawful) any interest payable on the defaulted interest, in any lawful manner. It may elect to pay such defaulted interest, plus any such interest payable on it, to the Persons who are Holders of such Securities on which the interest is due on a subsequent special record date. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each such Security and the date of the proposed payment. The Company shall fix or cause to be fixed any such record date and payment date for such payment, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before any such record date, the Company shall mail to Securityholders affected thereby a notice that states the record date, payment date, and amount of such interest to be paid. SECTION 2.12 SPECIAL RECORD DATES. (a) The Company may, but shall not be obligated to, set a record date for the purpose of determining the identity of Holders entitled to consent to any 11 supplement, amendment or waiver permitted by this Indenture. If a record date is fixed, the Holders of Securities of that series outstanding on such record date, and no other Holders, shall be entitled to consent to such supplement, amendment or waiver or revoke any consent previously given, whether or not such Holders remain Holders after such record date. No consent shall be valid or effective for more than 90 days after such record date unless consents from Holders of the principal amount of Securities of that series required hereunder for such amendment or waiver to be effective shall have also been given and not revoked within such 90-day period. (b) The Company may, but shall not be obligated to, fix any day as a record date for the purpose of determining the Holders of any series of Securities entitled to join in the giving or making of any notice of Default, any declaration of acceleration, any request to institute proceedings or any other similar direction. If a record date is fixed, the Holders of Securities of that series outstanding 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, however, that no such action shall be effective hereunder unless taken on or prior to the date 90 days after such record date. SECTION 2.13 GLOBAL SECURITIES. (a) Terms of Securities. A Board Resolution, a ------------------- supplemental indenture hereto or an Officers' Certificate shall establish whether the Securities of a series shall be issued in whole or in part in the form of one or more Global Securities and the Depositary for such Global Security or Securities. (b) Transfer and Exchange. Notwithstanding any provisions --------------------- to the contrary contained in Section 2.06 of this Indenture and in addition thereto, any Global Security shall be exchangeable pursuant to Section 2.06 of this Indenture for securities registered in the names of Holders other than the Depositary for such Security or its nominee only if (i) such Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or if at any time such Depositary ceases to be a clearing agency registered under the Exchange Act, and, in either case, the Company fails to appoint a successor Depositary within 90 days of such event or (ii) the Company executes and delivers to the Trustee an Officers' Certificate to the effect that such Global Security shall be so exchangeable. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Securities registered in such names as the Depositary shall direct in writing in an aggregate principal amount equal to the principal amount of the Global Security with like tenor and terms. Except as provided in this paragraph (b) of this Section, a Global Security may not be transferred except as a whole by the Depositary with respect to such Global Security to a nominee of such Depositary, by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such a successor Depositary. 12 (c) Legend. Any Global Security issued hereunder shall ------ bear a legend in substantially the following form: "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 issuer 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 may be requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as may be 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." "Transfer 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 limited to transfers made in accordance with the restrictions set forth in the Indenture referred to herein." (d) Acts of Holders. The Depositary, as a Holder, may --------------- appoint agents and otherwise authorize participants to give or take any request, demand, authorization, direction, notice, consent, waiver or other action which a Holder is entitled to give or take under this Indenture. (e) Payments. Notwithstanding the other provisions of -------- this Indenture, unless otherwise specified as contemplated by Section 2.01 hereof, payment of the principal of and interest, if any, on any Global Security shall be made to the Person specified therein. (f) Consents, Declaration and Directions. Except as ------------------------------------ provided in paragraph (e) of this Section, the Company, the Trustee and any Agent shall treat a Person as the Holder of such principal amount of outstanding Securities of such series represented by a Global Security as shall be specified in a written statement of the Depositary with respect to such Global Security, for purposes of obtaining any consents, declarations or directions required to be given by the Holders pursuant to this Indenture. SECTION 2.14 CUSIP NUMBERS. The Company in issuing any series of Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices 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 such Securities or as contained in any notice and that reliance may be placed only on the other identification numbers printed on such Securities, and any such action relating to such notice shall not be affected by any defect in or omission of such numbers in such notice. The Company shall promptly notify the Trustee of any change in the "CUSIP" numbers. 13 ARTICLE 3 REDEMPTION SECTION 3.01 NOTICES TO TRUSTEE. If the Company elects to redeem Securities of any series pursuant to any optional redemption provisions thereof, it shall furnish to the Trustee at least 30 days, but not more than 60 days before a redemption date, an Officer's Certificate which shall specify (i) the provisions of such Security or this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Securities of that series to be redeemed and (iv) the redemption price. If the Company elects to reduce the principal amount of Securities of any series to be redeemed pursuant to mandatory redemption provisions thereof, it shall notify the Trustee of the amount of, and the basis for, any such reduction. If the Company elects to credit against any such mandatory redemption Securities it has not previously delivered to the Trustee for cancellation, it shall deliver such Securities with such notice. SECTION 3.02 SELECTION OF SECURITIES TO BE REDEEMED. If less than all the Securities of any series are to be redeemed, or purchased in an offer to purchase at any time, the Trustee shall select the Securities of that series to be redeemed or purchased as follows: (1) if the Securities of such series are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Securities of that series are listed, or, (2) if the Securities of that series are not listed on a national securities exchange, on a pro rata basis, by lot or by such other method as the Trustee deems fair and - -------- appropriate. In the event of a partial redemption or purchase by lot, the particular Securities to be redeemed or purchased will be selected not less than 30 nor more than 60 days prior to the redemption or purchase date by the Trustee from Securities of that series outstanding and not previously called for redemption. The Trustee shall notify the Company promptly in writing of the Securities or portions of Securities to be called for redemption or purchase and, in the case of any Securities selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Except as otherwise provided as to any particular series of Securities, Securities and portions thereof that the Trustee selects shall be in amounts equal to the minimum authorized denomination for Securities of the series to be redeemed or purchased or any integral multiple thereof, except that if all of the Securities of the series are to be redeemed or purchased, the entire outstanding amount of the Securities of the series held by such Holder, even if not equal to the minimum authorized denomination for the Securities of that series, shall be redeemed or purchased. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.03 NOTICE OF REDEMPTION. Except as otherwise provided as to any particular series of Securities, at least 30 days but not more than 60 days before a redemption date, the Company shall mail a notice of redemption to each Holder whose Securities are to be redeemed. 14 The notice shall identify the Securities of the series to be redeemed and shall state: (1) the redemption date; (2) the redemption price fixed in accordance with the terms of the Securities of the series to be redeemed, plus accrued interest, if any, to the date fixed for redemption (the "redemption price"); (3) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the redemption date, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Securities; (4) the name and address of the Paying Agent; (5) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that, unless the Company defaults in payment of the redemption price, interest on Securities called for redemption ceases to accrue on and after the redemption date; (7) the CUSIP number, if any, of the Securities to be redeemed. (8) the paragraph of the Securities and/or the section of the Indenture pursuant to which the Securities called for redemption are being redeemed; and (9) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense, provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. The notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice of the Holder of any Security shall not affect the validity of the proceeding for the redemption of any other Security. SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION. Except if the giving of a notice of redemption would violate the terms of the Credit Agreement, and subject to the subordination provisions of any series of Securities, once notice of redemption is mailed in accordance with Section 3.03 hereof, Securities called for redemption become due and payable on the redemption date for the redemption price. Upon surrender to the Paying Agent, such Securities will be paid at the Redemption Price. 15 SECTION 3.05 DEPOSIT OF REDEMPTION PRICE. On or before 10:00 a.m., New York City time, on the redemption or purchase date, the Company shall deposit with the Trustee or Paying Agent (or, if the Company or any Affiliate is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption or purchase price of all Securities called for redemption on that date other than Securities that have previously been delivered by the Company to the Trustee for cancellation. The Paying Agent shall return to the Company any money not required for that purpose. If the Company complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest shall cease to accrue on the Securities (or the portions thereof) called for redemption or purchase. If a Security is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Securities were registered at the close of business on such record date. If any Securities called for redemption or purchase shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in accordance with the terms of the Securities of the series to be redeemed. SECTION 3.06 SECURITIES REDEEMED OR PURCHASED IN PART. Upon surrender of a Security that is redeemed or purchased in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Security of same series equal in principal amount to the unredeemed or unpurchased portion of the Security surrendered. ARTICLE 4 COVENANTS SECTION 4.01 PAYMENT OF SECURITIES. The Company shall, jointly and severally, pay or cause to be paid the principal of, premium, if any, and interest on the Securities on the dates and in the manner provided in this Indenture and the Securities. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or an Affiliate, holds as of 10:00 a.m., New York City time, on that date immediately available funds designated for and sufficient to pay all principal, premium, if any, and interest then due. To the extent lawful, the Company shall, jointly and severally, pay interest on overdue principal and overdue installments of interest at the rate per annum borne by the applicable series of Securities. SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee or 16 Registrar) where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company shall 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. The Company may also from time to time designate one or more other offices or agencies 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 Borough of Manhattan, The City of New York for such purposes. The Company shall 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. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. SECTION 4.03 REPORTS. The Company shall deliver to the Trustee within 15 days after it files them with the Commission copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) that the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act; provided, however the Company shall not be required to deliver to the Trustee any materials for which the Company has sought and received confidential treatment by the Commission. The Company also shall comply with the other provisions of TIA Section 314(a). 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 4.04 COMPLIANCE CERTIFICATE. (a) The Company or any Guarantors shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers (one of whom shall be the principal executive officer, principal financial officer or principal accounting officer of the Company) with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every 17 covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, any year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Securities are outstanding, deliver to the Trustee, forthwith upon becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05 TAXES. The Company shall pay prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of any Securities. SECTION 4.06 STAY, EXTENSION AND USURY LAWS. The Company and any Guarantors covenant (to the extent that it may lawfully do so) that they shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each Guarantor (to the extent that they may lawfully do so) hereby expressly waive all benefits or advantages of any such law, and covenant that they shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.07 CALCULATION OF ORIGINAL ISSUE DISCOUNT. 18 If, as of the end of any fiscal year of the Company, the Company has any outstanding Original Issue Discount Securities under the Indenture, the Company shall file with the Trustee promptly following the end of such fiscal year (i) a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on such Original Issue Discount Securities as of the end of such year and (ii) such other specific information relating to such original issue discount as may then be required under the Internal Revenue Code of 1986, as amended from time to time. ARTICLE 5 SUCCESSORS SECTION 5.01 WHEN COMPANY MAY MERGE, ETC. In addition to provisions applicable to a particular series of Securities, the Company shall not directly or indirectly: (i) consolidate or merge with or into another Person (whether or not the Company is the surviving Person), or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Subsidiaries in one or more related transactions to any Person unless: (1) either (x) the Company is the surviving Person; or (y) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a Person organized or existing under the laws of the United States, any state thereof or the District of Columbia; (2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes (by supplemental indenture reasonably satisfactory to the Trustee) all the obligations of the Company under the Securities and this Indenture; and (3) immediately after the transaction no Default or Event of Default exists. The Company shall deliver to the Trustee on or prior to the consummation of the proposed transaction an Officers' Certificate to the foregoing effect and an Opinion of Counsel stating that the proposed transaction and such supplemental indenture comply with this Indenture. In addition, the Company shall not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. SECTION 5.02 SUCCESSOR PERSON SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, conveyance or other disposition (other than by lease) of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor Person formed by such consolidation or into which the Company is merged or to which such sale, assignment, transfer, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date 19 of such consolidation, merger, sale, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor Person and not to the Company), 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; provided, however, that the predecessor Company shall not be relieved from the obligation to pay principal of, and interest on, any Securities except in the case of a sale, assignment, transfer, conveyance or other disposition of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01 EVENTS OF DEFAULT. An "Event of Default" occurs with respect to Securities of any ---------------- particular series if, unless as otherwise provided in the establishing Board Resolution, Officers' Certificate or supplemental indenture hereto: (1) the Company defaults in the payment of interest on any Security of that series when the same becomes due and payable and the Default continues for a period of 30 days; (2) the Company defaults in the payment, when due, of the principal of, or premium, if any, on any Security of that series when the same becomes due and payable at maturity, upon redemption (including in connection with any offer to purchase under the terms of such Securities) or otherwise; (3) an Event of Default, as defined in the Securities of that series, occurs and is continuing, or the Company fails to comply with any of its other agreements in the Securities of that series or in this Indenture with respect to that series and the Default continues for the period and after the notice specified below; (4) the Company pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing its inability generally to pay its debts as the same become due. 20 (5) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case; (B) appoints a Custodian of the Company or for all or substantially all of its property; or (C) orders the liquidation of the Company; and the order or decree remains unstayed and in effect for 60 days. (6) any other Event of Default provided with respect to Securities of that series which is specified in a Board Resolution, Officers' Certificate or supplemental indenture establishing that series of Securities. The term "Bankruptcy Law" means Title 11, U.S. Code or any -------------- similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. A Default under clause (3) above is not an Event of Default with respect to a particular series of Securities until the Trustee or the Holders of at least 50% in principal amount of the then outstanding Securities of that series notify the Company of the Default and the Company does not cure the Default within 60 days after receipt of the notice. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." Such notice shall be given by the Trustee if so requested in writing by the Holders of 50% of the principal amount of the then outstanding Securities of that series. SECTION 6.02 ACCELERATION. If an Event of Default with respect to Securities of any series (other than an Event of Default specified in clauses (4) and (5) of Section 6.01) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 50% in principal amount of the then outstanding Securities of that series by notice to the Company and the Trustee, may, subject to any prior notice requirements set forth in any supplemental indenture, declare the unpaid principal (or, in the case of Original Issue Discount Securities, such lesser amount as may be provided for in such Securities) of and any accrued interest on all the Securities of that series to be due and payable on the Securities of that series. Upon such declaration the principal (or such lesser amount) and interest shall be due and payable immediately. If an Event of Default specified in clause (4) or (5) of Section 6.01 occurs, all of such amount shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in principal amount of the then outstanding Securities of that series by 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 with respect to that series have been cured or waived except nonpayment of principal (or such lesser amount) or interest that has become due solely because of the acceleration. SECTION 6.03 OTHER REMEDIES. 21 If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal or interest on the Securities of that series or to enforce the performance of any provision of the Securities of that series or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04 WAIVER OF PAST DEFAULTS. Subject to Section 6.02, the Holders of not less than a majority in aggregate principal amount of the then outstanding Securities of any series, by notice to the Trustee, may on behalf of the Holders of the Securities of that series, waive an existing Default or Event of Default with respect to that series and its consequences except a continuing Default or Event of Default in the payment of the principal (including any mandatory sinking fund or like payment) of, premium, if any, or interest on any Security of that series (including in connection with an offer to purchase); provided, however, that the Holders of a majority in aggregate principal amount of the outstanding Securities of any series may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration and its consequences, including any related payment default that resulted from any such acceleration. 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 6.05 CONTROL BY MAJORITY. The Holders of a majority in principal amount of the then outstanding Securities of any series may direct the time, method and place of conducting any proceeding for exercising any remedy with respect to that series available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of other Holders of Securities of that series, or that may involve the Trustee in personal liability. The Trustee may take any other action which it deems proper that is not inconsistent with any such direction. Notwithstanding any provision to the contrary in this Indenture, the Trustee shall not be obligated to take any action with respect to the provisions of Section 6.02 unless directed to do so pursuant to this Section 6.05. SECTION 6.06 LIMITATION ON SUITS. A Holder of Securities of any series may not pursue a remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice of a continuing Event of Default with respect to that series; 22 (2) the Holders of at least 25% in principal amount of the then outstanding Securities of that series make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer, and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (5) during such 60-day period the Holders of a majority in principal amount of the then outstanding Securities of that series do not give the Trustee a direction inconsistent with the request. No Holder of any series of Securities may use this Indenture to prejudice the rights of another Holder of Securities of that series or to obtain a preference or priority over another Holder of Securities of that series. SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal, premium, if any, and interest on the Security, on or after the respective due dates expressed in the Security (including in connection with any offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not, except as provided in the subordination provisions, if any, applicable to such Security, be impaired or affected without the consent of the Holder. SECTION 6.08 COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(1) or (2) hereof occurs and is continuing with respect to Securities of any series, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal (or such portion of the principal as may be specified as due upon acceleration at that time in the terms of that series of Securities), premium, if any, and interest, remaining unpaid on the Securities of that series then outstanding, together with (to the extent lawful) interest on overdue principal and interest, and such further amount as shall be sufficient to cover the costs and, to the extent lawful, expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due the Trustee under Section 7.07 hereof. SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due to the Trustee under Section 7.07 hereof) and the Securityholders allowed in any judicial proceedings relative to the Company (or any other 23 obligor on the Securities), its creditors or its property and shall be entitled to and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims, and any custodian in any such judicial proceedings 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 to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07 hereof. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder 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 Securityholder in any such proceeding. SECTION 6.10 PRIORITIES. If the Trustee collects any money with respect to Securities of any series pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: in accordance with the subordination provisions, if any, of the Securities of such series; Third: to Securityholders for amounts due and unpaid on the Securities of such series for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities of such series for principal, premium, if any, and interest, respectively; and Fourth: to the Company or to such party as a court of competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to Holders of Securities of any series pursuant to this Section. The Trustee shall notify the Company in writing reasonably in advance of any such record date and payment date. SECTION 6.11 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 or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defense made by the party litigant. This Section does not apply to 24 a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof or a suit by Holders of more than 10% in principal amount of the then outstanding Securities of any series. ARTICLE 7 TRUSTEE SECTION 7.01 DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, 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 man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default known to the Trustee: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture or the TIA and the Trustee need perform only those duties that are specifically set forth in this Indenture or the TIA and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a responsible 25 officer of the Trustee, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee may refuse to perform any duty or exercise any right or power, including without limitation, the provisions of Section 6.05 hereof, unless it receives security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Absent written instruction from the Company, the Trustee shall not be required to invest any such money. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02 RIGHTS OF TRUSTEE. Subject to TIA Section 315(a) through (d): (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. 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, may make such further inquiry or investigation into such facts or matters as it may see fit. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers under the Indenture, unless the Trustee's conduct constitutes negligence. 26 (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee may consult with counsel of its selection and may rely upon the advice of such counsel or any Opinion of Counsel. (g) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event that is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities generally or the Securities of a particular series, as the case may be, and this Indenture. (h) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as duties. SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or an Affiliate with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to TIA Sections 310(b) and 311. SECTION 7.04 TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities other than its certificate of authentication. SECTION 7.05 NOTICE OF DEFAULTS. If a Default or Event of Default with respect to the Securities of any series occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to all Holders of Securities of that series a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment on any such Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of such Securityholders. SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after May 15 in each year, the Trustee with respect to any series of Securities shall mail to Holders of Securities of that series as provided in TIA Section 313(c) a brief report dated as of such May 15 that complies with TIA Section 313(a) (if such report is required by TIA Section 313(a)). The Trustee shall also comply with TIA Section 313(b)(2). A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the Commission and each stock exchange on which any of the 27 Securities are listed, as required by TIA Section 313(d). The Company shall notify the Trustee when the Securities are listed on any stock exchange, and of any delisting thereof. SECTION 7.07 COMPENSATION AND INDEMNITY. The Company, jointly and severally, shall pay to the Trustee from time to time such compensation as shall be agreed upon in writing for its services hereunder. The Company, jointly and severally, shall reimburse the Trustee upon written request for all reasonable out-of-pocket expenses incurred by it. Such expenses shall include the reasonable compensation and out-of-pocket expenses of the Trustee's agents and counsel. The Company, jointly and severally, shall indemnify each of the Trustee or any predecessor Trustee for any loss, liability, damage, claims or expenses, including taxes (other than taxes based upon, measured by or determined by the income of the Trustee) incurred by it, without negligence or bad faith on its part, in connection with the acceptance or administration of this Indenture and its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee in its capacity as Trustee, except money or property held in trust to pay principal and interest on particular Securities. Such lien will survive the satisfaction and discharge of this Indenture. If the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(4) or (5) hereof occurs, the expenses and the compensation for the services will be intended to constitute expenses of administration under any applicable Bankruptcy Law. This Section 7.07 shall survive the resignation or removal of the Trustee and the termination of this Indenture. SECTION 7.08 REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee with respect to one or more or all series of Securities and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign with respect to one or more or all series of Securities by so notifying the Company in writing. The Holders of a majority in principal amount of the then outstanding Securities of any series may remove the Trustee as to that series by so notifying the Trustee in writing and may appoint a successor Trustee with the Company's consent. The Company may remove the Trustee with respect to one or more or all series of Securities if: (1) the Trustee fails to comply with Section 7.10 hereof; 28 (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If, as to any series of Securities, the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee for that series. Within one year after the successor Trustee with respect to any series takes office, the Holders of a majority in principal amount of the then outstanding Securities of that series may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee as to a particular series does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the then outstanding Securities of that series may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof with respect to any series, any Holder of Securities of that series who satisfies the requirements of TIA Section 310(b) may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee for that series. A successor Trustee as to any series of Securities shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee (subject to the lien provided for in Section 7.07 hereof), the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture as to that series. The successor Trustee shall mail a notice of its succession to the Holders of Securities of that series. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring trustee. In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and that (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) shall contain such provisions as shall be necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary or desirable to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; provided, however, that nothing herein or in such 29 supplemental Indenture shall constitute such Trustee co-trustees of the same trust and that each such Trustee shall be trustee of a trust hereunder separate and apart from any trust hereunder administered by any other such Trustee. Upon the execution and delivery of such supplemental Indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each 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 with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee as to any series of Securities consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee as to that series. SECTION 7.10 ELIGIBILITY; DISQUALIFICATION. Each series of Securities shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee as to any series of Securities shall always have a combined capital and surplus of at least $25,000,000 as set forth in its most recent published annual report of condition. The Trustee is subject to TIA Section 310(b). SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 SATISFACTION AND DISCHARGE; DEFEASANCE SECTION 8.01 SATISFACTION AND DISCHARGE. This Indenture will be discharged and will cease to be of further effect with respect to any series of Securities issued hereunder, when: (1) either: (a) all Securities of such series that have been authenticated (except lost, stolen or destroyed Securities that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (b) all Securities of such series that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited 30 with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and accrued interest to the date of maturity or redemption: (2) no Default or Event of Default with respect to such series of Securities shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other material instrument to which the Company or any Guarantor is a party to or by which the Company or any Guarantor is bound; (3) the Company or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture with respect to such series of Securities; and (4) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Securities of such series at maturity or the redemption date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Notwithstanding, the satisfaction and discharge of this Indenture with respect to a series of Securities, if money shall have been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section, the provisions of Section 8.06 shall survive. SECTION 8.02 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. Unless Section 8.03 or 8.04 is otherwise specified to be inapplicable to Securities of a series, the Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.03 or 8.04 hereof be applied to all outstanding Securities of any such series upon compliance with the conditions set forth below in this Article Eight. SECTION 8.03 LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.02 hereof of the option applicable to this Section 8.03, the Company and any Guarantor shall, subject to the satisfaction of the conditions set forth in Section 8.05 hereof, be deemed to have been discharged from their respective obligations with respect to all outstanding Securities of any series on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and any Guarantor shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Securities of a series, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.06 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Securities and this Indenture (and the Trustee, on demand of and at 31 the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Securities to receive solely from the trust fund described in Section 8.05 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium and interest on such Securities when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.03 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's or any Guarantors' obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.03 notwithstanding the prior exercise of its option under Section 8.04 hereof. SECTION 8.04 COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.02 hereof of the option applicable to this Section 8.04, the Company or any Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.05 hereof, be released from their respective obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.06, and 4.08, and Section 5.01 hereof with respect to the outstanding Securities of any series on and after the date the conditions set forth in Section 8.05 are satisfied (hereinafter, "Covenant Defeasance"), and the Securities of such series shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Securities shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Securities of any series, the Company or any Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.02 hereof of the option applicable to this Section 8.04 hereof, subject to the satisfaction of the conditions set forth in Section 8.05 hereof, Sections 6.01(3) through 6.01(6) hereof shall not constitute Events of Default. SECTION 8.05 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.03 or 8.04 hereof to the outstanding Securities of any series. In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium and interest on the outstanding Securities on the stated date for payment thereof or on the applicable redemption date, as the case may be; 32 (b) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date hereof, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.04 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Securities pursuant to this Article Eight concurrently with such incurrence) or insofar as Sections 6.01(4) or 6.01(5) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (g) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.06 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.07 hereof, all money and non-callable U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.06, the "Trustee") pursuant to Section 8.01 or Section 8.05 hereof in respect of the outstanding Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying 33 Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company, jointly and severally, shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable U.S. Government Obligations deposited pursuant to Section 8.05 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Securities. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable U.S. Government Obligations held by it as provided in Section 8.05 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.05(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.07 REPAYMENT TO COMPANY. 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, premium, if any, or interest on any Securities and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Securities shall thereafter 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; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.08 REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable U.S. Government Securities in accordance with Section 8.01, 8.03 or 8.04 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.03 or 8.04 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.03 or 8.04 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Securities following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. 34 ARTICLE 9 SUPPLEMENTS, AMENDMENTS AND WAIVERS SECTION 9.01 WITHOUT CONSENT OF HOLDERS. The Company and the Trustee as to any series of Securities may supplement or amend this Indenture or the Securities without notice to or the consent of any Securityholder: (1) to cure any ambiguity, defect or inconsistency; (2) to comply with Article 5; (3) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA; (4) to provide for uncertificated Securities in addition to or in place of certificated Securities; (5) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities, provided, however, that any such addition, change or elimination (A) shall neither (i) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (ii) modify the rights of the Holder of any such Security with respect to such provision or (B) shall become effective only when there is no outstanding Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision; (6) to make any change that does not adversely affect in any material respect the interests of the Securityholders of any series; or (7) to establish additional series of Securities as permitted by Section 2.01 hereof. SECTION 9.02 WITH CONSENT OF HOLDERS. Subject to Section 6.07, the Company and the Trustee as to any series of Securities may amend this Indenture or the Securities of that series with the written consent of the Holders of a majority in principal amount of the then outstanding Securities of each series affected by the amendment, with each such series voting as a separate class. The Holders of a majority in principal amount of the then outstanding Securities of any series may also waive compliance in a particular instance by the Company with any provision of this Indenture with respect to that series or the Securities of that series; provided, however, that without the consent of each Securityholder affected, an amendment or waiver may not: (1) reduce the percentage of the principal amount of Securities whose Holders must consent to an amendment or waiver; 35 (2) reduce the amount of, or postpone the date fixed for, the payment of any sinking fund or analogous provision; (3) reduce the rate of, or change the time for payment of interest on, any Security; (4) reduce the principal of or change the fixed maturity of any Security or waive a redemption payment or alter the redemption provisions with respect thereto; (5) make any Security payable in money other than that stated in the Security (including defaulted interest); (6) reduce the principal amount of Original Issue Discount Securities payable upon acceleration of the maturity thereof; (7) make any change in Section 6.04, 6.07 or this Section 9.02; or (8) waive a default in the payment of the principal of, or interest on, any Security, except to the extent otherwise provided for in Section 6.02 hereof. An amendment or waiver under this Section that waives, changes or eliminates any covenant or other provision of this Indenture that has expressly been included solely for the benefit of one or more particular series of Securities, or that modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. The Company shall mail supplemental indentures to Holders upon request. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. SECTION 9.03 REVOCATION AND EFFECT OF CONSENTS. Until an amendment or waiver becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security; provided, however, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security if the Trustee receives the written notice of revocation before the date on which the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver shall become effective in accordance with its terms and thereafter shall bind every Holder of Securities of that series. 36 SECTION 9.04 NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment, supplement or waiver changes the terms of a Security: (a) the Trustee may require the Holder of the Security to deliver it to the Trustee, the Trustee may, at the written direction of the Company and at the Company's expense, place an appropriate notation on the Security about the changed terms and return it to the Holder and the Trustee may place an appropriate notation on any Security thereafter authenticated; or (b) if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.05 TRUSTEE TO SIGN AMENDMENTS, ETC. Subject to the preceding sentence, the Trustee shall sign any amendment of supplement Indenture if the same does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver that affects the Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental Indenture, the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon, in addition to the documents required by Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental Indenture is authorized or permitted by this Indenture. ARTICLE 10 GUARANTEES SECTION 10.01 GUARANTEE. Any series of Securities may be guaranteed by one or more of the Guarantors. The terms and the form of any such Guarantee will be established in the manner contemplated by Section 2.01 for that particular series of Securities. ARTICLE 11 MISCELLANEOUS SECTION 11.01 INDENTURE SUBJECT TO TRUST INDENTURE ACT. This Indenture is subject to the provisions of the TIA that are required to be part of this Indenture, and shall, to the extent applicable, be governed by such provisions. SECTION 11.02 NOTICES. Any notice or communication is duly given if in writing and delivered in person or sent by first-class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next-day delivery, addressed as follows: 37 If to the Company and/or any Guarantor: Entercom Radio, LLC c/o Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 Attention: John C. Donlevie, Esq. Telephone: (610) 660-5638 Facsimile: (610) 660-5641 with a copy to: Latham & Watkins 11400 Commerce Park Drive, Suite 200 Reston, Virginia 20191 Attention: Scott C. Herlihy, Esq. Telephone: (703) 390-0902 Facsimile: (703) 390-0901 If to the Trustee: HSBC Bank USA 452 Fifth Avenue New York, NY 10018 Attention: Issuer Services Telephone: (212) 525-1398 Facsimile: (212) 525-1300 The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next-day delivery. Any notice or communication to a Securityholder shall be mailed by first-class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to his address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Security holder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If the Company mails a notice or communication to Securityholders, it shall mail a copy to the Trustee at the same time. Any notice or communication shall also be mailed to any Person described in TIA [sec] 313(c), to the extent required by the TIA. 38 If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. SECTION 11.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 11.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate, in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, such action is authorized or permitted by this Indenture and that all such conditions precedent have been complied with. SECTION 11.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificate provided pursuant to TIA [sec][sec]314(a)(4) shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (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 such Person, he or she has made such examination or investigation as is necessary to enable him or her 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 or not, in the opinion of such Person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an officer's certificate or certificates of public officials. 39 SECTION 11.06 RULES BY TRUSTEE AND AGENTS. The Trustee as to Securities of any series may make reasonable rules for action by or at a meeting of Holders of Securities of that series. The Registrar and any Paying Agent or Authenticating Agent may make reasonable rules and set reasonable requirements for their functions. SECTION 11.07 LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a Sunday or a day on which ------------- banking institutions in the City of New York, New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 11.08 NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, manager, securityholder or incorporator, as such, of the Company or any successor Person shall have any liability for any obligations of the Company or any Guarantor under any series of Securities, any guarantees thereof, or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration of issuance of the Securities. SECTION 11.09 COUNTERPARTS. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 11.10 GOVERNING LAW. The internal laws of the State of New York shall govern and be used to construe this Indenture and the Securities (including any guarantees thereof), without giving effect to the applicable principles of conflicts of laws to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 11.11 SUBMISSION TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL Each party hereto hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State Court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Indenture, the Securities (including any guarantee thereof) or the transactions contemplated hereby and thereby. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the State of New 40 York. Without limiting the foregoing, the parties agree that service of process upon such party at the address referred to in Section 11.02, together with written notice of such service to such party, shall be deemed effective service of process upon such party. Each of the parties hereto irrevocably waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this Indenture, the Securities (including any guarantee thereof) or the transactions contemplated hereby and thereby. SECTION 11.12 SEVERABILITY. 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 11.13 EFFECT OF HEADINGS, TABLE OF CONTENTS, ETC. The Article and Section headings herein and the table of contents are for convenience only and shall not affect the construction hereof. SECTION 11.14 SUCCESSORS AND ASSIGNS. All covenants and agreements of the Company in this Indenture and the Securities shall bind its successors and assigns. All agreements of the Trustee in this Indenture shall bind its successor. All agreements of any Guarantor in this Indenture shall bind its successors, except as otherwise provided by the terms hereof. SECTION 11.15 NO INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any Subsidiary or of any Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. [Signature Page Follows] 41 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first above written. ISSUERS: -------- ENTERCOM RADIO, LLC By: /s/ John C. Donlevie --------------------------------------- Name: John C. Donlevie Title: Executive Vice President, Secretary, General Counsel ENTERCOM CAPITAL, INC. By: /s/ John C. Donlevie --------------------------------------- Name: John C. Donlevie Title: Executive Vice President, Secretary and General Counsel 42 GUARANTORS: ----------- ENTERCOM COMMUNICATIONS CORP. ENTERCOM BOSTON I TRUST ENTERCOM NEW YORK, INC. ENTERCOM BOSTON, LLC ENTERCOM BOSTON LICENSE, LLC ENTERCOM BUFFALO, LLC ENTERCOM BUFFALO LICENSE, LLC ENTERCOM DENVER, LLC ENTERCOM DENVER LICENSE, LLC DELAWARE EQUIPMENT HOLDINGS, LLC ENTERCOM GAINESVILLE, LLC ENTERCOM GAINESVILLE LICENSE, LLC ENTERCOM GREENSBORO, LLC ENTERCOM GREENSBORO LICENSE, LLC ENTERCOM GREENVILLE, LLC ENTERCOM GREENVILLE LICENSE, LLC ENTERCOM INTERNET HOLDING, LLC ENTERCOM KANSAS CITY, LLC ENTERCOM KANSAS CITY LICENSE, LLC ENTERCOM LONGVIEW, LLC ENTERCOM LONGVIEW LICENSE, LLC ENTERCOM MADISON, LLC ENTERCOM MADISON LICENSE, LLC ENTERCOM MEMPHIS, LLC ENTERCOM MEMPHIS LICENSE, LLC ENTERCOM MILWAUKEE, LLC ENTERCOM MILWAUKEE LICENSE, LLC ENTERCOM NEW ORLEANS, LLC ENTERCOM NEW ORLEANS LICENSE, LLC ENTERCOM NORFOLK, LLC ENTERCOM NORFOLK LICENSE, LLC By: /s/ John C. Donlevie -------------------------------------- Name: John C. Donlevie Title: Executive Vice President, Secretary and General Counsel 43 ENTERCOM PORTLAND, LLC ENTERCOM PORTLAND LICENSE, LLC ENTERCOM ROCHESTER, LLC ENTERCOM ROCHESTER LICENSE, LLC ENTERCOM SACRAMENTO, LLC ENTERCOM SACRAMENTO LICENSE, LLC ENTERCOM SEATTLE, LLC ENTERCOM SEATTLE LICENSE, LLC ENTERCOM WICHITA, LLC ENTERCOM WICHITA LICENSE, LLC ENTERCOM WILKES-BARRE SCRANTON, LLC By: /s/ John C. Donlevie -------------------------------------- Name: John C. Donlevie Title: Executive Vice President, Secretary and General Counsel ENTERCOM DELAWARE HOLDING CORPORATION By: /s/ John C. Donlevie -------------------------------------- Name: John C. Donlevie Title: President, Secretary and General Counsel 44 HSBC BANK USA, as Trustee By: /s/ Deirdra N. Ross ------------------------------ Name: Deirdra N. Ross Title: Assistant Vice President 45 Schedule 1 ---------- DELAWARE EQUIPMENT HOLDINGS, LLC ENTERCOM COMMUNICATIONS CORP. ENTERCOM DELAWARE HOLDING CORPORATION ENTERCOM BOSTON I TRUST ENTERCOM BOSTON, LLC ENTERCOM BOSTON LICENSE, LLC ENTERCOM DENVER, LLC ENTERCOM DENVER LICENSE, LLC ENTERCOM GAINESVILLE, LLC ENTERCOM GAINESVILLE LICENSE, LLC ENTERCOM GREENSBORO, LLC ENTERCOM GREENSBORO LICENSE, LLC ENTERCOM GREENVILLE, LLC ENTERCOM GREENVILLE LICENSE, LLC ENTERCOM INTERNET HOLDING, LLC ENTERCOM KANSAS CITY, LLC ENTERCOM KANSAS CITY LICENSE, LLC ENTERCOM LONGVIEW, LLC ENTERCOM LONGVIEW LICENSE, LLC ENTERCOM MADISON, LLC ENTERCOM MADISON LICENSE, LLC ENTERCOM MEMPHIS, LLC ENTERCOM MEMPHIS LICENSE, LLC ENTERCOM MILWAUKEE, LLC ENTERCOM MILWAUKEE LICENSE, LLC ENTERCOM NEW ORLEANS, LLC ENTERCOM NEW ORLEANS LICENSE, LLC ENTERCOM NEW YORK, INC. ENTERCOM BUFFALO, LLC ENTERCOM BUFFALO LICENSE, LLC ENTERCOM ROCHESTER, LLC ENTERCOM ROCHESTER LICENSE, LLC ENTERCOM NORFOLK, LLC ENTERCOM NORFOLK LICENSE, LLC ENTERCOM PORTLAND, LLC ENTERCOM PORTLAND LICENSE, LLC ENTERCOM SACRAMENTO, LLC ENTERCOM SACRAMENTO LICENSE, LLC ENTERCOM SEATTLE, LLC ENTERCOM SEATTLE LICENSE, LLC ENTERCOM WICHITA, LLC ENTERCOM WICHITA LICENSE, LLC ENTERCOM WILKES-BARRE SCRANTON, LLC 46 EX-4.03 5 dex403.txt FIRST SUPPLEMENTAL INDENTURE DATED 3/5/2002 EXHIBIT 4.03 ================================================================================ ============================= ENTERCOM RADIO, LLC ENTERCOM CAPITAL, INC., as Co-Issuers and the GUARANTORS named herein ============================= FIRST SUPPLEMENTAL INDENTURE Dated as of March 5, 2002 ============================= HSBC BANK USA, Trustee ============================= ================================================================================ TABLE OF CONTENTS
Page ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE ............................. 1 Section 1.01. Definitions ........................................................ 1 Section 1.02. Other Definitions .................................................. 17 ARTICLE 2. THE NOTES .............................................................. 17 Section 2.01. General ............................................................ 17 Section 2.02. Transfer and Exchange .............................................. 18 Section 2.03. Treasury Notes ..................................................... 21 ARTICLE 3. REDEMPTION AND PREPAYMENT .............................................. 21 Section 3.01. Optional Redemption ................................................ 21 Section 3.02. Mandatory Redemption ............................................... 22 Section 3.03. Offer to Purchase by Application of Excess Proceeds ................ 22 ARTICLE 4. COVENANTS .............................................................. 23 Section 4.01. Additional Interest on Defaulted Interest .......................... 23 Section 4.02. Reports ............................................................ 24 Section 4.03. Restricted Payments ................................................ 24 Section 4.04. Dividend and Other Payment Restrictions Affecting Subsidiaries ..... 26 Section 4.05. Incurrence of Indebtedness and Issuance of Preferred Stock ......... 27 Section 4.06. Asset Sales ........................................................ 30 Section 4.07. Transactions with Affiliates ....................................... 32 Section 4.08. Liens .............................................................. 33 Section 4.09. Offer to Repurchase Upon Change of Control ......................... 33 Section 4.10. No Senior Subordinated Debt ........................................ 34 Section 4.11. Additional Subsidiary Guarantees ................................... 34 Section 4.12. Limitation on Issuances of Equity Interests in Wholly Owned Subsidiaries ....................................................... 35 Section 4.13. Payments for Consent ............................................... 35 Section 4.14. Designation of Restricted and Unrestricted Subsidiaries ............ 35 ARTICLE 5. SUCCESSORS ............................................................. 35 Section 5.01. Merger, Consolidation, or Sale of Assets ........................... 35 ARTICLE 6. DEFAULTS AND REMEDIES .................................................. 36 Section 6.01. Events of Default .................................................. 36 Section 6.02. Acceleration ....................................................... 38
TABLE OF CONTENTS (continued)
Page ARTICLE 7. AMENDMENT, SUPPLEMENT AND WAIVER ....................................... 39 Section 7.01. Without Consent of Holders of Notes ................................ 39 Section 7.02. With Consent of Holders of Notes ................................... 40 Section 7.03. Compliance with Trust Indenture Act ................................ 41 ARTICLE 8. SUBORDINATION .......................................................... 41 Section 8.01. Agreement to Subordinate ........................................... 41 Section 8.02. Liquidation; Dissolution; Bankruptcy ............................... 41 Section 8.03. Default on Designated Senior Indebtedness .......................... 42 Section 8.04. Acceleration of Notes .............................................. 43 Section 8.05. When Distribution Must Be Paid Over ................................ 43 Section 8.06. Notice by Company .................................................. 44 Section 8.07. Subrogation ........................................................ 44 Section 8.08. Relative Rights .................................................... 44 Section 8.09. Subordination May Not Be Impaired by Company or any Guarantor ...... 44 Section 8.10. Distribution or Notice to Representative ........................... 45 Section 8.11. Rights of Trustee and Paying Agent ................................. 45 Section 8.12. Authorization to Effect Subordination .............................. 45 Section 8.13. Amendments ......................................................... 45 Section 8.14. Reinstatement of Payments .......................................... 46 ARTICLE 9. GUARANTEES ............................................................. 46 Section 9.01. Guarantee .......................................................... 46 Section 9.02. Subordination of Guarantee ......................................... 47 Section 9.03. Limitation on Guarantor Liability .................................. 47 Section 9.04. Execution and Delivery of Guarantee ................................ 47 Section 9.05. Subsidiary Guarantors May Consolidate, etc., on Certain Terms ...... 48 Section 9.06. Releases Following Sale of Assets .................................. 48 ARTICLE 10. DEFEASANCE ............................................................. 49 Section 10.01. Covenant Defeasance ................................................ 49 Section 10.02. Miscellaneous ...................................................... 49 ARTICLE 11. MISCELLANEOUS .......................................................... 50 Section 11.01. Ratification of Base Indenture ..................................... 50 Section 11.02. Application of First Supplemental Indenture. ....................... 50
ii TABLE OF CONTENTS (continued)
Page Section 11.03. Benefits of First Supplemental Indenture ........................... 50 Section 11.04. Effective Date ..................................................... 50 Section 11.05. Trustee ............................................................ 50 Section 11.06. Governing Law ...................................................... 50 Section 11.07. Successors ......................................................... 50 Section 11.08. Severability ....................................................... 50 Section 11.09. Counterpart Originals .............................................. 51
EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF SUPPLEMENTAL INDENTURE Exhibit C FORM OF NOTATION OF GUARANTEE iii FIRST SUPPLEMENTAL INDENTURE dated as of March 5, 2002 to that certain Indenture, dated as of March 5, 2002 (the "Base Indenture," and together with the First Supplemental Indenture, the "Indenture"), among Entercom Radio LLC, a Delaware limited liability company ("Radio"), Entercom Capital, Inc., a Delaware corporation ("Capital," each of Radio and Capital being referred to herein individually as an "Issuer" and collectively as the "Company"), Entercom Communications Corp., a Pennsylvania corporation (the "Parent Guarantor"), the Subsidiary Guarantors listed on Schedule I thereto (the "Subsidiary Guarantors," and together with the Parent Guarantor, the "Guarantors") and HSBC Bank USA, as Trustee (the "Trustee"). The Issuers and the Trustee have heretofore executed the Base Indenture, a form of which has been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, as Exhibit 4.4 to the Company's Registration Statement on Form S-3 (Registration No. 333-82542), providing for the issuance from time to time of debt securities of the Issuers. The Issuers and the Trustee are hereby supplementing the Base Indenture pursuant to the provisions of Section 9.01(7) of the Base Indenture to establish the form and terms of the debt securities issued pursuant to this First Supplemental Indenture. The terms of this First Supplemental Indenture shall supplement and be incorporated in their entirety with the terms of the Base Indenture. To the extent any terms of this First Supplemental Indenture are contrary to or duplicative of terms contained in the Base Indenture, the terms of this First Supplemental Indenture shall be deemed to supersede the Base Indenture. The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 7-5/8% Senior Subordinated Notes due 2014 (the "Notes"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. So long as any of the Notes are outstanding, the following definitions shall be applicable to the Notes, shall be included as defined terms for all purposes under the Base Indenture with respect to the Notes and, to the extent inconsistent with the definitions contained in Section 1.01 of the Base Indenture, shall replace such definitions with respect to the Notes. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Base Indenture. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Acquisition Debt" means Indebtedness the proceeds of which are utilized solely to (x) acquire all or substantially all of the assets or a majority of the Voting Stock of an existing radio broadcasting business or station or (y) finance an LMA (in each case, including to repay or refinance indebtedness or other obligations incurred in connection with such acquisition or LMA, as the case may be, and to pay related fees and expenses). 1 "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary that apply to such transfer or exchange. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights, other than in the ordinary course of business (provided, that the sale, lease, conveyance or other disposition of radio stations or all or substantially all their assets shall be deemed not to be in the ordinary course of business); provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of this First Supplemental Indenture described in Sections 4.09 and/or 5.01 hereof and not by the provisions of Section 4.06 hereof; and (2) the issuance of Equity Interests in a Restricted Subsidiary to any Person other than the Parent Guarantor or a Restricted Subsidiary or the sale by the Company or a Restricted Subsidiary of Equity Interests in a Restricted Subsidiary. Notwithstanding the foregoing, the following items will not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that involves assets having a fair market value of $5.0 million or less; (2) a transfer of assets between or among the Company and its Restricted Subsidiaries; (3) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (4) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business; (5) the sale and leaseback of any assets within 90 days of the acquisition thereof; (6) foreclosure on assets; (7) the disposition of equipment that the Company shall determine in good faith to be obsolete or no longer used or useful in the business of such entity; (8) the sale or other disposition of cash or Cash Equivalents; and (9) a Restricted Payment or Permitted Investment that is permitted by Section 4.03 hereof. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning. 2 "Board of Directors" means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the board of directors of the general partner of the partnership; and (3) with respect to any other Person, the board or committee of such Person having a similar function. Unless the context otherwise requires, references to "Board of Directors" is the board of directors (or equivalent body) or a committee of such board of directors of the Parent Guarantor. "Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars; (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government having maturities of not more than one year from the date of acquisition; (iii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to Credit Facilities or any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better; (iv) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above; (v) commercial paper having one of the two highest ratings obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within one year after the date of acquisition; and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i) through (v) of this definition. "Change of Control" means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a Principal; 3 (2) the adoption of a plan relating to the liquidation or dissolution of the Company; (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares; or (4) the first day on which a majority of the members of the Board of Directors are not Continuing Directors. "Company" means Entercom Radio LLC and Entercom Capital, Inc., and any and all successors thereto. "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: (1) an amount equal to any extraordinary loss plus any net loss, together with any related provision for taxes, realized by such Person or any of its Restricted Subsidiaries in connection with (a) an Asset Sale (including any sale and leaseback transaction), or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries, to the extent such losses were deducted in computing such Consolidated Net Income; plus (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to obligations with respect to any sale and leaseback transaction, all fees, including but not limited to agency fees, letter of credit fees, commitment fees, commissions, discounts and other fees and charges incurred in respect of Indebtedness and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus (4) depreciation, amortization (including non-cash employee and officer equity compensation expenses, amortization of goodwill and other intangibles, amortization of programming costs and barter expenses, but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus (5) any extraordinary or non-recurring expenses of such Person and the Restricted Subsidiaries for such period to the extent that such charges were deducted in computing such Consolidated Net Income; minus 4 (6) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business; minus (7) cash payments related to non-cash charges that increased Consolidated Cash Flow in any prior period; minus (8) barter revenues, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Restricted Subsidiary will be added to Consolidated Net Income to compute Consolidated Cash Flow of the Company only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum, without duplication of: (1) the consolidated interest expense of such Person and the Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations); (2) the consolidated interest expense of such Person and the Restricted Subsidiaries that was capitalized during such period; (3) any interest expense on Indebtedness of another Person that is guaranteed by such Person or any of the Restricted Subsidiaries or secured by a Lien on assets of such Person or any of the Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon); and (4) the product of: (a) all cash dividend payments (and non-cash dividend payments in the case of a Person that is a Restricted Subsidiary) on any series of preferred stock of such Person or any of the Restricted Subsidiaries, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: 5 (1) the Net Income (to the extent positive) of any Person other than a Restricted Subsidiary shall be included only the extent of dividends and distributions paid in cash to the Company or a Restricted Subsidiary by such Person; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition will be excluded; and (4) the cumulative effect of a change in accounting principles will be excluded. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Parent Guarantor who (i) was a member of or nominated to such Board of Directors on the date of this First Supplemental Indenture; or (ii) was nominated for election either (a) by one or more of the Principals or (b) with the approval of at least a majority of the members of the Board of Directors then in office who either were members of the Board of Directors on the date of this First Supplemental Indenture or whose election or nomination for election was previously so approved. "Credit Agreement" means that certain Credit Agreement, dated as of December 16, 1999, as amended through the date of this First Supplemental Indenture, by and among Radio, as borrower, the Parent Guarantor, as guarantor, Banc of America Securities LLC, as book manager, Key Corporate Capital Inc., as administrative agent, Bank of America, N.A., as syndication agent and the lenders party thereto, including any related notes, guarantees, letters of credit, collateral documents, instruments and agreements executed in connection therewith, as amended, extended, restated, supplemented, modified, renewed, refunded, restructured, replaced or refinanced from time to time (including any increase in principal amount), in whole or in part, whether with the original agents and lenders or other agents and lenders, and whether provided under the original credit agreement or one or more other credit agreements or otherwise. "Credit Facilities" means, one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time (including any increase in principal amount), in whole or in part. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.02 hereof, substantially in the form of Exhibit A-1 hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Designated Senior Indebtedness" means (i) any Indebtedness outstanding under the Credit Agreement, including any guarantees in respect of such Indebtedness; and (ii) any other Senior 6 Indebtedness permitted under this First Supplemental Indenture the principal amount of which (or which is otherwise available under a committed facility) at the date of determination is $25.0 million or more and that has been designated by an Issuer or a Subsidiary Guarantor as "Designated Senior Indebtedness;" provided, however, that, so long as the Credit Agreement remains in effect, lenders holding a majority of the loan commitments or outstanding loans thereunder shall have consented in writing to such designation by an Issuer or a Subsidiary Guarantor unless the Credit Agreement expressly provides that such lenders shall not have such right to consent to such designation. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event (other than an optional call for redemption by the issuer thereof), matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the provisions of Section 4.03. "Domestic Subsidiary" means any Restricted Subsidiary that is formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means an offering of Capital Stock (other than Disqualified Stock) of the Company or an offering by any direct or indirect parent of the Company of its Capital Stock in which the proceeds are contributed to the Company, in each case which offering results in at least $25.0 million of net proceeds to the Company. "Existing Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the date of this First Supplemental Indenture. "Existing Debentures" means the 6 1/4% Convertible Subordinated Debentures due 2014 of the Parent Guarantor. "Existing Debentures Indenture" means the Indenture dated as of October 6, 1999 by and between the Parent Guarantor, as issuer, and Wilmington Trust Company, as Trustee with respect to the Existing Debentures. "Global Notes" means, individually and collectively, the Global Notes, substantially in the form of Exhibit A hereto issued in accordance with Section 2.01, 2.02(b)(ii) or 2.02(d) hereof. "Global Note Legend" means the legend set forth in Section 2.02(f) hereof, which is required to be placed on all Global Notes issued under this First Supplemental Indenture. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. 7 "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "Guarantors" means the Parent Guarantor and the Subsidiary Guarantors. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under (i) currency exchange or interest rate swap agreements, interest rate cap agreements and currency exchange or interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or interest rates. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations; (5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) representing the aggregate net amount of all Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person; provided, however, that Indebtedness shall not include the pledge of the Capital Stock of an Unrestricted Subsidiary to secure Non-Recourse Debt of that Unrestricted Subsidiary. The amount of any Indebtedness outstanding as of any date will be: (1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; and (2) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of 8 Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary or a Restricted Subsidiary issues any of its Equity Interests such that, in each case, after giving effect to any such sale, disposition or issuance, such Person is no longer a Restricted Subsidiary, the Company will be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.03. "Leverage Ratio" means the ratio of (i) the aggregate outstanding amount of Indebtedness of each of the Company and the Indebtedness of the Restricted Subsidiaries as of the last day of the most recently ended fiscal quarter for which the Company has filed consolidated financial statements with the SEC, plus the aggregate liquidation preference of all outstanding Disqualified Stock of the Company and outstanding preferred stock of the Restricted Subsidiaries (except preferred stock issued to the Company or a Restricted Subsidiary) as of such day to (ii) the aggregate Consolidated Cash Flow of the Company for the last four full fiscal quarters for which the Company has filed consolidated financial statements with the SEC or first provided consolidated financial statements to the holders of the Notes ending on or prior to the date of determination (the "Reference Period"). For purposes of this definition, the aggregate outstanding principal amount of the Indebtedness of the Company and the Restricted Subsidiaries and the aggregate liquidation preference of all Disqualified Stock and outstanding preferred stock of the Restricted Subsidiaries for which such calculation is made shall be determined on a pro forma basis as if the Indebtedness, Disqualified Stock and preferred stock giving rise to the need to perform such calculation had been incurred and issued and the proceeds therefrom had been applied, and all other transactions in respect of which such Indebtedness is being incurred or Disqualified Stock or preferred stock is being issued had occurred, on the first day of such Reference Period. In addition to the foregoing, for purposes of this definition, the Leverage Ratio shall be calculated on a pro forma basis, after giving effect to (i) the incurrence of the Indebtedness of such Person and the Restricted Subsidiaries and the issuance of the Disqualified Stock or preferred stock (and the application of the proceeds therefrom) giving rise to the need to make such calculation and any incurrence (and the application of the proceeds therefrom) or repayment of other Indebtedness, Disqualified Stock or preferred stock, at any time subsequent to the beginning of the Reference Period and on or prior to the date of determination (including any deemed incurrence or issuance which is the subject of an Incurrence Notice delivered to the Trustee during such period pursuant to clause (xiii) of the definition of Permitted Indebtedness), as if such incurrence or issuance (and the application of the proceeds thereof), or the repayment, as the case may be, occurred on the first day of the Reference Period (except that, in making such computation, the amount of Indebtedness under any revolving credit facility shall be computed based upon the average balance of such Indebtedness at the end of each month during such period), and (ii) any acquisition at any time on or subsequent to the first day of the Reference Period and on or prior to the date of determination (including any deemed acquisition which is the subject of an Incurrence Notice delivered to the Trustee during such period pursuant to clause (xiii) of the definition of Permitted Indebtedness), as if such acquisition or disposition (including the incurrence, assumption or liability for, or repayment of, any such Indebtedness and the issuance of such Disqualified Stock or preferred stock and also including any Consolidated Cash Flow associated with such acquisition) and occurred on the first day of the Reference Period giving pro forma effect to any non-recurring expenses, non-recurring costs and cost reductions within the first year after such acquisition the Company reasonably anticipates in good faith if the Company delivers to the Trustee an officer's certificate executed by the chief financial or accounting officer of the Company certifying to and describing and quantifying in reasonable detail such non-recurring expenses, non-recurring costs and cost reductions. Furthermore, in calculating Consolidated Interest Expense for purposes of the calculation of Consolidated Cash Flow, (a) interest on Indebtedness determined on a fluctuating basis as of the date of determination (including Indebtedness actually incurred on the date of the transaction giving rise to the need to calculate the Leverage Ratio) and 9 which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness as in effect on the date of determination and (b) notwithstanding (a) above, interest determined on a fluctuating basis, to the extent such interest is covered by Hedging Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "LMA" means a local marketing arrangement, joint sales agreement, time brokerage agreement, shared services agreement, management agreement or similar arrangement pursuant to which a Person, subject to customary preemption rights and other limitations (i) obtains the right to sell a portion of the advertising inventory of a radio station of which a third party is the licensee, (ii) obtains the right to exhibit programming and sell advertising time during a portion of the air time of a radio station or (iii) manages a portion of the operations of a radio station. "Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale, or (b) the disposition of any securities by such Person or any Restricted Subsidiary or the extinguishment of Indebtedness of such Person or any Restricted Subsidiary; and (ii) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any Restricted Subsidiary in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (i) the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, (ii) taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, (iii) amounts required to be applied to the repayment of Indebtedness, other than Senior Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale and (iv) any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP (but only for so long as and to the extent such reserve is maintained in accordance with GAAP). "Non-Recourse Debt" means Indebtedness: (1) as to which neither the Company nor any Restricted Subsidiary (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender; and (2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any Restricted Subsidiary to declare a default on such other 10 Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its stated maturity. "Notes" has the meaning assigned to it in the preamble to this First Supplemental Indenture. The Notes and the Additional Notes shall be treated as a single class for all purposes under this First Supplemental Indenture. "Obligations" means any principal (or accreted amount in the case of any discount obligation), interest, premium, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing, creating, evidencing or securing any Indebtedness and in all cases whether direct or indirect, absolute or contingent, now outstanding or hereafter created, assumed or incurred and including, without limitation, interest accruing subsequent to the filing of a petition in bankruptcy or the commencement of any insolvency, reorganization or similar proceedings at the rate provided in the relevant documentation, whether or not an allowed claim, and any obligation to redeem or defease any of the foregoing. "Offering" means the offering of the Notes by the Company. "Parent Guarantor" means Entercom Communications Corp., in its capacity as guarantor under this First Supplemental Indenture. "Participant" means, with respect to the Depositary, a Person who has an account with the Depositary. "Permitted Asset Swap" means, with respect to the Company and the Restricted Subsidiaries, the substantially concurrent exchange of assets of the Company or a Restricted Subsidiary (including Equity Interests of a Restricted Subsidiary) for assets of another Person, which assets are used in or useful to a Permitted Business. "Permitted Business" means any business engaged in by the Company or the Restricted Subsidiaries as of the Closing Date or any business reasonably related, ancillary or complementary thereto. "Permitted Investments" means: (1) any Investment in the Company or in a Restricted Subsidiary; (2) any Investment in Cash Equivalents; (3) any Investment by the Company or any Restricted Subsidiary in a Person, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.06; 11 (5) any acquisition of assets (including Investments in Unrestricted Subsidiaries) solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (6) notes and accounts receivable incurred in the ordinary course of business and any Investments received in compromise of obligations of any Person incurred in the ordinary course of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; (7) Hedging Obligations; (8) loans and advances to employees of the Company or any Restricted Subsidiary in the ordinary course of business not in excess of $10.0 million in aggregate principal amount at any time outstanding; or (9) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), that, when taken together with all other Investments made pursuant to this clause (9) do not exceed $20.0 million at any time outstanding. "Permitted Junior Securities" means (i) Equity Interests in the Company or the Parent Guarantor or, subject to the provisions of the Credit Agreement, any Subsidiary Guarantor; or (ii) debt securities of an Issuer or any Guarantor that are subordinated to all Senior Indebtedness and any debt securities issued in exchange for Senior Indebtedness and subordinated to substantially the same extent as, or to a greater extent than, the Notes and the Guarantees are subordinated to Senior Indebtedness under this First Supplemental Indenture. "Permitted Liens" means: (1) Liens securing Senior Indebtedness that was permitted by the terms of this First Supplemental Indenture to be incurred; (2) Liens in favor of the Company or a Restricted Subsidiary; (3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary; (4) Liens on property existing at the time of acquisition of the property by the Company or any Restricted Subsidiary; provided that such Liens were in existence prior to the contemplation of such acquisition; (5) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of the second paragraph of Section 4.05 covering only the assets acquired with such Indebtedness; 12 (7) Liens existing on the date of this First Supplemental Indenture; (8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor; (9) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary with respect to obligations that do not exceed an aggregate amount of $10.0 million at any one time outstanding; (10) Liens securing Permitted Refinancing Indebtedness where the Liens securing the Indebtedness being refinanced were permitted under this First Supplemental Indenture; (11) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred or imposed, as applicable, in the ordinary course of business and consistent with industry practices; (12) any interest or title of a lessor under any Capital Lease Obligation; (13) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to letters of credit and products and proceeds thereof; (14) Liens encumbering deposits made to secure statutory, regulatory, contractual or warranty obligations, including rights of offset and set-off; (15) Liens securing Hedging Obligations which Hedging Obligations relate to Indebtedness that is otherwise permitted under this First Supplemental Indenture; (16) leases or subleases granted to others; (17) Liens under licensing agreements in the ordinary course of business; (18) judgment Liens not giving rise to an Event of Default; (19) Liens encumbering property of the Company or a Restricted Subsidiary consisting of carriers, warehousemen, mechanics, materialmen, repairmen and landlords, and other Liens arising by operation of law and incurred in the ordinary course of business for sums which are not overdue or which are being contested in good faith by appropriate proceedings and (if so contested) for which appropriate reserves with respect thereto have been established and maintained on the books of the Company or a Restricted Subsidiary in accordance with GAAP; (20) Liens encumbering property of the Company or a Restricted Subsidiary incurred in the ordinary course of business in connection with workers' compensation, unemployment insurance, or other forms of governmental insurance or benefits, or to secure performance of bids, tenders, statutory obligations, leases, and contracts (other than for Indebtedness) entered into in the ordinary course of business of the Company or a Restricted Subsidiary; and (21) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries. 13 "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any Restricted Subsidiary issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any Restricted Subsidiary (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all expenses and premiums incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Principals" means Joseph M. Field and David J. Field. "Related Party" means: (1) any immediate family member (in the case of an individual) of any Principal; or (2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or such other Persons referred to in the immediately preceding clause (1). "Representative" means, as the case may be, a trustee, agent or representative appointed for the holders of any Senior Indebtedness under an agreement to which such Senior Indebtedness was issued. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" means each of the current and future Subsidiaries of the Company, other than Unrestricted Subsidiaries. "SEC" means the Securities and Exchange Commission. "Senior Indebtedness" means (i) all Indebtedness of the Company or any Guarantor outstanding under the Credit Agreement and all Hedging Obligations with respect thereto, (ii) any other Indebtedness of the Company or any Guarantor permitted to be incurred under the terms of this First Supplemental Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is 14 on a parity with or subordinated in right of payment to the Notes or any Guarantee, and (iii) all Obligations with respect to the items listed in the preceding clauses (i) and (ii). Notwithstanding anything to the contrary in the preceding sentence, Senior Indebtedness will not include (w) any liability for federal, state, local or other taxes owed or owing by an Issuer or a Guarantor, (x) any intercompany Indebtedness of the Company, the Parent Guarantor or any Restricted Subsidiary to the Company or any of its Affiliates; (y) any trade payables; or (z) the portion of any Indebtedness that is incurred in violation of this First Supplemental Indenture; provided, however, that, notwithstanding the foregoing, solely with respect to the Parent Guarantor, during the time that any Existing Debentures remain outstanding, Senior Indebtedness shall mean the "Secured Senior Debt" of the Parent Guarantor (as defined in the Existing Debentures Indenture). "Senior Guarantees" means the Guarantees by the Guarantors of Obligations under the Credit Facilities. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1.02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary Guarantee" means the Guarantee of a Subsidiary Guarantor with respect to the Notes. "Subsidiary Guarantors" means each of: (1) the Restricted Subsidiaries on the date of this First Supplemental Indenture; and (2) any other of the Company's Subsidiaries that executes a Subsidiary Guarantee in accordance with the provisions of this First Supplemental Indenture; and (3) each of their respective successors and assigns. "Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any Restricted Subsidiary has any direct or indirect obligation to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and 15 (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any Restricted Subsidiary. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by the terms of Section 4.03 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of this First Supplemental Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary as of such date and, if such Indebtedness is not permitted to be incurred as of such date pursuant to Section 4.05, the Company will be in default under such section. The Board of Directors may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1) such Indebtedness is permitted pursuant to Section 4.05 calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would exist following such designation. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" of any specified Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) will at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person. 16 Section 1.02. Other Definitions. Defined in Term Section - ---- ------- "Additional Notes"................................................ 2.01 "Affiliate Transaction"........................................... 4.07 "Asset Sale Offer"................................................ 3.03 "Change of Control Offer"......................................... 4.09 "Change of Control Payment"....................................... 4.09 "Change of Control Payment Date".................................. 4.09 "Event of Default"................................................ 6.01 "Excess Proceeds"................................................. 4.06 "incur"........................................................... 4.05 "Incurrence Notice"............................................... 4.05 "Offer Amount".................................................... 3.03 "Offer Period".................................................... 3.03 "Payment Blockage Notice"......................................... 8.03 "Payment Default"................................................. 6.01 "Permitted Indebtedness".......................................... 4.05 "Purchase Date"................................................... 3.03 "Restricted Payments"............................................. 4.03 ARTICLE 2. THE NOTES Section 2.01. General. (a) Designation of Series. Pursuant to the terms hereof and Section 2.01 of the Base Indenture, there is hereby established the Notes, known as the "7-5/8% Senior Subordinated Notes due 2014," which shall be guaranteed by the Guarantors, and such Notes and Guarantees shall be deemed "Securities" for all purposes under the Base Indenture. (b) Form of Notes. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The Company may issue additional Notes (the "Additional Notes") under this First Supplemental Indenture from time to time after the date hereof, subject to compliance with Section 4.05 hereof. The Notes and any debt securities subsequently issued under the Indenture (but not this First Supplemental Indenture) shall be treated as distinct classes of debt securities for all purposes under the Indenture, including waivers, amendments, redemptions and offers to purchase. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of the Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of the Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. 17 (c) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.02 hereof. The Company initially appoints the Depositary Trust Company ("DTC") to act as Depositary with respect to the Global Notes. Section 2.02. Transfer and Exchange. Pursuant to Section 9.01 of the Base Indenture, this Section 2.02 hereby supercedes and replaces in their entirety Section 2.06 and Section 2.13(b) and (c) of the Base Indenture. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in this Section 2.02. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.02, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.02(a); however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.02(b), (c) or (e) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this First Supplemental Indenture and the Applicable Procedures. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in a Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.02(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 18 2.02(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this First Supplemental Indenture and the Notes or otherwise applicable under the Securities Act, and upon receipt by the Trustee of an Opinion of Counsel, reasonably acceptable to the Trustee, with respect to such matters, if requested by the Trustee, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.02(g) hereof. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. If any holder of a beneficial interest in a Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.02(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.02(g) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.02(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. A Holder of a Definitive Note may exchange such Note for a beneficial interest in a Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Global Notes. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. A Holder of Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of another Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Definitive Notes pursuant to the instructions from the Holder thereof. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.02(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. (f) Legend. The following legend shall appear on the face of all Global Notes issued under this First Supplemental Indenture in substantially the following form: 19 "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.02 OF THE BASE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.02(a) OF THE FIRST SUPPLEMENTAL INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.10 OF THE BASE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (g) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.10 of the Base Indenture. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (h) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Section 2.10 of the Base Indenture and Sections 3.01, 3.03, 4.06, 4.09 and 8.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this First Supplemental Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 of the Base Indenture and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any 20 Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes (subject to the provisions of the Notes for record dates), and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 of the Base Indenture. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.02 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.03. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. ARTICLE 3. REDEMPTION AND PREPAYMENT Pursuant to Sections 2.01(g) and (h) of the Base Indenture, the following provisions are hereby added to Article 3 of the Base Indenture: Section 3.01. Optional Redemption. (a) Except as set forth in clause (b) of this Section 3.01, the Company shall not have the option pursuant to this Section 3.01 to redeem the Notes prior to March 1, 2007. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on March 1 of each of the years indicated below: Year Percentage - ---- ---------- 2007............................................................. 103.813% 2008............................................................. 102.542% 2009............................................................. 101.271% 2010 and thereafter.............................................. 100.00% (b) Notwithstanding the provisions of clause (a) of this Section 3.01, at any time prior to March 1, 2005, the Company may, on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this First Supplemental Indenture with the net proceeds of one or more Equity Offerings at a redemption price equal to 107.625% of the aggregate principal amount 21 thereof; provided that at least 65% in aggregate principal amount of the Notes originally issued remain outstanding immediately after the occurrence of such redemption and that such redemption occurs within 180 days of the date of the closing of such Equity Offering. (c) Any redemption pursuant to this Section 3.01 shall be made pursuant to the provisions of Section 3.01 through 3.06 of the Base Indenture. Section 3.02. Mandatory Redemption. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. Section 3.03. Offer to Purchase by Application of Excess Proceeds. In the event that, pursuant to Section 4.06 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.06 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.03 and Section 4.06 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 only; 22 (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.03. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.03, any purchase pursuant to this Section 3.03 shall be made pursuant to the provisions of Sections 3.01 through 3.06 of the Base Indenture. ARTICLE 4. COVENANTS Pursuant to Section 2.01(l) of the Base Indenture, so long as any of the Notes are outstanding, the Company covenants and agrees, in addition to the covenants and agreements contained in Article 4 of the Base Indenture, as follows with respect to the Notes; provided that Section 4.07 of the Base Indenture shall not be applicable to the Notes: Section 4.01. Additional Interest on Defaulted Interest. The following paragraph shall supercede and replace in its entirety the second paragraph of Section 4.01 of the Base Indenture: 23 The Company shall jointly and severally pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02. Reports. The following provisions shall supercede and replace in its entirety the Section 4.03 of the Base Indenture: (a) Whether or not required by the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes, within the time periods specified in the SEC's rules and regulations for a company subject to Section 13 or 15(d) under the Exchange Act: (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company (or, taking into account Rule 3-10 of Regulation S-X or any successor rule or regulation, the Parent Guarantor) were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's (or the Parent Guarantor's) certified independent accountants; and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company (or the Parent Guarantor) were required to file such reports. The Company shall at all times comply with TIA [sec] 314(a). (b) If either of the Company or any Subsidiary Guarantor has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph will include, either on the face of the financial statements or in the footnotes thereto, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations, a reasonably detailed summary of the Company and the Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries containing line items substantially consistent with those contained in the summary section of the offering memorandum with respect to the Offering. Section 4.03. Restricted Payments. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any Restricted Subsidiary's Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any Restricted Subsidiary) or to the direct or indirect holders of the Company's or any Restricted Subsidiary's Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company and other than dividends or distributions payable to the Company or a Restricted Subsidiary); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or of any direct or indirect parent of the Company (other than any such Equity Interests owned by the Company or a Restricted Subsidiary); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees, except a payment of interest or principal at the Stated Maturity thereof (except for payments into a trust within one year of the stated maturity of any such Subordinated Indebtedness which payments effect a defeasance or discharge of such Indebtedness); or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: 24 (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of such Restricted Payment; (b) the Company, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, would have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Leverage Ratio test set forth in Section 4.05 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries on or after the date of this First Supplemental Indenture (excluding Restricted Payments permitted by clauses (b), (c), (d), (e), (f) and (g), of the next succeeding paragraph), is less than the sum, without duplication, of: (i) (x) 100% of the aggregate Consolidated Cash Flow of the Company (or, in the event such Consolidated Cash Flow shall be a deficit, minus 100% of such deficit) accrued for the period beginning on the first day of the first calendar month commencing after the date of this First Supplemental Indenture and ending on the last day of the most recently completed fiscal quarter for which the Company has filed consolidated financial statements with the SEC or first provided consolidated financial statements to Holders of the Notes, less (y) 1.4 times Consolidated Interest Expense for the same period, plus (ii) 100% of the aggregate net proceeds (including the fair market value of property other than cash or Cash Equivalents) received by the Company on or after the date of this First Supplemental Indenture from (a) any parent as a capital contribution or (b) the issue or sale of Equity Interests of the Company (other than Disqualified Stock), or of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Restricted Subsidiary and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (iii) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the date of this First Supplemental Indenture, the fair market value of the Company's Investment in such Subsidiary as of the date of such redesignation, plus (iv) to the extent that all or any part of a Restricted Investment is sold for cash or otherwise liquidated, retired or repaid for cash, the lesser of (a) the net cash proceeds received by us or any Restricted Subsidiary therefrom (less the cost of disposition, if any) and (b) the initial amount of such Restricted Investment, plus (v) the aggregate amount returned in cash with respect to Restricted Investments made after the date of this First Supplemental Indenture whether through interest payments, principal payments, dividends or other distributions. The preceding provisions shall not prohibit: (a) the payment of any dividend within 60 days after the date of declaration of the dividend, if at the date of declaration the dividend payment would have complied with the provisions of this First Supplemental Indenture; (b) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Restricted Subsidiary or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially 25 concurrent sale (other than to a Restricted Subsidiary) of, Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (c) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any Restricted Subsidiary with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (d) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; (e) payment of dividends on Disqualified Stock the incurrence of which was permitted by this First Supplemental Indenture; (f) repurchases of Equity Interests deemed to occur upon the cashless exercise of stock options; and (g) dividends or distributions by the Company to the Parent Guarantor for (i) bona fide costs and operating expenses directly related to the operations of the Company and the Restricted Subsidiaries, (ii) other bona fide costs and expenses not to exceed an aggregate of $15.0 million in any calendar year, plus (iii) so long as no Default or Event of Default has occurred and is continuing, amounts necessary to fund interest payments and other required payments on the Existing Debentures, except during any period during which interest on the Existing Debentures has been deferred in accordance with their terms. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.03 shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. The Board of Director's determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $10.0 million. Section 4.04. Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (a) pay dividends or make any other distributions on its Capital Stock to an Issuer or any Restricted Subsidiary, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any Restricted Subsidiary; (b) make loans or advances to the Company or any Restricted Subsidiary; or (c) transfer any of its properties or assets to the Company or any Restricted Subsidiary. However, the preceding restrictions shall not apply to encumbrances or restrictions existing under or by reason of: 26 (i) agreements governing Existing Indebtedness and Credit Facilities as in effect on the date of this First Supplemental Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements as in effect on the date of this First Supplemental Indenture; (ii) this First Supplemental Indenture, the Notes and the Subsidiary Guarantees; (iii) applicable law, rule, regulation or order; (iv) any instrument governing Indebtedness of a Person acquired by the Company or any Restricted Subsidiary as in effect at the time of such acquisition, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this First Supplemental Indenture to be incurred; (v) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (vi) purchase money obligations (including Capital Lease Obligations) for property acquired in the ordinary course of business that impose restrictions only on that property of the nature described in clause (c) above; (vii) contracts for the sale of assets, including without limitation any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition; (viii) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (ix) Liens securing Indebtedness otherwise permitted to be incurred under the provisions of Section 4.08 hereof that limit the right of the debtor to dispose of the assets subject to such Liens; (x) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, assets sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business; and (xi) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. Section 4.05. Incurrence of Indebtedness and Issuance of Preferred Stock. The Company shall not, and shall cause its Restricted Subsidiaries not to, directly, or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), Disqualified Stock or preferred stock; provided, however, that the Company or any Subsidiary Guarantor may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Company's 27 Leverage Ratio at the time of incurrence of such Indebtedness or the issuance of such Disqualified Stock or such preferred stock, as the case may be, after giving pro forma effect to such incurrence or issuance as of such date and to the use of the proceeds therefrom as if the same had occurred at the beginning of the most recently ended four full fiscal quarter period of the Company for which the Company has filed consolidated financial statements with the SEC or first provided consolidated financial statements to Holders of the Notes, would have been no greater than 7.0 to 1. The provisions of the first paragraph of this Section 4.05 shall not prohibit any of the following (collectively, "Permitted Indebtedness"): (i) the incurrence by the Company and any Subsidiary Guarantor of additional Indebtedness and letters of credit under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (i) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed $650.0 million less the aggregate amount applied by the Company or the Subsidiary Guarantors to permanently reduce the availability of Indebtedness under the Credit Agreement pursuant to Section 4.06 hereof; (ii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (iii) the incurrence by the Company and the Subsidiary Guarantors of Indebtedness represented by the Notes and the related Subsidiary Guarantees to be issued on the date of this First Supplemental Indenture; (iv) the incurrence by the Company or any Restricted Subsidiary of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment whether through the direct purchase of assets or at least a majority of the Voting Stock of any person owning such assets, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (iv) not to exceed $20.0 million at any time outstanding; (v) the incurrence by the Company or any Restricted Subsidiary of Permitted Refinancing Indebtedness in exchange for, or the proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this First Supplemental Indenture to be incurred under the first paragraph of this Section 4.05, this clause (v) or clauses (ii), (iii), (iv), (xii) or (xiii) of this paragraph. (vi) the incurrence by the Company or any Restricted Subsidiary of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that (a) if we or a Subsidiary Guarantor is the obligor on intercompany Indebtedness owed to a Restricted Subsidiary that is not a Subsidiary Guarantor, such intercompany Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes or the relevant Subsidiary Guarantee, as applicable, and (b)(x) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company or (y) any sale or other transfer of any such Indebtedness to a Person other than the Company or a Restricted Subsidiary of the Company, shall be deemed, in each case, to constitute at the time of such issuance or transfer an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (vi); 28 (vii) the incurrence by the Company or any Restricted Subsidiary of Hedging Obligations that are incurred for the purpose of fixing or hedging (x) interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this First Supplemental Indenture to be outstanding or (y) currency exchange rate risk in the ordinary course of business; (viii) the guarantee by the Company of Indebtedness of any of Restricted Subsidiary or by any Restricted Subsidiary of Indebtedness of the Company or any other Restricted Subsidiary, in each case that is permitted to be incurred by another provision of this covenant; provided, however, that such guarantee may be on a senior basis if the Indebtedness being guaranteed is Senior Indebtedness, but otherwise shall be pari passu with any Indebtedness being guaranteed that is pari passu with the Notes or the relevant Subsidiary Guarantee, or shall be on a subordinated basis if the Indebtedness being guaranteed is subordinated to the Notes or the relevant Subsidiary Guarantee, in which event such guarantee shall be subordinated at least to the same extent as the Indebtedness being guaranteed is subordinated to the Notes or the relevant Subsidiary Guarantee, as the case may be; (ix) the incurrence of Indebtedness by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including without limitation letters of credit in respect to workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence; (x) the incurrence of Obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary in the ordinary course of business; (xi) the incurrence by any Unrestricted Subsidiary of Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event will be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (xi); (xii) the incurrence by the Company or any Restricted Subsidiary of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (xii), not to exceed $20.0 million; and (xiii) Acquisition Debt of the Company or a Restricted Subsidiary if (a) such Acquisition Debt is incurred within 270 days after the date on which the related definitive acquisition agreement or LMA, as the case may be, was entered into by the Company or such Restricted Subsidiary, (b) the aggregate principal amount of such Acquisition Debt is no greater than the aggregate principal amount of Acquisition Debt set forth in a notice from the Company to the Trustee (an "Incurrence Notice") within ten days after the date on which the related definitive acquisition agreement or LMA, as the case may be, was entered into by the Company or such Restricted Subsidiary, which notice shall be executed on the Company's behalf by the chief financial officer of the Company in such capacity and shall describe in reasonable detail the acquisition or LMA, as the case may be, which such Acquisition Debt shall be incurred to finance, (c) after giving pro forma effect to the acquisition or LMA, as the case may be, described in such Incurrence Notice, the Company or such Restricted Subsidiary could have incurred such Acquisition Debt under the first paragraph of this Section 4.05 as of the date upon which the Company delivers such Incurrence Notice to the Trustee and (d) such Acquisition Debt, when 29 actually incurred, is utilized solely to finance the acquisition or LMA, as the case may be, described in such Incurrence Notice (including to repay or refinance indebtedness or other obligations incurred in connection with such acquisition or LMA, as the case may be, and to pay related fees and expenses); provided, however, that the Company shall be entitled to deliver a subsequent notice or notices to the Trustee that the Company is reducing the amount of Acquisition Debt specified in a prior notice or notices to the Trustee pursuant to clause (a) of this clause (xiii), in which case from and after the date of such later notice, only the amount of Acquisition Debt specified in such later notice shall be given effect pursuant to this clause (d) or incurred pursuant to this clause (xiii). For purposes of determining compliance with this Section 4.05, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (i) through (xiii) above, or is entitled to be incurred pursuant to the first paragraph of this Section 4.05, the Company shall be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.05. Accrual of interest, accretion or amortization of original issue discount, the payments of dividends in kind and the accretion of accreted value shall not be deemed to be an incurrence of Indebtedness for purposes of this Section 4.05. Indebtedness under Credit Facilities outstanding on the date on which Notes are first issued and authenticated under the Indenture shall be deemed to have been incurred on such date in reliance on the exception provided by clause (i) of the definition of Permitted Indebtedness. Section 4.06. Asset Sales. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, consummate an Asset Sale unless: (i) The Company or the Restricted Subsidiary, as the case may be, receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; (ii) the fair market value is determined by the Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee; and (iii) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents, except to the extent the Company is undertaking a Permitted Asset Swap. For purposes of this provision and the next paragraph, each of the following shall be deemed to be cash: (A) any liabilities, as shown on the Company's or such Restricted Subsidiary's most recent balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets and the lender releases the Company or such Restricted Subsidiary from further liability; and (B) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary within 90 days into cash or Cash Equivalents, to the extent of the cash or Cash Equivalents received in that conversion. 30 Notwithstanding the foregoing, the Company or any Restricted Subsidiary shall be permitted to consummate an Asset Sale without complying with the foregoing if: (x) the Company or such Restricted Subsidiary receive consideration at the time of such Asset Sale at least equal to the fair market value of the assets or other property sold, issued or otherwise disposed of: (y) the fair market value is determined by the Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee; and (z) at least 75% of the consideration for such Asset Sale constitutes a majority of the Voting Stock of a Permitted Business, assets used or useful in a Permitted Business and/or cash; provided that any cash (other than any amount deemed cash under clause (iii)(A) of the preceding paragraph) received by the Company or such Restricted Subsidiary in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Proceeds subject to the provisions of the following paragraph. (b) Within 365 days after the receipt of any Net Proceeds from an Asset Sale, provided that (1) such Net Proceeds either singularly or when aggregated with all other Net Proceeds from all Asset Sales consummated since the date of this First Supplemental Indenture exceed $10.0 million, the Company or such Restricted Subsidiary may apply those Net Proceeds at its option: (i) to repay Senior Indebtedness and, if the Senior Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; (ii) to acquire (or enter into a binding agreement to acquire, provided that such commitment shall be subject only to customary conditions and such acquisition shall be consummated within 180 days after the end of such 365-day period) all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business, or the minority interest in a Restricted Subsidiary other than a Subsidiary Guarantor; (iii) to make capital expenditures; or (iv) to acquire (or enter into a binding agreement to acquire, provided that such commitment shall be subject only to customary conditions and such acquisition shall be consummated within 180 days after the end of such 365-day period) other assets that are used or useful in a Permitted Business. Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall make an Asset Sale Offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100% of principal amount plus accrued and unpaid interest to the date of purchase, and shall be payable in cash. If any 31 Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. (c) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of this First Supplemental Indenture, the Company shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of this First Supplemental Indenture by virtue of such conflict. Section 4.07. Transactions with Affiliates. The Company shall not, and shall not permit any Restricted Subsidiary to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless: (a) the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (b) the Company delivers to the Trustee: (i) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $2.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this Section 4.07 and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (ii) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Company of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. The following items shall not be deemed to be Affiliate Transactions and, therefore, shall not be subject to the provisions of the prior paragraph: (a) any employment agreement entered into by the Company or any Restricted Subsidiary in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary; (b) transactions between or among the Company and/or its Restricted Subsidiaries; (c) loans, advances, payment of reasonable fees, indemnification of directors, or similar arrangements to officers, directors, employees and consultants who are not otherwise Affiliates of the Company; 32 (d) sales of Equity Interests (other than Disqualified Stock) to Affiliates of the Company; (e) agreements in effect at the date of this First Supplemental Indenture or any amendment thereto so long as such amendment is no less favorable to the Company or such Restricted Subsidiary in any material respect that the original agreement as in effect on the date of this First Supplemental Indenture; (f) services to be provided to any Unrestricted Subsidiary of the Company or any Restricted Subsidiary in the ordinary course of business, which the Board of Directors has determined, pursuant to a resolution thereof, are provided on terms at least as favorable to the Company and its Restricted Subsidiaries as those that would have been obtained in a comparable transaction with an unrelated Person; and (g) Permitted Investments and Restricted Payments that are permitted by the provisions of this First Supplemental Indenture described under Section 4.03. Section 4.08. Liens. The Company shall not, and shall not permit any Subsidiary Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind on any asset now owned or hereafter acquired of the Company or such Subsidiary Guarantor securing Indebtedness ranking pari passu with, or junior to the Notes or the Subsidiary Guarantees (other than Permitted Liens), unless all Obligations in respect of the Notes, the Subsidiary Guarantees and this First Supplemental Indenture are secured on an equal and ratable basis with (if such secured Indebtedness is pari passu with the Notes or the Subsidiary Guarantee, as the case may be; and otherwise on a senior basis to) the Indebtedness so secured until such Indebtedness is no longer secured by a Lien. Section 4.09. Offer to Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase ( the "Change of Control Payment"). Within 10 business days following any Change of Control, the Company shall mail a notice to each Holder stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.09 and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and 33 regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes in connection with a Change of Control. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof properly tendered and (3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes properly tendered and accepted the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note shall be in a principal amount of $1,000 or an integral multiple thereof. (c) Prior to complying with any of the provisions of this Section 4.09, but in any event within 90 days following a Change of Control, the Company will either pay all outstanding Senior Indebtedness or obtain the requisite consents, if any, under all the agreements governing outstanding Senior Indebtedness to permit the repurchase of the Notes required by this covenant. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (d) Notwithstanding anything to the contrary in this Section 4.09, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.09 and Section 3.03 hereof and all other provisions of the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer. Section 4.10. No Senior Subordinated Debt. The Company shall not incur, create, issue, assume, guarantee, or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Indebtedness of the Company and senior in any respect in right of payment to the Notes. No Subsidiary Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinated or junior in right of payment to the Senior Indebtedness of such Guarantor and senior in any respect in right of payment to such Guarantor's Subsidiary Guarantee. Section 4.11. Additional Subsidiary Guarantees. If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the date of this First Supplemental Indenture, excluding all Subsidiaries that have been properly designated as Unrestricted Subsidiaries in accordance with this First Supplemental Indenture for so long as they continue to constitute Unrestricted Subsidiaries, then that newly acquired or created Domestic Subsidiary shall become a Subsidiary Guarantor and execute a supplemental Indenture and deliver an opinion of counsel satisfactory to the Trustee within 10 Business Days of the date on which it was acquired or created; provided, however, that if a Subsidiary of the Company that is not a Guarantor guarantees the Indebtedness of the Company or a Subsidiary Guarantor, such guarantee may be on a senior basis if the Indebtedness being guaranteed is Senior Indebtedness, but otherwise shall be pari passu with any Indebtedness being guaranteed that is pari passu with the Notes, or shall be on a subordinated basis if the Indebtedness being guaranteed is subordinated to the Notes, in which event such guarantee shall be subordinated at least to the same extent the Indebtedness being guaranteed is subordinated to the Notes. 34 Section 4.12. Limitation on Issuances of Equity Interests in Wholly Owned Subsidiaries. The Company (i) shall not, and shall not permit any of its Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any Equity Interest in any Wholly Owned Subsidiaries of the Company to any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company), unless (a) as a result of such transfer, conveyance, sale, lease or other disposition or issuance such Restricted Subsidiary no longer constitutes a Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Section 4.06 hereof and (ii) shall not permit any Restricted Subsidiary to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than to the Company or a Wholly Owned Restricted Subsidiary of the Company. Section 4.13. Payments for Consent. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this First Supplemental Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Section 4.14. Designation of Restricted and Unrestricted Subsidiaries. The Board of Directors may designate any Restricted Subsidiary (or any Person that upon its acquisition otherwise would become a Restricted Subsidiary) to be an Unrestricted Subsidiary if that designation would not cause a Default or Event of Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and the Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of Section 4.03 hereof or Permitted Investments, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default or Event of Default. ARTICLE 5. SUCCESSORS Pursuant to Section 2.01(r) of the Base Indenture, so long as any of the Notes are outstanding, the following provision shall supercede and replace in its entirety Section 5.01 of the Base Indenture with respect to the Notes: Section 5.01. Merger, Consolidation, or Sale of Assets. An Issuer shall not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not such Issuer is the surviving Person); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of such Issuer and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless: (i) either: (x) such Issuer is the surviving Person; or (y) the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or to which such sale, assignment, transfer, conveyance or other disposition has been made is an entity organized or 35 existing under the laws of the United States, any state of the United States or the District of Columbia; (ii) the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all of the obligations of such Issuer under the Notes and this First Supplemental Indenture pursuant to a supplemental indenture reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) such Issuer or the Person formed by or surviving any such consolidation or merger (if other than such Issuer), or to which such sale, assignment, transfer, conveyance or other disposition has been made (x) shall, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Leverage Ratio test set forth in the first paragraph of Section 4.05, or (y) would have a lower Leverage Ratio immediately after the transaction, after giving pro forma effect to the transaction as if the transaction had occurred at the beginning of the applicable four quarter period, than the Company's Leverage Ratio immediately prior to the transaction. The preceding clause (iv) shall not prohibit: (x) a merger between an Issuer and one of such Issuer's Wholly Owned Restricted Subsidiaries; or (y) a merger between an Issuer and one of such Issuer's Affiliates incorporated solely for the purpose of reincorporating in another state of the United States. In addition, an Issuer shall not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. The provisions of this Section 5.01 shall not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among an Issuer and any of its Wholly Owned Restricted Subsidiaries. ARTICLE 6. DEFAULTS AND REMEDIES Pursuant to Section 2.01(m) of the Base Indenture, so long as any Notes are outstanding, the following provisions shall supercede and replace in their entirety Sections 6.01 and 6.02 of the Base Indenture with respect to the Notes; provided that, for purposes of the Notes, references in Section 6.08 of the Base Indenture to Section 6.01(1) and 6.01(2) thereof shall be deemed to refer to Sections 6.01(a) and 6.01(b), respectively, of this First Supplemental Indenture and references in Section 7.07 of the Base Indenture to Section 6.01(4) and 6.01(5) thereof shall be deemed to refer to Sections 6.01(h) and 6.01(i), respectively, of this First Supplemental Indenture. Section 6.01. Events of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment when due of interest on the Notes and such default continues for a period of 30 days; (b) the Company defaults in the payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture) when the same 36 becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; (c) the Company or any Restricted Subsidiary fails to comply with any of the provisions of Section 4.09 hereof; (d) the Company or any Restricted Subsidiary fails to comply with any of the provisions of Section 4.03, 4.05, 4.06 or 5.01 hereof for 30 days; (e) the Company or any Restricted Subsidiary fails to observe or perform any other covenant, representation, warranty or other agreement in the Indenture for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class; (f) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of the Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of the Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after the date hereof, which default (i) is caused by a failure to pay principal of such Indebtedness at the final Stated Maturity thereof (a "Payment Default") or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $15.0 million or more; (g) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such undischarged judgments exceeds $10.0 million; (h) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; or (i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (ii) appoints a custodian of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or 37 substantially all of the property of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (j) except as permitted by the Indenture, any Subsidiary Guarantee of a Significant Subsidiary is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Significant Subsidiary that is a Guarantor, or any Person acting on behalf of any such Guarantor, shall deny or disaffirm its obligations under such Guarantor's Subsidiary Guarantee. Section 6.02. Acceleration. If any Event of Default (other than an Event of Default specified in clause (h) or (i) of Section 6.01 hereof with respect to the Company, any Significant Subsidiary or any group of Significant Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; provided, however, that until the Credit Agreement has been paid in full in cash, no principal or accrued interest under the Notes shall become due and payable until the earlier of (a) the date on which the Indebtedness under the Credit Agreement shall been declared, or shall become or be, due and payable or (b) the day that is five Business Days after the date on which the agent(s) under the Credit Agreement is given written notice in accordance with the provisions of the Credit Agreement of such declaration of acceleration of the Notes. Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (h) or (i) of Section 6.01 hereof occurs with respect to the Company, any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. In the event of a declaration of acceleration of the Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (f) of Section 6.01 hereof, the declaration of acceleration of the Notes shall be automatically annulled if the holders of any Indebtedness described in clause (f) of Section 6.01 hereof have rescinded the declaration of acceleration in respect of the Indebtedness and if (i) the annulment of the acceleration of Notes would not conflict with any judgment or decree of a court of competent jurisdiction; and (ii) all existing Events of Default, except nonpayment of principal or interest on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived. If an Event of Default occurs on or after March 1, 2007 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have been required to pay if the Company then had elected to redeem the Notes pursuant to Section 3.01 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in the Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to March 1, 2007 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, 38 then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable in an amount, for each of the years beginning on of the years set forth below, as set forth below (expressed as a percentage of the principal amount of the Notes on the date of payment that would otherwise be due but for the provisions of this sentence): Year Percentage - ---- ---------- 2003........................................................... 107.625% 2004........................................................... 106.672% 2005........................................................... 105.719% 2006 and thereafter............................................ 104.766% Notwithstanding any provision to the contrary herein, the Trustee shall not be obligated to take any action with respect to the provisions of this paragraph unless directed to do so pursuant to Section 6.05 of the Base Indenture. ARTICLE 7. AMENDMENT, SUPPLEMENT AND WAIVER Pursuant to Section 2.01(r) of the Base Indenture, so long as any Notes are outstanding, the following provisions shall supercede and replace Sections 9.01 and 9.02 of the Base Indenture with respect to the Notes: Section 7.01. Without Consent of Holders of Notes. Notwithstanding Section 7.02 of this First Supplemental Indenture, but subject to the provisions of Article 8 hereof, the Company, the Guarantors and the Trustee may amend or supplement this First Supplemental Indenture , the Subsidiary Guarantees or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of the Company's or a Guarantor's obligations to the Holders of the Notes by a successor to the Company pursuant to Article 5 of the Base Indenture or Article 9 of this First Supplemental Indenture; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any such Holder; (e) to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; (f) to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of the date hereof; or (g) to allow any Guarantor to execute a supplemental indenture and/or a Guarantee with respect to the Notes. 39 Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 of the Base Indenture, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of the Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under the Indenture or otherwise. Section 7.02. With Consent of Holders of Notes. Except as provided below in this Section 7.02, but subject to the provisions of Article 8 hereof, the Company and the Trustee may amend or supplement the Indenture (including Section 3.03, 4.06 and 4.09 hereof), the Subsidiary Guarantees and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 of the Base Indenture and Article 8 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of the Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 of the Base Indenture, the Trustee shall join with the Company in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee's own rights, duties or immunities under the Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 7.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. The Holders of a majority in aggregate principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of the Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 7.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 3.03, 4.06 and 4.09 hereof; 40 (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or interest or premium on the Notes; (g) waive a redemption payment with respect to any Note except as provided above with respect to Sections 3.03, 4.06 and 4.09 hereof; (h) make any change in the foregoing amendment and waiver provisions; or (i) amend or waive the provisions of Article Eight of this First Supplemental Indenture in a manner that adversely affects the rights of the Holders of the Notes; or (j) release any Guarantor from any of its obligations under its Guarantee or the Indenture, except in accordance with the terms of the Indenture. Section 7.03. Compliance with Trust Indenture Act. Every amendment or supplement to this First Supplemental Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. ARTICLE 8. SUBORDINATION Pursuant to Section 2.01(u) of the Base Indenture, so long as any Notes are outstanding, the following provisions shall be applicable with respect to the Notes: Section 8.01. Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the principal, interest, premium on and all other Obligations arising under the Notes or this Indenture are subordinated in right of payment, to the extent and in the manner provided in this Article Eight, to the prior payment in full in cash of all Senior Indebtedness (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness. Section 8.02. Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or in any marshaling of the Company's assets and liabilities: 41 (i) holders of Senior Indebtedness shall be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Indebtedness (including interest after the commencement of any such proceeding at the rate and on the terms specified in the applicable Senior Indebtedness whether or not a claim for such interest would be allowed in such proceeding) before Holders of the Notes shall be entitled to receive any payment or distribution of any assets or securities with respect to the Notes or on account of any purchase or redemption or other acquisition of any Note (except that Holders may receive and retain (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.06 of the Base Indenture so long as, on the date or dates the respective amounts were paid into trust, such payments were made without violating the provisions set forth in this Article Eight); and (ii) until all Obligations with respect to Senior Indebtedness (as provided in clause (i) above) are paid in full in cash, any payment or distribution to which Holders would be entitled but for this Article Eight shall be made to holders of Senior Indebtedness (except that Holders of Notes may receive and retain (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.06 of the Base Indenture so long as, on the date or dates the respective amounts were paid into trust, such payments were made without violating the provisions set forth in this Article Eight), as their interests may appear. Section 8.03. Default on Designated Senior Indebtedness. (a) Neither the Company nor any Guarantor may make any payment or distribution of any assets or securities to the Trustee or any Holder in respect of the Notes or any applicable Guarantee in respect thereof and may not acquire, redeem or purchase from the Trustee or any Holder any Notes for cash or property (other than (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.06 of the Base Indenture so long as, on the date or dates the respective amounts were paid into trust, such payments were made without violating the provisions set forth in this Article Eight) until all principal and other Obligations with respect to the Designated Senior Indebtedness have been paid in full in cash if: (i) a default in the payment of any principal of, or premium, if any, or interest on or any fees or other Obligations with respect to Designated Senior Indebtedness occurs and is continuing (a "payment default"); or (ii) any other default, other than a payment default (a "nonpayment default"), on any series of Designated Senior Indebtedness occurs and is continuing that permits holders of that series of Designated Senior Indebtedness to accelerate its maturity and the Trustee receives a notice in writing of the default (a "Payment Blockage Notice") from the holders of any Designated Senior Indebtedness or their Representative. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until at least 360 days shall have elapsed since the delivery of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default has been cured or waived for a period of not less than 90 consecutive days. (b) The Company may and shall resume payments on and distributions in respect of the Notes and may acquire them: 42 (i) in the case of a payment default, upon the date which the default is cured or waived in writing by the holders of Designated Senior Indebtedness or a representative on their behalf, or (ii) in the case of a nonpayment default, the earlier of: (A) the date on which such nonpayment default is cured or waived in writing by holders of Designated Senior Indebtedness or a representative on their behalf, (B) 179 days after the applicable Payment Blockage Notice is received by the Trustee, or (C) the date on which the trustee receives notice in writing from or on behalf of the holders of Designated Senior Indebtedness to terminate the applicable Payment Blockage Notice, unless in any case, the maturity of any such Designated Senior Indebtedness has been accelerated, if this Article Eight otherwise permits the payment, distribution or acquisition at the time of such payment, distribution or acquisition. Section 8.04. Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the acceleration. Section 8.05. When Distribution Must Be Paid Over. In the event that the Trustee or any Holder receives any payment or distribution with respect to the Notes (except (A) in Permitted Junior Securities or (B) from payments and other distributions made from any defeasance trust created pursuant to Section 8.06 of the Base Indenture so long as on the date or dates the respective amounts were paid into trust, such payments were made without violating the provisions set forth in this Article Eight) at a time when such payment or distribution is prohibited by Section 8.02 or 8.03 hereof, such payment or distribution shall be held by the Trustee or such Holder, in trust for the benefit of the holders of Senior Indebtedness, and shall be paid over and delivered, with any necessary endorsement, upon written request of the holders of Senior Indebtedness, to the holders of Senior Indebtedness as their interests may appear or their Representative under this First Supplemental Indenture or other agreement (if any) pursuant to which Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness remaining unpaid to the extent necessary to pay such Obligations in full in cash in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article Eight, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this First Supplemental Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article Eight, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 8.06. Notice by Company. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article Eight, but failure to give such notice shall not affect the subordination of the Notes to the Senior Indebtedness or the rights of holders of Senior Indebtedness as provided in this Article Eight. 43 Section 8.07. Subrogation. No payment or distribution to any holder of Senior Indebtedness pursuant to this Article 8 shall entitle any holder of Notes to exercise any rights of subrogation in respect thereof until the Senior Indebtedness shall have been paid in full in cash. After all Senior Indebtedness is paid in full in cash and until the Notes are paid in full in cash, Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Indebtedness. A distribution made under this Article Eight to holders of Senior Indebtedness that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Notes. Section 8.08. Relative Rights. This Article Eight defines the relative rights of Holders of Notes and holders of Senior Indebtedness. Nothing in this First Supplemental Indenture shall: (i) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (ii) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Indebtedness; or (iii) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to Holders of Notes. If the Company fails because of this Article Eight to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. Section 8.09. Subordination May Not Be Impaired by Company or any Guarantor. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Guarantor or any Holder or by the failure of the Company or any Guarantor or any Holder to comply with this First Supplemental Indenture or any Note or any Guarantee regardless of any knowledge thereof that any holder of Senior Indebtedness may have or otherwise be charged with. No exercise of, delay in exercising or failure to exercise any right arising under this Article Eight, no act or omission of any holder of Senior Indebtedness in respect of the Company or any of its Subsidiaries or any other Person or any collateral security for any Senior Indebtedness or any right arising under this Article Eight, no change, impairment, or suspension of any right or remedy of any holder of any Senior Indebtedness, no other act, failure to act, circumstance, occurrence or event which, but for this provision, would or could act as a release or exoneration of the obligations of any Holder of Notes under this Article Eight shall in any way affect, decrease, diminish or impair any of the obligations of the holders of the Notes under this Article Eight or give any Holder of the Notes any recourse or defense against any holder of the Senior Indebtedness in respect of any right arising under this Article Eight. 44 Section 8.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article Eight, the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Eight. Section 8.11. Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article Eight or any other provision of this First Supplemental Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least two Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article Eight. Only the Company, the holders of Senior Indebtedness and their Representatives may give such notice, provided that only the holders of Designated Senior Indebtedness or their Representative may give a Payment Blockage Notice. Nothing in this Article Eight shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 of the Base Indenture. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 8.12. Authorization to Effect Subordination. Each Holder of Notes, by the 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 as provided in this Article Eight, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 of the Base Indenture at least 30 days before the expiration of the time to file such claim, the Representatives are hereby authorized, but shall not be obligated, to file an appropriate claim for and on behalf of the Holders of the Notes. Section 8.13. Amendments. The provisions of this Indenture relating to subordination shall not be amended, modified or waived in a manner adverse to the holders of Designated Senior Indebtedness without the written consent of the holders of all Designated Senior Indebtedness or their duly authorized representatives. Section 8.14. Reinstatement of Payments. This Article Eight shall remain in full force and effect until such time as the Senior Indebtedness shall have been indefeasibly paid in full in cash and the liability of the Trustee and the Noteholders under this Article Eight shall be reinstated and revived, and the rights of the holders of Senior Indebtedness shall continue, with respect to any amount at any time paid on account of the Senior Indebtedness which shall thereafter be required to be restored or returned by the holders of the Senior Indebtedness, whether 45 pursuant to any proceeding described in Sections 6.01(h) or (i), pursuant to any fraudulent conveyance or fraudulent transfer statute or otherwise, as though such amount had not been paid. ARTICLE 9. GUARANTEES Pursuant to Section 2.01(v) of the Base Indenture, so long as any Notes are outstanding, the following provisions shall be applicable with respect to the Notes: Section 9.01. Guarantee. Subject to this Article Nine, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of, premium, if any, and interest on the Notes will be promptly paid in full in cash when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a Guarantee of payment and not a Guarantee of collection. The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that the Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, the Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of the Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of the Guarantee. The Guarantors shall have the right 46 to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. Section 9.02. Subordination of Guarantee. The Obligations of each Guarantor under its Guarantee pursuant to this Article Nine shall be junior and subordinated to Senior Indebtedness of such Guarantor on the same basis as the Notes are junior and subordinated to Senior Indebtedness of the Company provided that, with respect to the Parent Guarantor only, the Guarantee shall be subordinated in accordance with the provisions of the Existing Debentures Indenture. For the purposes of this Section 9.02, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this First Supplemental Indenture. Section 9.03. Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article Nine, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance. Section 9.04. Execution and Delivery of Guarantee. To evidence its Guarantee set forth in Section 9.01, each Guarantor hereby agrees that a notation of such Guarantee substantially in the form included in Exhibit C hereto shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this First Supplemental Indenture shall be executed on behalf of such Guarantor by its Officers. Each Guarantor hereby agrees that its Guarantee set forth in Section 9.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. If an Officer whose signature is on this First Supplemental Indenture or on the Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this First Supplemental Indenture on behalf of the Guarantors. In the event that the Company or any of its Restricted Subsidiaries creates or acquires any new Domestic Subsidiaries subsequent to the date hereof, if required by Section 4.11 of this First Supplemental Indenture, the Company shall cause such Subsidiaries to execute supplemental indentures to this First Supplemental Indenture and Subsidiary Guarantees in accordance with Section 4.11 of this First Supplemental Indenture and this Article Nine, to the extent applicable. 47 Section 9.05. Subsidiary Guarantors May Consolidate, etc., on Certain Terms. Except as otherwise provided in Section 9.06, no Subsidiary Guarantor may sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person) another Person other than the Company, the Parent Guarantor or another Subsidiary Guarantor unless: (1) immediately after giving effect to such transaction, no Default or Event of Default exists; and (2) either (a) subject to Section 9.06 hereof, the Person acquiring the property in any such sale of disposition or the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Subsidiary Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, this First Supplemental Indenture and the Guarantee on the terms set forth herein or therein; or (b) the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including, without limitation, Section 4.11 of the Indenture. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under this First Supplemental Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of this First Supplemental Indenture as though all of such Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in this First Supplemental Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. Section 9.06. Releases Following Sale of Assets. In the event of (a) any sale or other disposition of all or substantially all of the assets of a Subsidiary Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) a Subsidiary of the Company, and as a result of which such Subsidiary Guarantor ceases to be a Restricted Subsidiary, if the sale or other disposition complies with Section 4.06 hereof, (b) in connection with any sale of all of the Capital Stock of a Subsidiary Guarantor to a Person that is not (either before or after giving effect to such transaction) a Subsidiary of the Company, and as a result of which such Subsidiary Guarantor ceases to be a Restricted Subsidiary, if the sale complies with Section 4.06 hereof, (c) the designation of any Restricted Subsidiary that is a Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with Section 4.14 hereof, or (d) the discharge or release of all guarantees by such Subsidiary Guarantor of, and all pledges of property or assets of such Subsidiary Guarantor securing, all other Indebtedness of the Company and the Restricted Subsidiaries, then such Guarantor or, in the case of a sale or other disposition of all or substantially all of 48 the assets of such Guarantor, the Person acquiring such property, will be released and relieved of any obligations under its Guarantee. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale, disposition, redesignation or discharge or release was made by the Company in accordance with the provisions of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Guarantee. Any Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article Nine. ARTICLE 10. DEFEASANCE Pursuant to Section 2.01(r) of the Base Indenture, so long as any of the Notes are outstanding, the following provision shall supercede and replace in its entirety Section 8.04 of the Base Indenture with respect to the Notes: Section 10.01. Covenant Defeasance. Upon the Company's exercise under Section 8.02 of the Base Indenture of the option applicable to this Section 10.01, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.05 of the Base Indenture, be released from their respective obligations under the covenants contained in Sections 4.02 through 4.14, and Section 5.01 hereof with respect to the outstanding Securities of any series on and after the date the conditions set forth in Section 8.05 of the Base Indenture are satisfied, and the Securities of such series shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Securities shall not be deemed outstanding for accounting purposes). For this purpose, "Covenant Defeasance" means that, with respect to the outstanding Securities of any series, the Company and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this First Supplemental Indenture and such Securities shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.02 of the Base Indenture of the option applicable to this Section 10.01, subject to the satisfaction of the conditions set forth in Section 8.05 hereof, Sections 6.01(c) through 6.01(j) of this First Supplemental Indenture shall not constitute Events of Default. Section 10.02. Miscellaneous. So long as any Notes are outstanding, references in Section 8.05(c) of the Base Indenture to Section 6.01(4) and 6.01(5) thereof shall, for purposes of the Notes and this First Supplemental Indenture, be deemed to refer to Section 6.01(h) and 6.01(i), respectively, of this First Supplemental Indenture. 49 ARTICLE 11. MISCELLANEOUS Section 11.01. Ratification of Base Indenture. Except as specifically modified herein, the Base Indenture is in all respects ratified and confirmed and shall remain in full force and effect in accordance with its terms. Section 11.02. Application of First Supplemental Indenture. Each and every term and condition contained in this First Supplemental Indenture that modifies, amends or supplements the terms and conditions of the Base Indenture shall apply only to the Notes created hereby and not to any future series of Securities established under the Base Indenture. Section 11.03. Benefits of First Supplemental Indenture. Nothing contained in this First Supplemental Indenture shall or shall be construed to confer upon any person other than a Holders of the Notes, the Company, the Holders of Senior Indebtedness and the Trustee any right or interest to avail itself of any benefit under any provision of this First Supplemental Indenture. Section 11.04. Effective Date. This First Supplemental Indenture shall be effective as of the date first written above and upon the execution and delivery hereof by each of the parties hereto. Section 11.05. Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this First Supplemental Indenture or for or in respect of the recitals contained herein, all of which are made solely by the Company. Section 11.06. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 11.07. Successors. All agreements of the Company in the Indenture and the Notes shall bind its successors. All agreements of the Trustee in this First Supplemental Indenture shall bind its successors. All agreements of each Guarantor in this First Supplemental Indenture shall bind its successors, except as otherwise provided in Section 9.06. Section 11.08. Severability. In case any provision in this First Supplemental Indenture or in the Notes 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. 50 Section 11.09. Counterpart Originals. The parties may sign any number of copies of this First Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. [Signatures on following page] 51 SIGNATURES Dated as of March 5, 2002 ISSUERS: ------- ENTERCOM RADIO, LLC By: /s/ John C. Donlevie ----------------------------- Name: John C. Donlevie Title: Executive Vice President, Secretary, and General Counsel 52 GUARANTORS: ----------- ENTERCOM COMMUNICATIONS CORP. ENTECOM BOSTON I TRUST ENTECOM NEW YORK, INC. ENTECOM BOSTON, LLC ENTERCOM BOSTON LICENSE, LLC ENTERCOM BUFFALO, LLC ENTERCOM BUFFALO LICENSE, LLC ENTERCOM DENVER, LLC ENTERCOM DENVER LICENSE, LLC DELAWARE EQUIPMENT HOLDINGS, LLC ENTERCOM GAINESVILLE, LLC ENTERCOM GAINESVILLE LICENSE, LLC ENTERCOM GREENSBORO, LLC ENTERCOM GREENSBORO LICENSE, LLC ENTERCOM GREENVILLE, LLC ENTERCOM GREENVILLE LICENSE, LLC ENTERCOM INTERNET HOLDING, LLC ENTERCOM KANSAS CITY, LLC ENTERCOM KANSAS CITY LICENSE, LLC ENTERCOM LONGVIEW, LLC ENTERCOM LONGVIEW LICENSE, LLC ENTERCOM MADISON, LLC ENTERCOM MADISON LICENSE, LLC ENTERCOM MEMPHIS, LLC ENTERCOM MEMPHIS LICENSE, LLC ENTERCOM MILWAUKEE, LLC ENTERCOM MILWAUKEE LICENSE, LLC ENTERCOM NEW ORLEANS, LLC ENTERCOM NEW ORLEANS LICENSE, LLC ENTERCOM NORFOLK, LLC ENTERCOM NORFOLK LICENSE, LLC By: /s/ John C. Donlevie ------------------------------ Name: John C. Donlevie Title: Executive Vice President, Secretary and General Counsel 53 ENTERCOM PORTLAND, LLC ENTERCOM PORTLAND LICENSE, LLC ENTERCOM ROCHESTER, LLC ENTERCOM ROCHESTER LICENSE, LLC ENTERCOM SACRAMENTO, LLC ENTERCOM SACRAMENTO LICENSE, LLC ENTERCOM SEATTLE, LLC ENTERCOM SEATTLE LICENSE, LLC ENTERCOM WICHITA, LLC ENTERCOM WICHITA LICENSE, LLC ENTERCOM WILKES-BARRE SCRANTON, LLC By: /s/ John C. Donlevie ------------------------------ Name: John C. Donlevie Title: Executive Vice President, Secretary and General Counsel ENTERCOM DELAWARE HOLDING CORPORATION By: /s/ John C. Donlevie ------------------------------ Name: John C. Donlevie Title: President, Secretary and General Counsel 54 HSBC BANK USA, as Trustee By: /s/ Deirdra N. Ross -------------------------------- Name: Deirdra N. Ross Title: Assistant Vice President 55 EXHIBIT A [Face of Note] - ------------------------------------------------------------------------------- CUSIP/CINS 7-5/8% Senior Subordinated Notes due 2014 No. ___ $150,000,000 ENTERCOM RADIO, LLC ENTERCOM CAPITAL, INC. promise, jointly and severally, to pay to _____________________________________ or registered assigns, the principal sum of One Hundred and Fifty Million Dollars on March 1, 2014. Interest Payment Dates: March 1 and September 1 Record Dates: February 15 and August 15 Dated: March 5, 2002 ENTERCOM RADIO, LLC By: ___________________________________ Name: Title: ENTERCOM CAPITAL, INC. By: ___________________________________ Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: HSBC BANK USA, as Trustee By: ____________________________________ Authorized Officer - ------------------------------------------------------------------------------- 56 [Back of Note] 7-5/8% Senior Subordinated Notes due 2014 [Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Entercom Radio LLC, a Delaware limited liability company ("Radio") and Entercom Capital, Inc., a Delaware corporation ("Capital," each of Radio and Capital being referred to herein individually as an "Issuer" and collectively as the "Company"), promise, jointly and severally, to pay interest on the principal amount of this Note at 7-5/8% per annum from March 5, 2002 until maturity. The Company will pay interest semi-annually in arrears on March 1 and September 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be September 1, 2002. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the February 15 or August 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.11 of the Base Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest and premium on, all Global Notes and all other Notes the Holders of which will have purchased wire transfer instructions to the Company or the Paying Agent. Such payment shall be 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. 3. PAYING AGENT AND REGISTRAR. Initially, HSBC Bank USA, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of March 5, 2002 (the "Base Indenture"), as supplemented by the First Supplemental Indenture, dated as of March 5, 2002 (the "First Supplemental Indenture," and together with the Base Indenture, the "Indenture") among the Company, the guarantors party thereto (the "Guarantors") and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code [sec][sec] 77aaa-77bbbb). The Notes are subject to all such 57 terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are unsecured obligations of the Company initially limited to $150.0 million in aggregate principal amount. 5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraph (b) of this Paragraph 5, the Company shall not have the option to redeem the Notes prior to March 1, 2007. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on March 1 of the years indicated below: Year Percentage - ---- ---------- 2007 ..................................................... 103.813% 2008 ..................................................... 102.542% 2009 ..................................................... 101.271% 2010 and thereafter ...................................... 100.00% (b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to March 1, 2005, the Company may redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture with the net proceeds of one or more Equity Offerings at a redemption price equal to 107.625% of the aggregate principal amount thereof; provided that at least 65% in aggregate principal amount of the Notes originally issued remain outstanding immediately after the occurrence of such redemption and that such redemption occurs within 180 days of the date of the closing of such Equity Offering. 6. MANDATORY REDEMPTION. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, the Company shall be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 60 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Subsidiary consummates any Asset Sales, within five days of each date on which the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall commence an offer to all Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.03 of the First Supplemental Indenture to purchase the maximum principal amount of Notes (including any Additional Notes) and other pari passu Indebtedness that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including any Additional Notes) and other pari passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for any purpose not otherwise prohibited by 58 the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and other pari passu Indebtedness to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class, and any existing Default or compliance with any provision of the Indenture, the Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or Guarantor's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, to provide for the Issuance of Additional Notes in accordance with the limitations set forth in the Indenture, or to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Guarantee with respect to the Notes. 12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise, (iii) failure by the Company to comply with Section 4.09 of the First Supplemental Indenture; (iv) failure by the Company for 30 days to comply with Section 4.03, 4.05 or 4.06 or 5.01 of the First Supplemental Indenture; (v) failure by the Company for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class to comply with certain other agreements in the Indenture, the Notes; (vi) default under certain other agreements relating to Indebtedness of the Company which default is caused by a failure to pay principal of such Indebtedness at 59 the final maturity thereof or results in the acceleration of such Indebtedness prior to its express maturity; (vii) certain final judgments for the payment of money that remain undischarged for a period of 60 days; (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries; and (ix) except as permitted by the Indenture, any Guarantee of a Significant Subsidiary shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor that is a Significant Subsidiary or any Person acting on its behalf shall deny or disaffirm its obligations under such Guarantor's Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable; provided that the Notes shall not become due and payable until the Credit Agreement shall have been declared or be due and payable or the Trustee or such Holders shall have provided 5 business days' notice to the agent(s) under the Credit Agreement of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. SUBORDINATION. The Notes are subordinated to Senior Indebtedness, as defined in the First Supplemental Indenture. To the extent provided in the First Supplemental Indenture, Senior Indebtedness must be paid in full before the Notes may be paid. The Company and each Guarantor agrees, and each Holder by accepting a Note agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, officer, employee, manager, incorporator or stockholder, of the Company or any Guarantor, as such, shall not have any liability for any obligations of the Company or any Guarantor under the Notes, and Guarantee thereof or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. 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). 60 18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of SUCH numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 19. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Attention: John Donlevie, Esq. 61 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: _________________________________ (Insert assignee's legal name) _______________________________________________________________________________ (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*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). 62 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, check the appropriate box below: [ ] Section 4.06 [ ] Section 4.09 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.06 or Section 4.09 of the Indenture, state the amount you elect to have purchased: $__________________ Date: _______________ Your Signature: ________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ________________ Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). 63 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE* The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount of this Global Note Signature of Amount of Amount of following such authorized officer decrease in increase in decrease (or of Trustee or Note Principal Amount Principal Amount ------------ ---- Date of Exchange of this Global Note of this Global Note increase) Custodian - ---------------- ------------------- ------------------- --------- ---------
* This schedule should be included only if the Note is issued in global form. 64 EXHIBIT B FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of Entercom Radio, LLC (or its permitted successor), a Delaware limited liability company (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and HSBC Bank USA, as trustee under the Indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of March 5, 2002 providing for the issuance of an unlimited aggregate principal amount of 7-5/8% Senior Subordinated Notes due 2014 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the First Supplemental Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and premium, if any, and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. 65 (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (i) Pursuant to Section 9.03 of the First Supplemental Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article Nine of the First Supplemental Indenture, this new Subsidiary Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guarantor under this Subsidiary Guarantee will not constitute a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees to execute the Subsidiary Guarantee as provided by Section 9.04 of the First Supplemental Indenture and Exhibit B thereto and to recognize that the Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. 66 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) A Guaranteeing Subsidiary may not sell or consolidate with or merge with or into (whether or not such Guaranteeing Subsidiary is the surviving Person) another Person other than the Company, the Parent Guarantor or another Guaranteeing Subsidiary unless: (1) immediately after giving effect to such transaction, no Default or Event of Default exists; and (2) either (i) subject to Sections 9.05 and 9.06 of the First Supplemental Indenture, the Person acquiring the property in any such sale of disposition or the Person formed by or surviving any such consolidation or merger (if other than a Guaranteeing Subsidiary or the Company) unconditionally assumes all the obligations of such Guaranteeing Subsidiary, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the First Supplemental Indenture and the Guarantee on the terms set forth herein or therein; or (ii) the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including, without limitation, Section 4.06 of the First Supplemental Indenture. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 and Section 9.06 of Article 9 of the First Supplemental Indenture, and notwithstanding clauses (a)(2)(i) and (ii) above, nothing contained in the First Supplemental Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 5. RELEASES. In the event of (i) any sale or other disposition of all or substantially all of the assets of a Subsidiary Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) a Subsidiary of the Company, and as a result of which such Subsidiary Guarantor ceases to be a Restricted Subsidiary, if the sale or other disposition complies with Section 4.06 of the First Supplemental Indenture, (ii) in connection with any sale of all of the Capital Stock of a Subsidiary Guarantor to a Person that is not (either before or after giving effect to such transaction) a Subsidiary of the Company, and as a result of 67 which such Subsidiary Guarantor ceases to be a Restricted Subsidiary, if the sale complies with Section 4.06 of the First Supplemental Indenture, (iii) the designation of any Restricted Subsidiary that is a Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with Section 4.14 of the First Supplemental Indenture, or (iv) the discharge or release of all guarantees by such Subsidiary Guarantor of, and all pledges of property or assets of such Subsidiary Guarantor securing, all other Indebtedness of the Company and the Restricted Subsidiaries, then such Guarantor or, in the case of a sale or other disposition of all or substantially all of the assets of such Guarantor, the Person acquiring such property, will be released and relieved of any obligations under its Guarantee. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale, disposition, redesignation or discharge or release was made by the Company in accordance with the provisions of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Guarantee. (b) Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 9 of the First Supplemental Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, manager, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 7. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. SUBMISSION TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL. Each party hereto hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State Court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Supplemental Indenture, the Notes, the Guarantees or the transactions contemplated hereby and thereby. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the State of New York. Without limiting the foregoing, the parties agree that service of process upon such party at the address referred to in Section 11.02 of the Base Indenture, together with written notice of such service to such party, shall be deemed effective service of process upon such party. Each of the parties hereto irrevocably waives any and all rights to trial by jury in any legal proceeding arising out of or relating to the Indenture, the Notes, the Guarantees or the transactions contemplated hereby and thereby. 9. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 68 10. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 11. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. 12. SUBORDINATION. The Subsidiary Guarantees are subordinated to Senior Indebtedness, as defined in the First Supplement Indenture. To the extent provided in the First Supplemental Indenture, Senior Indebtedness must be paid in full before the Notes may be paid. Each Guarantor hereby agrees, and each Holder, by accepting a Guarantee hereby agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give them effect and appoints the Trustee as attorney-in-fact for such purpose. 69 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, ____ [GUARANTEEING SUBSIDIARY] By: ______________________________ Name: Title: ENTERCOM RADIO, LLC By: ______________________________ Name: Title: ENTERCOM CAPITAL, INC. By: ______________________________ Name: Title: GUARANTORS By: ______________________________ Name: Title: HSBC BANK USA as Trustee By: ______________________________ Authorized Officer 70 EXHIBIT C [FORM OF NOTATION OF GUARANTEE] For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of March 5, 2002 (the "Base Indenture"), as supplemented by the First Supplemental Indenture thereto, dated as of March 5, 2002 (the "Supplemental Indenture," and together with the Base Indenture, the "Indenture") among Entercom Radio, LLC ("Radio"), Entercom Capital, Inc. ("Capital," and together with Radio, the "Company"), Entercom Communications Corp., the Guarantors listed on Schedule I thereto and HSBC Bank USA, as Trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth in Article 9 of the First Supplemental Indenture and reference is hereby made to the Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. 71 ENTERCOM COMMUNICATIONS CORP. ENTERCOM BOSTON I TRUST ENTERCOM NEW YORK, INC. ENTERCOM BOSTON, LLC ENTERCOM BOSTON LICENSE, LLC ENTERCOM BUFFALO, LLC ENTERCOM BUFFALO LICENSE, LLC ENTERCOM DENVER, LLC ENTERCOM DENVER LICENSE, LLC DELAWARE EQUIPMENT HOLDINGS, LLC ENTERCOM GAINESVILLE, LLC ENTERCOM GAINESVILLE LICENSE, LLC ENTERCOM GREENSBORO, LLC ENTERCOM GREENSBORO LICENSE, LLC ENTERCOM GREENVILLE, LLC ENTERCOM GREENVILLE LICENSE, LLC ENTERCOM INTERNET HOLDING, LLC ENTERCOM KANSAS CITY, LLC ENTERCOM KANSAS CITY LICENSE, LLC ENTERCOM LONGVIEW, LLC ENTERCOM LONGVIEW LICENSE, LLC ENTERCOM MADISON, LLC ENTERCOM MADISON LICENSE, LLC ENTERCOM MEMPHIS, LLC ENTERCOM MEMPHIS LICENSE, LLC ENTERCOM MILWAUKEE, LLC ENTERCOM MILWAUKEE LICENSE, LLC ENTERCOM NEW ORLEANS, LLC ENTERCOM NEW ORLEANS LICENSE, LLC ENTERCOM NORFOLK, LLC ENTERCOM NORFOLK LICENSE, LLC By: ________________________________ Name: Title: 72 ENTERCOM PORTLAND, LLC ENTERCOM PORTLAND LICENSE, LLC ENTERCOM ROCHESTER, LLC ENTERCOM ROCHESTER LICENSE, LLC ENTERCOM SACRAMENTO, LLC ENTERCOM SACRAMENTO LICENSE, LLC ENTERCOM SEATTLE, LLC ENTERCOM SEATTLE LICENSE, LLC ENTERCOM WICHITA, LLC ENTERCOM WICHITA LICENSE, LLC ENTERCOM WILKES-BARRE SCRANTON, LLC By: ________________________________ Name: Title: ENTERCOM DELAWARE HOLDING CORPORATION By: ________________________________ Name: Title: 73 Schedule I SCHEDULE OF GUARANTORS The following schedule lists each Guarantor under the Indenture as of the Closing Date: 74 Schedule 1 ---------- DELAWARE EQUIPMENT HOLDINGS, LLC ENTERCOM COMMUNICATIONS CORP. ENTECOM DELAWARE HOLDING CORPORATION ENTECOM BOSTON I TRUST ENTECOM BOSTON LLC ENTERCOM BOSTON LICENSE, LLC ENTERCOM DENVER LLC ENTERCOM DENVER LICENSE LLC ENTERCOM GAINESVILLE, LLC ENTERCOM GAINESVILLE LICENSE, LLC ENTERCOM GREENSBORO LLC ENTERCOM GREENSBORO LICENSE, LLC ENTERCOM GREENVILLE LLC ENTERCOM GREENVILLE LICENSE, LLC ENTERCOM INTERNET HOLDING, LLC ENTERCOM KANSAS CITY, LLC ENTERCOM KANSAS CITY LICENSE, LLC ENTERCOM LONGVIEW, LLC ENTERCOM LONGVIEW LICENSE, LLC ENTERCOM MADISON LLC ENTERCOM MADISON LICENSE LLC ENTERCOM MEMPHIS LLC ENTERCOM MEMPHIS LICENSE, LLC ENTERCOM MILWAUKEE LLC ENTERCOM MILWAUKEE LICENSE, LLC ENTERCOM NEW ORLEANS LLC ENTERCOM NEW ORLEANS LICENSE, LLC ENTERCOM NEW YORK, INC. ENTERCOM BUFFALO LICENSE, LLC ENTERCOM BUFFALO LLC ENTERCOM ROCHESTER LLC ENTERCOM ROCHESTER LICENSE LLC ENTERCOM NORFOLK LLC ENTERCOM NORFOLK LICENSE, LLC ENTERCOM PORTLAND LLC ENTERCOM PORTLAND LICENSE, LLC ENTERCOM SACRAMENTO LLC ENTERCOM SACRAMENTO LICENSE LLC ENTERCOM SEATTLE, LLC. ENTERCOM SEATTLE LICENSE, LLC ENTERCOM WICHITA LLC ENTERCOM WICHITA LICENSE LLC ENTERCOM WILKES-BARRE/SCRANTON, LLC 75 -----END PRIVACY-ENHANCED MESSAGE-----